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Showing posts with label ArcelorMittal. Show all posts
Showing posts with label ArcelorMittal. Show all posts

Monday, November 14, 2011

Lakshmi Mittal, the King of Steel, Trips Up


ArcelorMittal, his steel colossus, is burdened by overcapacity and debt

A distress signal erected by workers protesting the closure of an ArcelorMittal blast furnace in northern France
A distress signal erected by workers protesting the closure of an ArcelorMittal blast furnace in northern France Jean-Christophe Verhaegen/AFP/Getty ImagesBy and Thomas Biesheuvel

In 2006, Lakshmi Mittal became the King of Steel, though it wasn’t long before the crown grew heavy. Just two years after Mittal created the world’s largest steel company with his $41 billion takeover of Arcelor, the global financial crisis hit, dramatically curbing demand for the metal. Now, with operations concentrated in slow-growth Europe and the U.S., the future for his giant looks increasingly problematic. The latest sign of trouble: At the end of October, ArcelorMittal (MT) pulled out of a venture to buy Australia’s Macarthur Coal (MCC:AU), leaving its partner in the takeover, Peabody Energy (BTU), to pursue the $5.1 billion deal on its own.Lakshmi Niwas Mittal

Buying all sorts of steel-related assets, including coal mines, was until recently part of Mittal’s strategy to build a globe-straddling steel company. And for a while the strategy was working. The Arcelor acquisition was to have been the achievement of Mittal’s career. The new company, combining Mittal’s proven ability to wring efficiencies from aging steelworks with Arcelor’s state-of-the-art European technology, seemed poised to profit handsomely from a booming world economy.

Three years of weak steel demand have put downward pressure on earnings and profits at ArcelorMittal, which is heavily indebted after years of dealmaking. The company also has to contend with a steel glut: Chinese mills have more than doubled production since 2005 to a projected 733 million metric tons this year, according to U.K. steel consultant MEPS. ArcelorMittal has trimmed back output some 20 percent from the 116 million metric tons it produced in 2007. Its share of the global market has fallen from 9.5 percent in 2006 to 6.4 percent in 2010, according to data compiled by Bloomberg.

The stock is down some 50 percent from its 52-week high in February. And Mittal’s 40.9 percent stake in the company is now worth about $12 billion, down from $55 billion in 2008. Says Rochus Brauneiser, an analyst at Frankfurt brokerage Kepler Capital Markets: “We’re in a very dark market environment right now.”



Mittal, 61, one of the globe’s most prolific dealmakers over the past three decades, seems ever the cool hand. Wearing a blue suit with no tie at his office on London’s tree-filled Berkeley Square, Mittal shrugs off any notion that the marriage with Luxembourg-based Arcelor has been anything less than a success. “There has been no surprise or disappointment in the merger,” he says. “It has been a very positive experience.”

ArcelorMittal is forecast to report a profit of $3.7 billion this year, the highest in three years. Still, that’s far less than the company’s $10.4 billion profit in 2007. Analysts wonder if that record can ever be reprised. “Those days may be gone forever,” says Tony Taccone, a co-founder of First River Consulting in Pittsburgh. “The only way we return is if the economies of all major countries and regions fire on all cylinders at the same time.”

Just about everyone, including Chief Financial Officer Aditya Mittal, agrees with that assessment. “Prices have moved down in the fourth quarter,” Mittal’s 35 year-old son told reporters on Nov. 3. “Customers are not keen to build inventories.”

An anemic economy is exposing the weak links in Mittal’s empire. The plants acquired through the merger with Arcelor are concentrated in Western Europe, where operating costs are high. To keep steel prices from collapsing, Mittal is putting some of those plants on ice. Rather than cutting production across the board, the goal is to keep the best facilities such as those at Ghent in Belgium and at Dunkirk in France running at near full capacity while closing less competitive mills, reducing costs by $1 billion.

In the last two months, ArcelorMittal has announced it is idling plants in France, Germany, Luxembourg, Poland, and Spain. On Oct. 14 the company said it would permanently shut down its blast furnaces in Liège, Belgium, which employs 581 workers. Employees responded by barricading six Arcelor managers in their offices for 24 hours. The company says it will try to find new jobs for them. “What is happening now is not a surprise,” says former Arcelor Chief Executive Officer Guy Dollé. “Continental Europe plants have no future.”

ArcelorMittal has also cut back production sharply in the U.S., which accounts for 24 percent of overall output and a slightly smaller share of sales. Mittal can’t count on demand from the so-called BRIC countries to offset weakness in Europe and North America. A planned $500 million plant expansion in Brazil has been put on hold, and progress on moving into India, Mittal says, “has not been what we expected.” Nor does he see an opportunity to expand in China, where the company has two joint ventures. Chinese producers, he warns, which make about half the world’s steel, can “export what they don’t sell [at home] at any price. They will always be a threat.”

For now the emphasis is on conserving cash and trimming debt. Mittal said he is even considering selling some $10 billion in noncore assets. Balking on the Macarthur Coal takeover is just more evidence that Mittal is hunkering down. He says the company shied away from the purchase when it became too expensive. Still, analysts see a shift in Mittal’s take-no-prisoners style of dealmaking. “They’ve always been acquirers of assets, and they’ve always held on,” says Anindya Mohinta, an analyst at Citigroup (C) in London.

