Luxembourg, July 27, 2017 - ArcelorMittal
(referred to as "ArcelorMittal" or the "Company") (MT (New York,
Amsterdam, Paris, Luxembourg), MTS (Madrid)), the world's leading
integrated steel and mining company, today announced
results
[1] for the
three month and six month periods ended June 30, 2017.
Highlights:
-
Health and safety: LTIF rate of 0.72x in 2Q
2017; 1H 2017 LTIF of 0.78x stable YoY
-
Operating income of $1.4 billion in 2Q 2017; 1H
2017 operating income of $3.0 billion, 38.1% higher YoY
-
EBITDA of $2.1 billion in 2Q 2017; 1H 2017
EBITDA of $4.3 billion, 61% higher YoY
-
Net income of $1.3 billion in 2Q 2017; 1H 2017
net income of $2.3 billion as compared to $696 million in 1H
2016
-
Steel shipments of 21.5 Mt in 2Q 2017, up 2% vs.
1Q 2017; 1H 2017 steel shipments of 42.5Mt, down 2.4% YoY. Steel
shipments down 1.2% on a comparable basis
-
2Q 2017 iron ore shipments of 15.2Mt (-0.9%
YoY), of which 9.5 Mt shipped at market prices (-1.2% YoY); 1H 2017
market price iron ore shipments at 18.1Mt; up 4.3% YoY
- Net debt decreased to $11.9 billion as of June
30, 2017, as compared to $12.1 billion as of March 31, 2017 due to
positive free cash flow[2] (+$0.6
billion) (despite investment in working capital) offset in part by
foreign exchange losses (-$0.4 billion)
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Key strategic
developments:
-
Advancing our leadership position:
-
ArcelorMittal launched two new advanced high
strength steel products Usibor® 2000 and Ductibor® 1000 to the
market, furthering our industry leading offering to automotive
customers; in addition, the new Jet Vapor Deposition line at Liege
highlights ArcelorMittal's technology leadership
-
Action 2020 progress ongoing: Transformation
program in Europe progressing well; we are now operating from a
more efficient, resized footprint and utilising enhanced
digitalization of operations to drive productivity improvements and
support maintenance excellence
-
Investing with focus and discipline:
-
ArcelorMittal selected to become the new owner
of Ilva, a significant opportunity to create value for our
shareholders by leveraging ArcelorMittal's strengths to realise
Ilva's potential as a Tier 1 supplier to European and Italian steel
customers. Additionally, ArcelorMittal Brasil S.A. announced the
acquisition of Votorantim S.A. long steel businesses in
Brazil[3] to
strengthen the Company's long product capability and product
leadership
-
Strategic investments completed in line with the
continuous shift towards higher added value products:
-
Completed slab yard expansion project at Calvert
(US), and Galvaline investment at Dofasco (Canada), increasing our
galvanised sheet capability; and commissioned the ArcelorMittal
Krakow (Poland) hot rolling mill extension for increased HRC and
HDG capacity
-
Balance sheet progress:
-
Net debt was lower by $0.8 billion YoY despite a
$2.8 billion investment in working capital over the last 12 months
reflecting improved market conditions;
-
S&P and Moody's credit rating upgrades
reflecting ongoing progress towards achieving our financial
priority of an investment grade credit rating
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Outlook:
Looking to the outlook, current market conditions are improved
compared to twelve months ago with steel spreads currently at
healthy levels. The demand environment is positive, as evidenced by
the highest readings from the ArcelorMittal weighted PMI Index
since April 2011, which suggests that steel shipments in 2H 2017
will be higher than would normally be suggested by seasonality
alone.
The Company now expects that the cash needs of the business
(excluding working capital and premiums paid to retire debt early
of $0.2 billion (not included in previous guidance)) in 2017 to be
approximately $4.6 billion (as compared to $5.0 billion previous
guidance). Given the liability management exercise and lower
average debt, we now expect interest expense to decline to $0.8
billion in 2017 (as compared to $0.9 billion from previous guidance
and $1.1 billion in FY 2016). While capex expectation for 2017
remains at $2.9 billion (from $2.4 billion in 2016), the Company
expects lower cash taxes and contributions to fund pensions and
other cash expenses to be lower than previous guidance.
Given the improved market conditions, the Company now expects a
full year 2017 investment in working capital of approximately $1.5
billion (as compared to previous guidance of approximately $1.0
billion). |
Financial highlights (on the basis of
IFRS1):
(USDm)
unless otherwise shown |
2Q 17 |
1Q 17 |
2Q 16 |
1H 17 |
1H 16 |
Sales |
17,244 |
16,086 |
14,743 |
33,330 |
28,142 |
Operating
income |
1,390 |
1,576 |
1,873 |
2,966 |
2,148 |
Net income
attributable to equity holders of the parent |
1,322 |
1,002 |
1,112 |
2,324 |
696 |
Basic
earnings per share (US$)[4] |
1.30 |
0.98 |
1.13 |
2.28 |
0.88 |
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|
|
|
|
Operating
income/ tonne (US$/t) |
65 |
75 |
85 |
70 |
49 |
EBITDA |
2,112 |
2,231 |
1,770 |
4,343 |
2,697 |
EBITDA/
tonne (US$/t) |
98 |
106 |
80 |
102 |
62 |
Steel-only
EBITDA/ tonne (US$/t) |
83 |
83 |
73 |
83 |
56 |
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Crude steel
production (Mt) |
23.2 |
23.6 |
23.1 |
46.8 |
46.3 |
Steel
shipments (Mt) |
21.5 |
21.1 |
22.1 |
42.5 |
43.6 |
Own iron
ore production (Mt) |
14.7 |
14.0 |
13.5 |
28.7 |
27.6 |
Iron ore
shipped at market price (Mt) |
9.5 |
8.7 |
9.6 |
18.1 |
17.4 |
Commenting, Mr. Lakshmi N. Mittal, ArcelorMittal
Chairman and CEO, said:
"We have materially improved our financial performance in the first
half of 2017, and continue to make important progress on our Action
2020 plan. The recently announced acquisition
of Ilva represents a unique opportunity to create value
for our shareholders. Looking ahead demand remains strong in
our core markets supporting robust order books and healthy levels
of steel spreads. However, it remains a matter of concern that
we are not able to capture the full benefits of this demand growth
due to continued high levels of imports. We continue to work
towards achieving a comprehensive trade solution in response to
unfair imports."
Second quarter 2017 earnings analyst conference
call
ArcelorMittal management (including CEO and CFO) will host a
conference call for members of the investment community to discuss
the second quarter period ended June 30, 2017 on:
Date |
US Eastern
time |
London |
CET |
Thursday
July 27, 2017 |
9.30am |
2.30pm |
3.30pm |
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The dial in
numbers are: |
|
|
Location |
Toll free
dial in numbers |
Local dial
in numbers |
Participant |
UK
local: |
0800 0515
931 |
+44 (0)203
364 5807 |
24379437# |
US
local: |
1 86 6719
2729 |
+1 24 0645
0345 |
24379437# |
US (New
York): |
1 86 6719
2729 |
+ 1 64 6663
7901 |
24379437# |
France: |
0800
914780 |
+33 1 7071
2916 |
24379437# |
Germany: |
0800 965
6288 |
+49 692
7134 0801 |
24379437# |
Spain: |
90 099
4930 |
+34 911
143436 |
24379437# |
Luxembourg: |
800
26908 |
+352 27 86
05 07 |
24379437# |
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A replay of the conference call will be
available for one week by dialing: |
Number |
Language |
Access
code |
+49
(0) 1805 2047 088 |
English |
511066# |
Forward-Looking Statements
This document may contain forward-looking information and
statements about ArcelorMittal and its subsidiaries. These
statements include financial projections and estimates and their
underlying assumptions, statements regarding plans, objectives and
expectations with respect to future operations, products and
services, and statements regarding future performance.
Forward-looking statements may be identified by the words
"believe", "expect", "anticipate", "target" or similar expressions.
Although ArcelorMittal's management believes that the expectations
reflected in such forward-looking statements are reasonable,
investors and holders of ArcelorMittal's securities are cautioned
that forward-looking information and statements are subject to
numerous risks and uncertainties, many of which are difficult to
predict and generally beyond the control of ArcelorMittal, that
could cause actual results and developments to differ materially
and adversely from those expressed in, or implied or projected by,
the forward-looking information and statements. These risks and
uncertainties include those discussed or identified in the filings
with the Luxembourg Stock Market Authority for the Financial
Markets (
Commission de Surveillance du
Secteur Financier) and the United States
Securities and Exchange Commission (the "SEC") made or to be made
by ArcelorMittal, including ArcelorMittal's latest Annual Report on
Form 20-F on file with the SEC. ArcelorMittal undertakes no
obligation to publicly update its forward-looking statements,
whether as a result of new information, future events, or
otherwise.
About ArcelorMittal
ArcelorMittal is the world's leading steel and mining company, with
a presence in 60 countries and an industrial footprint in 18
countries. Guided by a philosophy to produce safe, sustainable
steel, we are the leading supplier of quality steel in the major
global steel markets including automotive, construction, household
appliances and packaging, with world-class research and development
and outstanding distribution networks.
