TIDMMT
Luxembourg, November 7, 2019 - ArcelorMittal (referred to as
"ArcelorMittal" or the "Company") (MT (New York, Amsterdam, Paris,
Luxembourg), MTS (Madrid)), the world's leading integrated steel and
mining company, today announced results(1) for the three-month and
nine-month periods ended September 30, 2019.
Highlights:
-- Health and safety: LTIF rate2 of 1.36x in 3Q 2019 as compared to 1.26x in
2Q 2019; 1.24x in 9M 2019
-- Operating income of $0.3bn in 3Q 2019 as compared to an operating loss of
$0.2bn in 2Q 2019
-- EBITDA of $1.1bn in 3Q 2019, 31.6% lower as compared to $1.6bn in 2Q
2019, primarily reflecting the impact of seasonally lower steel shipments
and negative price-cost effect on the steel business, and the impact of
lower marketable iron ore shipments (-14.7%) and lower iron ore quality
premia11 on the mining segment results
-- Net loss of $0.5bn in 3Q 2019 as compared to net loss of $0.4bn in 2Q
2019
-- Steel shipments of 20.2Mt in 3Q 2019, 7.3% below 2Q 2019 on a comparable
basis (i.e excluding scope effect of remedy assets) largely reflecting
seasonality
-- 3Q 2019 iron ore shipments of 14.6Mt (+2.7% YoY), of which 8.4Mt shipped
at market prices (-1.5% YoY)
-- Gross debt of $14.3bn as of September 30, 2019, as compared to $13.8bn as
of June 30, 2019. Net debt increased by $0.5bn during the quarter to
$10.7bn as of September 30, 2019, primarily driven by negative free cash
flow due in part to a seasonal working capital investment ($0.2bn)
Financial highlights (on the basis of IFRS(1) ):
(USDm) unless otherwise shown 3Q 19 2Q 19 3Q 18 9M 19 9M 18
--------------------------------- ------- ------- ------ ------- --------
Sales 16,634 19,279 18,522 55,101 57,706
Operating income/(loss) 297 (158) 1,567 908 5,497
Net (loss)/income attributable
to equity holders of the parent (539) (447) 899 (572) 3,956
Basic (loss)/earnings per common
share (US$) (0.53) (0.44) 0.89 (0.56) 3.89
Operating income/(loss) / tonne
(US$/t) 15 (7) 76 14 86
EBITDA 1,063 1,555 2,729 4,270 8,314
EBITDA/ tonne (US$/t) 53 68 133 66 131
Steel-only EBITDA/ tonne (US$/t) 34 43 119 45 116
Crude steel production (Mt) 22.2 23.8 23.3 70.1 69.8
Steel shipments (Mt) 20.2 22.8 20.5 64.8 63.6
Own iron ore production (Mt) 13.6 14.6 14.5 42.3 43.5
Iron ore shipped at market price
(Mt) 8.4 9.9 8.5 27.5 27.7
--------------------------------- ------- ------- ------ ------- --------
Commenting, Mr. Lakshmi N. Mittal, ArcelorMittal Chairman and CEO, said:
"As anticipated, we continued to face tough market conditions in the
third quarter, characterized by low steel prices coupled with high raw
material costs. In these markets, we remain focused on our own
initiatives to improve performance and our priority is to reduce costs,
adapt production and focus on ensuring the business remains cash flow
positive. We continue to expect a substantial working capital release in
the fourth quarter which should enable us to further reduce net debt
year on year."
Sustainable development and safety performance
Health and safety - Own personnel and contractors lost time injury
frequency rate
Health and safety performance(2) (inclusive of ArcelorMittal Italia
(previously known as Ilva)), based on own personnel figures and
contractors lost time injury frequency (LTIF) rate was 1.36x in third
quarter of 2019 ("3Q 2019") as compared to 1.26x in the second quarter
of 2019 ("2Q 2019"). Health and safety performance (inclusive of
ArcelorMittal Italia) in the first nine months of 2019 ("9M 2019") was
1.24x.
Excluding the impact of ArcelorMittal Italia, the LTIF was 0.82x for 3Q
2019 as compared to 0.68x for 2Q 2019 and 0.62x for the third quarter of
2018 ("3Q 2018"). Health and safety performance (excluding the impact of
ArcelorMittal Italia) for 9M 2019 was 0.71x as compared to 0.66x for
first nine months of 2018 (9M 2018).
The Company's efforts to improve its Health and Safety record remain
focused on both further reducing the rate of severe injuries and
preventing fatalities.
Own personnel and contractors - Frequency rate
Lost time injury frequency rate 3Q 19 2Q 19 3Q 18 9M 19 9M 18
----------------------------------- ----- ----- ----- ----- -------
Mining 1.53 0.64 0.63 0.86 0.59
NAFTA 0.54 0.46 0.56 0.53 0.56
Brazil 0.21 0.43 0.39 0.37 0.39
Europe 1.18 1.00 0.76 0.98 0.88
ACIS 0.59 0.58 0.61 0.65 0.63
Total Steel 0.71 0.69 0.62 0.70 0.68
Total (Steel and Mining) 0.82 0.68 0.62 0.71 0.66
-----------------------------------
ArcelorMittal Italia 13.45 13.73 - 12.61 -
Total (Steel and Mining) including
ArcelorMittal Italia 1.36 1.26 - 1.24 -
----- ----- ----- ----- -------
Key sustainable development highlights for 3Q 2019:
-- ArcelorMittal won the Steelie Award for Sustainability from the World
Steel Association for the third consecutive year for the Company's
Climate Action report, a first for the steel industry.
-- ArcelorMittal was ranked first in the world in five categories relating
to steel companies' readiness for a low carbon transition in the CDP
report on the steel sector, 'Melting Point'.
-- ArcelorMittal reached two milestones in its low-emissions technology
strategy, signing a Framework Collaboration Agreement with technology
provider Midrex Technologies for the design of a demonstration plant at
its Hamburg site to produce steel with hydrogen; and a memorandum of
understanding with international energy firm Equinor to develop value
chains in carbon capture and storage as part of the Northern Lights
project which, together with partners Shell and Total, includes transport,
reception and permanent storage of CO2 in a reservoir in the northern
part of the North Sea.
-- ArcelorMittal Ghent completed the installation of more than 27,000
rooftop solar panels, resulting in the largest solar roof in Belgium,
with a capacity of 10.7kWp. Alongside the 10 wind turbines onsite and the
two further turbines planned, the Ghent site will soon have 50MW
installed renewable energy capacity on site.
Analysis of results for the nine months ended September 30, 2019 versus
results for the nine months ended September 30, 2018
Total steel shipments for 9M 2019 were 64.8 million metric tonnes
representing an increase of 1.8% as compared to 63.6 million metric
tonnes in 9M 2018, primarily due to higher steel shipments in Europe
(+6.9%) due to the impact of the consolidation of ArcelorMittal Italia
as from November 1, 2018, offset in part by the scope effect of the
remedy asset sales related to the ArcelorMittal Italia acquisition and
in Brazil (+0.8%) due primarily to the acquisition of Votorantim
(consolidated as from April 2018), offset in part by lower shipments in
ACIS (-5.6%) and NAFTA (-5.8%). Excluding the impact of ArcelorMittal
Italia, Votorantim, and remedy assets sales steel shipments in 9M 2019
were 1.8% lower as compared to 9M 2018.
Sales for 9M 2019 decreased by 4.5% to $55.1 billion as compared with
$57.7 billion for 9M 2018, primarily due to lower average steel selling
prices reflecting continued supply chain destocking (-7.6%) offset in
part by higher steel shipments (+1.8%).
Depreciation of $2.3 billion for 9M 2019 was higher as compared with
$2.1 billion in 9M 2018. Depreciation charges for 2019 include the
depreciation of right-of-use assets recognized in property, plant and
equipment under IFRS 16 "Leases"(4) , which were previously recorded as
lease expenses in cost of sales and selling, general and administrative
expenses. FY 2019 depreciation is expected to be approximately $3.1
billion (based on current exchange rates).
Impairment charges for 9M 2019 were $1.1 billion(3) related to the
remedy asset sales for the ArcelorMittal Italia acquisition ($0.5
billion) and impairment of the fixed assets of ArcelorMittal USA ($0.6
billion). Impairment charges for 9M 2018 were $595 million primarily
related to the remedy asset sales for the ArcelorMittal Italia
acquisition and $86 million related to the agreed remedy package in
connection with the Votorantim acquisition(5) .
Exceptional items for 9M 2019 were nil. Exceptional charges for 9M 2018
were $146 million related to a provision taken in 1Q 2018 in respect of
a litigation case that was settled in 3Q 2018(6) .
Operating income for 9M 2019 was lower at $908 million as compared to
$5.5 billion in 9M 2018 primarily impacted by weaker operating
conditions (negative price-cost effect in steel segments) reflecting
both the impact of the decline in steel prices since 4Q 2018 and higher
raw material costs (reflecting in particular supply-side developments in
Brazil) and impairments as discussed above, offset in part by improved
mining segment performance (driven by higher seaborne iron ore reference
prices +37.9%). The raw material pricing environment increased during 9M
2019 and remains dislocated from steel fundamentals, compressing steel
spreads to unsustainably low levels.
Income from associates, joint ventures and other investments for 9M 2019
was lower at $327 million as compared to $425 million for 9M 2018 driven
by lower profitability of investees, whilst 9M 2018 was negatively
impacted by $132 million in impairment of ArcelorMittal's investment in
Macsteel (South Africa) following the announced sale of its 50% stake in
May 2018. Income from investments in associates, joint ventures and
other investments in 9M 2019 and 9M 2018 include the annual dividend
income from Erdemir of $93 million and $87 million, respectively.
Net interest expense was lower at $467 million for 9M 2019, as compared
to $475 million in 9M 2018. The Company expects full year 2019 net
interest expense to be approximately $0.6 billion.
Foreign exchange and other net financing losses were $928 million for 9M
2019 as compared to losses of $1.0 billion for 9M 2018. Foreign exchange
losses for 9M 2019 were $126 million as compared to $227 million in 9M
2018. 9M 2019 includes non-cash mark-to-market losses related to the
mandatory convertible bond call option following the market price
decrease of the underlying shares totalling $0.3 billion as compared to
a loss of $0.1 billion in 9M 2018. 9M 2018 included $0.1 billion premium
expense on the early redemption of bonds.
ArcelorMittal recorded an income tax expense of $334 million for 9M 2019
as compared to $362 million for 9M 2018. The tax expense of $362 million
in 9M 2018 included recognition of a deferred tax asset primarily due to
the expectation of higher future profits mainly in Luxembourg.
ArcelorMittal's net loss for 9M 2019 was $0.6 billion (or $0.56 basic
loss per common share), as compared to a net income in 9M 2018 of $4.0
billion (or $3.89 basic earnings per common share).
Analysis of results for 3Q 2019 versus 2Q 2019 and 3Q 2018
Total steel shipments in 3Q 2019 were 11.4% lower at 20.2Mt as compared
with 22.8Mt for 2Q 2019. Excluding the impact of the remedy assets sales,
steel shipments were 7.3% lower as compared to 2Q 2019, primarily due to
lower steel shipments in Europe (-10.4%, due largely to seasonality and
weaker demand), ACIS (-14.6%, across Ukraine, Kazakhstan and South
Africa) and NAFTA (-5.6%) offset in part by a slight improvement in
Brazil (+0.9%).
Total steel shipments in 3Q 2019 were 1.7% lower as compared with 20.5Mt
for 3Q 2018. Excluding the impact of the ArcelorMittal Italia
acquisition net of the remedy asset sales, steel shipments were 1.6%
lower as compared to 3Q 2018.
Sales in 3Q 2019 were $16.6 billion as compared to $19.3 billion for 2Q
2019 and $18.5 billion for 3Q 2018. Sales in 3Q 2019 were 13.7% lower as
compared to 2Q 2019 primarily due to lower steel shipments (-11.4%),
lower average steel selling prices (-3.1%), lower market-priced iron ore
shipments (-14.7%) and lower realized iron ore pricing reflecting
reduced premia for high grade product including pellet(11) . Sales in 3Q
2019 were 10.2% lower as compared to 3Q 2018 primarily due to lower
average steel selling prices (-11.1%), lower steel shipments (-1.7%) and
lower market-priced iron ore shipments (-1.5%) offset in part by higher
seaborne iron ore reference prices (+52.6%).
Depreciation for 3Q 2019 was stable at $766 million as compared 2Q 2019.
Depreciation for 3Q 2019 was higher than $653 million in 3Q 2018
primarily due to the impact of IFRS 16.
Impairment charges for 3Q 2019 were nil. Impairment charges for 2Q 2019
were $947 million related to the remedy asset sales for the
ArcelorMittal Italia acquisition ($347 million) and impairment of the
fixed assets of ArcelorMittal USA ($600 million)(3) . Impairment charges
for 3Q 2018 were $509 million primarily related to remedy asset sales
for the ArcelorMittal Italia acquisition.
Operating income for 3Q 2019 was $297 million as compared to an
operating loss for 2Q 2019 of $158 million and an operating income of
$1.6 billion in 3Q 2018. Operating income for 3Q 2019 was impacted by
lower shipment volumes and negative price-cost effect in the steel
segments and lower market price iron ore shipments and lower iron ore
premia in the mining segment. Operating loss in 2Q 2019 was primarily
driven by impairments as discussed above, as well as weaker operating
conditions (negative price-cost effect in the steel segments). Operating
result for 3Q 2018 was impacted by impairment charges as discussed
above.
Due to the lower profitability of investees, income from associates,
joint ventures and other investments for 3Q 2019 was $25 million as
compared to $94 million for 2Q 2019 and $183 million for 3Q 2018.
Net interest expense in 3Q 2019 was $152 million as compared to $154
million in 2Q 2019 and $152 million in 3Q 2018.
Foreign exchange and other net financing losses in 3Q 2019 were $524
million as compared to $173 million for 2Q 2019 and $475 million in 3Q
2018. Foreign exchange loss for 3Q 2019 was $112 million as compared to
foreign exchange gains of $34 million and $9 million, in 2Q 2019 and 3Q
2018, respectively. 3Q 2019 includes non-cash mark-to-market losses of
$243 million related to the mandatory convertible bonds call option
following the market price decrease of the underlying shares; such
losses amounted to $55 million in 2Q 2019 and $114 million in 3Q 2018.
3Q 2018 also include premium expenses on the early redemption of bonds
of $0.1 billion.
ArcelorMittal recorded an income tax expense of $185 million in 3Q 2019
as compared to an income tax expense of $14 million for 2Q 2019 and $178
million for 3Q 2018. The difference is primarily driven by 2Q 2019
recognition of deferred tax asset in Luxembourg due to the expectation
of higher future profits.
ArcelorMittal recorded a net loss for 3Q 2019 of $0.5 billion (or $0.53
basic loss per common share), as compared to net loss for 2Q 2019 of
$0.4 billion, (or $0.44 basic loss per common share), and a net income
for 3Q 2018 of $0.9 billion, (or $0.89 basic earnings per common share).
Analysis of segment operations
NAFTA
(USDm) unless otherwise
shown 3Q 19 2Q 19 3Q 18 9M 19 9M 18
Sales 4,395 5,055 5,367 14,535 15,475
Operating (loss) / income (24) (539) 612 (347) 1,580
Depreciation (147) (137) (132) (418) (395)
Impairment -- (600) -- (600) --
EBITDA 123 198 744 671 1,975
Crude steel production
(kt) 5,658 5,590 5,723 16,636 17,533
Steel shipments (kt) 5,135 5,438 5,512 15,892 16,874
Average steel selling
price (US$/t) 792 836 896 835 843
-------------------------- ----- ----- ----- ------ ------
NAFTA segment crude steel production increased by 1.2% to 5.7Mt in 3Q
2019 as compared to 5.6Mt in 2Q 2019, due to a marginal increase in
Canada.
Steel shipments in 3Q 2019 decreased by 5.6% to 5.1Mt as compared to 2Q
2019, primarily due to a 5.9% decline in flat steel shipments (due in
part to lower slab shipments to the joint venture AM/NS Calvert) and
reflecting supply chain destocking.
Sales in 3Q 2019 decreased by 13.1% to $4.4 billion as compared to $5.1
billion in 2Q 2019, primarily due to a 5.2% decline in average steel
selling prices (with flat and long products down 5.1% and 6.7%,
respectively) reflecting ongoing supply chain destock, as well as to
lower steel shipments.
Impairment charges for 3Q 2019 and 3Q 2018 were nil. Impairment charges
for 2Q 2019 were $600 million related to impairment of the fixed assets
of ArcelorMittal USA. Operating loss in 3Q 2019 was $24 million as
compared to operating loss of $539 million in 2Q 2019 and an operating
income of $612 million in 3Q 2018.
EBITDA in 3Q 2019 decreased by 37.9% to $123 million as compared to $198
million in 2Q 2019 primarily due to negative price-cost effect and lower
steel shipments. EBITDA in 3Q 2019 decreased by 83.5% as compared to
$744 million in 3Q 2018 primarily due to negative price-cost effect and
lower steel shipments.
Brazil
(USDm) unless otherwise
shown 3Q 19 2Q 19 3Q 18 9M 19 9M 18
Sales 1,929 2,126 2,103 6,211 6,282
Operating income 196 234 374 669 958
Depreciation (62) (79) (71) (211) (214)
Impairment -- -- -- -- (86)
EBITDA 258 313 445 880 1,258
Crude steel production (kt) 2,669 2,830 3,158 8,512 9,073
Steel shipments (kt) 2,810 2,785 3,097 8,475 8,411
Average steel selling price
(US$/t) 676 705 714 695 730
---------------------------- ----- ----- ----- ----- -----
Brazil segment crude steel production decreased by 5.7% to 2.7Mt in 3Q
2019 as compared to 2.8Mt for 2Q 2019, due in part to lower flat
production following the stoppage of ArcelorMittal Tubarão's blast
furnace #2 in response to deteriorating export market conditions, offset
in part by higher production in the long business. Given continued weak
export market conditions and high raw material costs, we expect the
stoppage at BF#2 at Tubarão to last until the end of 2019.
