UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN
PRIVATE ISSUER
PURSUANT TO RULE
13a-16 OR 15d-16
UNDER THE SECURITIES
EXCHANGE ACT OF 1934
Dated August 3, 2015
Commission File number 001-35788
ARCELORMITTAL
(Translation of Registrant’s name into English)
24-26, boulevard d’Avranches,
L-1160 Luxembourg,
Grand Duchy of Luxembourg
(Address of principal executive offices)
Indicate by check mark whether
the registrant files or will file annual reports under cover Form 20-F or Form
40-F.
Form 20-F x Form 40-F
Indicate by check mark if the
registrant is submitting the Form 6-K in paper as permitted by Regulation S-T
Rule 101(b)(1):____
Indicate by check mark if the
registrant is submitting the Form 6-K in paper as permitted by Regulation S-T
Rule 101(b)(7):_____
Indicate by check mark whether
the registrant by furnishing the information contained in this Form is also thereby
furnishing the information to the Commission pursuant to Rule 12g3-2(b) under
the Securities Exchange Act of 1934.
Yes ☐ No x
If “Yes” marked, indicate below
the file number assigned to the registrant in connection with Rule 12g3-2(b):
82-______
THIS REPORT ON
FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE REGISTRATION
STATEMENT ON FORM F-3 (NO. 333-202409) OF ARCELORMITTAL
AND THE PROSPECTUSES INCORPORATED THEREIN.
Exhibits
99.1 and 99.2 are hereby incorporated by reference into this report on Form
6-K.
Exhibit List
|
|
|
|
|
Exhibit 99.1
|
|
Management’s Discussion and
Analysis of Financial Condition and Results of Operations for the Six Months Ended
June 30, 2015.
|
|
|
Exhibit 99.2
|
|
Condensed consolidated financial
statements of ArcelorMittal for the six months ended June 30, 2015, prepared
in accordance with International Financial Reporting Standards as issued by
the International Accounting Standards Board.
|
SIGNATURES
Pursuant to the requirements of
the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 3, 2015
By: /s/ Henk Scheffer
Name: Henk Scheffer
Title: Company Secretary
Exhibit Index
|
|
|
|
|
Exhibit 99.1
|
|
Management’s Discussion and
Analysis of Financial Condition and Results of Operations for the Six Months
Ended June 30, 2015.
|
|
|
Exhibit 99.2
|
|
Condensed consolidated financial
statements of ArcelorMittal for the six months ended June 30, 2015, prepared
in accordance with International Financial Reporting Standards as issued by
the International Accounting Standards Board.
|
Management’s Discussion and
Analysis of Financial Condition and Results of Operations for the six months
ended June 30, 2015
Company overview
ArcelorMittal
including its subsidiaries (“ArcelorMittal” or the “Company”) is the world’s
leading integrated
steel
and mining company, with annual
achievable production capacity of approximately 114 million tonnes of crude
steel. ArcelorMittal had sales of $34.0 billion, steel shipments of 43.8 million tonnes, crude
steel production of 47.8 million tonnes, iron
ore production from own mines of 31.9 million tonnes and
coal production from own mines of 3.1 million tonnes in the six months ended June 30,
2015 as compared to sales
of $40.5 billion, steel shipments of 42.4 million tonnes, crude
steel production of 46.1 million tonnes, iron ore production from own mines of 31.4 million tonnes and coal production from own mines of 3.6 million tonnes in the six months ended June
30, 2014. The Company had sales
of $79.3 billion, steel shipments of 85.1 million tonnes, crude steel production
of 93.1 million tonnes, iron ore production from own mines of 63.9 million tonnes and coal production
from own mines of 7.0 million tonnes for the year ended December 31,
2014. As of June 30, 2015, ArcelorMittal had
approximately 219,000 employees.
ArcelorMittal has steel-making operations in 19 countries on four
continents, including 56 integrated and mini-mill steel-making facilities.
ArcelorMittal is the largest steel producer in the Americas, Africa, and Europe
and is the sixth largest steel producer in the Commonwealth of Independent
States (“CIS”) region. ArcelorMittal produces a broad range of high-quality
steel finished and semi-finished products. Specifically, ArcelorMittal produces
flat steel products, including sheet and plate, long steel products, including
bars, rods and structural shapes. ArcelorMittal also produces pipes and tubes
for various applications. ArcelorMittal sells its steel products primarily in
local markets and through its centralized marketing organization to a diverse
range of customers in over 170 countries including the automotive, appliance,
engineering, construction and machinery industries.
ArcelorMittal
has a global portfolio of 14 operating units with mines in operation and
development and is among the largest iron ore producers in the world. The
Company currently has iron ore mining activities in Brazil, Bosnia, Canada,
Kazakhstan, Liberia, Mexico, Ukraine and the United States and holds a minority
position in Algeria. The Company also has projects under development or
prospective development in Canada and India. The Company currently has coal
mining activities in Kazakhstan and the United States. The Company also
produces various types of mining products including iron ore lump, fines,
concentrate and sinter feed, as well as coking coal, Pulverized Coal Injection
(“PCI”) and thermal coal.
Key factors affecting results of operations
The
steel industry, and the iron ore and coal mining industries, which provide its
principal raw materials, have historically been highly cyclical. They are
significantly affected by general economic conditions, as well as worldwide
production capacity and fluctuations in international steel trade and tariffs.
In particular, this is due to the cyclical nature of the automotive,
construction, machinery and equipment and transportation industries that are
the principal consumers of steel. After a period of continuous growth between
2004 and 2008, the sharp fall in demand resulting from the global economic crisis
demonstrated the steel market’s vulnerability to volatility and sharp
corrections. The last quarter of 2008 and the first half of 2009 were
characterized by a deep slump in demand, as customers used up existing
inventories rather than buying new stock. Since then, demand has improved
but has been impacted by the onset of the eurozone crisis and more recently a slowdown in China and recessions in some large emerging markets
(e.g. Brazil and Russia). In all cases, the weakness of apparent demand has
been exacerbated by the inventory cycle. Moreover, the current weakness in
demand and a ramp up in supply has caused iron ore prices to decline back to
levels below those seen at the height of the financial crisis, and this is
having a negative impact on profitability, not only directly in terms of
marketable ore sales but also in the reduced benefit from the use of local
captive ore.
The Company’s sales of iron ore to external customers as a
percentage of overall mining sales has increased in recent years, due
to the Company’s marketing efforts in anticipation of increasing mining
production. Sales of iron
ore to external parties
increased in 2013, rising to 11.6 million tonnes for the year compared to 10.4
million tonnes in 2012. In 2014, sales of iron ore to external parties
increased further to 14.4 million tonnes, due to rising output at Mines Canada
and Liberia operations. However, while total sales of marketable iron ore rose
again in the first half of 2015 to 20.1 million tonnes up from 19.8 million
tonnes during the first half of 2014, actual sales to external customers fell
slightly (6.5 million tonnes for the first half of 2015 compared to 6.7 million
tonnes in the first half of 2014) as the Company shipped an increasing
proportion at market prices internally.
The Company’s operating profitability has been particularly
sensitive to fluctuations in raw material prices, which have remained volatile
over the past few years but have broadly trended lower, with iron ore averaging
only $60 per tonne (“/t”) cost inclusive of freight (CFR) China during the
first half of 2015. This is down from an average of over $110 during the first
half of 2014. With respect to iron ore and coal supply, ArcelorMittal’s growth
strategy in the mining business is an important natural hedge against raw
material price volatility. Volatility on steel margins aside, the results of the
Company’s Mining segment is also directly impacted by iron ore prices, which
were weaker in 2014, averaging $97/t. As the Mining segment’s production and
external sales grow, the Company’s exposure to the impact of iron ore price
fluctuations also increases. This means, among other things, that if iron ore
prices were to remain around current levels ($50-55/t) due to additional supply
or any further significant slowdown of Chinese steel production, this would continue
to have a negative impact on ArcelorMittal’s revenues and profitability.
However, during the first half of 2015 ArcelorMittal has reduced the costs of
its total iron ore production by 14% year-on-year to keep its costs as
internationally competitive as possible. However, the profitability of the
Mining segment has weakened as lower selling prices have largely offset reduced
costs and in the long-term the iron ore price could be negatively impacted by
steel demand peaking in China.
One of the principal factors affecting the Company’s operating
profitability is the relationship between raw material prices and steel selling
prices. Profitability depends in part on the extent to which steel selling
prices exceed raw material prices, and, in particular, the extent to which
changes in raw material prices are passed through to steel selling prices.
Complicating factors include the time lag between (a) the raw material price
change and the steel selling price change and (b) the date of the raw material
purchase and the actual sale of the steel product in which the raw material was
used (average cost basis). In recent periods, steel selling prices have tended
to react quickly to changes in raw material prices, due in part to the tendency
of distributors to increase purchases of steel products early in an increasing
cycle of raw material prices and to hold back from purchasing as raw material
prices decline. With respect to (b), as an average cost basis is used to
determine the cost of the raw materials incorporated, inventories must first be
worked through before a decrease in raw material prices translates into
decreased operating costs. In some of ArcelorMittal’s segments, in particular
Europe and NAFTA, there are several months between raw material purchases and
sales of steel products incorporating those materials. Although this lag has
been reduced recently by changes to the timing of pricing adjustments in iron
ore contracts, it cannot be eliminated and exposes these segments’ margins to
changes in steel selling prices in the interim (known as a “price-cost
squeeze”).
In 2014, steel demand in the developed markets of North America
and Europe, which account for a majority of ArcelorMittal deliveries,
rebounded, slightly in Europe and more strongly in the United States, fuelled by the strength of underlying demand but also the
inventory cycle. During the first half of 2015, while underlying demand continued
to rise in both markets, apparent demand in the United States has declined due
to a reversal of the inventory cycle. This has been driven by the abnormally
high level of imports last year, which rose 38% year-on-year to more than 40
million tonnes and is an example of how excess capacity in one region can
negatively impact another. China has seen domestic demand decline year-on-year
through both the second half of 2014 and the first half of 2015 as real steel
demand declined due to the weakness of the real estate sector. At the same
time, there has been a significant increase in exports from 82 million tonnes
annualized in the first half of 2014 to 106 million tonnes annualized during
the first half of 2015. While these exports are mainly directed to Asia, they
are also increasingly sold into many of ArcelorMittal’s domestic markets. Moreover,
steel demand has also declined in some other traditional net exporting regions
during the first half of 2015, notably CIS and Japan, which has put added
pressure on international export markets.
Overall, ArcelorMittal’s sales are predominantly derived from the
sale of flat steel products, long steel products, and tubular products as well
as of iron ore and coal. Prices of steel products, iron ore and coal, in
general, are sensitive to changes in worldwide and regional demand, which, in
turn, are affected by worldwide and country-specific economic conditions and
available production capacity.
Economic
environment[1]
After a weak start to 2015,
indicators suggest that global GDP is expanding again at a moderate pace,
having picked up only marginally from 2.5% year-on-year in 2013 to 2.6% in
2014. GDP growth in the eurozone and Japan is picking up, and the United States
is expected to continue to expand at a robust pace despite another weak start
to the year, while a broad-based slowdown is underway in many developing
countries. Continued low commodity prices are affecting global activity, with
consumer spending in commodity importing countries benefiting from lower oil
prices holding inflation at record lows. In contrast, economic activity has
slowed in commodity exporting countries (notably Russia and Brazil), which have
raised policy interest rates to defend their currencies despite also having to
tighten fiscal policy as commodity-related revenues have fallen.
Economic activity in the
United States stalled at the start of the year as a result of another cold
winter, disruptions to port activity and sharp cutbacks in capital expenditures
in the energy sector. Also, the dollar has appreciated significantly over the
past 12 months, largely driven by the markets anticipating the Federal Reserve
(the US Central Bank), raising interest rates. The appreciation of the dollar
is exerting downward pressure on capital flows to developing countries.
However, lower energy prices, robust job creation of over 600,000 jobs in the
second quarter and rising wages have bolstered consumer spending, supporting
homebuilding and auto sales. Auto sales remain robust, up to 3.6% year-on-year
in the second quarter of 2015 to 17.1 million units and highest first half year
sales since 2005.
The recovery in the United
Kingdom remains on track despite mixed data in the first quarter of 2015,
including indications of weak construction and manufacturing activity. The
recovery in the eurozone has progressed, supported by a weak euro, low oil
prices, record low interest rates, and an improvement in bank credit supply
conditions. Real GDP growth picked up from 0.3% quarter-on-quarter at the end of
2014 to 0.4% in the first quarter of 2015, with notable improvements in Spain
and France. Additional monetary easing by the European Central Bank (“ECB”),
including the launch in March 2015 of a quantitative easing program, has
brought long-term interest rates to record lows and contributed to a
substantial depreciation of the euro since mid-2014, which is supporting
activity and is expected to gradually lift inflation from the current very low
levels. Eurozone consumer spending accelerated in the first quarter, as lower
energy prices boosted purchasing power. Investment growth strengthened in a
number of countries, including Germany and the Netherlands, which was helped by
the easing credit conditions and increasing business confidence. Fiscal policy
is now broadly neutral, following several years of significant consolidation
efforts. The turmoil in Greece is having wide-ranging repercussions for the
Greek economy, but contagion to the eurozone as a whole has been limited so
far. However, the risk remains that further deterioration may damage broader
eurozone confidence in the face of persistent headwinds: elevated corporate
leverage, financial fragmentation and significant slack in the labor markets of
periphery countries.
Activity in China has
continued to decelerate, leading to support from both monetary and fiscal
stimuli. Fixed asset investment growth slowed to 15.2% in 2014, down from 19.4%
in 2013, but is still the main driver of aggregate demand. In response to
weaker real estate sales (down 8% year-on-year in 2014), new starts declined
throughout 2014 and were down 16% year-on-year in the first half of 2015.
However, real estate sales returned to growth by the middle of 2015, which
should begin to support new starts in 2016. The labor market remains relatively
tight, as a result of rapid service sector growth despite reportedly stagnating
employment in industries with overcapacity. Producer prices have contracted
significantly, particularly in industrial sectors affected by overcapacity.
Inflation has steadily declined since 2013 and is expected to stabilize at a
low level. Chinese authorities have put in place a series of stimulus measures
to boost growth and to alleviate the drag from high debt levels. Specifically,
interest rates have been cut (three times), the required reserve ratio has been
lowered and import taxes have been reduced. Authorities also announced a debt
swap program to reduce local-government debt-servicing costs. The renminbi has
been relatively stable against the dollar and therefore has appreciated
relative to many of China’s trading partners, thus reducing export
competitiveness.
The Russian economy has been
in recession since mid-2014 and the downturn has accelerated in the first half
of 2015 as high inflation has required interest rates to remain high hitting
both business investment and consumer demand hard. The outlook for Brazil continues
to weaken, with PMI clearly indicating contraction as the economy re-enters
recession exacerbated by government cuts, fallout from the Petrobas
investigation, fragile confidence, low commodity prices and high inflation. In
contrast, activity in India is buoyed by stronger confidence as a reform-
[1] GDP and industrial
production data and estimates sourced from IHS Global Insight July 15, 2015
minded government implements its agenda and lower oil
prices help contain vulnerabilities. Growth in South Africa is held back by
energy shortages, weak investor sentiment amid policy uncertainty and by the anticipated
tightening of monetary and fiscal policies.
In line with GDP growth, the
weak start to the year has been reflected in industrial production.
Organization for Economic Co-operation and Development (OECD) industrial
production slowed to around 1.3% year-on-year in the first half of 2015, from
2.3% in 2014, in particular hit by the bad weather in the US. Whereas,
industrial production growth in non-OECD countries is estimated to have fallen
to around 2.7% year-on-year in the first half of 2015, from 3.8% in 2013 driven
by the slowdown in China and recessions in both Brazil and Russia.
Global apparent steel
consumption (“ASC”) is estimated to have grown by 1.8% year-on-year in 2014.
This was mainly due to world ex-China consumption rising over 4% year-on-year,
a significant increase compared to the 1% average growth over the previous two
years. Chinese ASC growth is estimated to have declined slightly in 2014 due to
substantial de-stocking over an otherwise positive real demand growth, compared
to the 10% growth per annum since 2007. During the first half of 2015, Chinese
demand has continued to decline, down over 3.5% year-on-year. Most other
emerging markets have continued to grow with the exception of Brazil (down 11%
year-on-year for the first half of 2015), Russia (down 12% year-on-year for
January through May 2015) and Ukraine (down 35% year-on-year for January
through May 2015). In addition, after strong growth in steel demand in
developed markets last year, ASC is declining in USA (down 2.5% year-on-year
for the first half of 2015), Canada and Japan due mainly to the negative impact
of the stock cycle.
Steel production[2]
Global production
increased in 2014, up 2.3% to 1.68 billion tonnes due to rising output in
China. Chinese production increased from 815 million tonnes in 2013 to about
838 million tonnes in 2014 (an increase of 2.8% year-on-year), whereas world
ex-China growth also increased from 827 million tonnes to 839 million tonnes an
increase of 1.5% year-on-year). However, world ex-China remains about 19
million tonnes below the pre-crisis peak of 858 million tonnes in 2007. Indeed,
the only regions to have grown in comparison to 2007 are the Middle East
(73.3%) and Asia ex-China (15.4%), whereas output was down 8.6% in NAFTA, 19.4%
in EU28, 6.3% in South America, 15.2% in CIS and 14.7% in Africa.
Chinese
steel production is estimated to have set yet another record of 838 million
tonnes in 2014, over 71% higher than the pre-crisis output of 490 million
tonnes in 2007. Output was slightly weaker during the second half of 2014 due
to weakening demand conditions and falling prices but Chinese exports rose
significantly in 2014 as mills global competitiveness was supported by
softening iron ore prices, which helped producers avoid output cuts. Chinese
output as a share of global production increased from 49.7% in 2013 to 50.0% in
2014.
Global production
outside of China improved during 2014 mainly due to a rebound in Europe and
NAFTA. EU output rose by 1.8% to 169 million tonnes reflecting strengthening
industrial activity. In NAFTA, output increased by 2.1% to 120 million tonnes
in 2014 despite reduced utilization in the USA at the start of the year due to
severe weather conditions. Production in Asia ex-China also remained strong,
particularly in South Korea, where output increased by 7.5% year-on-year to 71
million tonnes in 2014. Over the same period, India recorded a 2.3% increase in
crude steel production to 83 million tonnes, whereas output in Japan also
increased by 0.4% to 111 million tonnes. Production faltered in South America
as demand weakened in Brazil, falling by 1.4% year-on-year to 45 million
tonnes. In the CIS, output decreased for the third consecutive year, falling by
2.0% year-on-year in 2014 to 106 million tonnes partly as a result of the
political tensions in Ukraine and Russia.
During
the first half of 2015, global production fell by 1.6% year-on-year mainly due
to a significant decline in output in key producers such as NAFTA, Ukraine,
Japan, South Korea as well as a small decrease in China. Indeed,
[2]Annual global production data to 2014 for all countries is
collected or estimated by World Steel. The only exception is China, where the
Chinese National Bureau of Statistics data as initially reported is used as a
base together with ArcelorMittal estimates for under-reporting. 2015 production
is for countries for which World Steel Association collects monthly information
and excludes countries whose data is collected annually. The growth rates for
China in 2015 compare the monthly data as reported during the first half of
2014 with the monthly data reported during first half of 2015.
Chinese output fell by 0.4% year-on-year to 419 million
tonnes reflecting weakening domestic demand, while NAFTA production dropped to
55.5 million tonnes (a decrease of 6.6% year-on-year). CIS production also
declined to 50.7 million tonnes (a decrease of 6.9% year-on-year) due to
falling output in Ukraine, down significantly by 27.2% year-on-year, though
Russian production actually increased by 0.8% over the first half of 2015 as
the weak ruble supported exports. Production in Japan (52.7 million tonnes, a
decrease of 4.5%) and South Korea (34.5 million tonnes, a decrease of 4.9%)
also declined over the first half of 2015. However, output in EU28 remained
steady, rising by a marginal 0.5% year-on-year to 88.1 million tonnes due to
continued strength in industrial activity whereas in Brazil output rose by 2.0%
as domestic producers increased foreign shipments amid lackluster domestic demand.
In India, production also increased by 4.1% year-on-year over the same period
to 4 million tonnes. Overall, however, world ex-China output declined by 2.7%.
Steel
prices[3]
Steel
prices for flat products in Europe remained relatively stable in Euro terms
during the first quarter of 2015, against the average price of the fourth
quarter of 2014, despite continued falls in raw material costs. The steel
market improved with rising demand for consumer durables, while the weak Euro
made imports less attractive. In Northern Europe hot rolled coil (“HRC”) price
improved slightly from January to March, to an average of €405-413 ($458-467)
per tonne (“/t”) for the first quarter of 2015. In Southern Europe, prices saw
a similar trend, with spot HRC at €395-404 ($446-456)/t in the first quarter of
2015. The weaker Euro caused prices in USD terms to decline in both Northern
and Southern Europe by around $50 as compared to the fourth quarter of 2014.
Economic conditions remained good in Europe during the second quarter of 2015,
with strong bookings in industry and auto. Despite this, prices consistently
weakened from April to June as domestic producers try to safeguard their
position against increasing import pressures, especially from Russia (now
facing weaker local demand). Spot HRC averaged between €398-405 ($440-448)/t in
Northern Europe and between €385-393 ($425-435)/t in Southern Europe.
In the United States, underlying demand remained
strong, despite negative sentiment in the oil & gas sector, with consumer
confidence in February at its highest since 2007. Nevertheless, the steel
market was challenging, with high inventories and buyers cautious in placing
orders. The strong USD continued to encourage imports during the first quarter
of 2015, with South Korea, Japan and Germany quickly taking over from Russian
deliveries, upon the termination of the suspension agreement in December 2014.
Domestic prices declined sharply, especially during February and March,
following the Scrap #1 Busheling drop from $369 per gross tonne (“/GT”) in
January to $255/GT in March. The spot HRC average price during the first
quarter of 2015 was $580/t, with January at $626-637/t, while the lowest levels
were seen in March at $526-538/t. The second quarter started weak, with scrap
prices stable at $255/GT and HRC bottoming at a range of $491-503/t in April.
Auto, appliances and construction saw some momentum build in May, allowing
prices to strengthen to $502-510/t. Scrap #1 Busheling gained $30/GT from April
to June to an average of $266/GT for the second quarter of 2015, supporting HRC
price improvement to $507-514/t, for a quarterly average range of $500-509/t.
