Ispat International N.V. Reports Record Results for Second Quarter
2004 ROTTERDAM, The Netherlands, August 5 /PRNewswire-FirstCall/ --
Ispat International N.V., (NYSE:IST)(AEX:ISTAEX:NA), today reported
a record net income of $325 million or $2.75 per share for the
second quarter of 2004 as compared to a net income of $14 million
or $0.11 per share for the second quarter of 2003. In the first
quarter of 2004, the net income was $102 million or $0.85 per
share. The results for this quarter, in fact, exceeded the best
ever annual results achieved so far. Consolidated sales and
operating income for the second quarter were $2.1 billion and $426
million, respectively, as compared to $1.4 billion and $58 million,
respectively, for the second quarter of 2003; and $1.8 billion and
$158 million respectively for the first quarter of 2004. Total
steel shipments were approximately 4.1 million tons [1], which
represented an increase of approximately 2% over the second quarter
of 2003 and a decrease of approximately 4% over the first quarter
of 2004. For the six-month period January-June 2004, Ispat
International N.V.'s net income was $427 million or $3.60 per share
as compared to net income of $65 million or $0.52 per share for the
six-month period January-June 2003. Consolidated sales and
operating income for the six month period January-June 2004 were
$3.9 billion and $584 million respectively, compared to $2.7
billion and $133 million respectively for the six-month period
January-June 2003. Total steel shipments for the six-month period
January-June 2004 were 8.3 million tons, an increase of 6% compared
to the six-month period January-June 2003. The improved earnings
were primarily due to strong demand for our products across all
markets. Our average price realization in the second quarter 2004
improved by 43% compared to the second quarter of 2003 and by 25%
compared to the first quarter of 2004, driven by higher base
selling prices, raw material surcharges and improved product mix.
For the six-month period January-June 2004, average price
realization was 30% higher than the corresponding period of 2003.
The situation with respect to availability and procurement prices
of key raw materials such as iron ore, scrap, coke and natural gas
continued to remain challenging. However, Ispat International was
able to manage the situation successfully, thereby maintaining
shipments and customer service levels. Overall, cost per ton during
the quarter was higher by 23% as compared to the second quarter of
2003 and by 9% compared to the first quarter of 2004. Cost per ton
during the six-month period January-June 2004 was higher by 18%
compared to the corresponding period of 2003. There were no
material unusual or one-time items during the quarter. Selling,
general and administrative expenses were marginally higher due to
higher levels of sales activity, as well as higher costs of
logistics. Other income included a gain from the sale of
environmental credits at Ispat Inland. Net interest expense was
higher mainly due to the costs related to the issue of bonds by
Ispat Inland to refinance the previous term loan. [1] The term
"ton" means a short ton (ST). One short ton is equal to 2,000
pounds. Details of Shipments, Sales and Operating Income at our
main operating subsidiaries were as follows: Shipments Subsidiary
Q2 2004 Q2 2003 Q1 2004 000'Tons 000'Tons 000'Tons US and Canadian
1,801 1,785 1,825 Operating Subsidiaries Ispat Europe Group 1,000
940 1,125 Other Subsidiaries 1,256 1,235 1,274 Sales Subsidiary Q2
2004 Q2 2003 Q1 2004 $ Million $ Million $ Million US and Canadian
1,010 714 853 Operating Subsidiaries Ispat Europe Group 509 373 496
Other Subsidiaries 590 323 406 Operating Income Subsidiary Q2 2004
Q2 2003 Q1 2004 $ Million $ Million $ Million US and Canadian 167
(20) 95 Operating Subsidiaries Ispat Europe Group 54 15 5 Other
Subsidiaries 205 63 58 For the six month period January - June:
Shipments Subsidiary Six Months Six Months 2004 2003 000'Tons
000'Tons US and Canadian 3,627 3,433 Operating Subsidiaries Ispat
Europe Group 2,126 1,941 Other Subsidiaries 2,528 2,418 Sales
Subsidiary Six Months Six Months 2004 2003 000'Tons 000'Tons $
Million $ Million US and Canadian 1,862 1,410 Operating
Subsidiaries Ispat Europe Group 1006 731 Other Subsidiaries 996 597
Operating Income Subsidiary Six Months Six Months 2004 2003
000'Tons 000'Tons $ Million $ Million US and Canadian 262 31
Operating Subsidiaries Ispat Europe Group 60 26 Other Subsidiaries
262 76 Liquidity continues to improve. During the second quarter of
2004, working capital increased by $117 million, mainly due to
higher levels of inventories and receivables driven by higher
levels of costs and selling prices. The underlying physical levels
(represented by number of days' working capital) remained largely
unchanged. During the six month period January-June 2004, working
capital increased by $275 million. Capital expenditure during the
quarter was $35 million and during the six months of 2004 was $56
million. As at June 30, 2004, the Company's cash and cash
equivalents were $143 million ($80 million at December 31, 2003 and
$104 million at March 31, 2004). In addition, the Company's
operating subsidiaries had available borrowing capacity of $223
million as at June 30, 2004. The comparable number was $236 million
as at March 31, 2004 and $143 million as at December 31, 2003.
