ArcelorMittal expects less losses, drops deeper into junk territory with S&P

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ArcelorMittal expects less losses

This is attributed to the closure of the Thabazimbi mine which caused a damage charge of 1,950 million rand last year.

(READ MORE: ArcelorMittal S.Africa to submit environmental plan to VEJA)

“The loss per share is expected to reduce from 535 cents per share to a range between 33 and 43 cents per share (92 per cent -94 per cent improvement),” said [DATA ACL:ArcelorMittal].

The world’s largest steelmaker, dropped deeper into junk territory on Tuesday after Standard & Poor’s downgraded the company’s debt due to weaker iron ore prices.

The rating agency said it had lowered its long-term credit rating on ArcelorMittal to BB from BB+ after revising its benchmark iron ore price assumptions for 2015 and 2016 to $65 from $85 per tonne, given a well-supplied market.

S&P added that it estimated ArcelorMittal’s core profit (EBITDA) in 2015 would be $7.0-7.3 billion, falling short of its previous expectation of $8 billion.

It forecast that the ratio of funds from operations to debt was likely to be closer to 15 percent than 20 percent in the next two years.

“The outlook is stable because we believe that ArcelorMittal has some flexibility and capacity to support the current rating,” the S&P report said.

S&P cut ArcelorMittal’s debt to junk status in August 2012, believing then the steel industry would weaken as the global economy, particularly in Europe, slowed down.

ArcelorMittal has steadily increased its own iron ore production in recent years, shipping almost 30 million tonnes in the first nine months of 2014.

S&P also said it was cautious in its assumptions about average steel margins in the next two years, saying lower raw materials prices might not necessarily result in higher margins because the supply-demand balance in the steel industry remained relatively weak.

“Improvements in the steel segment are unlikely to fully compensate for weaker mining profits,” the ratings agency said.

ArcelorMittal said it was disappointed by the downgrade, but said debt reduction and assets sales in recent years could be seen in recent earnings, which, together with recovering demand for steel, was improving profitability.