Falling iron ore price leads ArcelorMittal to cut guidance again

ArcelorMittal downgraded its 2015 earnings expectations on Thursday, as it continues to grapple with the sharp fall in iron ore prices.

The world's largest steelmaker by sales now expects earnings before interest, taxes, depreciation and amortisation of between $6bn to $7bn, down from its previous guidance in February of $6.5bn to $7bn.

The cut in earnings guidance comes as Arcelor reported a widening of losses in the first quarter, largely driven by its mining division and the impact of foreign exchange. The company made a net loss of $728m, compared to $205m in the same period in 2014.

The falling iron ore price - which hit a six-year low last month - hurts ArcelorMittal more than other steelmakers because it has significant mining operations. The group is one of the world's largest producers of the key steelmaking ingredient and sells about two-thirds of its output to other companies.

The iron ore price halved during 2014 because of weaker demand in China, one of the most important markets for the commodity, and increased supply from major miners in Australia.

Lakshi Mittal, the Indian metals tycoon who heads up ArcelorMittal, said: "We faced a number of headwinds in the first quarter, including a declining iron-ore price, a stronger dollar and a surge of imports in the US."

ArcelorMittal's mining division slipped to a first-quarter operating loss of $36m, compared with a profit of $274m in the same period in 2014.

Its US steel division fell to an operating loss of $107m, compared with a profit of $70m a year ago, largely because of a rise in cheap steel imports.

"Off-setting the impact of these headwinds is a priority and we are focused on achieving a 15 per cent reduction in mining costs and improving the competitive position of our US operations," Mr Mittal said.

He added that the company still expected to remain free cash flow positive and further reduce net debt over the course of the year. Net debt at the end of the first quarter rose to $16.6bn, compared to $15.8bn at the end of the previous quarter.

The Luxembourg-based company reported first-quarter earnings before interest, tax and depreciation (ebitda) of $1.38bn, down 21 per cent from $1.75bn a year ago. Analysts polled by independent research company Vuma Financial Services had forecast ebitda of $1.44bn.

While the group was hit in its mining and US steel operations, its European steel division continued to improve. It reported operating income of $317m in the first quarter, compared with $80m a year ago.

ArcelorMittal has spent the past few years restructuring its European division by closing plants and cutting jobs. The steel sector, particularly in Europe, was hit by a sharp contraction in demand during the economic downturn.

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