Falling steel prices hit ArcelorMittal bottom line

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Paris (AFP)

ArcelorMittal, the world's largest steel firm, said Thursday its net profits plunged in the first quarter of the year due to a slide in prices, with competition from Chinese firms still weighing on the market.

The net profit of $414 million (370 million euros) was roughly a third of what the Luxembourg-based firm earned in the first three months of last year.

However the firm maintained sales stable at $19.2 billion thanks to higher deliveries and an increase in iron ore prices.

"Our first quarter results reflect the challenging operating environment the industry has faced in recent months," chief executive Lakshmi Mittal was quoted as saying in the company's earnings statement.

"Profitability has been impacted by lower steel pricing due to weaker economic activity and continued global overcapacity, as well as rising raw material costs as a result of supply-side developments in Brazil," he added.

The sales figure beat the analyst consensus calculated by Bloomberg, but the earnings before interest, tax, depreciation and amortisation (EBITDA), which fell 34 percent to $1.65 billion, came in below.

ArcelorMittal raised its forecast for global steel demand growth this year, to 1 to 1.5 percent from 0.5 to 1.0 percent.

The company said maintaining its investment grade rating remains its financial priority and adjusted the company's target to reduce net debt to $7 billion, from $6 billion previously.

The company's net debt rose by a billion dollars over the quarter to $11.2 billion due to the introduction of new accounting measures.

ArcelorMittal's net debt swelled to over $18 billion earlier this decade as demand for steel declined and the firm cut production. Its financial health has since improved as global steel demand has picked up and it raised equity from shareholders.

In recent years the firm has advocated loudly for measures to protect steelmakers from unfair competition from subsidised Chinese producers.

It noted that safeguard measures introduced by the European Commission have not been fully effective, and that it has had to undertake temporary production cuts in Europe to deal with high levels of imports.