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Ispat International N.V. Reports Record Results for Third Quarter
2004
ROTTERDAM, The Netherlands, Oct. 25 /PRNewswire-FirstCall/ -- Ispat
International N.V., (NYSE:ISTNYSE:US)(AEX:ISTAEX:NA), today reported a record
net income of $460 million or $3.91 per share for the third quarter of 2004 as
compared to a net loss of $10 million or negative $0.08 per share for the third
quarter of 2003. In the second quarter of 2004, the net income was $325 million
or $2.75 per share.
Consolidated sales and operating income for the third quarter were $2.5 billion
and $659 million, respectively, as compared to $1.3 billion and $4.0 million
loss, respectively, for the third quarter of 2003; and $2.1 billion and $426
million respectively for the second quarter of 2004.
Total steel shipments were approximately 4.1 million tons(1), which represented
an increase of approximately 15% over the third quarter of 2003 and an increase
of approximately 1% over the second quarter of 2004.
For the nine-month period January-September 2004, Ispat International N.V.'s
net income was $887 million or $7.51 per share as compared to net income of $55
million or $0.44 per share for the nine-month period January-September 2003.
Consolidated sales and operating income for the nine month period
January-September 2004 were $6.3 billion and $1.2 billion respectively,
compared to $4.0 billion and $129 million respectively for the nine-month
period January-September 2003.
Total steel shipments for the nine-month period January-September 2004 were
12.4 million tons, compared to 11.4 million tons for the nine-month period
January-September 2003.
The improved earnings were primarily due to strong demand and prices for our
products across all markets. Our average price realization in the third quarter
2004 improved by 61% compared to the third quarter of 2003 and by 11% compared
to the second quarter of 2004, driven by higher base selling prices, raw
material surcharges and improved product mix. For the nine-month period
January-September 2004, average price realization was 40% higher than the
corresponding period of 2003.
The situation with respect to availability and prices of key raw materials such
as iron ore, scrap, coke and natural gas continued to remain challenging.
Overall, cost of sales per ton during the quarter was higher by 20% as compared
to the third quarter of 2003 and by 4% compared to the second quarter of 2004.
Cost of sales per ton during the nine-month period January-September 2004 was
higher by 20% 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 higher due to higher costs and
increased shipments.
Details of Shipments, Sales and Operating Income at our main operating
subsidiaries were as follows:
Q3 2004 Q3 2003 Q2 2004
Shipments 000'Tons 000'Tons 000'Tons
US and Canadian
Operating Subsidiaries 1,843 1,672 1,801
Ispat Europe Group 955 832 1,000
Other Subsidiaries 1,310 1,078 1,256
Q3 2004 Q3 2003 Q2 2004
Sales $ Million $ Million $ Million
US and Canadian
Operating Subsidiaries 1,176 679 1,010
Ispat Europe Group 529 328 509
Other Subsidiaries 751 287 590
Q3 2004 Q3 2003 Q2 2004
Operating Income $ Million $ Million $ Million
US and Canadian
Operating Subsidiaries 307 (39) 167
Ispat Europe Group 78 0 54
Other Subsidiaries 274 35 205
For the nine-month period January-September, details of Shipments, Sales and
Operating Income at our main operating subsidiaries were as follows:
Nine Months Nine Months
2004 2003
Shipments 000'Tons 000'Tons
US and Canadian Operating Subsidiaries 5,470 5,105
Ispat Europe Group 3,081 2,774
Other Subsidiaries 3,838 3,495
Nine Months Nine Months
2004 2003
Sales $ Million $ Million
US and Canadian Operating Subsidiaries 3,038 2,096
Ispat Europe Group 1,535 1,060
Other Subsidiaries 1,747 876
Nine Months Nine Months
2004 2003
Operating Income $ Million $ Million
US and Canadian Operating Subsidiaries 569 0
Ispat Europe Group 138 26
Other Subsidiaries 536 103
Liquidity continues to improve. During the third quarter of 2004, working
capital increased by $226 million, mainly due to higher levels of inventories
and receivables driven by higher levels of costs and selling prices, partly
offset by improvements in trade accounts payables. During the nine month
period January-September 2004, working capital increased by $501 million.
