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ArcelorMittal posts $447 million loss in second quarter, says it will shed $2 billion in assets

ArcelorMittal’s offices at Indiana Harbor in East Chicago.

ArcelorMittal lost $447 million in the second quarter amid weakening market conditions and nagging overcapacity in the global steel industry.

The Luxembourg-based steelmaker, which is one of Northwest Indiana's largest employers, said it would sell off as much as $2 billion in assets over the next two years. ArcelorMittal USA suffered a $600 million impairment as the value of its assets dropped "following a sharp decline in steel prices and high raw material costs."

"After a strong 2018, market conditions in the first half of 2019 have been very tough, with the profitability of our steel segments suffering due to lower steel prices combined with higher raw material costs," ArcelorMittal Chairman and CEO Lakshmi Mittal said. "This has been only partially offset by improved profitability from our mining segment, but I am pleased that we have generated healthy free cash flow demonstrating the improved robustness of the business thanks to our Action 2020 plan."

ArcelorMittal suffered an operating loss of $200 million in the second quarter, which included more than $900 million in impairments that also were related to its asset sales to appease regulators for the ArcelorMittal Italia acquisition. The company's Earnings Before Interest, Taxes, Depreciation and Amoritization, or EBITDA, plunged by 42.6% to $1.6 billion in the second quarter.

"Global overcapacity remains a clear challenge. We have reduced capacity in Europe in response to the current weak demand environment, which has also impacted the turnaround of the ex-Ilva facilities in Italy," Mittal said. "Further action needs to be taken to address the increasing level of imports entering the continent due to ineffective safeguard measures and we continue to engage with the European Commission to create a level playing field for the sector. A supportive regulatory and funding environment is also crucial to our ambition to significantly reduce our emissions as announced in our recent Climate Action report."

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The steelmaker, which employs about 10,000 steelworkers in Northwest Indiana, increased shipments to 22.8 million in the second quarter. Shipments were up 4.3% as compared to the first quarter and 4.8% year over year.

In the first half of the year, steel shipments are up 3.5%, but ArcelorMittal still posted a loss of $33 million because of declining steel prices.

ArcelorMittal said it is taking the initiative to reduce costs and will spend less on capital projects. It has reduced its cash needs for the business by $1 billion to $5.4 billion because of the cutback in capital expenditure and the lower tax burden that's expected in a less profitable environment.

"We are taking further actions to adapt and strengthen the company, ensuring we make continued progress towards our net debt target and increase returns to shareholders," Mittal said. "Despite the current challenges, the company is well-positioned to benefit from any improvement in market conditions and the current very low spread environment."

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Business Reporter

Joseph S. Pete is a Lisagor Award-winning business reporter who covers steel, industry, unions, the ports, retail, banking and more. The Indiana University grad has been with The Times since 2013 and blogs about craft beer, culture and the military.