Ispat International N.V. Reports Record Results for Third Quarter
2004 ROTTERDAM, The Netherlands, Oct. 25 /PRNewswire-FirstCall/ --
Ispat International N.V., (NYSE:ISTNYSE:US)(AEX:ISTAEX:NA), today
reported a record net income of $460 million or $3.91 per share for
the third quarter of 2004 as compared to a net loss of $10 million
or negative $0.08 per share for the third quarter of 2003. In the
second quarter of 2004, the net income was $325 million or $2.75
per share. Consolidated sales and operating income for the third
quarter were $2.5 billion and $659 million, respectively, as
compared to $1.3 billion and $4.0 million loss, respectively, for
the third quarter of 2003; and $2.1 billion and $426 million
respectively for the second quarter of 2004. Total steel shipments
were approximately 4.1 million tons(1), which represented an
increase of approximately 15% over the third quarter of 2003 and an
increase of approximately 1% over the second quarter of 2004. For
the nine-month period January-September 2004, Ispat International
N.V.'s net income was $887 million or $7.51 per share as compared
to net income of $55 million or $0.44 per share for the nine-month
period January-September 2003. Consolidated sales and operating
income for the nine month period January-September 2004 were $6.3
billion and $1.2 billion respectively, compared to $4.0 billion and
$129 million respectively for the nine-month period
January-September 2003. Total steel shipments for the nine-month
period January-September 2004 were 12.4 million tons, compared to
11.4 million tons for the nine-month period January-September 2003.
The improved earnings were primarily due to strong demand and
prices for our products across all markets. Our average price
realization in the third quarter 2004 improved by 61% compared to
the third quarter of 2003 and by 11% compared to the second quarter
of 2004, driven by higher base selling prices, raw material
surcharges and improved product mix. For the nine-month period
January-September 2004, average price realization was 40% higher
than the corresponding period of 2003. The situation with respect
to availability and prices of key raw materials such as iron ore,
scrap, coke and natural gas continued to remain challenging.
Overall, cost of sales per ton during the quarter was higher by 20%
as compared to the third quarter of 2003 and by 4% compared to the
second quarter of 2004. Cost of sales per ton during the nine-month
period January-September 2004 was higher by 20% 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 higher due to higher costs and
increased shipments. Details of Shipments, Sales and Operating
Income at our main operating subsidiaries were as follows: Q3 2004
Q3 2003 Q2 2004 Shipments 000'Tons 000'Tons 000'Tons US and
Canadian Operating Subsidiaries 1,843 1,672 1,801 Ispat Europe
Group 955 832 1,000 Other Subsidiaries 1,310 1,078 1,256 Q3 2004 Q3
2003 Q2 2004 Sales $ Million $ Million $ Million US and Canadian
Operating Subsidiaries 1,176 679 1,010 Ispat Europe Group 529 328
509 Other Subsidiaries 751 287 590 Q3 2004 Q3 2003 Q2 2004
Operating Income $ Million $ Million $ Million US and Canadian
Operating Subsidiaries 307 (39) 167 Ispat Europe Group 78 0 54
Other Subsidiaries 274 35 205 For the nine-month period
January-September, details of Shipments, Sales and Operating Income
at our main operating subsidiaries were as follows: Nine Months
Nine Months 2004 2003 Shipments 000'Tons 000'Tons US and Canadian
Operating Subsidiaries 5,470 5,105 Ispat Europe Group 3,081 2,774
Other Subsidiaries 3,838 3,495 Nine Months Nine Months 2004 2003
Sales $ Million $ Million US and Canadian Operating Subsidiaries
3,038 2,096 Ispat Europe Group 1,535 1,060 Other Subsidiaries 1,747
876 Nine Months Nine Months 2004 2003 Operating Income $ Million $
Million US and Canadian Operating Subsidiaries 569 0 Ispat Europe
Group 138 26 Other Subsidiaries 536 103 Liquidity continues to
improve. During the third quarter of 2004, working capital
increased by $226 million, mainly due to higher levels of
inventories and receivables driven by higher levels of costs and
selling prices, partly offset by improvements in trade accounts
payables. During the nine month period January-September 2004,
working capital increased by $501 million. Capital expenditure
during the quarter was $37 million and during nine months of 2004
was $93 million. As at September 30, 2004, the Company's cash and
cash equivalents were $170 million ($80 million at December 31,
2003 and $143 million at June 30, 2004). In addition, the Company's
operating subsidiaries had available borrowing capacity of $482
million as at September 30, 2004. The comparable number was $223
million as at June 30, 2004 and $143 million as at December 31,
2003. During the third quarter 2004, the Company reduced net debt
by $391 million, consisting of reduction of borrowings by $364
million, largely by prepaying long-term debt at its subsidiaries,
and increase of $27 million in cash and cash equivalents. During
the nine-month period January-September 2004, borrowing was reduced
by $514 million, cash and cash equivalents increased by $90
million, thus net debt reduced by $604 million. Gross 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 $1.8 billion, as compared to $2.1 billion at the end of the
second quarter of 2004. ($2.3 billion as at December 31, 2003).
