SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
DATED MAY 6, 2004
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Commission File Number: 001-14666
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ISPAT INTERNATIONAL N.V.
(Exact name of registrant as specified in its Charter)
______________
15th Floor, Hofplein 20
3032 AC Rotterdam
The Netherlands
(Address of registrant's principal executive offices)
______________
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
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Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1):
Yes No X
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Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(7):
Yes No X
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Indicate by check mark whether by furnishing the information contained
in this Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
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If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- N/A
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INDEX
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Press Release of Ispat International N.V., dated May 6, 2004, regarding
financial results of Ispat International N.V. for the first quarter of 2004.
[GRAPHIC OMITTED]
Member of the LNM GROUP
For Immediate Release: Rotterdam, May 6, 2004
Ispat International N.V. Reports
FIRST QUARTER 2004 results
Ispat International N.V., (NYSE: IST US; AEX: IST NA), today reported a net
income of $102 million or 85 cents per share for the first quarter of 2004 as
compared to net income of $51 million or 41 cents per share for the first
quarter of 2003. The current quarter's results include the benefit of an after
tax gain of $23 million at Ispat Inland resulting from a reassessment of
property taxes for the years 2002 and 2003. Excluding this benefit, the first
quarter net income would have been $79 million or 65 cents per share.
Consolidated sales and operating income for the first quarter were $1.8 billion
and $158 million, respectively, as compared to $1.3 billion and $75 million,
respectively, for the first quarter of 2003. Total steel shipments increased by
10% to 4.2 million tons.
Debt at the end of the first quarter was $2.3 billion. Capital expenditure for
the first quarter of 2004 was $21 million. At March 31, 2004 the Company's
consolidated cash, cash equivalents and short term investments totaled $104
million. The Company also had approximately $383 million available to it under
various un-drawn lines of credit and bank credit arrangements(1).
Ispat International N.V. is one of the largest and most global steel producers,
with major steelmaking operations in the United States, Canada, Mexico,
Trinidad, Germany and France. The Company produces a broad range of flat and
long products sold mainly in the North American Free Trade Agreement (NAFTA)
participating countries and the European Union (EU) countries. Ispat
International N.V. is a member of the LNM Group.
This news release contains forward-looking statements that involve a number of
risks and uncertainties. These statements are based on current expectations
whereas actual results may differ. Among the factors that could cause actual
results to differ are the risk factors listed in the Company's most recent SEC
filings.
For further information, visit our web site: http://www.ispat.com, or call:
Ispat International Limited Citigate Financial Intelligence
T.N. Ramaswamy John McInerney / Jessica Wolpert
Director, Finance Investor Relations
+ 44 20 7543 1174 +1 201 499 3535 / +1 201 499 3533
__________________________
(1) Corresponding exercisable/available limits are lower, which are based on the
level of inventory/receivable.
3
CONSOLIDATED BALANCE SHEETS UNDER U.S. GAAP
----------------------------------------------------------------------------------------------
In millions of U.S. Dollars
As at
March 31, December 31,
2004 2003
(Unaudited) (Audited)
ASSETS
Current Assets
Cash and cash equivalents, including short term investments 104 80
Trade accounts receivable - net 617 507
Inventories 852 828
Prepaid expenses and other 145 105
Deferred tax assets 30 30
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Total Current Assets 1,748 1,550
Property, plant and equipment - net 3,047 3,091
Investments in affiliates and Joint Ventures 256 252
Deferred tax assets 512 535
Intangible pension assets 115 117
Other assets 110 90
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Total Assets 5,788 5,635
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Payable to banks and current portion of long-term debt 225 363
Trade accounts payable 636 577
Accrued expenses and other current liabilities 464 492
Deferred tax liabilities 29 28
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Total Current Liabilities 1,354 1,460
Long term debt including affiliates 2,101 1,914
Deferred tax liabilities 87 74
Deferred employee benefits 1,894 1,906
Other long term obligations 130 132
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Total Liabilities 5,566 5,486
Shareholders' equity
Common shares 7 7
Additional paid-up capital 446 476
Retained earnings 309 207
Cumulative other comprehensive income (540) (541)
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Total Shareholders' equity 222 149
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Total Liabilities and Shareholders' Equity 5,788 5,635