In China, the economic slowdown continued and 2015
started with uncertainty, due to the change in export rebate policy as of
January 1st, and the government’s efforts to implement
anti-pollution regulation, adding more pressure on the domestic market. Despite
the Chinese Central Bank’s cuts to interest rates and the bank reserve
requirement ratio to boost growth, steel market activity remained depressed in
the first quarter of 2015 and continued to weaken into the second quarter,
especially entering the rainy season. Production was however sustained by
exports surging again from March onward. Domestic prices continued in
accelerated decline, with spot HRC down to $357-362/t VAT excluded, during the
first quarter, (from $415-419/t in the fourth quarter of 2014), and further to
$326-330/t VAT excluded, in the second quarter.
Long products saw good demand in Europe in January and
February 2015, and a slight increase in scrap prices gave support for
improvement on commodity pricing, despite pressure from Russian and Ukrainian
exports into Eastern Europe in particular. Buyers became more hesitant towards
the end of the first quarter as scrap prices weakened, thus building
expectations for a price decline. However, medium sections prices improved
from January to March (an increase of €7), with a quarterly average at €512-522
($577-589)/t. Rebar’s price, on the other hand,
[3] Source: Steel Business Briefing (SBB)
suffered
a stronger impact from the scrap price weakness and declined by €10 during the
first quarter of 2015, to an average range of €413-422 ($466-476)/t. Greater
availability of financing began to have a positive impact on construction
investments, keeping demand for long products solid during the period from
April to June. In addition, with scrap picking up, further price gains were
achieved in Euro terms both for medium sections at €521-530 ($576-585)/t and
rebar’s at €418-426 ($462-470)/t.
Prices of scrap Heavy Melting Steel 1&2 imported
into Turkey of USA origin, dropped substantially during the first two months of
2015, from $311/t CFR in January, to $248/t CFR in February. This was followed
by an unexpected price improvement starting in March, on the back of tight
supply, to a peak of $286/t in May (average range of $274-279/t during the
second quarter of 2015). Export prices for Turkish rebar fluctuated alongside
scrap, dropping from $493/t FOB in January to $436/t FOB in March (average
range of $455-461/t during the first quarter of 2015), and reversing to a peak
of $454/t FOB in May (average range of $441-446/t FOB during the second quarter
of 2015).
Current
and anticipated trends in steel production and prices
Global
steel production increased by 2.3% in 2014 buoyed by rising output in most
regions with the exception of mainly the CIS and South America, where output
fell by 2% and 1.7% respectively. In China, production growth remained strong
in 2014, rising by 2.8%, and with domestic consumption declining, exports rose
by over 30 million tonnes to around 94 million tonnes in 2014. Although Chinese
production decreased over the first half of 2015, exports remained high,
exceeding 100 million tonnes annualized over the first half of 2015. While the
first half of 2015 saw a fall in global output, the Company is cautious about
output growth over the second half as it expects apparent steel consumption
growth to remain weak in key regions, particularly in Brazil and the CIS.
ArcelorMittal
continues to expect growth in underlying steel demand in the United States in
2015, but due to the strength of restocking last year, apparent steel
consumption is expected to fall from the levels seen last year, as is domestic
steel production. Indeed, apparent steel consumption in the USA is expected to
fall by 3 to 4% in 2015. In Europe, ArcelorMittal expects the gradual recovery
in the steel consuming sectors to continue in 2015. ArcelorMittal forecasts
global steel demand to broadly stagnate in 2015 due to weaker growth in developed
markets, Brazil and the CIS, while growth in other developing markets is
expected to pick up. In Russia, low oil prices, economic and financial
sanctions are pushing Russia into recession causing domestic steel demand to
contract sharply but the weak ruble are supporting exports and in turn steel
production (up around 2.5% during first half of 2015). In Brazil, ArcelorMittal
expects demand to contract by over 10% in 2015. In China, weaker steel demand,
due to reduced purchasing activity from stockists and a weakening real estate
sector, led to a decline of 1.3% in apparent steel consumption in 2014. The
decline in underlying demand has accelerated during the first half of 2015,
especially the reduction in newly started real estate projects. However, apparent
consumption is expected to stagnate, at best, supported by slower destocking
activity in 2015 compared to the previous year.
Despite decreasing raw material prices over the first half of
2015, with both iron ore and coking coal falling to record lows, steel prices
also dipped significantly as supply continued to outstrip demand. Contrary to
our initial expectations, Chinese steel exports have continued to rise in the
first half of 2015 and are having a negative impact on pricing in many markets.
Exports from China are expected to slow during the second half of the year, but
will reach a record high for the year.
Raw
materials
The
primary inputs for a steelmaker are iron ore, solid fuels, metallics (e.g.,
scrap), alloys, electricity, natural gas and base metals. ArcelorMittal is
exposed to price volatility in each of these raw materials with respect to its
purchases in the spot market and under its long-term supply contracts. In the
longer term, demand for raw materials is expected to continue to correlate
closely with the steel market, with prices fluctuating according to supply and
demand dynamics. Since most of the minerals used in the steel-making process
are finite resources, they may also
rise in response to
any perceived scarcity of remaining accessible supplies, combined with the
evolution of the pipeline of new exploration projects to replace depleted
resources.
As with other commodities, the spot market prices for most raw
materials used in the production of steel saw their recent lows during the
global financial crisis of 2008/2009, but have since recovered with a greater
degree of volatility.
Until the 2008-2009 market downturn, ArcelorMittal had largely been able to
reflect raw material price increases in its steel selling prices. However, from
2009 onwards, ArcelorMittal has not been able to fully pass raw materials cost
increases onto customers as its steel markets are structurally oversupplied and
fragmented. This has resulted in a partial decoupling of raw material costs
(mainly driven by Asian market demand) from steel selling prices achieved in
the European market, and consequently increased risk of margin squeeze.
Since 2012, quarterly and monthly pricing systems have
been the main type of contract pricing mechanism, but spot purchases also
appear to have gained a greater share of pricing mechanisms as steelmakers have
developed strategies to benefit from increasing spot market liquidity and
volatility. In 2014 as well as 2015, the trend for using shorter-term pricing
cycles seems to continue as in previous years, with spot purchases and spot
indexed purchases further increasing their share of pricing mechanisms.
Iron Ore
In the first half of 2014, iron ore spot prices declined by 31%
from $134.50 per tonne on January 1, 2014 to $93.25 per tonne on June 30, 2014.
This downward price trend was due to increasing supply in the seaborne market
and financial weakness in the Chinese steel sector. Credit market tightness
combined with stretched cash flows at Chinese mills resulted in a strong
destocking trend at Chinese mills from the beginning of the year through the
end of the second quarter. Rising iron ore import inventory at Chinese ports
was reflective of stronger seaborne supply while real iron ore demand in the
Chinese off-shore market remained relatively stable. The
downward trend continued and reached the lowest level at
$66-69 per tonne in late December 2014 on continued structural iron ore
oversupply and persistent strains in the credit market in China as well as no
seasonal restocking. The average spot price for the fourth quarter of 2014 was
$74 per tonne, or 18% lower than previous quarter at $90 per tonne.
The
downward trend continued in the first half of 2015, with high volatility. The iron
ore spot price hit its lowest level on April 2, 2015
at $47.5 per tonne (Platts 62% Fe, CFR China),
driven by structural oversupply, resilient loss making supply,
lower mining and freight costs (following the sharp oil price decrease since
late 2014 and weaker currencies in mining regions) and uncertainty about
Chinese steel demand. In May and the beginning of June 2015, the recovery of
Chinese crude steel production rate and short term limited supply due to
weather disruptions in Australia provoked a temporary price rebound, reaching
$65.75 per tonne on June 10, 2015, which then decreased by the end of June to
$59.5 per tonne. The iron ore price (Platts 62%Fe CFR China) averaged $62.4 per
tonne in the first quarter of 2015 and $58.5 per tonne in the second quarter of
2015.
Coking
coal and coke
Due to the combined effects
of strong Australian coking coal production performance and weaker seaborne
demand in key importing regions, the coking coal spot market has been on a
downward trend since the beginning of 2014. The spot price of a premium hard
coking coal from Australia declined from $132-133 per tonne FOB Australia in
January 2014 to $110-111 per tonne by the end of June 2014 and then stabilized
in the range of $108-112 per tonne during the second half of the year. The
quarterly reference contract settlement price followed this downward trend and
settled at $120 per tonne for the second quarter, down $23 per tonne from the
first quarter settlement price of $143 per tonne FOB Australia. The third
quarter contract settlement of 2014 was a rollover of the second quarter prices
of 2014, at $120 per tonne FOB Australia, and was supported by continued strong
seaborne supply, mainly from Australia, and lower seaborne imports from China.
The coking coal market fundamentals remained stable in the fourth quarter with
stable supply and demand conditions. The reference price for the fourth quarter
of 2014 was settled at $119 per tonne, a decrease of $1 per tonne compared to
the third quarter.
In
2015, the downward trend accelerated, caused by lower imports from China and
decreasing production costs from major miners in Australia and other regions.
Better performances from domestic mining operations in China supported the
domestic price decrease. Chinese seaborne imports hit a record low in May 2015
at 1.3 million tonnes (down 69% year-on-year). Weaker Japanese imports in the
first half of 2015 also contributed to lower spot and
contract
prices. The premium HCC FOB Australia quarterly contract price was settled at
$117 per tonne in the first quarter of 2015 (down $2 per tonne compared to the
previous quarter), $109.5 per tonne in the second quarter of 2015 (down $7.5
per tonne compared to the previous quarter) and $93 per tonne in the third
quarter of 2015 (down $16.5 per tonne compared to the previous quarter). The
spot price (Premium LV HCC, FOB Australia) reached its lowest level at $81.15
per tonne on May 11, 2015 and recovered by the end of June 2015 to a range of
$88-89 per tonne as the Chinese spot buying activity recovered slightly.
ArcelorMittal continues to leverage its extensive supply chain,
diversified supply portfolio and contracts flexibility to capture a maximum
value from the market price volatility and rapidly changing pricing
environment.
Scrap
During
first half of 2015, following the market drop in global commodities, the
international scrap market continued the downward trend that began in the last
quarter of 2014. Scrap prices declined another $40-50/ton (“/t”) in the first
quarter of 2015 compared to the last quarter of 2014. Year-on-year, export
prices for scrap grade HMS 80:20 declined by $80/t, from an average of $333/t
in Rotterdam FOB full year 2014 to an average of $253/t in the first half of
2015; in the United States, East Cost FOB prices declined by $80/t, from $339/t
to $259/t.
Turkey,
the biggest scrap importer in the deep sea market, also experienced decreases
in scrap prices of $85/t CFR for HMS 80:20 in the first half of 2015 compared
to the full year 2014. Prices for USA originated material decreased from $360/t
in 2014 to $275/t in the first half of 2015 (CFR Turkey) and prices for EU
originated scrap decreased from $352/t to $267/t (CFR Turkey) during the same
period. These price decreases were supported by massive imports of billets from
China-based iron ore production. Steel production decreased in Turkey in the
first half of 2015 by 9.4% compared to first half of 2014, scrap imports
decreased by 13.6% during the first four months of 2015 compared to first four
months of 2014. High imports of billets from China remains and Turkey is
currently out of the scrap imports market HMS 80:20 dropped to$235 on average
for July 2015.
In
the domestic US market, scrap prices decreased by more than a $100/t in the
first half of 2015 compared to the full year of 2014. The Midwest Index for HMS
1 moved from $364/t in 2014 full year average to $248/t in the first half of
2015 full year average. Crude steel production in the United States decreased
by 9% in the first half of 2015 compared to the first half of 2014. A stronger
US dollar also supported the scrap price reduction in the deep sea market where
prices are set in USD.
Average prices on the
Eurofer Index for demolition scrap E3 decreased €24, moving from an average of
€262/t for the 2014 full year compared to an average of €238/t for the first
half of 2015. The scrap price reduction, in Europe, was moderate compared to
the US and international markets due to good European demand for scrap. The
different market behavior was mainly due to healthy steel production levels in
the EU and the European currency devaluation against the US dollar, making
Europe the best choice for scrap imports. Steel production in the first half of
2015, in EU 28, was 0.5% higher compared to first half of 2014. Currently in
July 2015, with summer shutdowns in place, the European E3 price is decreasing
€15-20 which is influenced by cheap Chinese billets available in the market and
Turkey withdrawing from the imports markets.
Alloys (manganese) and base
metals
The underlying price driver for manganese alloys is the price of
manganese ore, which decreased by 28.6% from $4.20 per dry metric tonne unit
(“dmtu”) (for 44% lump ore) on Cost, Insurance and Freight (“CIF”) China in
January 2015 to $3.00 per dmtu in June 2015, as a result of poor demand,
oversupply and aggressive competition.
During the first half of 2015, prices for manganese alloys
followed the trend of manganese ore. Prices of high carbon ferro manganese
decreased by 7.06% (from $1,048 to $974 per tonne), and prices of silicon
manganese also decreased by 7.02% (from $1,140 to $1,060 per tonne). Prices for
medium carbon ferro manganese decreased by 5.13% (from $1,618 to $1,535 per
tonne).
The base metals used
by ArcelorMittal are zinc and tin for coating, and aluminum for the deoxidization
of liquid steel. ArcelorMittal partially hedges its exposure to its base metal
inputs in accordance with its risk management policies.
The average price of zinc in the first half of 2015 was $2,138 per
tonne, representing a decrease of 1.2% as compared to the average price for the
full year 2014 ($2,164 per tonne). The January average price was $2,111 per
tonne while the June average price was $2,087 per tonne, with a first half low
of $1,985 per tonne on March 17 and high of $2,405 per tonne on May 6. Stocks
registered at the London Metal Exchange (“LME”) warehouses stood at 464,400
tonnes as of June 30, 2015, representing a decrease of 227,200 (32.9%) tonnes
compared to December 31, 2014 (when stocks registered stood at 691,600 tonnes).
Energy
Electricity
In most of the countries where ArcelorMittal operates, electricity
prices have moved in line with other commodities, mostly hydrocarbon fuels.
In North America, since the beginning of 2015, yearly forward
prices for electricity are giving an average price of ~$45/megawatt (“MWh”),
consistent to the gas price slightly below $3/million British Thermal Unit
(“MMBtu”). The 2014 low gas storage level linked to the historically cold winter
conditions in first quarter is over and current working gas remains slightly
above the five year average. Overall, coal is expected to account for an
average of 36% of total U.S. electricity generation in 2015 and natural gas to
account for 31%. One of the factors of the declining share of coal generation
is the retirement of some coal-fired power plants. These plant closures are
linked to both the competitiveness of gas prices (driven by the shale gas
surge) and the Mercury and Air Toxics Standards regulations. During 2014, 4.1
gigawatts (“GW”) of coal capacity were retired, while 12.8 GW are expected to
retire in 2015.
In Europe, less harsh winters, higher renewables installed
capacity; consumption reduction from energy efficiency actions and a decrease
of energy intensive industrial footprint are keeping stress price signals in
the market at bay. Aside from specific taxes (i.e. fuel and production taxes in
Spain) or political uncertainty regarding nuclear (i.e. plant life extension
and safety requirements in Belgium), the market remains below €40/MWh both for
spot and forward prices in most European countries. Overall production capacity
in Europe is comfortable in the short term but increasing environmental
constraints and low market prices are pushing utilities to close gas and old
coal power plants.
Oil prices have been moving to the range of $50-65/barrel (“bbl”)
during the first half of 2015, which impacts the electricity production cost
for peak hours where oil derivatives are used to maintain the network balance.
Gas prices have decreased for countries with active gas combined cycles in
their production mix.
Steam coal prices, a key
driver for electricity prices, have also followed a bearish trend since
November 2014 and have stabilized around $60/ton (API2 index) as no support was
found on China’s demand nor India’s expected increase in consumption. All in
all, electricity prices in Europe are reaching historical minimum levels. As
from today, the positive factor in the short term is the CO2 market and the
possibility that the EU pushes forward with the market stability reserve
intended to rebalance the existing long term market.
Natural gas
Natural
gas is priced regionally. European prices were historically linked with
petroleum prices but continuous spot market development and increasing
liquidity is now prevailing in almost all countries except in poorly integrated
markets (e.g., Spain, Portugal) or markets in transition from tariff based
system (e.g., Poland, Ukraine ). With increasing Liquefied Natural Gas (“LNG”)
flows in Spain, 2015 could be a year of the definitive movement towards a more
liquid and integrated market.
This
trend is reducing the correlation and sensibility of the Western European
market to oil prices volatility. North American natural gas prices trade
independently of oil prices and are set by spot and future contracts, traded on
the NYMEX exchange or over-the-counter. Elsewhere, prices are set on an oil
derivative or bilateral basis, depending on local market conditions.
International oil prices are dominated by global supply and demand conditions
and are also influenced by geopolitical factors. Currently, price volatility is
driven by the Organization of the Petroleum Exporting Countries (“OPEC”)
production (expected to further increase), Iran oil reserves hitting the market
(if nuclear agreement is found), stabilization of U.S. oil production based on
fracking and overall recovery of the worldwide economy. Taking into account
that oil storages are at historical high levels, an oil price rally is not
expected.
So
far, in 2015, the LNG market has stabilized. Supply continues to increase as
new LNG production facilities continue to ramp-up in the Pacific basin over
2015, pressuring prices down from $12/MMBtu in 2014 down to
$7.5/MMBtu
at the end of the first half of 2015. As a consequence, LNG reloading from
Europe has decreased sharply in the first half of 2015 (limited to South
America) compared to 2014. The perspective start-up of LNG exports in 2016 from
the United States will reinforce this trend of a “well balanced” LNG market.
Demand stabilized in Asia in the context of nuclear plants restarting in Japan
(step by step) and sharp competition from pipe gas in China. Increased net LNG
receipts in Europe compensate for lower Russian pipe exports and capped
Groningen production.
Overall
prices in Europe stabilized around $6.5/MMBtu with pressure on the longer term
curve in the context of lower oil prices. The main risk to the market remains
the dispute between Russia and Ukraine as it creates tension and volatility on
the market with rebates under discussion.
In
the United States, despite a second very cold winter in a row, unconventional
gas production proved more than robust, and storages are now back at the 5 year
average level (3,800 to 4,000 billion standard cubic feet expected in October
2015). Projects to build liquefaction facilities for export to Europe or Asia
continue to be developed, with an early start in the first half of 2016 which
could potentially push US gas prices up to keep up with the new export demand.
In this context, natural gas prices in North American markets stabilize below
$3/MMBtu and the forward curve remains in slight contango.
Overall
forward prices for exported LNG from the US seem to be consistent with European
forward prices which could help stabilize prices in current ranges on both
sides of the Atlantic basin.
Ocean freight[4]
Ocean freight prices have decreased for the majority of the first
half of 2015 primarily due to a fall in coal imports and a decline in growth of
iron ore imports. This decrease has positively affected the Company’s
performance for the first half of 2015.
The market has seen four consecutive quarters of decline in
Chinese dry bulk imports. Nevertheless, such de-stocking creates
potential for re-stocking opportunities in second half of 2015. There has been
a flood of new build deliveries in the first half of 2015, but at the same time
bulker demolition has also surged which has helped to curb a small portion of
the oversupply and thereby slow expected net fleet growth.
The Baltic Dry Index (“BDI”) averaged 623 points in the first half
of 2015, representing a 46% decrease compared to the first half of 2014. The
Capesize sector averaged $4,591/day in the first half of 2015 (compared to $14,135/day
in the first half of 2014). The Panamax sector averaged $4,999/day (compared to
$8,399/day in the first half of 2014).
Impact of exchange rate movements
During the first
half of 2015, the launch of the ECB quantitative easing program, a weaker
currency and lower oil prices supported a recovery in the euro area. The euro
started the year at around 1.20 against the US dollar before plummeting to a 10
year low of 1.0450. Despite growing concerns about the situation in Greece, the
euro recovered to almost 1.12 to the U.S. dollar at the end of June. During
the first half of the year, the U.S. dollar moved to an all-time high against
the Turkish lira (from 2.27 to 2.80), spiked against the South African rand
(from 10.80 to 12.65), strengthened against the Mexican peso (from 13.50 to
15.70) and against the Brazilian real (from 2.70 to 3.12). The U.S. dollar reached a new record high of 30 against the
Ukrainian hryvna in February, explained by strong hard currency demand,
continuing unrest, gloomy GDP outlook and high inflation, but finally
stabilized at around 20. The Russian ruble showed some resilience, helped by
the normalization of its monetary policy, and strengthened
[4]Sources:
Baltic Dry Index, Clarksons Shipping Intelligence Network, Fearnleys, SSY
against
the U.S. dollar from 64 in January to 48 in May. A strong U.S. dollar together
with a slowing energy sector, weak investments, and declining corporate margins
led to poor U.S. growth in the beginning of the year.
Because a
substantial portion of ArcelorMittal’s assets, liabilities, sales and earnings
are denominated in currencies other than the U.S. dollar (its reporting
currency), ArcelorMittal has exposure to fluctuations in the values of these
currencies relative to the U.S. dollar. These currency fluctuations, especially
the fluctuations of the U.S. dollar relative to the euro, as well as
fluctuations in the currencies of the other countries in which ArcelorMittal
has significant operations and sales, can have a material impact on its results
of operations. In order to minimize its currency exposure, ArcelorMittal enters
into hedging transactions to lock-in a set exchange rate, as per its risk
management policies.
Trade and import competition
Europe[5]
In
2014, finished steel imports are estimated to have increased by 17.8%
year-on-year to around 21.7 million tonnes with the growth mainly due to
increased shipments originating from the Commonwealth of Independent States
(“CIS”) and China. However, finished steel demand also strengthened, increasing
by approximately 3.5%. As a result, the import penetration rate for 2014 is
estimated to have risen to approximately 14.8%.
Apparent
steel consumption (“ASC”) continued to grow during the first half of 2015,
increasing by approximately 1% year-on-year, albeit more slowly than the 6%
year-on-year increase recorded over the first half of 2014. The penetration
rate of total steel imports in the first half of 2015 remained at roughly the
same level as that recorded in the first half of 2014 (15.5%), as imports also
increased by approximately the same margin as ASC. Semi-finished steel imports,
however, actually declined while finished steel imports increased by over 7%
during the first half of 2015, mainly due to an increase in Chinese origin
shipments.
