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Arcelor Posts Record Profit in 2Q

Posted on: Thursday, 28 July 2005, 12:00 CDT

BRUSSELS, Belgium - Steel giant Arcelor SA reported a record profit for the second quarter on Thursday, benefiting from higher global prices despite weak European demand.

The world's second-largest steelmaker posted a net profit of 1 billion euros ($1.2 billion), up from 631 million euros ($756.6 million) in the same quarter last year. Sales rose 12 percent to 8.64 billion euros ($10.36 billion) from 7.69 billion euros.

Analysts surveyed by Dow Jones Newswires said earnings were better than a consensus estimate of 804 million euros ($964 million).

Shares rose 1.8 percent to 18 euros ($21.58) in early trading on the Euronext stock exchange.

The Luxembourg-based company also announced that it would merge its Brazilian long and flat carbon steels businesses: CST, Vega do Sul and Belgo. The new firm, Arcelor Brazil, will be listed on the Sao Paulo stock exchange.

Chief Executive Guy Dolle said Arcelor's access to low-cost production such as in its Brazil mills gives it an advantage over European rivals such as Germany's ThyssenKrupp AG and Anglo-Dutch Corus Group PLC.

"Our strong position in Brazil puts us in a much better position than our rivals to resist troughs in the cycle," Dolle told journalists in a conference call.

The global steel industry has enjoyed a demand boom from China over the last couple of years. However, China's own fast-growing domestic steel output and expanding exports are now beginning to push prices down.

Dolle said the company continues talks to take over a major Chinese steel producer, as yet unnamed. He also said Arcelor's long-term contracts with makers of household appliances and car companies are helping to shield it from falling prices.

To protect its margins, Arcelor plans to reduce output of flat steel in the third quarter, Dolle said. He predicted a seasonal dip in earnings but expected to be able to raise prices for flat steel in the fourth quarter.

Arcelor, created in 2002 through the merger of Usinor of France, ARBED of Luxembourg and Aceralia of Spain, is the world's largest steelmaker by sales after the Rotterdam, Netherlands-based Mittal Steel.

Source: Associated Press/AP Online

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