During the second quarter 2004, the Company reduced net debt by
$248 million, consisting of reduction of borrowings by $209
million, largely by prepaying long-term debt at its subsidiaries,
and increase of $39 million in cash and cash equivalents. During
the six-month period January-June 2004, borrowings was reduced by
$160 million and net debt was reduced by $223 million. Total debt
at the end of the quarter - which includes both long and short-term
debt, as well as borrowings under working capital credit facilities
- was $2.1 billion, as compared to $2.3 billion at the end of the
first quarter of 2004. During the quarter, the Company purchased 2
million of its own shares from the market under the previously
announced share buy back program at an average price of $12 per
share. During the six-month period January-June 2004, the number of
its own shares purchased under this program was 5.3 million and the
average price was $10.25 per share. Outlook for third quarter 2004
The Company expects continued strong demand in all its principal
markets. However, third quarter shipments are traditionally lower
due to seasonal factors. The Company expects improved selling
prices across all product segments and flat to somewhat reduced
shipments compared to second quarter. On the other hand, there is
likely to be continued pressure on availability and cost of all
major inputs. Working capital is expected to increase due to
increases in input prices and sales. Capital expenditure is
expected to be slightly higher in the third quarter than in the
second. A key milestone during the third quarter will be the
pre-commissioning trials at the new degasser facility in Mexico.
Ispat Inland's labor contract has been extended until August 15,
2004 by mutual agreement between Ispat Inland and the United
Steelworkers of America (USWA). The contract was originally
scheduled to expire on July 31, 2004. The Company is hopeful that
Ispat Inland will be able to finalize a new agreement with the
USWA. However, if such agreement does not take place, the existing
agreement contains provisions for recourse to binding interest
arbitration, without any disruption to operations. Overall, the
Company expects to benefit from strong market conditions for its
products. The third quarter is expected to be a better quarter than
the second. The summary consolidated financial and other
information, including accounts of Ispat International N.V. ("Ispat
International" or "the Company") and its consolidating subsidiaries
are prepared in accordance with U.S. GAAP. All material
inter-company balances and transactions have been eliminated.
Quantitative information on total shipments of steel products
includes inter-company shipments. Ispat International N.V. is one
of the largest and most global steel producers, with major
steel-making operations in the United States, Canada, Mexico,
Trinidad, Germany and France. The Company produces a broad range of
flat and long products sold mainly in the North American Free Trade
Agreement (NAFTA) participating countries and the European Union
(EU) countries. Ispat International N.V. is a member of the LNM
Group. This news release contains forward-looking statements that
involve a number of risks and uncertainties. These statements are
based on current expectations and actual results may differ
materially from these expectations. Among the factors that could
cause actual results to differ are the risk factors listed in the
Company's most recent SEC filings Additionally, the Company has
made, and may continue to make, including in (but not limited to)
this Press Release, various forward-looking statements with respect
to its financial position, business strategy, projected costs,
projected savings, and plans and objectives of management. Such
forward-looking statements are identified by the use of the
forward-looking words or phrases such as 'anticipates', 'intends',
'expects', 'plans', 'believes', 'estimates', or words or phrases of
similar import. These forward-looking statements are subject to
numerous assumptions, risks and uncertainties, and the statements
looking forward beyond the second quarter of 2004 are subject to
greater uncertainty because of the increased likelihood of changes
in underlying factors and assumptions. Actual results could differ
materially from those anticipated in the forward-looking
statements. For further information, visit our web site:
http://www.ispat.com/ CONSOLIDATED BALANCE SHEETS UNDER U.S. GAAP
As at June 30, December 31, In millions of U.S. Dollars 2004 2003
(Unaudited) (Audited) ASSETS Current Assets Cash and cash
equivalents, including short term $143 $80 investments Trade