United States[6]
During 2014, finished steel
imports grew strongly, up 35.9% year-on-year, to 30.6 million tonnes, the
highest level since 2006. Penetration increased to 28.4%, again the highest
level since 2006, with imports the major reason for the 11.4% increase in
apparent steel demand during 2014. Overall steel imports were up 37.9% during
2014, as imports of semis increased by over 59.8% year-on-year.
While imports continued to
increase strongly at the start of the year, increasing by 21% year-on-year
during the first quarter of 2015, volumes dropped significantly during the
second quarter, declining by 14% year-on-year.
Consequently, imports increased by a more sustainable rate of 2.7% year-on-year
during the first half of 2015. Meanwhile, apparent consumption is estimated to
have declined by over 2% during the first half of 2015 due to destocking activity.
As a result, imports penetration rose to 30.3% during the first half of the
year.
Consolidation in the steel and mining industries
The global steel and mining industries experienced consolidation during
the ten years prior to 2008. After pausing during the credit crisis and global
economic downturn of 2008-2009, merger and acquisition activity of various
steel and mining players, including Chinese and Indian companies, increased at
a rapid pace. However, given the current economic uncertainties in developed
economies, combined with a slowdown in emerging regions such as China and
India, consolidation transactions decreased significantly in terms of number and
value after 2012. This is expected to continue in 2015, unless and until prices
stabilize and supply and demand balance out in the context of worldwide
structural overcapacity.
As developed markets continue to present fewer opportunities for
consolidation, steel industry consolidation also began to slow down
substantially in China in 2012. Despite being a key initiative of the Chinese
government’s
[5]Source: Eurostat trade data to May 2015, estimates for June 2015.
[6]Source: U.S. Department of Commerce, customs census data up to May 2015
and June 2015 import license data.
five-year plan issued in March 2011, the
concentration process of the steel industry that was expected to reduce
overcapacity, rationalize steel production based on obsolete technology,
improve energy efficiency, achieve environmental targets and strengthen the
bargaining position of Chinese steel companies in price negotiations for iron
ore declined as a result of the slowing economy. This situation has affected
the Chinese government’s objective for the top ten Chinese steel producers to
account for 60% of national production by 2015 and for at least two producers
to reach 100 million ton capacity in the next few years. However, the
Chinese government is considering scrapping a ban on overseas control which was
imposed in 2005, enabling non-Chinese companies to make acquisitions in China,
which could drive merger and acquisition activity if implemented. In May 2015,
China’s natural resource ministry announced plans to consolidate firms in the
mining industry including China Aluminum Corporation, Xiamen Tungsten Co Ltd,
Inner Mongolia BaoTou Steel Union Co Ltd, China Minmetals Corporation, Ganzhou
Rare Earth Group Co Ltd and Guangdong Rare Earth Industrial Group Co Ltd.
Merger and acquisition activity is expected to remain relatively active
in the Indian steel and mining industry though at a slower pace considering the
current economic slowdown. The country has become the world’s third largest
steel consumer after China and the United States and is the world’s third
largest steel producer after China and Japan.
Recent
and expected future industry consolidation should foster the ability of the
steel industry to maintain more consistent performance through industry cycles
by achieving greater efficiencies and economies of scale, and should lead to
improved bargaining power relative to customers and, crucially, suppliers,
which tend to have a higher level of consolidation. The wave of steel industry
consolidation in the previous years has followed the lead of raw materials
suppliers, which occurred in an environment of rising prices for iron ore and
most other minerals used in the steel-making process. The merger of Cliffs
Natural Resources and Consolidated Thompson in 2011 was a significant
consolidation move in North America which, at the same time, strengthened
vertical relationships into the Chinese steel market. In the context of
volatile prices and an overall decline since 2011, which is expected to
continue in 2015 given the large additional supply expected to come on line,
iron ore producers continue to seek consolidation that would strengthen their
options whatever the direction of future price trends. There are still only
four primary iron ore suppliers in the world market. Consolidation among other
mining companies has continued, as evidenced by the completion of the merger
between Xstrata and Glencore on May 2, 2013.
A. Operating results
ArcelorMittal reports its
operations in five segments: NAFTA, Brazil, Europe, ACIS and Mining.
Key
indicators
The
key performance indicators that ArcelorMittal’s management uses to analyze performance
and operations are the lost
time injury frequency (“LTIF”) rate, sales, average steel selling
prices, steel shipments, iron ore and coal production and operating income.
Management’s analysis of liquidity and capital resources is driven by operating
cash flows.
Six
months ended June 30, 2015 as compared to six months ended June 30, 2014
Health
and safety
Through the Company’s core values of sustainability, quality and
leadership, it operates responsibly with respect to the health, safety and
wellbeing of its employees, contractors and the communities in which it
operates.
Health and safety performance, based on the Company’s personnel
figures and contractors LTIF rate, improved to 0.79 for the six months ended
June 30, 2015 as compared to 0.86 for the six months ended June 30, 2014.
Significant improvements in health and safety performance were made in the
Brazil, Europe, and ACIS segments, offset by deterioration in the Mining and
NAFTA segments. The Company’s efforts to improve the Group’s health and safety
record continues and remains focused on both further reducing the rate of
severe injuries and preventing fatalities.
Own personnel and contractors
|
|
|
|
|
|
|
For the six months
ended June 30,
|
Lost time injury frequency rate
|
|
2014
|
|
2015
|
Mining
|
|
0.54
|
|
0.59
|
|
|
|
|
|
NAFTA
|
|
0.95
|
|
0.97
|
Brazil
|
|
0.72
|
|
0.59
|
Europe
|
|
1.23
|
|
1.05
|
ACIS
|
|
0.51
|
|
0.47
|
Total Steel
|
|
0.92
|
|
0.82
|
|
|
|
|
|
Total (Steel and Mining)
|
|
0.86
|
|
0.79
|
Sales,
operating income, crude steel production, steel shipments, average steel
selling prices and mining production
ArcelorMittal’s sales were lower at $34.0
billion for the six months ended June 30, 2015, down from $40.5 billion for the
six months ended June 30, 2014, primarily due to 18% lower average steel
selling prices and 46% lower seaborne iron ore prices, partially offset by 3% higher
steel shipments and 2% higher marketable iron ore shipments.
ArcelorMittal’s steel shipments increased
3% to 43.8 million tonnes for the six months ended June 30, 2015, from 42.4
million tonnes for the six months ended June 30, 2014. Average steel selling prices
decreased by 18% for the six months ended June 30, 2015 as compared to the six
months ended June 30, 2014.
ArcelorMittal had
iron ore and coal production (own production of iron ore and coal, excluding
supplies sourced under strategic contracts) of 31.9 million tonnes and 3.1 million
tonnes, respectively, for the six months ended June 30, 2015, an increase of
1.6% and decrease of 13.2%, as compared to 31.4 million tonnes and 3.6 million
tonnes, respectively, for the six months ended June 30, 2014. The increase in
iron ore production resulted primarily from increased production in Canada
while the decrease in coal production was mainly related to lower production at
the Company’s U.S. coal operations (Princeton) and the disposal of the Kuzbass
coal mines in Russia during the fourth quarter of 2014.
ArcelorMittal’s
operating income for the six months ended June 30, 2015 amounted to $1,150
million, compared to operating income of $1,506 million for the six months
ended June 30, 2014. Operating income decreased primarily due to lower average
steel selling prices partially offset by an increase in shipments.
Operating
income for the six months ended June 30, 2015 was negatively affected by a $69
million provision primarily related to onerous hot rolled and cold rolled
contracts in the US and an impairment charge of $19 million relating to the
closure of the Georgetown facility in the US.
Operating
income for the six months ended June 30, 2014 was negatively affected by a $90
million charge following the settlement of antitrust litigation in the United
States.
Cost
of sales consists primarily of purchases of raw materials necessary for
steel-making (iron ore, coke and coking coal, scrap and alloys) and electricity
cost. Cost of sales for the six months ended June 30, 2015 was $31.6 billion,
decreasing as compared to $37.5 billion for the six months ended June 30, 2014,
which was driven by a decline in raw material prices. Selling, general and
administrative expenses (“SG&A”) for the six months ended June 30, 2015
were slightly lower at $1.3 billion. as compared to $1.5 billion for the six
months ended June 30, 2014. SG&A represented 3.8% of sales for the six
months ended June 30, 2015, as compared to 3.6% for the six months ended June
30, 2014.
The
following tables and discussion summarize ArcelorMittal’s performance by
reportable segment for the six months ended June 30, 2015 as compared with the
six months ended June 30, 2014:
|
|
|
Sales for the six months
ended June 30,*
|
|
Operating Income for the
six months ended June 30,*
|
|
Segment
|
|
2014
(in $ millions)
|
|
2015
(in $ millions)
|
|
2014
(in $ millions)
|
|
2015
(in $ millions)
|
|
NAFTA
|
|
10,351
|
|
9,322
|
|
77
|
|
(52)
|
|
Brazil
|
|
4,787
|
|
4,286
|
|
592
|
|
566
|
|
Europe
|
|
20,840
|
|
17,147
|
|
414
|
|
704
|
|
ACIS
|
|
4,307
|
|
3,370
|
|
5
|
|
7
|
|
Mining
|
|
2,639
|
|
1,722
|
|
507
|
|
(78)
|
|
Other and eliminations
|
|
(2,432)
|
|
(1,839)
|
|
(89)**
|
|
3 **
|
|
Total consolidated operating income
|
|
40,492
|
|
34,008
|
|
1,506
|
|
1,150
|
|
|
|
|
|
|
|
|
|
|
*
|
Segment amounts are prior to inter-segment eliminations.
|
|
|
|
|
|
|
|
|
**
|
Total adjustments to segment operating income and other reflects
certain adjustments made to operating income of the segments to reflect
corporate costs, income from non-steel operations (e.g. energy, logistics and
shipping services) and the elimination of stock margins between the segments.
See table below.
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments to segment operating income and other
|
|
Six months ended June
30,
|
|
|
|
|
|
|
|
2014
(in $ millions)
|
|
2015
(in $ millions)
|
|
|
|
|
|
Corporate and shared services 1
|
|
(75)
|
|
38
|
|
|
|
|
|
Financial activities
|
|
(6)
|
|
(11)
|
|
|
|
|
|
Shipping and logistics
|
|
(4)
|
|
(34)
|
|
|
|
|
|
Intragroup stock margin eliminations
|
|
17
|
|
23
|
|
|
|
|
|
Depreciation and impairment
|
|
(21)
|
|
(13)
|
|
|
|
|
|
Total adjustments to segment operating income and other
|
|
(89)
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes primarily staff and other holding costs and results
from shared service activities.
|
|
|
|
|
NAFTA
|
|
|
|
|
|
|
|
Performance for the six
months ended June 30,
|
|
(in millions of USD unless otherwise shown)
|
|
2014
|
|
2015
|
|
Sales
|
|
10,351
|
|
9,322
|
|
Operating income / (loss)
|
|
77
|
|
(52)
|
|
|
|
|
|
|
|
Crude steel production (million tonnes)
|
|
12,409
|
|
11,683
|
|
Steel shipments (million tonnes)
|
|
11,403
|
|
11,105
|
|
|
|
|
|
|
|
Average steel selling price (USD/tonne)
|
|
848
|
|
760
|
|
Sales
in the NAFTA segment decreased 10% to $9.3 billion for the six months ended
June 30, 2015, from $10.4 billion for the six months ended June 30, 2014,
mainly due to a 10% decrease in average steel selling prices and a 3% decrease
in steel shipments.
Operating
loss for the NAFTA segment for the six months ended June 30, 2015 was $52
million, as compared with operating income of $77 million for the six months
ended June 30, 2014. Operating loss for the six months ended June 30, 2015 was
negatively affected by a $69 million provision primarily related to onerous hot
rolled and cold rolled contracts in the US and an impairment of $19 million
relating to the closure of the Georgetown facility in the US as well as lower
volumes and lower average selling prices as compared to the six months ended
June 30, 2014. Operating income for the six months ended June 30, 2014 was
negatively affected by a $90 million charge following the settlement of
antitrust litigation in the United States and the severe weather conditions
during the first half of 2014.
Crude steel production in
the NAFTA segment decreased by 6% to 11.7 million tonnes for the six months
ended June 30, 2015 as compared to 12.4 million tonnes for the six months ended
June 30, 2014 to align with weaker demand.
Total steel shipments in the
NAFTA segment decreased 3% to 11.1 million tonnes for the six months ended June
30, 2015, from 11.4 million tonnes for the six months ended June 30, 2014.
Steel shipments for the six months ended June 30, 2015 were negatively affected
by increased imports. Steel shipments for the six months ended June 30, 2014
were impacted by severe winter weather conditions in the United States.
Average steel selling price in the NAFTA
segment decreased 10% to $760 per tonne for the six months ended June 30, 2015
from $848 per tonne for the six months ended June 30, 2014, primarily due to
lower domestic prices impacted by falling raw material prices and import
pressures.
Brazil
|
|
|
|
|
|
|
|
Performance for the six
months ended June 30,
|
|
(in millions of USD unless otherwise shown)
|
|
2014
|
|
2015
|
|
Sales
|
|
4,787
|
|
4,286
|
|
Operating income / (loss)
|
|
592
|
|
566
|
|
|
|
|
|
|
|
Crude steel production (million tonnes)
|
|
4,795
|
|
5,809
|
|
Steel shipments (million tonnes)
|
|
4,637
|
|
5,542
|
|
|
|
|
|
|
|
Average steel selling price (USD/tonne)
|
|
914
|
|
704
|
|
Sales in the
Brazil segment were $4.3 billion for the six months ended June 30, 2015 as
compared to $4.8 billion for the six months ended June 30, 2014, primarily due
to lower average selling prices partially offset by higher steel shipments
following the restart of Blast Furnace #3 at Tubarão in July 2014.
Operating
income for the Brazil segment for the six months ended June 30, 2015 was $566
million, as compared with operating income of $592 million for the six months
ended June 30, 2014. Operating income for the six months ended June 30, 2015
was negatively affected by lower average steel selling prices offset in part by
higher steel shipments (following the restart of the Tubarão furnace in July
2014) and the improvement in the Company’s tubular operations.
Crude steel production increased by 21% to
5.8 million tonnes for the six months ended June 30, 2015 as compared with 4.8
million tonnes for the six months ended June 30, 2014 as a result of the
restart of the Tubarão furnace in July 2014.
Total steel shipments in the Brazil
segment were 5.5 million tonnes for the six months ended June 30, 2015 as
compared to 4.6 million tonnes for the six months ended June 30, 2014 primarily
driven by increased slab exports from Brazil. Steel shipments for the six
months ended June 30, 2014 were negatively affected by operational issues in
the hot strip mill in Tubarão.
Average steel selling price in the Brazil
segment decreased 23% to $704 per tonne for the six months ended June 30, 2015
from $914 per tonne for the six months ended June 30, 2014, primarily driven by
a weaker Brazilian real, weaker product mix due to increased slab exports post
the restart of the Tubarão furnace described above and a decline in
international prices.
Europe
|
|
|
|
|
|
|
|
Performance for the six
months ended June 30,
|
|
(in millions of USD unless otherwise shown)
|
|
2014
|
|
2015
|
|
Sales
|
|
20,840
|
|
17,147
|
|
Operating income / (loss)
|
|
414
|
|
704
|
|
|
|
|
|
|
|
Crude steel production (million tonnes)
|
|
21,840
|
|
22,985
|
|
Steel shipments (million tonnes)
|
|
20,200
|
|
21,557
|
|
|
|
|
|
|
|
Average steel selling price (USD/tonne)
|
|
804
|
|
625
|
|
Sales in the Europe segment decreased 18%
to $17.1 billion for the six months ended June 30, 2015 as compared to $20.8
billion for the six months ended June 30, 2014, primarily due to a 22% decrease
in average steel selling prices which were negatively impacted by the USD
appreciation against the Euro partially offset by an increase in steel
shipments by 7%.
Operating
income for the Europe segment for the six months ended June 30, 2015 was $704
million, as compared with operating income of $414 million for the six months
ended June 30, 2014. Operating income for the six months ended June 30, 2015
was positively impacted by improved market conditions and the realized benefits
of cost optimization efforts as well as increased shipments and the effects of
the USD appreciation against the Euro, offset by lower average steel selling
prices.
Crude steel production for the Europe
segment increased 5% to 23 million tonnes for the six months ended June 30,
2015, from 21.8 million tonnes for the six months ended June 30, 2014 primarily
due to fewer facilities under maintenance during the six month period ended
June 30, 2015 and to align with increased demand.
Total steel
shipments in the Europe segment increased 7% to 21.6 million tonnes for the six
months ended June 30, 2015, from 20.2 million tonnes for the six months ended
June 30, 2014. The increase was primarily driven by improved demand compared to
the first half of 2014.
Average steel selling price in the Europe
segment decreased 22% to $625 per tonne for the six months ended June 30, 2015
from $804 per tonne for the six months ended June 30, 2014, largely due to
exchange rate effects and a marginal decline in local average steel prices,
partially reflecting lower raw material costs.
ACIS
|
|
|
|
|
|
|
|
Performance for the six
months ended June 30,
|
|
(in millions of USD unless otherwise shown)
|
|
2014
|
|
2015
|
|
Sales
|
|
4,307
|
|
3,370
|
|
Operating income / (loss)
|
|
5
|
|
7
|
|
|
|
|
|
|
|
Crude steel production (million tonnes)
|
|
7,013
|
|
7,299
|
|
Steel shipments (million tonnes)
|
|
6,493
|
|
6,211
|
|
|
|
|
|
|
|
Average steel selling price (USD/tonne)
|
|
580
|
|
477
|
|
Sales in the ACIS segment decreased 22% to
$3.4 billion for the six months ended June 30, 2015 as compared to $4.3 billion
for the six months ended June 30, 2014, primarily due to an 18% decrease in
average steel selling prices and a 4% decrease in steel shipments.
Operating
income for the ACIS segment for the six months ended June 30, 2015 was $7
million, as compared with operating income of $5 million for the six months
ended June 30, 2014. Operating income for the six months ended June 30, 2015
was positively affected by lower costs particularly in Ukraine due to currency
devaluation, offset by lower steel shipments and lower average steel selling
prices.
Crude steel production for the ACIS
segment increased 4% to 7.3 million tonnes for the six months ended June 30,
2015, from 7.0 million tonnes for the six months ended June 30, 2014 primarily
driven by higher production in South Africa following the Newcastle reline
completion.
Total steel shipments in the ACIS segment
decreased 4% to 6.2 million tonnes for the six months ended June 30, 2015, from
6.5 million tonnes for the six months ended June 30, 2014. Steel shipments for
the six months ended June 30, 2015 were negatively affected by lower volumes in
South Africa and lower shipments in Ukraine impacted by a weaker CIS market.
Average steel selling price
in the ACIS segment decreased 18% to $477 per tonne for the six months ended
June 30, 2015 from $580 per tonne for the six months ended June 30, 2014,
primarily due to lower global steel prices and weak demand in both CIS and
South Africa.
Mining
|
|
|
|
|
|
|
|
Sales and operating
results for the six months ended June 30,
|
|
(in millions of USD unless otherwise shown)
|
|
2014
(in $ millions)
|
|
2015
(in $ millions)
|
|
Sales
|
|
2,639
|
|
1,722
|
|
Operating income / (loss)
|
|
507
|
|
(78)
|
|
|
|
|
|
|
|
|
Six months ended June
30,
|
|
|
Mining shipments (million tonnes) 1
|
|
|
|
|
|
2014
|
|
2015
|
|
|
Iron ore shipped externally
|
|
|
|
|
|
6.7
|
|
6.5
|
|
|
Iron ore shipped internally and reported at market price 3
|
|
13.1
|
|
13.6
|
|
|
Iron ore shipped externally and internally and reported at
market price 3
|
|
19.8
|
|
20.1
|
|
|
Iron ore shipped internally and reported at cost-plus 3
|
|
|
|
|
|
10.4
|
|
10.5
|
|
|
Total iron ore shipments 2
|
|
|
|
|
|
30.2
|
|
30.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal shipped externally
|
|
|
|
|
|
1.0
|
|
0.7
|
|
|
Coal shipped internally and reported at market price 3
|
|
1.1
|
|
0.6
|
|
|
Coal shipped externally and internally and reported at market
price 3
|
|
2.1
|
|
1.3
|
|
|
Coal shipped internally and reported at cost-plus 3
|
|
|
|
|
|
1.6
|
|
1.7
|
|
|
Total coal shipments 4
|
|
|
|
|
|
3.7
|
|
3.0
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
There are three categories of sales: (1) “External sales”: mined
product sold to third parties at market price; (2) “Market-priced tonnes”:
internal sales of mined product to ArcelorMittal facilities reported at
prevailing market prices; (3) “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 reported at cost-plus
is whether or not 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).
|
|
(2)
|
Total of all finished products of fines, concentrate, pellets
and lumps and includes tonnes shipped externally and internally and reported
at market price as well as tonnes shipped internally on a cost-plus basis.
|
|
(3)
|
Market-priced tonnes represent amounts of iron ore and coal from
ArcelorMittal mines that could practically be sold to third parties.