Through our core values of sustainability, quality and leadership,
we operate responsibly with respect to the health, safety and
wellbeing of our employees, contractors and the communities in
which we operate.
For us, steel is the fabric of life, as it is at the heart of the
modern world from railways to cars and washing machines. We are
actively researching and producing steel-based technologies and
solutions that make many of the products and components people use
in their everyday lives more energy efficient.
We are one of the world's five largest producers of iron ore and
metallurgical coal. With a geographically diversified portfolio of
iron ore and coal assets, we are strategically positioned to serve
our network of steel plants and the external global market. While
our steel operations are important customers, our supply to the
external market is increasing as we grow.
In 2016, ArcelorMittal had revenues of $56.8 billion and crude
steel production of 90.8 million metric tonnes, while own iron ore
production reached 55.2 million metric tonnes.
ArcelorMittal is listed on the stock exchanges of New York (MT),
Amsterdam (MT), Paris (MT), Luxembourg (MT) and on the Spanish
stock exchanges of Barcelona, Bilbao, Madrid and Valencia
(MTS).
For more information about ArcelorMittal please visit:
http://corporate.arcelormittal.com/
Enquiries
ArcelorMittal Investor Relations |
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Europe |
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Tel: +44
207 543 1128 |
Americas |
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Tel: +1 312
899 3985 |
Retail |
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Tel: +44
207 543 1156 |
SRI |
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Tel: +44
207 543 1156 |
Bonds/Credit |
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Tel: +33 1
71 92 10 26 |
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ArcelorMittal Corporate Communications |
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E-mail:
press@arcelormittal.com Tel: +44 0207 629 7988 |
Paul
Weigh |
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Tel: +44
203 214 2419 |
France |
Image
7 |
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Tel: +33
153 70 94 17 |
Corporate responsibility and safety
performance
Health and safety - Own personnel and
contractors lost time injury frequency rate
Health and safety performance, based on own personnel figures and
contractors lost time injury frequency (LTIF) rate was 0.72x in the
second quarter of 2017 ("2Q 2017") as compared to 0.80x for the
first quarter of 2017 ("1Q 2017") and 0.79x for the second quarter
of 2016 ("2Q 2016").
Health and safety performance was stable at 0.78x in the first six
months of 2017 ("1H 2017") as compared to the first six months of
2016 ("1H 2016").
The Company's effort to improve the Health and Safety record
continues and remains focused on both further reducing the rate of
severe injuries and preventing fatalities.
Own personnel and contractors - Frequency
rate
Lost time
injury frequency rate |
2Q 17 |
1Q 17 |
2Q 16 |
1H 17 |
1H 16 |
Mining |
0.58 |
0.58 |
0.84 |
0.58 |
0.83 |
NAFTA |
0.51 |
0.85 |
0.62 |
0.75 |
0.84 |
Brazil |
0.37 |
0.41 |
0.46 |
0.40 |
0.42 |
Europe |
1.08 |
1.20 |
1.11 |
1.15 |
0.97 |
ACIS |
0.62 |
0.45 |
0.53 |
0.52 |
0.61 |
Total Steel |
0.75 |
0.83 |
0.78 |
0.81 |
0.77 |
Total (Steel and Mining) |
0.72 |
0.80 |
0.79 |
0.78 |
0.78 |
Key corporate responsibility highlights for 2Q
2017:
-
Annual Review, Sustainable Progress,
published in May 2017 as the group's second step towards integrated
reporting.
-
Launched 2nd generation of our iCARe®
electrical steels in June 2017. iCARe® offers more power and
driving range for electric motors.
-
On top of the relining of blast furnace
no. 5 and modernization of the basic oxygen furnace already
completed in Krakow, Poland, the capacity expansion of the hot
rolling mill and a new galvanizing line have been commissioned in
2Q 2017. Together, these investments exceed €120 million and not
only will they extend the life of the blast furnace for the next 20
years, preserving jobs in the Krakow unit and numerous related
industries, but they will also ensure the Krakow site complies with
EU air emission regulations which come into force in autumn
2018.
-
On June 27, 2017, ArcelorMittal filed
its 2016 report on Payments to Governments in respect of Extractive
Activities, which provides a consolidated overview of payments made
by the Company and its subsidiaries in 2016 to governments
regarding its mining operations. The report, which complies with
new reporting requirements under Luxembourg law, is available for
download from corporate.arcelormittal.com within the 'Investors'
section.
Analysis of results for the six months ended June
30, 2017 versus results for the six months ended June 30,
2016
Total steel shipments for 1H 2017 were 42.5 million metric tonnes.
On a comparable basis, excluding shipments from assets sold
subsequent to the comparable period (i.e. sale of long steel
producing subsidiaries in the US (LaPlace and Vinton) and Zaragoza
in Spain), and excluding the impact of the optimization at
Zumarraga in Spain (Europe segment) total steel shipments in 1H
2017 declined 1.2% as compared to 1H 2016.
Sales for 1H 2017 increased by 18.4% to $33.3 billion as compared
with $28.1 billion for 1H 2016, primarily due to higher average
steel selling prices (+23.1%), and higher seaborne iron ore
reference prices (+43%).
Depreciation of $1.3 billion for 1H 2017 was stable as compared to
1H 2016. FY 2017 depreciation is expected to be approximately $2.8
billion.
Impairment charges for 1H 2017 were $46 million related to a
downward revision of cash flow projections in South Africa as
compared to impairment charges for 1H 2016 of $49 million related
to the sale of ArcelorMittal Zaragoza in Spain.
Exceptional income for 1H 2016 was $832 million relating to a
one-time gain on employee benefits following the signing of the US
labour contract
[5].
Operating income for 1H 2017 was $3.0 billion as compared to $2.1
billion in 1H 2016. Operating results for 1H 2016 were positively
impacted by exceptional income as discussed above.
Income from investments in associates, joint ventures and other
investments in 1H 2017 was $206 million as compared to $492 million
in 1H 2016. Income from investments in associates, joint ventures
and other investments in 1H 2017 included improved performance of
Calvert and Chinese investees, offset in part by a loss on dilution
of the Company's stake in China Oriental
[6]. Income
from investments in associates, joint ventures and other
investments for 1H 2016 included $329 million related to gain on
disposal of Gestamp
[7]. Income
from investments in associates, joint ventures and other
investments in 1H 2016 and 1H 2017 includes the annual dividend
received from Erdemir of $44 million, and $45 million,
respectively.
Net interest expense (including interest expense and interest
income) was lower at $430 million in 1H 2017, as compared to $638
million in 1H 2016, driven by debt reduction including early bond
repayments and repayment at maturity on bonds. The Company now
expects full year 2017 net interest expense of approximately $0.8
billion (reduced from previous guidance of $0.9 billion).
Foreign exchange and other net financing gains were $77 million for
1H 2017 as compared to foreign exchange and other net financing
costs of $441 million for 1H 2016. Foreign exchange and other net
financing gains for 1H 2017 include foreign exchange gains of $282
million as compared to a foreign exchange gain of $60 million in 1H
2016, mainly on account of USD depreciation of 8.3% against the
Euro (versus 2% depreciation in prior period). 1H 2017 includes
non-cash mark-to-market gains on derivatives (primarily mandatory
convertible bonds call options following the market price increase
in the underlying shares) totalling $0.3 billion in 1H 2017 as
compared to $0.1 billion in 1H 2016. The foreign exchange gain in
1H 2017 is largely non-cash and primarily relates to the gain from
the impact of the USD movements on Euro denominated deferred tax
assets, partially offset by foreign exchange losses on euro
denominated debt. Foreign exchange and other net financing
gains/costs for 1H 2017 and 1H 2016 also includes $159 million and
$237 million premium expense on the early redemption of
bonds.
ArcelorMittal recorded an income tax expense of $480 million for 1H
2017 as compared to an income tax expense of $853 million for 1H
2016. The tax expense in 1H 2016 includes derecognition of
deferred tax assets (DTA) amounting to $0.7 billion in Luxembourg.
This derecognition is related to revised expectations of DTA
recoverability in US dollar terms, and is not related to a
deterioration of expected future taxable income.
ArcelorMittal's net income for 1H 2017 was $2.3 billion, or $2.28
earnings per share
4, as compared
to net income in 1H 2016 of $0.7 billion, or $0.88 earnings per
share
4.
Analysis of results for 2Q 2017 versus 1Q 2017 and
2Q 2016
Total steel shipments in 2Q 2017 were 2% higher at 21.5 million
metric tonnes as compared with 21.1 million metric tonnes for 1Q
2017 primarily due to improved shipments in Brazil (+17.8%), Europe
(+2.5%), ACIS (+1.1%), offset in part by lower shipments in NAFTA
(-3.4%).
On a comparable basis, excluding shipments from assets sold
subsequent to the comparable period (i.e. considering the sale of
Zaragoza in Spain), and excluding the impact of the optimization at
Zumarraga in Spain (Europe segment) total steel shipments for 2Q
2017 were 2.0% lower as compared to 2Q 2016, primarily due to lower
shipment volumes in Brazil (-2.5% due to weak construction market),
Europe (down 0.2Mt or -2.2% due to weaker long products) and ACIS
(down 0.2Mt or -5.7% due to weak South Africa market and lower
shipments in Ukraine).
