Commodities & Metals

ArcelorMittal Wants to Raise $3 Billion

ArcelorMittal (NYSE: MT), the world’s largest steelmaker, revealed fourth-quarter and full-year 2015 results Friday morning, and the view was anything but pretty. The company’s net loss for the year totaled $7.9 billion, following more than $6 billion in charges for its iron ore business and steel inventory. Almost $7 billion of the year’s net loss was posted in the fourth quarter

To help get the company back on firmer ground, ArcelorMittal plans to issue $3 billion in new shares, of which some $1.1 billion worth will be taken by the Mittal family that owns nearly 40% of the company. The goal is to reduce net debt from $15.7 billion at the end of December to $12 billion.

ArcelorMittal also plans to sell its 35% stake in Spanish automotive metals component firm Gestamp Automoción for around $1 billion by the end of June, again to help reduce debt.

The Wall Street Journal noted Friday morning that the cost to insure $10 million in ArcelorMittal debt dropped from nearly $1.2 million to $869,000. That’s a savings of nearly $500 million year on the current debt total.

The steel market has been hammered by the twin devils of too much capacity and, no surprise, oversupply. Prices have crumbled, although company officials said they have seen some signs that demand is stabilizing and that spreads are improving. The Financial Times cites Chief Financial Officer Aditya Mittal:

2015 was a very challenging time for the steel and mining industries. 2016 will continue to be challenging but we are confident that as a result of … accelerating net debt reduction we strengthen our balance sheet, which puts us in a relatively advantaged [position] compared to the global landscape of steel.

The company had better hope so.

Shares traded down about 5.7% in the mid-morning on Friday, at $3.90 in a 52-week range of $3.25 to $11.95. The consensus price target on the stock is $6.38.

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