Impact of rising costs sees profits take a hit at Mittal's steel empire

Britain's richest man, Lakshmi Mittal, has reported a fall in profits at his multi-billion pound global steel empire due to increased cost prices and reduced demand for his company's products.

ArcelorMittal, which manufacturers steel for the automotive,

construction and packaging industries, reported that sales fell by 2.8 per cent to 21 billion US dollars (13.3bn) in the third quarter compared to the second quarter.

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Its net income dropped from 1.7 billion US dollars (1.1bn) to 900 million US dollars (570m) in the same period.

The company, which produced 6 per cent of the world's steel output in 2009, said total shipments in the third quarter amounted to 21 million metric tonnes, compared with 22.8 million metric tonnes in the previous three months, which it blames in part on seasonally lower volumes.

"In Q3 the business performed towards the lower end of our expectations against a background of seasonally lower volumes, weakening spot prices and higher costs," said chairman and chief executive Mr Mittal.

The performance of the company is seen as an important bellwether for the global economy because its products are used by a variety of industries.

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The company is cautious about its prospects in the fourth quarter as its underlying earnings will be squeezed by at least 16 per cent because operating costs will continue to increase due to higher raw material prices and the average price at which it sells steel will decline.

However, it does expect to see a slight improvement in demand for its products.

"Our outlook for Q4 remains cautious as the expected higher input prices continue to work through the business and demand remains muted," Mr Mittal added.

Mr Mittal and his family topped the Sunday Times Rich List this year with an estimated wealth of 22.5bn. The company has operations in more than 20 countries.