Capital expenditure during the quarter was $37 million and during nine months
of 2004 was $93 million.
As at September 30, 2004, the Company's cash and cash equivalents were $170
million ($80 million at December 31, 2003 and $143 million at June 30, 2004).
In addition, the Company's operating subsidiaries had available borrowing
capacity of $482 million as at September 30, 2004. The comparable number was
$223 million as at June 30, 2004 and $143 million as at December 31, 2003.
During the third quarter 2004, the Company reduced net debt by $391 million,
consisting of reduction of borrowings by $364 million, largely by prepaying
long-term debt at its subsidiaries, and increase of $27 million in cash and
cash equivalents. During the nine-month period January-September 2004,
borrowing was reduced by $514 million, cash and cash equivalents increased by
$90 million, thus net debt reduced by $604 million.
Gross 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 $1.8
billion, as compared to $2.1 billion at the end of the second quarter of 2004.
($2.3 billion as at December 31, 2003).
During the nine-month period January-September 2004, the number of its own
shares purchased under the stock buy back program was 5.3 million and the
average price was $10.25 per share.
Outlook for fourth quarter 2004
The Company expects improved selling prices arising out of prior bookings of
orders. However, shipments in the fourth quarter will be lower due to seasonal
factors. There is also likely to be continued pressure on availability and
cost of all major inputs.
Working capital is expected to continue to increase due to increases in input
prices and costs. Capital expenditure is expected to be slightly higher in the
fourth quarter than in the third.
Overall, the Company expects to benefit from market conditions for its
products. The fourth quarter is expected to be in line with the third quarter.
Recent development
On the same day as this Earning Release (October 25, 2004) the Company
announced two major transactions, involving acquisitions of other steel
companies. Please read the separate press releases on this subject.
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 steelmaking 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 third 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/, or call:
Ispat International Limited Abernathy MacGregor Group
T.N. Ramaswamy Chuck Burgess / Gillian Angstadt
Director, Finance Investor Relations
+44 20 7543 1174 +1 212 371 5999
(1) The term "ton" means a short ton (ST). One short ton is equal to
2,000 pounds.
CONSOLIDATED BALANCE SHEETS UNDER U.S. GAAP
As at
September 30, December 31,
In millions of U.S. Dollars 2004 2003
(Unaudited) (Audited)
ASSETS
Current Assets
Cash and cash equivalents,
including short term investments $170 $80
Trade accounts receivable - net 857 507
Inventories 1,106 828
Prepaid expenses and other 159 105
Deferred tax assets 88 30
Total Current Assets 2.380 1,550
Property, plant and equipment - net 3,030 3,091
Investments in affiliates and Joint Ventures 267 252
Deferred tax assets 344 535
Intangible pension assets 113 117
Other assets 110 90
Total Assets $6,244 $5,635
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Payable to banks and current portion
of long-term debt including affiliates $394 $363
Trade accounts payable 695 577
Accrued expenses and other current liabilities 575 492
Deferred tax liabilities 37 28
Total Current Liabilities 1,701 1,460
Long term debt including affiliates 1,370 1,914
Deferred tax liabilities 159 74
Deferred employee benefits 1,899 1,906
Other long term obligations 107 132
Total Liabilities 5,236 5,486
Shareholders' equity
Common shares 7 7
Treasury stock (125) (110)
Additional paid-up capital 557 586
Retained earnings 1,094 207
