ArcelorMittal takes $4.3 billion writedown on weak Europe

BRUSSELS Fri Dec 21, 2012 5:03pm IST

The logo of the ArcelorMittal's steel plant is seen on the site of Fos-sur-Mer near Marseille, South eastern France, November 5, 2008. REUTERS/Jean-Paul Pelissier/Files

The logo of the ArcelorMittal's steel plant is seen on the site of Fos-sur-Mer near Marseille, South eastern France, November 5, 2008.

Credit: Reuters/Jean-Paul Pelissier/Files

Related Topics

Stocks

   

BRUSSELS (Reuters) - ArcelorMittal(ISPA.AS), the world's biggest steelmaker, is writing down the value of its European business by $4.3 billion, underscoring its gloom about prospects for the region's recession-hit manufacturers.

The group, formed in 2006 when the steel business of India-born Lakshmi Mittal bought Europe's Arcelor for about $33 billion, said on Friday steel demand had fallen about 8 percent in Europe this year and there was no sign of a quick recovery.

As a result, it was writing down the goodwill - the value of intangible assets like a brand rather than physical assets like machinery - of its European operations by 87 percent.

"It is negative, but it shouldn't really be a big surprise that the book value of its European business was too high," said a London-based analyst who asked not to be named.

At 1045 GMT, ArcelorMittal shares were down 2.9 percent at 7.74 euros, one of the biggest falls by a European blue chip stock and reversing gains made earlier this week.

The $500-billion-a-year steel industry, a gauge of the global economy, has slowed sharply this year from last as a moderation in China's economic growth has compounded weak demand from austerity-ravaged Europe.

The World Steel Association in October forecast steel demand would rise by 2.1 percent in 2012, down from 6.2 percent in 2011. It had forecast 3.6 percent growth in April.

Other steelmakers are hurting too. Earlier this month, Germany's ThyssenKrupp posted an annual net loss of 4.7 billion euros.

WEAK POINT

Europe is a particular weak point, as austerity drives aimed at tackling a sovereign debt crisis have cut demand for construction and cars, the steel sector's largest markets. The euro zone's manufacturing sector has contracted for 17 straight months.

ArcelorMittal, which makes about 6-7 percent of the world's steel, said steel demand in Europe had fallen about 29 percent since 2007, when the financial crisis started.

But it highlighted better trends in the United States, where it said demand was up almost 8 percent this year and is now about 10 percent lower than in 2007.

ArcelorMittal, whose output is more than double that of its nearest rival, has already announced the closure of blast furnaces in France and Belgium, with other operations temporarily idled due to overcapacity.

The writedown represents over a third of ArcelorMittal's overall goodwill of $12.5 billion reported at the end of last year. The group, around 40-percent owned by the Mittal family, took on about $6.6 billion of goodwill when it bought Arcelor.

It said the writedown would be a non-cash charge in its fourth quarter results and would not affect net debt or core profit. Before the writedown, analysts had on average forecast the group would make $529.5 million in net profit this year, and $7.1 billion in core profit, according to StarMine. (Additional reporting by Philip Blenkinsop; Editing by Hans-Juergen Peters and Mark Potter)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Jan Dhan Yojana

REUTERS SHOWCASE

Japan Trip

Japan Trip

Modi eyes breakthrough nuclear pact on Japan trip.  Full Article 

Chance For Reform

Chance For Reform

India's coal crunch - a chance to revamp, reallocate and revive.  Full Article 

E-Commerce

E-Commerce

Ratan Tata invests in online retailer Snapdeal.  Full Article 

Top Priority

Top Priority

Finance minister says food inflation is top priority.  Full Article 

Deal Talk

Deal Talk

Who wants to buy Snapchat? Microsoft, Google, Apple, Alibaba.  Video 

Fresh Funding

Fresh Funding

Tiger Global leads $65 million funding in Indian messaging app Hike.  Full Article 

GDP Preview

GDP Preview

Economy likely grew faster in June quarter: Reuters poll.  Full Article 

Safety Net

Safety Net

SEBI revamps trading safety-net rules.  Full Article 

Fraud Investigation

Fraud Investigation

IMF's Lagarde put under investigation in French fraud case.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage