ArcelorMittal sees weak Q1, cuts dividend

ArcelorMittal sees weak Q1, cuts dividend
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First Published: Wed, Feb 11 2009. 12 16 PM IST
Updated: Wed, Feb 11 2009. 12 16 PM IST
Brussels: ArcelorMittal, the world’s largest steelmaker, reported a 42% drop in fourth-quarter core profit on Wednesday after a sharp slump in demand, forecast a very weak first quarter and cut its dividend.
The company said EBITDA (earnings before interest, tax, depreciation and amortisation) dropped to $2.81 billion in the October-December period, compared with the average $2.24 billion in a Reuters poll of 10 analysts.
That was within the company’s own guidance of $2.5 billion to $3.0 billion, but well below the $4.85 billion of a year ago when the commodities boom was in full swing.
ArcelorMittal forecast first-quarter EBITDA would be about $1.0 billion due to the full impact of price and output cuts.
The company said it would cut its annual dividend to $0.75 per share. There had been growing speculation among analysts that it would fail to stick to its previous commitment of $1.50.
Demand has slumped in key auto and construction markets.
Prices of hot-rolled coil, a form of flat steel mainly used in automotive industry, have slumped from a mid-2008 record of $1,125 a tonne to about $520 in the United States.
Prices of rebar, used for building, have slumped to about $676 a tonne from more than $1,000.
ArcelorMittal’s response was to cut output by 35% and shed 9,000 white-collar jobs, 3% of its workforce.
Analysts were looking for signs the company has its balance sheet under control.
It said it was on track to reduce net debt by $10 billion by the end of this year, having sold its stake in German plate mill Dillinger Huette for about $1 billion in December.
The company, formed from Mittal Steel’s takeover of then world number two Arcelor, went on a spending spree during the commodities boom, ratcheting up debt.
Overall debt fell to $26.5 billion, from $32.5 billion at the end of the third quarter.
Debt market concerns have eased.
Five-year credit default swaps on ArcelorMittal debt were trading at about 910 basis points a year for five year bonds, Markit data showed, from up to 1,525 basis points at end-2008.
ArcelorMittal shares are up some 19% in the year-to-date, although they fell about 8% on Tuesday.
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First Published: Wed, Feb 11 2009. 12 16 PM IST