* Proposes dividend of $0.20 from 2013, vs $0.75 in 2012
* Sees challenging conditions continuing in Q4
* Q3 core profit $1.34 bln; Reuters poll consensus $1.33 bln
* Sees 2012 core profit of $7 bln
* Shares down 4.1 pct, among weakest of European blue-chips
(Adds finance chief, analyst comment, updates shares)
By Philip Blenkinsop
BRUSSELS, Oct 31 ArcelorMittal, the
world's largest steelmaker, plans to slash its dividend and
focus on cutting debt after slowing demand from China and
sluggish European markets drove it to a third-quarter loss.
The group, which makes 6-7 percent of the world's steel,
said on Wednesday market conditions would remain tough this year
and scrapped its forecast for core profit per tonne in the
second half to be similar to that in the first.
However, finance chief Aditya Mittal was hopeful of some
improvement in 2013, following a recent pick up in iron ore and
Chinese steel prices and stability in the price of scrap.
"Clearly Q3 and Q4 represent very challenging operating
conditions, but should mark the low point in the cycle," he told
a conference call.
Shares in ArcelorMittal, formed in 2006 when the steel
business of Indian-born tycoon Lakshmi Mittal bought European
peer Arcelor, were down 4.1 percent at 1115 GMT, among the
weakest in the blue-chip FTSEurofirst 300 index .
The $500-billion-a-year steel industry - a gauge of the
global economy - has slowed sharply this year from last, as a
moderation in China's economic growth has compounded weak demand
from austerity-ravaged Europe.
The World Steel Association earlier this month forecast
steel demand would rise by 2.1 percent in 2012, down from 6.2
percent in 2011. It had forecast 3.6 percent growth in April.
Other steelmakers are hurting too. South Korea's POSCO
, the world number four, last week posted a 25
percent drop in quarterly profit.
ArcelorMittal, whose output is more than double that of its
nearest rival, reported third-quarter earnings before interest,
tax, depreciation and amortisation (EBITDA) of $1.34 billion, in
line with forecasts, but the lowest in three years.
It sees European Union demand falling 8 percent this year,
leaving it 29 percent below pre-crisis levels, and has responded
with plans to close blast furnaces in Belgium and France.
Including an impairment and restructuring charges related to
those closures, as well as a one-off hit from a new U.S. labour
contract, ArcelorMittal tumbled to a net loss of $709 million,
greater than the $193 million loss expected.
ArcelorMittal said it planned to cut its annual dividend to
$0.20 per share in 2013, saving $1 billion as it battles to
reduce debt and keep a valuable investment-grade credit rating.
The group, which paid out a dividend of $0.75 per share this
year, said it would also reduce capital spending next year.
Net debt climbed $1.2 billion during the third quarter to
$23.2 billion at the end of September.
Analysts said the dividend cut was steeper than expected,
though not as painful for shareholders as a rights issue.
Kepler's Rochus Brauneiser was disappointed by the rise in
debt and that the company gave few details on other ways of
cutting borrowings, like selling a stake in mines.
"As nothing has materialized so far, they remain under
pressure," he said.
Ratings agency Standard & Poor's has already reduced the
steelmaker's debt to junk status. Moody's has cut its outlook to
negative and said ArcelorMittal needs to lower net debt by $5
billion by early 2013 to avoid a downgrade.
ArcelorMittal has said losing investment grade status
completely would cost about $100 million in interest charges.
It has already sold non-core businesses, including stakes in
Australian coal miner Macarthur Coal and in Turkish
Sources familiar with the matter say it has also begun
exploring the possible sale of a minority stake in its Quebec
Aditya Mittal, Lakshmi Mittal's son, said ArcelorMittal did
not plan to divest core mining assets, but could follow the
example of others in selling a stake to a customer.
He declined to say whether the company wanted to buy the
Steel Americas assets put up for sale by ThyssenKrupp,
which analysts say could go to a price-cutting competitor.
"Clearly we are a player in the Americas, we are the largest
steel company in the world. It is something we need to take a
close look at," Aditya Mittal said.
For the full year, ArcelorMittal said it expected EBITDA to
be around $7 billion. The average Thomson Reuters I/B/E/S
forecast is $7.34 billion.
(Additional reporting by Clara Ferreira Marques.; Editing by
Rex Merrifield and Mark Potter)