Steel giant ArcelorMittal (MT) announced that it will halt melting at its Schifflange works in Luxembourg and reduce output on several of its long products rolling lines, and at its nearby Rodange facility due to weak demand in Europe.
Up to 450 people could be affected by these drastic measures. The company stated that this is a temporary step and the decision will be re-evaluated at the end of 2011.
Schifflange is set to shut for an indefinite period as ArcelorMittal blamed a sharp deterioration in economic conditions from the third quarter of 2011.
The electric arc furnace at Schifflange has a 1.3 million mt/year capacity. The facility produces bars, sections, and crane rails for the European market. The Luxembourg plants are the first long product mills to be affected by temporary closures in the ArcelorMittal group in 2011.
The company recently announced a series of temporary closures at flat steel producing facilities in Germany, Belgium and France, blaming weak demand and a need to better align output with orders.
In July 2011, the company reported its second quarter 2011 results. The company reported diluted net earnings of 99 cents per share in the second quarter of 2011, above the Zacks Consensus Estimate of 94 cents, but below last year’s $1.13.
Total steel shipments in the second quarter of 2011 were 22.2 million metric tons compared with 22.3 million metric tons in the year-ago quarter.
Quarterly revenues increased 24.7% year over year to $25.1 billion from $20.2 billion in the year-ago quarter and 13.3% sequentially. Sales were higher over the previous quarter primarily due to average steel selling prices (+10.9%). However, the results were slightly below the Zacks Consensus Estimate of $25.3 billion.
For the third quarter of 2011, management expects EBITDA to be approximately $2.4 –$2.8 billion. Working capital requirements and net debt are expected to remain stable sequentially.
For the second half of 2011, management expects raw material accounting costs to increase sequentially. Due to the continued underlying demand recovery, steel shipments in the second half of 2011 are expected to be higher than the same period in 2010. Results of the mining business are expected to further improve due to increased production and shipments.
For 2011, management continues to target a growth of 10% in iron ore production and an increase of 20% in coking coal production. Overall group EBITDA per-ton in the second half of 2011 is expected to exceed the level achieved in the same period of 2010.
The company’s full-year 2011 capital expenditure target increased by 10% from $5.0 billion to $5.5 billion (versus $3.3 billion in 2010) due to investments in the recently announced capacity expansions at the company’s Canadian mines, investments in energy saving projects (reinvesting the proceeds from the sale of carbon dioxide credits), Vega Do Sul investment in Brazil and expenses related to the study of the Liberia phase 2 expansion.
Major competitors of ArcelorMittal are United States Steel Corp. (X), POSCO and Tata Steel Limited of India.
We maintain our Outperform recommendation on ArcelorMittal with a Zacks #4 Rank (Sell) on the stock.
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