Steel shipments in 3Q 2019 increased marginally by 0.9% to 2.8Mt as
compared to 2Q 2019, due to an increase in domestic shipments while
exports declined. Overall long products shipments increased by 6.1%
while flat products declined by 3.2% due to lower exports.
Sales in 3Q 2019 decreased by 9.2% to $1.9 billion as compared to $2.1
billion in 2Q 2019, primarily due to 4.1% lower average steel selling
prices offset in part by marginally higher steel shipments as discussed
above.
Operating income in 3Q 2019 declined to $196 million as compared to $234
million in 2Q 2019 and $374 million in 3Q 2018.
EBITDA in 3Q 2019 decreased by 17.6% to $258 million as compared to $313
million in 2Q 2019 primarily due to negative price-cost effect. EBITDA
in 3Q 2019 was 42.0% lower as compared to $445 million in 3Q 2018
primarily due to lower steel shipment volumes and negative price-cost
effect.
Europe
(USDm) unless otherwise
shown 3Q 19 2Q 19 3Q 18 9M 19 9M 18
Sales 8,796 10,396 9,559 29,686 30,727
Operating (loss) /
income (168) (301) 100 (458) 1,533
Depreciation (311) (313) (262) (933) (872)
Impairment -- (347) (509) (497) (509)
Exceptional charges -- -- -- -- (146)
EBITDA 143 359 871 972 3,060
Crude steel production
(kt) 10,432 12,079 10,841 34,883 33,113
Steel shipments (kt) 9,698 11,811 9,709 33,062 30,922
Average steel selling
price (US$/t) 686 704 776 707 793
----------------------- ------ ------ ------ ------ ------
Europe segment crude steel production decreased by 13.6% to 10.4Mt in 3Q
2019 as compared to 12.1Mt in 2Q 2019. Excluding the scope impact of
remedy asset sales related to the ArcelorMittal Italia acquisition,
steel production was down 5.2%. The 4.2Mt annualized production
curtailments to bring supply in line with addressable demand that were
announced in May 2019 took effect in part in 3Q 2019 and are scheduled
to take full effect in 4Q 2019.
Steel shipments in 3Q 2019 decreased by 17.9% to 9.7Mt as compared to
11.8Mt in 2Q 2019. Excluding the scope impact of remedy asset sales
related to the ArcelorMittal Italia acquisition, steel shipments were
down 10.4% due to seasonality and lower demand driven by macro headwinds
including declines in automobile production. Steel shipments were stable
in 3Q 2019 as compared to 3Q 2018.
Sales in 3Q 2019 were $8.8 billion, 15.4% lower as compared to $10.4
billion in 2Q 2019, with lower average steel selling prices -2.5% and
lower shipments, as discussed above.
Impairment charges for 3Q 2019 were nil. Impairment charges for 2Q 2019
and 3Q 2018 were $347 million and $509 million, respectively, related to
remedy asset sales for the ArcelorMittal Italia acquisition.
Operating loss in 3Q 2019 was $168 million as compared to an operating
loss in 2Q 2019 of $301 million and an operating income of $100 million
in 3Q 2018. Operating results for 2Q 2019 and 3Q 2018 were impacted by
impairment charges as discussed above.
EBITDA in 3Q 2019 decreased by 60.3% to $143 million as compared to $359
million in 2Q 2019 primarily due to lower steel shipment volumes with a
negative price cost effect offset by improved fixed cost performance.
EBITDA in 3Q 2019 decreased by 83.6% as compared to $871 million in 3Q
2018 primarily due to negative price-cost effect and continued losses of
ArcelorMittal Italia.
ACIS
(USDm) unless otherwise
shown 3Q 19 2Q 19 3Q 18 9M 19 9M 18
-------------------------- ------ ------ ------ ------- ---------
Sales 1,654 1,906 1,989 5,205 6,198
Operating income 35 114 371 213 973
Depreciation (93) (85) (76) (259) (234)
EBITDA 128 199 447 472 1,207
Crude steel production
(kt) 3,450 3,252 3,560 10,025 10,047
Steel shipments (kt) 2,718 3,182 2,986 8,562 9,072
Average steel selling
price (US$/t) 532 536 597 536 609
-------------------------- ----- ----- ----- ------ ------
ACIS segment crude steel production in 3Q 2019 increased by 6.1% to
3.5Mt as compared to 3.3Mt in 2Q 2019 primarily due to normalized
production in Ukraine following planned blast furnace repair during 2Q
2019, offset in part by weaker South Africa performance.
Steel shipments in 3Q 2019 decreased by 14.6% to 2.7Mt as compared to
3.2Mt as at 2Q 2019, due to the lower domestic shipments in South Africa
due to weaker demand, maintenance of the hot strip mill for further
improvements in Kazakhstan and timing of shipments in Ukraine.
Sales in 3Q 2019 decreased by 13.2% to $1.7 billion as compared to $1.9
billion in 2Q 2019 primarily due to lower steel shipments.
Operating income in 3Q 2019 was $35 million as compared to $114 million
in 2Q 2019 and significantly lower as compared to $371 million in 3Q
2018.
EBITDA decreased by 35.8% to $128 million in 3Q 2019 as compared to $199
million in 2Q 2019 primarily due to negative price-cost effect and lower
steel shipment volumes. EBITDA in 3Q 2019 was significantly lower as
compared to $447 million in 3Q 2018, primarily due to negative
price-cost effect and lower steel shipments.
Mining
(USDm) unless otherwise shown 3Q 19 2Q 19 3Q 18 9M 19 9M 18
--------------------------------------- ------ ------ ------ ------ --------
Sales 1,182 1,423 1,008 3,732 3,097
Operating income 260 457 179 1,030 619
Depreciation (112) (113) (102) (332) (316)
EBITDA 372 570 281 1,362 935
Own iron ore production (Mt) 13.6 14.6 14.5 42.3 43.5
Iron ore shipped externally and
internally at market price (a)
(Mt) 8.4 9.9 8.5 27.5 27.7
----- ----- ----- ----- -----
Iron ore shipment - cost plus
basis (Mt) 6.2 5.6 5.6 16.4 14.9
Own coal production (Mt) 1.4 1.5 1.5 4.1 4.6
Coal shipped externally and internally
at market price (a) (Mt) 0.7 0.7 0.7 2.1 1.8
Coal shipment - cost plus basis
(Mt) 0.8 0.7 0.9 2.2 2.7
--------------------------------------- ----- ----- ----- ----- -----
(a) Iron ore and coal shipments of market-priced based materials include
the Company's own mines and share of production at other mines
Own iron ore production in 3Q 2019 decreased by 7.4% to 13.6Mt as
compared to 14.6Mt in 2Q 2019, primarily due to lower production at
ArcelorMittal Mines Canada(7) (AMMC) following an electrical failure
which led to a temporary stoppage of the concentrator and seasonally
lower production (rainy season) at ArcelorMittal Liberia. Own iron ore
production in 3Q 2019 decreased by 6.2% as compared to 3Q 2018 primarily
due to lower AMMC and ArcelorMittal Volcan mine production offset in
part by higher production in Kazakhstan.
Market-priced iron ore shipments in 3Q 2019 decreased by 14.7% to 8.4Mt
as compared to 9.9Mt in 2Q 2019, primarily driven by lower shipments in
AMMC due to production constraints following the temporary stoppage of
the concentrator and seasonally lower market-priced iron ore shipments
in Liberia. Market-priced iron ore shipments in 3Q 2019 were 1.5% lower
as compared to 3Q 2018 driven by lower shipments in AMMC and at the
Volcan mine, offset by higher shipments in Serra Azul and Liberia.
Market-priced iron ore shipments for FY 2019 are expected to be stable
as compared to FY 2018 with an increase in Liberia to be offset by lower
volume at AMMC and Volcan mine.
Own coal production in 3Q 2019 of 1.4Mt was relatively stable as
compared to 1.5Mt in 2Q 2019 primarily due to lower production at
Princeton (US) offset in part by higher production in Temirtau
(Kazakhstan). Own coal production in 3Q 2019 decreased by 2.1% as
compared to 1.5Mt in 3Q 2018 due to lower production at Temirtau
(Kazakhstan).
Market-priced coal shipments in 3Q 2019 increased by 4.9% to 0.7Mt as
compared to 2Q 2019 and 4.7% as compared to 3Q 2018.
Operating income in 3Q 2019 decreased by 43.2% to $260 million as
compared to $457 million in 2Q 2019 and increased by 45% as compared to
$179 million in 3Q 2018.
