) announced that it will incur a goodwill write down amounting to
$4.3 billion for its European businesses in the fourth quarter of
2012. The charge is in accordance with the results of its
goodwill impairment test as per the IFRS accounting standards.
The write down will be in the form of a non-cash impairment
ArcelorMittal considered weak market conditions in Europe to be
responsible for the impairment charge. Steel demand in Europe
fell about 8% this year, bringing the cumulative decline in
demand to approximately 29% since 2007. However, the company's
U.S. business is performing well where apparent steel consumption
is up almost 8% this year and lagging the 2007 level by only
ArcelorMittal is wary of the situation in Europe and the
domino effect it might have on other markets. As a result, the
company is focusing on improving its efficiency, productivity,
assets optimization and net debt reduction.
Last month, ArcelorMittal posted a net loss of $709 million or
46 cents per share in the third quarter of 2012 compared with a
net income of $659 million or 19 cents per share a year ago. The
bottom line was hurt by the challenging economic conditions
including the slowdown in China as well as lower steel pricing
The company's adjusted loss of 31 cents a share missed the
Zacks Consensus Estimate of earnings of 6 cents. The adjusted
loss excluded one-time items - impairment and restructuring
Revenues declined 18.5% year over year to $19,723 million,
trailing the Zacks Consensus Estimate of $21,189 million. Sales
also declined 12.3% on a sequential basis due to lower steel
shipment volumes and lower average steel selling prices.
Shipments declined 5.7% to 19.9 million metric tons in the
The company, which competes with
U.S. Steel Corp.
) and Tata Steel Limited, maintains a Zacks #5 Rank, which
translates into a short-term (1 to 3 months) Strong Sell rating.
We currently have a long-term (more than 6 months) Underperform
recommendation on the shares of ArcelorMittal.
ARCELOR MITTAL (MT): Free Stock Analysis
UTD STATES STL (X): Free Stock Analysis
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