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ArcelorMittal posts loss but upbeat on outlook
BRUSSELS—The cost of spinning off its stainless steel unit and higher raw material costs pushed ArcelorMittal into a fourth quarter loss, but the world's largest steel maker predicted 2011 will be better than 2010. The Luxembourg-based company yesterday posted a net loss of US$780 million for the final three months of 2010, compared with a year-earlier profit of US$1.11 billion. Prices for key raw materials like iron ore and coking coal as well as financing costs have been rising over the past year, hurting ArcelorMittal’s bottom line. In addition, the company recorded a US$547 million loss at Aperam, its stainless steel unit that it spun off last month. The loss was caused by US$598 million in charges related to the spinoff. Sales, however, rose to US$20.7 billion from US$17.43 billion in the same period a year earlier thanks to higher shipments.
The company is still recovering from the recession’s collapse in demand for its steel used in buildings, bridges and cars. Capacity utilisation decreased to 69 per cent in the fourth quarter from 71 per cent in the third quarter due to weak market demand, ArcelorMittal said. While the results deteriorated in the second half of 2010, full-year results were still much better than in 2009, ArcelorMittal’s Chief Financial Officer Aditya Mittal told journalists. Net profit for all of 2010 jumped to US$2.92 billion from just US$157 million a year earlier, while sales rose to US$78.03 billion from US$61.02 billion. “Overall, we expect 2011 to be better than 2010,” said Mittal. Steel prices have been adjusting to higher raw material costs and capacity utilisation should rise to 76 per cent in the first quarter, Mittal said.
Shipment volumes and average steel prices are likely to increase further, pushing earnings before interest, taxes, depreciation and amortisation—or Ebitda—up to between US$2 billion and US$2.5 billion in the first quarter, compared with US$1.85 billion in the fourth quarter, the company said. ArcelorMittal said it expects raw material costs to continue rising, while increased investment activity will also add to costs. The world’s three biggest iron-ore suppliers decided in 2009 to price their contracts on a quarterly basis rather than an annual one, making steel producers more vulnerable to sudden price changes. (AP)
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