Mittal Steel Company N.V. Reports Second Quarter and Half Year Results 2005
ROTTERDAM, The Netherlands, August 10 /PRNewswire-FirstCall/ -- Mittal Steel Company N.V., (NYSE: MT; AEX: MT),'Mittal Steel' or 'the Company'), the world's largest and most global steel company, today announced results for the second quarter and six months ended June 30, 2005.
Highlights:
- Solid results given current market conditions
(US Dollars in millions except per share data and shipments)
2Q 2005 1Q 2005 2Q 2004 1H 2005 1H 2004
Shipments (000'ST) 12,181 10,379 10,843 22,560 20,949
Revenues 7,604 6,424 5,588 14,028 9,728
Operating income 1,391 1,719 1,690 3,110 2,489
Net income 1,090 1,147 1,276 2,237 1,815
Earning Per Share ($) 1.57 1.78 1.98 3.35 2.81
The results of the second quarter include those of International Steel Group ('ISG') which merged with Mittal Steel from April 15, 2005, and excludes the first 15 days of ISG second quarter results.
- Further strengthening of global position
The merger of International Steel Group ('ISG') with Mittal Steel was completed on April 15, 2005. This is Mittal Steel's first earnings release consolidating the results of ISG from the acquisition date of April 15, 2005. The acquisition of ISG was accounted for using the purchase method of accounting, as required under US GAAP.
Commenting, Mr Lakshmi N. Mittal, Chairman and CEO, Mittal Steel Company, said:
'The industry has been experiencing an inventory de-stocking in Europe and the US, as a result of which demand and prices have softened. The industry response to this has been positive, with various producers cutting production including Mittal Steel. Against this backdrop, we have maintained net income at US$1.1 billion. Looking ahead to the third quarter, we are expecting conditions to remain difficult but key economic indicators are showing an encouraging signal for real steel demand prospects and prices are expected to improve in the short-term. We believe that the basic fundamentals for the steel industry remain positive and that Mittal Steel is well positioned to further build on its unique global position.'
Second Quarter 2005 Earnings Conference Call
Lakshmi N. Mittal, Chairman and Chief Executive Officer, and Aditya Mittal, President and Chief Financial Officer, will host a conference call for members of the investment community to discuss the company's financial results and general business operations at 9:30 AM New York Time/ 2:30 PM London time on Wednesday, August 10, 2005. The conference call will include a brief question and answer session with senior management. The conference call information is as follows:
Date: Wednesday, August 10, 2005
Time: 9:30 AM New York Time/2:30 PM London Time
Dial-In Number from within the U.S.: +1-877-780-2271
Dial-In Number from outside the U.S.:+1-973-582-2737
For individuals unable to participate in the conference call, a telephone replay will be available from 1:00 PM New York Time/6:00 PM London Time on August 10, 2005 until midnight/5:00 AM London Time on August 24, 2005 at:
Replay Number from within the U.S.: +1-877-519-4471
Replay Number from outside the U.S.: +1-973-341-3080
Passcode: 6329996
A webcast of the conference call can also be accessed via www.mittalsteel.com and will be available for one week. RealPlayer or Windows Media Player will be required in order to access the webcast.
Mittal Steel Company N.V. net income for the quarter ended June 30, 2005 was $1.1 billion or $1.57 per share, as compared with net income of $1.1 billion or $1.78 per share for the quarter ended March 31, 2005 and $1.3 billion or $1.98 per share for the quarter ended June 30, 2004.
Consolidated sales and operating income for the quarter ended June 30, 2005 were $7.6 billion and $1.4 billion, respectively, as compared with $6.4 billion and $1.7 billion, respectively, for the quarter ended March 31, 2005 and compared with $5.6 billion and $1.7 billion, respectively, for the quarter ended June 30, 2004.
Total steel shipments for the quarter ended June 30, 2005 were 12.2 million tons as compared with 10.4 million tons for the quarter ended March 31, 2005 and 10.8 million tons in the quarter ended June 30, 2004.
Inter company transactions have been eliminated in financial consolidation.
Analysis of operations
Mittal Steel's consolidated financial statements for the quarter ended June 30, 2005 include ISG, the results of which were included from April 15, 2005. As a result, the comparison of past periods may not be entirely appropriate.
