ArcelorMittal (MT) reported Wednesday a 76.4% decline in third-quarter profit, as sales more than halved, hurt by lower steel demand and sharply lower selling prices. However, posting a profit after three consecutive losses, the Luxembourg-based steel giant pointed out that it has seen the first signs of recovery in the quarter. The company issued fourth-quarter EBITDA forecast, and said it expects sequential growth in shipments and average steel selling prices. ArcelorMittal also projects further gradual improvement through 2010, and maintained its fiscal 2010 base dividend.
Third-quarter net income attributable to owners of the parent was $903 million or $0.60 per share, compared to $3.82 billion or $2.78 per share last year. In euro terms, net income was 631 million euros or 0.42 euros per share, down from 2.54 billion euros or 1.85 euros per share in the previous year.
The company said the latest quarter results included foreign exchange and other net financing gains of $106 million, as compared to costs of $380 million last year. Gains related to the fair value of derivative instruments amounted to $6 million, compared to losses of $107 million a year ago. The company also recorded a loss of $110 million in the quarter, as a result of mark-to-market adjustments on the conversion options embedded in its recently issued convertible bonds.
In the prior-year period, ArcelorMittal USA agreed to a new four-year labor contract with its union employees, which required to recognize a non-recurring expense in the quarter of approximately $1.6 billion primarily related to vested post-employment benefits.
On average, six analysts polled by Thomson Reuters expected a loss of $0.06 per share for the quarter. Analysts' estimate typically exclude one-time items.
In the preceding second quarter, the company had reported a net loss of $792 million or 581 million euros, and loss per share of $0.57 or 0.42 euros.
During the latest quarter, ArcelorMittal recorded an income tax benefit of $0.9 billion, compared to an income tax expense of $0.7 billion last year. Income before taxes and non-controlling interest was $19 million in the quarter, compared to prior year's $4.93 billion.
Sales for the third quarter of 2009 fell sharply to $16.17 billion from $35.20 billion in the comparable period, and missed four Wall Street analysts' consensus estimate of $16.30 billion. On a sequential basis, however, sales grew from $15.18 billion in the preceding second quarter.
Quarterly sales were 11.31 billion euros, down from 23.39 billion euros last year, but up from 11.14 billion euros last quarter.
According to the company, the year-over-year plunge in sales was due to the global economic crisis, including a steep fall in selling prices, while quarter-over-quarter sales growth reflected improved demand.
Total steel shipments for the quarter were 18.2 million metric tonnes, down from 25.6 million metric tonnes a year ago, due to reduced steel production in response to falling demand amid the global economic crisis, while shipments rose 7% from 17 million metric tonnes in the second quarter.
Total iron ore production was 13.1 million metric tonnes, lower than prior year's 18.5 million metric tonnes, but up from 12.1 million metric tonnes in the sequential quarter.
Third-quarter operating income plunged to $305 million from $5.47 billion, and operating margin fell to 1.9% from 15.5% a year ago. EBITDA was $1.59 billion, lower than last year's $8.58 billion. ArcelorMittal was expecting third-quarter EBITDA between $1.4 billion and $1.8 billion, and shipments to be slightly higher than in the second quarter, while average steel selling prices were projected to remain stable or slightly lower.
Segment-wise, Flat Carbon Americas recorded sales of $3.29 billion for the third quarter, higher than sequential quarter's sales of $2.8 billion, on higher volumes, partly offset by a 1.8% decrease in average steel selling price. Total steel shipments in the Flat Carbon Americas segment were 4.16 million metric tonnes.
Flat Carbon Europe's sales were $4.87 billion, up from second quarter's sales of $4.5 billion, and steel shipments were 5.60 million metric tonnes. Sales at Long Carbon Americas and Europe were $4.33 billion in the third quarter, higher than second quarter, while steel shipments dropped sequentially to 5.03 million metric tonnes.
Asia Africa and CIS, or AACIS, recorded third-quarter sales of $1.99 billion and steel shipments of 3.04 million metric tonnes, both higher than the second quarter.
