Published: Wednesday, 29 Jul 2009 | 12:06 PM ET

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ArcelorMittal

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[MT  Loading...      ()   ], the world's largest steelmaker, forecast a gradual improvement throughout the second half of the year after a third consecutive quarterly net loss due to destocking.

Chief Executive Lakshmi Mittal said the company had seen some initial signs of recovery in recent weeks, which had allowed it to restart production at some plants.

"Provided there are no further unexpected economic deteriorations, we should see continued gradual improvement throughout the second half of the year, with full recovery remaining slow and progressive," he said.

The company's much-watched EBITDA (earnings before interest, tax, depreciation and amortization) slid 85 percent to $1.22 billion. 

The average forecast in a Reuters poll of 12 analysts was $1.17 billion.

ArcelorMittal itself had previously given a guidance range of $1.2-$1.5 billion.

For the third quarter, the company forecast EBITDA of $1.4 billion to $1.8 billion. The mid-point would be an 81 percent slide year-on-year.

The global downturn has hit demand for steel, an industry often seen as a broad gauge of an economy's strength, as activity in the key automotive and construction sectors has tumbled.

ArcelorMittal made a third consecutive net loss, of $792 million, with further inventory write-downs and provisions for job cuts.

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The company and its rivals have felt a double blow as customers opt to build down stocks rather than buy fresh steel, leaving many running at half capacity.

However, that destocking is drawing to a close.

Nippon Steel, the world's number two also reporting on Wednesday,swung to a quarterly loss on large one-time losses and said it would not pay a first-half dividend.

JFE Holdings, the world's number five, said on Tuesday it had swung to a quarterly loss but forecast a full-year profit.

ArcelorMittal, three times larger than its nearest rival and holding some 10 percent of the world steel market, has faced scrutiny over debt driven up by acquisitions, notably the then Mittal Steel's 26 billion euro ($37.1 billion) takeover of Arcelor in 2006.

The company's net debt fell to $22.9 billion at the end of June, from $26.7 billion at the end of March and gearing to 37 from 48 percent. It has a $22.5 billion debt target by year end, calming nerves with $11 billion of equity, convertible and bond issues this year.

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It also agreed with lenders earlier this month to relax its covenants on more than $31 billion of credit. It said that meant its net debt/EBITDA limits were now 4.5 times in December 2009, 4.0 in June 2010, reverting to 3.5 times in December 2010.

Shares in ArcelorMittal closed 4.4 percent lower on the day.

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