ARCELORMITTAL STEEL COMPANY CASE

Arcelormittal Steel Company Case

Arcelormittal Steel Company Case

Company's History development and growth

ArcelorMittal is the world's largest steel producer. The group has a crude steel production capacity of 116.4 million tons and sells its products in approximately 170 countries. ArcelorMittal sells its products to the automotive, appliance, engineering, construction and machinery industries. (Flynn, 2011) ArcelorMittal has steel-making operations in 20 countries on four continents. The group is headquartered in Luxembourg City, Luxembourg and employs about 311,000 people. (Miltenburg, 2009)

SWOT Analysis

Financial side of SWOT

The group recorded revenues of $105,216 million during the financial year ended December 2007 (FY2007), an increase of 78.7% over the financial year ended December 2006 (FY2006). The operating profit of the group was $14,830 million during FY2007, an increase of 96.9% over FY2006. The net profit was $10,368 million in FY2007, an increase of 97.6% over FY2006. ArcelorMittal has also been unable to press ahead with a 12mn tpa project in Jharkhand due to similar problems, but is reportedly seeking to start construction some time in 2011. Following years of land acquisition disputes, ArcelorMittal now plans to begin construction of one of its Indian projects at Bellary, Karnataka in H111, which will have capacity of 6mn tpa. (De Smedt, 2011)

External environment

Arcelor Mittal is the world's largest steel producer having vast scale of operations. The group has an annual production capacity of approximately 130 million tons of crude steel and shipped approximately 110 million tons of steel in FY2007. Moreover, in FY2006, Mittal Steel significantly increased its size by acquiring Arcelor to form ArcelorMittal, which was the world's second largest steel producer by production volume at that time. The group has operations in each country that is a member of North American Free Trade Agreement (NAFTA), and European Union, which facilitates the free trade of goods between such countries. In addition, group's operating units have access to markets experiencing above average growth in steel consumption.The combination of group's local, regional, and international distribution provides it with a global manufacturing and marketing presence. Further, the scale and global presence of the group helps to achieve significant cost savings and operational efficiencies in production, procurement, and marketing.

The group has built up significant debt in the last few years, mainly due to various acquisitions. ArcelorMittal's debt levels increased significantly during FY2007, primarily as the result of financing incurred in connection with its acquisition of Arcelor and several other companies. In FY2007, ArcelorMittal had a total debt outstanding of $30.6 billion while the cash and cash equivalents stood at $8.1 billion including short-term investments and restricted cash. High debt could significantly harm the group's financial condition, results of operations, and profitability. Further, it could harm the group's ability to refinance its existing indebtedness and limit its flexibility in managing its business. (Keen, 2010)

ArcelorMittal is a holding company. It is dependent on the earnings and cash flows of, and dividends and distributions from, its operating subsidiaries to pay expenses, meet its debt service obligations, and pay any cash dividends or ...