With the share price of BHP Billiton Limited (ASX: BHP) falling by a painful 50% in the past 12 months, shareholders in the “Big Australian” wouldn’t be feeling like there is too much to be thankful for.

However, a decision taken back in 2000 to spin-off the group’s steel manufacturing divisions of Arrium Ltd (ASX: ARI) – then known as OneSteel – and BlueScope Steel Limited (ASX: BSL) in 2002 has arguably spared BHP Billiton shareholders even more pain.

On Wednesday morning, Arrium’s share price fell 17.5% after the group released its half year earnings result for the six months ending December 31.

In total, the stock is down around 95% since it listed on the ASX!

Here are the key points from today’s interim report:

  • Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $115 million
  • Underlying net loss after tax of $24 million
  • Net debt of $2 billion
  • Asset impairments of $142 million which helped drag down the statutory loss to $236 million

What now?

While the Mining Consumables and Steel divisions recorded strong performances with both divisions experiencing an uplift in underlying EBITDA, these positives were outweighed by the further decline in iron ore prices which dragged the Mining division to a negative EBITDA result.

Indeed, it’s Arrium’s exposure to iron ore which is the cause of much of the company’s woes. When coupled with the group’s high debt level, investors’ concerns are exacerbated.

Arrium continues to look for ways to restructure the business and implement cost reductions. The group is targeting at least $200 million in annualised cost reductions and productivity gains.

While bargains can often be found in areas of the market that are undergoing severe stress, the current dynamics of the iron ore market arguably make it one that is best avoided by most investors for the time being.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.