ArcelorMittal: Will Cost Reductions Save It From Going Under?

ArcelorMittal (MT) continues to work on fundamentals such as reducing operating costs for mines and lowering SG&A expenses. For instance, the company has reduced iron ore unit cash costs by 17% for the first nine months of the year. This costs optimization efforts have allowed the company to remain ahead by approximately 15% from its target for the full year.

These deductions coupled with its costs reduction and efficiency efforts lead to savings of nearly $1.00 billion for the year. In addition, the company is reducing its debt position.
It is expected to lower its net debt by over $1.00 billion to $15.8 billion at the end of fiscal year 2015. Its net debt was $16.8 billion at the end of third-quarter of 2015.

More importantly, ArcelorMittal has improved its liquidity position. It has extended $6 billion line of credit refinanced recently. This leads to total liquidity position of $9.6 billion at the end of September 30.

Improved costs performance is driving mining profitability

More importantly, these costs reduction pains have improved mining profitability by more than 24.5% across its mines in Canada, Europe, Liberia and NAFTA. In fact, these excellent costs position helped ArcelorMittal to offset lower realized selling price in the domestic market.

In addition, the company is now focusing on the core assets to ensure lowest cost footprint that should further improve the mining profitability in the coming years for ArcelorMittal. In fact, ArcelorMittal has saved approximately $1.00 billion through European footprint optimization.


ArcelorMittal is taking aggressive steps to combat the soft iron ore prices. It has significantly reduced its unit costs and expects further reduction in its operating costs that should help the company to improve its bottom line performance. Moreover, the company has improved its liquidity position and lowered its net debt considerably that has strengthened its balance sheet. The company remains a good investment prospects in the long-run.
Published on Feb 23, 2016
By Yaggyaseni Mittra

Copyrighted 2016. Content published with author's permission.

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