ArcelorMittal Reports Third Quarter 2012 and Nine Months 2012 Results

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ArcelorMittal Reports Third Quarter 2012 and Nine Months 2012 Results

LUXEMBOURG--(BUSINESS WIRE)-- Regulatory News:

ArcelorMittal (referred to as "ArcelorMittal" or the "Company") (MT (New York, Amsterdam, Paris, Luxembourg), MTS (Madrid)), the world's leading integrated steel and mining company, today announced results1 for the three and nine- month periods ended September 30, 2012.


Highlights:

  • Health and safety performance: LTIF rate2 of 1.0x in 3Q 2012 as compared to 0.8x in 2Q 2012 and 1.5x in 3Q 2011
  • EBITDA3 of $1.3 billion in 3Q 2012 (including negative $0.1 billion from employee benefit charges4) as compared to $2.4 billion in 2Q 2012 (which included positive $0.3 billion of gains on subsidiary divestments5)
  • Steel shipments of 19.9 Mt in 3Q 2012, a decrease of 8.3% as compared to 2Q 2012 and 5.7% below 3Q 2011
  • 14.3Mt iron ore produced in 3Q 2012, up +1.3% YoY; 7.1Mt shipped and reported at market price6, up +6.7% YoY
  • Net debt7 increased by $1.2 billion during 3Q 2012 to $23.2 billion, driven by negative operating cash flow (including a $0.3 billion investment in working capital) and negative foreign exchange impacts partially offset by proceeds from asset disposal and an issuance of perpetual securities
  • Liquidity19 of $13.4 billion at end 3Q 2012, with an average debt maturity of 6.2 years
  • Asset optimization plan progressing: Closure of liquid phase at Liege, Belgium8 agreed; announced intention to launch a project to permanently close the liquid phase of Florange in France
  • Management gains plan completed with $4.8 billion savings achieved ahead of schedule

Outlook and guidance:

  • The Q3 2012 fall in the iron ore price9 and the weaker global economic backdrop adversely impacted steel prices and steel volumes as well as the profitability of our mining operations, affecting our previous expectations for group profitability in 2H 2012
  • The Company now expects to achieve FY 2012 EBITDA of approximately $7 billion
  • Iron ore shipments remain on track to increase by approximately 10% in FY 2012 compared to FY 2011
  • Excluding any proceeds from future asset sales, net debt is expected to be approximately $22 billion by year end; deleveraging is a priority as the Company continues to target an investment grade credit rating
  • Considering the challenging global economic conditions, and the Company's priority to deleverage, ArcelorMittal's Board of Directors proposes reducing the annual dividend payment to $0.20/share10 from 2013 (from $0.75/share in 2012)
  • 2012 capex is expected to be approximately $4.5 billion; ArcelorMittal Mines Canada expansion to 24mtpa11 on track for ramp up during 1H 2013

Financial highlights (on the basis of IFRS1, amounts in USD):

(USDm) unless otherwise shown 3Q 12 2Q 12 3Q 11 9M 12 9M 11
Sales $19,723 $22,478 $24,214 $64,904 $71,524
EBITDA 1,336 2,449 2,408 5,757 8,403
Operating income / (loss) (49) 1,101 1,168 1,715 4,851
Income from discontinued operations - - - - 461
Net income / (loss) (709) 959 659 261 3,263
Basic earnings / (loss) per share (USD) (0.46) 0.62 0.43 0.17 2.11
           
Continuing operations          
Own iron ore production (Mt) 14.3 14.4 14.1 41.9 39.0
Iron ore shipments at market price (Mt) 7.1 8.2 6.7 22.1 19.6
Crude steel production (Mt) 21.9 22.8 22.4 67.4 70.2
Steel shipments (Mt) 19.9 21.7 21.1 63.8 65.2

EBITDA/tonne (USD/t)12

 67 113 114 90 129

Mr. Lakshmi N. Mittal, Chairman and CEO of ArcelorMittal, commented:

The already fragile global economy was further impacted in the third quarter of 2012 by the slowdown in China. This resulted in very challenging operating conditions for ArcelorMittal, which are expected to continue in the fourth quarter. Against this backdrop, the Company is focussed on delivering its plan of asset optimization, net debt reduction and productivity and efficiency improvements.

