TIDMMT
Luxembourg, August 1, 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
six-month periods ended June 30, 2019.
Highlights:
-- Health and safety: LTIF rate2 of 1.26x in 2Q 2019 and 1.19x in 1H 2019
-- Operating loss of $0.2bn in 2Q 2019 including $0.9bn of impairments
($0.3bn related to the remedy asset sales for the ArcelorMittal Italia
acquisition and $0.6bn impairment of the fixed assets of ArcelorMittal
USA following a sharp decline in steel prices and high raw material
costs); 1H 2019 operating income of $0.6bn including $1.1bn of
impairments3
-- EBITDA of $1.6bn in 2Q 2019; 1H 2019 EBITDA of $3.2bn, -42.6% lower YoY
reflecting a negative price-cost effect
-- Net loss of $0.4bn in 2Q 2019 (including $0.9bn of impairments3); 1H 2019
net loss of $33 million (including $1.1bn of impairments3)
-- Steel shipments of 22.8Mt in 2Q 2019, up 4.3% vs. 1Q 2019 and up 4.8% vs.
2Q 2018; 1H 2019 steel shipments of 44.6Mt, up 3.5% YoY largely
reflecting the impact of the ArcelorMittal Italia acquisition
-- 2Q 2019 iron ore shipments of 15.5Mt (+6.1% YoY), of which 9.9Mt shipped
at market prices (-1.0% YoY); 1H 2019 iron ore shipments of 29.3Mt (+3.0%
YoY), of which 19.1Mt shipped at market prices (-0.4% YoY)
-- Gross debt of $13.8bn as of June 30, 2019 as compared to $13.4bn as of
March 31, 2019. Net debt decreased by $1.0bn during the quarter to
$10.2bn as of June 30, 2019, due in part to M&A proceeds and working
capital release ($0.4bn) (despite higher raw materials costs and higher
steel shipments). Excluding IFRS 16 impact4, net debt as of June 30, 2019
was $1.5bn lower YoY
Strategic actions:
-- Given weak demand and high import levels in Europe, the Company has taken
steps to align its European production levels to the current market
demand. As a result of previously announced European production
curtailments, approximately 4.2Mt of annualized production curtailment is
scheduled for 2H 2019
-- Further temporary cost initiatives undertaken to navigate the current
weak market backdrop
-- Excluding IFRS 16 impact, net debt at the end of June 30, 2019 was the
lowest level achieved since the ArcelorMittal merger. Deleveraging
remains the Group's priority.
-- Cash needs of the business for 2019 have been reduced by $1.0bn to $5.4bn,
due to lower expected capex and tax and others
-- To complement the expected deleveraging through FCF generation, the
Company has identified opportunities to unlock up to $2bn of value from
its asset portfolio over the next two years
Outlook:
-- The Company now expects global steel demand in 2019 to grow +0.5% to
+1.5% (ex-China steel demand growth of +0.5% to +1.0%; US +0% to +1.0%;
and Europe to contract by between -2.0% to -1.0%)
-- Against this backdrop and considering scope changes (ArcelorMittal Italia
acquisition, remedy asset sales and European production curtailments)
steel shipments are still expected to increase YoY, which should provide
support for the Group's Action 2020 program
Financial highlights (on the basis of IFRS(1) ):
(USDm) unless otherwise shown 2Q 19 1Q 19 2Q 18 1H 19 1H 18
----------------------------------- ------- ------ ------ ------- --------
Sales 19,279 19,188 19,998 38,467 39,184
Operating (loss)/income (158) 769 2,361 611 3,930
Net (loss)/income attributable
to equity holders of the parent (447) 414 1,865 (33) 3,057
Basic (loss) / earnings per common
share (US$) (0.44) 0.41 1.84 (0.03) 3.01
Operating (loss) / income/ tonne
(US$/t) (7) 35 109 14 91
EBITDA 1,555 1,652 3,073 3,207 5,585
EBITDA/ tonne (US$/t) 68 76 141 72 130
Steel-only EBITDA/ tonne (US$/t) 43 56 127 50 114
Crude steel production (Mt) 23.8 24.1 23.2 47.8 46.5
Steel shipments (Mt) 22.8 21.8 21.8 44.6 43.1
Own iron ore production (Mt) 14.6 14.1 14.5 28.7 29.1
Iron ore shipped at market price
(Mt) 9.9 9.2 10.0 19.1 19.1
----------------------------------- ------- ------ ------ ------- --------
Commenting, Mr. Lakshmi N. Mittal, ArcelorMittal Chairman and CEO, said:
"After a strong 2018, market conditions in the first half of 2019 have
been very tough, with the profitability of our steel segments suffering
due to lower steel prices combined with higher raw material costs. This
has been only partially offset by improved profitability from our mining
segment, but I am pleased that we have generated healthy free cash flow
demonstrating the improved robustness of the business thanks to our
Action 2020 plan.
