International credit ratings agency Moody's has stated that the acquisition of German steelmaker ThyssenKrupp's Alabama, US-based steel mill by the joint venture partnership between ArcelorMittal and Japan's Nippon Steel & Sumitomo Metal Corporation (NSSMC) is modestly negative financially, but positive operationally, for the Japanese steelmaker. The acquisition will not change Moody's ratings or outlook for NSSMC.
According to Moody's, with this new venture, both participants will strengthen their ability to reliably supply high-end automotive products to US-located customers. Specifically, NSSMC will be positioned to meet growing demand from Japanese automakers operating in the US.
The ratings agency pointed out that, while the acquisition's cost is within the amount set under NSSMC's mid-term management plan, the transaction, because of the expected rise in debt or fall in cash compared to the case without the acquisition, will nevertheless modestly delay the improvements to leverage needed to maintain NSSMC's rating.
Moody's said that ThyssenKrupp's US steel mill has underperformed as a result of low capacity utilization rates. Stronger earnings could result if the new owners increase utilization based on NSSMC's strong ties with the Japanese automakers and Arcelormittal's well-established customer relationship in the US.
