Arcelor Mittal Slips Into Losses For Sept Quarter 2012

The world’s largest steel producing company, Arcelor Mittal, has posted weak results for the Sept 2012 quarter. The company for the quarter has slipped into the net loss and has cut down the outlook for the full year FY13. The net loss during the quarter stood at USD 709 million as compared to the profit of USD 959 million in the previous quarter. The net sales of the company during the quarter declined by 18.5% on a YoY and 12.54% on QoQ basis to USD 19723 million.

The decline in the topline and bottomline was largely on the back of the slowdown in the major global economies especially Europe and china. Further the company in its press release has stated that the fall in the iron ore price and the weaker global economic has adversely impacted steel prices and steel volumes as well as the profitability of our mining operations.
The company’s steel business has not done well. The steel shipments (Volumes) declined by 5.5% on YoY and 8.3 % on a QoQ basis to 19.9 million tonnes which has largely impacted the financial performance of the company.

Moreover the EBITDA margin declined by 300 basis points on YoY basis to 6.77 per cent. The lower EBITDA was on the back of changes in the employee benefit charges during the quarter. The company has stated that it took a hit in the July-September period as the slowdown in China compounded the difficulties of an already fragile global economy. This resulted in very challenging operating conditions for Arcelor Mittal, which are expected to continue in the fourth quarter.

The World Steel Association has earlier mentioned steel demand to rise by 2.1 per cent in 2012, down from 6.2 percent in 2011. It had said in April that it expected 3.6 percent expansion this year. Further against the backdrop of a weak global steel scenario, the world apparent steel consumption declined by 3.3% on QoQ basis while that of China has declined by 1.3%.

A statement released by the company also says that global leading indicators have improved over the past few months but still remains weak. In Europe, manufacturing output has stabilised as destocking at end-users ends and sentiment improves however, it also mentions that Europe will continue to remain a big challenge for the company in the coming quarter and it does not expect any rebound in the short term.

On the price front the company has mentioned that the steel prices are currently lower, which is supported by the lower raw material prices have bottomed out in the international markets in the last one quarter.

In conclusion we believe that internationally steel companies will continue to face challenges in the quarter on the back of weak global markets which is yet in the dark clouds. Demand from China and the US and Europe will not see any major rebound in the coming quarter.

On the domestic side we believe Steel companies will report muted numbers for the Sept quarter 2012. Slowdown in demand due to monsoon and 5-10% fall in the steel prices will result into lower topline and bottomline.