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ArcelorMittal reports plungs into loss on weak Chinese demand for steel
by Staff Writers
Paris (AFP) Oct 31, 2012

Top world steelmaker ArcelorMittal plunged into quarterly loss and slashed its stock dividend on Wednesday, blaming a slump in Chinese demand and operating losses in Europe, and sending its share price sharply down in Paris.

ArcelorMittal reported a third quarter net loss of $709 million (546 million euros) and said that cutting debt was now a priority.

In the third quarter of last year, the group had reported a net profit of $659 million.

Chronically weak demand and difficult trading conditions forced the group to revise downwards its profit outlook for the second half of this year.

ArcelorMittal also reported an operating loss of $643 million euros on the production of flat carbon steels in Europe in the first nine months of the year.

The group, caught in controversy owing to its decision to close two furnaces in northern France, said that sales in the third quarter had fallen by 19.0 percent to $19.7 billion.

The furnaces, which have been damped down for 14 months, are being closed because they are uncompetitive in a tough trading climate, partly because they lie too far from ports for transportation, ArcelorMittal has said.

French officials are looking for a buyer, and have received several expressions of interest, including one from the Russian group Severstal, according to the French financial daily Les Echos.

The figures released on Wednesday were far below those expected by analysts polled by Dow Jones Newswires who had broadly forecast a net loss of $230 million and sales of $20.56 billion.

The head of the group, Lakshmi Mittal said in a statement that the main cause was a slowdown in demand from China that was likely to continue into the fourth quarter.

A fall in the price of iron ore in the third quarter and a weakening of the world economy had also led the group to revise down the outlook for profits in the second half, the group said.

It now anticipates an operating profit of about $7.0 billion for all of 2012.

The group has greatly increased its iron ore interests in recent years as part of a vertical development strategy to protect its raw materials inputs.

Meanwhile, steel deliveries by the group fell by 5.7 percent in the quarter to 19.9 million tonnes, while output of iron ore rose by 1.3 percent.

The board recommended a cut in the dividend from next year to 0.20 US cents per share from 0.75 cents.

ArcelorMittal shares plunged by 4.63 percent to 11.65 euros in afternoon trading, while the Paris CAC 40 index of blue-chip stocks was 0.20 percent higher overall.

"The market expected a lower dividend but maybe not such a big one," commented Tangi Le Liboux, and analyst at the Aurel BGC brokerage.

Citi analysts said: "We think the dividend cut and weaker outlook will lead to near-term underperformance and strengthen the view that the company could lose its investment grade status with Moodys," in reference to the international ratings agency.

Excluding future asset sales, ArcelorMittal's net debt was expected to rise to $22.0 billion at the end of the year, the group said, stressing that reducing its debt had become a high priority.

Finance director Aditya Mittal told a telephone conference that the third and fourth quarters should mark the "low point" in ArcelorMittal's business cycle.

Mittal said the group planned investments of 4.5 billion euros this year, in particular to expand a Canadian mining operation that was on track to be finished in the first half of 2013.


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