THIRD quarter 2012 Earnings ANALYST Conference Call

ArcelorMittal management will host a conference call for members of the investment community to discuss the financial performance for the third quarter and nine-months period ended September 30, 2012 at:

Date New York London Luxembourg
Wednesday October 31, 2012 10.30am 2.30pm 3.30pm
   
The dial in numbers:  
Location Toll free dial in numbers Local dial in numbers Participant
UK local: 0800 169 3059 +44 (0)207 970 0006 899569#
USA local: 1800 814 6417 +1 215 599 1757 899569#
France: 0800917772 +33 170707578 899569#
Germany: 08009646526 +49 6940359700 899569#
Spain: 900994921 +34 914140992 899569#
Luxembourg: 80024686 +352 24871048 899569#
 
A replay of the conference call will be available for one week by dialing
  Language Access code
+49 (0) 1805 2043 089 English 439204#

The conference call will include a brief question and answer session with senior management. The presentation will be available via a live webcast on www.arcelormittal.com.

Forward-Looking Statements

This document may contain forward-looking information and statements about ArcelorMittal and its subsidiaries. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. Forward-looking statements may be identified by the words "believe," "expect," "anticipate," "target" or similar expressions. Although ArcelorMittal's management believes that the expectations reflected in such forward-looking statements are reasonable, investors and holders of ArcelorMittal's securities are cautioned that forward-looking information and statements are subject to numerous risks and uncertainties, many of which are difficult to predict and generally beyond the control of ArcelorMittal, that could cause actual results and developments to differ materially and adversely from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed or identified in the filings with the Luxembourg Stock Market Authority for the Financial Markets (Commission de Surveillance du Secteur Financier) and the United States Securities and Exchange Commission (the "SEC") made or to be made by ArcelorMittal, including ArcelorMittal's Annual Report on Form 20-F for the year ended December 31, 2011 filed with the SEC. ArcelorMittal undertakes no obligation to publicly update its forward-looking statements, whether as a result of new information, future events, or otherwise.

About ArcelorMittal

ArcelorMittal is the world's world's leading integrated steel and mining company, with a presence in more than 60 countries.

ArcelorMittal is the leader in all major global steel markets, including automotive, construction, household appliances and packaging, with leading R&D and technology, as well as sizeable captive supplies of raw materials and outstanding distribution networks. With an industrial presence in over 20 countries spanning four continents, the Company covers all of the key steel markets, from emerging to mature.

Through its core values of sustainability, quality and leadership, ArcelorMittal commits to operating in a responsible way with respect to the health, safety and well-being of its employees, contractors and the communities in which it operates. It is also committed to the sustainable management of the environment. It takes a leading role in the industry's efforts to develop breakthrough steelmaking technologies and is actively researching and developing steel-based technologies and solutions that contribute to combat climate change.

In 2011, ArcelorMittal had revenues of $94 billion and crude steel production of 91.9 million tonnes, representing approximately 6 percent of world steel output.

ArcelorMittal is listed on the stock exchanges of New York (MT), Amsterdam (MT), Paris (MT), Luxembourg (MT) and on the Spanish stock exchanges of Barcelona, Bilbao, Madrid and Valencia (MTS).

For more information about ArcelorMittal please visit: www.arcelormittal.com.

ARCELORMITTAL THIRD QUARTER 2012 RESULTS

ArcelorMittal, the world's leading integrated steel and mining company, today announces results for the three month and nine month periods ended September 30, 2012.

