(FROM THE WALL STREET JOURNAL 2/6/16) 
   By Alex MacDonald and John W. Miller 

ArcelorMittal, the world's largest steelmaker, said Friday it would issue $3 billion in shares to shore up its finances as it grapples with a global steel glut that pushed it to a $6.7 billion loss in the fourth quarter.

Chief Executive Lakshmi Mittal said in an interview that it is time "to focus on improving our balance sheet" amid the deteriorating global outlook for the industry.

ArcelorMittal lost almost $8 billion for all of last year as a flood of Chinese exports and a collapse in demand battered steel prices. The average global steel price fell 23% in 2015, according to consultancy firm MEPS International Ltd. The company also mines iron ore, steel's main ingredient, and its benchmark price dropped 43% last year.

Amid the tough market conditions, ArcelorMittal aims to reduce net debt by about $4 billion from $15.7 billion at the end of 2015. The company's dismal fourth-quarter results -- which were released a week earlier than scheduled -- underscored the urgency of that plan.

ArcelorMittal's net loss ballooned to $6.7 billion from just under $1 billion in the year-earlier quarter, and revenue sank 25% to $14 billion amid the slump in prices of iron ore and steel. Impairment charges of $4.8 billion largely related to its iron-ore operations led to a full-year loss of $7.9 billion, worse than its $1.1 billion loss in 2014.

The Mittal family, which at the end of last year owned about a 39% stake, said it would subscribe to its entitlement in the share issue, or about $1.1 billion.

The company, which is based in Luxembourg and run out of London, will also sell its 35% stake in Gestamp Automocion, a Spanish manufacturer of bumpers, chassis, pedal boxes and other steel car parts, for about $1 billion by the end of June to pay down debt.

Aditya Mittal, the steelmaker's chief financial officer, said shareholders would be better served by a rights issue than more asset sales given expectations that supply and demand in the global steel market will achieve a better balance with time. "We have to make sure we don't destroy value" through asset sales, he told reporters on Friday.

ArcelorMittal shares have fallen 60% over the past year and closed the day down 9.7% at $3.73 on the New York Stock Exchange. Falling steel prices and excess steel supply from China, the world's largest steel producer, have exerted intense pressure on its business. In 2015, Chinese steel exports grew 22% to 100.3 million tons, by far the most steel a country has ever exported, according to Chinese customs data.

Lakshmi Mittal said ArcelorMittal faces continued tough trading conditions. "[This year] will be another difficult year for our industries," he said. "It is clear that China has a challenge to restructure its steel industry . . . Until this situation is fully addressed the effective and swift implementation of trade defense instruments will be critical."

 

(END) Dow Jones Newswires

February 06, 2016 02:47 ET (07:47 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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