--ArcelorMittal eyes $3 million in management savings by the end
of 2015
--ArcelorMittal targets Ebitda/ton of $150 by 2017 up from
$85/ton in 2012
--ArcelorMittal eyes 40 million tons extra of annual steel
demand in EU, North America by 2017
By Alex MacDonald and Nadya Masidlover
LONDON--Steel titan ArcelorMittal (MT) announced Friday a new
management savings target of $3 billion by the end of 2015 in a bid
to boost its profit margin given protracted weakness in steel
demand and structural overcapacity, most notably in Europe.
ArcelorMittal, the world's largest steelmaker by volume, has
idled production capacity, cut its dividend, sold billions of
dollars in assets and raised $4.3 billion via a rights issue in
order to pay down debt after the world's largest credit ratings
agencies downgraded the company's debt to junk status.
Steelmakers around the world are facing profit margin squeezes
due to weak steel demand stemming from last year's
slower-than-expected Chinese economic growth and weak demand from
frail U.S. and European economies. The prospects are looking rosier
for this year with global steel demand set to grow 3% to 3.5% after
rising 2% the year before, but European demand is still forecast to
shrink at a pace of 1% after contracting 9% last year, according to
the company.
The Luxembourg-based steel maker, which produces more steel than
its next two closest rivals put together, said it plans to draw
further management savings from operational efficiencies, energy
savings, and fixed cost savings after delivering $4.8 billion in
cost savings from a management gains program announced in 2008 and
completed last year.
This is in addition to a $1 billion asset optimization savings
program completed this year that led to the structural shutdown of
7 million tons of production capacity in Europe and the temporary
idling of several other furnaces.
ArcelorMittal expects the savings program along with a 15%
expansion in its steel markets to help restore the company's
earnings before interest, taxes, depreciation and amortization or
Ebitda per ton of steel produced to $150 a metric ton by the end of
2017.
This compares with Ebitda per ton of $85 last year, down from
$118 the year before and down from a peak of $241 in 2008. The
company expects increased steel demand globally to boost its steel
shipments above 95 million tons annually over the next five years
compared to less than 90 million tons annually over the past four
years. The company shipped 110 million tons of steel at its peak in
2006.
ArcelorMittal expects its mining division, Brazilian steel
operations and automotive steel business to be a key driver behind
the company's future profitability. It is also banking on North
American and European Union steel demand rising by a combined 40
million tons, or about 3.5% annually, over the next five years, in
order to reach its Ebitda per ton target.
"I do not see major risk in [reaching] $150/ton and I'm quite
confident we could achieve this," said ArcelorMittal's Chief
Executive Lakshmi Mittal in response to some analysts' skepticism
about the company's steel demand growth forecast for North America
and the European Union. He told analysts at the company's investor
day meeting Friday that the projections were based on data from
steel associations and the industry that had been cross-referenced
against the company's own internal projections.
The company is aiming to reduce its net debt to $15 billion
before it will contemplate either boosting capital expenditure or
returning cash to shareholders, Mr. Mittal said. The company
doesn't believe greenfield steel projects are economically viable
at the moment, even in India where its projects have faced delays.
It noted that brownfield projects in India, however, were still
viable.
ArcelorMittal's CFO Aditya Mittal said the company also remains
committed to restoring its credit rating to investment grade over
time and will continue to dispose of assets at the right time and
price. He said the company wouldn't consider any transformational
deal until its share price better reflects the value of the
business.
ArcelorMittal's shares closed down 1% at EUR11.41 a share and
have fallen 11.8% since the beginning of the year.
Write to Alex MacDonald at alex.macdonald@dowjones.com
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