Brussels / London: Arcelor Mittal, the company formed last year in the steel industry’s largest-ever takeover, said 2006 profit fell 3.5% because of higher tax and announced plans to hand $2.4 billion to shareholders.
Net income fell to $7.97 billion, or $5.76 a share, compared with $8.26 billion, or $5.97 a share, based on figures calculated as if the company had existed for more than a year. Sales rose 10% to $88.6 billion. The Luxembourg-based Arcelor Mittal will buy back $590 million of stock and pay a $1.8 billion dividend, it said today in an e-mailed statement.
CEO Lakshmi Mittal agreed last year to buy Arcelor SA in a $38.3 billion takeover to create a steelmaker pouring a 10th of the world’s steel. Arcelor Mittal paid $1.65 billion in tax, 18% more than in 2005 as some tax credits were exhausted, chief financial officer Aditya Mittal said. Today’s earnings were the first reported by the enlarged company.
“We remain very positive in terms of the steel market in 2007 and believe 2007 will be a much better year for Arcelor Mittal than 2006,” Aditya Mittal said at a press conference in Luxembourg.
Shares of Mittal Steel Co. and Arcelor trade separately, pending the completion of the combination of the companies. Mittal gained 7 cents to 38.30 euros ($50.30) as of 1:56pm in Amsterdam. The stock has risen 38% over the last year, lagging behind the 66% gain of the 10-member Bloomberg Europe Steel Index. Arcelor was unchanged at 50.2 euros in Paris. The stock has risen 66% in the last 12 months.
“This is a very large company with substantial free cash” to return to shareholders, said Tom Muller, analyst at Theodoor Gilissen Bankiers NV in Amsterdam. “That will mean the company can continue to pay a dividend even if steel prices decline.” The company said Q4 net income rose to $2.37 billion, $1.71 a share. It didn’t give year-earlier figures.
Arcelor Mittal forecast unchanged profit in the first quarter, compared with the fourth quarter and said cost-savings from acquisitions were “on track”. Overall steel shipments will be in line with the 26.7 million metric tonnes shipped in the final three months of 2006, it said.
North American flat carbon-steel profits in the first quarter will “suffer” as customers use inventories, while profits in Europe will “remain positive,” the company said.
Savings from combining purchases, trading and marketing of both companies will increase to an annual rate of $500 million in the first quarter, from $270 million in the fourth quarter, Lakshmi Mittal said in Luxembourg. In China, exports are falling and producers will raise prices due to higher costs, he said.
Other European steelmakers have reported higher earnings in the past month on increased regional demand for the alloy. ThyssenKrupp AG, Germany’s largest steelmaker, said earlier this month that net income in the three months ended 31 December almost tripled, led by higher stainless-steel sales. Rautaruukki Oyj, Finland’s biggest producer of carbon steel, said on 7 February that fourth-quarter profit more than doubled on construction demand in eastern Europe.
Prices for European heavy-plate steel averaged $732.50 a metric tonne in 2006, from $680 a year earlier, according to data from UK publisher Metal Bulletin. Demand in the US is improving and there is no need to extend production cuts in the US to Europe, the elder Mittal said.
London-based Lakshmi Mittal, 56, is looking to add assets and is considering making an offer for the 51% stake in Indian iron-ore miner Sesa Goa Ltd that’s being sold by Mitsui & Co., he said at yesterday’s meeting. The company said last week it agreed with the Bin Jarallah Group to build a 500,000-tonne-a-year steel mill in Saudi Arabia.
“The future looks very aggressive,” said Stephen Pope, head of equity research in London at Cantor Fitzgerald LP, who rates the shares “buy” and doesn’t own them. “As they gain in size, that will give them pricing power.” (Bloomberg)