EBITDA in 3Q 2019 decreased by 34.8% to $372 million as compared to $570
million in 2Q 2019, primarily due to the impact of lower market-priced
iron ore shipments (-14.7%), lower iron ore quality premia, higher
freight costs as well as the impact of lower seaborne marketable coking
coal prices (-20.6%). EBITDA in 3Q 2019 was 32.5% higher as compared to
$281 million in 3Q 2018, primarily due to higher seaborne iron ore
reference prices (+52.6%) offset in part by lower market-priced iron ore
shipments (-1.5%) and lower iron ore quality premia, as well as the
impact of lower seaborne marketable coking coal prices (-14.4%).
Liquidity and Capital Resources
For 3Q 2019 net cash provided by operating activities was $328 million
as compared to $1,786 million in 2Q 2019 and $634 million in 3Q 2018.
Net cash provided by operating activities in 3Q 2019 includes in part a
working capital investment of $203 million as compared to a working
capital release of $353 million in 2Q 2019 and a working capital
investment of $1,713 million in 3Q 2018.
The Group invested more in working capital than expected in FY 2018
($4.4 billion versus guidance of $3.0-3.5 billion) and continues to
expect this additional investment of approximately $1 billion to be
released in full in 2019. As a result, given the 9M 2019 investment of
$0.4 billion, the Company expects at least a $1.4 billion release in the
final quarter of 2019. The actual extent of any further changes in
working capital in 2019, will however be dictated by market conditions,
particularly the price and volume environment in the final weeks of the
year.
Net cash used in investing activities during 3Q 2019 was $816 million as
compared to $564 million during 2Q 2019 and $601 million in 3Q 2018.
Capex increased to $941 million in 3Q 2019 as compared to $869 million
in 2Q 2019 and $781 million in 3Q 2018. The Company continues to adapt
its capex plans to the operating environment and now expects FY 2019
capex to be less than $3.5 billion (lower versus mid-year guidance of
$3.8 billion).
Net cash provided by other investing activities in 3Q 2019 of $125
million primarily includes net proceeds from the sale of our remaining
2.6% stake in Gerdau ($116 million cash received following sale of 30
million shares) and final installment of disposal proceeds from
ArcelorMittal USA's 21% stake in the Empire Iron Mine Partnership ($44
million), offset by the quarterly lease payment for ArcelorMittal
Italia. Net cash provided by other investing activities in 2Q 2019 of
$305 million primarily includes net proceeds from remedy asset sales for
the ArcelorMittal Italia acquisition of $0.5 billion, offset by $0.1
billion partial reversal of the Indian rupee rolling hedge entered into
in connection with the proposed acquisition of Essar(10) and by the
quarterly lease payment for the ArcelorMittal Italia acquisition.
Net cash provided by financing activities in 3Q 2019 was $659 million as
compared to $180 million in 2Q 2019 and net cash used in financing
activities in 3Q 2018 of $597 million. In 3Q 2019, net cash provided by
financing activities includes a net inflow of $804 million primarily
related to the net issuance and early redemption of bonds (see recent
developments below). In 2Q 2019, net cash provided by financing
activities included a net inflow of $0.5 billion for new bank financing.
Net cash used in financing activities in 3Q 2018 of $597 million
primarily includes payments relating to bond repurchases pursuant to
cash tender offers ($0.6 billion).
During 3Q 2019, the Company paid dividends of $61 million mainly to
minority shareholders in ArcelorMittal Mines Canada. During 2Q 2019, the
Company paid dividends of $204 million mainly to ArcelorMittal
shareholders. During 3Q 2018, the Company paid dividends of $37 million
to minority shareholders in ArcelorMittal Mines Canada.
Outflows from lease principal payments and other financing activities
(net) were $84 million for 3Q 2019 and 2Q 2019 respectively, as compared
to $17 million in 3Q 2018. The increase year-on-year is as a result of
the first-time application of IFRS 16 effective from January 1, 2019, as
the repayments of the principal portion of the operating leases are
presented under financing activities (previously reported under
operating activities).
As of September 30, 2019, the Company's cash and cash equivalents
amounted to $3.6 billion as compared to $3.7 billion at June 30, 2019
and $2.4 billion at December 31, 2018.
Gross debt increased to $14.3 billion as of September 30, 2019, as
compared to $13.8 billion at June 30, 2019 and $12.6 billion in December
31, 2018. As of September 30, 2019, net debt increased by $0.5 billion
to $10.7 billion as compared to $10.2 billion as of June 30, 2019. Net
debt was higher as of September 30, 2019 as compared to June 30, 2019
primary due to negative free cash flow (including a temporary working
capital investment of $0.2 billion).
As of September 30, 2019, the Company had liquidity of $9.1 billion,
consisting of cash and cash equivalents of $3.6 billion and $5.5 billion
of available credit lines(8) . The $5.5 billion credit facility contains
a financial covenant not to exceed 4.25x Net debt / LTM EBITDA (as
defined in the facility). As of September 30, 2019, the average debt
maturity was 5.1 years.
Key recent developments
-- On November 4, 2019, AM InvestCo Italy ("AM InvestCo") sent to the
Commissioners of Ilva S.p.A. a notice to withdraw from, or terminate, the
agreement (the "Agreement") for the lease and subsequent conditional
purchase of the business of Ilva S.p.A. and certain of its subsidiaries
("Ilva"), that had closed on 31 October 2018. The Agreement stipulates
that, in the event that a new law affects the environmental plan for the
Taranto plant so as to materially impair the ability to operate it or to
implement its industrial plan, AM InvestCo has a contractual right to
withdraw from the Agreement. Effective on November 3, 2019, the Italian
Parliament has removed the legal protection necessary for AM InvestCo to
implement its environmental plan without the risk of criminal liability,
thus justifying the withdrawal notice. In addition, the decisions issued
by the criminal court of Taranto bind the Ilva extraordinary
Commissioners to complete certain prescriptions by December 13, 2019 - a
term the Commissioners themselves deemed impossible to meet - failing
which blast furnace number 2 will be shut down. Such prescriptions should
also reasonably and prudentially be applied to the other two blast
furnaces at the Taranto plant. The shutdown would make it impossible for
AM InvestCo to implement its industrial plan, operate the Taranto plant
and, generally, perform the Agreement. Other serious occurrences,
independent of AM InvestCo's will, have also led to a situation of legal
and operational uncertainty that has further significantly impaired the
ability to carry out the necessary operations at Ilva and operate the
Taranto plant. All the mentioned circumstances also entitle AM InvestCo
to terminate the Agreement under the applicable provisions and principles
of the Italian Civil Code. In accordance with the content of the
Agreement, AM InvestCo has asked the extraordinary Commissioners to take
responsibility for Ilva's operations (including the Taranto plant and the
plants in Novi Ligure and Genova) and employees within 30 days from the
receipt of the notice of withdrawal and termination.Until transfer of the
operations to the Commissioners is completed, AM InvestCo will implement
its stand-by plan. AM InvestCo has been loss making since its
consolidation in the Group's results in November 2018. ArcelorMittal
expects to continue to consolidate AM InvestCo's results until the
control of the assets is transferred to the Commissioners.
-- The Supreme Court case which dealt with appeals over NCLAT's earlier
order concluded on October 24, 2019. Assuming a favourable and clear
final order which is expected to be issued shortly, the transaction
closing is expected in 4Q 2019. After completion, ArcelorMittal will
jointly own and operate ESIL in partnership with Nippon Steel Corp
("NSC"), Japan's largest steel producer and the third largest steel
producer in the world, in-line with the joint venture formation agreement
signed with NSC on January 22, 2019. ArcelorMittal and NSC expect to
finance the joint venture through a combination of partnership equity
(one-third) and debt (two-thirds), and ArcelorMittal anticipates that its
investment in the joint venture will be equity accounted.
-- On October 4, 2019, S&P reaffirmed its BBB- rating but revised its
outlook to negative on the stated basis that they remain watchful of
further deteriorating markets or if the Company experiences delays with
its divestment program.
-- On September 25, 2019, ArcelorMittal South Africa (AMSA) announced that
its board of directors (the "AMSA Board") had extended its planned
strategic evaluation process to incorporate a review of the operational
and financial sustainability of certain of its major operating sites,
individual plants and production areas, although excluding its commercial
market coke operations and not impacting the announced planned
acquisition of the Highveld Structural Mill. AMSA is in the process of
consulting with its employees and trade unions and it is envisaged that
this process may be finalized in the fourth quarter of 2019. The
announcement notes that the objective of the review is to strengthen the
long-term sustainability of AMSA. Consequently, by actively addressing
those operating sites, individual plants and production areas which
historically have had a negative impact on AMSA's financial results, the
AMSA Board aims to strengthen the financial fundamentals of those
business areas which are underpinned by the targeted asset footprint. The
announcement further notes that the AMSA Board is committed to the
establishment of an affordable asset footprint with an enduring
competitive advantage. However, certain of the AMSA's operating sites,
individual plants and production areas have proven to be particularly
vulnerable from a financial perspective given (i) the extended period of
economic weakness, (ii) structural disadvantages, and (iii) an
increasingly uncompetitive cost base - notably manifest in unaffordable
regulated tariffs and raw material prices. The outcome of the review may
result in the closure of certain operating sites, individual plants and
production areas, and the consequential concentration of operations at
the remaining sites. Such decisions would be taken as a result of the
affected business areas being no longer financially viable considering
the factors noted above.
