After losing more than $US3 billion in 2012, the world’s largest manufacturer of steel lost more than $2.5 billion again last year as weakening conditions in the resources sector impacted the group’s mining business and subdued conditions in manufacturing and construction in some key markets impacted the its steel manufacturing business.
In a recent announcement, Luxembourg based ArcelorMittal unveiled a fourth quarter loss of $US1.227 billion as impairment charges on significant mining projects and restructuring charges for finishing facilities at the group’s plant in Leige Belgium wiped almost $US1.2 billion from the bottom line.
That bought the company’s full year result to a net loss of $US2.545 billion – down from the previous year’s loss of $US3.52 billion but hardly an impressive outcome.
Still, not all was negative. Stripping out exceptional items, the company made an underlying loss of just $US36 million during the latest quarter and a profit of $US1.197 billion over the course of the year.
Moreover, capital management initiatives have seen Arcelor’s debt burden fall from $21.8 billion to $16.1 billion, albeit with net debt remaining above the company’s $15 billion target.
Despite the negative result overall, company Chairman and Chief Executive Officer Lakshmi N. Mittal put a positive spin on the numbers, stressing that the company’s debt burden was it its lowest level since ArcelorMittal was created from a merger in 2006, a number of selected steel growth projects had re-started amid improving economic conditions and the acquisition of the ThyssenKrupp rolling mill in Calvert, Alabama, meant the company was now better positioned to service automotive and energy steel markets within the NAFTA Free Trade area.
Around the world, steel manufacturers have been hit by weak demand and low selling prices in recent years amid generally subdued conditions in manufacturing and construction – albeit with average prices amongst all product types having rebounded by around eight percent since the middle of last year amid generally improving sentiment in the US and Europe, according to a composite index published by British steel industry information provider MEPS.
Manufacturers in Australia have not been immune. BlueScope, for instance, recorded a net loss after tax of $84 million over the twelve months to June last year whilst a $961 million write-down forced OneSteel owner Arrium into a position of a $695 million loss over the same period.
In Arcelor’s case, however, the company has been particularly affected as a result of its strong exposure to Europe, where the IMF estimates the economy contracted by 0.4 percent over the past year.
Going forward, Arcelor says it is cautiously optimistic about the outlook and has forecast earnings before interest, tax, depreciation and amortisation of around $8.0 billion in 2014 – up from $6.888 billion this year.