accounts receivable - net 695 507 Inventories 947 828 Prepaid
expenses and other 119 105 Deferred tax assets 54 30 Total Current
Assets 1,958 1,550 Property, plant and equipment - net 3,028 3,091
Investments in affiliates and Joint Ventures 262 252 Deferred tax
assets 454 535 Intangible pension assets 112 117 Other assets 110
90 Total Assets $5,924 $5,635 LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities Payable to banks and current portion of
long-term $167 $363 debt Trade accounts payable 629 577 Accrued
expenses and other current liabilities 524 492 Deferred tax
liabilities 32 28 Total Current Liabilities 1,352 1,460 Long term
debt including affiliates 1,950 1,914 Deferred tax liabilities 106
74 Deferred employee benefits 1,883 1,906 Other long term
obligations 115 132 Total Liabilities 5,406 5,486 Shareholders'
equity Common shares 7 7 Treasury stock (150) (110) Additional
paid-up capital 576 586 Retained earnings 635 207 Cumulative other
comprehensive income (550) (541) Total Shareholders' equity 518 149
Total Liabilities and Shareholders' Equity $5,924 $5,635
CONSOLIDATED FINANCIAL & OTHER INFORMATION AS PER U.S. GAAP For
the Second For the Six Quarter Ended Months Ended June 30, June 30,
In millions of 2004 2003 2004 2003 U.S. Dollars, except share, per
share and other data (Unaudited) (Unaudited) (Unaudited)
(Unaudited) STATEMENT OF INCOME DATA Sales 2,109 1,410 3,864 2,738
Costs and expenses: Cost of sales 1,588 1,263 3,090 2,430
(exclusive of depreciation shown separately) Depreciation 48 46 99
91 Selling, 47 43 91 84 general and administrative expenses 1,683
1,352 3,280 2,605 Operating 426 58 584 133 income (loss) Operating
20.2% 4.1% 15.1% 4.9% margin Other income 11 - 37 20 (expense) -
net Financing costs: Interest (47) (41) (88) (85) (expense)
Interest - 4 1 7 income Net gain 3 (8) 2 (2) (loss) from foreign
exchange (44) (45) (85) (80) Income (loss) 393 13 536 73 before
taxes Income tax expense (benefit): Current 12 5 16 9 Deferred 56
(6) 93 (3) 68 (1) 109 6 Net income 325 14 427 67 before change in
accounting principle Cumulative - - - (2) effect of change in
accounting principle Net income $325 $14 $427 $65 (loss) Basic and
2.75 0.11 3.60 0.52 diluted earnings per common share Weighted 118
122 118 122 average common shares outstanding (in millions) OTHER
DATA Total shipments of steel products 4,057 3,960 8,281 7,792
including inter-company shipments (thousands of tons) For the
Second For the Six Quarter Ended Months Ended June 30, June 30, In
millions of 2004 2003 2004 2003 U.S. Dollars, (Unaudited)
(Unaudited) (Unaudited) (Unaudited) Operating activities: Net
income 325 14 427 65 Adjustments required to reconcile net income
to net cash provided from operations: Depreciation 48 46 99 91
Deferred employee (7) 6 (13) 12 benefit costs Net foreign exchange
(2) 5 (2) 1 loss (gain) Deferred income tax 55 (5) 94 (2)
Undistributed earnings (17) (4) (44) (19) from joint ventures Other
operating 8 6 (2) 1 expenses Changes in operating assets and
liabilities, net of effects from purchases of subsidiaries: Trade
accounts (65) (30) (200) (7) receivable Inventories (99) 24 (130)
(2) Prepaid expenses and 19 1 (17) (31) other assets Trade accounts
payable (19) (45) 47 (64) Accrued expenses and 47 24 25 28 other
liabilities Net cash provided 293 42 284 73 (used) by operating
activities Investing activities: Purchase of property, (35) (37)
(56) (56) plant and equipment Proceeds from sale of - - 18 18
assets and investments including affiliates Investments in 9 3 17
14 affiliates and joint ventures Other investing 2 - 2 - activities
Net cash provided (24) (34) (19) (24) (used) by investing
activities Financing activities: Proceeds from payable 603 955
1,533 1,671 to banks Proceeds from long-term 36 6 890 44 debt
including from affiliates Payments of payable to (600) (896)
(1,613) (1,638) banks Payments of long-term (247) (73) (960) (131)
debt including affiliates Purchase of treasury (24) (7) (54) (9)
stock Capital contribution - - (2) - Sale of treasury stock 2 - 4 -
Net cash provided (230) (15) (202) (63) (used) by financing
activities Net increase (decrease) 39 (7) 63 (14) in cash and cash
equivalents Effect of exchange rate - 1 - 2 changes on cash Cash
and cash equivalent: At the beginning of the 104 71 80 77 period At
the end of the 143 65 143 65 period DATASOURCE: Ispat International
N.V. CONTACT: Ispat International Limited: T.N. Ramaswamy,
Director, Finance, +44-207-543-1174. Citigate Financial
Intelligence: John McInerney/Jessica Wolpert, Investor Relations,
+1-201-499-3535/+1-201-499-3533
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