Sales in 2Q 2017 were $17.2 billion as compared to $16.1 billion
for 1Q 2017 and $14.7 billion for 2Q 2016. Sales in 2Q 2017 were
7.2% higher as compared to 1Q 2017 primarily due to higher average
steel selling prices (+4.8%), higher steel shipments (+2%), higher
market-priced iron ore shipments (+9.5%) offset in part by lower
seaborne iron ore reference prices (-26.6%). Sales in 2Q 2017 were
17% higher as compared to 2Q 2016 primarily due to higher average
steel selling prices (+21.5%) and higher seaborne iron ore
reference prices (+13.0%) offset by lower steel shipments (-2.8%)
and lower market-priced iron ore shipments (-1.2%).
Depreciation for 2Q 2017 was higher at $676 million as compared to
$655 million for 1Q 2017 and stable as compared to $680 million in
2Q 2016. Depreciation increased in 2Q 2017 as compared to 1Q 2017,
primarily on account of foreign exchange differences following the
depreciation of USD vs major currencies.
Impairment charges for 2Q 2017 were $46 million related to a
downward revision of cash flow projections in South Africa.
Impairment charges for 2Q 2016 were $49 million related to the sale
of the ArcelorMittal Zaragoza facility in Spain.
Exceptional income for 2Q 2016 was $832 million relating to a
one-time gain on employee benefits following the signing of the US
labour contract
5.
Operating income for 2Q 2017 was $1.4 billion as compared to $1.6
billion in 1Q 2017 and $1.9 billion in 2Q 2016. Operating results
for 2Q 2017 were impacted by impairment charges as discussed above.
Operating results for 2Q 2016 were impacted by exceptional income
discussed above.
Income from associates, joint ventures and other investments for 2Q
2017 of $120 million was higher as compared to income for 1Q 2017
of $86 million and lower as compared to $168 million for 2Q 2016.
Income from associates, joint ventures and other investments for 2Q
2017 increased on account of improved performance of the Chinese
investees. Income in 1Q 2017 included the annual dividend declared
by Erdemir ($45 million) offset by a loss on dilution of the
Company's stake in China Oriental
6. Income from
associates, joint ventures and other investments for 2Q 2016
included an annual dividend received from Erdemir ($44 million)
which in 2017 is included in 1Q 2017.
Net interest expense in 2Q 2017 was $207 million as compared to
$223 million in 1Q 2017 and $306 million in 2Q 2016. Net interest
expense was lower in 2Q 2017 as compared to 1Q 2017 and 2Q 2016
primarily due to debt reduction including early bond repayment via
debt tenders and repayment at maturity on bonds during 2016 and
2017.
Foreign exchange and other net financing gains in 2Q 2017 were $210
million as compared to foreign exchange and other net financing
costs of $133 million for 1Q 2017 and costs of $450 million in 2Q
2016. The foreign exchange gains/losses are largely non-cash and
primarily relate to the gains/losses from the impact of the USD
movements on euro-denominated deferred tax assets, partially offset
by foreign exchange gain/losses on euro-denominated debt. For 2Q
2017 a foreign exchange gain of $247 million was recorded (as
compared to a gain of $35 million for 1Q 2017) mainly on account of
a 6.7% depreciation of the USD against the Euro (versus 1.4%
depreciation in 1Q 2017). Both 2Q 2017 and 1Q 2017 include non-cash
mark-to-market gains on derivatives (primarily mandatory
convertible bonds call options following the market price increase
in the underlying shares) of $150 million and $158 million,
respectively. 1Q 2017 includes $159 million on premium expenses on
an early repayment of bonds (settled in April 2017). Foreign
exchange and other net financing costs for 2Q 2016 include a
foreign exchange loss of $47 million mainly on account of USD
appreciation of 2.5% against the Euro and 10.9% depreciation
against BRL. 2Q 2016 also includes $237 million premium expense on
the early redemption of bonds.
ArcelorMittal recorded an income tax expense of $197 million for 2Q
2017 as compared to an income tax expense of $283 million for 1Q
2017 and an income tax expense of $153 million for 2Q
2016.
ArcelorMittal recorded net income for 2Q 2017 of $1,322 million, or
$1.30 earnings per share
4, as compared
to net income for 1Q 2017 of $1,002 million, or $0.98 earnings per
share
4, and a net
income for 2Q 2016 of $1,112 million, or $1.13 earnings per
share
4.
Capital expenditure projects
The following tables summarize the Company's principal growth and
optimization projects involving significant capital
expenditures.
Completed projects in most recent
quarters
Segment |
Site |
Project |
Capacity /
particulars |
Actual
completion |
NAFTA |
Indiana Harbor |
Indiana Harbor "footprint optimization project" |
New caster at No.3 Steelshop installed |
4Q 2016(a) |
NAFTA |
AM/NS Calvert |
Phase 2: Slab yard expansion (Bay 5) |
Increase coil production level from 4.6Mt/year to 5.3Mt/year
coils |
2Q 2017 |
NAFTA |
ArcelorMittal Dofasco (Canada) |
Phase 2: Convert the current galvanizing line #4 to a
Galvalume line |
Allow the galvaline #4 to produce 160kt galvalume and 128kt
galvanize and closure of galvanize line #1 (capacity 170kt of
galvalume) |
2Q 2017 |
Europe |
ArcelorMittal Krakow (Poland) |
Hot strip mill (HSM) extension |
Increase hot rolled coil (HRC) capacity by 0.9Mt/year |
Commissioned 2Q 2017(b) |
Europe |
ArcelorMittal Krakow (Poland) |
Hot dipped galvanizing (HDG) increase |
Increasing HDG capacity by 0.4Mt/year |
Commissioned 2Q 2017(b) |
Ongoing projects
Segment |
Site |
Project |
Capacity /
particulars |
Forecast
completion |
Europe |
Gent & Liège (Europe Flat Automotive UHSS Program)
|
Gent: Upgrade HSM and new furnaceLiège: Annealing line
transformation |
Increase ~400kt in Ultra High Strength Steel
capabilities |
2017 |
Europe |
ArcelorMittal Differdange |
Modernisation of finishing of "Grey rolling mill" |
Revamp finishing to achieve full capacity of Grey mill at
850kt/y. |
1Q 2018 |
NAFTA |
Indiana Harbor |
Indiana Harbor "footprint optimization project" |
Restoration of 80" HSM and upgrades at Indiana Harbor
finishing and logistics |
2018(a) |
ACIS |
ArcelorMittal Kryvyi Rih |
New LF&CC 2&3 |
Facilities upgrade to switch from ingot to continuous caster
route. Additional billets of 290kt over ingot route through yield
increase. |
4Q 2018 |
NAFTA |
Burns Harbor |
New Walking Beam Furnaces |
Two new walking beam reheat furnaces bringing benefits on
productivity, quality and operational cost |
2021 |
Brazil |
ArcelorMittal Vega Do Sul |
Expansion project |
Increase hot dipped galvanizing (HDG) capacity by 0.6Mt/year
and cold rolling (CR) capacity by 0.7Mt/year |
On hold |
Brazil |
Juiz de Fora |
Meltshop expansion |
Increase in meltshop capacity by 0.2Mt/year |
On hold(c) |
Brazil |
Monlevade |
Sinter plant, blast furnace and meltshop |
Increase in liquid steel capacity by 1.2Mt/year;Sinter feed
capacity of 2.3Mt/year |
On hold |
Mining |
Liberia |
Phase 2 expansion project |
Increase production capacity to 15Mt/year |
Under review(d) |
a) In support of the Company's Action 2020 program that was
launched at its fourth quarter and full-year 2015 earnings
announcement, the footprint optimization project at ArcelorMittal
Indiana Harbor is now underway, which has resulted in structural
changes required to improve asset and cost optimization. The plan
involves idling redundant operations including the #1 aluminize
line, 84" hot strip mill (HSM), and #5 continuous galvanizing line
(CGL) and No.2 steel shop (idled in 2Q 2017) whilst making further
planned investments totalling ~$200 million including a new caster
at No.3 steelshop (completed in 4Q 2016), restoration of the 80"
hot strip mill, logistics and Indiana Harbor finishing are ongoing.
The full project scope is expected to be completed in
2018.
b) On July 7, 2015, ArcelorMittal Poland announced
it was restarting preparations for the relining of blast furnace
No. 5 in Krakow, which was commissioned in 3Q 2016. Total
investments in the primary operations in the Krakow plant will
amount to more than €40 million, which also includes modernization
of the basic oxygen furnace No. 3. Additional projects in the
downstream operations will also be implemented. These include the
extension of the hot rolling mill capacity by 0.9 million tons per
annum and increasing the hot dip galvanizing capacity by 0.4
million tons per annum commissioned in 2Q 2017. In total, the Group
has invested more than €120 million in its operations in Krakow,
including both upstream and downstream installations.
c) Although the Monlevade wire rod expansion
project and Juiz de Fora rebar expansion were completed in
2015, the Juiz de Fora melt shop project is currently on
hold and is expected to be completed upon Brazil domestic market
recovery, and the Company does not expect to increase
shipments until domestic demand improves.
d) ArcelorMittal Liberia is moving ore extraction
from its depleting DSO (direct shipping ore) deposit at Tokadeh to
the nearby, low strip ratio and higher-grade DSO Gangra deposit
where planned ramp up will occur in 2H 2017. Following a period of
exploration cessation caused by the onset of Ebola, ArcelorMittal
Liberia recommenced drilling for DSO resource extensions in late
2015. During 2016, the operation at Tokadeh was right-sized to
focus on its "natural" Atlantic markets. The nearby Gangra deposit
is now the next development in a staged approach as opposed to the
originally planned phase 2 step up to 15Mtpa of concentrate sinter
fine ore product that was delayed in August 2014 due to the
declaration of force majeure by contractors following the Ebola
virus outbreak, and then reassessed following rapid iron ore price
declines over the period since. The Gangra mine, haul road and
related existing plant and equipment upgrades are on track.