Corporate responsibility and safety performance

Health and safety - Own personnel and contractors lost time injury frequency rate2

Health and safety performance, based on own personnel figures and contractors lost time injury frequency rate, increased to 1.0x in third quarter of 2012 ("3Q 2012") as compared to 0.8x for the second quarter of 2012 ("2Q 2012") and significantly decreased as compared to 1.5x for the third quarter of 2011 ("3Q 2011").

The lost time injury frequency rate of 1.0x in first nine months of 2012 ("9M 2012") compares to 1.5x for the first nine months of 2011 ("9M 2011"), with significant improvements across all segments, especially in the Mining, Flat Carbon Americas, Long Carbon Americas and Europe and Distribution Solutions segments.

Despite this encouraging performance in lost time injury frequency rate, there is still more work to be done. In particular we have to focus on improving the safety performance of the contractors who work at our sites.

Own personnel and contractors - Frequency Rate
Lost time injury frequency rate 3Q 12 2Q 12 3Q 11 9M 12 9M 11
Total Mines 0.7 0.5 1.2 0.8 1.3
           
Lost time injury frequency rate 3Q 12 2Q 12 3Q 11 9M 12 9M 11
Flat Carbon Americas 0.9 1.1 1.7 1.0 1.9
Flat Carbon Europe 1.4 1.2 1.6 1.4 1.7
Long Carbon Americas and Europe 1.2 0.9 1.7 1.0 1.5
Asia Africa and CIS 0.5 0.3 0.9 0.5 0.7
Distribution Solutions 1.2 1.2 4.4 1.5 3.7
Total Steel 1.0 0.9 1.6 1.0 1.5
           
Lost time injury frequency rate 3Q 12 2Q 12 3Q 11 9M 12 9M 11
Total (Steel and Mines) 1.0 0.8 1.5 1.0 1.5

Key corporate responsibility highlights for 3Q 2012

  • ArcelorMittal leads the steel sector in the 2012 Dow Jones Sustainability Index (DJSI). The improved score resulted from improvements in disclosure, human rights, and the Company's responsible sourcing program.
  • ArcelorMittal Hamburg has been recognized as the flagship project for the city of Hamburg's European Green Capital 2011. This accolade builds on ArcelorMittal Hamburg's recent ISO50001 certification for energy management. Approximately 60,000 tonnes of CO2 have already been saved through energy efficiency improvements at this plant since 2007.
  • ArcelorMittal in Kazakhstan is pioneering the reuse of coal-bed mine waste methane gas for power generation. In addition to removing potentially dangerous methane from the coal mine, the project inaugurated in July 2012 is expected to generate an annual 1.4MW of electricity that will meet ~20% of the mine's power needs and reduce CO2 emissions significantly.

Analysis of results for the nine months ended September 30, 2012 versus results for the nine months ended September 30, 2011

ArcelorMittal's net income for 9M 2012 was $0.3 billion, or $0.17 per share, as compared to net income for 9M 2011 of $3.3 billion, or $2.11 per share.

Total steel shipments for 9M 2012 were lower at 63.8 million metric tonnes as compared with 65.2 million metric tonnes for 9M 2011.

Sales for 9M 2012 decreased by 9.3% to $64.9 billion as compared with $71.5 billion for 9M 2011 primarily due to lower average steel selling prices (-8.1%) and lower steel shipments (-2.2%).

Depreciation of $3.4 billion for 9M 2012 was comparable with 9M 2011.

Impairment charges for 9M 2012 totaled $199 million, primarily related to the intention to launch a project to permanently close the liquid phase at the Florange site in France ($130 million); and the extended idling of the electric arc furnace and continuous caster at the Schifflange site in Luxembourg. Impairment expenses for 9M 2011 were $103 million relating to a rolling facility in the Long Carbon Americas segment as well as costs associated with the decision to close two blast furnaces, sinter plant, steel shop and continuous casters at Liege, Belgium.

Restructuring charges for 9M 2012 totaled $395 million and consisted largely of costs associated with the implementation of the Asset Optimization Plan primarily impacting Flat Carbon Europe and Long Carbon Europe operations.