Average price realization in the quarter ended June 30, 2005 marginally increased by 1% as compared with the quarter ended March 31, 2005 (4% lower excluding ISG). Average price realization in the quarter ended June 30, 2005 improved by 19% as compared with the quarter ended June 30, 2004, primarily due to higher base selling prices, following a steep increase in the cost of inputs (14% higher excluding ISG).
Steel shipments were higher by 17% in the quarter ended June 30, 2005 as compared with the quarter ended March 31, 2005 (10% lower excluding ISG). Steel shipments for quarter ended June 30, 2005 were 12% higher as compared with the quarter ended June 30, 2004, primarily due to inclusion of ISG (14% lower excluding ISG).
Due to the increases in the cost of key inputs, such as iron ore, electricity, natural gas, and the reduction of production due to the market environment, cost of goods sold per ton during the quarter ended June 30, 2005 was higher by 14% as compared with the quarter ended March 31, 2005 (4% higher excluding ISG) and higher by 40% as compared with the quarter ended June 30, 2004 (28% higher excluding ISG). The Company voluntarily cut production in some of its subsidiaries, to address an inventory de-stocking situation in the market place.
Cost of sales during the quarter ended June 30, 2005 include the cash receipt of $75 million relating to an insurance claim, following the fire at Mittal Steel Temirtau (formerly known as Ispat Karmet) on February 17, 2005.
Selling, general and administrative expenses in the quarter ended June 30, 2005 increased by 8% as compared with the quarter ended March 31, 2005 and increased by 52% as compared with the quarter ended June 30, 2004 largely due to higher levels of sales activity, as well as the inclusion of ISG.
Operating income for the quarter ended June 30, 2005 was $1.4 billion as compared with $1.7 billion for both the quarter ended March 31, 2005 and quarter ended June 30, 2004, for reasons described above.
Other income for the quarter ended June 30, 2005 was $35 million which includes $14 million in respect of a gain on a sale of a property at our Mexican operations, partly offset by $7 million minority interest, and $24 million relating to dividend from our 8.6% investment in Erdemir, which was made during December 2002 and March 2003 dates.
Net interest expenses at Mittal Steel for the quarter ended June 30, 2005 increased to $55 million as compared with $33 million for the quarter ended March 31, 2005 and $47 million for the quarter ended June 30, 2004 primarily due to the increased borrowing for acquisition of ISG and assumption of debt at ISG.
Mittal Steel's income tax expense for the quarter ended June 30, 2005 amounted to $165 million as compared with $397 million for the quarter ended March 31, 2005. The effective tax rate for the quarter ended June 30, 2005 was 12% as compared with 23% for the quarter ended March 31, 2005 primarily due to a tax credit in our Mexican operation, amounting to $136 million, as well as a one-time tax credit of $20 million in our US operations, due to a change in the Ohio tax regulations. Mittal Steel's income tax expense for quarter ended June 30, 2004 amounted to $257 million.
Net income for the quarter ended June 30, 2005 remained flat as compared with the quarter ended March 31, 2005 at $1.1 billion and lower as compared with quarter ended June 30, 2004 at $1.3 billion owing to the reasons as discussed above.
Americas
Total steel shipments in the Americas region were 5.4 million tons in the quarter ended June 30, 2005, as compared with 3.0 million tons for the quarters ended March 31, 2005 and June 30, 2004. Excluding ISG, shipments were lower, primarily due to the de-stocking taking place.
Sales were higher at $3.5 billion in the quarter ended June 30, 2005, as against $1.9 billion for the quarter ended March 31, 2005 and $1.6 billion for quarter ended June 30, 2004 due to the inclusion of ISG.
Operating income was $447 million for the quarter ended June 30, 2005 as compared with $568 million for the quarter ended March 31, 2005 and compared with $370 million for quarter ended June 30, 2004. Excluding ISG, operating income was lower due to higher cost of inputs as well as reduced levels of activities due to the market environment.