Market-priced tonnes that are transferred from the Mining segment to the
Company’s steel producing segments are reported at the prevailing market
price. Shipments of raw materials that do not constitute market-priced
tonnes are transferred internally on a cost-plus basis.
|
|
(4)
|
Total of all finished products of coal and includes tonnes
shipped externally and internally and reported at market price as well as
tonnes shipped internally on a cost-plus basis.
|
|
|
|
|
|
|
|
|
|
Six months ended June
30,
|
|
|
Iron ore production (million metric tonnes) 1
|
|
Type
|
|
Product
|
|
|
2014
|
|
2015
|
|
|
Own mines
|
|
|
|
|
|
|
|
|
|
|
|
North America 2
|
|
Open pit
|
|
Concentrate, lump, fines and pellets
|
|
|
17.7
|
|
19.1
|
|
|
South America
|
|
Open pit
|
|
Lump and fines
|
|
|
2.2
|
|
1.8
|
|
|
Europe
|
|
Open pit
|
|
Concentrate and lump
|
|
|
1.1
|
|
1.1
|
|
|
Africa
|
|
Open pit / Underground
|
|
Fines
|
|
|
3.0
|
|
2.6
|
|
|
Asia, CIS & Other
|
|
Open pit / Underground
|
|
Concentrate, lump, fines and sinter feed
|
|
|
7.4
|
|
7.3
|
|
|
Total own iron ore production
|
|
|
|
|
|
|
31.4
|
|
31.9
|
|
|
Strategic long-term contracts - iron ore
|
|
|
|
|
|
|
|
|
|
|
|
North America 3
|
|
Open pit
|
|
Pellets
|
|
|
2.8
|
|
2.5
|
|
|
Africa 4
|
|
Open pit
|
|
Lump and fines
|
|
|
2.8
|
|
2.8
|
|
|
Total strategic long-term contracts - iron ore
|
|
|
|
|
|
|
5.6
|
|
5.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
37.0
|
|
37.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Total of all finished production of fines, concentrate, pellets
and lumps.
|
|
(2)
|
Includes own mines and share of production from Hibbing (United
States, 62.30%) and Peña (Mexico, 50%).
|
|
(3)
|
Consists of a long-term supply contract with Cleveland Cliffs
for purchases made at a previously set price, adjusted for changes in certain
steel prices and inflation factors.
|
|
(4)
|
Includes purchases under an interim strategic agreement with
Sishen Iron Ore Company (Proprietary) Limited (“SIOC”) which was extended on
December 13, 2012 and became effective on January 1, 2013, pursuant to which
SIOC supplied a maximum annual volume of 4.8 million tonnes of iron ore at a
weighted average price of $65 per tonne. On November 5, 2013, ArcelorMittal
and SIOC entered into an agreement establishing long-term pricing
arrangements for the supply of iron ore by SIOC to ArcelorMittal. Pursuant
to the terms of the agreement, which became effective on January 1, 2014,
ArcelorMittal may purchase from SIOC up to 6.25 million tonnes iron ore per
year, complying with agreed specifications and lump-fine ratios. The price of
iron ore sold to ArcelorMittal by SIOC is determined by reference to the cost
(including capital costs) associated with the production of iron ore from the
DMS Plant at the Sishen mine plus a margin of 20%, subject to a ceiling price
equal to the Sishen Export Parity Price at the mine gate. While all prices
are referenced to Sishen mine costs (plus 20%) from 2016, the parties agreed
to a different price for certain pre-determined quantities of iron ore for
the first two years of the 2014 Agreement.
|
|
|
|
|
|
|
Six months ended June
30,
|
|
|
Coal production (million metric tonnes)
|
|
|
|
2014
|
|
2015
|
|
|
Own mines
|
|
|
|
|
|
|
|
|
North America
|
|
|
|
1.03
|
|
0.79
|
|
|
Asia, CIS & Other
|
|
|
|
2.53
|
|
2.30
|
|
|
Total own coal production
|
|
|
|
3.56
|
|
3.09
|
|
|
Strategic long-term contracts - coal
|
|
|
|
|
|
|
|
|
North America 1
|
|
|
|
0.18
|
|
0.05
|
|
|
Africa 2
|
|
|
|
0.20
|
|
-
|
|
|
Total strategic long-term contracts - coal
|
|
|
|
0.38
|
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
3.94
|
|
3.14
|
|
|
|
|
|
|
|
|
|
|
1
|
Includes strategic agreement - prices on a fixed price basis.
|
|
2
|
Includes long term lease - prices on a cost-plus basis.
|
|
Sales
in the Mining segment decreased 35% to $1.7 billion for the six months ended
June 30, 2015 from $2.6 billion for the six months ended June 30, 2014. Sales
of marketable iron ore and coal (internal market-priced and sales to external
customers) decreased 44% to $1.2 billion for the six months ended June 30, 2015
from $2.1 billion for the six months ended June 30, 2014. Sales to external
customers were $0.42 billion for the six months ended June 30, 2015
representing a 41% decrease compared to $0.71 billion for the six months ended
June 30, 2014. The decrease in sales to external customers was primarily due to
lower shipments from own mines for iron ore and coal and lower average iron ore
and coal selling prices. Iron ore shipments to external customers decreased by
3% from 6.7 million tonnes for the six months ended June 30, 2014 to 6.5
million tonnes for the six months ended June 30, 2015. Sales of marketable iron
ore (internal market-priced and sales to external customers) increased by 2%
from 19.8 million tonnes for the six months ended June 30, 2014 to 20.1 million
tonnes for the six months ended June 30, 2015. The increase in external
shipments was due to increased production at the Company’s Canadian operations
offset partially by lower Liberia and Brazil shipments. Coal
shipments to external customers decreased 30% from 1.0 million tonnes to 0.7
million tonnes. With respect to lower average selling prices, for example, the
average iron ore spot price of $60 per tonne CFR China and the average spot
price for hard coking coal FOB Australia at $96 per tonne were 46% and 18%
lower for the six months ended June 30, 2015 than for the six months ended June
30, 2014, respectively. It should be noted, however, that there may be no
direct correlation between reference prices and actual selling prices in
various regions at a given time.
Operating
loss attributable to the Mining segment for the six months ended June 30, 2015
was $78 million, as compared with operating income of $507 million for the six
months ended June 30, 2014 primarily
driven by lower seaborne iron ore market prices, partially offset by lower
costs and restructuring of the Company’s coal operations, including the sale of
the Kuzbass coal mines. Iron ore marketable volume for the six months ended
June 30, 2015 was 20.1 million tonnes, compared to 19.8 million tonnes for the
six months ended June 30, 2014, representing an increase of 2%. Coal marketable
volume for the six months ended June 30, 2015 was 1.3 million tonnes, compared
to 2.1 million tonnes for the six months ended June 30, 2014, representing a
decrease of 38%. Cost of sales was lower at $1.7 billion for the six months
ended June 30, 2015 as compared to $2.0 billion for the six months ended June
30, 2014.
Own iron ore production (not including supplies under strategic
long-term contracts) in the six months ended June 30, 2015 was 31.9 million
metric tonnes, 2% higher than in the six months ended June 30, 2014, primarily
due to higher production at the Company’s Canadian operations.
Own coal production (not
including supplies under strategic long-term contracts) in the six months ended
June 30, 2015 was 3.1 million metric tonnes, representing a decrease of 13%
compared to the six months ended June 30,
2014, mainly
related to lower production at the Company’s USA coal operations (Princeton)
and the disposal of the Kuzbass coal mines in Russia during the fourth quarter
of 2014.
Investments
in associates, joint ventures and other investments
Income from investments in
associates, joint ventures and other investments was $123 million for the six
months ended June 30, 2015, compared to income of $154 million for the six
months ended June 30, 2014. The income was primarily related to the annual
dividend received from Erdemir. The income for the six months ended June 30,
2014 was primarily related to the annual dividend received from Erdemir,
improved performance of Spanish entities and the share of profits of the Calvert
operations.
Financing
costs
Net
financing costs for the six months ended June 30, 2015 were stable at $1.5
billion as compared to the six months ended June 30, 2014.
Net interest expense
(interest expense less interest income) decreased to $648 million for the six
months ended June 30, 2015 as compared to $809 million for the six months ended
June 30, 2014. The reduction is attributable to both lower gross debt outstanding
and lower average cost following the repayments of convertible bonds in the
second quarter of 2014 and bonds in the fourth quarter of 2014.
Foreign
exchange and other net financing costs (which includes foreign currency swaps,
bank fees, interest on pensions, impairments of financial instruments,
revaluation of derivative instruments, and other charges that cannot be
directly linked to operating results) for the six months ended June 30, 2015
amounted to $829 million, as compared to costs of $707 million for the six
months ended June 30, 2014. Foreign exchange and other net financing costs
include a foreign exchange loss of $423 million as compared to income of $11
million for the six months ended June 30, 2014 mainly related to the
appreciation of the US dollar against the Euro (7.8% for the six months ended
June 30, 2015 as compared to 1% for the six months ended June 30, 2014) and the
Brazilian Real (14.4% for the six months ended June 30, 2015 as compared to
6.4% for the six months ended June 30, 2014). This foreign exchange loss
primarily relates to the impact of the US dollar appreciation on Euro
denominated deferred tax assets partially offset by foreign exchange income on
euro debt.
In
addition, foreign exchange and other net financing costs for the six months
ended June 30, 2014 included a payment following the termination of the Senegal
greenfield project, non-cash charges for the premiums related to call options
on treasury shares expired following the maturity of Euro convertible bonds and
hedging instruments.
Income
tax
ArcelorMittal’s consolidated income tax expense (benefit) is
affected by the income tax laws and regulations in effect in the various
countries in which it operates and the pre-tax results of its subsidiaries in
each of these countries, which can vary from year to year. ArcelorMittal
operates in jurisdictions, mainly in Eastern Europe and Asia, which have a
structurally lower corporate income tax rate than the statutory tax rate as in
effect in Luxembourg (29.22%), as well as in jurisdictions, mainly in Western
Europe and the Americas which have a structurally higher corporate income tax
rate.
ArcelorMittal recorded a consolidated income tax expense of $334
million for the six months ended June 30, 2015, as compared to a consolidated
income tax expense of $217 million for the six months ended June 30, 2014.
Non-controlling
interests
Net
income attributable to non-controlling interests for the six months ended June
30, 2015 was $11 million as compared with net income attributable to
non-controlling interests of $80 million for the six months ended June 30, 2014.
Net income attributable to non-controlling interests primarily relates to the
minority shareholders’ share of net income recorded in ArcelorMittal Mines
Canada and Belgo Bekaert Arames in Brazil partly offset by a net loss in
ArcelorMittal Liberia.
Net loss attributable to
equity holders of the parent
ArcelorMittal’s net loss attributable to equity holders of the
parent for the six months ended June 30, 2015 was $549 million as compared to
net loss attributable to equity holders of the parent of $153 million for the
six months ended June 30, 2014, for the reasons discussed above.
B. Liquidity and capital
resources
ArcelorMittal’s
principal sources of liquidity are cash generated from its operations and its
credit facilities at the corporate level.
Because
ArcelorMittal is a holding company, it is dependent upon the earnings and cash
flows of, and dividends and distributions from, its operating subsidiaries to
pay expenses and meet its debt service obligations. Significant cash or cash
equivalent balances may be held from time to time at the Company’s
international operating subsidiaries, including in particular those in France,
where the Company maintains a cash management system under which most of its
cash and cash equivalents are centralized, and in Argentina, Brazil, Canada,
Morocco, South Africa, Ukraine, USA, and Venezuela. Some of these operating
subsidiaries have debt outstanding or are subject to acquisition agreements
that impose restrictions on such operating subsidiaries’ ability to pay
dividends, but such restrictions are not significant in the context of
ArcelorMittal’s overall liquidity. Repatriation of funds from operating
subsidiaries may also be affected by tax and foreign exchange policies in place
from time to time in the various countries where the Company operates, though
none of these policies is currently significant in the context of
ArcelorMittal’s overall liquidity.
In
management’s opinion, ArcelorMittal’s credit facilities are adequate for its
present requirements.
As
of June 30, 2015, ArcelorMittal’s cash and cash equivalents, including
restricted cash amounted to $4.7 billion as compared to $4.0 billion as of
December 31, 2014. In addition, ArcelorMittal had available borrowing
capacity of $6.0 billion under its credit facilities as of June 30, 2015,
unchanged from December 31, 2014.
As of June 30, 2015, ArcelorMittal’s total debt, which includes
long-term debt and short-term debt, was $21.3 billion, compared to $19.8
billion (excluding $0.1 billion of debt classified as held for sale) as of
December 31, 2014. Net debt (defined as long-term debt plus short-term debt, less cash
and cash equivalents and restricted cash) was $16.6 billion as of June 30,
2015, up from $15.8 billion at December 31, 2014. Net debt increased primarily
due to working capital deployment and dividend payments partly offset by the
impact of the appreciation of the U.S. dollar against the euro. Most of the
external debt is borrowed by the parent company on an unsecured basis and bears
interest at varying levels based on a combination of fixed and variable
interest rates. Gearing (defined as net debt divided by total equity) at June
30, 2015 was 42% as compared to 35% at December 31, 2014.
The margin applicable to
ArcelorMittal’s principal credit facilities and the coupons on certain of its
outstanding bonds are subject to adjustment in the event of a change in its
long-term credit ratings. Due to, among other things, the weak steel industry
outlook and ArcelorMittal’s credit metrics and level of debt, Standard &
Poor’s, Moody’s and Fitch downgraded the Company’s rating to below “investment
grade” in August, November and December 2012, respectively. On February 3,
2015, Standard & Poor’s further downgraded ArcelorMittal’s
credit rating to BB with a stable outlook. In addition, Moody’s currently has
ArcelorMittal’s credit rating on negative outlook. These downgrades
triggered the interest rate “step-up” clauses in most of the Company’s
outstanding bonds, resulting in an incremental interest expense of $63 million
for the six months ended June 30, 2015, and $50 million for the six months
ended June 30, 2014, compared to interest expense expected prior to the
downgrades.
ArcelorMittal’s principal credit facility, which is the $6 billion
revolving credit facility incorporating a first tranche of $2.5 billion
maturing on April 30, 2018, and a second tranche of $3.5 billion maturing on
April 30, 2020, contains restrictive covenants. Among other things, these
covenants limit encumbrances on the assets of ArcelorMittal and its
subsidiaries, the ability of ArcelorMittal’s subsidiaries to incur debt and the
ability of ArcelorMittal and its subsidiaries to dispose of assets in certain
circumstances. These agreements also require compliance with a financial
covenant, as summarized below.
The
Company must ensure that the ratio of “Consolidated Total Net Borrowings”
(consolidated total borrowings less consolidated cash and cash equivalents) to
“Consolidated EBITDA” (the consolidated net pre-taxation profits of the
ArcelorMittal group for a Measurement Period, subject to certain adjustments as
set out in the facilities) does not, at the end of each “Measurement Period”
(each period of 12 months ending on the last day of a financial half-year or a
financial year of the Company), exceed a certain ratio, referred to by the
Company as the “Leverage ratio”. ArcelorMittal’s principal credit facilities
set this ratio to 4.25 to 1, whereas certain facilities have a ratio of 4.0 to 1.
As of June 30, 2015, the Company was in compliance with both ratios.
Non-compliance
with the covenants in the facilities described above would entitle the lenders
under such facilities to accelerate the Company’s repayment obligations. The Company
was in compliance with the financial covenants in the agreements related to all
of its borrowings as of June 30, 2015.
As
of June 30, 2015, ArcelorMittal had guaranteed approximately $0.3 billion of
debt of its operating subsidiaries. ArcelorMittal’s debt facilities have
provisions whereby the acceleration of the debt of another borrower within the
ArcelorMittal group could, under certain circumstances, lead to acceleration
under such facilities.
The
following table summarizes the repayment schedule of ArcelorMittal’s
outstanding indebtedness, which includes short-term and long-term debt, as of
June 30, 2015.
|
|
Repayment Amounts per Year
|
|
|
(in billions of $)
|
|
Type of Indebtedness
As of June 30, 2015
|
Q315
|
|
Q415
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
>2020
|
|
Total
|
|
Bonds
|
1.0
|
|
-
|
|
1.6
|
|
2.5
|
|
2.5
|
|
2.3
|
|
2.2
|
|
7.0
|
|
19.1
|
|
Long-term revolving credit lines
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $2.5 billion tranche of $6 billion revolving credit facility
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
- $3.5 billion tranche of $6 billion revolving credit facility
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Commercial paper 1
|
0.2
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
0.2
|
|
Other loans
|
0.2
|
|
0.1
|
|
0.9
|
|
0.2
|
|
0.1
|
|
0.2
|
|
0.1
|
|
0.2
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt
|
1.4
|
|
0.1
|
|
2.5
|
|
2.7
|
|
2.6
|
|
2.5
|
|
2.3
|
|
7.2
|
|
21.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Commercial paper is expected to continue to be rolled over in
the normal course of business.
|
The average debt
maturity of the Company was 6.3 years as of June 30, 2015, as compared to
6.2 years as of December 31, 2014.
Financings
Principal credit facilities
On April 30, 2015,
ArcelorMittal signed a $6 billion revolving credit facility which incorporates
a first tranche of $2.5 billion maturing on April 30, 2018 and a second tranche
of $3.5 billion maturing on April 30, 2020. The facility may be used for
general corporate purposes and replaces the $2.4 billion revolving credit
facility agreement
dated May 6, 2010 and the $3.6
billion revolving credit facility agreement dated March 18, 2011. As of June
30, 2015, the $6 billion revolving credit facility remains fully available.
On September 30,
2010, ArcelorMittal entered into the $500 million revolving multi-currency
letter of credit facility (the “Letter of Credit Facility”). The Letter of
Credit Facility was used by the Company and its subsidiaries for the issuance
of letters of credit and other instruments and matures on September 30, 2016.
The terms of the letters of credit and other instruments contain certain
restrictions as to duration. The Letter of Credit Facility was amended on
October 26, 2012 to reduce its amount to $450 million. On September 30,
2014, the Company refinanced its Letter of Credit Facility by entering into a
$350 million revolving multi-currency letter of credit facility.
2015 Capital markets transactions
and other outstanding loans and debt securities
On July 3, 2015, ArcelorMittal completed the offering of CHF 225
million 2.5% Notes due July 3, 2020, issued under the Company’s Euro Medium
Term Notes Programme. The proceeds of the issuance will be used to repay or
prepay existing indebtedness.
On July 2, 2015, the Company redeemed its $1 billion 4.5%
Unsecured Notes due August 5, 2015 prior to their scheduled maturity for a
total amount of $1,022 million, including premium and accrued interest.
On June 1, 2015, ArcelorMittal completed the offering of $500
million 5.125% Notes due June 1, 2020 and $500 million 6.125% Notes due June 1,
2025, issued under the Company’s automatic shelf registration statement filed
with the U.S. Securities and Exchange Commission (“SEC”) (including a prospectus).
The proceeds of the issuance were used to repay existing indebtedness, in
particular the early redemption of bonds maturing in August 2015.
On April 9, 2015, ArcelorMittal completed the offering of €400
million Floating Rate Notes due April 9, 2018 and €500 million 3.00% Notes due
April 9, 2021 issued under the Company’s Euro Medium Term Notes Programme. The
proceeds of the issuance were used for general corporate purposes.
On June 10, 2014, ArcelorMittal entered into an agreement for
financing with a financial institution for $1.0 billion. The financial
institution had the right to request early repayment once per year beginning in
February 2015 until the final maturity on April 20, 2017. On February 13, 2015,
the Company elected to make an early repayment of such financing.
On January 14, 2015, ArcelorMittal completed the offering of €750
million 3.125% Notes due January 14, 2022 issued under the Euro Medium Term
Notes Programme. The proceeds of the issuance were used for general corporate
purposes.
During the six months ended June 30, 2014, ArcelorMittal entered
into certain short-term committed bilateral credit facilities. The facilities
were extended in 2015. As of June 30, 2015 the facilities, totalling
approximately $0.8 billion, remain fully available.
Additional information regarding the Company’s outstanding loans
and debt securities is set forth in Note 17 of ArcelorMittal’s consolidated
financial statements for the year ended December 31, 2014 and Note 8 of
ArcelorMittal’s condensed consolidated financial statements for the period
ended June 30, 2015.
True
sale of receivables (“TSR”) programs
The
Company has established a number of programs for sales without recourse of
trade accounts receivable to various financial institutions (referred to as
True Sale of Receivables (“TSR”)) for an aggregate amount of $5,267 million as
of June 30, 2015. This amount represents the maximum amounts of unpaid
receivables that may be sold and outstanding at any given time. Of this amount,
the Company has utilized $5,015 million and $4,778 million as of December 31,
2014 and as of June 30, 2015, respectively. Through the TSR programs, certain
operating subsidiaries of ArcelorMittal surrender the control, risks and
benefits associated with the accounts receivable sold; therefore, the amount of
receivables sold is recorded as a sale of financial assets and the balances are
removed from the consolidated statements of financial position at the moment of
sale. The total amount of receivables sold under
TSR
programs and derecognized in accordance with IAS 39 for the six months ended
June 30, 2014 and 2015 was $19.4 billion and $17.2 billion, respectively (with
amounts of receivables sold converted to U.S. dollars at the monthly average
exchange rate). Expenses incurred under the TSR programs (reflecting the
discount granted to the acquirers of the accounts receivable) recognized in the
consolidated statements of operations for the six months ended June 30, 2014
and 2015 were $80 million and $61 million, respectively.
Sources and uses of cash
The following table
summarizes cash flows of ArcelorMittal for the six months ended June 30, 2015
and 2014:
|
Summary of Cash Flows
for the six months ended June 30,
|
|
2014
|
|
2015
|
|
(in $ millions)
|
|
(in $ millions)
|
Net cash provided by operating activities
|
1,077
|
|
104
|
Net cash used in investing activities
|
(1,697)
|
|
(875)
|
Net cash (used in) provided by financing activities
|
(1,118)
|
|
1,597
|
Net cash provided by
operating activities
For
the six months ended June 30, 2015, net cash provided by operating activities was
$0.1 billion as compared with net cash provided by operating activities of $1.1
billion for the six months ended June 30, 2014.
Net
cash provided by operating activities for the six months ended June 30, 2015,
was negatively impacted by a $0.8 billion increase in working capital
(consisting of inventories plus accounts receivable less accounts payable),
primarily related to an increase in trade receivables and decrease in trade payables
of $888 million and $571 million, respectively, partly offset by a decrease in inventories
of $645 million, as compared to a $50 million increase in working capital a
year earlier. The increase in trade receivables and decrease in trade payables is
mainly due to increased activity in the first quarter of 2015 after a seasonal
break at the end of the fourth quarter of 2014 while the reduction in inventories is mainly related to
lower raw material prices for the six months ended June 30, 2015 as the average
benchmark iron ore price per tonne of $60 CFR China and the average benchmark
price for hard coking coal FOB Australia were 46% and 9% lower than in 2014,
respectively, leading to a lower carrying value of raw materials and finished
steel products in inventory.
Net cash provided by operating activities for the six months ended
June 30, 2014 was negatively affected by payments made relating to the
settlement of antitrust litigation in the United States and termination of the
Senegal greenfield project.
Net cash used in investing
activities
Net
cash used in investing activities for the six months ended June 30, 2015 was $0.9
billion as compared with net cash used in investing activities of $1.7 billion
for the six months ended June 30, 2014.
Capital
expenditures were $1.3 billion for the six months ended June 30, 2015 as
compared with $1.6 billion for the six months ended June 30, 2014. The Company
currently expects that capital expenditures for the year ended 2015 will amount
to approximately $3.0 billion, involving mainly sustaining capital expenditures.