Mittal insists his company is becoming stronger year by year, and he may be right. If the world economy does bounce back, Mittal will be better positioned than most to profit because he could quickly bring back idled capacity. “The direction is right,” he insists, “but it is being overshadowed by the bad economy.”

With Sonja Elmquist
Reed is a reporter-at-large for Bloomberg News and Bloomberg Businessweek. Biesheuvel is a reporter for Bloomberg News in London.

Monday, April 26, 2010

Wealth of Britain's Richest Rises by 30%




Rich list reveals record rise in wealth

Collective wealth of Britain's 1,000 richest people rose 30%, the biggest annual increase in list's 22-year history
Lakshmi Mittal
Lakshmi Mittal topped the rich list for the sixth straight year. Photograph: Sebastien Pirlet/Reuters

April 25 (Bloomberg) -- The fortunes of the richest people in the U.K. rose at a record pace last year, with the 1,000 wealthiest experiencing a 30 percent increase in their net worth, according to the annual Sunday Times Rich List.

Lakshmi Mittal, the 59-year-old chief executive officer of ArcelorMittal, the world’s largest steelmaker, topped the list for the sixth straight year. His fortune doubled to 22.5 billion pounds ($34.6 billion) as the recovering economy bolstered orders from automakers and builders, according to the Rich List, published today.

Roman Abramovich, 43, the Russian-born billionaire, remained in second place after adding 400 million pounds to his net worth.

The cumulative wealth of the U.K.’s richest people rose to 333.5 billion pounds ($512.8 billion) during the year. The total fell short of the record 413 billion pounds reached in 2008, according to the rankings compiled each year by Philip Beresford. None of the top 10 lost money during the year, while the number of billionaires on the list rose 10 to 53.

The list has been compiled for the past 22 years and is based on identifiable wealth, including property, art, racehorses and shares in publicly-held companies. It excludes bank account balances.

The 30 percent increase in combined wealth in the last year is “easily the biggest annual rise” in the history of the list, Beresford said in an e-mailed statement.

The year before, the net worth of those on the list had plunged 37 percent, in the depths of the global financial crisis.



Joseph Lau, Duke of Westminster

The highest new entry was Joseph Lau, the 58-year-old chairman and CEO of Hong Kong-based Chinese Estates Holdings Ltd., who took the 12th spot. Lau, with a fortune calculated at 3.8 billion pounds, recently paid 33 million for a house in London’s Eaton Square.

The Duke of Westminster, the highest-placed British-born billionaire, remained in third place. His ancestral land holdings in central London are among the most expensive properties in the nation and helped boost his net worth by 4 percent.

It was the smallest gain seen among the wealthiest 10 people in the U.K. The Queen, 84, ranked 245 with a fortune of 290 million pounds.

New to the 10-top list were Alisher Usmanov, who made his money in steel and mines, Galen and George Weston, whose wealth from retailing was combined this year, and Indian-born Anil Agarwal, who had an increase of 583 percent in his fortune thanks to the skyrocketing price of his London-based mining group
Vedanta Resources Holdings Ltd.
 
ArcelorMittal
Falling from the top 10 were Hans Rausing and family, whose fortune is in packaging; Sammy and Eyal Ofer, and John Fredriksen in the shipping industry; Joe Lewis in investments; and Kirsten and Jorn Rausing in inheritance.


Mittal holds a 41 percent stake in Luxembourg-based ArcelorMittal, which he formed through the takeover of Arcelor SA by Mittal Steel Co. in 2006. The stock surged 89 percent in 2009 as it boosted output of the metal as the world economy recovered and automakers and builders increased orders.

The steel industry is recovering faster and stronger than expected, the World Steel Association said April 20. The group, whose members include nineteen of the world’s 20 top steelmakers, forecast that steel consumption will increase 10.7 percent this year.

European hot-rolled coil, a benchmark product used in cars and appliances, increased 41 percent in the first quarter as raw material prices surged, according to Metal Bulletin data.

Abramovich
Abramovich, owner of the Chelsea football club, accrued his wealth after the fall of the Soviet Union by building up Russia’s fifth-largest oil producer. His oil business, OAO Sibneft, was bought by OAO Gazprom in 2005 as then-President Vladimir Putin moved to return the country’s oil wealth into state hands.

The billionaire, once Russia’s richest man according to Forbes, has since bought into metal producers. Millhouse LLC, which manages his assets, has stakes in Evraz Group SA, Russia’s second-largest steelmaker, and Highland Gold Mining Ltd.

Britain’s 10 Largest Fortunes (in billions of pounds)

1. Lakshmi Mittal and Family       Steel          22.5
2. Roman Abramovich Oil 7.4
3. The Duke of Westminster Property 6.8
4. Ernesto and Kitty Bertarelli Pharma 6.0
5. David and Simon Reuben Property 5.5
6. Alisher Usmanov Steel, Mines 4.7
7. Galen and George Weston Retail 4.5
8. Charlene, Michel de Carvalho Inheritance 4.4
9. Philip Green and wife Retailing 4.1
10. Anil Agarwal Mining 4.1

By Michelle Fay Cortez in London at mcortez@bloomberg.net