Analysis of results for the six months ended June 30, 2013 versus results for the six months ended June 30, 2012
ArcelorMittal’s net loss for 1H 2013 was $1.1 billion, or $(0.65) loss per share, as compared to net income for 1H 2012 of $1.1 billion, or $0.72 per share.
Total steel shipments for 1H 2013 were lower at 42.3 million metric tonnes as compared with 43.9 million metric tonnes at 1H 2012.
Sales for 1H 2013 decreased by 11.6% to $39.9 billion as compared with $45.2 billion for 1H 2012 primarily due to lower average steel selling prices (-6.0%) and lower steel shipments (-3.7%).
Depreciation of $2.3 billion for 1H 2013 was comparable with 1H 2012.
Impairment charges for 1H 2013 were $39 million primarily relating to the closure of the organic coating and tin plate lines in Florange (Flat Carbon Europe). Impairment charges for 1H 2012 totalled $69 million, primarily related to the extended idling of the electric arc furnace and continuous caster at the Schifflange site in Luxembourg (Long Carbon Europe).
Restructuring charges for 1H 2013 were $173 million, including $137 million of cost incurred for the long term idling of the Florange liquid phase (including voluntary separation scheme costs, site rehabilitation/safeguarding costs, and take or pay obligations). Restructuring charges for 1H 2012 totalled $297 million and consisted largely of costs associated with the implementation of Asset Optimization primarily impacting Flat Carbon Europe and Long Carbon Europe operations.
Operating income for 1H 2013 was $756 million as compared with operating income of $2.0 billion for 1H 2012. Operating results for 1H 2013 were positively impacted by a $47 million fair valuation gain relating to the acquisition of an additional ownership interest in DJ Galvanizing in Canada. In addition, the operating income for 1H 2013 was positively impacted by $92 million related to “Dynamic Delta Hedge” (DDH) income. The DDH income recorded in 1Q 2013 was the final instalment of such income. This gain on the unwinding of a currency hedge related to raw materials purchases was initially recorded in equity in 4Q 2008, and has now been fully recorded in the income statement. Operating income for 1H 2012 was positively impacted by $295 million of DDH income recognized during the period. Operating income during 1H 2012 was also positively impacted by $624 million: changes to the employee benefit plans at Dofasco led to curtailment gains of $285 million[9] and the Skyline Steel divestment[11] led to a gain of $339 million.
Loss from equity method investments and other income in 1H 2013 was $42 million, as compared to income of $103 million in 1H 2012. Losses incurred during 1H 2013 related primarily to a contingent consideration related to the Gonvarri Brasil acquisition in 2008 and weaker performance of European associates during the year.
Net interest expense (including interest expense and interest income) was $949 million for 1H 2013 as compared to $917 million for 1H 2012. Net interest expense increased due to the interest rate “step up” clauses in most of the Company’s outstanding bonds, which were triggered by the Company’s rating downgrades that occurred in the second half of 2012 and which resulted in incremental interest expense of $40 million in 1H 2013.
Foreign exchange and other net financing costs[10] were $685 million for 1H 2013 as compared to costs of $484 million for 1H 2012.
ArcelorMittal recorded an income tax expense of $196 million for 1H 2013, as compared to an income tax benefit of $394 million for 1H 2012.
Gains attributable to non-controlling interests for 1H 2013 were $9 million as compared with losses attributable to non-controlling interests for 1H 2012 of $1 million.
Analysis of results for 2Q 2013 versus 1Q 2013 and 2Q 2012
ArcelorMittal recorded a net loss for 2Q 2013 of $0.8 billion, or $(0.44) loss per share, as compared to a net loss of $0.3 billion, or $(0.21) loss per share for 1Q 2013, and net income of $1.0 billion, or $0.66 earnings per share, for 2Q 2012.
Total steel shipments for 2Q 2013 were 21.3 million metric tonnes as compared with 20.9 million metric tonnes for 1Q 2013 and 21.7 million metric tonnes for 2Q 2012.
Sales for 2Q 2013 increased by 2.3% to $20.2 billion as compared with $19.8 billion for 1Q 2013, and were 10.1% lower than $22.5 billion for 2Q 2012. Sales were higher in 2Q 2013 as compared to 1Q 2013 primarily due to higher steel shipment volumes (+1.7%).
Depreciation amounted to $1.1 billion for 2Q 2013, as compared to $1.2 billion for both 1Q 2013 and 2Q 2012.
Impairment charges for 2Q 2013 were $39 million primarily relating to the closure of the organic coating and tin plate lines in Florange (FCE). There were no impairment charges recorded in 1Q 2013 or 2Q 2012.
Restructuring charges for 2Q 2013 were $173 million, including $137 million of costs incurred for the long term idling of the Florange liquid phase (including voluntary separation scheme costs, site rehabilitation/safeguarding costs, and take or pay obligations). Restructuring charges for 1Q 2013 were nil. Restructuring charges for 2Q 2012 totalled $190 million and consisted primarily of costs associated with the project to close two blast furnaces, sinter plant, steel shop and continuous casters in Liege, Belgium.
Operating income for 2Q 2013 was $352 million as compared with operating income of $404 million for 1Q 2013 and operating income of $1.2 billion for 2Q 2012. Operating income for 1Q 2013 was positively impacted by a $47 million fair valuation gain relating to the acquisition of an additional ownership interest in DJ Galvanizing in Canada. Operating income during 2Q 2012 was positively impacted by $339 million gain from the Skyline Steel divestment[11]. In addition, operating income for 1Q 2013 and 2Q 2012 was positively impacted by $92 million and $136 million, respectively, of DDH income recognized.
Loss from equity method investments and other income in 2Q 2013 was $24 million as compared to loss of $18 million in 1Q 2013 and an income of $118 million in 2Q 2012. Losses incurred during 2Q 2013 relate primarily to a contingent consideration from the Gonvarri Brasil acquisition in 2008.
Net interest expense (including interest expense and interest income) in 2Q 2013 was $471 million, as compared to $478 million for 1Q 2013 and $456 million for 2Q 2012.
Foreign exchange and other net financing costs were $530 million for 2Q 2013 as compared to costs of $155 million for 1Q 2013 and costs of $77 million for 2Q 2012. This includes a foreign exchange loss of $249 million in 2Q 2013 as compared to a gain of $96 million in 1Q 2013 primarily driven by 9% devaluation of Brazilian Real versus USD which impacted loans and payables denominated in foreign currency.
ArcelorMittal recorded an income tax expense of $99 million for 2Q 2013, as compared to an income tax expense of $97 million for 1Q 2013 and an income tax benefit of $218 million for 2Q 2012.
Gains attributable to non-controlling interests for 2Q 2013 were $8 million as compared with gains of $1 million for 1Q 2013 and losses of $6 million for 2Q 2012.
Capital expenditure projects
The following tables summarize the Company’s principal growth and optimization projects involving significant capital expenditures.