The following tables summarize the Company’s principal growth and
optimization projects involving significant capital expenditures (including
those invested by the Company’s joint ventures) completed in the last half of
2014 and in the current year, as well as those that are ongoing.
|
Completed projects in most recent quarters
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Region/segment
|
|
Site
|
|
Project
|
|
Capacity / particulars
|
|
Actual completion
|
|
China
|
|
Hunan Province
|
|
VAMA auto steel JV
|
|
Capacity of 1.5mt pickling line, 0.9mt continuous annealing line
and 0.5mt of hot dipped galvanizing auto steel
|
|
Q1 2015
|
|
USA
|
|
AM/NS Calvert
|
|
Continuous coating line upgrade to Aluminize line#4
|
|
Increased production of Usibor by 0.1mt / year
|
|
Q1 2015
|
|
Brazil
|
|
Juiz de Fora (Brazil)
|
|
Rebar expansion
|
|
Increase in rebar capacity by 0.4mt / year
|
|
Q1 2015
|
|
NAFTA
|
|
ArcelorMittal Dofasco (Canada)
|
|
Phase 1: Construction of a heavy gauge galvanizing line#6 to
optimize galvanizing operations
|
|
Optimize cost and increase shipment of galvanized products by
0.3mt / year
|
|
Q2 2015
|
|
|
|
|
|
|
|
|
|
|
|
Ongoing projects
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
|
|
Site
|
|
Project
|
|
Capacity / particulars
|
|
Forecasted completion
|
|
NAFTA
|
|
ArcelorMittal Dofasco (Canada)
|
|
Phase 2: Convert the current galvanizing line #4 to a Galvalume
line
|
|
Allow the galvaline #4 to produce 160kt for galvalume and 128kt
for galvanize
|
|
2016
|
|
Europe
|
|
ArcelorMittal Krakow (Poland)
|
|
HRM extension
HDG increase
|
|
Increase HRC capacity by 0.9mt/ year
Increasing HDG capacity by 0.4mt/ year
|
|
2016
2016
|
|
Brazil
|
|
Acindar (Argentina)
|
|
New rolling mill
|
|
Increase in rolling capacity by 0.4mt / year for bars for civil
construction
|
|
2016
|
|
Mining
|
|
Liberia
|
|
Phase 2 expansion project
|
|
Increase production capacity to 15mt/ year (high grade sinter
feed)
|
|
Initial forecast of 2015 /
Currently delayed1
|
|
Brazil
|
|
ArcelorMittal Vega Do Sul (Brazil)
|
|
Expansion project
|
|
Increase hot dipped galvanizing (HDG) capacity by 0.6mt / year
and cold rolling (CR) capacity by 0.7mt / year
|
|
On hold
|
|
Brazil
|
|
Monlevade (Brazil)
|
|
Wire rod production expansion
|
|
Increase in capacity of finished products by 1.1mt / year
|
|
On hold2
|
|
Brazil
|
|
Juiz de Fora (Brazil)
|
|
Meltshop expansion
|
|
Increase in meltshop capacity by 0.2mt / year
|
|
On hold2
|
|
Brazil
|
|
Monlevade (Brazil)
|
|
Sinter plant, blast furnace and melt shop
|
|
Increase in liquid steel capacity by 1.2mt / year; Sinter feed
capacity of 2.3mt / year
|
|
On hold
|
|
|
|
|
|
|
|
|
|
|
|
Joint venture projects
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country
|
|
Site
|
|
Project
|
|
Capacity / particulars
|
|
Forecasted completion
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
|
Baffinland
|
|
Early revenue phase
|
|
Production capacity 3.5mt/ year (iron ore)
|
|
H2 2015
|
|
USA
|
|
AM/NS Calvert
|
|
Slab yard expansion
|
|
Increase coil production level up to 5.3mt/year coils.
|
|
H2 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
The Liberia phase 2 project to invest $1.7 billion to construct
15 million tonnes of concentrate capacity and associated infrastructure has
been delayed. This follows the contractor’s declaration of force majeure on
August 8, 2014 due to the Ebola virus outbreak in West Africa. Given the
project delays and recent deterioration of iron ore prices, the Company is
assessing its options to progress with this project. ArcelorMittal remains
fully committed to Liberia. Phase 1 operations are continuing as normal at
this time and to date have not been affected by the Ebola situation in
Liberia.
|
2
|
Though the Monlevade wire rod expansion project and Juiz de
Fora meltshop expansion are expected to be completed in the second half of
2015 and 2016 respectively, the Company does not expect to increase shipments
until domestic demand improves.
|
Cash
inflow from other investing activities for the six months ended June 30, 2015
amounted to $412 million and included primarily an inflow of $108 million from
the exercise of the fourth put option on Hunan Valin shares, $67 million
following the repayment of a loan granted to the equity method investment
ArcelorMittal RZK Celik Servis Merkezi Sanayi ve Ticaret Annim Sirketi (“RZK”),
$92 million from the steel cord business divestment and proceeds from the sale
of tangible assets. Other investing activities for the six months ended June
30, 2014 included an inflow of $183 million from the sale of ATIC Services S.A.
(“ATIC”) and the steel cord business ($144 million and $39 million,
respectively) as well as proceeds from the exercise of the second put option in
Hunan Valin. Other investing activities for the six months ended June 30, 2014
included also an outflow of $258 million associated with the acquisition of
ThyssenKrupp Steel USA through the joint venture with Nippon Steel &
Sumitomo Metal Corporation (“NSSMC”).
Net cash (used in)
provided by financing activities
Net
cash provided by financing activities was $1.6 billion for the six months ended
June 30, 2015, as compared to cash used in financing activities of $1.1 billion
for the six months ended June 30, 2014.
During
the six months ended June 30, 2015, receipts from the issuance
of debenture loans amounted to $2.6 billion including $1.9 billion related to
the issuance of Notes under the Company’s Euro Medium Term Notes Programme
(€750 million 3.125% Notes due January 14, 2022, €400 million Floating Rate
Notes due April 9, 2018 and €500 million 3.00% Notes due April 9, 2021) and $1
billion proceeds from the issuance of $500 million 5.125% Notes due June 1,
2020 and $500 million 6.125 per cent Notes due June 1, 2025. These proceeds
were partly offset by a repayment of a $1.0 billion loan with a financial
institution.
Dividends paid to ArcelorMittal shareholders and to
non-controlling shareholders in subsidiaries during the six months ended June
30, 2015 amounted to $331 million and $53 million, respectively. Dividends paid
to non-controlling shareholders in subsidiaries and payments to holders of
subordinated perpetual capital securities during the six months ended June 30,
2014 amounted to $40 million and $22 million, respectively.
Equity
Equity attributable to the equity holders of the parent decreased
to $36.8 billion at June 30, 2015, compared with $42.1 billion at December 31,
2014, primarily due to the decrease of the
foreign exchange translation reserve by $4.4 billion as a result of the
depreciation of most currencies against the U.S. dollar, the net loss
attributable to the equity holders of the parent of $0.5 billion and dividend
payments of $0.3 billion.
Earnings
distributions
On
May 5, 2015 at the Annual General Shareholders’ meeting, the shareholders
approved the Company’s dividend of $0.20 per share. The dividend amounted to $331
million and was paid on June 15, 2015.
Treasury
shares
ArcelorMittal
held 10,876,852 shares in treasury at June 30, 2015, down from 11,018,413
shares at December 31, 2014 as a result of allocations to employees under
incentive plans. At June 30, 2015, the number of treasury shares represented
approximately 0.65% of the total issued number of ArcelorMittal shares.
C.
Research and development, patents and licenses
Research and development
expense (included in selling, general and administrative expenses) was $120
million for the six months ended June 30, 2015 as compared to $150 million for
the six months ended June 30, 2014. The decrease in expense was largely due to
the USD appreciation against the Euro.
D.
Trend information
All
of the statements in this “Trend information” section are subject to and
qualified by the information set forth under the “Cautionary statement regarding
forward-looking statements”. See also “—Key factors affecting results of operations”
above.
Outlook
Based on the current economic outlook, ArcelorMittal expects
global apparent steel consumption (“ASC”) to be stable in 2015 as compared to
2014. ArcelorMittal expects the pick-up in European manufacturing activity to
continue and support ASC growth of approximately 1.5% to 2.5% in 2015. Whilst
underlying demand continues to expand in the United States, due to the destock
that occurred during the first six months of 2015, ASC is expected to decline
by 3% to 4% in 2015; nevertheless, ASC in the United States for the second half
of 2015 is expected to be approximately 2% to 3% above the first half of 2015
levels. The outlook for emerging markets remains weak and ArcelorMittal has
revised its ASC forecasts accordingly. In Brazil, particularly due to a weaker
construction market, ASC is expected to decline by 11% to 13%; for the CIS
ArcelorMittal expects to decline by 8% to 10%. In China, ArcelorMittal sees
signs of stabilization due to the government’s targeted stimulus, however the
real estate market remains weak and ArcelorMittal expects a slight decline of
up to 1% in apparent steel consumption in 2015. While risks remain to the
global demand picture, given ArcelorMittal’s specific geographical and end
market exposures, the Company expects its steel shipments to increase by
between 3% to 5% in 2015 as compared to 2014.
Additionally, the Company expects 2015 capital expenditures of
approximately $3.0 billion and 2015 net interest expense of approximately $1.4
billion.
Importantly, the Company continues to expect to achieve progress
towards the medium term net debt target of $15 billion.
E.
Off-balance sheet arrangements
ArcelorMittal
has no unconsolidated special purpose financing or partnership entities that
are likely to create material contingent obligations.
Recent developments
·
During the first half of 2015,
ArcelorMittal completed several financing transactions. Please refer to the
Business Overview – Liquidity and Capital Resources and Business Overview –
Financings sections of this report for a summary of the transactions.
·
On July 10, 2015, ArcelorMittal announced that Simon Wandke has
been nominated Executive Vice President of ArcelorMittal and promoted to Chief
Executive Officer of ArcelorMittal Mining, with immediate effect. Simon
replaces Bill Scotting, who is leaving the Company to pursue other
opportunities.
·
On May 22, 2015, ArcelorMittal and the Steel Authority of India
Limited (“SAIL”), India’s leading steel company signed a Memorandum of
Understanding to set up an automotive steel manufacturing facility under a
joint venture arrangement in India. This was the first step toward creating the
proposed joint venture which will construct a state-of-the-art cold rolling
mill and other downstream finishing facilities in India that will offer
technologically advanced steel products to India’s rapidly growing automotive
sector.
Legal proceedings
Tax claims
Brazil
In May 2014,
ArcelorMittal Comercializadora de Energia received a tax assessment from the
state of Minas Gerais alleging that the Company did not correctly
calculate tax credits on interstate sales of electricity from the February
2012 to December 2013 period. The amount claimed totals $49 million.
ArcelorMittal Comercializadora de Energia filed its defense in June 2014.
Following an unfavorable administrative decision in November 2014,
ArcelorMittal filed an appeal in December 2014. In March 2015, there was a
further unfavourable decision at the second administrative level. The Company
is preparing a judicial claim.
In the period from May to
July 2015, ArcelorMittal Brasil received 9 tax assessments from the state
of Rio Grande do Sul alleging that the Company, through its branches in
that state, had not made advance payments of ICMS ( a value added tax) on sales
in that state covering the period from May 2010 to April 2015. The amount
claimed totals $85 million. ArcelorMittal Brasil has filed its defense in 8
cases and is preparing its defense in the other case.
Ukraine
In
September 2012, the Ukrainian tax authorities conducted an audit of
ArcelorMittal Kryvyi Rih, resulting in a tax claim of approximately $71
million. The claim relates to cancellation of VAT refunds, cancellation of
deductible expenses and queries on transfer pricing calculations. On January 2,
2013, ArcelorMittal Kryvyi Rih filed a lawsuit with the District Administrative
Court to challenge the findings of this tax audit. On
April 9, 2013, the District Administrative Court rejected the claim by the tax
authorities retaining only a tax liability of approximately $0.2 million
against ArcelorMittal Kryvyi Rih. Both parties filed appeals,
and, on November 7, 2013, the Court of Appeal rejected the appeal by the tax
authorities and retained only a tax liability of approximately $0.1 million
against ArcelorMittal Kryvyi Rih. On November 12, 2013, the tax
authorities filed an appeal in cassation. On June 3, 2015, the Supreme
Administrative Court of Ukraine decided entirely in favour of ArcelorMittal
Kryvyi Rih. The tax authorities may appeal the judgment to the Supreme Court of
Ukraine before June 3, 2016.
Competition/Antitrust claims
Romania
In 2010 and 2011,
ArcelorMittal Galati entered into high volume electricity purchasing contracts
with Hidroelectrica, a partially state-owned electricity producer. Following
allegations by Hidroelectrica’s minority shareholders that ArcelorMittal Galati
(and other industrial electricity consumers) benefitted from artificially low
tariffs, the European Commission opened a formal investigation into alleged
state aid in April 2012. The European Commission announced on June 12 2015 that
electricity supply contracts signed by Hidroelectrica with certain
electricity traders and industrial customers (including
the one entered by ArcelorMittal Galati) did not involve state aid within the
meaning of the EU rules.
Other
legal claims
Argentina
Over the course of 2007 to 2015, the Argentinian Customs Office
Authority (Aduana) notified the Company of certain inquiries that it is
conducting with respect to prices declared by the Company’s Argentinian
subsidiary, Acindar related to iron ore imports. The Customs Office Authority
is seeking to determine whether Acindar incorrectly declared prices for iron
ore imports from several different Brazilian suppliers and from ArcelorMittal
Sourcing on 37 different claims concerning several shipments made between 2002
and 2014. The aggregate amount claimed by the Customs Office Authority in respect
of the shipments is approximately $ 192 million. The investigations are
subject to the administrative procedures of the Customs Office Authority and
are at different procedural stages depending on the filing date of the
investigation. By May 2015, in 21of the total 37 cases, the administrative
branch of the Customs Office Authority ruled against Acindar (representing
total claims of $65 million). These decisions have been appealed to the
Argentinian National Fiscal Court.
Italy
In January 2010, ArcelorMittal received notice of a claim filed by
Finmasi S.p.A. relating to a memorandum of agreement (“MoA”) entered into
between ArcelorMittal Distribution Services France (“AMDSF”) and Finmasi in
2008. The MoA provided that AMDSF would acquire certain of Finmasi’s businesses
for an amount not to exceed €93 million, subject to the satisfaction of certain
conditions precedent, which, in AMDSF’s view, were not fulfilled. Finmasi sued
for (i) enforcement of the MoA, (ii) damages of €14 million to €23.7 million or
(iii) recovery costs plus quantum damages for Finmasi’s alleged lost
opportunity to sell to another buyer. In September 2011, the court rejected
Finmasi’s claims other than its second claim. The court appointed an expert to
determine the quantum of damages. In May 2013, the expert’s report was issued
and valued the quantum of damages in the range of €37.5 million to €59.5
million. ArcelorMittal appealed the decision on the merits. In May 2014, the
Court of Appeals issued a decision rejecting ArcelorMittal’s appeal. In June
2014, ArcelorMittal filed an appeal of the Court of Appeal’s judgment with the
Italian Court of Cassation. On December 18, 2014, the Court of Milan issued a
decision on the quantum of the damages and valued the quantum of damages in the
sum of €23.7 million plus interest. In June 2015, both parties served appeals
of the decision on quantum, with ArcelorMittal also seeking the suspension of
the enforceability of the decision. On July 1, 2015, Finmasi
formally notified to AMDSF the declaration of enforcement of the decision of
December 18, 2014. On July 28, 2015, AMDSF filed an appeal against such
declaration with the Court of Appeal of Reims in France.
Corporate governance
Please refer to the “Corporate Governance”
section of our 2014 Annual Report on Form 20-F for a complete overview of our
corporate governance practices. The purpose of the present section is solely to
describe the events and changes affecting the corporate governance of the
Company between December 31, 2014 and June 30, 2015.
For a description of
the changes to the board of directors of the Company (the “Board of Directors”)
after the annual general meeting of shareholders held on May 5, 2015, please
refer to the Board of Directors section below.
Share ownership
In May 2015, the
Company put in place a Share Ownership Policy for its Chief Executive Officer
(“CEO”). Share ownership demonstrates to our shareholders, the investing public
and the Company’s employees, the commitment of the CEO to the Company, and
directly aligns his interests with the Company’s shareholders.
Accordingly,
the CEO should, within 3 years of the end of the current calendar year, own
common shares of the Company at least equal to 3 times his annual salary.
Annual general meeting of
shareholders held on May 5, 2015
Share
buy-back
The
share buy-back authorization approved by the annual general meeting of
shareholders in May 2010 was cancelled by a resolution of the general meeting
of shareholders on May 5, 2015. The share buy-back authorization approved by
the annual general meeting of shareholder on May 5, 2015 will remain valid for
a five-year period, i.e., until May 5, 2020, or until the date of its renewal
by a resolution of the general meeting of shareholders if such renewal date is
prior to the expiration of the five-year period.
The
maximum number of shares that may be held or acquired is the maximum allowed by
the Luxembourg law of August 10, 1915 on commercial companies, as amended (the
“Law”), in such manner that the accounting par value of the Company’s shares
held by the Company do not in any event exceed 10% of the Company’s issued
share capital.
The
maximum number of own shares that the Company may hold at any time directly or
indirectly may not have the effect of reducing its net assets ("actif
net") below the amount mentioned in paragraphs 1 and 2 of Article 72-1
of the Law.
The
purchase price per share to be paid shall not represent more than 110% of the
trading price of the shares on the markets where the Company is listed, and no
less than one cent.
For
off-market transactions, the maximum purchase price shall be 110% of the
reference price on the Euronext markets where the Company is listed. The
reference price will be deemed to be the average of the final listing prices
per share on these markets during thirty (30) consecutive days on which these
markets are open for trading preceding the three trading days prior to the date
of purchase. In the event of a share capital increase by incorporation of
reserves or issue premiums and the free allotment of shares, as well as in the
event of the division or regrouping of the shares, the purchase price indicated
above shall be adjusted by a multiplying coefficient equal to the ratio between
the number of shares comprising the issued share capital prior to the
transaction and such number following the transaction.
All
powers were granted to the Board of Directors, with the power to delegate, to
effectuate the implementation of this authorization.
Equity-based
compensation
The
May 5, 2015 annual general meeting of shareholders authorized the Board of
Directors, in particular to allocate up to 5 million of the Company’s fully
paid-up common shares (the “2015 Cap”), and to adopt any rules or measures to
implement the Group Management Board Performance Share Unit Plan (the “GMB PSU
Plan”) and other retention based grants below the level of the GMB that the
Board of Directors may at its discretion consider appropriate. Such
authorization is valid until the annual general meeting of shareholders to be
held in 2016.
The
GMB PSU Plan is designed to enhance the long-term performance of the Company
and align the members of our Group Management Board (“GMB”) with the Company’s
objectives. The GMB PSU Plan complements the Company’s existing program of
annual performance-related bonuses, which is the Company’s reward system for
short-term performance and achievements. The main objective of the GMB PSU Plan
is to be an effective performance-enhancing scheme for GMB members based on the
achievement of the Company’s strategy aimed at creating measurable long-term
shareholder value.
The
members of the GMB, including the Chief Executive Officer, will be eligible for
Performance Share Unit (“PSU”) grants. The GMB PSU Plan provides for cliff
vesting on the third year anniversary of the grant date, under the condition
that the relevant GMB member continues to be actively employed by the
ArcelorMittal group on that date. If the GMB member is retired on that date or
in case of an early retirement by mutual consent, the relevant GMB member will
not automatically forfeit PSUs and pro rata vesting will be considered at the
end of the vesting period at the sole discretion of the Appointments,
Remuneration & Corporate Governance Committee of the Board
of Directors. Awards under the GMB PSU Plan are subject
to the fulfillment of cumulative performance criteria over a three-year period
from the date of the PSU grant. The value of the grant at grant date will equal
one year of base salary for the Chief Executive Officer and 80% of base salary
for the other GMB members. Each PSU may give right to up to one and half (1.5)
shares of the Company.
An
explanatory presentation, including a description of the performance targets
applicable to the GMB PSU Plan is available on www.arcelormittal.com under
Investors – Equity investors – Shareholders’ meetings – Annual General Meeting
May 5, 2015.
The
allocation of PSUs to eligible GMB members is reviewed by the Appointments,
Remuneration & Corporate Governance Committee of the Board of Directors,
which is comprised of four independent directors, and which makes a proposal
and recommendation to the full Board of Directors pursuant to such review. The
vesting criteria of the PSUs are also monitored by the Appointments,
Remuneration & Corporate Governance Committee. The Company will report in
its annual reports on the progress of meeting the vesting criteria on each
grant anniversary date as well as on the applicable peer group.
Board
of Directors
The
May 5, 2015 annual general meeting of shareholders re-elected Mr. Narayanan
Vaghul, Mr. Wilbur Ross and Mr. Tye Burt as directors and elected Mrs. Karyn
Ovelmen as director, each of them for a
three-year term that will automatically expire at the annual general meeting of
shareholders to be held in 2018.
The
Board of Directors is composed of 12 directors, of whom eleven are
non-executive directors and eight are independent directors. The 12 directors
are Mr. Lakshmi N. Mittal, Mrs. Vanisha Mittal Bhatia, Mr. Antoine Spillmann,
Mr. Wilbur L. Ross, Mr. Lewis B. Kaden, Mr. Narayanan Vaghul, Mr. Jeannot
Krecké, Mr. Tye Burt, Mrs. Suzanne Nimocks, Mr. Bruno Lafont, Mr. Michel Wurth
and Mrs. Karyn Ovelmen. The four non independent directors are Mr. Lakshmi N.
Mittal, Mrs. Vanisha Mittal Bhatia, Mr. Jeannot Krecké and Mr. Michel Wurth.
The Board of Directors comprises one executive director: Mr. Lakshmi N. Mittal,
the Chairman and Chief Executive Officer of the Company. None of the members of
the Board of Directors, including the executive director, have entered into
service contracts with the Company or any of its subsidiaries that provide for
benefits upon the termination of their mandate. For additional information on
the functioning of the Board of Directors and the composition of its
committees, please refer to the 2014 Annual Report on Form 20-F of the Company
available on www.arcelormittal.com under “Investors – Financial reports – SEC
Filings.”
Cautionary statement regarding 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 financial and stock
market regulator (Commission de Surveillance du Secteur Financier) and the SEC.
ArcelorMittal undertakes no obligation to publicly update its forward looking
statements, whether as a result of new information, future events, or
otherwise.