-- On August 30, 2019, ArcelorMittal redeemed all of the outstanding $324
million of its $500 million 5.125% Notes due June 1, 2020 and the
outstanding $626 million of its $1 billion 5.250% Notes due August 5,
2020.
-- On July 16, 2019, ArcelorMittal issued $750 million of its 3.60% Notes
due 2024 and $500 million of its 4.25% Notes due 2029. ArcelorMittal used
the net proceeds of this offering for general corporate purposes
including future repayment of existing indebtedness and to partially
pre-fund commitments under the ESIL acquisition financing facility.
-- On July 4, 2019, ArcelorMittal completed the issuance of EUR250 million
($285 million) of its 2.25% Fixed Rate Notes due 2024, which were
consolidated and form a single series with the existing EUR750 million
2.25% Fixed Rate Notes due 2024 originally issued on January 17, 2019
under its EUR10 billion EMTN Program. The proceeds of the issuance were
used for general corporate purposes.
-- On July 1, 2019, ArcelorMittal completed the offering of EUR450 million
($512 million) in variable rate loans in the German Schuldschein market.
The proceeds of the issuance were used for general corporate purposes.
Outlook and guidance
Based on year-to-date growth and the current economic outlook
ArcelorMittal expects global apparent steel consumption ("ASC") to grow
in 2019 by between +0.5% to +1.0% (i.e. towards the lower end of
previous guidance of +0.5% to 1.5%). By region: In the US, given
continued destocking of the supply chain, ASC is now expected to
contract by up to -0.5% to -1.0% in 2019 (versus +0.0% to +1.0% previous
guidance range), with ongoing weakness in automotive demand and a
slowdown in machinery offset in part by healthy non-residential
construction demand; In Europe, demand is expected to contract by up to
-3.0% (versus -1.0% to -2.0% previous guidance range) with ongoing
automotive demand weakness and slowing construction exacerbated by
supply chain destocking; In Brazil, ASC growth in 2019 is forecasted at
around +0.5% to +1.0% (a moderation versus +1.5% to +2.5% previous
guidance range) driven by delayed growth in infrastructure spend,
ongoing supply chain destocking, as well as impacts of the Argentinian
recession; In the CIS, expected ASC growth in 2019 has been upgraded to
+2.5% to +3.0% (versus +1.0% to +2.0% previous estimate) led by robust
demand in Russia. Overall, World ex-China ASC in 2019 is now expected to
be stable in 2019 (versus previous guidance for growth within the range
of +0.5% to +1.0%). In China, overall demand expectations have been
increased again and we now forecast growth of between +1.5% to 2.0% in
2019 (versus +0.5% to +1.5% previous guidance range) as real estate
demand continues to remain robust.
Given these demand expectations, the Group's steel shipments are now
expected to be stable in 2019 vs 2018 (revised from previous guidance of
an increase year-on-year).
Market-priced iron ore shipments for FY 2019 are still expected to be
stable as compared to FY 2018.
The Company expects certain cash needs of the business (including capex,
interest, cash taxes, pensions and certain other cash costs but
excluding working capital movements) to be $5.0 billion in 2019 versus
previous $5.4 billion guidance at 1H 2019 results announcement. The
Company has further reduced expected capex to $3.5 billion versus
mid-year guidance of $3.8 billion. Interest expense in 2019 is now
expected to be $0.6 billion (revised down from $0.65 billion previous
guidance) while cash taxes, pensions and other cash costs are now
expected to be $0.9 billion (versus previous guidance of $1.0 billion
due to lower expected cash taxes).
The Group invested more in working capital than expected in 2018 ($4.4
billion versus guidance of $3.0-3.5 billion) and continues to expect
this additional investment of approximately $1 billion to be released in
full in 2019. As a result, given the 9M 2019 investment of $0.4 billion,
the Company expects a release of at least $1.4 billion in the final
quarter of 2019. The actual extent of any further changes in working
capital in 2019 will, however, be dictated by market conditions,
particularly the price and volume environment in the final weeks of the
year.
As previously announced in the 2Q 2019 results and in line with our
ongoing efforts to optimize our asset portfolio, we have identified
opportunities to unlock $2 billion of value from the portfolio over the
next 2 years. The Company is making progress and currently engaged in
active discussions with interested parties on several opportunities.
The Company will continue to prioritize deleveraging and believes that
$7 billion (including impact of IFRS 16) is an appropriate net debt
target that will sustain investment grade metrics even at the low point
of the cycle.
ArcelorMittal intends to progressively increase the base dividend paid
to its shareholders, and, on attainment of the net debt target, the
Company is committed to returning a portion of annual FCF to
shareholders.
ArcelorMittal Condensed Consolidated Statement of Financial Position(1)
Sept 30, Jun 30, Dec 31,
In millions of U.S. dollars 2019 2019 2018
------------------------------------------------- -------- ------- ---------
ASSETS
Cash and cash equivalents 3,647 3,656 2,354
Trade accounts receivable and other 4,340 5,048 4,432
Inventories 18,938 20,550 20,744
Prepaid expenses and other current assets 2,830 3,123 2,834
Assets held for sale(9) 115 122 2,111
Total Current Assets 29,870 32,499 32,475
Goodwill and intangible assets 5,408 5,480 5,728
Property, plant and equipment 35,903 36,725 35,638
Investments in associates and joint ventures 4,826 5,026 4,906
Deferred tax assets 8,449 8,412 8,287
Other assets 3,691 4,224 4,215
Total Assets 88,147 92,366 91,249
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt and current portion of long-term
debt 3,337 3,107 3,167
Trade accounts payable and other 12,440 14,418 13,981
Accrued expenses and other current liabilities 5,288 5,549 5,486
Liabilities held for sale(9) 29 35 821
Total Current Liabilities 21,094 23,109 23,455
-------- ------- -------
Long-term debt, net of current portion 10,968 10,723 9,316
Deferred tax liabilities 2,160 2,284 2,374
Other long-term liabilities 11,696 12,139 11,996
Total Liabilities 45,918 48,255 47,141
Equity attributable to the equity holders of
the parent 40,242 42,033 42,086
Non-controlling interests 1,987 2,078 2,022
Total Equity 42,229 44,111 44,108
Total Liabilities and Shareholders' Equity 88,147 92,366 91,249
------------------------------------------------- -------- ------- -------
ArcelorMittal Condensed Consolidated Statement of Operations(1)
Three months ended Nine months ended
------------------------------------------
In millions of U.S. dollars unless Sept 30, Jun 30, Sept 30, Sept 30, Sept 30,
otherwise shown 2019 2019 2018 2019 2018
---------- ---------- ---------- ---------- ----------
Sales 16,634 19,279 18,522 55,101 57,706
------ ------ ------ ------ ------
Depreciation (B) (766) (766) (653) (2,265) (2,076)
------ ------ ------ ------ ------
Impairments (B) -- (947) (509) (1,097) (595)
Exceptional items(6) (B) -- -- -- -- (146)
Operating income / (loss) (A) 297 (158) 1,567 908 5,497
Operating margin % 1.8% (0.8)% 8.5% 1.6% 9.5%
Income from associates, joint
ventures and other investments 25 94 183 327 425
Net interest expense (152) (154) (152) (467) (475)
Foreign exchange and other net
financing loss (524) (173) (475) (928) (1,039)
(Loss) / income before taxes
and non-controlling interests (354) (391) 1,123 (160) 4,408
Current tax expense (121) (225) (206) (526) (730)
Deferred tax (expense) / benefit (64) 211 28 192 368
Income tax expense (185) (14) (178) (334) (362)
(Loss) / income including non-controlling
interests (539) (405) 945 (494) 4,046
Non-controlling interests income -- (42) (46) (78) (90)
Net (loss) / income attributable
to equity holders of the parent (539) (447) 899 (572) 3,956
Basic (loss) / earnings per common
share ($) (0.53) (0.44) 0.89 (0.56) 3.89
Diluted (loss) / earnings per
common share ($) (0.53) (0.44) 0.88 (0.56) 3.87
Weighted average common shares
outstanding (in millions) 1,012 1,014 1,014 1,013 1,016
Diluted weighted average common
shares outstanding (in millions) 1,012 1,014 1,019 1,013 1,021
OTHER INFORMATION
EBITDA (C = A-B) 1,063 1,555 2,729 4,270 8,314
EBITDA Margin % 6.4% 8.1% 14.7% 7.7% 14.4%
Own iron ore production (Mt) 13.6 14.6 14.5 42.3 43.5
Crude steel production (Mt) 22.2 23.8 23.3 70.1 69.8
Steel shipments (Mt) 20.2 22.8 20.5 64.8 63.6