Global overcapacity remains a clear challenge. We have reduced capacity
in Europe in response to the current weak demand environment, which has
also impacted the turnaround of the ex-Ilva facilities in Italy. Further
action needs to be taken to address the increasing level of imports
entering the continent due to ineffective safeguard measures and we
continue to engage with the European Commission to create a level
playing field for the sector. A supportive regulatory and funding
environment is also crucial to our ambition to significantly reduce our
emissions as announced in our recent Climate Action report.
We are taking further actions to adapt and strengthen the Company,
ensuring we make continued progress towards our net debt target and
increase returns to shareholders. Despite the current challenges, the
Company is well positioned to benefit from any improvement in market
conditions and the current very low spread environment".
Sustainable development and safety performance
Health and safety - Own personnel and contractors lost time injury
frequency rate
Health and safety performance (inclusive of ArcelorMittal Italia
(previously known as Ilva)), based on own personnel figures and
contractors lost time injury frequency (LTIF) rate was 1.26x in second
quarter of 2019 ("2Q 2019") as compared to 1.14x in the first quarter of
2019 ("1Q 2019"). Health and safety performance (inclusive of
ArcelorMittal Italia) in the first six months of 2019 ("1H 2019") was
1.19x.
Excluding the impact of ArcelorMittal Italia, the LTIF was 0.68x for 2Q
2019 as compared to 0.66x for 1Q 2019 and 0.71x for the second quarter
of 2018 ("2Q 2018"). Health and safety performance (excluding the
impact of ArcelorMittal Italia) improved to 0.66x in 1H 2019 as compared
to 0.67x for the first six months of 2018 ("1H 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 2Q 19 1Q 19 2Q 18 1H 19 1H 18
----------------------------------- ----- ----- ----- ----- -------
Mining 0.64 0.38 0.62 0.51 0.53
NAFTA 0.46 0.58 0.64 0.50 0.52
Brazil 0.43 0.48 0.35 0.45 0.36
Europe 1.00 0.85 1.02 0.91 0.92
ACIS 0.58 0.75 0.52 0.66 0.64
Total Steel 0.69 0.71 0.72 0.69 0.69
Total (Steel and Mining) 0.68 0.66 0.71 0.66 0.67
-----------------------------------
ArcelorMittal Italia 13.73 11.05 - 12.35 -
Total (Steel and Mining) including
ArcelorMittal Italia 1.26 1.14 - 1.19 -
----- ----- ----- ----- -------
Key sustainable development highlights for 2Q 2019:
-- ArcelorMittal published its first Climate Action report with a stated
ambition to significantly reduce its carbon footprint by 2050;
ArcelorMittal's European business specifically targets to be carbon
neutral by 2050.
-- ArcelorMittal has become a member of the Energy Transition Commission.
-- ArcelorMittal hosted a consultation at the ArcelorMittal Orbit in London
on the draft ResponsibleSteel(TM) standard - the steel industry's first,
multi-stakeholder standard for the entire 'mine-to-metal' steel value
chain. The standard is due to launch to the market at the end of 2019.
-- ArcelorMittal won Fiat Chrysler Automobiles' best raw material supplier
award, recognizing our commitment to deliver value through innovation,
quality and competitiveness.
-- ArcelorMittal was named Steel Sustainability Champion by the World Steel
Association for the second consecutive year.
Analysis of results for the six months ended June 30, 2019 versus
results for the six months ended June 30, 2018
Total steel shipments for 1H 2019 were 44.6 million metric tonnes
representing an increase of 3.5% as compared to 1H 2018,
primarily due to higher steel shipments in Europe (+10.1%) due to the
impact of ArcelorMittal Italia (following its consolidation from
November 1, 2018) and in Brazil (+6.6%), offset in part by lower
shipments in ACIS (-4.0%) and NAFTA (-5.3%). Excluding the impact of
ArcelorMittal Italia and Votorantim, steel shipments in 1H 2019 were
1.9% lower as compared to 1H 2018.