Europe
The European region achieved total steel shipments of 4.0 million tons in the quarter ended June 30, 2005, as compared with 4.6 million tons for the quarter ended March 31, 2005 and 4.8 million tons for the quarter ended June 30, 2004. Shipments were lower primarily due to the aforementioned de-stocking taking place.
Sales were lower at $2.6 billion in the quarter ended June 30, 2005, as compared with $3.0 billion for the quarter ended March 31, 2005, and $2.6 billon for the quarter ended June 30, 2004.
Operating income was $263 million for the quarter ended June 30, 2005 as compared with $492 million for the quarter ended March 31, 2005, and compared with $668 million for the quarter ended June 30, 2004. Lower operating income was due to higher cost of inputs as well as reduced levels of production, caused by the market environment.
Asia & Africa
Total steel shipments of our Asia & Africa region (formerly known as Rest of World) were 2.7 million tons for the quarter ended June 30, 2005 as compared with 2.8 million tons for the quarter ended March 31, 2005, and 3.0 million tons for the quarter ended June 30, 2004. Shipments for the first and second quarters 2005 were affected primarily due to a fire at Kazakhstan subsidiary.
Sales were marginally higher at $2.1 billion in the quarter ended June 30, 2005, as compared with $2.0 billion for the quarter ended March 31, 2005, and $1.8 billion for the quarter ended June 30, 2004 due to higher selling prices.
Operating income was higher at $678 million for the quarter ended June 30, 2005 compared with $632 million for the quarter ended March 31, 2005, and higher as compared with $600 million for the quarter ended June 30, 2004.
Liquidity
The Company's liquidity remains strong. As at June 30, 2005, the Company's cash and cash equivalents including restricted cash were $2.7 billion ($2.7 billion at March 31, 2005 and $1.5 billion at June 30, 2004). In addition, the Company's operating subsidiaries had available borrowing capacity of $2.2 billion as at June 30, 2005.[1]
Net debt (which is total debt including loan from shareholder and dividend payable less cash and cash equivalents and restricted cash) at the end of June 30, 2005 was $2.0 billion ($520 million at March 31, 2005). During the quarter, ISG purchase consideration of $2.1 billion was paid to ISG shareholders. In addition, $144 million was paid out for the cancellation of ISG stock options and net debt of $96 million at ISG was assumed. On a pro forma basis, including ISG stock options, the net debt decreased by $1,008 million in the quarter ended June 30, 2005.
Inventories, receivables and prepaid expenses and other current assets were higher during the quarter, offset by increases in trade payables, accrued expenses and other liabilities net of effects of acquisitions, mainly due to reduced purchases, payment of options resulting from the merger and severance related costs at ISG.
Capital expenditures during the quarter ended June 30, 2005 were $255 million as compared with $205 million for the quarter ended March 31, 2005 and $199 million for the quarter ended June 30, 2004.
Depreciation during the quarter ended June 30, 2005 was $192 million as compared with $163 million for the quarter ended March 31, 2005 and $133 million for the quarter ended June 30, 2004.
On June 20, 2005 the Board of Directors of Mittal Steel Company declared a dividend of US$0.10 per share, as per the dividend policy recently announced. The cash dividend was paid on July 7, 2005 to stockholders of record on June 30, 2005.
Outlook for third quarter 2005.
For the third quarter, production and shipments are expected to be slightly lower, selling prices are expected to be significantly lower and cost of sales slightly lower. Overall, we expect operating income to be lower by $50-$60 per ton as compared to second quarter. The tax rate should return to its normal level of around 25%.
[1] Corresponding exercisable/available limits are lower, which are based on the level of inventory/receivable. Includes new unused portion of unsecured revolving credit facility.
