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LONDON (Scrap Monster): The world's leading steel producer ArcelorMittal has reported a net profit of $1 billion in the first half of the year, down significantly from the $2.6 billion recorded during the same period of 2011.

The company resulted to be more profitable during the second quarter of the year, compared with the first three months, despite the fact steel shipments and sales both decreased slightly by comparison.

According to Chairman and CEO Lakshmi Mittal, "Market conditions in the first half have been very challenging, more than we had expected. Against this backdrop the company has delivered a creditable performance, continuing to make progress on the divestment of non-core assets and reducing net debt below the half year target. Europe remains our biggest concern and the severity of the situation is reflected in the performance of our European operations."

They continues to develop its raw material operations, reporting iron ore production in Q2 of 14.4 million mt, up 9.9% year-on-year. Going forward, it expects to reach its target of increasing production by 10% during 2012, compared with 2011.

Overall, ArcelorMittal's mining unit was the most profitable in H1 2012, with an operating income of $758 million, although this was down from $1.2 billion recorded in H1 2011.

Flat carbon Europe continues reporting losses

The company's Flat Carbon Europe unit, which focuses on flat products in Europe, recorded a net loss of $438 million during the first half of the year, from a loss of over $600 million recorded in H2 2011.

The company continued cutting output at its unit to balance weak demand in the market and reported crude steel output at its mills of 14.3 million mt, down 8% year-on-year.

Steel shipments also decreased significantly during the second quarter of this year, down 9.2% compared with Q1.

"Against this very challenging backdrop, ArcelorMittal is taking measures to optimise production at its most competitive sites," the company said, stressing that the current situation in Europe is impacting a wide range of industries, not least the automotive industry.

ArcelorMittal is currently keeping one of its flat mills in Florange, France, idled while it announced last year the closure of its mill in Liege, Belgium. The company is also keeping blast furnaces idled during the summer, to offset the weakness of the demand in Gijon, Spain, and Dunkirk, France.

The new production cuts in Europe could not be "ruled out" as the company was still targeting profitability. Further price increases on flat products in Europe could be seen as input costs were slightly up and the unit was un-profitable so far, Lakshmi Mittal concluded.