Sales for 1H 2019 decreased by 1.8% to $38.5 billion as compared with
$39.2 billion for 1H 2018, primarily due to lower average steel selling
prices (-6.1%) offset in part by higher steel shipments (+3.5%).
Depreciation of $1.5 billion for 1H 2019 was higher as compared with
$1.4 billion in 1H 2018. Depreciation charges for 2019 include the
depreciation of right-of-use assets recognized in property, plant and
equipment under IFRS 16 lease accounting, which were previously recorded
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 1H 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.
Impairment charges for 1H 2018 were $86 million related to the agreed
remedy package required for the approval of the Votorantim
acquisition(5) .
Exceptional items for 1H 2019 were nil. Exceptional charges for 1H 2018
were $146 million related to a provision taken in respect of a case that
has been settled(6) .
Operating income for 1H 2019 was lower at $0.6 billion as compared to
$3.9 billion in 1H 2018 primarily driven by impairments as discussed
above, as well as 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 offset in part
by improved mining segment performance.
Income from associates, joint ventures and other investments for 1H 2019
was higher at $302 million as compared to $242 million for 1H 2018.
Performance of Calvert and Chinese investee weakened in 1H 2019 as
compared to 1H 2018, whilst 1H 2018 was negatively impacted by $132
million 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 1H 2019 and 1H 2018 include the annual dividend income
from Erdemir of $93 million and $87 million, respectively.
Net interest expense in 1H 2019 was slightly lower at $315 million as
compared to $323 million in 1H 2018. The Company expects full year 2019
net interest expense to be approximately $650 million.
Foreign exchange and other net financing losses were $404 million for 1H
2019 as compared to $564 million for 1H 2018. Foreign exchange losses
for 1H 2019 were $14 million as compared to foreign exchange losses of
$237 million in 1H 2018.
ArcelorMittal recorded an income tax expense of $149 million for 1H 2019
as compared to $184 million for 1H 2018. The deferred tax benefit of
$340 million in 1H 2018 is the result of recording a deferred tax asset
primarily due to the expectation of higher future profits mainly in
Luxembourg, following the share capital conversion.
ArcelorMittal's net loss for 1H 2019 was $33 million, or $0.03 basic
loss per common share, as compared to a net income in 1H 2018 of $3.1
billion, or $3.01 basic earnings per common share.
Analysis of results for 2Q 2019 versus 1Q 2019 and 2Q 2018
Total steel shipments in 2Q 2019 were 4.3% higher at 22.8Mt as compared
with 21.8Mt for 1Q 2019 primarily due to higher steel shipments in ACIS
(+19.5%) due to normalization of production in Temirtau (Kazakhstan),
seasonally higher shipments in Europe (+2.2%), higher shipments in NAFTA
(+2.2%), primarily due to ramp up of the blast furnace in Mexico, offset
by lower shipments in Brazil (-3.3%) due to weaker export conditions.
Total steel shipments in 2Q 2019 were 4.8% higher as compared with
21.8Mt for 2Q 2018 primarily due to higher steel shipments in Europe
(+12.3%) due to the acquisition of ArcelorMittal Italia, ACIS (+4.1%)
due to operational issues in Ukraine last year offset by lower steel
shipments in NAFTA (-6.3%) and in Brazil (-1.6%). Excluding the impact
of the ArcelorMittal Italia acquisition, steel shipments were -0.7%
lower as compared to 2Q 2018.
Sales in 2Q 2019 were 0.5% higher at $19.3 billion as compared to $19.2
billion for 1Q 2019 primarily due to higher steel shipments (+4.3%)
offset in part by lower average steel selling prices (-3.9%). Sales in
2Q 2019 were 3.6% lower as compared to $20 billion for 2Q 2018 primarily
due to lower average steel selling prices (-8.8%), partially offset by
higher steel shipments (+4.8%).
Depreciation for 2Q 2019 was higher at $766 million as compared to $733
million for 1Q 2019. 2Q 2019 depreciation expense was higher than $712
million in 2Q 2018 primarily due to the impact of IFRS 16.
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 1Q 2019 of $150 million related to the remedy
asset sales for the ArcelorMittal Italia acquisition. Impairment charges
for 2Q 2018 were nil.