======= =======
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4
CONSOLIDATED FINANCIAL
& OTHER INFORMATION AS PER U.S. GAAP
----------------------------------------------------------------------------------------------------------------------------------
For the Quarter Ended
March 31,
In millions of U.S. Dollars, except share, per share and other data 2004 2003
(Unaudited) (Unaudited)
STATEMENT OF INCOME DATA
Sales 1,755 1,328
Costs and expenses:
Cost of sales (exclusive of depreciation shown separately) 1,502 1,167
Depreciation 51 45
Selling, general and administrative expenses 44 41
------------ -----------
1,597 1,253
Operating income (loss) 158 75
Operating margin 9.0% 5.6%
Other income (expense) - net 26 20
Financing costs:
Interest (expense) (41) (44)
Interest income 1 3
Net gain (loss) from foreign exchange (1) 6
------------ -----------
(41) (35)
143 60
Income (loss) before taxes
Income tax expense (benefit):
Current 4 4
Deferred 37 3
------------ -----------
41 7
------------ -----------
Net income before change in accounting principle 102 53
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Cumulative effect of change in accounting principle - (2)
------------ -----------
Net income (loss) 102 51
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Basic and diluted earnings per common share 0.85 0.41
Weighted average common shares outstanding (in millions) 121 124
OTHER DATA
Total shipments of steel products including inter-company shipments
(thousands of tons) 4,224 3,832
----------------------------------------------------------------------------------------------------------------------------------
(1) Certain regroupings have been made to the prior period's financial statements in order to conform to 2004 groupings.
5
CONSOLIDATED STATEMENTS OF CASH FLOWS AS PER U.S. GAAP
---------------------------------------------------------------------- -------------------------- --- ------------------------
For the Quarter Ended
March 31,
In millions of U.S. Dollars 2004 2003
(Unaudited) (Unaudited)
Operating activities:
Net income 102 51
Adjustments required to reconcile net income to net cash provided
from operations:
Depreciation 51 45
Deferred employee benefit costs (6) 6
Net foreign exchange loss (gain) - (4)
Deferred income tax 39 3
Undistributed earnings from joint ventures (27) (15)
Other operating expenses (10) (5)
Changes in operating assets and liabilities, net of effects from
purchases of subsidiaries:
Trade accounts receivable (135) 23
Inventories (31) (26)
Prepaid expenses and other assets (36) (32)
Trade accounts payable 66 (19)
Accrued expenses and other liabilities (22) 4
---------------------------------------------------------------------- ------------ ------------- --- ------------ -----------
Net cash provided (used) by operating activities (9) 31
---------------------------------------------------------------------- ------------ ------------- --- ------------ -----------
Investing activities:
Purchase of property, plant and equipment (21) (19)
Proceeds from sale of assets and investments
including affiliates and joint ventures 18 18
Investments in affiliates and joint ventures 8 11
---------------------------------------------------------------------- ------------ ------------- --- ------------ -----------
Net cash provided (used) by investing activities 5 10
---------------------------------------------------------------------- ------------ ------------- --- ------------ -----------
Financing activities:
Proceeds from payable to banks 930 716
Proceeds from long-term debt including from affiliates 854 38
Payments of payable to banks (1,013) (742)
Payments of long-term debt including affiliates (713) (58)
Purchase of treasury stock (30) (2)
Capital contribution (2) -
Sale of treasury stock 2 -
---------------------------------------------------------------------- ------------ ------------- --- ------------ -----------
Net cash provided (used) by financing activities 28 (48)
---------------------------------------------------------------------- ------------ ------------- --- ------------ -----------
Net increase (decrease) in cash and cash equivalents 24 (7)
Effect of exchange rate changes on cash - 1
Cash and cash equivalent:
At the beginning of the period 80 77
At the end of the period 104 71
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6
Analysis of Results of Operations and Financial Condition
This is not Operating and Financial Review and Prospects ("OFRP"). The OFRP, as
an annual document is filed as part of the Company's annual report (Form 20-F)
under Item 5 - Operating and Financial Review and Prospects.
The summary consolidated financial and other information, including accounts of
Ispat International N.V. ("Ispat International" or "the Company") and its
consolidating subsidiaries are prepared in accordance with U.S. GAAP. All
material inter-company balances and transactions have been eliminated.
Quantitative information on total shipments of steel products includes
inter-company shipments.
All references to 'Net Sales' exclude freight and handling costs and fees.
Management uses 'Net Sales' to manage the business, which is based on net
realizations from sales transactions. Management believes that 'Net Sales'
reflects a true underlying commercial reality of the sales performance. All
analysis presented in this earnings release is prepared using "Net Sales".