ArcelorMittal remains committed to Liberia where it operates a full
value chain of mine, rail and port and where it has been
operating the mine on a DSO basis since 2011. The Company
believes that ArcelorMittal Liberia presents a strong, competitive
source of product ore for the international market based on
continuing DSO mining and then moving to a long-term sinter feed
concentration phase.
Analysis of segment operations
NAFTA
(USDm) unless otherwise shown |
2Q
17 |
1Q
17 |
2Q
16 |
1H
17 |
1H
16 |
Sales |
4,607 |
4,458 |
3,920 |
9,065 |
7,742 |
Operating
income |
378 |
396 |
1,209 |
774 |
1,414 |
Depreciation |
(128) |
(128) |
(136) |
(256) |
(270) |
Exceptional
income5 |
- |
- |
832 |
- |
832 |
EBITDA |
506 |
524 |
513 |
1,030 |
852 |
Crude steel
production (kt) |
5,762 |
6,216 |
5,735 |
11,978 |
11,379 |
Steel
shipments (kt) |
5,419 |
5,610 |
5,443 |
11,029 |
10,906 |
Average
steel selling price (US$/t) |
760 |
719 |
660 |
739 |
647 |
NAFTA segment crude steel production decreased 7.3% to 5.8 million
metric tonnes in 2Q 2017 as compared to 6.2 million metric tonnes
for 1Q 2017 primarily due to planned maintenance.
Steel shipments in 2Q 2017 decreased by 3.4% to 5.4 million metric
tonnes as compared to 5.6 million metric tonnes in 1Q 2017,
primarily driven by a 3.9% decrease in flat products volumes offset
in part by 1.9% increase in long products.
Sales in 2Q 2017 increased by 3.3% to $4.6 billion as compared to
$4.5 billion in 1Q 2017, primarily due to higher average steel
selling prices (+5.7%) offset in part by lower steel shipment
volumes as discussed above. Compared to 1Q 2017, average steel
selling prices for flat products improved by +5.8% and for long
products improved by +4.3%.
Operating income in 2Q 2017 decreased to $378 million as compared
to operating income of $396 million in 1Q 2017 and operating income
of $1,209 million in 2Q 2016. Operating performance for 2Q 2016 was
positively impacted by a one-time gain of $0.8 billion on employee
benefits following the signing of the US labour contract
5.
EBITDA in 2Q 2017 decreased by 3.3% to $506 million as compared to
$524 million in 1Q 2017 primarily due to lower steel shipment
volumes (-3.4%) and higher costs, including planned maintenance
($45 million), partially offset by higher average steel selling
prices. EBITDA in 2Q 2017 declined by 1.2% as compared to $513
million in 2Q 2016.
Brazil
(USDm) unless otherwise shown |
2Q
17 |
1Q
17 |
2Q
16 |
1H
17 |
1H
16 |
Sales |
1,834 |
1,610 |
1,488 |
3,444 |
2,743 |
Operating
income |
128 |
175 |
149 |
303 |
238 |
Depreciation |
(73) |
(71) |
(64) |
(144) |
(120) |
EBITDA |
201 |
246 |
213 |
447 |
358 |
Crude steel
production (kt) |
2,714 |
2,710 |
2,800 |
5,424 |
5,467 |
Steel
shipments (kt) |
2,622 |
2,226 |
2,689 |
4,848 |
5,161 |
Average
steel selling price (US$/t) |
655 |
678 |
515 |
666 |
495 |
Brazil segment crude steel production was stable at 2.7 million
metric tonnes in 2Q 2017 as compared to 1Q 2017.
Steel shipments in 2Q 2017 increased by 17.8% to 2.6 million metric
tonnes as compared to 2.2 million metric tonnes in 1Q 2017,
primarily due to a 23.4% increase in flat product steel shipments
(primarily export shipments and temporary shipment delays in the
prior quarter) and a 9% increase in long product steel
shipments.
Sales in 2Q 2017 increased by 13.9% to $1.8 billion as compared to
$1.6 billion in 1Q 2017, due to higher steel shipments offset in
part by lower average steel selling prices (-3.4%) driven in part
by foreign exchange.
Operating income in 2Q 2017 decreased to $128 million as compared
to an operating income of $175 million in 1Q 2017 and operating
income of $149 million in 2Q 2016.
EBITDA in 2Q 2017 decreased by 18% to $201 million as compared to
$246 million in 1Q 2017 primarily due to a negative price cost
impact and weaker product mix offset in part by higher steel
shipment volumes. EBITDA in 1Q 2017 included a $21 million
provision reversal. EBITDA in 2Q 2017 was 5.4% lower as compared to
$213 million in 2Q 2016.
Europe
(USDm) unless otherwise shown |
2Q
17 |
1Q
17 |
2Q
16 |
1H
17 |
1H
16 |
Sales |
9,180 |
8,222 |
7,810 |
17,402 |
14,961 |
Operating
income |
652 |
636 |
383 |
1,288 |
469 |
Depreciation |
(290) |
(273) |
(293) |
(563) |
(570) |
Impairment |
- |
- |
(49) |
- |
(49) |
EBITDA |
942 |
909 |
725 |
1,851 |
1,088 |
Crude steel
production (kt) |
10,997 |
11,212 |
10,720 |
22,209 |
21,891 |
Steel
shipments (kt) |
10,466 |
10,208 |
10,886 |
20,674 |
21,330 |
Average
steel selling price (US$/t) |
698 |
649 |
562 |
674 |
546 |
Europe segment crude steel production decreased by 1.9% to 11.0
million metric tonnes in 2Q 2017, as compared to 11.2 million
metric tonnes in 1Q 2017.
Steel shipments in 2Q 2017 increased by 2.5% to 10.5 million metric
tonnes as compared to 10.2 million metric tonnes in 1Q 2017,
primarily due to a 3.8% increase in long product shipments and 1.4%
increase in flat product steel shipments.
Sales in 2Q 2017 increased 11.7% to $9.2 billion as compared to
$8.2 billion in 1Q 2017, primarily due to higher steel shipments as
discussed above and higher average steel selling prices (+7.7%),
with flat and long products average steel selling prices increasing
+8.4% and +5.7%, respectively.
Operating income in 2Q 2017 was $652 million as compared to $636
million in 1Q 2017 and $383 million in 2Q 2016. Operating
performance in 2Q 2016 was negatively impacted by $49 million of
impairment related to the sale of ArcelorMittal Zaragoza facility
in Spain.
EBITDA in 2Q 2017 increased by 3.6% to $942 million as compared to
$909 million in 1Q 2017 primarily due to higher steel volumes
partially offset by negative price-cost impact. EBITDA in 2Q 2017
improved 29.8% as compared to 2Q 2016 primarily on account of
positive price cost impact offset in part by lower steel
shipments.
ACIS
(USDm) unless otherwise shown |
2Q
17 |
1Q
17 |
2Q
16 |
1H
17 |
1H
16 |
Sales |
1,834 |
1,807 |
1,581 |
3,641 |
2,773 |
Operating
income |
51 |
116 |
162 |
167 |
147 |
Depreciation |
(77) |
(75) |
(80) |
(152) |
(156) |
Impairment |
(46) |
- |
- |
(46) |
- |
EBITDA |
174 |
191 |
242 |
365 |
303 |
Crude steel
production (kt) |
3,685 |
3,492 |
3,926 |
7,177 |
7,594 |
Steel
shipments (kt) |
3,257 |
3,221 |
3,453 |
6,478 |
6,768 |
Average
steel selling price (US$/t) |
499 |
502 |
409 |
500 |
365 |
ACIS segment crude steel production in 2Q 2017 increased by 5.5% to
3.7 million metric tonnes as compared to 3.5 million metric tonnes
in 1Q 2017. The higher production was largely due to increased
output in Ukraine following the planned maintenance of BF#9 in 1Q
2017.
Steel shipments in 2Q 2017 increased by 1.1% to 3.3 million metric
tonnes as compared to 3.2 million metric tonnes in 1Q 2017
primarily due to higher steel shipments in Ukraine as the prior
period had been impacted by the planned maintenance as described
above, offset in part by lower South Africa shipments due to weak
demand.
Sales in 2Q 2017 increased 1.5% to $1.8 billion as compared to 1Q
2017, primarily due to higher steel shipments (+1.1%) offset in
part by lower average steel selling prices (-0.6%).
Operating income in 2Q 2017 was $51 million as compared to an
operating income of $116 million in 1Q 2017 and operating income of
$162 million in 2Q 2016. Operating performance in 2Q 2017 was
impacted by impairment charges of $46 million related to a downward
revision of cash flow projections in South Africa.
