ArcelorMittal (MT), the world’s largest steelmaker, is selling some Ukrainian output in other markets on a forecast for slower-than-expected demand growth in the region.
“Domestic markets are down in the Ukraine,” Chief Executive Officer Lakshmi Mittal said today in a presentation to investors. While operations are running normally, the company is diverting more steel to other countries, he said.
Markets have been roiled by Ukraine’s political crisis, which saw President Viktor Yanukovych unseated in February following months of street protests. The escalation of tensions has brought pro-Russian forces to Crimea as President Vladimir Putin moves to wrest control of the region from Ukraine.
Steel demand in the Commonwealth of Independent States, which includes Russia and Ukraine, may increase more slowly than the 1.5 percent to 2.5 percent previously forecast by ArcelorMittal, the CEO said today, citing the crisis.
The company said Feb. 24 that it had relocated some foreign workers and dismantled a monument to Vladimir Lenin outside one of its Kryvyi Rih steel plants in central Ukraine after protesters destroyed statues of the Soviet Union founder.
ArcelorMittal’s Ukrainian plants produced 6.4 million metric tons of steel last year. The Luxembourg-based company bought its Ukrainian assets from the country’s government for about $4.8 billion in 2005.
The company today reiterated its full-year profit target as demand rebounds in the U.S. and Europe, its biggest markets, and maintained a medium-term goal of achieving earnings before interest, taxes, depreciation and amortization of $150 on each ton of steel. Global steel use will grow by 3.5 percent to 4 percent this year, it said.
Mittal said North American and European markets will both consume an additional 20 million tons of steel a year from 2013 to 2018, helping the company increase the use of its steelmaking capacity.
The steelmaker has cut $4.8 billion in costs since 2008 and targets a further $3 billion in savings by 2015. It has reduced its workforce by more than 80,000 and shuttered plants in Belgium and France. The shares fell 1.9 percent to 10.90 euros by the close in Amsterdam.
Aditya Mittal, chief financial officer, said that while the company couldn’t rule out further plant closures, it saw no need for additional cuts if steel demand met current estimates.
“Whilst the company has provided an update on operations and medium-term plans, much of this is unchanged from what was discussed at their investor day last year,” said Luc Pez, an Exane BNP Paribas analyst. “We believe investors were hoping for additional cost-cutting, hence some disappointment post the announcement.”
ArcelorMittal also said it will exceed its current iron-ore production target as it increases output at mines in Liberia and Canada. The company will add an additional 5 million tons of capacity in Liberia and 6 million tons in Canada. ArcelorMittal, which produced 58 million tons of iron ore last year, is targeting 84 million tons a year by 2015.
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