Rating agency Standard & Poor's said that the ratings on Luxembourg registered steel group ArcelorMittal reflect Standard & Poor's Ratings Services view of the group's satisfactory business risk and significant financial risk profiles.
The business risk profile is supported by the group's leading global market positions, with about 20% of EBITDA coming from Europe, 17% from North America and 33% from emerging markets. ArcelorMittal also has greater product diversity than other steel companies, as 30% of its profits come from profitable and growing mining operations. Offsetting factors include the cyclicality of the steel industry and the weak performance of the group's European operations in the sluggish economic environment.
ArcelorMittal's financial risk profile is constrained by the group's cyclical cash flow generation and substantial adjusted debt that was USD 39.1 billion on March 31st 2012. The company has informed us that its deferred tax assets related to its postretirement funding deficit of USD 11 billion amounted to USD 3.6 billion as of December 31st 2011, rather than USD 1.7 billion explained to us earlier.
S&P said that "Consequently we have changed our assessment of the postretirement obligation adjustment to debt to USD 7.4 billion from USD 9.3 billion. The company's adjusted debt at March 31st 2012, therefore stood at USD 39.1 billion instead of USD 41.1 billion. The adjusted ratio of funds from operations to debt was 18% as of March 31st 2012."
It added that "The financial risk profile is supported by what we view as the group's moderate financial policy, and our expectation that ArcelorMittal will be able to deleverage to bring its fully adjusted ratio of FFO to debt to 25% by mid 2013, which we believe is commensurate with our BBB- rating. Our base case scenario includes a substantial reduction in adjusted debt to about USD 30 billion by the end of 2012, which we expect management to achieve through a series of bold actions, in particular disposals and the attainment of moderately positive free operating cash flow. An additional supportive factor is the group's medium term maturity profile."
Source - Standard & Poor's
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