EBITDA in 2Q 2017 decreased 9.1% to $174 million as compared to
$191 million in 1Q 2017, due to weaker performance in South Africa
(impacted by lower volumes and a negative price cost impact).
EBITDA in 2Q 2017 was 28.2% lower as compared to $242 million in 2Q
2016, primarily due to a negative price cost impact and lower steel
shipment volumes in South Africa.
Mining
(USDm) unless otherwise shown |
2Q
17 |
1Q
17 |
2Q
16 |
1H
17 |
1H
16 |
Sales |
1,015 |
1,030 |
809 |
2,045 |
1,409 |
Operating
income |
216 |
378 |
62 |
594 |
60 |
Depreciation |
(103) |
(102) |
(101) |
(205) |
(201) |
EBITDA |
319 |
480 |
163 |
799 |
261 |
Own iron ore production (a) (Mt) |
14.7 |
14.0 |
13.5 |
28.7 |
27.6 |
Iron ore shipped externally and internally at market price
(b) (Mt) |
9.5 |
8.7 |
9.6 |
18.1 |
17.4 |
Iron ore
shipment - cost plus basis (Mt) |
5.8 |
4.7 |
5.8 |
10.5 |
11.1 |
Own coal production(a) (Mt) |
1.6 |
1.7 |
1.4 |
3.3 |
2.9 |
Coal shipped externally and internally at market
price(b) (Mt) |
0.8 |
0.8 |
0.7 |
1.6 |
1.6 |
Coal
shipment - cost plus basis (Mt) |
0.9 |
0.9 |
0.8 |
1.8 |
1.7 |
(a) Own iron ore and coal production not including strategic
long-term contracts.
(b) Iron ore and coal shipments of market-priced based materials
include the Company's own mines, and share of production at other
mines, and exclude supplies under strategic long-term
contracts.
Own iron ore production in 2Q 2017 increased by 4.9% to 14.7
million metric tonnes as compared to 14 million metric tonnes in 1Q
2017 due to seasonally higher production in Canada and increased
production in Mexico (Volcan mine restarted February 2017). Own
iron ore production in 2Q 2017 increased by 9.1% as compared to 2Q
2016 primarily due to increased production in Canada and
Mexico.
Market-priced iron ore shipments in 2Q 2017 increased 9.5% to 9.5
million metric tonnes as compared to 8.7 million metric tonnes in
1Q 2017, primarily driven by higher shipments in ArcelorMittal
Mines Canada
[8] and Mexico.
Market-priced iron ore shipments in 2Q 2017 decreased 1.2% as
compared to 2Q 2016 driven by decreased shipments in Canada,
Liberia and Brazil offset by higher shipments in Mexico. FY 2017
market-priced iron ore shipments are still expected to increase by
approximately 10% versus FY 2016.
Own coal production in 2Q 2017 decreased by 5.8% to 1.6 million
metric tonnes as compared to 1.7 million metric tonnes at 1Q 2017
due to lower production in Kazakhstan. Own coal production in 2Q
2017 increased 11.5% as compared to 2Q 2016 with increases at both
Kazakhstan and Princeton (US) mines.
Market-priced coal shipments in 2Q 2017 increased 3% to 0.8 million
metric tonnes as compared to 1Q 2017 primarily due to increased
shipments at Princeton (US). Market-priced coal shipments in 2Q
2017 increased 17.2% as compared to 2Q 2016 primarily due to
increased shipments at Princeton (US) and Kazakhstan.
Operating income in 2Q 2017 decreased to $216 million as compared
to an operating income of $378 million in 1Q 2017, and an operating
income of $62 million in 2Q 2016, primarily for the reasons
discussed below.
EBITDA in 2Q 2017 decreased 33.7% to $319 million as compared to
$480 million in 1Q 2017, primarily due to decreased seaborne iron
ore reference prices (-26.6%) and lower coal prices, partially
offset by higher market-priced iron ore shipments. EBITDA in 2Q
2017 was significantly higher as compared to $163 million in 2Q
2016, primarily due to higher seaborne iron ore reference prices
(+13%) and higher coal prices offset in part by lower market-priced
iron ore shipment volumes (-1.2%).
Liquidity and Capital Resources
For 2Q 2017, net cash provided by operating activities was $1,214
million as compared to net cash used in operating activities of
$299 million in 1Q 2017 and net cash provided by operating
activities of $869 million in 2Q 2016. The net cash provided by
operating activities during 2Q 2017 reflects in part a working
capital investment ($548 million) as a result of higher inventory,
smaller as compared to a working capital investment ($2,181
million) in 1Q 2017.
Net cash used in investing activities during 2Q 2017 was $738
million as compared to net cash used in investing activities of
$598 million in 1Q 2017 and net cash provided by investing
activities of $538 million in 2Q 2016. Capital expenditure
decreased to $566 million in 2Q 2017 as compared to $580 million in
1Q 2017 and $521 million in 2Q 2016. FY 2017 capital expenditure is
expected to be $2.9 billion. Investing activities in 2Q 2017
include $44 million cash consideration (net of cash acquired for
$14 million) for the acquisition of a 55.5% stake in Bekaert Sumare
(a tire cord manufacturer in Brazil) and $110 million deposited in
a restricted cash account in ArcelorMittal South Africa in
connection with various environmental obligations and true sale of
receivable programs.
Net cash used in financing activities for 2Q 2017 was $744 million
as compared to net cash provided by financing activities of $666
million for 1Q 2017 and net cash used in financing activities of
$1.9 billion for 2Q 2016. Net cash used in financing activities for
2Q 2017 primarily includes $851 million used to early redeem the
9.85% Notes due June 1, 2019. On May 25, 2017, ArcelorMittal South
Africa Limited, signed a 4.5 billion South African Rand
(approximately $350 million) revolving borrowing base finance
facility maturing on May 25, 2020. As of June 30, 2017, $258
million was drawn. Net cash provided by financing activities for 1Q
2017 primarily includes proceeds from the European Investment Bank
loan
[9] of €350
million ($373 million) and $0.3 billion of commercial paper
issuances. Net cash used in financing activities for 2Q 2016
primarily includes payments totalling $4.9 billion relating to bond
repurchases pursuant to cash tender offers ($2.1 billion); early
redemption of the 4.5% Notes due February 25, 2017 ($1.4 billion)
and €1.0 billion in bond repayments at maturity, partially offset
by proceeds from a $3.1 billion rights issue.
During 1Q 2017, the Company paid dividends of $40 million primarily
to minority shareholders in ArcelorMittal Mines Canada
8. During 2Q
2016 the Company paid dividends primarily to minority shareholders
in ArcelorMittal Mines Canada
8 and Brazil
(Bekaert) of $41 million.
As of June 30, 2017, the Company's cash and cash equivalents
amounted to $2.3 billion as compared to $2.4 billion at March 31,
2017 and $2.4 billion at June 30, 2016. Gross debt decreased to
$14.2 billion as of June 30, 2017, as compared to $14.5 billion at
March 31, 2017 and $15.1 billion at June 30, 2016.
As of June 30, 2017, net debt decreased to $11.9 billion as
compared with $12.1 billion at March 31, 2017 primarily due to
positive free cashflow, despite working capital investment, offset
in part by forex ($0.4 billion), and was lower than the net debt of
$12.7 billion as of June 30, 2016.
As of June 30, 2017, the Company had liquidity of $7.8 billion,
consisting of cash and cash equivalents of $2.3 billion and $5.5
billion of available credit lines
[10]. The $5.5
billion credit facility contains a financial covenant of 4.25x Net
debt / EBITDA. On June 30, 2017, the average debt maturity was 6.4
years.
Key recent developments
-
On June 21, 2017, as a result of the
extension of the partnership between ArcelorMittal and Bekaert
Group ("Bekaert") in the steel cord business in Brazil, the Company
completed the acquisition from Bekaert of a 55.5% controlling
interest in Bekaert Sumaré Ltda subsequently renamed ArcelorMittal
Bekaert Sumaré Ltda ("Sumaré"), a manufacturer of metal ropes for
automotive tires located in the municipality of Sumaré/SP, Brazil.
The Company agreed to pay a total cash consideration of €56 million
($49 million net of cash acquired of $14 million), of which €52
million ($58 million) was settled on closing date and €4 million
($5 million) to be paid subsequently upon conclusion of certain
business restructuring measures by Bekaert.
-
On June 16, 2017, ArcelorMittal and
Marcegaglia announced that AM Investco Italy Srl ('AM Investco')
had concluded the exclusive negotiation phase and reached a binding
agreement concerning the lease and obligation to purchase Ilva
S.p.A and certain of its subsidiaries with the Italian Government.
The ancillary documentation was completed on June 28, 2017. The
closing of the transaction is subject to certain conditions
precedent, including receipt of anti-trust approvals. Intesa
Sanpaolo will formally join the consortium before transaction
closing.
Transaction highlights and key details of AM
Investco's plans for Ilva include:
- Purchase price of €1.8 billion, with annual
leasing costs of €180 million to be paid in quarterly installments.
Ilva's assets will be initially leased by AM Investco, with rental
payments qualifying as down payments against the purchase price.