------------------------------------------ ---------- ---------- ---------- ---------- ----------
ArcelorMittal Condensed Consolidated Statement of Cash flows(1)
Three months ended Nine months ended
--------------------------------------
Sept 30, Jun 30, Sept 30, Sept 30, Sept 30,
In millions of U.S. dollars 2019 2019 2018 2019 2018
---------- ------- -------- ---------- ----------
Operating activities:
(Loss)/income attributable to
equity holders of the parent (539) (447) 899 (572) 3,956
Adjustments to reconcile net income
to net cash provided by operations:
Non-controlling interests income -- 42 46 78 90
Depreciation and impairments 766 1,713 1,162 3,362 2,671
Exceptional items(6) -- -- -- -- 146
Income from associates, joint
ventures and other investments (25) (94) (183) (327) (425)
Deferred tax expense / (benefit) 64 (211) (28) (192) (368)
Change in working capital (203) 353 (1,713) (403) (4,814)
-----
Other operating activities (net) 265 430 451 1,139 770
-----
Net cash provided by operating
activities (A) 328 1,786 634 3,085 2,026
Investing activities:
Purchase of property, plant and
equipment and intangibles (B) (941) (869) (781) (2,757) (2,149)
Other investing activities (net) 125 305 180 684 316
Net cash used in investing activities (816) (564) (601) (2,073) (1,833)
Financing activities:
Net proceeds / (payments) relating
to payable to banks and long-term
debt 804 468 (543) 1,136 194
Dividends paid (61) (204) (37) (311) (188)
Share buyback -- -- -- (90) (226)
Lease payments and other financing
activities (net) (84) (84) (17) (240) (58)
Net cash provided by / (used in)
financing activities 659 180 (597) 495 (278)
Net increase / (decrease) in cash
and cash equivalents 171 1,402 (564) 1,507 (85)
----- --- ------ ------- ------ -------
Cash and cash equivalents transferred
(to)/from assets held for sale -- 21 -- 10 (23)
----- ------ ------- ------ -------
Effect of exchange rate changes
on cash (155) 17 (56) (153) (143)
--------------------------------------
Change in cash and cash equivalents 16 1,440 (620) 1,364 (251)
Free cash flow (C=A+B) (613) 917 (147) 328 (123)
-------------------------------------- ----- ------ ------- ------ -------
Appendix 1: Product shipments by region
(000'kt) 3Q 19 2Q 19 3Q 18 9M 19 9M 18
--------- ----- ------ ----- ------ --------
Flat 4,454 4,732 4,885 13,936 14,707
Long 847 873 774 2,441 2,664
NAFTA 5,135 5,438 5,512 15,892 16,874
Flat 1,513 1,563 1,695 4,775 4,589
Long 1,312 1,236 1,415 3,742 3,855
Brazil 2,810 2,785 3,097 8,475 8,411
Flat 7,225 8,824 6,855 24,696 22,112
Long 2,333 2,883 2,798 8,037 8,701
Europe 9,698 11,811 9,709 33,062 30,922
CIS 1,657 2,064 1,879 5,338 5,606
Africa 1,060 1,113 1,102 3,222 3,468
ACIS 2,718 3,182 2,986 8,562 9,072
--------- ----- ------ ----- ------ ------
Note: "Others and eliminations" are not presented in the table
Appendix 2a: Capital expenditures
(USDm) 3Q 19 2Q 19 3Q 18 9M 19 9M 18
------- ----- ----- ----- ----- -------
NAFTA 210 144 155 536 425
Brazil 68 80 59 232 142
Europe 390 337 298 1,080 837
ACIS 153 115 141 405 375
Mining 107 125 116 347 342
Total 941 869 781 2,757 2,149
------- ----- ----- ----- ----- -----
Note: "Others" are not presented in the table
Appendix 2b: Capital expenditure projects
The following tables summarize the Company's principal growth and
optimization projects involving significant capex.
Completed projects in most recent quarter
Segment Site / Project Capacity / details Actual
unit completion
NAFTA Indiana Indiana Harbor "footprint Restoration of 80" HSM and 4Q 2018
Harbor optimization project" upgrades at Indiana Harbor (a)
(US) finishing
------- ------- ------------------------- --------------------------- -----------
Ongoing projects
Segment Site / unit Project Capacity / details Forecasted
completion
------- --------------------- ------------------- --------------------------------- -----------
ACIS ArcelorMittal Kryvyi New LF&CC 2&3 Facilities upgrade to switch 2019
Rih (Ukraine) from ingot to continuous
caster route. Additional
billets of up to 290kt over
ingot route through yield
increase
Europe Sosnowiec (Poland) Modernization of Upgrade rolling technology 2019
Wire Rod Mill improving the mix of HAV
products and increase volume
by 90kt
NAFTA Mexico New Hot strip mill Production capacity of 2.5Mt/year 2020(b)
NAFTA ArcelorMittal Dofasco Hot Strip Mill Replace existing three end 2021(c)
(Canada) Modernization of life coilers with two
states of the art coilers
and new runout tables
NAFTA Burns Harbor (US) New Walking Beam Two new walking beam reheat 2021
Furnaces furnaces bringing benefits
on productivity, quality
and operational cost
Brazil ArcelorMittal Vega Expansion project Increase hot dipped / cold 2021(d)
Do Sul rolled coil capacity and
construction of a new 700kt
continuous annealing line
(CAL) and continuous galvanising
line (CGL) combiline
Brazil Juiz de Fora Melt shop expansion Increase in meltshop capacity On hold(e)
by 0.2Mt/year
Brazil Monlevade Sinter plant, blast Increase in liquid steel On hold(e)
furnace and melt capacity by 1.2Mt/year;
shop Sinter feed capacity of
2.3Mt/year
Mining Liberia Phase 2 expansion Increase production capacity Under
project to 15Mt/year review(f)
------- --------------------- ------------------- --------------------------------- -----------
1. In support of the Company's Action 2020 program, the footprint
optimization project at ArcelorMittal Indiana Harbor is now complete,
which has resulted in structural changes required to improve asset and
cost optimization. The plan involved idling redundant operations
including the #1 aluminize line, 84" hot strip mill (HSM), and #5
continuous galvanizing line (CGL) and No.2 steel shop (idled in 2Q 2017)
whilst making further planned investments totalling approximately $200
million including a new caster at No.3 steel shop (completed in 4Q 2016),
restoration of the 80" hot strip mill and Indiana Harbor finishing. The
full project scope was completed in 4Q 2018.
2. On September 28, 2017, ArcelorMittal announced a major US$1 billion,
three-year investment programme at its Mexican operations, which is
focused on building ArcelorMittal Mexico's downstream capabilities,
sustaining the competitiveness of its mining operations and modernizing
its existing asset base. The programme is designed to enable
ArcelorMittal Mexico to meet the anticipated increased demand
requirements from domestic customers, realize in full ArcelorMittal
Mexico's production capacity of 5.3 million tonnes and significantly
enhance the proportion of higher added-value products in its product mix,
in-line with the Company's Action 2020 plan. The main investment will be
the construction of a new hot strip mill. Upon completion, the project
will enable ArcelorMittal Mexico to produce c. 2.5 million tonnes of flat
rolled steel, long steel c. 1.8 million tonnes and the remainder made up
of semi-finished slabs. Coils from the new hot strip mill will be
supplied to domestic, non-auto, general industry customers. The project
commenced late 4Q 2017 and is expected to be completed in 2020.
3. Investment in ArcelorMittal Dofasco (Canada) to modernize the hot strip
mill. The project is to install two new state of the art coilers and
runout tables to replace three end of life coilers. The strip cooling
system will be upgraded and include innovative power cooling technology
to improve product capability. Project is expected to be completed in
2021.
4. In August 2018, ArcelorMittal announced the resumption of the Vega Do Sul
expansion to provide an additional 700kt of cold-rolled annealed and
galvanized capacity to serve the growing domestic market. The three-year
$0.3 billion investment programme to increase rolling capacity with
construction of a new continuous annealing line and CGL combiline (and
the option to add a ca. 100kt organic coating line to serve construction
and appliance segments), and upon completion, will strengthen
ArcelorMittal's position in the fast growing automotive and industry
markets through Advanced High Strength Steel products. The investments
will look to facilitate a wide range of products and applications whilst
further optimizing current ArcelorMittal Vega facilities to maximize site
capacity and its competitiveness, considering comprehensive digital and
automation technology. Project completion is expected in 2021.
5. Although the Monlevade wire rod expansion project and Juiz de Fora rebar
expansion were completed in 2015, both projects are currently on hold and
are expected to be completed upon Brazil domestic market recovery.
