The international credit rating agency Standard and Poor's (S&P) has announced that it has affirmed its 'BBB-/A-3' long- and short-term corporate credit ratings on Luxembourg-based steel giant ArcelorMittal, confirming the outlook as negative.
The agency indicated that ArcelorMittal's adjusted EBITDA in the past six months was only $3.4 billion, below expectations, while it was not able to reduce its debt despite selling stakes in McArthur Coal and Turkish steelmaker Erdemir. As of March 30, 2012, the company's adjusted debt was $41.1 billion and its net reported debt was $24 billion.
Regarding the credit rating and the outlook, S&P stated that it has also took "somewhat stronger, but uncertain, growth in steel demand globally" into consideration, adding that the profitability in the global steel industry, and especially in Europe, to which ArcelorMittal is very exposed, is expected to remain weak compared with 2007-2008 because of overcapacity.
The agency expects volumes, capacity utilization, and profits to improve from the second quarter of 2012 onwards and be supported by stronger economic growth in Europe at the end of the year, pointing out that the negative outlook reflects the likelihood of a downgrade during the next 12 months if the group fails to demonstrate that it is on a firm track to restore cash flow coverage measures to a level in line with its ratings.