The term 'ton' as discussed herein refers to short ton and the term 'tonne'
used herein refers to metric tonne. All references to iron ore pellets, direct
reduced iron ('DRI') and scrap are in tonnes, and all references to steel
products are in tons. The term 'steel products' as used herein refers to
semi-finished and finished steel products and excludes DRI.
All references to 'Ispat International' are to 'Ispat International N.V.'; to
'Ispat Inland' are to Ispat Inland Inc.; to 'Imexsa' or 'Ispat Mexicana' are to
Ispat Mexicana, S.A. de C.V.; to 'Ispat Sidbec' are to Ispat Sidbec Inc.; to
'Caribbean Ispat' are to Caribbean Ispat Limited; to 'Ispat Europe Group' are
collectively to Ispat Hamburger Stahlwerke GmbH ('IHSW'), Ispat Stahlwerke
Ruhrort GmbH ('ISRG'), Ispat Walzdraht Hochfeld GmbH ('IWHG'), Ispat Unimetal
S.A., Trefileurope S.A. and SMR SNC.
The Company has made, and may continue to make, various forward-looking
statements with respect to its financial position, business strategy, projected
costs, projected savings, and plans and objectives of management. Such
forward-looking statements are identified by the use of the forward-looking
words or phrases such as 'anticipates', 'intends', 'expects', 'plans',
'believes', 'estimates', or words or phrases of similar import. These
forward-looking statements are subject to numerous assumptions, risks and
uncertainties, and the statements looking forward beyond the second quarter of
2004 are subject to greater uncertainty because of the increased likelihood of
changes in underlying factors and assumptions. Actual results could differ
materially from those anticipated in the forward-looking statements.
7
First Quarter 2004 Compared with First Quarter 2003
Results of Operations
Revenue
Sales increased by 32% to $1,755 million in the first quarter of 2004 from
$1,328 million. The increase in shipments by 10% combined with a 16% increase in
average selling prices including appreciation of the Euro and the Canadian $
resulted in a 32% increase in net sales to $1,678 million.
The following table summarizes the stand-alone numbers of net sales for our
principal operating subsidiaries.
---------------------- --------------------------- ----------------------------
Subsidiary Net Sales(2) Changes in
------------------------------
Q1 2004 Q1 2003 Net Sales Shipments Average
Selling
$ Million $ Million % % Price %
---------------------- ------------- ------------- -------- -------------------
Ispat Inland 647 536 21 13 7
Ispat Mexicana 270 194 39 12 24
Ispat Sidbec 178 137 30 3 12*
Caribbean Ispat 103 93 10 (6) 17
Ispat Europe Group 464 334 39 12 1*
---------------------- ---------- ------------- -------------------------------
* For Ispat Sidbec and Ispat Europe Group change in Net Selling Price is based
on C$ and Euro prices respectively.
Net sales at Ispat Inland increased by 21% due to an increase in average price
per ton by 7% across most product lines, base price increases, favorable mix due
to higher sales of cold rolled and coated products and implementation of
surcharges to cover increase in input costs on certain shipments. Overall
shipments increased by 13% due to stronger demand across most markets and the
realization of increased production resulting from the successful reline of
Blast Furnace No.7.
Ispat Mexicana's net sales were higher by 39% due to increase in average selling
prices by 24% and a 12% increase in shipments. The demand for slabs remained
strong in all major markets.
Ispat Sidbec's net sales increased by 30% primarily due to a 28% increase in
average selling prices in US$ (12% in Canadian $) and 3% increase in shipments
due to the improving demand in all market segments.
Net sales at Caribbean Ispat increased 10% due to increase in demand for its
products in all of its principal markets, as well as improved prices. Steel
sales increased by 9% due to a 21% increase in selling prices and 9% decline in
shipments. DRI sales increased by 12% due to an increase in average selling
prices by 17%, offset by a reduction of shipment by 4%. These sales were largely
to affiliates.
Net sales at Ispat Europe increased by 39% in US$ dollars (19% in Euros) due to
improving demand for long products in Europe. Shipments increased by 12%;
however, transaction prices remained flat due to earlier commitments.
