ArcelorMittal sees modest pickup after deep 2012 loss

BRUSSELS Wed Feb 6, 2013 5:35pm IST

1 of 2. A worker shovels silica next to melted steel inside a hall at the ArcelorMittal Galati steel factory in Galati, 250 km (155 miles) northeast of Bucharest May 31, 2012.

Credit: Reuters/Radu Sigheti/Files

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BRUSSELS (Reuters) - ArcelorMittal (ISPA.AS), the world's largest steelmaker, forecast improving demand and earnings this year, after a wretched 2012 in which sliding European consumption and a Chinese slowdown drove it to a deep net loss.

The Luxembourg-based company said global steel consumption - a gauge of the world economy - would grow by 3 percent in 2013 after a 2 percent increase last year, driven by faster growth in Brazil and China, while Europe would not weaken as much.

The $500 billion a year steel industry slowed sharply last year as a moderation in Chinese growth compounded weak demand in austerity-hit Europe. ArcelorMittal has no operations in China, but like all steelmakers is influenced by trends in the world's largest producer and consumer of the metal.

China's economy grew at its slowest pace in 13 years in 2012, but a year-end spurt in infrastructure spending and a jump in trade should set it on course for quicker expansion.

ArcelorMittal said it expected its own steel shipments would rise by between 2 and 3 percent in 2013 and margins per tonne would improve slightly over the course of the year due to a cost savings plan.

Core profit (EBITDA) would be higher this year than the $7.08 billion achieved in 2012, the second-lowest since the company was formed in 2006.

The group posted a net loss of $3.73 billion for the year, largely the result of a $4.3 billion hit in the fourth quarter from writing down the value of its European steel business and $1.3 billion related to the idling and closure of plants.

Its shares, which have fallen 10 percent in the past two weeks, were 2.7 percent higher by 1055 GMT, making them among the top 10 best performers in the FTSEurofirst 300 index .FTEU3 of leading European stocks.

Nomura analyst Neil Sampat said the guidance was consistent with consensus estimates for core profit this year of $8 billion. "To me that's relatively positive, given there was a fear that estimates would come down," he said.

BOTTOMING OUT

Chief Executive Lakshmi Mittal said 2012 had been a difficult year for steel, particularly in Europe, where an 8.8 percent drop in demand had prompted a number of steps to reduce capacity and cut debt.

Investors already knew that ArcelorMittal had slashed its proposed dividend, sold assets and raised $4 billion by selling shares and convertibles to cut debt after losing its investment-grade status.

Steel industry body Eurofer said yesterday it expects European steel demand to fall further this year after a sharp drop in 2012.

Yet global economic indicators were trending upwards and there were signs of stabilisation in Europe, though euro zone uncertainty remained a key risk, ArcelorMittal said.

The group forecast European consumption would be 1 percent lower this year than last. However, the Chinese market would grow by 3 percent from 2 percent in 2012 and Brazilian growth would accelerate to 5 percent from 1 percent.

World number five POSCO (005490.KS) has also forecast global demand rising 3 percent this year and sees a sharp improvement in first-quarter earnings from the fourth. However, its 2013 sales target is 10 percent below the 2012 level.

U.S. producers U.S. Steel (X.N) and AK Steel Holding Corp (AKS.N) have said results this quarter should improve, though the extent of China's 2012 slowdown has also been underscored by results from Chinese steelmakers.

Profit at China's large steel mills slumped 98 percent last year, according to the China Iron & Steel Association, which has a slightly improved outlook this year.

ArcelorMittal also said iron ore shipments from its expanding mining operations would increase by 20 percent on the back of a ramp-up of production in Canada. Prices had also recovered from third-quarter lows. (Editing by David Cowell and David Holmes)

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