London: ArcelorMittal plans to raise $3 billion from investors and sell a $1 billion stake in Spanish auto-parts maker Gestamp as the world’s largest steelmaker looks to ride out an industry slump caused by record Chinese exports.
Billionaire Lakshmi Mittal, the chief executive officer who owns about 37 per cent of the business, has committed to maintain his stake and his family will take up about $1.1 billion, the Luxembourg-based company said in a statement on Friday. Full-year earnings before interest, taxes, depreciation and amortisation declined 28 per cent to $5.2 billion.
"This capital raise, combined with the sale of our minority shareholding in Gestamp, will accelerate the company’s debt- reduction plan," Mittal said in the statement. "This will help ensure that the business is resilient in any market environment and puts ArcelorMittal in a position of strength from which to further improve performance."
Shares of ArcelorMittal, which supplied steel for New York’s One World Trade Center and London’s Wembley stadium, have dropped 58 per cent in the last 12 months. They’ve been hit by declining prices for steel as China pushes the material onto the world market at record levels to counter its slowing economy. Prices for the iron ore ArcelorMittal mines have also dropped as demand for the steelmaking ingredient fell and supplies from exporters expanded.
The stock fell as much as 11 per cent, the biggest intraday drop since December 2, to 3.3 euros and traded 6.1 per cent lower at 3.46 euros by 9:12am in Amsterdam.
Bloomberg News reported on Thursday that the company was planning to raise capital, citing people familiar with situation. Goldman Sachs International, BofA Merrill Lynch and Credit Agricole Corporate & Investment Bank are joint global coordinators for the share sale and will underwrite the portion not taken up by the Mittal family, subject to conditions. The share sale, which should be completed in the first half, will cut debt to less than $12 billion.
"2015 was a very difficult year for the steel and mining industries," Mittal said in a separate statement. "Although demand in our core markets remained strong, prices deteriorated significantly during the year as a result of excess capacity in China."
The company has scrapped its dividend, cut expansion plans and shuttered plants as it seeks to pay down debt. It reported net debt of $15.7 billion. Full-year sales declined 19 per cent to $31.9 billion. Ebitda will drop to "in excess of" $4.5 billion in 2016, it said.
ArcelorMittal, whose full-year net loss swelled to $7.95 billion after taking $4.8 billion in write-downs, said it would continue to cut costs. The company said it would trim capital spending by $300 million to about $2.4 billion this year and reduce interest payments by $200 million. It also unveiled a plan to make more than $85 profit per tonne of steel produced and eventually deliver $2 billion of free cash flow a year.
ArcelorMittal twice reduced its profit forecast last year as China’s exports undercut steel prices in Europe and the US, its biggest markets. Exports from China rose by a fifth to a record 112 million metric tonnes in 2015. European hot-rolled coil, a benchmark for steel prices, sank in November to its lowest since at least 2007, down 75 per cent from its peak. US prices slid 40 per cent in 2015 to a decade low. — Bloomberg News