Cost of sales
Cost of sales increased by 29% to $1,502 million. This increase is due to an
increase in input costs as well as appreciation of the Euro and Canadian $,
which translates into higher US$ costs. Overall, cost per ton in US$ increased
by 12% primarily due to higher prices of most of the inputs, including scrap,
iron ore, natural gas, alloys and higher transportation costs. These increases
in input costs are driven by the continued strong global demand.
___________________________
(2) Net Sales numbers are standalone numbers for certain operating subsidiaries
and include inter-company shipments.
8
Ispat Inland's cost per ton increased by 8%, excluding a one-time reversal of
provision for property taxes. The increase in costs was due to a steep increase
in scrap and coke costs. Costs of other inputs such as alloys, natural gas also
increased. Higher operating and sales volumes partially mitigated the cost
increase on a per ton basis. Due to the reline of Blast Furnace No.7, fewer
slabs were purchased thereby reducing costs.
Ispat Mexicana's cost per ton increased by 21%. Substantial increases in prices
of natural gas and pellet feed costs (price and freight) were the main reasons
for the increase in cost per ton.
Ispat Sidbec's cost per ton increased by 25% in US$ (11% in Canadian $) due to
steep increase in scrap prices.
Cost per ton at Caribbean Ispat increased by 19%. The increase was mainly due to
an increase in the cost of iron ore (price and freight).
Ispat Europe's cost per ton increased by 21% in US$ (4% in Euros) primarily due
to increase in prices of scrap.
Gross profit
Gross profit is Net Sales less Cost of Sales (excluding depreciation).
Management believes that gross profit and gross profit margin provide useful
management information.
Gross profit increased to $253 million, an increase of 57% over the first
quarter of 2003. Gross margin for the first quarter was 14% compared to 12% in
the same period in 2003. The increase is due to higher levels of activities
(both production and shipment). In addition, the current quarter gross profit
benefited from a pre-tax gain of $35 million from a release of property taxes
provision for earlier years.
Comparative numbers of gross margin at the principal operating subsidiaries
were:
-------------------------------------------------- ----------------------------
Subsidiary Gross Margin
(%)
Q1 2004 Q1 2003
-------------------------------------------------- -------------- -------------
Ispat Inland 17.4 14.1
Ispat Mexicana 15.5 13.0
Ispat Sidbec 13.1 11.0
Caribbean Ispat 22.3 19.9
Ispat Europe Group 6.8 10.0
-------------------------------------------------- -------------- -------------
Operating income
The Company had an operating income of $158 million compared to $75 million in
the same quarter last year. The increase came from higher gross profit.
Depreciation increased by 13% primarily due to capitalization in 2003 at some
facilities as well as appreciation of the Canadian $ and the Euro.
Selling general and administrative expenses increased by 7%. The increase was
mainly due to the appreciation of the Euro and the Canadian $. In local currency
terms, selling, general and administrative expenses remained at prior year
levels.
9
Comparative numbers of Operating Income and Operating Margin at the principal
operating subsidiaries were:
--------------------------- ------------------------------------ ------------------------------------
Subsidiary Operating Income / (Loss) Operating Margin
$ Million (%)
Q1 2004 Q1 2003 Q1 2004 Q1 2003
--------------------------- ------------------ ----------------- ----------------- ------------------
Ispat Inland 81 44 12.5 8.3
Ispat Mexicana 30 16 11.1 8.1
Ispat Sidbec 14 6 7.7 4.7
Caribbean Ispat 17 12 16.1 13.2
Ispat Europe Group 5 11 1.1 3.3
--------------------------- ------------------ ----------------- ----------------- ------------------
Other income / (expense)
During the quarter, other income included a gain of $9 million realized by Ispat
Mexicana from the sale of a ship and a gain of $7 million realized by Ispat
Inland from the sale of environmental credits.
Financing costs
Net interest expense has reduced by $1 million mainly due to a reduction in
interest rates and reduction in debt.
Income tax
The Company's deferred tax expenses increased due to higher profits.
Net income
There was a net income of $102 million in the first quarter of 2004 compared to
a net income of $51 million in the first quarter of 2003 due to the reasons
discussed above. In first quarter 2003, the company took a charge of $2 million
due to change of accounting principle.
10
Liquidity and Capital Resources
During the first quarter working capital increased by $158 million primarily due
to higher levels of trade receivables and inventories to support the higher
levels of operations and sales. Capital expenditure during the first quarter was
$21 million.
During the quarter, Ispat Inland made a contribution of $32 million to its
pension fund in accordance with its agreement with the Pension Benefit Guaranty
Corporation.