During the nine-month period January-September 2004, the number of
its own shares purchased under the stock buy back program was 5.3
million and the average price was $10.25 per share. Outlook for
fourth quarter 2004 The Company expects improved selling prices
arising out of prior bookings of orders. However, shipments in the
fourth quarter will be lower due to seasonal factors. There is also
likely to be continued pressure on availability and cost of all
major inputs. Working capital is expected to continue to increase
due to increases in input prices and costs. Capital expenditure is
expected to be slightly higher in the fourth quarter than in the
third. Overall, the Company expects to benefit from market
conditions for its products. The fourth quarter is expected to be
in line with the third quarter. Recent development On the same day
as this Earning Release (October 25, 2004) the Company announced
two major transactions, involving acquisitions of other steel
companies. Please read the separate press releases on this subject.
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 steelmaking 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 third 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/, or
call: Ispat International Limited Abernathy MacGregor Group T.N.
Ramaswamy Chuck Burgess / Gillian Angstadt Director, Finance
Investor Relations +44 20 7543 1174 +1 212 371 5999 (1) The term
"ton" means a short ton (ST). One short ton is equal to 2,000
pounds. CONSOLIDATED BALANCE SHEETS UNDER U.S. GAAP As at September
30, December 31, In millions of U.S. Dollars 2004 2003 (Unaudited)
(Audited) ASSETS Current Assets Cash and cash equivalents,
including short term investments $170 $80 Trade accounts receivable
- net 857 507 Inventories 1,106 828 Prepaid expenses and other 159
105 Deferred tax assets 88 30 Total Current Assets 2.380 1,550
Property, plant and equipment - net 3,030 3,091 Investments in
affiliates and Joint Ventures 267 252 Deferred tax assets 344 535
Intangible pension assets 113 117 Other assets 110 90 Total Assets
$6,244 $5,635 LIABILITIES AND SHAREHOLDERS' EQUITY Current
Liabilities Payable to banks and current portion of long-term debt
including affiliates $394 $363 Trade accounts payable 695 577
Accrued expenses and other current liabilities 575 492 Deferred tax
liabilities 37 28 Total Current Liabilities 1,701 1,460 Long term
debt including affiliates 1,370 1,914 Deferred tax liabilities 159
74 Deferred employee benefits 1,899 1,906 Other long term
obligations 107 132 Total Liabilities 5,236 5,486 Shareholders'
equity Common shares 7 7 Treasury stock (125) (110) Additional
paid-up capital 557 586 Retained earnings 1,094 207 Cumulative
other comprehensive income (525) (541) Total Shareholders' equity
1,008 149 Total Liabilities and Shareholders' Equity $6,244 $5,635
CONSOLIDATED FINANCIAL & OTHER INFORMATION AS PER U.S. GAAP For
the Third For the Nine Quarter Ended Months Ended September 30,
September 30, 2004 2003 2004 2003 (Unaudited) (Unaudited)
(Unaudited) (Unaudited) In millions of U.S. Dollars, except share,
per share and other data STATEMENT OF INCOME DATA Sales 2,456 1,294
6,320 4,032 Costs and expenses: Cost of sales (exclusive of
depreciation shown separately) 1,704 1,215 4,794 3,645 Depreciation
