By KEVIN NEVERS

ArcelorMittal (AM) is reporting a net income of $3.8 billion or $2.79 basic earnings per share for the third quarter of 2008, compared to $5.839 billion or $4.20 basic earnings per share for the second quarter and $2.96 billion or $2.10 basic earnings per share in the year-ago period.

That fall-off in earnings from the second to the third quarter coincides with a decrease in shipments and sales alike. Shipments dropped by 14 percent, from 29.8 million metric tons in the second quarter to 25.6 million metric tons (26 million metric tons in the year-ago period). Sales, meanwhile, dropped by 7 percent, from $37.840 billion in the second quarter to $35.198 billion in the third quarter ($25.524 billion in the year-ago period).

Commenting on the report, AM Chair and CEO Lakshmi Mittal said, “We have announced today strong results for the quarter. . . . Looking forward, we have also announced necessary and responsible measures to ensure we are well adapted to the current environment. Our focus remains on cost-leadership and service to customers.”

“The current period of de-stocking,” Mittal also said, “requires that we make appropriate production cuts to seek to re-balance supply and demand, and we are also accelerating efforts to pay down debt. ArcelorMittal, with its diversified business model, strong cash-flow and cost-leadership position, is well placed to weather the challenging economic environment we currently face. We remain optimistic about the industry’s medium-term growth prospects, but it is appropriate to pause our growth strategy until we have a more settled economic outlook.”

In the fourth quarter the company expects EBITDA—operating income plus depreciation—to be in the range of $2.5 to $3 billion, compared to $8.58 billion in the third quarter, “due to increased production cuts following weaker demand across all segments as a consequence of the current credit and economic environment.”

In the fourth quarter the company also expects “positive cash flow from operations” and capital expenditures of around $1.5 billion.

Other third-quarter numbers:

•EBITDA was $8.58 billion, compared to $8.046 billion in the second quarter and $4.881 billion in the year-ago period.

•Operating income was $5.467 billion, compared to $6.621 billion in the second quarter and $3.853 billion in the year-ago period.

Flat Carbon Americas

The Flat Carbon Americas segment reported the following numbers for the second quarter:

•Total steel shipments were 6.9 million metric tons, compared to 7.4 million metric tons—or 7.1 million metric tons excluding the Sparrows Point facility, sold in May—in the second quarter.

•Sales were $8.5 billion, compared to $7.5 billion in the second quarter.

•Operating income was $600 million, compared to $1.4 billion in the second quarter. Excluding the impact of the new labor agreement, operating income was higher in the third quarter at $2.2 billion.

•Operating results—excluding the impact of the new labor agreement—increased “primarily due to higher average selling prices on a comparable basis and partially offset by increased input costs and lower steel shipment volumes,” the company said. Operating income was negatively impacted by $58 million due to a reduction of goodwill. Operating income in the second quarter was also negatively impacted by $158 million due to a reduction of goodwill.

Other Numbers

•As of Sept. 30, the company’s cash and cash equivalents were $6 billion, compared to $7.5 billion on June 30 and $7.2 billion on March 31.

•As of Sept. 30, the company’s net debt was $32.5 billion, compared to $30.7 billion on June 30 and $27.4 billion on March 31.

•As of Sept. 30, the company had total liquidity of $12 billion—cash, cash equivalents, and available bank lines—compared to $15.8 billion on June 30 and $13.9 billion on March 31.

•Capital expenditures were $1.8 billion in the third quarter, compared to $1.4 billion in the second quarter.

Posted 11/5/2008