Operating loss for 2Q 2019 was $0.2 billion as compared to an operating
income of $0.8 billion in 1Q 2019 and an operating income of $2.4
billion in 2Q 2018 primarily driven by impairments as discussed above,
as well as weaker operating conditions (negative price-cost effect in
the steel segments) reflecting both the impact of the decline in steel
prices since 1Q 2019 and higher raw material prices, offset in part by
the impact of higher seaborne iron ore reference prices.
Income from associates, joint ventures and other investments for 2Q 2019
was $94 million as compared to $208 million for 1Q 2019 and $30 million
for 2Q 2018. 2Q 2019 was impacted by weaker Chinese and Calvert investee
performances. 1Q 2019 was positively impacted by the annual dividend
declared by Erdemir ($93 million). 2Q 2018 was impacted by $132 million
impairment of ArcelorMittal's investment in Macsteel (South Africa)
following the announced sale of its 50% stake in May 2018.
Net interest expense in 2Q 2019 was $154 million as compared to $161
million in 1Q 2019 and lower than $159 million in 2Q 2018.
Foreign exchange and other net financing losses in 2Q 2019 were $173
million as compared to $231 million for 1Q 2019 and $390 million in 2Q
2018. Foreign exchange gain for 2Q 2019 was $34 million as compared to
foreign exchange losses of $48 million and $309 million, in 1Q 2019 and
2Q 2018, respectively. 2Q 2019 includes non-cash mark-to-market losses
of $55 million related to the mandatory convertible bonds call option as
compared to losses of $6 million in 1Q 2019 and gains of $91 million in
2Q 2018.
ArcelorMittal recorded an income tax expense of $14 million in 2Q 2019
as compared to an income tax expense of $135 million for 1Q 2019 and an
income tax benefit of $19 million for 2Q 2018.
Income attributable to non-controlling interests was $42 million for 2Q
2019 as compared to $36 million for 1Q 2019 and losses attributable to
non-controlling interests of $4 million in 2Q 2018.
ArcelorMittal recorded a net loss for 2Q 2019 of $0.4 billion, or $0.44
basic loss per common share, as compared to net income for 1Q 2019 of
$0.4 billion, or $0.41 basic earnings per common share, and a net income
for 2Q 2018 of $1.9 billion, or $1.84 basic earnings per common share.
Analysis of segment operations
NAFTA
(USDm) unless otherwise
shown 2Q 19 1Q 19 2Q 18 1H 19 1H 18
Sales 5,055 5,085 5,356 10,140 10,108
Operating (loss) / income (539) 216 660 (323) 968
Depreciation (137) (134) (131) (271) (263)
Impairments (600) -- -- (600) --
EBITDA 198 350 791 548 1,231
Crude steel production
(kt) 5,590 5,388 5,946 10,978 11,810
Steel shipments (kt) 5,438 5,319 5,803 10,757 11,362
Average steel selling
price (US$/t) 836 874 853 855 817
-------------------------- ----- ----- ----- ------ ------
NAFTA segment crude steel production increased by 3.7% to 5.6Mt in 2Q
2019 as compared to 5.4Mt in 1Q 2019. This increase was primarily due to
ramp up of the blast furnace in Mexico (which had suffered delays
following scheduled maintenance in 3Q 2018).
Steel shipments in 2Q 2019 increased by 2.2% to 5.4Mt as compared to
5.3Mt in 1Q 2019 primarily due to a 21.1% improvement in the long
product shipments (mainly in Mexico as discussed above).
Sales in 2Q 2019 were stable at $5.1 billion as compared to 1Q 2019,
primarily due to higher steel shipments (+2.2%) offset by a 4.3% decline
in average steel selling prices (with both flat and long products down
3.6% and 5.7%, respectively). US prices have deteriorated through 2Q
2019 reflecting weaker demand exacerbated by prolonged customer
destocking and increased domestic supply with prices well below import
parity.
Impairment charges for 2Q 2019 were $600 million related to impairment
of the fixed assets of ArcelorMittal USA following a sharp decline in
steel prices and high raw material costs. As a result, there was an
operating loss in 2Q 2019 of $539 million as compared to operating
income of $216 million in 1Q 2019 and $660 million in 2Q 2018.
