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ArcelorMittal loss hits shares, sees pickup this year

The world's biggest steel maker ArcelorMittal yesterday reported a second-quarter net loss of $792 million (€581 million) but forecast an improvement in the market later this year.

The group said it expected a "gradual upturn" notably as China continued to import steel.

Chief executive officer Lakshmi Mittal said in a statement that "in recent weeks, we have begun to see the first signs of a pick-up."

But he cautioned that a return to production levels prevailing before the onset of the global financial crisis was not likely "before 2011".

The net loss disclosed yesterday, the company's third straight negative quarter, was more than double analysts' forecasts for $375 million and compared with a net profit of $5.84 billion 12 months earlier.

The shortfall appeared to discourage investors. ArcelorMittal shares at mid-day were showing a loss of 4.24 per cent to €24.25 on an overall Paris market that was 1.34 per cent stronger.

So far this year, the shares have gained 43 per cent while the Paris market's CAC 40 index has risen by slightly less than five per cent.

The three months to June outcome marked the third quarter running in the red for the steel giant which lost €1.1 billion in the three months to March and $2.6 billion in the three months to December.

Second-quarter sales slumped by more than half from a year earlier to $15.18 billion, reflecting a collapse in demand in its two key markets, the auto and construction industries.

On the operating level, ArcelorMittal reported a profit of $1.22 billion and said it expected this to rise to between $1.4 and $1.8 billion in the third quarter to September.

At Societe Generale, analysts said the results were disappointing.

Analysts at Aurel brokerage said the company's guidance pointed to earnings before interest, tax, depreciation and amortisation for the first nine months of the year of $3.4 - $3.9 billion, noting that this was "a very long way" from the $6.2 billion the house had previously expected for the whole of 2009.

The world's second-biggest steel maker, Nippon Steel, also reported a quarterly loss yesterday of 42.25 billion yen (€325 million).

With plants operating at about half capacity since the end of last year, some ArcelorMittal production had been restarted, in France, Belgium, Spain and the US.

Finance director Aditya Mittal said more furnaces could be brought back into production during the current quarter but did not provide further details. In emerging markets such as Brazil, steel mills were working almost at full capacity.

He said that inventories of steel had fallen to very low levels on the main markets and that China, the biggest user of steel, was continuing to import while US demand was recovering and de-stocking was coming to an end in Europe.

Unless there was a fresh deterioration in the economy, "we ought to see a gradual improvement in the second half (of the year) but a complete recovery will be slow," Aditya Mittal said.

At the end last month, the group, which has launched a vast plan for people to leave the company on a voluntary basis, had 296,000 employees, down from 322,000 12 months earlier. The programme would be pursued to cut costs further, Aditya Mittal said in a telephone conference. Costs had already been reduced by $1.7 billion since the beginning of this year.

At the end of last month, the group's net debt stood at $22.9 billion. The company, which has raised more than $11 billion in funding so far this year to reduce debt, is now close to its debt target of €22.5 billion by the end of this year.

ArcelorMittal has available funds of $22.7 billion. Aditya Mittal said that no big operation affecting the balance sheet was to be expected in the foreseeable future.

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