Arcelor: 2004 First Quarter Results
LUXEMBOURG--May 1, 20040, 2004--Arcelor (CELR.PA)
-- Arcelor reports its best quarterly operating result since
its creation
-- Net result, group share increased 22%
-- Further reduction of net financial debt, stronger balance
sheet and net debt-to-equity ratio at 0.46 versus 0.55 at
31 December 2003
The board of directors, chaired by Joseph Kinsch, reviewed the
consolidated accounts for the first quarter of 2004.
At March 31, 2004, consolidated net result, group share, was EUR
234 million, versus EUR 192 million for the first quarter of 2003.
At EUR 6,899 million for the first quarter of 2004 compared to EUR
6,852 million for the same period last year, consolidated revenues
increased 0.7% (+3.5% on a comparable basis). This evolution reflects
an increase in shipments (+3%), in particular in the Long Carbon Steel
sector, and higher sales prices. It also takes into account the
disposal of several companies -- primarily Thainox and Pum Plastiques.
Consolidated gross operating result amounted to EUR 696 million
for the first quarter of 2004 versus EUR 641 million for the same
quarter last year. It was not significantly impacted by the rise in
the price of raw materials -- a combined effect of hedging, long-term
procurement contracts and of a scrap surcharge mechanism set up late
2003.
Consolidated operating result amounted to EUR 409 million for the
first quarter of 2004 versus EUR 384 million for the same quarter last
year, which corresponds to a 5.9% margin versus 5.6% respectively. It
does not include anymore the depreciation of negative goodwills, which
contributed +EUR 22 million to the first quarter 2003 operating
result.
After a financial result of -EUR 92 million, a contribution from
associates of EUR 78 million and income tax of EUR 110 million,
consolidated net result, group share, increased 22%, to EUR 234
million versus EUR 192 million for the first quarter of 2003.
Key Figures
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In millions of euros 1st Quarter 2003 1st Quarter 2004
(Unaudited)
----------------------------- -------------------- -------------------
Revenues 6,852 6,899
----------------------------- -------------------- -------------------
Gross Operating Result 641 696
----------------------------- -------------------- -------------------
Operating Result 384 409
============================= ==================== ===================
Net Result, group share 192 234
----------------------------- ==================== ===================
Earnings per Share (in euro) 0.40 0.49
----------------------------- -------------------- -------------------
Net Financial Debt
Net financial debt decreased by EUR 437 million to EUR 4,027
million at the end of March 2004 versus EUR 4,464 millions at 31
December 2003 and the net debt-to-equity ratio (including minority
interests) decreased to 0.46 from 0.55 at the end of 2003. Throughout
the quarter, Arcelor continued to pay down debt by focusing on working
capital requirements, controlling capital expenditures and pursuing
its divestment programme (Thainox).
After strong realisations in 2003, the Group strengthened again
its balance sheet. Shareholders' equity increased after the
reintegration of negative goodwills (+EUR 694 million, IFRS) and the
successful conversion of the 3% O.C.E.A.N.E. due 2006.
----------------------------------------------------------------------
In millions of euros December 31, 2003 March 31, 2004
(unaudited)
-------------------------------- ------------------- ----------------
Shareholders' equity(a) 8,139(b) 8,682
-------------------------------- ------------------- ----------------
Net financial debt 4,464 4,027
================================ =================== ================
Net financial debt/Shareholders'
equity(a) 0.55 0.46
-------------------------------- ------------------- ----------------
(a) Including minority interests
(b) including residual negative goodwill
Flat Carbon Steel
Revenues for the Flat Carbon Steel sector decreased 2.1% (-1.7% on
a comparable basis) to EUR 3,650 million for the first quarter of 2004
compared to EUR 3,727 million for the first quarter of 2003. Shipments
stayed stable and realised selling prices (general industry segment)
were slightly lower -- but higher than prices for the fourth quarter
of 2003. Interestingly, and in comparison with the situation at the
end of 2003, the limited availability of raw materials led the sector
to focus on its European customer base and drastically reduce its
exposure to export markets.
At EUR 400 million compared to EUR 428 million for the first
quarter of 2003, gross operating result was not significantly impacted
by the rise in the price of raw materials and reflects good technical
performances. It includes EUR 18 million of restructuring charges.
Operating Result, at EUR 254 million for the first quarter of 2004
compared to EUR 289 million for the first quarter of 2003, corresponds
to a 7.0% margin versus 7.8% one year before.
Total shipments remained stable, at 6.879 million tonnes for the
first quarter 2004 versus 6.917 million tonnes for the first quarter
of 2003.
Long Carbon Steel
Revenues for the Long Carbon Steel sector increased 21.2% (+17.7%
on a comparable basis) at EUR 1,268 million for the first quarter of
2004 compared to EUR 1,046 million for the same quarter last year.
Demand was strong and the sector passed the increase in the cost of
scrap on to its customers.
Total shipments increased 11.7%, at 3.289 million tonnes for the
first quarter of 2004 compared to 2.944 million tonnes for the first
quarter of 2003, boosted by demand and by the integration, from July
2003 of the Italian rolling mill of Pallanzeno.
In spite of surging prices for scrap, the main raw material for
the Long Carbon Steel sector, gross operating result amounted to EUR
134 million compared to EUR 126 million for the same quarter last
year. This corresponds to a 10.6% margin -- a satisfactory level after
a difficult fourth quarter last year -- and demonstrates the capacity
of the sector to deal with rising costs.
Operating result reached EUR 90 million for the first quarter of
2004 versus EUR 84 million for the first quarter of 2003.
