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Ispat International N.V. Reports Record Results for Second
Quarter 2004
ROTTERDAM, The Netherlands, August 5 /PRNewswire-FirstCall/ -- Ispat
International N.V., (NYSE:IST)(AEX:ISTAEX:NA), today reported a record net
income of $325 million or $2.75 per share for the second quarter of 2004 as
compared to a net income of $14 million or $0.11 per share for the second
quarter of 2003. In the first quarter of 2004, the net income was $102 million
or $0.85 per share. The results for this quarter, in fact, exceeded the best
ever annual results achieved so far.
Consolidated sales and operating income for the second quarter were $2.1
billion and $426 million, respectively, as compared to $1.4 billion and $58
million, respectively, for the second quarter of 2003; and $1.8 billion and
$158 million respectively for the first quarter of 2004.
Total steel shipments were approximately 4.1 million tons [1], which
represented an increase of approximately 2% over the second quarter of 2003 and
a decrease of approximately 4% over the first quarter of 2004.
For the six-month period January-June 2004, Ispat International N.V.'s net
income was $427 million or $3.60 per share as compared to net income of $65
million or $0.52 per share for the six-month period January-June 2003.
Consolidated sales and operating income for the six month period January-June
2004 were $3.9 billion and $584 million respectively, compared to $2.7 billion
and $133 million respectively for the six-month period January-June 2003.
Total steel shipments for the six-month period January-June 2004 were 8.3
million tons, an increase of 6% compared to the six-month period January-June
2003.
The improved earnings were primarily due to strong demand for our products
across all markets. Our average price realization in the second quarter 2004
improved by 43% compared to the second quarter of 2003 and by 25% compared to
the first quarter of 2004, driven by higher base selling prices, raw material
surcharges and improved product mix. For the six-month period January-June
2004, average price realization was 30% higher than the corresponding period of
2003.
The situation with respect to availability and procurement prices of key raw
materials such as iron ore, scrap, coke and natural gas continued to remain
challenging. However, Ispat International was able to manage the situation
successfully, thereby maintaining shipments and customer service levels.
Overall, cost per ton during the quarter was higher by 23% as compared to the
second quarter of 2003 and by 9% compared to the first quarter of 2004. Cost
per ton during the six-month period January-June 2004 was higher by 18%
compared to the corresponding period of 2003.
There were no material unusual or one-time items during the quarter. Selling,
general and administrative expenses were marginally higher due to higher levels
of sales activity, as well as higher costs of logistics. Other income included
a gain from the sale of environmental credits at Ispat Inland. Net interest
expense was higher mainly due to the costs related to the issue of bonds by
Ispat Inland to refinance the previous term loan.
[1] The term "ton" means a short ton (ST). One short ton is equal to 2,000
pounds.
Details of Shipments, Sales and Operating Income at our main operating
subsidiaries were as follows:
Shipments
Subsidiary Q2 2004 Q2 2003 Q1 2004
000'Tons 000'Tons 000'Tons
US and Canadian 1,801 1,785 1,825
Operating
Subsidiaries
Ispat Europe Group 1,000 940 1,125
Other Subsidiaries 1,256 1,235 1,274
Sales
Subsidiary Q2 2004 Q2 2003 Q1 2004
$ Million $ Million $ Million
US and Canadian 1,010 714 853
Operating
Subsidiaries
Ispat Europe Group 509 373 496
Other Subsidiaries 590 323 406
Operating Income
Subsidiary Q2 2004 Q2 2003 Q1 2004
$ Million $ Million $ Million
US and Canadian 167 (20) 95
Operating
Subsidiaries
Ispat Europe Group 54 15 5
Other Subsidiaries 205 63 58
For the six month period January - June:
Shipments
Subsidiary Six Months Six Months
2004 2003
000'Tons 000'Tons
US and Canadian 3,627 3,433
Operating
Subsidiaries
Ispat Europe Group 2,126 1,941
Other Subsidiaries 2,528 2,418
Sales
Subsidiary Six Months Six Months
2004 2003
000'Tons 000'Tons
$ Million $ Million
US and Canadian 1,862 1,410
Operating
Subsidiaries
Ispat Europe Group 1006 731
Other Subsidiaries 996 597
Operating Income
Subsidiary Six Months Six Months
2004 2003
000'Tons 000'Tons
$ Million $ Million
US and Canadian 262 31
Operating
Subsidiaries
Ispat Europe Group 60 26
Other Subsidiaries 262 76
Liquidity continues to improve. During the second quarter of 2004, working
capital increased by $117 million, mainly due to higher levels of inventories
and receivables driven by higher levels of costs and selling prices. The
underlying physical levels (represented by number of days' working capital)
remained largely unchanged. During the six month period January-June 2004,
working capital increased by $275 million.