EBITDA in 2Q 2019 decreased by 43.4% to $198 million as compared to $350
million in 1Q 2019 primarily due to negative price-cost effect offset in
part by higher steel shipment volumes. EBITDA in 2Q 2019 decreased by
75.0% as compared to $791 million in 2Q 2018 primarily due to a negative
price-cost effect and lower steel shipments (-6.3%).
Brazil
(USDm) unless otherwise
shown 2Q 19 1Q 19 2Q 18 1H 19 1H 18
---------------------------- ------ ------ ------ ------ --------
Sales 2,126 2,156 2,191 4,282 4,179
Operating income 234 239 369 473 584
Depreciation (79) (70) (74) (149) (143)
Impairment -- -- -- -- (86)
EBITDA 313 309 443 622 813
-----
Crude steel production (kt) 2,830 3,013 3,114 5,843 5,915
Steel shipments (kt) 2,785 2,880 2,831 5,665 5,314
Average steel selling price
(US$/t) 705 704 728 705 739
---------------------------- ----- ----- ----- ----- -----
Brazil segment crude steel production decreased by 6.1% to 2.8Mt in 2Q
2019 as compared to 3.0Mt for 1Q 2019, due in part to the decision to
stop ArcelorMittal Tubarão's blast furnace #2 in June, two months
earlier than its initial maintenance schedule due to deteriorating
export market conditions, as well as lower production in the long
business.
Steel shipments in 2Q 2019 decreased by 3.3% to 2.8Mt as compared to
2.9Mt in 1Q 2019, due to a decrease in flat products (-8.0%) primarily
due to lower exports.
Sales in 2Q 2019 decreased by 1.4% to $2.1 billion as compared to $2.2
billion in 1Q 2019, primarily due to lower steel shipments as discussed
above. Average steel selling prices remained stable as increases in
local currency sales prices were offset by currency depreciation.
Operating income in 2Q 2019 marginally declined to $234 million as
compared to $239 million in 1Q 2019 and was lower than $369 million in
2Q 2018.
EBITDA in 2Q 2019 increased by 1.2% to $313 million as compared to $309
million in 1Q 2019. EBITDA in 2Q 2019 was 29.3% lower as compared to
$443 million in 2Q 2018 primarily due to negative price-cost effect and
foreign exchange translation impact.
Europe
(USDm) unless otherwise
shown 2Q 19 1Q 19 2Q 18 1H 19 1H 18
----------------------- ------- ------- ------- ------- ---------
Sales 10,396 10,494 10,527 20,890 21,168
Operating (loss) /
income (301) 11 853 (290) 1,433
Depreciation (313) (309) (292) (622) (610)
Impairment (347) (150) -- (497) --
Exceptional charges -- -- -- -- (146)
EBITDA 359 470 1,145 829 2,189
Crude steel production
(kt) 12,079 12,372 11,026 24,451 22,272
Steel shipments (kt) 11,811 11,553 10,516 23,364 21,213
Average steel selling
price (US$/t) 704 729 800 716 800
----------------------- ------ ------ ------ ------ ------
Europe segment crude steel production decreased by 2.4% to 12.1Mt in 2Q
2019 as compared to 12.4Mt in 1Q 2019, primarily due to weaker than
expected market conditions.
Steel shipments in 2Q 2019 seasonally increased by 2.2% to 11.8Mt as
compared to 11.6Mt in 1Q 2019, whilst they were 12.3% higher than 2Q
2018 (due to the scope impact from the ArcelorMittal Italia acquisition
which was consolidated from November 1, 2018), the impact of floods in
Asturias, Spain and the impact of rail strikes in France in 2Q 2018.
Sales in 2Q 2019 were $10.4 billion, -0.9% lower as compared to $10.5
billion in 1Q 2019, with lower average steel selling prices -3.5% (with
both flat and long products declining 3.5% and 3.7%, respectively)
offset in part by higher steel shipments, as discussed above.
Impairment charges for 2Q 2019 and 1Q 2019 were $347 million and $150
million, respectively, related to remedy asset sales related to
ArcelorMittal Italia. Impairment charges for 2Q 2018 were nil.
Operating loss in 2Q 2019 was $301 million as compared to operating
income of $11 million in 1Q 2019 and $853 million in 2Q 2018. Operating
results were impacted by impairment charges as discussed above.
