ArcelorMittal shelves investment plans on tough economic condition

By: | Updated: March 5, 2017 2:34 PM

Global steel giant ArcelorMittal has decided to curtail M&A and new investment activities following tough economic and market conditions.

The world’s largest steelmaker will now focus on asset optimisation and sale of non-core assets. (Reuters)

Global steel giant ArcelorMittal has decided to curtail M&A and new investment activities following tough economic and market conditions.

The world’s largest steelmaker will now focus on asset optimisation and sale of non-core assets.

“Due to difficult economic and market conditions, ArcelorMittal has curtailed M&A (Mergers and Acquisitions) and greenfield investment activity,” NRI billionaire Lakshmi Mittal-led company said in its latest annual report.

ArcelorMittal, which was created after an over USD 30 billion merger of Mittal Steel and Arcelor in 2006, said its focus is on improving its costs through management gains programme, non-core asset disposals and resizing operational footprint through asset optimisation.

The company has continued to dispose of non-core assets and sold its minority shareholding in Gestamp as part of this strategy.

Earlier, it disposed of Gallatin, Circuit Foil Luxembourg, ATIC and its steel cord business.

The company in its latest annual report said that with a proven track record in acquisitions and turnarounds, it takes a disciplined approach to investing and uses teams with diverse areas of expertise from different business units across the company to evaluate new assets, conduct due diligence and monitor integration and post-acquisition performance.

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“In particular, ArcelorMittal seeks to improve acquired businesses by eliminating operational bottlenecks, addressing any historical under-investments and increasing capability of acquired facilities to produce higher quality steel… ArcelorMittal believes that these operating and financial measures have improved the operating performance and quality of steel produced at such facilities,” it said.

In February 2016, the steel giant had announced its Action 2020 plan which targets an improvement in operating income by USD 3 billion.

The steel giant last month proposed new USD 6.5 billion steel project in Karnataka and said that it may set up a solar farm on land alloted for the 6 million tonnes (MT) steel project.

The company has entered into a pact with the Karnataka government for setting up a 6 million tonnes (MT) steel plant with a captive 750 MW power plant at an estimated investment of USD 6.5 billion.

ArcelorMittal has said, “In view of excess capacity of steel world-wide and uncertainty in iron ore availability locally, the company is also exploring the possibility of utilising the land in Karnataka for the establishment of a solar farm for generating solar energy.”

The steel giant in June 2010 had signed an MoU with the Karnataka government to set up a 6 MTPA greenfield project at Kuditini in Bellary, Karnataka.

After failing for over a decade to set up plants in Odisha and Jharkhand, ArcelorMittal had signed the pact with the Karnataka government for the plant but the same is yet to take off.

While the company is facing raw material security issues in Karnataka, the projects in Jharkhand and Odisha were marred by delays.

In 2016, ArcelorMittal had a revenue of USD 56.8 billion and crude steel production of 90.8 million tonnes, while own iron ore production reached 55.2 million tonnes.

ArcelorMittal is listed on several stock exchanges including New York, Amsterdam, Paris and Luxembourg.

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