Capital expenditure during the quarter was $35 million and during the six
months of 2004 was $56 million.
As at June 30, 2004, the Company's cash and cash equivalents were $143 million
($80 million at December 31, 2003 and $104 million at March 31, 2004). In
addition, the Company's operating subsidiaries had available borrowing capacity
of $223 million as at June 30, 2004. The comparable number was $236 million as
at March 31, 2004 and $143 million as at December 31, 2003.
During the second quarter 2004, the Company reduced net debt by $248 million,
consisting of reduction of borrowings by $209 million, largely by prepaying
long-term debt at its subsidiaries, and increase of $39 million in cash and
cash equivalents. During the six-month period January-June 2004, borrowings was
reduced by $160 million and net debt was reduced by $223 million.
Total debt at the end of the quarter - which includes both long and short-term
debt, as well as borrowings under working capital credit facilities - was $2.1
billion, as compared to $2.3 billion at the end of the first quarter of 2004.
During the quarter, the Company purchased 2 million of its own shares from the
market under the previously announced share buy back program at an average
price of $12 per share. During the six-month period January-June 2004, the
number of its own shares purchased under this program was 5.3 million and the
average price was $10.25 per share.
Outlook for third quarter 2004
The Company expects continued strong demand in all its principal markets.
However, third quarter shipments are traditionally lower due to seasonal
factors. The Company expects improved selling prices across all product
segments and flat to somewhat reduced shipments compared to second quarter. On
the other hand, there is likely to be continued pressure on availability and
cost of all major inputs.
Working capital is expected to increase due to increases in input prices and
sales. Capital expenditure is expected to be slightly higher in the third
quarter than in the second. A key milestone during the third quarter will be
the pre-commissioning trials at the new degasser facility in Mexico.
Ispat Inland's labor contract has been extended until August 15, 2004 by mutual
agreement between Ispat Inland and the United Steelworkers of America (USWA).
The contract was originally scheduled to expire on July 31, 2004. The Company
is hopeful that Ispat Inland will be able to finalize a new agreement with the
USWA. However, if such agreement does not take place, the existing agreement
contains provisions for recourse to binding interest arbitration, without any
disruption to operations.
Overall, the Company expects to benefit from strong market conditions for its
products. The third quarter is expected to be a better quarter than the second.
The summary consolidated financial and other information, including accounts of
Ispat International N.V. ("Ispat International" or "the Company") and its
consolidating subsidiaries are prepared in accordance with U.S. GAAP. All
material inter-company balances and transactions have been eliminated.
Quantitative information on total shipments of steel products includes
inter-company shipments.
Ispat International N.V. is one of the largest and most global steel producers,
with major steel-making operations in the United States, Canada, Mexico,
Trinidad, Germany and France. The Company produces a broad range of flat and
long products sold mainly in the North American Free Trade Agreement (NAFTA)
participating countries and the European Union (EU) countries. Ispat
International N.V. is a member of the LNM Group.
This news release contains forward-looking statements that involve a number of
risks and uncertainties. These statements are based on current expectations and
actual results may differ materially from these expectations. Among the factors
that could cause actual results to differ are the risk factors listed in the
Company's most recent SEC filings
Additionally, the Company has made, and may continue to make, including in (but
not limited to) this Press Release, various forward-looking statements with
respect to its financial position, business strategy, projected costs,
projected savings, and plans and objectives of management. Such forward-looking
statements are identified by the use of the forward-looking words or phrases
such as 'anticipates', 'intends', 'expects', 'plans', 'believes', 'estimates',
or words or phrases of similar import. These forward-looking statements are
subject to numerous assumptions, risks and uncertainties, and the statements
looking forward beyond the second quarter of 2004 are subject to greater
uncertainty because of the increased likelihood of changes in underlying
factors and assumptions. Actual results could differ materially from those
anticipated in the forward-looking statements.
For further information, visit our web site: http://www.ispat.com/
CONSOLIDATED BALANCE SHEETS UNDER U.S. GAAP
As at
June 30, December 31,
In millions of U.S. Dollars 2004 2003
(Unaudited) (Audited)
ASSETS
Current Assets
Cash and cash equivalents, including short term $143 $80
investments
Trade accounts receivable - net 695 507
Inventories 947 828
Prepaid expenses and other 119 105
Deferred tax assets 54 30
Total Current Assets 1,958 1,550
Property, plant and equipment - net 3,028 3,091
Investments in affiliates and Joint Ventures 262 252
Deferred tax assets 454 535
Intangible pension assets 112 117
Other assets 110 90
Total Assets $5,924 $5,635
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Payable to banks and current portion of long-term $167 $363
debt
Trade accounts payable 629 577
Accrued expenses and other current liabilities 524 492
Deferred tax liabilities 32 28
Total Current Liabilities 1,352 1,460
Long term debt including affiliates 1,950 1,914
Deferred tax liabilities 106 74
Deferred employee benefits 1,883 1,906
Other long term obligations 115 132
Total Liabilities 5,406 5,486
Shareholders' equity
Common shares 7 7
Treasury stock (150) (110)
Additional paid-up capital 576 586
Retained earnings 635 207
Cumulative other comprehensive income (550) (541)
Total Shareholders' equity 518 149
Total Liabilities and Shareholders' Equity $5,924 $5,635
CONSOLIDATED FINANCIAL & OTHER INFORMATION AS PER U.S.