As at March 31, 2004 the Company's cash and cash equivalents were $104 million,
(December 31, 2003: $80 million). In addition, the Company's operating
subsidiaries had available borrowing capacity under their various credit lines,
including receivable factoring facilities, of $383 million (December 31, 2003:
$337 million).
The following table summarizes working capital facilities at the main operating
units:
--------------------------------- --------------------- ----------------------- ------------------------
Subsidiary Limit Utilization Availability(3)
($ Millions) Mar 2004 Dec 2003 Mar 2004 Dec 2003 Mar 2004 Dec 2003
--------------------------------- --------- ----------- ----------- ----------- ----------- ------------
Ispat Inland 391 381 199 281 192 100
Ispat Sidbec 112 123 34 30 78 93
Caribbean Ispat 62 65 45 61 17 4
Ispat Europe 75 75 50 50 25 25
--------------------------------- --------- ----------- ----------- ----------- ----------- ------------
In addition to the credit facilities listed above, certain European subsidiaries
had the following receivable factoring facilities:
--------------------------------- ----------------------- ----------------------- -----------------------
Subsidiary Limit Utilization Availability(3)
($ Millions) Mar 2004 Dec 2003 Mar 2004 Dec 2003 Mar 2004 Dec 2003
--------------------------------- ----------- ----------- ---------- ------------ ----------- -----------
Ispat Europe - Receivables 257 261 185 159 72 102
factoring
--------------------------------- ----------- ----------- ---------- ------------ ----------- -----------
The increased utilization of receivable factoring is due to higher levels of
activity and increase in sales.
___________________________
(3) Corresponding exercisable limits are lower, which are based on the level of
inventory/receivable.
11
The Company's total debt including affiliates, both long and short term, was
$2,326 million. The corresponding amount as at December 31, 2003 was $2,277
million. Total debt for each of the principal operating subsidiaries is
summarized below.
----------------------- ---------------------- -------------------- -------------------- ---------------------
Subsidiary Long Term Debt (LTD) Payable to Bank Current Portion of Total Debt
LTD
($ Millions) Mar 2004 Dec 2003 Mar 2004 Dec 2003 Mar 2004 Dec 2003 Mar 2004 Dec 2003
----------------------- ------------ --------- ---------- --------- --------- ---------- ----------- ---------
Ispat Inland 1,166 1,100 31 21 1 7 1,198 1,128
Ispat Mexicana 357 387 - - 42 31 399 418
Ispat Sidbec 232 118 7 30 16 119 255 267
Caribbean Ispat 79 80 45 61 26 26 150 167
Ispat Europe 134 139 50 50 1 1 185 190
----------------------- ------------ --------- ---------- --------- --------- ---------- ----------- ---------
Ispat Inland issued senior secured notes of $800 million in a private offering
comprising $150 million principal amount of floating-rate notes maturing in 2010
and $650 million principal amount of 93/4% fixed-rate notes maturing in 2014.
The proceeds from this issue were used to prepay in full the outstanding amount
of $662 million of the Term Loans, as well as to pay down the borrowings under
its revolving credit facilities.
Ispat Sidbec concluded agreements with its lenders whereby maturities of
repayments were extended up to January 2006.
During the quarter the company purchased 3.3 million of its own shares at an
average price of $9.20 per share from the market under the previously announced
share buy back program.
Outlook for second quarter 2004
Demand in our principal markets is expected to be strong. We expect improved
selling prices across all product segments and overall shipments at first
quarter levels. On the other hand, we see increase in cost per ton due to
continued pricing pressure on all major inputs.
Working capital is expected to increase due to increases in input prices and
higher accounts receivable. Capital expenditure in the second quarter will be
higher at approximately $40 million due to work on restart of the DRI module at
Ispat Sidbec and installation of Ruhrstahl Heraeus Top Lance at Ispat Mexicana.
Debt reduction will continue to be one of our key priorities and we expect to
reduce our debt in this quarter. Interest costs are expected to increase due to
the higher interest rates arising from the refinancing of Ispat Inland's debt.
Overall, we expect to benefit from the strong market conditions for our
products. We look forward with confidence to a better quarter.
12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
Date: May 6, 2004
ISPAT INTERNATIONAL N.V.
By: /s/ Bhikam C. Agarwal
-----------------------
Bhikam C. Agarwal
Chief Financial Officer