The Lakshmi Mittal-headed company's profit has been damaged by falling steel demand in its biggest markets
ArcelorMittal, the world’s biggest steelmaker, cut its full-year profit forecast on weaker steel demand in the US and Europe than previously expected.
Earnings before interest, taxes, depreciation and amortisation (Ebitda) will be more than $6.5 billion, compared with the earlier figure of more than $7.1 billion, Luxembourg-based ArcelorMittal said in a statement on Thursday.
The Lakshmi Mittal-headed company’s profit has been damaged by falling steel demand in its biggest markets, the US and Europe, and its limited operations in the faster-growing Chinese market. US consumption slid 5.6 per cent in the first half from a year before and European Union steel use declined 5.7 per cent.
“In markets in which we operate apparent demand is weaker than anticipated, hence our shipments are weaker than anticipated,” Aditya Mittal, chief financial officer, told reporters. Forecast global demand growth of three per cent this year is “on the back of a strong China”.
Steel shipments will rise one per cent to two per cent this year compared with a forecast of two per cent in May, the company said. Iron-ore shipments will gain 20 per cent. ArcelorMittal also cut its annual profit forecast on weaker coking coal prices.
The company slipped 2.2 per cent to euro 9.683 by 10:39 a.m. in Amsterdam. The stock has declined 25 per cent this year.
Second-quarter Ebitda fell to $1.7 billion from $2.6 billion a year earlier. That’s almost in line with the $1.67 billion median estimate of 15 analysts surveyed by Bloomberg. In February, the steelmaker said earnings would recover in 2013 after it posted the lowest full-year profit since 2009.
“The operating environment in the first half continued to be challenging,” Chief Executive Officer Lakshmi Mittal said in the statement. “Although we have revised our full-year guidance, the second half should deliver a clear underlying improvement relative to the second half of 2012, which we believe marked the lowest point in the cycle.”
ArcelorMittal has cut more than $5 billion of debt in the past 12 months as it grapples with lower demand and excess capacity caused by Europe’s economic crisis. European steelmakers are able to produce about 210 million metric tonnes a year, as much as 60 million tonnes more than needed in a “normal market,” industry lobby group Eurofer says. “We’re seeing the beginning of a slow turnaround” in Europe, Aditya Mittal said. “Clearly we remain cautious.”
While net debt fell to $16.2 billion in the quarter, ArcelorMittal said it will rise to about $17 billion in the second half. The company is seeking to reduce borrowings after its credit rating was cut to below investment grade by Moody’s Investors Service, Standard & Poor’s and Fitch Ratings.
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