The world's biggest steel maker just lost $7.9 billion
Two huge resources firms reported results on Friday, and you can add both to the pile of giants getting crushed by the falling price of raw materials.
ArcelorMittal, the world's biggest steelmaker, and BG Group, the FTSE 100-listed oil giant, both took big hits last year, according to financial results released on Friday morning.
Let's start with Arcelormittal, the Dutch listed steel giant. Arcelor - whose boss Lakshmi Mittal was once the 6th richest man on earth - took an enormous loss of $7.9 billion (£5.4 million) in 2015, as the price of iron ore, a key component in making steel, continued to tank last year. The company is also trying to raise a whopping $3 billion (£2.06 billion) to deal with debt. The price of iron ore - a key ingredient in steel - fell by nearly 40% over the course of 2015.
Here are some of the key takeaways from Arcelor's results:
- The loss included $4.8 billion (£3.3 billion) of writedowns, and $1.4 billion (£960 million) of exceptional charges in the company's steel business;
- 2015's loss was more than four times the $1.86 billion (£1.28 billion) loss which hit the company in 2014;
- Debts stand at $15.7 billion (£10.8 billion), down by $1.1 billion (£760 million). That's the lowest level since Mittal Steel and Arcelor merged in 2006;
- ArcelorMittal will issue $3 billion of new shares in an attempt to further reduce debts further;
- Earnings fell 18.4% in the final quarter of 2015, down to $1.1 billion;
- Steel shipments fell by 0.6% over the course of 2015.
Speaking about the results, Mittal said (emphasis ours):
BG Group books a massive loss
The oil giant booked a loss of $1.17 billion (£810 million) in the final quarter of 2015, which is actually a substantial improvement on losses seen in the same period of 2014, when BG took an $8.3 billion (£5.7 billion) hit. Like iron ore, the price of oil has collapsed substantially over the last year, down from a high above $110 (£75.70) to around $30 (£20.64) a barrel.
Here are some of the key takeaways from BG's results:
- Earnings before interest and tax fell a massive 62% from $9.2 billion (£6.3 billion) in 2014, to $5.6 billion (£3.85 billion) in 2015;
- Upstream earnings - getting oil out of the ground - fell by 35% to $4.16 billion (£2.86 billion), while earnings in the liquid natural gas sector fell 46%;
- Business Performance earnings fell to $1.7 billion (£1.17 billion), while earnings per share dropped to 49.7 cents, both down by 58%;
- Free cash flow fell 8% to $5.2 billion (£3.6 billion):
- Dividends for the end of 2015 have been cancelled.
Since the price of virtually all commodities - particularly oil and hard metals like iron ore - started to crash in 2011, firms reliant on raw materials have been suffering.
In December, miner Anglo American was forced to announce a "radical restructuring". So far this year BHP Billiton has taken a $7.2 billion write down on its US shale oil and gas businesses, Shell has announced 10,000 job cuts, BP has taken a 51% hit on its profits, and Glencore has had its credit rating cut to just one notch above junk by Standard and Poor's.
On Thursday, British-listed mining firms saw share prices surge, with the FTSE 350 Mining Index enjoying its best day since 2009, and Anglo American grabbing the biggest one-day gains in its history, jumping as much as 25% during trading, before closing up by 20%.
This morning, however, those gains are starting to evaporate for some miners. An hour into trading at 9:45 a.m. GMT (4:45 a.m. ET), Rio Tinto and BHP Billiton are two of the five biggest fallers on the FTSE, although Anglo American is up by around 2.3%, the biggest gainer on the day.