Mittal Steel Co. NV reported Friday that first-quarter net profit fell 35 percent, but the results were stronger than analysts predicted and the company was optimistic about prospects for the rest of the year.

Mittal also said it had gained clearance from U.S. regulators for its proposed takeover of Luxembourg-based Arcelor SA, a move that would combine the world’s largest steelmakers.

Net profit for the three months ended March 31 fell to $743 million from $1.14 billion a year earlier, on sales that rose 31 percent to $8.43 billion from $6.42 billion a year ago. Analysts had predicted a net profit of $667.3 million.

Mittal said it expects its $26.4 billion hostile bid for Arcelor to go live shortly. Although gaining clearance in the United States, Mittal is waiting for a green light from market regulators in Europe.

Arcelor also beat analysts’ expectations, reporting a first-quarter profit of $968 million, down 20 percent on the same period last year as steel prices fell and the cost of oil rose.

“We are pleased to report a good performance this quarter, despite bottom-cycle market conditions in Africa and Asia,” said Mittal Chairman and CEO Lakshmi Mittal. “This performance has been underpinned by over 50 percent quarter-on-quarter growth in operating income of our American and European businesses.”

He said the company expects the market recovery to continue in the second and third quarter, supported by improvements in the Asian market.

On Tuesday, Mittal offered to revise its offer and make significant changes to its corporate governance if Arcelor’s board would recommend the deal to its shareholders.

On Thursday, Arcelor announced it had filed a lawsuit in the United States against Mittal for allegedly copying a type of steel for the auto industry. Mittal called the suit “without merit.”

Arcelor Chief Executive Guy Dolle said Mittal’s refusal to hand over sensitive business information meant he would not meet with Lakshmi Mittal.

Americas

Total steel shipments in the Americas region were 6.8 million tons in the three months ended March 31, 2006, as compared with 6.2 million tons for the three months ended December 31, 2005, primarily due to improved market conditions. Total steel shipments were higher in the three months ended March 31, 2006, as compared with 3.0 million tons for the three months ended March 31, 2005, primarily due to the inclusion of ISG. Excluding the impact of ISG, total steel shipments were lower in the three months ended March 31, 2006, at 2.8 million tons as compared with 3.0 million tons for the three months ended March 31, 2005.

Sales were higher at $4.1 billion for the three months ended March 31, 2006, as compared with $3.7 billion for the three months ended December 31, 2005, due to improved market conditions. Sales were higher in the three months ended March 31, 2006, as compared with $1.9 billion for the three months ended March 31, 2005, primarily due to the inclusion of ISG. Excluding the impact of ISG, sales were lower at $1.5 billion in the three months ended March 31, 2006, as compared with $1.9 billion for the three months ended March 31, 2005.

Operating income was higher at $340 million for the three months ended March 31, 2006, as compared with $225 million for the three months ended December 31, 2005, primarily due to higher volumes and higher average selling prices, partly offset by higher costs. Operating income for the three months ended March 31, 2006, was lower as compared with $568 million for the three months ended March 31, 2005, primarily due to higher costs. Excluding the impact of ISG, operating income was lower at $122 million for the three months ended March 31, 2006, as compared with $568 million for the three months ended March 31, 2005.

Indiana fire

On April 28, 2006, a fire halted production in one of the steelmaking shops at Mittal Steel USA Indiana Harbor facility in East Chicago, USA. The current assessment indicates that steel production will be down by approximately 200,000 tons. The damage to equipment and losses associated with business interruption in excess of the Company’s deductible is expected to be covered by insurance.

Europe

Total steel shipments in the European region were 5.8 million tons for the three months ended March 31, 2006, as compared with 4.6 million tons for each of the three months ended December 31, 2005 and March 31, 2005.

Asia & Africa

Total steel shipments in the Asia & Africa region were 3.0 million tons in the three months ended March 31, 2006, as compared with 2.8 million tons for each of the three months ended December 31, 2005 and March 31, 2005.

Other Highlights

Mittal, the world’s largest and most global steel company, listed the following highlights for the quarter:

—Strong results higher than guidance-reflecting an improved operating environment;

— Earnings Per Share up 15% from the fourth quarter;

—Operating income up 17% from the fourth quarter;

—Expectations of higher income in the second quarter;

—and operating conditions expected to further improve in the third quarter.

Mittal net income for the three months ended March 31, 2006, was $743 million or $1.06 per share, as compared with net income of $650 million or $0.92 per share for the three months ended December 31, 2005, and $1.1 billion or $1.78 per share for the three months ended March 31, 2005.

Consolidated sales and operating income for the three months ended March 31, 2006, were $8.4 billion and $1.0 billion, respectively, as compared with $7.1 billion and $871 million, respectively, for the three months ended December 31, 2005, and as compared with $6.4 billion and $1.7 billion, respectively, for the three months ended March 31, 2005.

Total steel shipments for the three months ended March 31, 2006, were 15.6 million tons as compared with 13.6 million tons for the three months ended December 31, 2005, and 10.4 million tons for the three months ended March 31, 2005.

Posted 5/12/2006