6. ArcelorMittal had previously announced a Phase 2 project that envisaged
the construction of 15 million tonnes of concentrate sinter fines
capacity and associated infrastructure. The Phase 2 project was initially
delayed due to the declaration of force majeure by contractors in August
2014 due to the Ebola virus outbreak in West Africa, and then reassessed
following rapid iron ore price declines over the ensuing period.
ArcelorMittal Liberia has now completed the detailed feasibility study to
identify the optimal concentration solution for utilizing the resources
at Tokadeh and its other deposits and has commenced detailed engineering
work in order to progress to the next stage of the process. The
investment case is now being assessed and in the final stages of review.
Appendix 3: Debt repayment schedule as of September 30, 2019
(USD billion) 2019 2020 2021 2022 2023 >=2024 Total
----------------- ---- ---- ---- ---- ---- ------ -------
Bonds -- 0.9 1.3 1.5 0.5 4.7 8.9
Commercial paper 0.7 0.6 -- -- -- -- 1.3
Other loans 0.3 1.0 0.7 0.5 0.9 0.7 4.1
Total gross debt 1.0 2.5 2.0 2.0 1.4 5.4 14.3
----------------- ---- ---- ---- ---- ---- ------ -----
Appendix 4: Reconciliation of gross debt to net debt
Sept 30, Jun 30, Dec 31,
(USD million) 2019 2019 2018
------------------------------------------------ -------- ------- ---------
Gross debt (excluding that held as part of the
liabilities held for sale) 14,305 13,830 12,483
Gross debt held as part of the liabilities held
for sale -- -- 77
Gross debt 14,305 13,830 12,560
Less:
Cash and cash equivalents (3,647) (3,656) (2,354)
Cash and cash equivalents held as part of the
assets held for sale -- -- (10)
Net debt (including that held as part of the
assets and the liabilities held for sale) 10,658 10,174 10,196
------------------------------------------------
Net debt / LTM EBITDA 1.7 1.3 1.0
------- ------ ------
Appendix 5: Terms and definitions
Unless indicated otherwise, or the context otherwise requires,
references in this earnings release report to the following terms have
the meanings set out next to them below:
Apparent steel consumption: calculated as the sum of production plus
imports minus exports.
Average steel selling prices: calculated as steel sales divided by steel
shipments.
Cash and cash equivalents: represents cash and cash equivalents,
restricted cash and short-term investments.
Capex: represents the purchase of property, plant and equipment and
intangibles.
Change in cash and cash equivalents: represents the change in cash and
cash equivalents, excluding restricted cash.
Crude steel production: steel in the first solid state after melting,
suitable for further processing or for sale.
EBITDA: operating results plus depreciation, impairment expenses and
exceptional income/ (charges).
EBITDA/tonne: calculated as EBITDA divided by total steel shipments.
Exceptional items (income / (charges)): relate to transactions that are
significant, infrequent or unusual and are not representative of the
normal course of business of the period.
Foreign exchange and other net financing (loss) / gain: include foreign
currency exchange impact, bank fees, interest on pensions, impairments
of financial assets, revaluation of derivative instruments and other
charges that cannot be directly linked to operating results.
Free cash flow (FCF): refers to net cash provided by operating
activities less capex.
Gross debt: long-term debt, plus short-term debt and IFRS 16 liabilities
impact (including that held as part of the liabilities held for sale).
Liquidity: cash and cash equivalents plus available credit lines
excluding back-up lines for the commercial paper program.
LTIF: lost time injury frequency rate equals lost time injuries per
1,000,000 worked hours, based on own personnel and contractors.
MT: refers to million metric tonnes
Market-priced tonnes: represent amounts of iron ore and coal from
ArcelorMittal mines that could be sold to third parties on the open
market. Market-priced tonnes that are not sold to third parties are
transferred from the Mining segment to the Company's steel producing
segments and reported at the prevailing market price. Shipments of raw
materials that do not constitute market-priced tonnes are transferred
internally and reported on a cost-plus basis.
Mining segment sales: i) "External sales": mined product sold to third
parties at market price; ii) "Market-priced tonnes": internal sales of
mined product to ArcelorMittal facilities and reported at prevailing
market prices; iii) "Cost-plus tonnes" - internal sales of mined product
to ArcelorMittal facilities on a cost-plus basis. The determinant of
whether internal sales are reported at market price or cost-plus is
whether the raw material could practically be sold to third parties
(i.e. there is a potential market for the product and logistics exist to
access that market).
Net debt: long-term debt, plus short-term debt and IFRS 16 liabilities
impact less cash and cash equivalents (including those held as part of
assets and liabilities held for sale).
Net debt/LTM EBITDA: refers to Net debt divided by last twelve months
(LTM) EBITDA calculation.
Net interest expense: includes interest expense less interest income
On-going projects: refer to projects for which construction has begun
(excluding various projects that are under development), even if such
projects have been placed on hold pending improved operating conditions.
Operating results: refers to operating income/(loss).
Operating segments: NAFTA segment includes the Flat, Long and Tubular
operations of USA, Canada and Mexico. The Brazil segment includes the
Flat, Long and Tubular operations of Brazil and its neighbouring
countries including Argentina, Costa Rica and Venezuela. The Europe
segment comprises the Flat, Long and Tubular operations of the European
business, as well as Downstream Solutions. The ACIS segment includes the
Flat, Long and Tubular operations of Kazakhstan, Ukraine and South
Africa. Mining segment includes iron ore and coal operations.
Own iron ore production: includes total of all finished production of
fines, concentrate, pellets and lumps and includes share of production.
PMI: refers to purchasing managers index (based on ArcelorMittal
estimates)
Seaborne iron ore reference prices: refers to iron ore prices for 62% Fe
CFR China
Shipments: information at segment and group level eliminates
intra-segment shipments (which are primarily between Flat/Long plants
and Tubular plants) and inter-segment shipments respectively. Shipments
of Downstream Solutions are excluded.
Steel-only EBITDA: calculated as Group EBITDA less Mining segment
EBITDA.
Steel-only EBITDA/tonne: calculated as steel-only EBITDA divided by
total steel shipments.
Working capital change (working capital investment / release): Movement
of change in working capital - trade accounts receivable plus
inventories less trade and other accounts payable.
YoY: refers to year-on-year.
Footnotes
1. The financial information in this press release has been prepared
consistently with International Financial Reporting Standards ("IFRS") as
issued by the International Accounting Standards Board ("IASB") and as
adopted by the European Union. The interim financial information included
in this announcement has also been also prepared in accordance with IFRS
applicable to interim periods, however this announcement does not contain
sufficient information to constitute an interim financial report as
defined in International Accounting Standard 34, "Interim Financial
Reporting". The numbers in this press release have not been audited. The
financial information and certain other information presented in a number
of tables in this press release have been rounded to the nearest whole
number or the nearest decimal. Therefore, the sum of the numbers in a
column may not conform exactly to the total figure given for that column.
In addition, certain percentages presented in the tables in this press
release reflect calculations based upon the underlying information prior
to rounding and, accordingly, may not conform exactly to the percentages
that would be derived if the relevant calculations were based upon the
rounded numbers. This press release also includes certain non-GAAP
financial/alternative performance measures. ArcelorMittal presents EBITDA,
and EBITDA/tonne, which are non-GAAP financial/alternative performance
measures and calculated as shown in the Condensed Consolidated Statement
of Operations, as additional measures to enhance the understanding of
operating performance. ArcelorMittal believes such indicators are
relevant to describe trends relating to cash generating activity and
provides management and investors with additional information for
comparison of the Company's operating results to the operating results of
other companies. Segment information presented in this press release are
prior to inter-segment eliminations and certain adjustments made to
operating result of the segments to reflect corporate costs, income from
non-steel operations (e.g., logistics and shipping services) and the
elimination of stock margins between the segments. ArcelorMittal also
presents net debt and change in working capital as additional measures to
enhance the understanding of its financial position, changes to its
capital structure and its credit assessment. The Company's guidance as to
its working capital release (or the change in working capital included in
net cash provided by operating activities) for the full year 2019 is
based on the same accounting policies as those applied in the Company's
financial statements prepared in accordance with IFRS. ArcelorMittal also
presents free cash flow (FCF), which is a non-GAAP financial/alternative
performance measure calculated as shown in the Condensed Consolidated
Statement of Cash flows, because it believes it is a useful supplemental
measure for evaluating the strength of its cash generating capacity. The
Company also presents the ratio of net debt to EBITDA for the last twelve
month period, which investors may find useful in understanding the
Company's ability to service its debt. Non-GAAP financial/alternative
performance measures should be read in conjunction with, and not as an
alternative for, ArcelorMittal's financial information prepared in
accordance with IFRS. Such non-GAAP/alternative performance measures may
not be comparable to similarly titled measures applied by other
companies.