Lease period to be a minimum of two years.
- Robust investment plan to materially improve
Ilva's environmental footprint and realise its full potential,
including investments of approximately €2.4 billion (approximately
€2.1 billion net of funds seized from the former shareholder) over
a seven-year period;
- €10 million start-up investment in new research
and development (R&D) centre in Taranto, which will initially
focus on ensuring a successful deployment of the industrial,
environment and commercial plans, while also ensuring a smooth
transfer of ArcelorMittal R&D intellectual property and
knowledge to enhance operationally efficiency, quality and
productivity at all Ilva plants;
- The assets will be transferred to AM Investco
free of long term liabilities and financial debt and will include
€1 billion of net working capital, subject to adjustment;
- Identified synergies of €310 million targeted by
2020 (excludes impact from fixed cost reductions and volume
improvements).
-
On June 2, 2017, ArcelorMittal
officially launched the second generation of its iCARe® electrical
steels at this year's coil-winding expo CWIEME in Berlin, between
June 20-22, 2017. iCARe® steel grades play a central role in the
construction of electric motors which are used in both electric
vehicles and conventional cars.
-
On May 25, 2017, ArcelorMittal South
Africa Limited, signed a 4.5 billion South African Rand
(approximately $350 million) revolving borrowing base finance
facility maturing on May 25, 2020. Any borrowings under the
facility will be secured by certain eligible inventory and
receivables, as well as certain other working capital and related
assets of ArcelorMittal South Africa. The facility will be used for
general corporate purposes. The facility is not guaranteed by
ArcelorMittal. As of June 30, 2017, $258 million was
drawn.
-
On May 22, 2017, following the approval
of the Reverse Stock Split (as defined below) by the extraordinary
general meeting of shareholders of ArcelorMittal held on May 10,
2017, ArcelorMittal has completed the consolidation of each three
existing shares in ArcelorMittal without nominal value into one
share without nominal value (the "Reverse Stock Split"). As a
result, the share capital of ArcelorMittal is now represented by
1,021,903,623 ordinary shares without nominal value while the
authorised share capital of ArcelorMittal is represented by
1,151,576,921 ordinary shares without nominal value.
-
On May 10, 2017, Poland's deputy prime
minister Mateusz Morawiecki took part in an official ceremony to
mark the completion of a series of important investment projects at
ArcelorMittal Poland's Kraków unit. Investments exceeding €120
million which were commissioned in 2016, and achieved their
operational ramp-up very recently, included the relining of blast
furnace no 5, modernization of the basic oxygen furnace, capacity
expansion of the hot rolling mill and a new galvanizing
line.
Outlook and guidance
The following global apparent steel consumption ("ASC") figures
have been updated to reflect the Company's latest outlook for
2017.
Based on the current economic outlook, ArcelorMittal has raised its
2017 global steel demand forecasts. 2017 global ASC is now expected
to grow by approximately +2.5% to +3.0% (revised up from previous
forecast +0.5% to +1.5%). By region: ASC in the US (excluding Pipe
& tube) is now expected to grow +2.0% to +3.0% (revised down
from previous forecast of +3.0% to 4.0%) reflecting lower
automotive production impacting flat products. In Europe,
ArcelorMittal expects the pick-up in underlying demand to continue,
driven primarily by strength of the construction and machinery
markets, and apparent demand is expected to remain at +0.5% to
+1.5% in 2017 on top of around 3% growth in 2016. In Brazil,
2017 ASC is expected to grow by +2.0% to +3.0% in 2017 (revised
down from previous forecast +3.0% to +4.0%) as the continued
weakness in construction is partially offset by mild improvement in
consumer confidence and automotive demand. In the CIS, ASC is
expected to grow +2.0 to +2.5% (revised up from previous forecast
of -0.5% to +0.5%) reflecting stronger economic growth in Russia.
In China, ASC growth of +2.5% to +3.5% in 2017 (revised up from
previous forecast of -1.0% to 0%), primarily due to strength in
real estate and machinery.
Current market conditions are improved compared to twelve months
ago with steel spreads currently at healthy levels. The demand
environment is positive, as evidenced by the highest readings from
the ArcelorMittal weighted PMI Index since April 2011, which
suggests that steel shipments in 2H 2017 will be higher than would
normally be suggested by seasonality alone.
The Company now expects that the cash needs of the business
(excluding working capital and premiums paid to retire debt early
of $0.2 billion (not included in previous guidance)) in 2017 to be
approximately $4.6 billion (as compared to $5.0 billion previous
guidance). Given the liability management exercise and lower
average debt we now expect interest expense in 2017 to decline to
$0.8 billion in 2017 (as compared to $0.9 billion from previous
guidance and $1.1 billion in FY 2016). While capex expectation for
2017 remains at $2.9 billion (from $2.4 billion in 2016), the
Company expects lower cash taxes and contributions to fund pensions
and other cash expenses to be lower than previous
guidance.
Given the improved market conditions, the Company now expects a
full year 2017 investment in working capital of approximately $1.5
billion (as compared to previous guidance of approximately $1
billion).
ArcelorMittal Condensed Consolidated Statement of
Financial Position1
|
|
|
Jun
30, |
Mar
31, |
Dec
31, |
In millions
of U.S. dollars |
|
|
2017 |
2017 |
2016 |
ASSETS |
|
|
|
|
|
Cash and
cash equivalents |
|
|
2,272 |
2,402 |
2,615 |
Trade
accounts receivable and other |
|
|
4,263 |
3,971 |
2,974 |
Inventories |
|
|
17,458 |
16,393 |
14,734 |
Prepaid
expenses and other current assets |
|
|
2,286 |
2,251 |
1,665 |
Assets held
for sale[11] |
|
|
127 |
126 |
259 |
Total
Current Assets |
|
|
26,406 |
25,143 |
22,247 |
|
|
|
|
|
|
Goodwill
and intangible assets |
|
|
5,769 |
5,716 |
5,651 |
Property,
plant and equipment |
|
|
35,765 |
35,049 |
34,831 |
Investments
in associates and joint ventures |
|
|
4,679 |
4,470 |
4,297 |
Deferred
tax assets |
|
|
6,470 |
5,931 |
5,837 |
Other
assets |
|
|
2,371 |
2,182 |
2,279 |
Total
Assets |
|
|
81,460 |
78,491 |
75,142 |
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
Short-term
debt and current portion of long-term debt |
|
|
3,936 |
3,452 |
1,885 |
Trade
accounts payable and other |
|
|
12,555 |
12,043 |
11,633 |
Accrued
expenses and other current liabilities |
|
|
4,930 |
4,853 |
4,502 |
Liabilities
held for sale11 |
|
|
39 |
38 |
95 |
Total
Current Liabilities |
|
|
21,460 |
20,386 |
18,115 |
|
|
|
|
|
|
Long-term
debt, net of current portion |
|
|
10,220 |
11,047 |
11,789 |
Deferred
tax liabilities |
|
|
2,690 |
2,626 |
2,529 |
Other
long-term liabilities |
|
|
10,838 |
10,503 |
10,384 |
Total
Liabilities |
|
|
45,208 |
44,562 |
42,817 |
|
|
|
|
|
|
Equity
attributable to the equity holders of the parent |
|
|
34,027 |
31,743 |
30,135 |
Non-controlling interests |
|
|
2,225 |
2,186 |
2,190 |
Total
Equity |
|
|
36,252 |
33,929 |
32,325 |
Total
Liabilities and Shareholders' Equity |
|
|
81,460 |
78,491 |
75,142 |
ArcelorMittal Condensed Consolidated Statement of
Operations1
|
Three
months ended |
Six months
ended |
In millions
of U.S. dollars unless otherwise shown |
Jun 30,
2017 |
Mar 31,
2017 |
Jun 30,
2016 |
Jun 30,
2017 |
Jun 30,
2016 |
Sales |
17,244 |
16,086 |