Statements in this press release that are not historical facts, including statements regarding expectations concerning market growth and development, expectations and targets for Mittal Steel's results of operations and expectations regarding cost savings from recently acquired companies and statements preceded by 'believe,' 'expect,' 'anticipate,' 'target' or similar expressions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those implied by such forward-looking statements on account of known and unknown risks and uncertainties, including, without limitation: (1) changes in general economic, political and social conditions; (2) adverse regulatory changes; (3) fluctuations in currency exchange rates; (4) cyclicality of the steel industry; (5) increased competition; (6) availability and cost of raw materials, energy and transportation; (7) Mittal Steel's ability to realize expected cost savings from recently acquired companies within the expected time frame; (8) Mittal Steel's ability to integrate recently acquired companies; (9) labor disputes; and (10) the risks contained in Mittal Steel's Form 20-F and other filings with the Securities and Exchange Commission. Mittal Steel undertakes no obligation to publicly update its forward-looking statements, whether as a result of new information, future events, or otherwise. This press release also contains pro forma data (adjusted to give effect to the merger of Mittal Steel and ISG) for informational purposes only and does not purport to represent what Mittal Steel's results of operations or financial condition would have actually been had the merger with ISG been completed at the beginning of the period or to project Mittal Steel's results of operations or financial position for any future period. This press release also contains pro forma data (adjusted to give effect to the merger of Mittal Steel and ISG) for informational purposes only and does not purport to represent what Mittal Steel's results of operations or financial condition would have actually been had the merger with ISG been completed at the beginning of the period or to project Mittal Steel's results of operations or financial position for any future period.
For further information, visit our web site: www.mittalsteel.com
MITTAL STEEL COMPANY N.V. CONSOLIDATED FINANCIAL & OTHER INFORMATION
MITTAL STEEL COMPANY N.V. CONSOLIDATED BALANCE SHEETS
As of
June 30, March 31, December 31,
In millions of U.S. 2005 2005 2004
Dollars
(Unaudited) (Unaudited) (Audited)
ASSETS
Current Assets
Cash and cash $ 2,049 $ 2,171 $ 2,495
equivalents
Restricted cash 681 560 138
Short-term 8 1 1
investments
Trade accounts 2,434 2,085 2,006
receivable - net
Inventories 5,979 4,209 4,013
Prepaid expenses and 950 738 666
other current assets
Deferred tax assets 222 246 306
Total Current Assets 12,323 10,010 9,625
Property, plant and 10,904 7,277 7,562
equipment - net
Investments in 710 682 667
affiliates and joint
ventures
Deferred tax assets 730 789 855
Intangible pension 102 104 106
assets
Other assets 507 311 338
Total Assets $25,276 $19,173 $19,153
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities
Payable to banks and $ 511 $ 369 $ 341
current portion of
long-term debt
Trade accounts 1,991 1,743 1,899
payable
Dividend payable 70 1,375 1,650
Accrued expenses and 3,037 2,250 2,307
other current
liabilities
Deferred tax 168 32 33
liabilities
Total Current 5,777 5,769 6,230
Liabilities
Long-term debt 4,213 1,508 1,639
Deferred tax 909 928 955
liabilities
Deferred employee 2,039 1,936 1,931
benefits
Other long-term 1,392 728 809
obligations
Total Liabilities 14,330 10,869 11,564
Minority Interest 1,756 1,719 1,743
Shareholders' Equity
Common shares 60 59 59
Treasury stock (113) (117) (123)
Additional paid-in 2,481 548 552
capital
Retained earnings 6,904 5,886 4,739
Accumulated (142) 209 619
comprehensive income
Total Shareholders' 9,190 6,585 5,846
Equity
Total Liabilities and $25,276 $19,173 $19,153
Shareholders' Equity
MITTAL STEEL COMPANY N.V. CONSOLIDATED FINANCIAL & OTHER INFORMATION
Quarter Ended Six Months Ended
