ArcelorMittal to Incur Hefty Charge - Analyst Blog
27 Dicembre 2012 - 1:15PM
Zacks
Steel maker ArcelorMittal (MT) announced that
it will incur a goodwill write down amounting to $4.3 billion for
its European businesses in the fourth quarter of 2012. The charge
is in accordance with the results of its goodwill impairment test
as per the IFRS accounting standards. The write down will be in the
form of a non-cash impairment charge.
ArcelorMittal considered weak market conditions in Europe to be
responsible for the impairment charge. Steel demand in Europe fell
about 8% this year, bringing the cumulative decline in demand to
approximately 29% since 2007. However, the company’s U.S. business
is performing well where apparent steel consumption is up almost 8%
this year and lagging the 2007 level by only 10%.
ArcelorMittal is wary of the situation in Europe and the domino
effect it might have on other markets. As a result, the company is
focusing on improving its efficiency, productivity, assets
optimization and net debt reduction.
Last month, ArcelorMittal posted a net loss of $709 million or
46 cents per share in the third quarter of 2012 compared with a net
income of $659 million or 19 cents per share a year ago. The bottom
line was hurt by the challenging economic conditions including the
slowdown in China as well as lower steel pricing and shipments.
The company’s adjusted loss of 31 cents a share missed the Zacks
Consensus Estimate of earnings of 6 cents. The adjusted loss
excluded one-time items – impairment and restructuring charges.
Revenues declined 18.5% year over year to $19,723 million,
trailing the Zacks Consensus Estimate of $21,189 million. Sales
also declined 12.3% on a sequential basis due to lower steel
shipment volumes and lower average steel selling prices. Shipments
declined 5.7% to 19.9 million metric tons in the quarter.
The company, which competes with U.S. Steel
Corp. (X) and Tata Steel Limited, maintains a Zacks #5
Rank, which translates into a short-term (1 to 3 months) Strong
Sell rating. We currently have a long-term (more than 6 months)
Underperform recommendation on the shares of ArcelorMittal.
ARCELOR MITTAL (MT): Free Stock Analysis Report
UTD STATES STL (X): Free Stock Analysis Report
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