Despite seasonally higher steel shipments, EBITDA in 2Q 2019 decreased
by -23.7% to $359 million as compared to $470 million in 1Q 2019
primarily due to a negative price-cost effect. EBITDA in 2Q 2019
decreased by -68.7% as compared to $1,145 million in 2Q 2018, primarily
due to negative price-cost effect, foreign exchange impact, and
continued losses of ArcelorMittal Italia. Assuming existing market
conditions and no ongoing license to operate issues, an accelerated
action plan has been implemented to significantly reduce ArcelorMittal
Italia losses by 4Q 2019.
ACIS
(USDm) unless otherwise
shown 2Q 19 1Q 19 2Q 18 1H 19 1H 18
---------------------------- ------ ------ ------ ------ --------
Sales 1,906 1,645 2,129 3,551 4,209
Operating income 114 64 312 178 602
Depreciation (85) (81) (85) (166) (158)
EBITDA 199 145 397 344 760
Crude steel production (kt) 3,252 3,323 3,087 6,575 6,487
Steel shipments (kt) 3,182 2,662 3,057 5,844 6,086
Average steel selling price
(US$/t) 536 541 621 538 616
---------------------------- ----- ----- ----- ----- -----
ACIS segment crude steel production in 2Q 2019 was broadly stable at
3.3Mt as compared to 1Q 2019 primarily due to normalization of
production in Temirtau (Kazakhstan) following an explosion at a gas
pipeline in 4Q 2018 offset by lower production in Ukraine due to planned
blast furnace repair and in South Africa following a scheduled
maintenance.
Steel shipments in 2Q 2019 increased by 19.5% to 3.2Mt as compared to
2.7Mt as at 1Q 2019, primarily due to the improved shipments in all
three regions particularly in Kazakhstan.
Sales in 2Q 2019 increased by 15.8% to $1.9 billion as compared to $1.6
billion in 1Q 2019 primarily due to higher steel shipments.
Operating income in 2Q 2019 was higher at $114 million as compared to
$64 million in 1Q 2019 and lower as compared to $312 million in 2Q 2018.
EBITDA in 2Q 2019 increased by 37.5% to $199 million as compared to $145
million in 1Q 2019 primarily due to higher steel shipment volumes.
EBITDA in 2Q 2019 was 49.7% lower as compared to $397 million in 2Q
2018, primarily due to negative price-cost effect partially offset by
higher shipments.
Mining
(USDm) unless otherwise shown 2Q 19 1Q 19 2Q 18 1H 19 1H 18
--------------------------------------- ------ ------ ------ ------ --------
Sales 1,423 1,127 1,065 2,550 2,089
Operating income 457 313 198 770 440
Depreciation (113) (107) (107) (220) (214)
EBITDA 570 420 305 990 654
Own iron ore production (Mt) 14.6 14.1 14.5 28.7 29.1
Iron ore shipped externally and
internally at market price (a)
(Mt) 9.9 9.2 10.0 19.1 19.1
Iron ore shipment - cost plus
basis (Mt) 5.6 4.6 4.6 10.2 9.3
Own coal production (Mt) 1.5 1.2 1.6 2.7 3.1
Coal shipped externally and internally
at market price (a) (Mt) 0.7 0.7 0.7 1.4 1.1
Coal shipment - cost plus basis
(Mt) 0.7 0.7 0.9 1.4 1.8
--------------------------------------- ----- ----- ----- ----- -----
(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 2Q 2019 increased by 4.0% to 14.6Mt as
compared to 14.1Mt in 1Q 2019, primarily due to seasonally higher
production in ArcelorMittal Mines Canada(7) (AMMC). Own iron ore
production in 2Q 2019 increased by 1.2% as compared to 2Q 2018 primarily
due to higher AMMC and Ukraine production offset in part by lower
production in Liberia and Kazakhstan and the Volcan mine in Mexico which
reached end of life in May 2019.
Market-priced iron ore shipments in 2Q 2019 increased by 7.7% to 9.9Mt
as compared to 9.2Mt in 1Q 2019, primarily driven by seasonally higher
market-priced iron ore shipments in AMMC offset in part by lower
shipments in Liberia and at the Volcan mine in Mexico (as discussed
above). Market-priced iron ore shipments in 2Q 2019 were largely stable
as compared to 2Q 2018 driven by higher shipments in AMMC and Serra Azul
offset by lower shipments in Ukraine. Market-priced iron ore shipments
for FY 2019 are expected to be stable as compared to FY 2018 with
increases in Liberia and AMMC to be offset by lower volume at the Volcan
mine.
