ArcelorMittal bets on acquisitions

NEW DELHI: Global steel giant ArcelorMittal has said that it is likely to continue to expand its base by acquiring companies worldwide even though it maintains that inorganic growth route could harm its financials.

“ArcelorMittal has grown through acquisitions and will likely continue to do so. Failure to manage external growth and difficulties in integrating acquired companies could harm ArcelorMittal’s future results of operations, financial conditions and prospects,” the NRI billionaire LN Mittal-led company said in a regulatory filing to the US Securities and Exchange Commission.

The world’s largest steel maker, formed after the merger of Mittal Steels and Arcelor
in 2006, has been growing primarily through acquisitions.

The company, however, said it is also banking on organic route for capacity expansion, which also suffers from operational risks. “Its growth strategy includes greenfield and brownfield projects that are inherently subject to completion and financing risks, which, if realised, could adversely affect ArcelorMittal’s results of operations and financial condition,” it said under ‘risk factors’ in the filing.

“As a part of its growth strategy, the company plans to expand its steel-making capacity and raw material self-sufficiency through a combination of brownfield growth, greenfield projects and acquisition opportunities, mainly in entering markets such as India, Africa and Brazil,” it added.

ArcelorMittal chairman LN Mittal had last month criticised the country’s investment climate and rued the inordinate delays his proposed projects — one each in Jharkhand and Orissa which are yet to take off even after four years — entailing an estimated investment of Rs 1 lakh crore.

The company is also considering setting up a 6 million tonne per annum integrated steel plant in Karnataka along with a 750 mw power plant.

The steel behemoth marked its first operational presence in the country by entering into a JV with domestic steel-maker Uttam Galva. The company has acquired 28.8% in the Miglani family-led Uttam Galva Steels and is in the process of buying an additional 4.9% in this Mumbai-based secondary steel producer.

Moreover, ArcelorMittal said its business is “exposed to the risk of steel production increases” in countries such as India and China, among other growing economies.

“The industry is currently characterised by a substantial increase in production capacity in the developing world, particularly in China, but also in India and other emerging markets. Over the short to medium-term, ArcelorMittal is exposed to the risk of steel production increases in China and other markets outstripping increases in real demand, which may weigh on price recovery,” it added.