ArcelorMittal plans to raise nearly Rs 27,000 crore to cut huge net loss

Billionaire Lakshmi Mittal-led ArcelorMittal on Friday said it will raise $3 billion (Rs 20,298 crore) from investors and sell $1 billion (Rs 6,766 crore) stake in Spanish auto-part maker Gestamp, to reduce debt after the losses widened 7-fold in 2015 to $7.9 billion (Rs 53,451.4 crore).

The world’s largest steel-maker outlined a plan to reduce its $15.7 billion (Rs 1.06 lakh crore) net debt by nearly a quarter.
Mittal, who owns about 37% of ArcelorMittal, will maintain his stake and will sign up to its entitlement of the share issue, worth about $1.1 billion (Rs 7,442.6 crore).
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Continuing to suffer from the Chinese industry’s overcapacity that has driven down world prices, the company reported net sales declining to $63.58 billion (Rs 4.30 lakh crore) in 2015 against $72.28 billion (Rs 4.89 lakh crore) in 2014.

Net loss reported $7.9 billion was mostly because of $4.8 billion (Rs 32,476.8 crore) write-downs on the iron ore mining business and a $1.3 billion (Rs 8,795.8 crore) charge on inventory due to the global steel price plunge. A year earlier the group made a loss of $1.1 billion (Rs 7,442.6 crore).
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The firm reported a widening of its net loss to $6.69 billion in the December quarter against a net loss of $955 million in the year-ago period as it faced a “very difficult” 2015, which witnessed iron ore and steel prices slide further.

The Luxembourg-headquartered company’s revenue fell by 25% to $13.98 billion in the October-December quarter of 2015, from $18.72 billion in the same quarter of 2014 fiscal. The firm follows January-December as its fiscal year.
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On the impairment charges, the firm said, “FY 2015 net loss of $7.9 billion including $4.8 billion of impairments (primarily due to mining impairments).

“And $1.4 billion of exceptional charges (primarily related to the write-down of inventory following the rapid decline of international steel prices).”

Breaking down the impairment charges, ArcelorMittal said the mining segment hit of $3.4 billion consists of $0.9 billion with respect to goodwill.

Besides, $2.5 billion related to fixed assets mainly due to a downward revision of cash flow projections relating to expected persistence of a lower raw material price outlook at ArcelorMittal Liberia ($1.4 billion), Las Truchas Mexico ($0.2 billion), ArcelorMittal Serra Azul in Brazil ($0.2 billion) and ArcelorMittal Princeton coal mining operations in the US ($0.7 billion).

While, steel segments’ hit of $1.4 billion consists of fixed asset impairment charges of $0.2 billion on intended sale of the Long Carbon facilities in the US (ArcelorMittal La Place, Steelton and Vinton within the NAFTA segment).

It also includes $0.4 billion primarily in connection with idling for an indefinite time of the ArcelorMittal Sestao plant in Spain (Europe segment) and $0.8 billion related to NAFTA: Deployment of asset optimisation programs at Indiana Harbor East and West in the US ($0.3 billion).