ArcelorMittal
Condensed
Consolidated Financial Statements as of and for the six months ended June 30,
2015
ARCELORMITTAL AND SUBSIDIARIES
Condensed Consolidated Statements of
Financial Position
(in
millions of U.S. dollars, except share and per share data)
(unaudited)
|
December 31,
2014
|
|
June 30,
2015
|
ASSETS
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
3,893
|
|
4,611
|
Restricted cash
|
123
|
|
101
|
Trade accounts receivable and other (including 469 and 665 from
related parties at December 31, 2014 and June 30, 2015,
respectively)
|
3,696
|
|
4,283
|
Inventories (note 4)
|
17,304
|
|
15,466
|
Prepaid expenses and other current assets
|
2,627
|
|
2,402
|
Assets held for sale (note 5)
|
414
|
|
24
|
Total current assets
|
28,057
|
|
26,887
|
|
|
|
|
Non-current assets:
|
|
|
|
Goodwill and intangible assets
|
8,104
|
|
7,279
|
Biological assets
|
128
|
|
103
|
Property, plant and equipment (note 2)
|
46,465
|
|
42,545
|
Investments in associates and joint ventures (note 3)
|
5,833
|
|
5,532
|
Other investments
|
1,202
|
|
1,103
|
Deferred tax assets
|
7,962
|
|
7,214
|
Other assets
|
1,428
|
|
1,269
|
Total non-current assets
|
71,122
|
|
65,045
|
Total assets
|
99,179
|
|
91,932
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
Current liabilities:
|
|
|
|
Short-term debt and current portion of long-term debt (note 8)
|
2,522
|
|
3,239
|
Trade accounts payable and other (including 290 and
242 to related parties at December 31, 2014 and June 30, 2015,
respectively)
|
11,450
|
|
10,291
|
Short-term provisions (note 10)
|
1,024
|
|
712
|
Accrued expenses and other liabilities
|
5,740
|
|
5,150
|
Income tax liabilities
|
230
|
|
161
|
Liabilities held for sale (note 5)
|
157
|
|
-
|
Total current liabilities
|
21,123
|
|
19,553
|
|
|
|
|
Non-current liabilities:
|
|
|
|
Long-term debt, net of current portion (note 8)
|
17,275
|
|
18,031
|
Deferred tax liabilities
|
3,004
|
|
2,707
|
Deferred employee benefits
|
10,074
|
|
9,652
|
Long-term provisions (note 10)
|
1,587
|
|
1,486
|
Other long-term obligations
|
956
|
|
670
|
Total non-current liabilities
|
32,896
|
|
32,546
|
Total liabilities
|
54,019
|
|
52,099
|
|
|
|
|
Commitments and contingencies (note 12 and note 13)
|
|
|
|
|
|
|
|
Equity (note 6):
|
|
|
|
Equity attributable to the equity holders of the parent
|
42,086
|
|
36,813
|
Non-controlling interests
|
3,074
|
|
3,020
|
Total equity
|
45,160
|
|
39,833
|
Total liabilities and equity
|
99,179
|
|
91,932
|
The accompanying notes are an integral part of these condensed consolidated
financial statements.
ARCELORMITTAL AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in
millions of U.S. dollars, except share and per share data)
(unaudited)
|
Six months ended June 30,
|
|
2014
|
|
2015
|
Sales (including 3,111 and 3,126 of sales to related parties for
2014 and 2015, respectively)
|
40,492
|
|
34,008
|
Cost of sales (including depreciation and impairment of 2,011
and 1,627 and purchases from related parties of 655 and 860 for
2014 and 2015, respectively)
|
37,517
|
|
31,552
|
Gross margin
|
2,975
|
|
2,456
|
Selling, general and administrative expenses
|
1,469
|
|
1,306
|
Operating income
|
1,506
|
|
1,150
|
Income from investments in associates, joint ventures and other investments
|
154
|
|
123
|
Financing costs - net
|
(1,516)
|
|
(1,477)
|
Income (loss) before taxes
|
144
|
|
(204)
|
Income tax expense (note 7)
|
217
|
|
334
|
Net income (loss) (including non-controlling interests)
|
(73)
|
|
(538)
|
|
|
|
|
Net income (loss) attributable to:
|
|
|
|
Equity holders of the parent
|
(153)
|
|
(549)
|
Non-controlling interests
|
80
|
|
11
|
Net income (loss) (including non-controlling interests)
|
(73)
|
|
(538)
|
|
|
|
|
Earnings (loss) per common share (in U.S. dollars):
|
|
|
|
Basic and diluted
|
(0.09)
|
|
(0.31)
|
|
|
|
|
Weighted average common shares outstanding (in millions):
|
|
|
|
Basic and diluted (note 6)
|
1,791
|
|
1,794
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated
financial statements.
ARCELORMITTAL AND SUBSIDIARIES
Condensed Consolidated Statements of Other
Comprehensive Income
(in
millions of U.S. dollars, except share and per share data)
(unaudited)
|
|
|
Six months ended
June 30,
|
|
|
|
2014
|
|
2015
|
|
Net income (loss) (including non-controlling interests)
|
|
(73)
|
|
|
(538)
|
|
|
|
|
|
|
|
|
Items that can be recycled to the condensed consolidated
statements of operations
|
|
|
|
|
|
|
Available-for-sale investments:
|
|
|
|
|
|
|
|
Gain (loss) arising during the period
|
253
|
|
|
(77)
|
|
|
|
Reclassification adjustments for (gain) loss included in the
condensed consolidated statements of operations
|
56
|
|
|
-
|
|
|
|
|
309
|
|
|
(77)
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
Gain (loss) arising during the period
|
87
|
|
|
10
|
|
|
|
Reclassification adjustments for (gain) loss included in the condensed
consolidated statements of operations
|
5
|
|
|
(82)
|
|
|
|
|
92
|
|
|
(72)
|
|
|
Exchange differences arising on translation of foreign
operations:
|
|
|
|
|
|
|
|
Gain (loss) arising during the period
|
145
|
|
|
(4,010)
|
|
|
|
Reclassification adjustments for (gain) loss included in the
condensed consolidated statements of operations
|
(18)
|
|
|
(54)
|
|
|
|
|
127
|
|
|
(4,064)
|
|
|
|
|
|
|
|
|
|
|
Share of other comprehensive income (loss) related to associates
and joint ventures:
|
|
|
|
|
|
|
|
Gain (loss) arising during the period
|
(85)
|
|
|
(355)
|
|
|
|
Reclassification adjustments for (gain) loss included in the
consolidated statements of operations
|
(54)
|
|
|
(2)
|
|
|
|
|
(139)
|
|
|
(357)
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (expense) related to components of other
comprehensive income that can be recycled to the condensed consolidated
statements of operations
|
(7)
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss)
|
382
|
|
|
(4,547)
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss) attributable to:
|
|
|
|
|
|
|
Equity holders of the parent
|
388
|
|
|
(4,400)
|
|
|
Non-controlling interests
|
(6)
|
|
|
(147)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
382
|
|
|
(4,547)
|
|
Total comprehensive income (loss)
|
|
309
|
|
|
(5,085)
|
|
Total comprehensive income (loss) attributable to:
|
|
|
|
|
|
|
Equity holders of the parent
|
|
235
|
|
|
(4,949)
|
|
Non-controlling interests
|
|
74
|
|
|
(136)
|
|
Total comprehensive income (loss)
|
|
309
|
|
|
(5,085)
|
The accompanying notes are an integral part of these condensed consolidated
financial statements.
ARCELORMITTAL AND SUBSIDIARIES
Condensed Consolidated Statements of Changes
in Equity
(in
millions of U.S. dollars, except share and per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that can be recycled
to the condensed consolidated statements of operations
|
|
Items that cannot be
recycled to the condensed consolidated statements of operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
Treasury shares
|
Subordinated perpetual
capital securities
|
Mandatorily convertible
notes
|
Additional paid-in capital
|
Retained earnings
|
Foreign
currency
translation
adjustments
|
|
Unrealized gains (losses)
on derivative financial instruments
|
|
Unrealized gains (losses)
on available-for-sale securities
|
|
Recognized actuarial
losses
|
Equity attributable to the
equity holders of the parent
|
Non-controlling interests
|
Total Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares1, 2
|
|
|
|
|
|
|
|
Balance at December 31, 2013
|
1,654
|
|
|
10,011
|
|
(414)
|
650
|
1,838
|
20,248
|
24,037
|
(2,910)
|
|
(324)
|
|
(105)
|
|
(3,238)
|
49,793
|
3,380
|
53,173
|
|
Net income (loss) (including non-controlling interests)
|
-
|
|
|
-
|
|
-
|
-
|
-
|
-
|
(153)
|
-
|
|
-
|
|
-
|
|
-
|
(153)
|
80
|
(73)
|
|
Other comprehensive income (loss)
|
-
|
|
|
-
|
|
-
|
-
|
-
|
-
|
-
|
7
|
|
66
|
|
315
|
|
-
|
388
|
(6)
|
382
|
|
Total comprehensive income (loss)
|
-
|
|
|
-
|
|
-
|
-
|
-
|
-
|
(153)
|
7
|
|
66
|
|
315
|
|
-
|
235
|
74
|
309
|
|
Redemption of subordinated perpetual capital securities
|
-
|
|
|
-
|
|
-
|
(650)
|
-
|
-
|
(7)
|
-
|
|
-
|
|
-
|
|
-
|
(657)
|
-
|
(657)
|
|
Mandatory convertible bonds extension
|
-
|
|
|
-
|
|
-
|
-
|
-
|
-
|
-
|
-
|
|
-
|
|
-
|
|
-
|
-
|
(47)
|
(47)
|
|
Option premiums on treasury shares
|
-
|
|
|
-
|
|
-
|
-
|
-
|
-
|
(309)
|
-
|
|
309
|
|
-
|
|
-
|
-
|
-
|
-
|
|
Recognition of share based payments
|
-
|
|
|
-
|
|
-
|
-
|
-
|
12
|
-
|
-
|
|
-
|
|
-
|
|
-
|
12
|
-
|
12
|
|
Dividend
|
-
|
|
|
-
|
|
-
|
-
|
-
|
-
|
(333)
|
-
|
|
-
|
|
-
|
|
-
|
(333)
|
(49)
|
(382)
|
|
Coupon on subordinated perpetual capital securities
|
-
|
|
|
-
|
|
-
|
-
|
-
|
|
(22)
|
-
|
|
-
|
|
-
|
|
-
|
(22)
|
-
|
(22)
|
|
Other changes in non-controlling interests
|
-
|
|
|
-
|
|
-
|
-
|
-
|
-
|
(40)
|
-
|
|
-
|
|
-
|
|
-
|
(40)
|
(52)
|
(92)
|
|
Other movements
|
-
|
|
|
-
|
|
-
|
-
|
-
|
-
|
(65)
|
-
|
|
-
|
|
-
|
|
-
|
(65)
|
(5)
|
(70)
|
|
Balance at June 30, 2014
|
1,654
|
|
|
10,011
|
|
(414)
|
-
|
1,838
|
20,260
|
23,108
|
(2,903)
|
|
51
|
|
210
|
|
(3,238)
|
48,923
|
3,301
|
52,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014
|
1,654
|
|
|
10,011
|
|
(399)
|
-
|
1,838
|
20,258
|
22,182
|
(7,627)
|
|
89
|
|
405
|
|
(4,671)
|
42,086
|
3,074
|
45,160
|
|
Net income (loss) (including non-controlling interests)
|
-
|
|
|
-
|
|
-
|
-
|
-
|
-
|
(549)
|
-
|
|
-
|
|
-
|
|
-
|
(549)
|
11
|
(538)
|
|
Other comprehensive income (loss)
|
-
|
|
|
-
|
|
-
|
-
|
-
|
-
|
-
|
(4,276)
|
|
(58)
|
|
(66)
|
|
-
|
(4,400)
|
(147)
|
(4,547)
|
|
Total comprehensive income (loss)
|
-
|
|
|
-
|
|
-
|
-
|
-
|
-
|
(549)
|
(4,276)
|
|
(58)
|
|
(66)
|
|
-
|
(4,949)
|
(136)
|
(5,085)
|
|
Recognition of share based payments
|
-
|
|
|
-
|
|
3
|
-
|
-
|
11
|
-
|
-
|
|
-
|
|
-
|
|
-
|
14
|
-
|
14
|
|
Dividend
|
-
|
|
|
-
|
|
-
|
-
|
-
|
-
|
(331)
|
-
|
|
-
|
|
-
|
|
-
|
(331)
|
(55)
|
(386)
|
|
Other changes in non-controlling interests (see note 6)
|
-
|
|
|
-
|
|
-
|
-
|
-
|
-
|
-
|
-
|
|
-
|
|
-
|
|
-
|
-
|
148
|
148
|
|
Other movements
|
-
|
|
|
-
|
|
-
|
-
|
-
|
-
|
(7)
|
-
|
|
-
|
|
-
|
|
-
|
(7)
|
(11)
|
(18)
|
|
Balance at June 30, 2015
|
1,654
|
|
|
10,011
|
|
(396)
|
-
|
1,838
|
20,269
|
21,295
|
(11,903)
|
|
31
|
|
339
|
|
(4,671)
|
36,813
|
3,020
|
39,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Excludes treasury shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
In millions of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated
financial statements.
ARCELORMITTAL AND SUBSIDIARIES
Condensed Consolidated Statements of Cash
Flows
(in
millions of U.S. dollars, except share and per share data)
(unaudited)
|
Six months ended June 30,
|
|
2014
|
|
2015
|
Operating activities:
|
|
|
|
Net loss (including non-controlling interests)
|
(73)
|
|
(538)
|
|
|
|
|
Adjustments to reconcile net loss to net cash provided by
operations and payments:
|
|
|
|
Depreciation and impairment
|
2,011
|
|
1,627
|
Interest expense
|
850
|
|
693
|
Interest income
|
(40)
|
|
(45)
|
Income tax expense
|
217
|
|
334
|
Income from associates, joint ventures and other investments
|
(154)
|
|
(123)
|
Provisions for labour agreements and separation plans
|
289
|
|
283
|
Foreign exchange effects, provisions and other non-cash
operating expenses (net)
|
92
|
|
223
|
|
|
|
|
Changes in operating assets and liabilities, net of effects
from acquisitions:
|
|
|
|
Trade accounts receivable
|
(374)
|
|
(888)
|
Inventories
|
380
|
|
645
|
Trade accounts payable
|
(56)
|
|
(571)
|
Interest paid
|
(933)
|
|
(839)
|
Interest received
|
69
|
|
30
|
Cash contributions to plan assets and benefits paid for pensions
and OPEB
|
(352)
|
|
(284)
|
VAT and other amounts from public authorities
|
291
|
|
304
|
Dividends received from associates, joint ventures and other
investments
|
118
|
|
155
|
Taxes paid
|
(224)
|
|
(246)
|
Other working capital, provision movements and other liabilities
|
(1,034)
|
|
(656)
|
Net cash provided by operating activities
|
1,077
|
|
104
|
|
|
|
|
Investing activities:
|
|
|
|
Purchase of property, plant and equipment and intangibles
|
(1,649)
|
|
(1,287)
|
Disposal of net assets of subsidiaries and non-controlling
interests (net of cash disposed of (84) and (10) for the six months ended
June 2014 and June 2015, respectively)
|
183
|
|
(5)
|
Acquisition of associates and joint ventures
|
(258)
|
|
-
|
Disposal of other financial assets
|
25
|
|
108
|
Other investing activities (net)
|
2
|
|
309
|
Net cash used in investing activities
|
(1,697)
|
|
(875)
|
|
|
|
|
Financing activities:
|
|
|
|
Proceeds from short-term and long-term debt
|
2,945
|
|
3,279
|
Payments of short-term and long-term debt
|
(3,318)
|
|
(1,304)
|
Payment of subordinated perpetual capital securities
|
(657)
|
|
-
|
Dividends paid
|
(62)
|
|
(384)
|
Other financing activities (net)
|
(26)
|
|
6
|
Net cash (used in) provided by financing activities
|
(1,118)
|
|
1,597
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
(1,738)
|
|
826
|
Effect of exchange rate changes on cash
|
(127)
|
|
(108)
|
|
|
|
|
|
|
|
|
At the beginning of the period
|
6,072
|
|
3,893
|
Reclassification of the period-end cash and cash equivalents
from assets held for sale
|
7
|
|
-
|
At the end of the period
|
4,214
|
|
4,611
|
The accompanying notes are an integral part of these condensed consolidated
financial statements.
ARCELORMITTAL AND SUBSIDIARIES
Notes to the Condensed Consolidated
Financial Statements for the six months ended June 30, 2015
(in
millions of U.S. dollars)
(unaudited)
NOTE 1 – BASIS OF
PRESENTATION AND ACCOUNTING POLICIES
Preparation of the
condensed consolidated financial statements
The condensed consolidated financial statements of
ArcelorMittal and Subsidiaries (“ArcelorMittal” or the “Company”) as of June
30, 2015 and for the six months then ended (the “Interim Financial Statements”)
have been prepared in accordance with International Accounting Standard (“IAS”)
No. 34, “Interim Financial Reporting”. They should be read in conjunction with
the annual consolidated financial statements and the notes thereto in the
Company’s Annual Report on Form 20-F for the year ended December 31, 2014,
which have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board
(“IASB”). The Interim Financial Statements are unaudited. They were authorized
for issuance on August 3, 2015 by the Company’s Board of Directors.
Accounting policies
The Interim Financial Statements have been prepared on
a historical cost basis, except for available for sale financial assets,
derivative financial instruments and biological assets, which are measured at
fair value less cost to sell, and inventories, which are measured at the lower
of net realizable value or cost. Unless specifically described herein, the
accounting policies used to prepare the Interim Financial Statements are the
policies described in note 2 of the consolidated financial statements for the
year ended December 31, 2014.
In 2015, ArcelorMittal Kryvyi Rih and ArcelorMittal
Temirtau changed their functional currencies from the U.S. Dollar to their
local currencies due to changes in the regulatory and economic environment and
transactional currencies of the operations in the Ukraine and changes in the
transactional currencies of the operations in Kazakhstan.
Adoption
of new IFRS standards and interpretations applicable from January 1, 2015
On January 1, 2015, the Company adopted the following amendments and
interpretation which did not have any material impact on the financial
statements of the Company:
·
Amendments to IAS 19 “Employee
Benefits”, published on November 21, 2013, clarify the requirements that relate
to how contributions from employees or third parties that are linked to service
should be attributed to periods of service.
·
Annual Improvements 2010-2012
published by the IASB on December 12, 2013 as part of its annual improvements
process made amendments to the following standards:
·
IFRS 2 “Share-based Payment”,
amends the definition of vesting condition and market condition and adds
definitions for performance condition and service condition
·
IFRS 3 “Business Combinations”,
provides additional guidance for accounting for contingent consideration in a
business combination
·
IFRS 8 “Operating Segments”,
provides clarification of the requirements for the aggregation of operating
segments and the reconciliation of the total of the reportable segments’ assets
to the entity’s assets
·
IFRS 13 “Fair Value Measurement”,
provides additional guidance for the measurement of short-term receivables and
payables
·
IAS 16 “Property, Plant and
Equipment”, provides additional guidance for the proportionate restatement of
accumulated depreciation when the revaluation method is applied
·
IAS 24 “Related Party Disclosure”,
provides additional guidance for the definition of key management personnel
·
IAS 38 “Intangible Assets”,
provides additional guidance for the proportionate restatement of accumulated
depreciation when the revaluation method is applied
·
Annual Improvements 2011-2013
published by the IASB on December 12, 2013 as part of its annual improvements
process made amendments to the following standards:
·
IFRS 1 “First-time Adoption of
International Financial Reporting Standards”, provides additional guidance for
the effectiveness of IFRSs
·
IFRS 3 “Business Combinations”,
clarifies the scope of the exception for joint arrangements
·
IFRS 13 “Fair Value Measurement”,
clarifies the scope of the portfolio exception
·
IAS 40 “Investment Property”,
provides clarification of the interrelationship of IFRS 3 and IAS 40 when
classifying property as investment property or owner-occupied property
The preparation of consolidated financial statements
in conformity with IFRS recognition and measurement principles requires the use
of estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. Management reviews its estimates on an
ongoing basis using currently available information. Changes in facts and
circumstances or obtaining new information or more experience may result in
revised estimates, and actual results could differ from those estimates.
NOTE
2 – PROPERTY, PLANT AND EQUIPMENT
Following
the announcement of the closure of the Georgetown facility in the US (NAFTA) in
May 2015, the Company recognized an impairment charge of property, plant and
equipment amounting to 19 during the period ended June 30, 2015.
NOTE 3 – INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
On April 30, 2015, ING Bank
and Macquarie Bank exercised their put option for their respective 9.9% and 7.5%
stakes in China Oriental Group Company Ltd (“China Oriental”) acquired on April
30, 2008 and April 30, 2014, respectively, in connection with a sale and
purchase agreement they entered into with ArcelorMittal to restore the minimum
free float of 25% of China Oriental on the Hong Kong Stock Exchange (“HKSE”). Accrued
expenses and other liabilities and prepaid expenses and other current assets
decreased by 96 and 112, respectively, as a result of these changes. The
Company had not derecognized the 17.4% stake in China Oriental as it retained
its exposure to significant potential risks and rewards of the investment
through the put options.
NOTE 4 – INVENTORIES
Inventory, net of the
allowance for slow-moving inventory, excess of cost over net realizable value
and obsolescence as of December 31, 2014 and June 30, 2015, is comprised of the
following:
|
December 31,
2014
|
|
June 30,
2015
|
Finished products
|
6,264
|
|
5,362
|
Production in process
|
3,701
|
|
3,453
|
Raw materials
|
5,691
|
|
4,975
|
Manufacturing supplies, spare parts and other
|
1,648
|
|
1,676
|
Total
|
17,304
|
|
15,466
|
The amount of write-downs of
inventories to net realizable value recognized as an expense was 363 and 305
during the six months ended June 30, 2014 and 2015, respectively.
NOTE 5 –
ASSETS AND LIABILITIES HELD FOR SALE
On
January 10, 2015, ArcelorMittal completed the sale of a 21% controlling stake
in ArcelorMittal Tebessa, which holds two iron ore mines in Ouenza and
Boukadra, Tebessa, to Sider and the Ferphos Group, two Algerian state-owned
entities. The Company accounted for its remaining 49% stake under the equity
method.