Operating income for 9M 2012 was $1.7 billion, compared with operating income of $4.9 billion for 9M 2011. Operating result for 9M 2012 was positively impacted by changes to the employee benefit plans at ArcelorMittal Dofasco13 which led to curtailment gains of $241 million, the Skyline Steel divestment5 which led to a gain of $339 million partially offset by $72 million charges related to one-time signing bonus and post retirement benefit costs following entry into the new US labor contract. Operating result for 9M 2012 was also positively impacted by $426 million of dynamic delta hedge ("DDH") income (unwinding of hedges on raw material purchases) recognized during the period. Operating result for 9M 2011 was positively impacted by $437 million DDH income and a non-cash gain of $336 million relating to the reversal of provisions for inventory write-downs and litigation.

Income from equity method investments and other income in 9M 2012 was $52 million as compared to $443 million in 9M 2011. Income from equity method investments and other income was lower in 9M 2012 on account of losses from Chinese investees and the impact of disposals (Erdemir14, Enovos15 and Macarthur Coal). Income for 9M 2011 included an impairment loss of $119 million as a result of the Company's withdrawal from the joint venture with Peabody Energy to acquire ownership of Macarthur Coal.

Net interest expense (including interest expense and interest income) for 9M 2012 at $1.4 billion was comparable to 9M 2011 level.

Due to exchange rate effects, foreign exchange and other net financing costs16 were $497 million for 9M 2012 as compared to costs of $1.0 billion for 9M 2011.

ArcelorMittal recorded an income tax benefit of $366 million for 9M 2012, as compared to an income tax expense of $49 million for 9M 2011.

Loss attributable to non-controlling interests for 9M 2012 was $21 million as compared with gain attributable to non-controlling interests for 9M 2011 of $21 million.

Discontinued operations for 9M 2012 was nil as compared to a gain of $461 million for 9M 2011, which included $42 million of the post-tax net results contributed by the stainless steel operations prior to the spin-off on January 25, 2011, and a $419 million one-time non-cash gain from the recognition through the income statement of gains/losses relating to the demerged assets previously held in equity.

Analysis of results for 3Q 2012 versus 2Q 2012 and 3Q 2011

ArcelorMittal recorded a net loss for 3Q 2012 of $0.7 billion, or $0.46 loss per share, as compared with net income of $1.0 billion, or $0.62 per share, for 2Q 2012, and net income of $0.7 billion,or $0.43 per share, for 3Q 2011.

Total steel shipments for 3Q 2012 were 19.9 million metric tonnes as compared with 21.7 million metric tonnes for 2Q 2012 and 21.1 million metric tonnes for 3Q 2011.

Sales for 3Q 2012 decreased by 12.3% to $19.7 billion as compared with $22.5 billion for 2Q 2012, and were down 18.5% as compared with $24.2 billion for 3Q 2011. Sales were lower during 3Q 2012 as compared to 2Q 2012 primarily due to lower steel shipment volumes (-8.3%), and lower average steel selling prices (-3.4%).

Depreciation amounted to $1.2 billion for 3Q 2012, comparable to 2Q 2012 and 3Q 2011.

Impairment charges for 3Q 2012 totaled $130 million, primarily related to the intention to launch a project to permanently close the liquid phase at the Florange site in France. Impairment charges for 2Q 2012 were nil. Impairment charges for the 3Q 2011 was $85 million relating to costs associated with the decision to close 2 blast furnaces, sinter plant, steel shop and continuous casters in Liege, Belgium.

Restructuring charges for 3Q 2012 and 2Q 2012 totaled $98 million and $190 million, respectively, and consisted primarily of costs associated with the decision to close two blast furnaces, sinter plant, steel shop and continuous casters in Liege, Belgium. There were no such restructuring charges in 3Q 2011.