2. Health and safety performance inclusive of ArcelorMittal Italia and
related facilities ("ArcelorMittal Italia") (consolidated as from
November 1, 2018) was 1.36x for 3Q 2019 and 1.26x for 2Q 2019. Health and
safety figures excluding ArcelorMittal Italia were 0.82x for 3Q 2019 as
compared to 0.68x for 2Q 2019. From 1Q 2019 onwards, the methodology and
metrics used to calculate health and safety figures for ArcelorMittal
Italia have been harmonized with those of ArcelorMittal.
3. Impairment charges for 2Q 2019 were $947 million related to the remedy
asset sales for the ArcelorMittal Italia acquisition ($347 million) and
impairment of the fixed assets of ArcelorMittal USA ($600 million)
following a sharp decline in steel prices and high raw material costs.
Impairment charges for 9M 2019 were $1.1 billion related to the remedy
asset sales for the ArcelorMittal Italia acquisition ($0.5 billion) and
impairment of the fixed assets of ArcelorMittal USA ($0.6 billion)
following a sharp decline in steel prices and high raw material costs.
4. ArcelorMittal has applied IFRS 16 "Leases" as of January 1, 2019. Due to
the transition option selected, the prior-period data has not been
restated. IFRS 16 "Leases" provides a single lessee accounting model
requiring lessees to recognize right-of-use assets and lease liabilities
for all non-cancellable leases except for short-term leases and low value
assets. The right-of-use assets are recognized as property, plant and
equipment and measured on January 1, 2019 at an amount equal to the lease
liability recognized as debt (short term $0.3 billion and long term $0.9
billion impact as of January 1, 2019) and measured on the basis of the
net present value of remaining lease payments. On January 1, 2019 net
debt increased accordingly by $1.2 billion following the adoption of IFRS
16 "Lease" standard. The recognition of the lease expense in EBITDA for
leases previously accounted for as operating leases is replaced by a
depreciation expense related to the right-of-use assets and an interest
expense reflecting the amortization of the lease liability. In addition,
cash payments relating to the repayment of the principal amount of the
lease liability are presented in the consolidated statements of cash
flows as outflows from financing activities while lease payments for
operating leases were previously recognized as outflows from operating
activities.
5. On April 20, 2018, following the approval by the Brazilian antitrust
authority - CADE of the combination of ArcelorMittal Brasil's and
Votorantim's long steel businesses in Brazil subject to the fulfilment of
divestment commitments, ArcelorMittal Brasil agreed to dispose of its two
production sites of Cariacica and Itaúna, as well as some wire
drawing equipment of ArcelorMittal Brasil and ArcelorMittal
Sul-Fluminense. The sale was completed early May 2018 to the Mexican
Group Simec S.A.B. de CV. A second package of some wire drawing equipment
of ArcelorMittal Brasil and ArcelorMittal Sul-Fluminense was sold to the
company Aço Verde do Brasil as part of CADE's conditional approval.
6. In July 2018, as a result of a settlement process, the Company and the
German Federal Cartel Office agreed to a EUR118 million ($146 million)
fine to be paid by ArcelorMittal Commercial Long Deutschland GmbH ending
an investigation that began in the first half of 2016 into antitrust
violations concerning the ArcelorMittal entities that were under
investigation. The payment was made in August 2018.
7. ArcelorMittal Mines Canada, otherwise known as ArcelorMittal Mines and
Infrastructure Canada.
8. On December 19, 2018, ArcelorMittal signed a $5,500,000,000 Revolving
Credit Facility, with a five-year maturity plus two one-year extension
options (i.e. the options to extend are in the first and second years, so
at end 2019 and at end 2020). The facility will replace the
$5,500,000,000 revolving credit facility agreement signed April 30, 2015
and amended December 21, 2016, and will be used for the general corporate
purposes of the ArcelorMittal group. The facility gives ArcelorMittal
considerably improved terms over the former facility, and extends the
average maturity date by approximately three years. As of September 30,
2019, the $5.5 billion revolving credit facility was fully available.
9. Assets and liabilities held for sale, as of September 30, 2019 and as of
June 30, 2019 are related to the carrying value of the USA long product
facilities at Steelton ("Steelton"). Assets and liabilities held for sale,
as of December 31, 2018, include the ArcelorMittal Italia remedy package
assets (as previously disclosed in the 1Q 2018 earnings release) and the
USA long product facilities at Steelton.
10. Relates to the rollover of the Indian rupee hedge at market price which
protects the dollar funds needed for the Essar transaction as per the
resolution plan approved by the Committee of Creditors and the National
Company Law Tribunal in Ahmedabad).
11. Weaker global steel demand has contributed to further price and margin
compression during 3Q 2019. Correspondingly the demand for higher priced
iron ore direct charge materials (i.e., pellets and higher-grade ore)
decreased and related quality premia declined in line with the market
conditions.
Third quarter 2019 earnings analyst conference call
ArcelorMittal will hold a conference call hosted by Heads of Finance and
Investor Relations for members of the investment community to discuss
the three-month and nine-month periods ended September 30, 2019 on:
Thursday November 7, 2019 at 9.30am US Eastern time; 14.30pm London time
and 15.30pm CET.
The dial in numbers are:
Toll free dial in Local dial in
Location numbers numbers Participant
UK local: 0800 0515 931 +44 (0)203 364 5807 14858322#
US local: 1 86 6719 2729 +1 24 0645 0345 14858322#
France: 0800 914780 +33 1 7071 2916 14858322#
Germany: 0800 965 6288 +49 692 7134 0801 14858322#
Spain: 90 099 4930 +34 911 143436 14858322#
Luxembourg: 800 26908 +352 27 86 05 07 14858322#
------------------ --------------------- -----------------
A replay of the conference call will be available for one week by dialling:
+49 (0) 1805 2047 088; Access code 2524629#
Forward-Looking Statements
This document may contain forward-looking information and statements
about ArcelorMittal and its subsidiaries. These statements include
financial projections and estimates and their underlying assumptions,
statements regarding plans, objectives and expectations with respect to
future operations, products and services, and statements regarding
future performance. Forward-looking statements may be identified by the
words "believe", "expect", "anticipate", "target" or similar
expressions. Although ArcelorMittal's management believes that the
expectations reflected in such forward-looking statements are reasonable,
investors and holders of ArcelorMittal's securities are cautioned that
forward-looking information and statements are subject to numerous risks
and uncertainties, many of which are difficult to predict and generally
beyond the control of ArcelorMittal, that could cause actual results and
developments to differ materially and adversely from those expressed in,
or implied or projected by, the forward-looking information and
statements. These risks and uncertainties include those discussed or
identified in the filings with the Luxembourg Stock Market Authority for
the Financial Markets (Commission de Surveillance du Secteur Financier)
and the United States Securities and Exchange Commission (the "SEC")
made or to be made by ArcelorMittal, including ArcelorMittal's latest
Annual Report on Form 20-F on file with the SEC. ArcelorMittal
undertakes no obligation to publicly update its forward-looking
statements, whether as a result of new information, future events, or
otherwise.
About ArcelorMittal
ArcelorMittal is the world's leading steel and mining company, with a
presence in 60 countries and an industrial footprint in 18 countries.
Guided by a philosophy to produce safe, sustainable steel, we are the
leading supplier of quality steel in the major global steel markets
including automotive, construction, household appliances and packaging,
with world-class research and development and outstanding distribution
networks.
Through our core values of sustainability, quality and leadership, we
operate responsibly with respect to the health, safety and wellbeing of
our employees, contractors and the communities in which we operate. For
us, steel is the fabric of life, as it is at the heart of the modern
world from railways to cars and washing machines. We are actively
researching and producing steel-based technologies and solutions that
make many of the products and components people use in their everyday
lives more energy efficient.
We are one of the world's five largest producers of iron ore and
metallurgical coal. With a geographically diversified portfolio of iron
ore and coal assets, we are strategically positioned to serve our
network of steel plants and the external global market. While our steel
operations are important customers, our supply to the external market is
increasing as we grow. In 2018, ArcelorMittal had revenues of $76.0
billion and crude steel production of 92.5 million metric tonnes, while
own iron ore production reached 58.5 million metric tonnes.
ArcelorMittal is listed on the stock exchanges of New York (MT),
Amsterdam (MT), Paris (MT), Luxembourg (MT) and on the Spanish stock
exchanges of Barcelona, Bilbao, Madrid and Valencia (MTS). For more
information about ArcelorMittal please visit:
http://corporate.arcelormittal.com/
Enquiries
ArcelorMittal investor relations: Europe: +44 207 543 1128; Americas: +1
312 899 3985; Retail: +44 207 543 1156; SRI: +44 207 543 1156 and
Bonds/credit: +33 1 71 92 10 26.
ArcelorMittal corporate communications (E-mail: press@arcelormittal.com)
+44 0207 629 7988. Contact: Paul Weigh +44 203 214 2419
Attachment
-- ArcelorMittal reports third quarter 2019 and nine months 2019 results
https://ml-eu.globenewswire.com/Resource/Download/f4a4260f-f266-4894-b635-2ca0ddeb570e
(END) Dow Jones Newswires
November 07, 2019 01:15 ET (06:15 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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