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ArcelorMittal to write down value of European business
December 23, 2012
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BRUSSELS: ArcelorMittal, the world’s biggest steelmaker, is to write down the value of its European business by $4.3 billion, underscoring gloom about prospects for the region’s recession-hit manufacturers.

 The group, formed in 2006 when India-born Lakshmi Mittal’s steel business bought European peer Arcelor for $33 billion, said that demand had fallen about 8 per cent in Europe this year and there was no sign of a quick recovery.

As a result, it will write down the goodwill - the value of intangible assets such as brands rather than physical assets such as machinery - of its European operations by 87 per cent.

“It is negative, but it should not really be a big surprise that the book value of its European business was too high,” said a London-based analyst who asked not to be named.

ArcelorMittal shares were down 2.7 per cent at 12.85 euros, one of the biggest falls by a European blue-chip stock and reversing gains made earlier this week.

Credit agency Fitch cut ArcelorMittal’s long-term issuer default rating to BB”, just below investment grade, due to the challenging outlook for Western European steel markets in 2013.

The $500-billion-a-year steel industry, a gauge of the global economy, has slowed sharply this year as a moderation in China’s economic growth has compounded weak demand from austerity-ravaged Europe.

The World Steel Association in October forecast steel demand would rise 2.1 per cent in 2012, down from 6.2 per cent in 2011. It had forecast 3.6 per cent growth in April.

Last month, Moody’s cut the company’s senior unsecured notes to Ba1 from Baa3, joining Standard & Poor’s in rating ArcelorMittal one notch below investment grade.

Other steelmakers are hurting too. Earlier this month, Germany group ThyssenKrupp posted a full-year net loss of 4.7 billion euros ($6.2 billion).

Europe is a particular weak point, as austerity drives aimed at tackling a sovereign debt crisis have cut demand for cars and construction -steel’s largest markets. Euro zone manufacturing has contracted for 17 straight months.



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