48 45 147 136 Selling, general and administrative expenses 45 38
136 122 1,797 1,298 5,077 3,903 Operating income (loss) 659 (4)
1,243 129 Operating margin 26.8% (0.3)% 19.7% 3.2% Other income
(expense) - net 6 12 43 32 Financing costs: Interest (expense) (43)
(42) (131) (127) Interest income -- 4 1 11 Net gain (loss) from
foreign exchange -- 5 2 3 (43) (33) (128) (113) Income (loss)
before taxes 622 (25) 1,158 48 Income tax expense (benefit):
Current 30 2 46 11 Deferred 132 (17) 225 (20) 162 (15) 271 (9) Net
income before change in accounting principle 460 (10) 887 57
Cumulative effect of change in accounting principle -- -- (2) Net
income (loss) $460 $(10) $887 $55 Basic earnings per common share
3.91 (0.08) 7.51 0.44 Weighted average common shares outstanding
(in millions) 118 122 118 122 OTHER DATA Total shipments of steel
products including inter-company shipments (thousands of tons)
4,108 3,582 12,389 11,374 CONSOLIDATED STATEMENTS OF CASH FLOWS AS
PER U.S. GAAP For the Third For the Nine Quarter Ended Months Ended
September 30, September 30, 2004 2003 2004 2003 (Unaudited)
(Unaudited) (Unaudited) (Unaudited) In millions of U.S. Dollars
Operating activities: Net income 460 (10) 887 55 Adjustments
required to reconcile net income to net cash provided from
operations: Depreciation 48 45 147 136 Deferred employee benefit
costs 6 (157) (7) (145) Net foreign exchange loss (gain) -- (4) (2)
(3) Deferred income tax 132 (18) 226 (20) Undistributed earnings
from joint ventures (21) (6) (65) (25) Other operating expenses 3 2
1 3 Changes in operating assets and liabilities, net of effects
from purchases of subsidiaries: Trade accounts receivable (150) 58
(350) 51 Inventories (146) 65 (276) 63 Prepaid expenses and other
assets (38) 1 (55) (30) Trade accounts payable 58 (12) 105 (76)
Accrued expenses and other liabilities 50 76 75 104 Net cash
provided (used) by operating activities 402 40 686 113 Investing
activities: Purchase of property, plant and equipment (37) (79)
(93) (135) Proceeds from sale of assets and investments including
affiliates 2 2 20 19 Investments in affiliates and joint ventures
17 7 34 22 Other investing activities -- -- 2 -- Net cash provided
(used) by investing activities (18) (70) (37) (94) Financing
activities: Proceeds from payable to banks 448 1,087 1,981 2,758
Proceeds from long-term debt including from affiliates 38 28 928 70
Payments of payable to banks (562) (1,036) (2,175) (2,672) Payments
of long-term debt including affiliates (288) (45) (1,248) (176)
Purchase of treasury stock -- -- (54) (9) Exercise of stock option
(5) -- (7) -- Sale of treasury stock 12 -- 16 -- Net cash provided
(used) by financing activities (357) 34 (559) (29) Net increase
(decrease) in cash and cash equivalents 27 4 90 (10) Effect of
exchange rate changes on cash -- 2 -- 4 Cash and cash equivalent:
At the beginning of the period 143 65 80 77 At the end of the
period 170 71 170 71 DATASOURCE: Ispat International N.V. CONTACT:
T.N. Ramaswamy, Director, Finance of Ispat International Limited,
+44-20-7543-1174; or Chuck Burgess or Gillian Angstadt, Investor
Relations of Abernathy MacGregor Group, +1-212-371-5999 Web site:
http://www.ispat.com/
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