14,743 |
33,330 |
28,142 |
Depreciation |
(676) |
(655) |
(680) |
(1,331) |
(1,332) |
Impairment |
(46) |
- |
(49) |
(46) |
(49) |
Exceptional
income5 |
- |
- |
832 |
- |
832 |
Operating income |
1,390 |
1,576 |
1,873 |
2,966 |
2,148 |
Operating
margin % |
8.1% |
9.8% |
12.7% |
8.9% |
7.6% |
|
|
|
|
|
|
Income from
associates, joint ventures and other investments |
120 |
86 |
168 |
206 |
492 |
Net
interest expense |
(207) |
(223) |
(306) |
(430) |
(638) |
Foreign
exchange and other net financing gain/(loss) |
210 |
(133) |
(450) |
77 |
(441) |
Income before taxes and non-controlling interests |
1,513 |
1,306 |
1,285 |
2,819 |
1,561 |
Current tax |
(126) |
(207) |
(83) |
(333) |
(107) |
Deferred tax |
(71) |
(76) |
(70) |
(147) |
(746) |
Income tax
expense |
(197) |
(283) |
(153) |
(480) |
(853) |
Income including non-controlling interests |
1,316 |
1,023 |
1,132 |
2,339 |
708 |
Non-controlling interests (income) / loss |
6 |
(21) |
(20) |
(15) |
(12) |
Net income attributable to equity holders of the
parent |
1,322 |
1,002 |
1,112 |
2,324 |
696 |
|
|
|
|
|
|
Basic
earnings per common share ($)4 |
1.30 |
0.98 |
1.13 |
2.28 |
0.88 |
Diluted
earnings per common share ($)4 |
1.29 |
0.98 |
1.13 |
2.27 |
0.88 |
|
|
|
|
|
|
Weighted
average common shares outstanding (in millions)4 |
1,020 |
1,020 |
987 |
1,020 |
792 |
Diluted
weighted average common shares outstanding (in millions)4 |
1,023 |
1,022 |
988 |
1,023 |
793 |
|
|
|
|
|
|
OTHER INFORMATION |
|
|
|
|
|
EBITDA |
2,112 |
2,231 |
1,770 |
4,343 |
2,697 |
EBITDA
Margin % |
12.2% |
13.9% |
12.0% |
13.0% |
9.6% |
|
|
|
|
|
|
Own iron
ore production (million metric tonnes) |
14.7 |
14.0 |
13.5 |
28.7 |
27.6 |
Crude steel
production (million metric tonnes) |
23.2 |
23.6 |
23.1 |
46.8 |
46.3 |
Total
shipments of steel products (million metric tonnes) |
21.5 |
21.1 |
22.1 |
42.5 |
43.6 |
ArcelorMittal Condensed Consolidated Statement of
Cash flows1
|
Three
months ended |
Six months
ended |
In millions
of U.S. dollars |
Jun 30,
2017 |
Mar 31,
2017 |
Jun 30,
2016 |
Jun 30,
2017 |
Jun 30,
2016 |
Operating activities: |
|
|
|
|
|
Income
attributable to equity holders of the parent |
1,322 |
1,002 |
1,112 |
2,324 |
696 |
Adjustments to reconcile net income to net cash (used in) /
provided by operations: |
|
|
|
|
|
Non-controlling interest's income / (loss) |
(6) |
21 |
20 |
15 |
12 |
Depreciation and impairment |
722 |
655 |
729 |
1,377 |
1,381 |
Exceptional
income5 |
- |
- |
(832) |
- |
(832) |
Income from
associates, joint ventures and other investments |
(120) |
(86) |
(168) |
(206) |
(492) |
Deferred
income tax |
71 |
76 |
70 |
147 |
746 |
Change in
working capital |
(548) |
(2,181) |
235 |
(2,729) |
(953) |
Other
operating activities (net) |
(227) |
214 |
(297) |
(13) |
(379) |
Net cash provided by / (used in) operating
activities |
1,214 |
(299) |
869 |
915 |
179 |
Investing activities: |
|
|
|
|
|
Purchase of
property, plant and equipment and intangibles |
(566) |
(580) |
(521) |
(1,146) |
(1,107) |
Other
investing activities (net) |
(172) |
(18) |
1,059 |
(190) |
1,073 |
Net cash (used in) / provided by investing
activities |
(738) |
(598) |
538 |
(1,336) |
(34) |
Financing activities: |
|
|
|
|
|
Net
(payments) / proceeds relating to payable to banks and long-term
debt |
(726) |
743 |
(4,923) |
17 |
(4,840) |
Dividends
paid |
- |
(40) |
(41) |
(40) |
(47) |
Equity
offering |
- |
- |
3,115 |
- |
3,115 |
Other
financing activities (net) |
(18) |
(37) |
(8) |
(55) |
55 |
Net cash (used in) / provided by financing
activities |
(744) |
666 |
(1,857) |
(78) |
(1,717) |
Net
decrease in cash and cash equivalents |
(268) |
(231) |
(450) |
(499) |
(1,572) |
Cash and
cash equivalents transferred from assets held for sale |
- |
13 |
- |
13 |
- |
Effect of
exchange rate changes on cash |
30 |
3 |
(23) |
33 |
(141) |
Change in cash and cash equivalents |
(238) |
(215) |
(473) |
(453) |
(1,713) |
Appendix 1: Product shipments by
region
(000'kt) |
2Q 17 |
1Q 17 |
2Q 16 |
1H 17 |
1H 16 |
Flat |
4,748 |
4,944 |
4,641 |
9,692 |
9,208 |
Long |
845 |
829 |
964 |
1,674 |
2,001 |
NAFTA |
5,419 |
5,610 |
5,443 |
11,029 |
10,906 |
Flat |
1,682 |
1,364 |
1,627 |
3,046 |
3,082 |
Long |
945 |
866 |
1,065 |
1,811 |
2,074 |
Brazil |
2,622 |
2,226 |
2,689 |
4,848 |
5,161 |
Flat |
7,482 |
7,377 |
7,536 |
14,859 |
14,868 |
Long |
2,913 |
2,806 |
3,316 |
5,719 |
6,380 |
Europe |
10,466 |
10,208 |
10,886 |
20,674 |
21,330 |
CIS |
2,212 |
2,119 |
2,322 |
4,331 |
4,524 |
Africa |
1,045 |
1,102 |
1,130 |
2,147 |
2,242 |
ACIS |
3,257 |
3,221 |
3,453 |
6,478 |
6,768 |
Note: "Others and eliminations" lines are not presented in the
table
Appendix 2: Capital expenditures
(USDm) |
2Q 17 |
1Q 17 |
2Q 16 |
1H 17 |
1H 16 |
NAFTA |
90 |
97 |
103 |
187 |
209 |
Brazil |
55 |
57 |
48 |
112 |
112 |
Europe |
248 |
252 |
192 |
500 |
467 |
ACIS |
75 |
73 |
101 |
148 |
164 |
Mining |
94 |
90 |
71 |
184 |
142 |
Total |
566 |
580 |
521 |
1,146 |
1,107 |
Note: "Segment others" are not presented in the table
Appendix 3: Debt repayment schedule as of June 30,
2017
Debt
repayment schedule (USD billion) |
2017 |
2018 |
2019 |
2020 |
2021 |
>2021 |
Total |
Bonds |
0.6 |
1.5 |
0.9 |
1.9 |
1.3 |
4.8 |
11.0 |
Commercial
paper |
0.5 |
0.2 |
- |
- |
- |
- |
0.7 |
Other
loans* |
1.0 |
0.2 |
0.3 |
0.2 |
0.2 |
0.6 |
2.5 |
Total gross debt |
2.1 |
1.9 |
1.2 |
2.1 |
1.5 |
5.4 |
14.2 |
* Other loans in 2017 include a $0.5 billion drawing under the
ArcelorMittal USA $1 billion asset based loan (facility available
until 2021) and a $258 million drawing under a ZAR 4.5 billion
(approximately $350 million) revolving borrowing base finance
facility in South Africa (facility available until 2020)
Appendix 4: Credit lines available as of June 30,
2017
Credit
lines available (USD billion) |
|
|
Maturity |
Commitment |
Drawn |
Available |
- $2.3bn
tranche of $5.5bn revolving credit facility |
|
|
21/12/2019 |
2.3 |
- |
2.3 |
- $3.2bn
tranche of $5.5bn revolving credit facility |
|
|
21/12/2021 |
3.2 |
- |
3.2 |
Total committed lines |
|
|
|
5.5 |
- |
5.5 |
Appendix 5: Reconciliation of EBITDA to operating
income
(USDm) |
2Q 17 |
1Q 17 |
2Q 16 |
1H 17 |
1H 16 |
EBITDA |
2,112 |
2,231 |
1,770 |
4,343 |
2,697 |
Depreciation |
(676) |
(655) |
(680) |
(1,331) |
(1,332) |
Impairment |
(46) |
- |
(49) |
(46) |
(49) |
Exceptional
income5 |
- |
- |
832 |
- |
832 |
Operating income |
1,390 |
1,576 |
1,873 |
2,966 |
2,148 |
Note: Segment EBITDA is reconciled to segment operating income in
each of the segment discussions above.
Appendix 6: Reconciliation of net
debt
(USDm) |
Jun 30, 2017 |
Mar 31, 2017 |
Dec 31, 2016 |
Short-term
debt and current portion of long-term debt |
3,936 |
3,452 |
1,885 |
Long-term
debt, net of current portion |
10,220 |
11,047 |
11,789 |
Gross Debt |
14,156 |
14,499 |
13,674 |
Less: |
|
|
|
Cash and
cash equivalents |
(2,272) |
(2,402) |
(2,615) |
Net debt |
11,884 |
12,097 |
11,059 |
Appendix 7: Reconciliation of free
cashflow
(USDm) |
2Q 17 |
1Q 17 |
2Q 16 |
1H
17 |
1H
16 |
Net cash
(used in) / provided by operating activities |
1,214 |
(299) |
869 |
915 |
179 |
Less: |
|
|
|
|
|
Purchase of
property, plant and equipment and intangibles |
(566) |
(580) |
(521) |
(1,146) |
(1,107) |
Free cashflow - positive/(negative) |
648 |
(879) |
348 |
(231) |
(928) |
Appendix 8: Terms and definitions
Unless indicated otherwise, or the context otherwise requires,
references in this earnings release report to the following terms
have the meanings set out next to them below:
Average steel selling prices: calculated as
steel sales divided by steel shipments.
Cash and cash equivalents: represents cash and
cash equivalents, restricted cash and short-term
investments.