In millions of June 30, March 31, June 30, June 30, June 30,
U.S. Dollars, 2005 2005 2004 2005 2004
except shares,(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
per share and
other data
STATEMENT OF
INCOME DATA
Sales $7,604 $6,424 $5,588 $14,028 $9,728
Costs and
expenses:
Cost of sales 5,748 4,289 3,585 10,037 6,650
(exclusive of
depreciation
shown
separately)
Depreciation 192 163 133 355 261
Selling, 273 253 180 526 328
general and
administrative
expenses
6,213 4,705 3,898 10,918 7,239
Operating 1,391 1,719 1,690 3,110 2,489
income
Operating 18% 27% 30% 22% 26%
margin
Other income 35 5 (9) 40 18
(expense) -
net
Income from 32 15 30 47 41
equity method
investments
Financing
costs:
Interest (88) (58) (63) (146) (118)
(expense)
Interest 33 25 16 58 23
income
Net gain from 4 13 11 17 -
foreign
exchange
(51) (20) (36) (71) (95)
Income before 1,407 1,719 1,675 3,126 2,453
taxes and
minority
interest
Income tax
expense:
Current 161 290 197 451 245
Deferred 4 107 60 111 173
165 397 257 562 418
Income before 1,242 1,322 1,418 2,564 2,035
minority
interest
Minority (152) (175) (142) (327) (220)
interest
Net income $1,090 $1,147 $1,276 $2,237 $1,815
Basic and $1.57 $1.78 $1.98 $3.35 $2.81
diluted
earnings per
common share
Weighted 695 643 643 669 645
average common
shares
outstanding
(in millions)
OTHER DATA
Total 12,181 10,379 10,843 22,560 20,949
shipments of
steel products
including
inter-company
shipments
(thousands of
tons)
MITTAL STEEL COMPANY N.V. CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarter Ended Six Months Ended,
In millions June 30, March 31, June 30, June 30, June 30,
of U.S. 2005 2005 2004 2005 2004
Dollars (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Operating
activities:
Net income $1,090 $1,147 $1,276 $2,237 $1,815
Adjustments
required to
reconcile net
income to net
cash provided
by
operations:
Depreciation 192 163 133 355 261
Net accretion (42) - - (42) -
of purchased
intangibles
Deferred (150) 4 (9) (146) (15)
employee
benefit costs
Net foreign (7) (5) (103) (12) (100)
exchange loss
(gain)
Deferred (17) 107 58 90 171
income tax
Undistributed (14) (10) (39) (24) (75)
earning from
Joint
Ventures
Loss (gain) (15) - - (15) -
on sale or
write-off of
property
plant &
equipment
Minority 152 175 142 327 220
interest
Other (22) 12 103 (10) 97
Changes in
operating
assets and
liabilities,
net of
effects from
acquisitions:
Trade 448 (174) (287) 274 (600)
accounts
receivable
Short-term (8) - (1) (8) (1)
investments
Inventories 210 (315) (386) (105) (437)
Prepaid (141) (87) (117) (228) (197)
expenses and
other assets
Trade (542) (79) 39 (621) 59
accounts
payable
Accrued (151) 27 211 (124) 259
expenses and
other
liabilities
Net cash 983 965 1,020 1,948 1,457
provided by
operating
activities
Investing
activities:
Purchase of (255) (205) (199) (460) (299)
property,
plant and
equipment
Proceeds from 37 (8) 2 29 21
sale of
assets and
investments
including
affiliates
and joint
ventures
Acquisition (1,306) - (73) (1,306) (15)
of net assets
of
subsidiaries,
net of cash
acquired
Investment in 22 - 8 22 16
affiliates
and joint
ventures
Restricted (97) (445) 185 (542) 8
cash
Other (1) 5 (1) 5
Net cash used (1,600) (658) (72) (2,258) (264)
in investing
activities
Financing
activities:
Proceeds from 824 520 656 1,344 1,585
payable to
banks
Proceeds from 3,080 19 42 3,099 952
long-term
debt
Debt issuance (10) - - (10) -
cost
Proceeds from - - - - 46
long-term
debt from an
affiliate
Payments of (707) (508) (736) (1,215) (1,786)
payable to
banks
Payments of (1,208) (116) (293) (1,324) (1,064)
long-term
debt
Payment of - - (3) - (3)
long-term
debt to an
affiliate
Purchase of - - (24) - (54)
treasury
stock
Sale of 4 2 2 6 2
treasury
stock
Dividends (1,375) (426) (150) (1,801) (261)
paid
Others (18) - 1 (18) 1
Net cash 590 (509) (505) 81 (582)
provided by
(used in)
financing
activities
Net increase (27) (202) 443 (229) 611
(decrease) in
cash and cash
equivalents
Effect of (95) (122) 18 (217) 28
exchange rate
changes on
cash
Cash and cash
equivalent:
At the 2,171 2,495 938 2,495 760
beginning of
the period
At the end of $2,049 $2,171 $1,399 $2,049 $1,399
the period