In the Stainless Steel segment, the company recorded sales of $1.06 billion and steel shipments of 354 thousand metric tonnes, and in Steel Solutions and Services segment, third-quarter sales totaled $3.25 billion, with steel shipments of 4.21 million metric tonnes.
The company said it has met its target to achieve management gains of $2 billion of sustainable SG&A and fixed cost reductions in 2009 ahead of schedule. As of third quarter-end, the company achieved annualized sustainable savings of $2.2 billion, and $7.3 billion of annualized temporary fixed cost savings resulting from industrial optimization in response to lower demand.
Among other steel manufacturers, Pittsburgh, Pennsylvania-based United States Steel Corp. (X) reported Tuesday a third-quarter net loss of $303 million or $2.11 per share, compared to prior year's profit of $919 million or $7.79 per share, reflecting plunge in shipments amid weak demand. Net sales for the quarter fell 61.4% $2.82 billion. Total steel shipments in the quarter fell to 4.16 million tons from last year's 6.43 million tons.
Tuesday, West Chester, Ohio-based AK Steel Holding Corp. (AKS) reported a sharp decline in its third-quarter net income attributable to the company to $6.2 million or $0.06 per share from last year's $188.3 million or $1.67 per share, as sales more than halved from last year, hurt by lower shipments and average sales price. Net sales for the third quarter were $1.04 billion on shipments of 1.05 million tons, compared to sales of $2.16 billion on shipments of 1.45 million tons for the year-ago quarter. Average selling price for the quarter was $994 per ton, approximately 32% lower than the $1,462 per ton average price realized in the third quarter of 2008.
Nucor Corp. (NUE) last Thursday posted a third-quarter net loss of $29.54 million or $0.10 per share, compared to a profit of $734.59 million or $2.31 per share a year ago, impacted negatively by high-cost pig iron inventories as well as sharp declines in shipments and average sales prices. Net sales plunged 58% to $3.12 billion from $7.45 billion in the third quarter of fiscal 2008.
For the nine months of fiscal 2009, ArcelorMittal's net loss was $952 million or $0.67 per share, compared to prior year's net income of $12.03 billion or $8.64 per share. In euro terms, net loss was 697 million euros or 0.49 euros per share, in comparison to net income of 7.91 billion euros or 5.69 euros per share in the previous year.
Sales for the nine months were $46.47 billion or 34.02 billion euros, lower than prior year's $102.85 billion or 67.58 billion euros. Shipments plunged to 51.1 million metric tonnes from 84.6 million metric tonnes a year earlier.
Looking ahead, for the fourth quarter, ArcelorMittal projects EBITDA to be about $2.0 billion to $2.4 billion. In addition, shipments and average steel selling prices are expected to be sequentially higher in the fourth quarter. The company also expects fixed costs to increase due to the expected increase in activity in the fourth quarter.
Lakshmi Mittal, Chairman and Chief Executive Officer, ArcelorMittal, said, "As anticipated, we have seen the first signs of recovery in the third quarter. In response to this increased demand, a number of our facilities have now been re-started, and we expect fourth quarter crude steel capacity utilization to be approximately 70%. We should continue to see further gradual improvement through 2010, although the operating environment remains challenging."
Further, the company said its Board of Directors has recommended to maintain the company's base dividend at $0.75 for fiscal 2010.
The Board will submit to a shareholders vote, at the next annual general meeting, a proposal to maintain the quarterly dividend payment at $0.1875, and the new quarterly dividend payments would take place on March 15, June 14, September 13, and December 15, 2010, taking into account that the first quarter dividend payment to be paid on March 15, 2010 shall be an interim dividend.
Final payment of current year dividend of $0.1875 per share will be payable on December 14, 2009, the company said.
MT closed Tuesday's regular trading session at $35.56, down $1.86, on a volume of 7.8 million shares. In the past 52 weeks, shares have been trading in a broad range of $15.44 to $42.32.
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