Capex: includes the acquisition of tangible
and intangible assets.
EBITDA: operating income plus depreciation,
impairment expenses and exceptional income/(charges).
EBITDA/tonne: calculated as EBITDA divided by
total steel shipments.
Exceptional income / (charges): relate to
transactions that are significant, infrequent or unusual and are
not representative of the normal course of business such as
restructuring costs or asset disposals.
Foreign exchange and other net financing (loss) /
gain: include foreign currency exchange impact, bank fees,
interest on pensions, impairments of financial instruments,
revaluation of derivative instruments and other charges that cannot
be directly linked to operating results.
Free cash flow: Refers to net cash provided by
(used in) operating activities less capex.
Gross debt: long-term debt, plus short term
debt (including those held as part of liabilities held for
sale).
Iron ore unit cash cost: includes weighted
average pellet and concentrate cost of goods sold across all
mines.
Liquidity: Cash and cash equivalents plus
available credit lines excluding back-up lines for the commercial
paper program.
LTIF: lost time injury frequency rate equals
lost time injuries per 1,000,000 worked hours, based on own
personnel and contractors.
Mining segment sales: i) "External sales":
mined product sold to third parties at market price; ii)
"Market-priced tonnes": internal sales of mined product to
ArcelorMittal facilities and reported at prevailing market prices;
iii) "Cost-plus tonnes" - internal sales of mined product to
ArcelorMittal facilities on a cost-plus basis. The determinant of
whether internal sales are reported at market price or cost-plus is
whether the raw material could practically be sold to third parties
(i.e. there is a potential market for the product and logistics
exist to access that market).
Market-priced tonnes: represent amounts of
iron ore and coal from ArcelorMittal mines that could be sold to
third parties on the open market. Market-priced tonnes that are not
sold to third parties are transferred from the Mining segment to
the Company's steel producing segments and reported at the
prevailing market price. Shipments of raw materials that do not
constitute market-priced tonnes are transferred internally and
reported on a cost-plus basis.
Net debt: long-term debt, plus short term debt
less cash and cash equivalents.
Net debt/EBITDA: Refers to Net debt divided by
last twelve months EBITDA calculation.
On-going projects: Refer to projects for which
construction has begun (excluding various projects that are under
development), even if such projects have been placed on hold
pending improved operating conditions.
Operating segments: The NAFTA segment includes
the Flat, Long and Tubular operations of USA, Canada and Mexico.
The Brazil segment includes the Flat operations of Brazil, and the
Long and Tubular operations of Brazil and its neighboring countries
including Argentina, Costa Rica and Venezuela. The Europe segment
comprises the Flat, Long and Tubular operations of the European
business, as well as Downstream Solutions. The ACIS segment
includes the Flat, Long and Tubular operations of Kazakhstan,
Ukraine and South Africa.
Operating results: Refers to operating
income/(loss).
Own iron ore production: Includes total of all
finished production of fines, concentrate, pellets and lumps
(excludes share of production and strategic long-term
contracts).
Seaborne iron ore reference
prices: refers to iron ore prices for 62% Fe CFR
China.
Shipments information at segment and group
level eliminates intra-segment shipments (which are primarily
between Flat/Long plants and Tubular plants) and inter-segment
shipments respectively. Shipments of Downstream Solutions are
excluded.
Steel-only EBITDA: calculated as EBITDA less
Mining segment EBITDA.
Steel-only EBITDA/tonne: calculated as
steel-only EBITDA divided by total steel shipments.
Working capital: trade accounts receivable
plus inventories less trade and other accounts payable.
YoY: Refers to year-on-year.
[1] The
financial information in this press release has been prepared
consistently with International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board
("IASB") and as adopted by the European Union. The interim
financial information included in this announcement has been also
prepared in accordance with IFRS applicable to interim periods,
however this announcement does not contain sufficient information
to constitute an interim financial report as defined in
International Accounting Standard 34, "Interim Financial
Reporting". The numbers in this press release have not been
audited. The financial information and certain other information
presented in a number of tables in this press release have been
rounded to the nearest whole number or the nearest decimal.
Therefore, the sum of the numbers in a column may not conform
exactly to the total figure given for that column. In addition,
certain percentages presented in the tables in this press release
reflect calculations based upon the underlying information prior to
rounding and, accordingly, may not conform exactly to the
percentages that would be derived if the relevant calculations were
based upon the rounded numbers. This press release also includes
certain non-GAAP financial measures. ArcelorMittal presents EBITDA,
and EBITDA/tonne, which are non-GAAP financial measures and defined
in appendix 7, as additional measurements to enhance the
understanding of operating performance. ArcelorMittal believes such
indicators are relevant to describe trends relating to cash
generating activity and provides management and investors with
additional information for comparison of the Company's operating
results to the operating results of other companies. ArcelorMittal
also presents net debt and the ratio of net debt to EBITDA as an
additional measurement to enhance the understanding of its
financial position, changes to its capital structure and its credit
assessment. ArcelorMittal also presents free cash flow, which is a
non-GAAP financial measure defined in appendix 7, because it
believes it is a useful supplemental measure for evaluating the
strength of its cash generating capacity. Non-GAAP financial
measures should be read in conjunction with and not as an
alternative for, ArcelorMittal's financial information prepared in
accordance with IFRS. Such non-GAAP measures may not be comparable
to similarly titled measures applied by other companies.
[2] Free
cashflow reconciliation provided in appendix 7.
[3] On February
23, 2017, ArcelorMittal Brasil S.A. and Votorantim S.A. announced
the signing of a definitive agreement, pursuant to which
Votorantim's long steel businesses in Brazil, Votorantim
Siderurgia, will become a subsidiary of ArcelorMittal Brasil and
Votorantim will hold a minority stake in ArcelorMittal Brasil.
Votorantim's long steel operations in Argentina (Acerbrag) and
Colombia (PazdelRío) were not included in the transaction. The
combination of the businesses will result in a long product steel
producer with annual crude steel capacity of 5.6 million metric
tonnes and annual rolling capacity of 5.4 million metric tonnes.
The transaction is subject to regulatory approvals in Brazil,
including the approval of the Brazilian anti-trust authority
CADE. Until closing, ArcelorMittal Brasil and Votorantim
Siderurgia will remain fully separate and independent
companies.
[4] At the
Extraordinary General Meeting held on May 10, 2017, the
ArcelorMittal Shareholders approved a share consolidation based on
a ratio 1:3, whereby every three current shares are consolidated
into one share (with a change in the number of shares outstanding
and the accounting par value per share). The figures presented for
the basic and diluted earnings per share reflect this change and
are considering the share consolidation.
[5] On June 23,
2016, following the ratification by the United Steelworkers of a
new labor agreement which is valid until September 1, 2018,
ArcelorMittal made changes mainly to healthcare post-retirement
benefits in its subsidiary ArcelorMittal USA (NAFTA). The changes
resulted in a gain of $832 million recorded in 2Q 2016.
[6] China
Oriental completed a share placement to restore the minimum 25%
free float as per HKEx listing requirements. Following the share
placement, ArcelorMittal's interest in China Oriental decreased
from 47% to 39%, as a result of which ArcelorMittal recorded a net
dilution loss of $44 million.
[7] On February
5, 2016 ArcelorMittal announced it had sold its 35% stake in
Gestamp Automoción ("Gestamp") to the majority shareholder, the
Riberas family, for a total cash consideration of €875 million
($971 million). In addition to the cash consideration,
ArcelorMittal received in 2Q 2016 a payment of $11 million as a
2015 dividend. ArcelorMittal will continue its supply relationship
with Gestamp through its 35% shareholding in Gonvarri, a sister
company of Gestamp. ArcelorMittal sells coils to Gonvarri for
processing before they pass to Gestamp and other customers.
Further, ArcelorMittal will continue to have a board presence in
Gestamp, collaborate in automotive R&D and remain its major
steel supplier.
[8]
ArcelorMittal Mines Canada, otherwise known as ArcelorMittal Mines
and Infrastructure Canada
[9] On December
16, 2016, ArcelorMittal signed a €350 million finance contract with
the European Investment Bank in order to finance European research,
development and innovation projects over the 2017-2020 period
within the European Union, predominantly France, Belgium and Spain,
but also in the Czech Republic, Poland, Luxembourg and Romania. The
Company benefits from a guarantee from the European Union under the
European Fund for Strategic Investments.
[10] On
December 21, 2016, ArcelorMittal signed an agreement for a $5.5
billion revolving credit facility (the "Facility"). This Facility
amends and restates the $6 billion revolving credit facility dated
April 30, 2015. The amended agreement incorporates a first tranche
of $2.3 billion maturing on December 21, 2019, and a second tranche
of $3.2 billion maturing on December 21, 2021. The Facility may be
used for general corporate purposes. As of June 30, 2017, the $5.5
billion revolving credit facility remains fully available.
[11] Assets and
liabilities held for sale, as of June 30, 2017, and as of March 31,
2017, primarily include the carrying value of the USA long product
facilities at Steelton ("Steelton"). Assets and liabilities held
for sale as of December 31, 2016, include the carrying value of
Steelton and some activities of ArcelorMittal Downstream Solutions
in the Europe segment and America's Tailored Blanks
ArcelorMittal reports second
quarter 2017 and half year 2017 results