GAAP
For the Second For the Six
Quarter Ended Months Ended
June 30, June 30,
In millions of 2004 2003 2004 2003
U.S. Dollars,
except share,
per share and
other data
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
STATEMENT OF
INCOME DATA
Sales 2,109 1,410 3,864 2,738
Costs and
expenses:
Cost of sales 1,588 1,263 3,090 2,430
(exclusive of
depreciation
shown
separately)
Depreciation 48 46 99 91
Selling, 47 43 91 84
general and
administrative
expenses
1,683 1,352 3,280 2,605
Operating 426 58 584 133
income (loss)
Operating 20.2% 4.1% 15.1% 4.9%
margin
Other income 11 - 37 20
(expense) -
net
Financing
costs:
Interest (47) (41) (88) (85)
(expense)
Interest - 4 1 7
income
Net gain 3 (8) 2 (2)
(loss) from
foreign
exchange
(44) (45) (85) (80)
Income (loss) 393 13 536 73
before taxes
Income tax
expense
(benefit):
Current 12 5 16 9
Deferred 56 (6) 93 (3)
68 (1) 109 6
Net income 325 14 427 67
before change
in accounting
principle
Cumulative - - - (2)
effect of
change in
accounting
principle
Net income $325 $14 $427 $65
(loss)
Basic and 2.75 0.11 3.60 0.52
diluted
earnings per
common share
Weighted 118 122 118 122
average common
shares
outstanding
(in millions)
OTHER DATA
Total
shipments of
steel products 4,057 3,960 8,281 7,792
including
inter-company
shipments
(thousands of
tons)
For the Second For the Six
Quarter Ended Months Ended
June 30, June 30,
In millions of 2004 2003 2004 2003
U.S. Dollars,
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Operating activities:
Net income 325 14 427 65
Adjustments required to
reconcile net income to
net cash provided from
operations:
Depreciation 48 46 99 91
Deferred employee (7) 6 (13) 12
benefit costs
Net foreign exchange (2) 5 (2) 1
loss (gain)
Deferred income tax 55 (5) 94 (2)
Undistributed earnings (17) (4) (44) (19)
from joint ventures
Other operating 8 6 (2) 1
expenses
Changes in operating
assets and liabilities,
net of effects from
purchases of
subsidiaries:
Trade accounts (65) (30) (200) (7)
receivable
Inventories (99) 24 (130) (2)
Prepaid expenses and 19 1 (17) (31)
other assets
Trade accounts payable (19) (45) 47 (64)
Accrued expenses and 47 24 25 28
other liabilities
Net cash provided 293 42 284 73
(used) by operating
activities
Investing activities:
Purchase of property, (35) (37) (56) (56)
plant and equipment
Proceeds from sale of - - 18 18
assets and investments
including affiliates
Investments in 9 3 17 14
affiliates and joint
ventures
Other investing 2 - 2 -
activities
Net cash provided (24) (34) (19) (24)
(used) by investing
activities
Financing activities:
Proceeds from payable 603 955 1,533 1,671
to banks
Proceeds from long-term 36 6 890 44
debt including from
affiliates
Payments of payable to (600) (896) (1,613) (1,638)
banks
Payments of long-term (247) (73) (960) (131)
debt including
affiliates
Purchase of treasury (24) (7) (54) (9)
stock
Capital contribution - - (2) -
Sale of treasury stock 2 - 4 -
Net cash provided (230) (15) (202) (63)
(used) by financing
activities
Net increase (decrease) 39 (7) 63 (14)
in cash and cash
equivalents
Effect of exchange rate - 1 - 2
changes on cash
Cash and cash
equivalent:
At the beginning of the 104 71 80 77
period
At the end of the 143 65 143 65
period
DATASOURCE: Ispat International N.V.
CONTACT: Ispat International Limited: T.N. Ramaswamy, Director, Finance,
+44-207-543-1174. Citigate Financial Intelligence: John
McInerney/Jessica Wolpert, Investor Relations,
+1-201-499-3535/+1-201-499-3533