Arcelor Mittal 2006 profit falls 3.5% on higher tax

Arcelor Mittal 2006 profit falls 3.5% on higher tax

BRUSSELS – Arcelor Mittal, the company formed last year in the largest- ever takeover in the steel industry, said Wednesday that 2006 profit fell 3.5 percent because of higher taxes and it announced plans to hand $2.4 billion to shareholders.

Net income fell to $7.97 billion from $8.26 billion, based on figures calculated as if the company had existed for more than a year. Sales rose 10 percent to $88.6 billion. Arcelor Mittal, based in Luxembourg, will buy back $590 million of stock and pay a $1.8 billion dividend.

Lakshmi Mittal, the chief executive, agreed last year to buy Arcelor in a $38.3 billion takeover to create a steel maker pouring a tenth of the world’s steel.

Arcelor Mittal paid $1.65 billion in taxes, 18 percent more than in 2005, as some tax credits were exhausted, said the chief financial officer, Aditya Mittal. The earnings reported Wednesday were the first that have been issued by the merged company.

“We remain very positive in terms of the steel market in 2007, and believe 2007 will be a much better year for Arcelor Mittal than 2006,” Aditya Mittal said during a press conference in Luxembourg.

Shares of Mittal Steel and Arcelor trade separately pending the completion of the combination of the companies. Mittal gained 41 cents to close at €38.64, or $50.77, in Amsterdam. Arcelor was up 38 cents to €50.58 in Paris.

“This is a very large company with substantial free cash” to return to shareholders, said Tom Muller, an analyst at Theodoor Gilissen Bankiers in Amsterdam. “That will mean the company can continue to pay a dividend even if steel prices decline.”

The company said fourth-quarter net income rose to $2.37 billion. It did not provide year-earlier figures.

Arcelor Mittal forecast unchanged profit in the first quarter compared with the fourth quarter and said that cost savings from acquisitions were “on track.”

Savings from combining purchases, trading and marketing of both companies will increase to an annual rate of $500 million in the first quarter, from $270 million in the fourth quarter, Lakshmi Mittal said in Luxembourg.

Other European steel makers have reported higher earnings in the past month on increased regional demand. ThyssenKrupp, the largest German steel maker, said earlier this month that net income in the three months ended Dec. 31 almost tripled, led by higher sales of stainless steel.

Lakshmi Mittal started out in 1976 with a single steel mill in Indonesia. His company was already the world’s biggest steel maker when Arcelor accepted his bid on June 25.

Mittal is looking to add assets and is considering making an offer for the 51 percent stake in the Indian iron-ore miner Sesa Goa that is being sold by Mitsui, Lakshmi Mittal said Wednesday.

“The future looks very aggressive,” said Stephen Pope, head of equity research in London at Cantor Fitzgerald. “As they gain in size, that will give them pricing power.”


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