By KEVIN NEVERS 

ArcelorMittal (AM) is reporting a net loss for the fourth quarter of 2008—its first quarterly loss ever—of $2.632 billion or $1.93 basic earnings per share, compared to a net income in the third quarter of $3.821 billion or $2.79 per share and a net income of $2.435 billion or $1.72 per share in the year-ago period. 

While acknowledging the impact of the “global economic crisis” on its bottom line, the company nevertheless attributed that loss to exceptional pre-tax charges of $4.4 billion. 

In early trading this morning Wall Street was finding favor with the report, with the company’s stock price up at one point by around $1.50 or better than 6 percent although falling later in the morning to around $1.03 or a bit better than 4 percent up from Tuesday. 

Paul Gipson, president of United Steelworkers Local 6787, was generally pleased by the reception of the earnings report on Wall Street and did not find it altogether surprising, although he suggested that it might have something to do with the stimulus package now “going through Senate negotiations.” 

Gipson also expressed the hope that the Buy American provision in the stimulus package survives those negotiations. “People call it protectionism,” he said. “It’s not. Look, China’s been manipulating its currency for 10 years. A lot of people have invested in the foreign steel market and they don’t like the Buy American provision. But it’s our tax money getting spent in the stimulus package and it ought to be spent in the U.S.” 

Gipson did indicate that there is a possibility—”a very slim possibility”—of union members’ receiving a small profit-sharing check, based on an October which proved stronger than November and December. But members would do well not to expect it, he said. 

More Numbers 

Sales were down by 37 percent, from $35.198 billion in the third quarter to $22.089 billion ($27.993 billion in the year-ago period). “This decline resulted from a collapse in demand for steel products and a sharp fall in prices in the fourth quarter as a result of the global economic crisis,” AM said. The company noted that it began responding to plummeting demand “with substantial production cuts” in September and then increased those cuts in the fourth quarter. 

Shipments were down as well by 33 percent—again, AM said, due to the “collapse in demand"—from 25.6 million metric tons in the third quarter to 17.1 million metric tons in the fourth quarter (28 million metric tons in the year-ago period). 

For the fourth quarter AM reported an operating loss of $3.5 billion, compared to an operating income of $5.5 billion for the third quarter and an operating income of $3.3 billion for the year-ago period. “During the fourth quarter of 2008,” the company said, “ArcelorMittal recorded exceptional charges of $4.4 billion related to write-downs of inventory and raw material supply contracts and provisions for workforce reductions and litigation.” 

“ArcelorMittal’s generally excellent performance in 2008 was overshadowed by the considerable slowdown in the world economy in the last quarter of the year,” AM Chair and CEO Lakshmi Mittal said in a statement released today. “Our scale, strength, and market leadership, however, allowed us to swiftly and decisively implement a number of operational and financial measures to adapt to the changing environment. These measures have already started to yield results. The reduction of net debt is particularly pleasing, enabled by our ability to continue to generate strong cash flow. Whilst the operating climate is likely to remain challenging for the first quarter, we are starting to see some signs of improvement.” 

At a press conference in Europe early this morning, Mittal said that it could take the global steel market at least two years to return to “normalcy,” the Associated Press reported. Still, he expected global demand to fall by only 7 to 10 percent this year and projected the market to gain some traction in the second quarter as inventories are depleted. 

Mittal observed that the company reduced its output by 45 percent in the fourth quarter and will do the same in the first quarter until inventories are reduced, the AP also reported. 

AM is cutting around 9,000 of its 320,000 employees through a voluntary retirement initiative, the AP reported. 

AM is projecting a first-quarter EBITA—operating income plus depreciation, impairment expenses, and exceptional items—of around $1 billion, compared to a fourth-quarter EBITDA of $2.808 billion, a third-quarter EBITDA of $8.58 billion, and a year-ago EBITDA of $4.847 billion. 

As of Dec. 31, 2008, the company’s cash and cash equivalents totaled $7.6 billion, compared to $6 billion on Sept. 30, and it recorded a total liquidity of $13.4 billion, compared to $12 billion on Sept. 30. 

Net debt, on the other hand—much of it incurred in the acquisition of Arcelor—fell by 18 percent, the company slashed it from $32.5 billion on Sept. 30 to $26.5 billion on Dec. 31. 

In September the company announced a “Management Gains” plan targeting cost reductions of $5 billion over the next five years. By the end of 2009, it hopes to achieve $2 billion in fixed cost savings including selling, general, and administrative costs. 

Flat Carbon Americas 

The Flat Carbon Americas segment posted the following numbers in the fourth quarter: 

•An operating loss of $400 million, compared to an operating income of $600 million for the  third quarter. That loss included exceptional charges of $500 million related to write-offs of inventory and raw material supply contracts, compared to a non-recurring charge of $1.5 billion in the third quarter in connection with the new labor agreement with the UWS. Excluding those exceptional charges, Flat Carbon Americas posted an operating income of $100 million for the fourth quarter, compared to an operating income of $2.2 billion for the third quarter. 

•Sales were down by 47 percent, from $8.5 billion in the third quarter to $4.5 billion in the fourth quarter, “due to both lower volumes and prices (an 8.7 percent decrease in average steel selling price).” 

•Total steel shipments were down by 43 percent, from 6.9 million metric tons in the third quarter to 3.9 million tons in the fourth quarter, “in line with the sharp deterioration of global steel markets in the fourth quarter.” 

2008 

For the year AM reported a net income of $9.4 billion or $6.80 per share, compared to $10.4 billion or $7.41 per share. 

Sales in 2008 were $124.9 million, compared to $105.2 billion in 2007. 

Shipments in 2008 were 102 million metric tons, compared to 110 million metric tons in 2007. 

Operating income in 2008 was $12.2 billion, compared to $14.8 billion in 2007.

Posted 2/11/2009