ArcelorMittal plans to cut dividend after losses

Thu, Nov 1, 2012, 00:00

ARCELORMITTAL, the world’s largest steelmaker, plans to slash its dividend and focus on cutting debt after slowing demand from China and sluggish European markets drove it to a third-quarter loss.

The group, which makes 6-7 per cent of the world’s steel, said yesterday market conditions would remain tough this year and scrapped its forecast for core profit per tonne in the second half to be similar to that in the first.

Finance chief Aditya Mittal was hopeful of some improvement in 2013, following a recent pick up in iron ore and Chinese steel prices and stability in the price of scrap.

“Clearly Q3 and Q4 represent very challenging operating conditions, but should mark the low point in the cycle,” he told a conference call.

Shares in ArcelorMittal, formed in 2006 when the steel business of Indian-born tycoon Lakshmi Mittal bought European peer Arcelor, were down 4.1 per cent in morning trading, among the weakest in the blue-chip FTSEurofirst 300 index .

The $500-billion-a-year steel industry – a gauge of the global economy – has slowed sharply this year from last, as a moderation in China’s economic growth has compounded weak demand from austerity-ravaged Europe.

The World Steel Association earlier this month forecast steel demand would rise by 2.1 per cent in 2012, down from 6.2 per cent in 2011. It had forecast 3.6 per cent growth in April.

ArcelorMittal, whose output is more than double that of its nearest rival, reported third-quarter earnings before interest, tax, depreciation and amortisation (EBITDA) of $1.34 billion, in line with forecasts, but the lowest in three years. It sees European Union demand falling 8 per cent this year, leaving it 29 per cent below pre-crisis levels, and has responded with plans to close blast furnaces in Belgium and France.

Including an impairment and restructuring charges related to those closures, as well as a one-off hit from a new US labour contract, ArcelorMittal tumbled to a net loss of $709 million.

ArcelorMittal said it planned to cut its annual dividend to $0.20 per share in 2013, saving $1 billion as it battles to reduce debt and keep a valuable investment-grade credit rating. – (Reuters)