Steel giant ArcelorMittal announced that it has agreed to sell its 15% stake in one of its iron ore operations, ArcelorMittal Mines Canada, for $1.1 billion. The company said that it will sell the stake to a consortium led by South Korean steelmaker Posco and Taiwan-listed China Steel Corp.
Under the agreement, ArcelorMittal, Posco and China Steel Corp will jointly own ArcelorMittal’s Labrador Trough iron ore mining and infrastructure assets and will enter into long-term iron ore supply agreements. The transaction is subject to the approval of the Taiwanese Government and is expected to close by mid-2013.
The joint venture is consistent with ArcelorMittal’s strategy of establishing strategic relationships with key customers and expand its mining business.
ArcelorMittal, in November 2012, released its third-quarter 2012 results. The company posted a net loss of $709 million or 46 cents per share in the quarter compared with a net income of $659 million or 19 cents per share a year ago. The bottom line was hurt by the challenging economic conditions, including the slowdown in China as well as lower steel pricing and shipments.
The company’s adjusted loss of 31 cents a share missed the Zacks Consensus Estimate of earnings of 6 cents per share. The adjusted loss excludes one-time items including impairment and restructuring charges.
Revenues declined 18.5% year over year to $19,723 million, trailing the Zacks Consensus Estimate of $21,189 million. Sales also declined 12.3% on a sequential basis, due to lower steel shipment volumes and lower average steel selling prices. Shipments declined 5.7% to 19.9 million metric tons in the quarter.
We currently have a long-term Underperform recommendation on ArcelorMittal. The company, which competes with U.S. Steel Corp. and Tata Steel Limited, maintains a Zacks #5 Rank (Strong Sell).