Operating loss for 3Q 2012 was $49 million, as compared with operating income of $1.1 billion for 2Q 2012 and operating income of $1.2 billion for 3Q 2011. Operating result for 3Q 2012 was negatively impacted by $72 million related to one-time signing bonus and post retirement benefit costs following entry into the new US labor contract. Operating result for 2Q 2012 was positively impacted by a $339 million gain from the Skyline Steel divestment5.

Operating result for 3Q 2012 and 2Q 2012 was positively impacted by $131 million and $136 million, respectively, of DDH income recognised during the quarter. Operating result for 3Q 2011 included a non-cash gain of $129 million relating to DDH income.

Loss from equity method investments and other income in 3Q 2012 was $55 million, as compared to an income of $121 million in 2Q 2012 on account of lower income from Chinese investees and lower dividend income. Income from equity method investments and other income in 3Q 2011 was $6 million.

Net interest expense (including interest expense and interest income) was higher at $479 million for 3Q 2012 as compared to $456 million for 2Q 2012 and $477 million for 3Q 2011. Net interest expense increased in 3Q 2012 compared to 2Q 2012 primarily on account of increased interest triggered by the Company's recent downgrade by Standard & Poor's.

Due to exchange rate effects, foreign exchange and other net financing losses were $103 million for 3Q 2012 as compared to losses of $32 million for 2Q 2012 and gains of $85 million for 3Q 2011.

ArcelorMittal recorded an income tax expense of $43 million for 3Q 2012, as compared to an income tax benefit of $219 million for 2Q 2012 and an income tax expense of $154 million in 3Q 2011.

Loss attributable to non-controlling interests for 3Q 2012 was $20 million as compared with a loss of $6 million for 2Q 2012 and a loss of $31 million for 3Q 2011.

Capital expenditure projects

The following tables summarize the Company's principal growth and optimization projects involving significant capital expenditures.

Completed Projects in Most Recent Quarters

Segment Site Project Capacity / particulars Actual Completion
Mining Liberia mines Greenfield Liberia Iron ore production of 4mt / year (Phase 1) 3Q 11(a)

Ongoing(b)Projects

Segment Site Project Capacity / particulars Forecasted Completion
Mining Andrade Mines (Brazil) Andrade expansion Increase iron ore production to 3.5mt / year 4Q 2012
Mining ArcelorMittal Mines Canada Replacement of spirals for enrichment Increase iron ore production by 0.8mt / year 1H 2013
Mining ArcelorMittal Mines Canada Expansion project Increase concentrator capacity by 8mt/year (16 to 24mt / year) 1H 2013
FCA ArcelorMittal Dofasco (Canada) Optimization of galvanizing and galvalume operations Optimize cost and increase galvalume production by 0.1mt / year On hold
FCA ArcelorMittal Vega Do Sul (Brazil) Expansion project Increase HDG capacity by 0.6mt / year and CR capacity by 0.7mt / year On hold
LCA Monlevade (Brazil) Wire rod production expansion Increase in capacity of finished products by 1.15mt / year On hold

a) Iron ore mining production commenced in 2011 with 1 million tonnes produced. The targeted iron ore production in 2012 is 4 million tonnes. As previously announced, the Company is considering a Phase 2 expansion that would lead to annual production of 15 million tonnes by 2015. This would require substantial investment in a concentrator, the approval process of which remains in the final stages.

b) Ongoing projects refer to projects for which construction has begun (excluding various projects that are under development), or have been placed on hold pending improved operating conditions.

Analysis of segment operations

Flat Carbon Americas

(USDm) unless otherwise shown 3Q 12 2Q 12 3Q 11 9M 12 9M 11
Sales $4,840 $5,359 $5,499 $15,469 $16,005
EBITDA 236 474 420 1,342 1,872
Operating income 3 245 193 655 1,197
           
Crude steel production (Mt) 5,726 6,014 5,866 17,989 18,206
Steel shipments (Mt)  Read Full Story

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