ArcelorMittal sees profit after 3 quarterly losses

BRUSSELS | ArcelorMittal SA, the world's largest steelmaker, on Wednesday posted a $903 million profit in the third quarter, its first after three consecutive quarterly losses, as it saw the first signs of a gradual recovery in demand.

Although the profit was still 76 percent below year-earlier levels, the company said the market was slowly improving after the global recession caused demand to plunge for steel used to make cars, machinery and buildings.

"We believe we are through the worst," ArcelorMittal's CFO Aditya Mittal told reporters. "We remain cautious, the economy is still weak, particularly in the developed world, and the recovery will continue to be slow and progressive."

Third quarter profit was down from the same period last year, when the company made $3.82 billion. Sales were $16.18 billion, down more than half from $35.19 billion a year ago -- and only a slight increase on $15.17 billion in the second quarter.

Luxembourg-based ArcelorMittal's results outpaced rival U.S. Steel, which reported a third quarter loss Tuesday and predicted another, narrower loss in the fourth quarter.

Mittal said the United States is seeing both "real and apparent demand" as companies go beyond restocking and increase output. He said one sign of real growth is higher sales to car makers whose recovery has been largely fueled by the government's cash-for-clunkers program.

The company says it expects higher shipments and steel prices in the fourth quarter and would focus on further growth in developing markets -- mainly South America and Asia -- by restarting key expansion projects in Brazil and India and mining projects elsewhere.

Emerging market growth does not fully compensate for sluggish growth in richer nations where the company has significant assets, Mittal said.

"The developed market economies are recovering; the level of recovery is still much lower that what it used to be in 2008," he said. "The faster and stronger it is, the better for ArcelorMittal."

ArcelorMittal is slowly restarting steel mills and furnaces that it stilled late last year. It was running at only 50 percent capacity in the second quarter, increasing that to 61 percent in the third quarter. It plans to take that up to 70 percent in the final three months of 2009.

The steelmaker warned sales are still "substantially lower" than a year ago and are less profitable because the economic crisis has also triggered a steep fall in selling prices.

Mittal said it was unclear whether higher European demand reflects a solid manufacturing recovery. The company's European flat carbon and global stainless steel and services divisions continued to report a loss in the third quarter.

ArcelorMittal operates integrated steel mills in East Chicago and Burns Harbor, a global research and development facility in East Chicago, a hot strip mill in Riverdale, a plate mill in Gary and a finishing facility as a joint venture in New Carlisle.

Shift in focus

The company said it has met a target to make $2.2 billion in longer-term savings this year, which included a voluntary redundancy program that has helped it shed some 40,000 workers since the start of the economic crisis.

Mittal said the company no longer would prioritize efforts to reduce its debt as it tries to put more money into growth projects.

It has already cut net debt to $21.6 billion -- down $10.9 billion from a year ago. Much of that was built up from an ambitious program to expand in emerging markets. ArcelorMittal has reorganized other debt and issued bonds and shares over the past year to increase capital flow.