BRUSSELS (AP) — ArcelorMittal, the world's biggest steel maker, posted Thursday a 50 percent drop in third-quarter net profit compared to the same period a year earlier. The company blamed weakening economic conditions and increasing uncertainty in the market and said the outlook for the rest of the year was difficult.
However, Lakshmi N. Mittal, Chairman and CEO, said ArcelorMittal's core profitability remained resilient.
Net profit dropped to $700 million in the third quarter, down from $1.4 billion a year earlier. But sales increased 22.6 percent to $24.2 billion from $19.7 billion.
"Despite weakening economic conditions, ArcelorMittal has reported EBITDA within the forecasted range," Mittal said in a statement. "Uncertainties around the economic outlook have increased in recent weeks, impacting the confidence levels of our customers, so as we move in to the 4Q we are facing both volume and price pressures. However, our core profitability is resilient, supported by our growing mining business, our market leading value-added steel franchise and our management gains programs. As a result I remain confident that the Group's EBITDA in the second half of 2011 will be above that of the second half of 2010."
Net income for the quarter was $659 million, down significantly from $1.5 billion in the three months ending in June, as well as from the $1.3 billion reported for the third quarter of 2010.
In a conference call with reporters, Aditya Mittal, the company's chief financial officer, said capacity utilization was about 71 percent in the third quarter, and he expected that to fall slightly in the fourth quarter.
In October, the Luxembourg-based company shut two blast furnaces at its site in Liege, Belgium. It was ArcelorMittal's first significant closure since it was formed in 2006 as a result of the merger between Mittal Steel and Arcelor to create the world's largest steel business.
However, Aditya Mittal said Thursday, "As of today, I do not believe any more capacity shutdowns are planned."
Although Europe's economic recovery will be "more muted" than originally anticipated, he said that in the long term there was potential for grown in demand in Eastern Europe, where there is currently low steel consumption per capita.
In October, ArcelorMittal pulled out of a planned deal to jointly control the Australian company Macarthur Coal Ltd. with U.S.-based Peabody Energy Corp. The total cost of the deal was reported to be in excess of $5 billion (euro3.62 billion).
Aditya Mittal said in the end it would have been too much money to spend for a company it would not have fully controlled. He said the money would be used instead to pay down ArcelorMittal's debts.
He also defended the 2006 merger between Mittal Steel and Arcelor.
"I think through the merger we have created a much stronger company that is much more able to withstand the crisis better than either company alone," he said.
In 2009, ArcelorMittal was responsible for about 6 percent of global steel output.