ArcelorMittal Seeks $3 Billion Cost Cuts as Steel Recovers

ArcelorMittal (MT), the world’s biggest steelmaker, plans to cut costs by the end of 2015 as it seeks to emerge from a slump in demand and revive earnings.

ArcelorMittal said the savings will be targeted in stages, through a program that includes improving the reliability and productivity of its blast furnaces and cutting fuel costs. ArcelorMittal is optimistic about the industry’s outlook and expects profit to be bolstered by rising demand, executives told investors today in presentations in London and New York.

“These focal points, combined with our leading market position in developed and emerging markets, our diverse mix of products, as well as our world class customer service will enable us to be successful in this new operating environment,” Lakshmi Mittal, chief executive officer of the Luxembourg-based company, said in a statement.

The steelmaker said last month it expects an earnings recovery in 2013 after posting the lowest quarterly profit in three years. Earnings in the industry have slumped as Europe’s economic crisis saps demand and slower Chinese growth weighs on commodity prices. European steelmakers are grappling with excess capacity that’s pushing down prices as operating costs climb.

ArcelorMittal said today it expects global steel consumption to rise by 3 percent to 3.5 percent this year. European demand will slide to a low point before rebounding next year.

Better Margins

The company plans to boost the profit it makes on each ton of steel in the next five years. Per-ton earnings before interest, taxes, depreciation and amortization will rise to $150 from an average of about $87 between 2010 and 2012, it forecast. Demand in both Europe and North America will rise by about 20 million tons in the next 5 years.

ArcelorMittal won’t raise its dividend or invest in growth capex until reducing net debt below a medium-term target of $15 billion, Chief Financial Officer Aditya Mittal said today. The company, which reported debt of $21.8 billion at the end of the fourth quarter, is seeking to reduce borrowings after its credit rating was cut to junk by Moody’s Investors Service, Standard & Poor’s and Fitch Ratings.

ArcelorMittal said it wants to regain its investment grade rating “in time” and that it will shun deals that have a negative impact on its credit rating.

The company has scaled back its dividend and sold assets, including a $1.1 billion stake in its Canadian mining business in a bid to pare debt to $17 billion by the end of June. It said today that it had completed the first installment of the sale of 15 percent in ArcelorMittal Mines Canada to a POSCO-led group.

To contact the reporter on this story: Thomas Biesheuvel in London at tbiesheuvel@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net