ArcelorMittal to Raise $3 Billion on Steel Rout; Profit Down

The company has been hit by declining prices for steel as China pushes the material onto the world market at record levels to counter its slowing economy.

Billionaire Lakshmi Mittal, the chief executive officer who owns about 37pc of the business, has committed to maintain his stake, with his family putting $1.1bn into the fundraising. It has written down both its steel in storage and its mining assets based on the falling steel and iron ore price. “Although demand in our core markets remained strong, prices deteriorated significantly during the year as a result of excess capacity in China”. This is compared to last year’s EBITDA of $5.23 billion.

2015 was a very challenging time for the steel and mining industries.

ArcelorMittal, the world’s largest steelmaker, launched plans on Friday to raise Dollars 3 billion from a share issue to reduce debt, as it continues to suffer from the Chinese industry’s overcapacity which it says has driven down world prices.

ArcelorMittal will cut its net debt by $4 billion to below $12 billion through the capital raising and sale of the stake in Gestamp Automacion.

ArcelorMittal said Friday it would ask shareholders for fresh funds, sell assets and slash costs after falling commodity prices pummelled its performance previous year, leaving a gaping hole in its accounts.

ArcelorMittal, whose US division employs more than 20,000 at 27 locations nationwide, said the financial moves would accelerate the company’s debt reduction plans, cutting net debt to less than $12 billion from the $15.7 billion reported at the end of December.

On the impairment charges, the firm said, “FY 2015 net loss of $7.9 billion including $4.8 billion of impairments (primarily due to mining impairments)”.

In the fourth quarter, sales fell 25% year-on-year due to a 22.6% fall in average steel selling prices, a 6.8% decline in steel shipments and a 37% slump in iron ore prices. Finance Director Aditya Mittal told an audio conference with reporters that his company is discussing with the EU Commission and other European producers ways to defend themselves against cheap steel imports from China, which has been accused of dumping its excess production on the world market at below cost.

Earnings might improve more if the company successfully implements a new plan to generate an additional $US3 billion in Ebitda and more than $US2 billion in free cash flow annually from 2020 by reducing costs and enhancing the efficiency of its mines and steel plants.