By KEVIN NEVERS

Mittal Steel Company (MSC) today reported net income for the first quarter of 2005 of $1.1 billion or $1.78 per share, compared to $1.6 billion or $2.42 per share for the fourth quarter of 2004 and $539 million or 83 cents per share for the year-ago period.

Consolidated sales were $6.4 billion, compared to $6.2 billion the fourth quarter of 2004 and $4.1 billion in the year-ago period.

Operating income was $1.7 billion, compared to $1.7 billion for the fourth quarter of 2004 and $799 million for the year-ago period.

Total steel shipments were 10.4 million tons, compared to 10.1 million in the fourth quarter of 2004 and also 10.1 million tons in the year-ago period.

Those results do not include the earnings of the former International Steel Group (ISG), which MSC acquired on April 15. ISG’s financial results will be consolidated as from the second quarter of 2005, MSC said.

On a pro forma basis, however—including ISG—MSC shipped 14.3 million tons in the first quarter, and reported sales of $9.1 billion, operating income of $2 billion, and net income of $1.3 billion or $1.88 per share.

Analysis of Operations

•Average price realization in the first quarter “remained flat” compared to the fourth quarter of 2004 but improved by 53 percent over the year-ago period.

•Total steel shipments in the first quarter increased by 3 percent over the fourth quarter of 2004 and by the same over the year-ago period.

•Due to increases in the cost of iron ore, electricity, natural gas, and transportation, the cost of goods sold per ton in the first quarter increased by 5 percent over the fourth quarter of 2004 and by 39 percent over the year-ago period.

•Selling, general, and administrative costs in the first quarter declined by 14 percent from the fourth quarter of 2004 by increased by 71 percent over the year-ago period.

•Operating income in the first quarter was $1.7 billion, compared to about the same in the fourth quarter of 2004 and to $799 million in the year-ago period.

•Net interest expenses declined in the first quarter to $33 million, compared to $50 million the fourth quarter of 2004 and $48 million in the year-ago period, “primarily due to lower outstanding debt.”

Americas

Total steel shipments in the Americas were 3.0 million tons in the first quarter, compared to 2.8 million tons in the fourth quarter of 2004 and 3.1 million tons in the year-ago period.

Sales totaled $1.9 billion in the first quarter, compared to $1.8 billion in the fourth quarter of 2004 and $1.3 billion in the year-ago period.

Operating income in the first quarter was $568 million, compared to $483 million in the fourth quarter of 2004 and $149 million in the year-ago period, “due to higher gross margins.”

Europe

Total steel shipments in Europe were 4.6 million tons in the first quarter, compared to 4.5 million tons in the fourth quarter of 2004 and 3.9 million tons in the year-ago period.

Sales totaled $3.0 billion in the first quarter, compared to $2.8 billion in the fourth quarter of 2004 and $1.6 billion in the year-ago period.

Operating income in the first quarter was $492 million, compared to $480 million in the fourth quarter of 2005 and $174 million in the year-ago period.

Rest of World

Total steel shipments in the Rest of the World were 2.8 million tons in the first quarter, compared to about the same in the fourth quarter of 2004 and 3.1 million tons in the year-ago period.

Sales totaled $2.0 billion in the first quarter, compared to $2.2 billion in the fourth quarter of 2005 and $1.6 billion in the year-ago period.

Operating income in the first quarter was $632 million, compared to $688 million in the fourth quarter of 2004 and $443 million in the year-ago period.

Liquidity

At March 31 the company’s cash and cash equivalents including restricted cash were $2.7 billion, compared to $2.6 billion at Dec. 31, 2004. The company’s operating subsidiaries also had unavailed borrowing limits of $1.3 billion at March 31.

Total debt at March 31—including long- and short-term debt, loan from shareholder, dividend payable, and borrowings under working capital credit facilities—total $3.3 billion, compared to $3.6 billion at Dec. 31, 2004.

On a pro forma basis, the net debt of MSC including ISG was $2.9 billion at March 31.

Capital expenditures in the first quarter were $205 million, compared to $376 million in the fourth quarter of 2004 and $100 million in the year-ago period.

Dividend payable at March 31 of $1.375 billion has since been paid in full.

Outlook

“Due to higher costs, on similar prices but lower volumes, the operating income per ton in the second quarter 2005 as compared to the first quarter 2005 is estimated to be lower by $25 to $30 per ton,” MSC said.

Posted 4/26/2005