Cumulative other comprehensive income (525) (541)
Total Shareholders' equity 1,008 149
Total Liabilities and Shareholders' Equity $6,244 $5,635
CONSOLIDATED FINANCIAL
& OTHER INFORMATION AS PER U.S. GAAP
For the Third For the Nine
Quarter Ended Months Ended
September 30, September 30,
2004 2003 2004 2003
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
In millions of U.S. Dollars,
except share, per share and
other data
STATEMENT OF INCOME DATA
Sales 2,456 1,294 6,320 4,032
Costs and expenses:
Cost of sales (exclusive
of depreciation
shown separately) 1,704 1,215 4,794 3,645
Depreciation 48 45 147 136
Selling, general
and administrative expenses 45 38 136 122
1,797 1,298 5,077 3,903
Operating income (loss) 659 (4) 1,243 129
Operating margin 26.8% (0.3)% 19.7% 3.2%
Other income (expense) - net 6 12 43 32
Financing costs:
Interest (expense) (43) (42) (131) (127)
Interest income -- 4 1 11
Net gain (loss)
from foreign exchange -- 5 2 3
(43) (33) (128) (113)
Income (loss) before taxes 622 (25) 1,158 48
Income tax expense (benefit):
Current 30 2 46 11
Deferred 132 (17) 225 (20)
162 (15) 271 (9)
Net income before change
in accounting principle 460 (10) 887 57
Cumulative effect of change
in accounting principle -- -- (2)
Net income (loss) $460 $(10) $887 $55
Basic earnings per common share 3.91 (0.08) 7.51 0.44
Weighted average common
shares outstanding (in millions) 118 122 118 122
OTHER DATA
Total shipments of steel
products including
inter-company shipments
(thousands of tons) 4,108 3,582 12,389 11,374
CONSOLIDATED STATEMENTS OF CASH FLOWS AS PER U.S. GAAP
For the Third For the Nine
Quarter Ended Months Ended
September 30, September 30,
2004 2003 2004 2003
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
In millions of U.S. Dollars
Operating activities:
Net income 460 (10) 887 55
Adjustments required to
reconcile net income to
net cash provided from operations:
Depreciation 48 45 147 136
Deferred employee benefit costs 6 (157) (7) (145)
Net foreign exchange loss (gain) -- (4) (2) (3)
Deferred income tax 132 (18) 226 (20)
Undistributed earnings
from joint ventures (21) (6) (65) (25)
Other operating expenses 3 2 1 3
Changes in operating assets
and liabilities, net of effects
from purchases of subsidiaries:
Trade accounts receivable (150) 58 (350) 51
Inventories (146) 65 (276) 63
Prepaid expenses
and other assets (38) 1 (55) (30)
Trade accounts payable 58 (12) 105 (76)
Accrued expenses
and other liabilities 50 76 75 104
Net cash provided (used)
by operating activities 402 40 686 113
Investing activities:
Purchase of property,
plant and equipment (37) (79) (93) (135)
Proceeds from sale of
assets and investments
including affiliates 2 2 20 19
Investments in affiliates
and joint ventures 17 7 34 22
Other investing activities -- -- 2 --
Net cash provided (used)
by investing activities (18) (70) (37) (94)
Financing activities:
Proceeds from payable to banks 448 1,087 1,981 2,758
Proceeds from long-term debt
including from affiliates 38 28 928 70
Payments of payable to banks (562) (1,036) (2,175) (2,672)
Payments of long-term
debt including affiliates (288) (45) (1,248) (176)
Purchase of treasury stock -- -- (54) (9)
Exercise of stock option (5) -- (7) --
Sale of treasury stock 12 -- 16 --
Net cash provided (used)
by financing activities (357) 34 (559) (29)
Net increase (decrease)
in cash and cash equivalents 27 4 90 (10)
Effect of exchange
rate changes on cash -- 2 -- 4
Cash and cash equivalent:
At the beginning of the period 143 65 80 77
At the end of the period 170 71 170 71
DATASOURCE: Ispat International N.V.
CONTACT: T.N. Ramaswamy, Director, Finance of Ispat International
Limited, +44-20-7543-1174; or Chuck Burgess or Gillian Angstadt, Investor
Relations of Abernathy MacGregor Group, +1-212-371-5999
Web site: http://www.ispat.com/