Stainless Steels, Alloys and Specialty Plates
Revenues for the Stainless Steels, Alloys and Specialty Plates
sector increased 6.2% (+7.2% on a comparable basis) at EUR 1,208
million for the first quarter of 2004 compared to EUR 1,137 million
for the first quarter of 2003, essentially led by higher selling
prices. The alloy surcharge more than doubled from one period to the
other following the strong appreciation of nickel prices. Base prices
and shipments started 2004 at levels below their levels of last year
but have recovered since March. Lastly, Arcelor pursued its strategy
to focus its flat stainless operations on Europe by disposing of
Thainox (deconsolidated since March 1, 2004).
Total shipments amounted to 638 kt for the first quarter of 2004
compared to 665 kt for the same quarter last year.
The small decline of the sector's gross operating result, at EUR
51 million for the first quarter of 2004 compared to EUR 56 million
for the first quarter of 2003, was mainly due to slightly higher raw
material costs, the impact of a lower level of shipments being offset
by a richer product mix.
Operating result, at EUR 10 million for the first quarter of 2004
compared to EUR 12 million for the first quarter of 2003 mirrors the
evolution of the gross operating result.
Distribution, Transformation, Trading
Revenues of the DTT sector decreased 6.3% (but increased 4.9% on a
comparable basis) at EUR 1,972 million for the first quarter of 2004
compared to EUR 2,104 million for the first quarter of 2003. After the
sharp decline in shipments monitored by the sector during the second
half of last year, volumes were back to their first quarter 2003
levels. Prices hikes were accepted in a context of mediocre real
demand in Europe but where customers found it difficult to be supplied
with material.
Gross operating result, at EUR 92 million for the first quarter of
2004 compared to EUR 58 million for the first quarter of 2003 and
operating result, at EUR 54 million versus EUR 39 million, showed
strong progress. This improvement started in February, accelerated in
March and concerned all of DTT's business units. It was based on the
traditional time lag between the immediate positive impact of higher
selling prices and the slower adjusting value of inventories sold.
Revenues, Gross Operating Result and Operating Result
by business sector
----------------------------------------------------------------------
In millions of euros 1st Quarter 2003
(Unaudited)
Revenues Gross Op. Result % Op. Result %
------------------------------- ---------------- ----- ---------- ----
Flat Carbon Steel 3,727 428 11.5% 289 7.8%
------------------------------- ---------------- ----- ---------- ----
Long Carbon Steel 1,046 126 12.0% 84 8.0%
------------------------------- ---------------- ----- ---------- ----
Stainless, Alloys &
Specialty Plates 1,137 56 4.9% 12 1.1%
------------------------------- ---------------- ----- ---------- ----
Distribution,
Transformation,
Trading 2,104 58 2.8% 39 1.9%
=============================== ================ ===== ========== ====
Others 223 -20 n.a. -33 n.a.
------------------------------- ---------------- ----- ---------- ----
Intra-Group -1,385 -7 n.a. -7 n.a.
=============================== ================ ===== ========== ====
Total 6,852 641 9.4% 384 5.6%
------------------------------- ---------------- ----- ---------- ----
----------------------------------------------------------------------
In millions of euros 1st Quarter 2004
(Unaudited)
Revenues Gross Op. Result % Op. Result %
------------------------------- ---------------- ----- ---------- ----
Flat Carbon Steel 3,650 400 11.0% 254 7.0%
------------------------------- ---------------- ----- ---------- ----
Long Carbon Steel 1,268 134 10.6% 90 7.1%
------------------------------- ---------------- ----- ---------- ----
Stainless, Alloys &
Specialty Plates 1,208 51 4.2% 10 0.8%
------------------------------- ---------------- ----- ---------- ----
Distribution,
Transformation,
Trading 1,972 92 4.7% 54 2.7%
=============================== ================ ===== ========== ====
Others 231 16 n.a. -2 n.a.
------------------------------- ---------------- ----- ---------- ----
Intra-Group -1,430 3 n.a. 3 n.a.
=============================== ================ ===== ========== ====
Total 6,899 696 10.1% 409 5.9%
------------------------------- ---------------- ----- ---------- ----
Outlook
Despite a slight easing, the tension on international markets for raw materials and freight, remains quite high. Steelmakers and their clients are still dealing with a situation of shortage on a worldwide basis.
Apparent demand for steel keeps rising, helped by the economic recovery in the US. Even if the growth rate of the Chinese consumption were to slow down slightly in the coming months, it should however remain at a high level. The volatility observed on certain spot prices can be seen as a technical correction.
In this environment, Arcelor focuses on serving its clients in its core markets -- Europe and Brazil. The Group increases its prices, which still remain below international prices, to cover higher cost of inputs. Worth noticing, the level of inventories in Europe is low.
The strong level of activity in the second quarter of 2004 should lead to improved results. Margins and financial structure of the Group should thus continue to show progress.
After a successful Integration phase, Arcelor started 2004 by entering into a culture of Transformation, based on entrepreneurship and innovation.
Arcelor is the world's largest steel producer, with a turnover of 25.9 billion euros and shipments of 40.2 million tonnes of steel in 2003. Employing 98,000 employees in over 60 countries, the company is a major player in all its main markets: automotive, construction, household appliances and packaging as well as general industry. Arcelor places its commitment to sustainable development at the heart of its strategy and ambitions to become a benchmark for economic performance, labour relations and social responsibility in the world of steel.
This press release contains certain forward looking statements regarding anticipated market evolution and the future prospects of Arcelor. While these statements are based on the Company's best estimations as of the date hereof, actual results will vary as a function of market conditions, the action of competitors, consumer demand, steel prices, economic conditions and other factors.