On
January 23, 2015, ArcelorMittal completed the disposal of the building in
Avenue de la Liberté in Luxembourg city, formerly the headquarters of the
Company, to the Banque et Caisse d’Epargne de l’Etat (“BCEE”).
On
February 26, 2015, ArcelorMittal established the investment ArcelorMittal RZK
Celik Servis Merkezi Sanayi ve Ticaret Anonim Sirketi (“AM RZK”) with a local
partner in Turkey through the contribution of assets and liabilities of the
Company’s wholly owned subsidiary Rozak Demir Profil Ticaret ve Sanayi Anonim
Sirketi (“Rozak”). ArcelorMittal holds a 50% stake in AM RZK and the investment
is accounted for under the equity method.
On
March 30, 2015, the Company established the joint venture ArcelorMittal CLN
Distribuzione Italia S.r.l. (“AMCDI”) with Coils Lamiere Nastri S.P.A. (“CLN”)
through the contribution of assets and liabilities of its wholly owned
subsidiary ArcelorMittal Distribution Solutions Italia S.R.L (“AMDSI”).
ArcelorMittal holds a 49% stake in AMCDI, which is accounted for under the
equity method.
The result on disposal for the above mentioned disposals was
immaterial. The aggregate net assets disposed of amounted to 97.
In May 2015, ArcelorMittal committed to a plan to sell its
investment in the Northern Cape Iron Ore Mining Project (Coza mine) in South
Africa, an associate in which the Company holds a 25% interest. Accordingly,
the carrying amount of 24 of this investment was classified as held for sale at
June 30, 2015.
NOTE 6 – EQUITY
Share capital
The aggregate number of
shares issued and fully paid up is 1,665,392,222 as of June 30, 2015. The
ordinary shares do not have a nominal value.
Treasury shares
ArcelorMittal held,
indirectly and directly, approximately 11.0 million and 10.9 million treasury
shares as of December 31, 2014 and June 30, 2015, respectively.
Earnings per common share
The weighted average common
shares outstanding (in millions) for the purposes of basic and diluted earnings
per share of 1,791 were retrospectively adjusted for anti-dilutive instruments
for the six months ended June 30, 2014.
Dividends
The dividend for the full
year of 2015 amounted to 331 and was paid on June 15, 2015. During the six
months ended June 30, 2014, the Company declared a dividend for an amount of
333. Payments were made on July 15, 2014.
Mandatorily
convertible notes
On
January 16, 2013, ArcelorMittal issued mandatorily convertible subordinated
notes (“MCNs”) with net proceeds of 2,222. The notes have a maturity of 3
years, were issued at 100% of the principal amount and are mandatorily converted
into ordinary shares of ArcelorMittal at maturity unless converted earlier at
the option of the holders or ArcelorMittal or upon specified events in
accordance with the terms of the MCNs. The MCNs pay a coupon of 6.00% per
annum, payable quarterly in arrears. The minimum conversion price of the MCNs
was set at $16.75, corresponding to the placement price of shares in the
concurrent ordinary shares offering as described above, and the maximum
conversion price was set at approximately 125% of the minimum conversion price
(corresponding to $20.94). The minimum and maximum conversion prices are
subject to adjustment upon the occurrence of certain events, and were, as of
June 30, 2015, $15.98 and $19.98, respectively. The Company determined the
notes met the definition of a compound financial instrument and as such
determined the fair value of the financial liability component of the bond was
384 on the date of issuance and recognized it as long-term obligation. The
value of the equity component of 1,838 was determined based upon the difference
of the cash proceeds received from the issuance of the bond and the fair value
of the financial liability component on the date of issuance and is included in
equity.
Non-controlling
interests
At
June 30, 2015, non-controlling
interests included an increase of 148 relating to a capital
increase in Arceo (Europe segment) subscribed by the Sogepa, the investment
fund of the Walloon Region in Belgium.
NOTE 7 – INCOME TAX
The tax expense for the period is based on an
estimated annual effective rate, which requires management to make its best
estimate of annual pre-tax income for the year. During the year, management
regularly updates its estimates based on changes in various factors such as
geographical mix of operating profit, prices, shipments, product mix, plant
operating performance and cost estimates, including labor, raw materials,
energy and pension and other postretirement benefits.
The income tax
expense was 217 and 334 for the six months ended June 30, 2014 and 2015,
respectively.
NOTE 8 – SHORT-TERM AND LONG-TERM DEBT
Short-term debt, including
the current portion of long-term debt, consisted of the following:
|
|
December 31,
2014
|
|
June 30,
2015
|
|
Short-term bank loans and other credit facilities including
commercial paper*
|
1,249
|
|
385
|
|
Current portion of long-term debt
|
1,200
|
|
2,783
|
|
Lease obligations
|
73
|
|
71
|
|
Total
|
2,522
|
|
3,239
|
|
|
|
|
|
*
|
The weighted average interest rate on short term borrowings
outstanding were 2.7% and 1.9% as of December 31, 2014 and June 30, 2015,
respectively.
|
Short-term bank loans and other credit facilities include
short-term loans, overdrafts and commercial paper.
During the six months ended
June 30, 2014, ArcelorMittal entered into certain short-term committed
bilateral credit facilities. The facilities were extended in 2015. As of June
30, 2015, the facilities, totaling approximately $0.8 billion, remain fully
available.
On June 10, 2014, ArcelorMittal entered into an agreement for
financing with a financial institution for 1 billion. The financial institution
had the right to request early repayment once per year beginning in February
2015 until the final maturity on April 20, 2017. On February 13, 2015, the
Company elected to make an early repayment of such financing.
The Company’s
long-term debt consisted of the following:
|
|
Year of maturity
|
|
Type of interest
|
|
Interest rate1
|
|
December 31,
2014
|
|
June 30, 2015
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
2.5 billion tranche of 6 billion revolving credit facility
|
2018
|
|
Floating
|
|
|
|
-
|
|
-
|
|
3.5 billion tranche of 6 billion revolving credit facility
|
2020
|
|
Floating
|
|
|
|
-
|
|
-
|
|
1.0 billion Unsecured Notes
|
2015
|
|
Fixed
|
|
4.50%
|
|
998
|
|
1,000
|
|
500 Unsecured Notes
|
2016
|
|
Fixed
|
|
4.50%
|
|
499
|
|
499
|
|
€1.0 billion Unsecured Bonds
|
2016
|
|
Fixed
|
|
10.63%
|
|
1,210
|
|
1,117
|
|
1.4 billion Unsecured Notes
|
2017
|
|
Fixed
|
|
5.25%
|
|
1,396
|
|
1,397
|
|
€1.0 billion Unsecured Bonds
|
2017
|
|
Fixed
|
|
5.88%
|
|
1,208
|
|
1,113
|
|
€500 million Unsecured Notes
|
2018
|
|
Fixed
|
|
5.75%
|
|
604
|
|
557
|
|
€400 million Unsecured Notes
|
2018
|
|
Floating
|
|
2.05%
|
|
-
|
|
446
|
|
1.5 billion Unsecured Notes
|
2018
|
|
Fixed
|
|
6.13%
|
|
1,500
|
|
1,500
|
|
€750 million Unsecured Bonds
|
2019
|
|
Fixed
|
|
3.00%
|
|
903
|
|
833
|
|
1.5 billion Unsecured Notes
|
2019
|
|
Fixed
|
|
10.60%
|
|
1,475
|
|
1,477
|
|
500 Unsecured Notes
|
2020
|
|
Fixed
|
|
5.13%
|
|
-
|
|
497
|
|
€600 million Unsecured Notes
|
2020
|
|
Fixed
|
|
2.88%
|
|
719
|
|
662
|
|
1.0 billion Unsecured Bonds
|
2020
|
|
Fixed
|
|
6.00%
|
|
988
|
|
989
|
|
1.5 billion Unsecured Notes
|
2021
|
|
Fixed
|
|
6.25%
|
|
1,489
|
|
1,489
|
|
€500 million Unsecured Notes
|
2021
|
|
Fixed
|
|
3.00%
|
|
-
|
|
555
|
|
€750 million Unsecured Bonds
|
2022
|
|
Fixed
|
|
3.13%
|
|
-
|
|
833
|
|
1.1 billion Unsecured Notes
|
2022
|
|
Fixed
|
|
7.00%
|
|
1,090
|
|
1,090
|
|
500 Unsecured Notes
|
2025
|
|
Fixed
|
|
6.13%
|
|
-
|
|
496
|
|
1.5 billion Unsecured Bonds
|
2039
|
|
Fixed
|
|
7.75%
|
|
1,465
|
|
1,465
|
|
1.0 billion Unsecured Notes
|
2041
|
|
Fixed
|
|
7.50%
|
|
983
|
|
984
|
|
Other loans
|
2021
|
|
Fixed
|
|
3.46%
|
|
70
|
|
64
|
|
EBRD loans
|
2015
|
|
Floating
|
|
-
|
|
8
|
|
-
|
|
EIB loan
|
2016
|
|
Floating
|
|
1.49%
|
|
304
|
|
280
|
|
300 Term Loan Facility
|
2016
|
|
Floating
|
|
2.29%
|
|
300
|
|
300
|
|
ICO loan
|
2017
|
|
Floating
|
|
2.52%
|
|
42
|
|
31
|
|
Other loans
|
2017-2035
|
|
Floating
|
|
0.00%-2.56%
|
|
144
|
|
220
|
|
Total Corporate
|
|
|
|
|
|
|
17,395
|
|
19,894
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
|
|
|
|
|
|
|
|
Other loans
|
2016-2026
|
|
Fixed/
Floating
|
|
0.58%-15.08%
|
|
420
|
|
310
|
|
Total Americas
|
|
|
|
|
|
|
420
|
|
310
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Asia & Africa
|
|
|
|
|
|
|
|
|
|
|
Other loans
|
2016-2025
|
|
Fixed/
Floating
|
|
0.00%-8.16%
|
|
28
|
|
30
|
|
Total Europe, Asia & Africa
|
|
|
|
|
|
|
28
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
17,843
|
|
20,234
|
|
Less current portion of long-term debt
|
|
|
|
|
|
|
(1,200)
|
|
(2,783)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt (excluding lease obligations)
|
|
|
|
|
|
|
16,643
|
|
17,451
|
|
Lease obligations 2
|
|
|
|
|
|
|
632
|
|
580
|
|
Total long-term debt, net of current portion
|
|
|
|
|
|
|
17,275
|
|
18,031
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Rates applicable to balances outstanding at June 30, 2015.
|
2
|
Net of current portion of 73 and 71 as of December 31, 2014 and
June 30, 2015, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
6 billion Revolving Credit Facility
On 30 April 2015,
ArcelorMittal signed a 6 billion revolving credit facility which incorporates a
first tranche of 2.5 billion maturing on April 30, 2018, and a second tranche
of 3.5 billion maturing on April 30, 2020. The facility may be used for general
corporate purposes and replaces the 2.4 billion revolving credit facility
agreement dated May 6, 2010, and the 3.6 billion revolving credit facility
agreement dated March 18, 2011. As of June 30, 2015, the 6 billion revolving credit
facility remains fully available.
Bonds
On July 3, 2015
ArcelorMittal completed the offering of CHF 225 million 2.5% Notes due July 3,
2020, issued under the Company’s Euro Medium Term Notes Programme. The proceeds
of the issuance will be used to repay or prepay existing indebtedness.
On July 2, 2015, the Company
redeemed its 1 billion 4.5% Unsecured Notes due August 5, 2015, prior to their
scheduled maturity for a total amount of 1,022, including premium and accrued
interest.
On June 1, 2015,
ArcelorMittal completed the offering of 500 5.125% Notes due June 1, 2020, and
500 6.125% Notes due June 1, 2025, issued under the Company’s automatic shelf
registration statement filed with the U.S. Securities and Exchange Commission
(including a prospectus). The proceeds of the issuance were used to repay
existing indebtedness, in particular the early redemption of bonds maturing in
August 2015.
On April 9, 2015,
ArcelorMittal completed the offering of €400 million Floating Rate Notes due
April 9, 2018, and €500 million 3.00% Notes due April 9, 2021, issued under the
Company’s Euro Medium Term Notes Programme. The proceeds of the issuance were
used for general corporate purposes.
On January 14, 2015,
ArcelorMittal completed the offering of €750 million 3.125% Notes due January
14, 2022, issued under the Company’s Euro Medium Term Notes Programme. The
proceeds of the issuance were used for general corporate purposes.
Other
Certain debt agreements of the Company or its subsidiaries contain
certain restrictive covenants. Among other things, these covenants limit
encumbrances on the assets of ArcelorMittal and its subsidiaries, the ability
of ArcelorMittal’s subsidiaries to incur debt and the ability of ArcelorMittal
and its subsidiaries to dispose of assets in certain circumstances. Certain of
these agreements also require compliance with a financial covenant.
The Company’s principal credit facilities (6 billion revolving credit
facility, and certain borrowing agreements) include the following financial
covenant: the Company must ensure that the ratio of “Consolidated Total Net
Borrowings” (consolidated total borrowings less consolidated cash and cash
equivalents) to “Consolidated EBITDA” (the consolidated net pre-taxation
profits of the Company for a Measurement Period, subject to certain adjustments
as set out in the facilities) does not, at the end of each “Measurement Period”
(each period of 12 months ending on the last day of a financial half-year or a
financial year of the Company), exceed a certain ratio, currently 4.25 to 1 and
4.0 to 1 depending on the borrowing agreement.
The Company was in compliance with the
financial covenants contained in the agreements related to all of its borrowings
as of June 30, 2015.
NOTE
9 – FINANCIAL INSTRUMENTS
The
Company enters into derivative financial instruments to manage its exposure to
fluctuations in interest rates, exchange rates and the price of raw materials,
energy and emission rights allowances arising from operating, financing and
investment activities.
Fair values versus carrying amounts
The estimated fair values of certain financial instruments have
been determined using available market information or other valuation
methodologies that require judgment in interpreting market data and developing
estimates. The following tables summarize assets and liabilities based on their
categories at June 30, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount in statements
of financial position
|
|
Non-financial assets and
liabilities
|
|
Loan and receivables
|
|
Liabilities at amortized
cost
|
|
Fair value recognized in
profit or loss
|
|
Available-for-sale assets
|
|
Derivatives
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
4,611
|
|
-
|
|
4,611
|
|
-
|
|
-
|
|
-
|
|
-
|
Restricted cash
|
101
|
|
-
|
|
101
|
|
-
|
|
-
|
|
-
|
|
-
|
Trade accounts receivable and other
|
4,283
|
|
-
|
|
4,283
|
|
-
|
|
-
|
|
-
|
|
-
|
Inventories
|
15,466
|
|
15,466
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Prepaid expenses and other current assets
|
2,402
|
|
1,381
|
|
794
|
|
-
|
|
-
|
|
-
|
|
227
|
Assets held for sale
|
24
|
|
24
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Total current assets
|
26,887
|
|
16,871
|
|
9,789
|
|
-
|
|
-
|
|
-
|
|
227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill and intangible assets
|
7,279
|
|
7,279
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Biological assets
|
103
|
|
-
|
|
-
|
|
-
|
|
103
|
|
-
|
|
-
|
Property, plant and equipment
|
42,545
|
|
42,545
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Investments in associates and joint ventures
|
5,532
|
|
5,532
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Other investments
|
1,103
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1,103
|
|
-
|
Deferred tax assets
|
7,214
|
|
7,214
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Other assets
|
1,269
|
|
398
|
|
819
|
|
-
|
|
-
|
|
-
|
|
52
|
Total non-current assets
|
65,045
|
|
62,968
|
|
819
|
-
|
-
|
|
103
|
|
1,103
|
|
52
|
Total assets
|
91,932
|
|
79,839
|
|
10,608
|
|
-
|
|
103
|
|
1,103
|
|
279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt and current portion of long-term debt
|
3,239
|
|
-
|
|
-
|
|
3,239
|
|
-
|
|
-
|
|
-
|
Trade accounts payable and other
|
10,291
|
|
-
|
|
-
|
|
10,291
|
|
-
|
|
-
|
|
-
|
Short-term provisions
|
712
|
|
660
|
|
-
|
|
52
|
|
-
|
|
-
|
|
-
|
Accrued expenses and other liabilities
|
5,150
|
|
1,308
|
|
-
|
|
3,715
|
|
-
|
|
-
|
|
127
|
Income tax liabilities
|
161
|
|
161
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Total current liabilities
|
19,553
|
|
2,129
|
|
-
|
|
17,297
|
|
-
|
|
-
|
|
127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion
|
18,031
|
|
-
|
|
-
|
|
18,031
|
|
-
|
|
-
|
|
-
|
Deferred tax liabilities
|
2,707
|
|
2,707
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Deferred employee benefits
|
9,652
|
|
9,652
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Long-term provisions
|
1,486
|
|
1,466
|
|
-
|
|
20
|
|
-
|
|
-
|
|
-
|
Other long-term obligations
|
670
|
|
224
|
|
-
|
|
332
|
|
-
|
|
-
|
|
114
|
Total non-current liabilities
|
32,546
|
|
14,049
|
|
-
|
|
18,383
|
|
-
|
|
-
|
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to the equity
holders of the parent
|
36,813
|
|
36,813
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Non-controlling interests
|
3,020
|
|
3,020
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Total equity
|
39,833
|
|
39,833
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Total liabilities and equity
|
91,932
|
|
56,011
|
|
-
|
|
35,680
|
|
-
|
|
-
|
|
241
|
The following tables summarize the bases used to measure certain
assets and liabilities at their fair value.
|
As of December 31, 2014
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Assets at fair value:
|
|
|
|
|
|
|
|
|
Available-for-sale financial assets
|
1,022
|
|
-
|
|
-
|
|
1,022
|
|
Derivative financial current assets
|
-
|
|
192
|
|
-
|
|
192
|
|
Derivative financial non-current assets
|
-
|
|
4
|
|
112
|
|
116
|
|
Total assets at fair value
|
1,022
|
|
196
|
|
112
|
|
1,330
|
|
Liabilities at fair value:
|
|
|
|
|
|
|
|
|
Derivative financial current liabilities
|
-
|
|
134
|
|
-
|
|
134
|
|
Derivative financial non-current liabilities
|
-
|
|
109
|
|
-
|
|
109
|
|
Total liabilities at fair value
|
-
|
|
243
|
|
-
|
|
243
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2015
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Assets at fair value:
|
|
|
|
|
|
|
|
|
Available-for-sale financial assets
|
717
|
|
231
|
|
-
|
|
948 *
|
|
Derivative financial current assets
|
-
|
|
128
|
|
99
|
|
227
|
|
Derivative financial non-current assets
|
-
|
|
52
|
|
-
|
|
52
|
|
Total assets at fair value
|
717
|
|
411
|
|
99
|
|
1,227
|
|
Liabilities at fair value:
|
|
|
|
|
|
|
|
|
Derivative financial current liabilities
|
-
|
|
127
|
|
-
|
|
127
|
|
Derivative financial non-current liabilities
|
-
|
|
114
|
|
-
|
|
114
|
|
Total liabilities at fair value
|
-
|
|
241
|
|
-
|
|
241
|
*
|
The balance does not include equity investments of 155 carried
at cost.
|
Available-for-sale
financial assets classified as Level 1 refer to listed securities quoted in
active markets. A quoted market price in an active market provides the most
reliable evidence of fair value and is used without adjustment to measure fair
value whenever available, with limited exceptions. The
total fair value is either the price of the most recent trade at the time of the
market close or the official close price as defined by the exchange on which
the asset is most actively traded on the last trading day of the period,
multiplied by the number of units held without consideration of transaction
costs. The decrease in the available-for-sale financial assets is related to
the share price evolution of Erdemir and the appreciation of the USD.
Derivative financial assets and
liabilities classified as Level 2 refer to instruments to hedge fluctuations in
interest rates, foreign exchange rates, raw materials (base metal), freight,
energy, and emission rights. The total fair value is based on the price a
dealer would pay or receive for the security or similar securities, adjusted
for any terms specific to that asset or liability. Market inputs are obtained
from well-established and recognized vendors of market data and the fair value
is calculated using standard industry models based on significant observable
market inputs such as foreign exchange rates, commodity prices, swap rates and
interest rates. Due to the temporary trading suspension of the Hunan Valin
securities between May 14, 2015 and July 15, 2015, the investment with a
carrying amount of 231 was reclassified from Level 1 to Level 2 as of June 30,
2015.
Derivative financial assets classified as
Level 3 refer to the call option on the 1,000 mandatory convertible bonds. The
fair valuation of Level 3 derivative instruments is established at each
reporting date in relation to which an analysis is performed in respect of
changes in the fair value measurement since the last period. ArcelorMittal’s
valuation policies for Level 3 derivatives are an integral part of its internal
control procedures and have been reviewed and approved according to the
Company’s principles for establishing such procedures. In particular, such
procedures address the accuracy and reliability of input data, the accuracy of
the valuation model and the knowledge of the staff performing the valuations.
ArcelorMittal
estimates the fair value of the 1,000 mandatory convertible bonds through the
use of binomial valuation models. Binomial valuation models use an iterative
procedure to price options, allowing for the specification of nodes, or points
in time, during the time span between the valuation date and the option’s
expiration date. In contrast to the Black-Scholes model, which provides a
numerical result based on inputs, the binomial model allows for the calculation
of the asset and the option for multiple periods along with the range of possible
results for each period.
Observable input
data used in the valuations include zero coupon yield curves, stock market
prices, European Central Bank foreign exchange fixing rates and Libor interest
rates. Unobservable inputs are used to measure fair value to the extent that
relevant observable inputs are not available. Specifically, the Company
computes unobservable volatility data based mainly on the movement of stock
market prices observable in the active market over 90 working days.
The following
table summarizes the reconciliation of the fair value of the call option on the
1,000 mandatory convertible bonds as of December 31, 2014 and June 30,
2015:
|
Call option on 1,000
mandatory convertible bonds
|
Balance as of December 31, 2013
|
-
|
Change in fair value
|
51
|
Balance of MCB call option as of January 17, 2014 (extension)
|
32
|
Balance as of June 30, 2014
|
83
|
|
|
Balance as of December 31, 2014
|
112
|
Change in fair value
|
(13)
|
Balance as of June 30, 2015
|
99
|
Portfolio of Derivatives
The Company
manages the counter-party risk associated with its instruments by centralizing
its commitments and by applying procedures which specify, for each type of
transaction and underlying, risk limits and/or the characteristics of the
counter-party. The Company does not generally grant to or require from its
counter-parties guarantees of the risks incurred. Allowing for exceptions, the
Company’s counterparties are part of its financial partners and the related
market transactions are governed by framework agreements (mainly the
International Swaps and Derivatives Association agreements which allow netting
only in case of counterparty default). Accordingly, derivative assets and
derivative liabilities are not offset.
