Analysis of results for the nine months ended September 30, 2013 versus results for the nine months ended September 30, 2012
ArcelorMittal’s net loss for 9M 2013 was $1.3 billion, or $(0.77) loss per share, as compared to net income for 9M 2012 of $0.5 billion, or $0.29 per share.
Total steel shipments for 9M 2013 were essentially flat at 63.4 million metric tonnes as compared with 63.8 million metric tonnes in 9M 2012.
Sales for 9M 2013 decreased by 8.2% to $59.6 billion as compared with $64.9 billion for 9M 2012 primarily due to lower average steel selling prices (-5.9%).
Depreciation of $3.4 billion for 9M 2013 was comparable to $3.5 billion in 9M 2012.
Impairment charges for 9M 2013 were $140 million, including $101 million for the costs associated with the discontinued iron ore project in Senegal[10] (Mining) and costs related to the closure of the organic coating and tin plate lines in Florange. Impairment charges for 9M 2012 totalled $199 million, primarily related to the project to permanently close the liquid phase at Florange for $130 million (Flat Carbon Europe), and the extended idling of the electric arc furnace and continuous caster at the Schifflange site in Luxembourg (Long Carbon Europe).
Restructuring charges for 9M 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 9M 2012 totaled $395 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 9M 2013 was $1.2 billion as compared with operating income of $2.1 billion for 9M 2012. Operating results for 9M 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, operating income for 9M 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 results for 9M 2012 were positively impacted by changes to the employee benefit plans at ArcelorMittal Dofasco[11] which led to curtailment gains of $285 million and the Skyline Steel divestment[12] which led to a gain of $339 million, partially offset by $72 million in charges related to one-time signing bonus and post retirement benefit costs following entry into the new US labor contract. Operating results for 9M 2012 were also positively impacted by $426 million of DDH income.
Income from equity method investments and other income in 9M 2013 was $11 million, as compared to income of $47 million in 9M 2012. Income earned during 9M 2013 was negatively impacted by a contingent consideration related to the Gonvarri Brasil acquisition in 2008 and weaker performance of European associates during the year. Income from equity method investments and other income for 9M 2012 included higher income earned from European associates offset in part by losses from Chinese investees.
Net interest expense (including interest expense and interest income) was $1.4 billion for 9M 2013, comparable to 9M 2012. Net interest expense in 2013 has been positively impacted by lower gross debt due to the tender and repayment of bonds and privately placed notes totalling $4 billion since the beginning of June 2013, offset in part by 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 interest expense of $65 million in 9M 2013.
Foreign exchange and other net financing costs[13] were higher in 9M 2013 at $954 million as compared to costs of $632 million for 9M 2012, primarily on account of foreign exchange losses.
ArcelorMittal recorded an income tax expense of $191 million for 9M 2013, as compared to an income tax benefit of $350 million for 9M 2012.
Gains attributable to non-controlling interests for 9M 2013 were $59 million as compared with losses attributable to non-controlling interests for 9M 2012 of $21 million, increasing primarily in ArcelorMittal Mines Canada after the disposal of 15% interest in 2013.
Analysis of results for 3Q 2013 versus 2Q 2013 and 3Q 2012
ArcelorMittal recorded a net loss for 3Q 2013 of $0.2 billion, or $(0.12) loss per share, as compared to a net loss of $0.8 billion, or $(0.44) loss per share for 2Q 2013, and net loss of $0.7 billion, or $(0.42) loss per share, for 3Q 2012.
Total steel shipments for 3Q 2013 were 21.1 million metric tonnes as compared with 21.3 million metric tonnes for 2Q 2013 and 19.9 million metric tonnes for 3Q 2012.
Sales for 3Q 2013 decreased by 2.7% to $19.6 billion as compared with $20.2 billion for 2Q 2013, and were 0.4% lower than $19.7 billion for 3Q 2012. Sales were lower in 3Q 2013 as compared to 2Q 2013 primarily due to lower average steel selling prices (-3.4%) and marginally lower steel volumes (-0.9%).
Depreciation amounted to $1.1 billion for 3Q 2013, comparable to 2Q 2013 and lower than $1.2 billion for 3Q 2012.
Impairment charges for 3Q 2013 were $101 million related to the costs associated with the discontinued iron ore project in Senegal[10]. Impairment charges for 2Q 2013 were $39 million primarily related to the closure of the organic coating and tin plate lines in Florange. Impairment charges for 3Q 2012 totalled $130 million, primarily related to the long term idling of the liquid phase at Florange.
Restructuring charges for 3Q 2013 were nil. Restructuring charges for Q2 2013 of $173 million including $137 million of costs 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 3Q 2012 of $98 million consisted primarily of costs associated with the closure of two blast furnaces, sinter plant, steel shop and continuous casters in Liege (Flat Carbon Europe).
Operating income for 3Q 2013 was $477 million as compared with operating income of $352 million for 2Q 2013 and operating income of $55 million for 3Q 2012. Operating results for 3Q 2012 were positively impacted by $131 million of DDH income partially offset by a $72 million charge related to a one-time signing bonus and post retirement benefit costs following entry into a new US labor contract.
Income from equity method investments and other income in 3Q 2013 was $53 million as compared to a loss of $24 million in 2Q 2013 and a loss of $56 million in 3Q 2012. During the third quarter of 2013, income from equity method investments and other income benefitted from stronger performance by Chinese investees (including the gain on disposal of 5% stake in Hunan Valin as part of share swap arrangement with Valin Group). Losses incurred during 2Q 2013 related primarily to a contingent consideration from the Gonvarri Brasil acquisition in 2008.
Net interest expense (including interest expense and interest income) in 3Q 2013 was $409 million, as compared to $471 million for 2Q 2013 and $479 million for 3Q 2012. Net interest was lower in 3Q 2013 as compared to 2Q 2013, primarily due to the above-mentioned bond and loan repayments.
Foreign exchange and other net financing costs were $269 million for 3Q 2013 as compared to $530 million for 2Q 2013 and $148 million for 3Q 2012. Foreign exchange and other net financing costs in 3Q 2013 were impacted by 0.6% devaluation of the Brazilian Real versus USD, leading to a loss of $10 million, as compared to a 9% devaluation in the 2Q 2013 which resulted in a $180 million loss.
ArcelorMittal recorded an income tax benefit of $5 million for Q3 2013, as compared to an income tax expense of $99 million for 2Q 2013 and an income tax expense of $44 million for 3Q 2012.
Gains attributable to non-controlling interests for 3Q 2013 were $50 million as compared with gains of $8 million for 2Q 2013 and losses of $20 million for 3Q 2012.
Capital expenditure projects
The following tables summarize the Company’s principal growth and optimization projects involving significant capital expenditures.