ArcelorMittal Slashes Production By 35% As Recession Bites
Shares in world's largest steel company lose almost a fifth of their value as it issues profit warning
ArcelorMittal, the world's largest steel company, today said it would slash production by 35% and warned its earnings would slump in the current quarter.
The group, underlining the magnitude of the economic recession, said it would cut around 9m tonnes of output from the near-30m tonnes it produced in the second quarter of this year.
The production cuts, including 30% in Europe, are double the scale of reductions the group announced only last month as the economic crisis has deepened.
ArcelorMittal said it now expected to earn just $2.5bn (?1.6bn) to $3bn in the current quarter compared with the $8.6bn it earned in the third quarter. Third-quarter earnings (Ebitda) were up 76% on a year ago but the profit warning sent shares down 18% by noon, dragging the rest of the steel sector down with them.
Aditya Mittal, chief financial officer, said the output cuts would continue until the early part of 2009 "but we do expect things to stabilize" next year.
He added: "Things have worsened in the last three weeks and, as a result, we've had to accelerate our production cuts."
His father Lakshmi, chairman and chief executive, said the cuts were required to rebalance supply and demand. The group would also speed up efforts to pay down debt, with the aim of reducing this by $10bn by the end of next year.
The rapidly worsening economic outlook means that ArcelorMittal has frozen its expansion plans. "As the credit situation improves, as the real economy comes back, we'll go back to our original growth plan so I would expect it to be a temporary delay," Aditya said.
The group, which rode high earlier this year on rising steel prices, insisted it would still deliver core earnings of between $24.2bn to $24.7bn this year compared with $19.4bn.
But, with demand already weakening, shipments of steel fell from 29.8m tonnes in the second quarter to 25.6m tonnes in the third. So far this year they stand at 84.6m compared with 81.7m tonnes in the first nine months of 2007.
The group, underlining the magnitude of the economic recession, said it would cut around 9m tonnes of output from the near-30m tonnes it produced in the second quarter of this year.
The production cuts, including 30% in Europe, are double the scale of reductions the group announced only last month as the economic crisis has deepened.
ArcelorMittal said it now expected to earn just $2.5bn (?1.6bn) to $3bn in the current quarter compared with the $8.6bn it earned in the third quarter. Third-quarter earnings (Ebitda) were up 76% on a year ago but the profit warning sent shares down 18% by noon, dragging the rest of the steel sector down with them.
Aditya Mittal, chief financial officer, said the output cuts would continue until the early part of 2009 "but we do expect things to stabilize" next year.
He added: "Things have worsened in the last three weeks and, as a result, we've had to accelerate our production cuts."
His father Lakshmi, chairman and chief executive, said the cuts were required to rebalance supply and demand. The group would also speed up efforts to pay down debt, with the aim of reducing this by $10bn by the end of next year.
The rapidly worsening economic outlook means that ArcelorMittal has frozen its expansion plans. "As the credit situation improves, as the real economy comes back, we'll go back to our original growth plan so I would expect it to be a temporary delay," Aditya said.
The group, which rode high earlier this year on rising steel prices, insisted it would still deliver core earnings of between $24.2bn to $24.7bn this year compared with $19.4bn.
But, with demand already weakening, shipments of steel fell from 29.8m tonnes in the second quarter to 25.6m tonnes in the third. So far this year they stand at 84.6m compared with 81.7m tonnes in the first nine months of 2007.
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