The portfolio
associated with derivative financial instruments classified as Level 2 as of
December 31, 2014 is as follows:
|
|
Assets
|
|
Liabilities
|
|
|
Notional Amount
|
|
Fair Value
|
|
Average Rate*
|
|
Notional Amount
|
|
Fair Value
|
|
Average Rate*
|
|
Interest rate swaps - fixed rate borrowings/loans
|
50
|
|
-
|
|
0.74%
|
|
1,118
|
|
(54)
|
|
2.13%
|
|
Total interest rate instruments
|
|
|
-
|
|
|
|
|
|
(54)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange rate instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward purchase of contracts
|
2,137
|
|
132
|
|
|
|
217
|
|
(3)
|
|
|
|
Forward sale of contracts
|
475
|
|
5
|
|
|
|
287
|
|
(5)
|
|
|
|
Currency swaps purchases
|
479
|
|
2
|
|
|
|
479
|
|
(95)
|
|
|
|
Currency swaps sales
|
125
|
|
-
|
|
|
|
250
|
|
(3)
|
|
|
|
Exchange option purchases
|
136
|
|
1
|
|
|
|
712
|
|
(8)
|
|
|
|
Exchange options sales
|
218
|
|
1
|
|
|
|
715
|
|
(7)
|
|
|
|
Total foreign exchange rate instruments
|
|
|
141
|
|
|
|
|
|
(121)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials (base metal), freight, energy, emission rights
|
|
|
|
|
|
|
|
|
|
|
|
|
Term contracts sales
|
146
|
|
20
|
|
|
|
82
|
|
(13)
|
|
|
|
Term contracts purchases
|
501
|
|
35
|
|
|
|
468
|
|
(55)
|
|
|
|
Options sales/purchases
|
7
|
|
-
|
|
|
|
7
|
|
-
|
|
|
|
Total raw materials (base metal), freight, energy, emission
rights
|
|
|
55
|
|
|
|
|
|
(68)
|
|
|
|
Total
|
|
|
196
|
|
|
|
|
|
(243)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
The average rate is determined for fixed rate instruments on the
basis of the U.S. dollar and foreign currency rates and for the variable rate
instruments generally on the basis of Euribor or Libor.
|
The portfolio
associated with derivative financial instruments classified as Level 2 as of
June 30, 2015 is as follows:
|
|
Assets
|
|
Liabilities
|
|
|
Notional Amount
|
|
Fair Value
|
|
Average Rate*
|
|
Notional Amount
|
|
Fair Value
|
|
Average Rate*
|
|
Interest rate swaps - fixed rate borrowings/loans
|
60
|
|
-
|
|
0.89%
|
|
60
|
|
(1)
|
|
1.39%
|
|
Total interest rate instruments
|
|
|
-
|
|
|
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange rate instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward purchase of contracts
|
1,710
|
|
39
|
|
|
|
844
|
|
(18)
|
|
|
|
Forward sale of contracts
|
893
|
|
6
|
|
|
|
640
|
|
(8)
|
|
|
|
Currency swaps purchases
|
744
|
|
53
|
|
|
|
1,396
|
|
(140)
|
|
|
|
Exchange option purchases
|
330
|
|
3
|
|
|
|
317
|
|
(5)
|
|
|
|
Exchange options sales
|
271
|
|
1
|
|
|
|
305
|
|
(1)
|
|
|
|
Total foreign exchange rate instruments
|
|
|
102
|
|
|
|
|
|
(172)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials (base metal), freight, energy, emission rights
|
|
|
|
|
|
|
|
|
|
|
|
|
Term contracts sales
|
483
|
|
42
|
|
|
|
61
|
|
(3)
|
|
|
|
Term contracts purchases
|
444
|
|
36
|
|
|
|
680
|
|
(65)
|
|
|
|
Options sales/purchases
|
7
|
|
-
|
|
|
|
6
|
|
-
|
|
|
|
Total raw materials (base metal), freight, energy, emission
rights
|
|
|
78
|
|
|
|
|
|
(68)
|
|
|
|
Total
|
|
|
180
|
|
|
|
|
|
(241)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
The average rate is determined for fixed rate instruments on the
basis of the U.S. dollar and foreign currency rates and for the variable rate
instruments generally on the basis of Euribor or Libor.
|
NOTE
10 – PROVISIONS
Provisions, as of
December 31, 2014 and June 30, 2015, are comprised of the following:
|
December 31,
2014
|
|
June 30,
2015
|
Environmental
|
855
|
|
793
|
Asset retirement obligations
|
305
|
|
306
|
Site restoration
|
46
|
|
54
|
Staff related obligations
|
190
|
|
166
|
Voluntary separation plans
|
153
|
|
106
|
Litigation and other (see note 13)
|
758
|
|
530
|
Tax claims
|
271
|
|
209
|
Other legal claims
|
289
|
|
266
|
Other unasserted claims
|
198
|
|
55
|
Commercial agreements and onerous
contracts
|
122
|
|
97
|
Other
|
182
|
|
146
|
Total
|
2,611
|
|
2,198
|
Short-term provisions
|
1,024
|
|
712
|
Long-term provisions
|
1,587
|
|
1,486
|
Total
|
2,611
|
|
2,198
|
|
NOTE 11 – SEGMENT AND GEOGRAPHIC INFORMATION
Reportable segments
ArcelorMittal
reports its operations in five segments: NAFTA, Brazil, Europe, ACIS and
Mining.
·
NAFTA represents the flat, long
and tubular facilities of the Company located in North America (Canada, United
States and Mexico). NAFTA produces flat products such as slabs, hot-rolled
coil, cold-rolled coil, coated steel and plate. These products are sold
primarily to customers in the following industries: distribution and
processing, automotive, pipe and tubes, construction, packaging, and
appliances. NAFTA also produces long products such as wire rod, sections,
rebar, billets, blooms and wire drawing, and tubular products;
·
Brazil includes the flat
operations of Brazil and the long and tubular operations of Brazil and
neighboring countries including Argentina, Costa Rica, Trinidad and Tobago and
Venezuela. Flat products include slabs, hot-rolled coil, cold-rolled coil and
coated steel. Long products consist of wire rod, sections, bar and rebar,
billets, blooms and wire drawing;
·
Europe is the largest flat steel producer
in Europe, with operations that range from Spain in the west to Romania in the
east, and covering the flat carbon steel product portfolio in all major
countries and markets. Europe produces hot-rolled coil, cold-rolled coil,
coated products, tinplate, plate and slab. These products are sold primarily to
customers in the automotive, general industry and packaging industries. Europe
produces also long products consisting of sections, wire rod, rebar, billets,
blooms and wire drawing, and tubular products. In addition, it includes
Distribution Solutions, primarily an in-house trading and distribution arm of
ArcelorMittal. Distribution Solutions also provides value-added and customized
steel solutions through further steel processing to meet specific customer
requirements;
·
ACIS produces a combination of
flat, long products and tubular products. Its facilities are located in Asia,
Africa and Commonwealth of Independent States; and
·
Mining comprises all mines owned
by ArcelorMittal in the Americas (Canada, USA, Mexico and Brazil), Asia
(Kazakhstan), Europe (Ukraine and Bosnia & Herzegovina) and Africa
(Algeria and Liberia). It supplies the Company and third parties customers with
iron ore and coal.
The following table summarizes certain financial data
relating to ArcelorMittal’s operations in its different reportable segments:
|
|
NAFTA
|
Brazil
|
Europe
|
ACIS
|
Mining
|
Others*
|
Eliminations
|
Total
|
|
Six months ended June 30, 2014
|
|
|
|
|
|
|
|
|
|
Sales to external customers
|
10,300
|
4,581
|
20,692
|
4,158
|
707
|
54
|
-
|
40,492
|
|
Intersegment sales**
|
51
|
206
|
148
|
149
|
1,932
|
233
|
(2,719)
|
-
|
|
Operating income
|
77
|
592
|
414
|
5
|
507
|
(122)
|
33
|
1,506
|
|
Depreciation
|
359
|
247
|
810
|
260
|
314
|
21
|
-
|
2,011
|
|
Impairment
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Capital expenditures
|
226
|
241
|
518
|
215
|
429
|
20
|
-
|
1,649
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2015
|
|
|
|
|
|
|
|
|
|
Sales to external customers
|
9,297
|
4,023
|
16,977
|
3,262
|
417
|
32
|
-
|
34,008
|
|
Intersegment sales**
|
25
|
263
|
170
|
108
|
1,305
|
169
|
(2,040)
|
-
|
|
Operating income
|
(52)
|
566
|
704
|
7
|
(78)
|
(20)
|
23
|
1,150
|
|
Depreciation
|
311
|
171
|
592
|
214
|
307
|
13
|
-
|
1,608
|
|
Impairment
|
19
|
-
|
-
|
-
|
-
|
-
|
-
|
19
|
|
Capital expenditures
|
187
|
229
|
432
|
179
|
263
|
10
|
(13)
|
1,287
|
|
|
|
|
|
|
|
|
|
|
*
|
Others include all other operational and non-operational items
which are not segmented, such as corporate and shared services, financial
activities, and shipping and logistics.
|
**
|
Transactions between segments are reported on the same basis of
accounting as transactions with third parties except for certain mining
products shipped internally and reported on a cost plus basis.
|
The reconciliation from operating income to net income is as
follows:
|
Six months ended June 30,
|
|
2014
|
|
2015
|
Operating income
|
1,506
|
|
1,150
|
Income from investments in associates and joint ventures
|
154
|
|
123
|
Financing costs - net
|
(1,516)
|
|
(1,477)
|
Income (loss) before taxes
|
144
|
|
(204)
|
Income tax (expense)
|
(217)
|
|
(334)
|
Net income (loss) (including non-controlling interests)
|
(73)
|
|
(538)
|
Geographical segmentation
Sales
(by destination)
|
Six months ended June 30,
|
|
2014
|
|
2015
|
Americas
|
|
|
|
United States
|
8,345
|
|
7,609
|
Brazil
|
3,295
|
|
2,238
|
Canada
|
1,725
|
|
1,471
|
Mexico
|
1,144
|
|
982
|
Argentina
|
596
|
|
608
|
Others
|
788
|
|
912
|
Total Americas
|
15,893
|
|
13,820
|
|
|
|
|
Europe
|
|
|
|
Germany
|
3,570
|
|
2,860
|
France
|
2,573
|
|
2,057
|
Spain
|
2,222
|
|
1,876
|
Poland
|
1,868
|
|
1,559
|
Italy
|
1,447
|
|
1,287
|
Turkey
|
1,177
|
|
1,090
|
Czech Republic
|
819
|
|
653
|
United Kingdom
|
771
|
|
647
|
Belgium
|
653
|
|
578
|
Netherlands
|
487
|
|
426
|
Romania
|
369
|
|
315
|
Russia
|
371
|
|
309
|
Others
|
2,602
|
|
2,180
|
Total Europe
|
18,929
|
|
15,837
|
|
|
|
|
Asia & Africa
|
|
|
|
South Africa
|
1,348
|
|
1,211
|
Morocco
|
391
|
|
318
|
China
|
497
|
|
275
|
Kazakhstan
|
718
|
|
246
|
South Korea
|
232
|
|
127
|
India
|
107
|
|
73
|
Others
|
2,377
|
|
2,101
|
Total Asia & Africa
|
5,670
|
|
4,351
|
|
|
|
|
Total
|
40,492
|
|
34,008
|
The table below presents
sales to external customers by product type. In addition to steel produced by
the Company, amounts include material purchased for additional transformation
and sold through distribution services. Others include mainly non-steel sales
and services.
Product segmentation
Sales (by products)
|
Six months ended June 30,
|
|
2014
|
|
2015
|
Flat products
|
22,377
|
|
19,594
|
Long products
|
9,778
|
|
7,619
|
Tubular products
|
1,181
|
|
1,261
|
Mining products
|
707
|
|
417
|
Others
|
6,449
|
|
5,117
|
Total
|
40,492
|
|
34,008
|
NOTE
12 – COMMITMENTS
The Company’s
commitments consist of the following:
|
|
December 31,
|
|
June 30,
|
|
|
20141
|
|
2015
|
|
Purchase commitments
|
22,735
|
|
22,340
|
|
Guarantees, pledges and other collateral
|
4,266
|
|
3,939
|
|
Non-cancellable operating leases
|
1,662
|
|
1,605
|
|
Capital expenditure commitments
|
748
|
|
432
|
|
Other commitments
|
1,644
|
|
1,495
|
|
Total
|
31,055
|
|
29,811
|
1
|
The total commitments balance as of December 31, 2014 shown in
the table above has been revised to correct the prior period disclosure,
decreasing the balance by 1,264. The revision impacted only the disclosed
amount and otherwise had no impact on the Company’s consolidated financial
statements. The Company has evaluated the impact of the revision and
determined that it did not have a material impact on any of its prior period
annual and interim consolidated financial statements.
|
Purchase
commitments
Purchase commitments consist primarily of major agreements for
procuring iron ore, coking coal, coke and hot metal. The Company also has a
number of agreements for electricity, industrial and natural gas, scrap and
freight contracts.
Purchase commitments include commitments given to associates for 317
and 576 as of December 31, 2014 and June 30, 2015, respectively. Purchase
commitments include commitments given to joint ventures for 731 and 1,492 as of
December 31, 2014 and June 30, 2015, respectively.
Guarantees,
pledges and other collateral
Guarantees related to financial debt and credit lines given on
behalf of third parties were 101 and 87 as of December 31, 2014 and June 30,
2015, respectively. Additionally, 22 and 11 were related to guarantees given on
behalf of associates and guarantees of 1,087 and 1,186 were given on behalf of
joint ventures as of December 31, 2014 and June 30, 2015, respectively.
Pledges and other collateral mainly relate to mortgages entered
into by the Company’s operating subsidiaries. Other sureties, first demand
guarantees, letters of credit, pledges and other collateral included nil of commitments
given on behalf of associates as of December 31, 2014 and June 30, 2015.
Non-cancellable
operating leases
Non-cancellable operating leases mainly relate to commitments for
the long-term use of various facilities, land and equipment belonging to third
parties.
Capital expenditure commitments
Capital expenditure commitments mainly relate to commitments
associated with investments in expansion and improvement projects by various
subsidiaries.
In 2008, ArcelorMittal Temirtau announced a
decision to expand its production capacity from 4 million tons to 6 million
tons and committed to improve the safety and security in its mining area. There
were no outstanding commitments for these projects as of December 31, 2014 and
June 30, 2015, respectively. Accordingly, the commitments as of December 31,
2014 have been retrospectively adjusted by 103 and 82 to correct the prior
period disclosure.
Other
commitments
Other commitments
given comprise mainly commitments incurred for gas supply to electricity
suppliers.
Commitments
to sell
In addition to the
commitments presented above, the Company has firm commitments to sell natural
gas and electricity for 435 and 644 as of December 31, 2014 and June 30, 2015, respectively.
NOTE
13 – CONTINGENCIES
ArcelorMittal may be
involved in litigation, arbitration or other legal proceedings. Provisions
related to legal and arbitral proceedings are recorded in accordance with the
principles described in note 2 to consolidated financial statements for the
year ended December 31, 2014.
Most of these claims involve
highly complex issues. Often these issues are subject to substantial
uncertainties and, therefore, the probabilities of loss and an estimate of
damages are difficult to ascertain. Consequently, for a large number of these
claims, the Company is unable to make a reasonable estimate of the expected
financial effect that will result from ultimate resolution of the proceeding.
In those cases, the Company has disclosed information with respect to the
nature of the contingency. The Company has not accrued a reserve for the
potential outcome of these cases.
In cases in which quantifiable
fines and penalties have been assessed or the Company has otherwise been able
to reasonably estimate the amount of probable loss, the Company has indicated
the amount of such fine or penalty or the amount of provision accrued.
In a limited number of
ongoing cases, the Company is able to make a reasonable estimate of the
expected loss or range of possible loss and has accrued a provision for such
loss, but believe that publication of this information on a case-by-case basis
would seriously prejudice the Company’s position in the ongoing legal
proceedings or in any related settlement discussions. Accordingly, in these
cases, the Company has disclosed information with respect to the nature of the
contingency, but has not disclosed the estimate of the range of potential loss
nor the recorded as a loss.
These assessments can
involve a series of complex judgments about future events and can rely heavily
on estimates and assumptions. These assessments are based on estimates and
assumptions that have been deemed reasonable by management. The Company believes
that the aggregate provisions recorded for the above matters are adequate based
upon currently available information. However, given the inherent uncertainties
related to these cases and in estimating contingent liabilities, the Company
could, in the future, incur judgments that could have a material effect on its
results of operations in any particular period. The Company considers it highly
unlikely, however, that any such judgments could have a material adverse effect
on its liquidity or financial condition.
Tax Claims
Brazil
In May 2014,
ArcelorMittal Comercializadora de Energia received a tax assessment from the
state of Minas Gerais alleging that the Company did not correctly
calculate tax credits on interstate sales of electricity from the February
2012 to December 2013 period. The amount claimed totals 49. ArcelorMittal
Comercializadora de Energia filed its defense in June 2014. Following an
unfavorable administrative decision in November 2014, ArcelorMittal filed an
appeal in December 2014. In March 2015, there was a further unfavourable
decision at the second administrative level. The company is preparing a
judicial claim.
In the period from May to
July 2015, ArcelorMittal Brasil received 9 tax assessments from the state
of Rio Grande do Sul alleging that the Company, through its branches in
that state, had not made advance payments of ICMS ( a value added tax) on
sales in that state covering the period from May 2010 to
April 2015. The amount claimed totals $85 million. ArcelorMittal Brasil has
filed its defense in 8 cases and is preparing its defense in the other
case.
Ukraine
In
September 2012, the Ukrainian tax authorities conducted an audit of
ArcelorMittal Kryvyi Rih, resulting in a tax claim of approximately 71. The
claim relates to cancellation of VAT refunds, cancellation of deductible
expenses and queries on transfer pricing calculations. On January 2, 2013,
ArcelorMittal Kryvyi Rih filed a lawsuit with the District Administrative Court
to challenge the findings of this tax audit. On
April 9, 2013, the District Administrative Court rejected the claim by the tax
authorities retaining only a tax liability of approximately 0.2 against
ArcelorMittal Kryvyi Rih. Both parties filed appeals,
and, on November 7, 2013, the Court of Appeal rejected the appeal by the tax
authorities and retained only a tax liability of approximately 0.1 against ArcelorMittal Kryvyi Rih. On November 12, 2013, the tax
authorities filed an appeal in cassation. On June 3, 2015, the
Supreme Administrative Court of Ukraine decided entirely in favour of
ArcelorMittal Kryvyi Rih. The tax authorities may appeal the judgment to the Supreme
Court of Ukraine before June 3, 2016.
Competition/Antitrust Claims
Romania
In 2010 and 2011,
ArcelorMittal Galati entered into high volume electricity purchasing contracts
with Hidroelectrica, a partially state-owned electricity producer. Following
allegations by Hidroelectrica’s minority shareholders that ArcelorMittal Galati
(and other industrial electricity consumers) benefitted from artificially low
tariffs, the European Commission opened a formal investigation into alleged
state aid in April 2012. The European Commission announced on June 12 2015 that
electricity supply contracts signed by Hidroelectrica with certain electricity
traders and industrial customers (including the one entered by ArcelorMittal
Galati) did not involve state aid within the meaning of the EU rules.
Other
Legal Claims
Argentina
Over the course of 2007 to 2015, the Argentinian Customs Office
Authority (Aduana) notified the Company of certain inquiries that it is
conducting with respect to prices declared by the Company’s Argentinian
subsidiary, Acindar related to iron ore imports. The Customs Office Authority is
seeking to determine whether Acindar incorrectly declared prices for iron ore
imports from several different Brazilian suppliers and from ArcelorMittal
Sourcing on 37 different claims concerning several shipments made between 2002
and 2014. The aggregate amount claimed by the Customs Office Authority in
respect of the shipments is approximately 192. The investigations are subject
to the administrative procedures of the Customs Office Authority and are at
different procedural stages depending on the filing date of the investigation. By May 2015, in 21of the total 37 cases, the administrative
branch of the Customs Office Authority ruled against Acindar (representing
total claims of 65). These decisions have been appealed to the Argentinian
National Fiscal Court.
Italy
In
January 2010, ArcelorMittal received notice of a claim filed by Finmasi S.p.A.
relating to a memorandum of agreement (“MoA”) entered into between
ArcelorMittal Distribution Services France (“AMDSF”) and Finmasi in 2008. The
MoA provided that AMDSF would acquire certain of Finmasi’s businesses for an
amount not to exceed €93 million, subject to the satisfaction of certain
conditions precedent, which, in AMDSF’s view, were not fulfilled. Finmasi sued
for (i) enforcement of the MoA, (ii) damages of €14 million to €23.7 million or
(iii) recovery costs plus quantum damages for Finmasi’s alleged lost opportunity
to sell to another buyer. In September 2011, the court rejected Finmasi’s
claims other than its second claim. The court appointed an expert to determine
the quantum of damages. In May 2013, the expert’s report was issued and valued
the quantum of damages in the range of €37.5 million to €59.5 million.
ArcelorMittal appealed the decision on the merits. In May 2014, the Court of
Appeals issued a decision rejecting ArcelorMittal’s appeal. In June 2014,
ArcelorMittal filed an appeal of the Court of Appeal’s judgment with the
Italian Court of Cassation. On December 18, 2014, the Court of Milan issued a
decision on the quantum of the damages and valued the quantum of damages in the
sum of €23.7 million plus interest. In June 2015, both parties served appeals
of the decision on quantum, with ArcelorMittal also seeking the suspension of
the enforceability of the decision. On July 1, 2015, Finmasi
formally notified to AMDSF the declaration of enforcement of the decision of
December 18, 2014. On July 28, 2015, AMDSF filed an appeal against such
declaration with the Court of Appeal of Reims in France.
Arcelor Mittal (NYSE:MT)
Historical Stock Chart
From Feb 2024 to Mar 2024
Arcelor Mittal (NYSE:MT)
Historical Stock Chart
From Mar 2023 to Mar 2024