Own coal production in 2Q 2019 increased by 18.1% to 1.5Mt as compared
to 1.2Mt in 1Q 2019 primarily due to higher production at Princeton (US)
and Temirtau (Kazakhstan). Own coal production in 2Q 2019 decreased by
9.0% as compared to 1.6Mt in 2Q 2018 due to lower production at Temirtau
(Kazakhstan).
Market-priced coal shipments in 2Q 2019 were stable at 0.7Mt as compared
to 1Q 2019 and 2Q 2018.
Operating income in 2Q 2019 increased by 46.2% to $457 million as
compared to $313 million in 1Q 2019 and $198 million in 2Q 2018.
EBITDA in 2Q 2019 increased by 35.8% to $570 million as compared to $420
million in 1Q 2019, primarily due to the impact of higher seaborne iron
ore reference prices (+22.5%) and higher market-priced iron ore
shipments (+7.7%). EBITDA in 2Q 2019 was 86.7% higher as compared to
$305 million in 2Q 2018, primarily due to higher seaborne iron ore
reference prices (+53.0%).
Liquidity and Capital Resources
For 2Q 2019 net cash provided by operating activities was $1,786 million
as compared to $971 million in 1Q 2019 and $1,232 million in 2Q 2018.
The cash provided by operating activities during 2Q 2019 reflects in
part a working capital release of $353 million as compared to a working
capital investment of $553 million in 1Q 2019 and a working capital
investment of $1,232 million in 2Q 2018.
Due to a smaller than anticipated release in 4Q 2018, the Group invested
more in working capital than expected in 2018 ($4.4 billion versus
guidance of $3.0-3.5 billion). The Group expects this additional
investment of approximately $1 billion to be released in full over the
course of 2019. The 1H 2019 working capital investment of $0.2 billion
was significantly less pronounced than in previous years despite
seasonally higher shipments and higher raw material prices reflecting
the Company's focus on the structural release of the excess working
capital. Given the 1H 2019 working capital investment of $0.2 billion
this implies a release of $1.2 billion in 2H 2019.
Net cash used in investing activities during 2Q 2019 was $564 million as
compared to $693 million during 1Q 2019 and $556 million in 2Q 2018.
Capex decreased to $869 million in 2Q 2019 as compared to $947 million
in 1Q 2019 and increased as compared to $616 million in 2Q 2018. Whilst
no significant delays to growth investments are expected, the Company
has reduced overall expected capex across all segments in FY 2019 by
$0.5 billion and now expects FY 2019 capex to be $3.8 billion versus
previous guidance of $4.3 billion.
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 (see below) and by
the quarterly lease payment for the ArcelorMittal Italia acquisition
($51 million). Net cash provided by other investing activities in 1Q
2019 of $254 million primarily includes $0.3 billion due 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, offset in part by the quarterly lease payment for
the ArcelorMittal Italia acquisition ($51 million).
Net cash provided by financing activities in 2Q 2019 was $180 million as
compared to net cash used in financing activities of $344 million in 1Q
2019 and net cash provided by financing activities in 2Q 2018 of $352
million.
In 2Q 2019, net cash provided by financing activities included a net
inflow of $0.5 billion for new bank financing. In 1Q 2019, net outflow
of debt repayments and issuances of $136 million includes $1 billion
repayment of amounts borrowed in connection with the purchase of the
Uttam Galva and KSS Petron debts, $0.9 billion repayment of the EUR750
million 5-year, 3% bond at maturity; and offset in part by $1.6 billion
cash received from the issuance of two new bonds (EUR750 million 2.25%
notes due 2024 and $750 million 4.55% notes due 2026) and $0.2 billion
commercial paper issuance. Net cash provided by financing activities in
2Q 2018 of $352 million primarily includes proceeds from a $1 billion
short-term loan facility entered into on May 14, 2018 offset by
repayment of a EUR400 million ($491 million) bond at maturity on April
9, 2018.
During 2Q 2019, the Company paid dividends of $204 million mainly to
ArcelorMittal shareholders. During 1Q 2019, the Company paid dividends
of $46 million to minority shareholders in AMMC (Canada). During 2Q
2018, the Company paid dividends of $101 million to ArcelorMittal
shareholders. During 1Q 2019, the Company completed its share buyback
programme having repurchased 4 million shares for a total value of $90
million (EUR80 million) at an approximate average price per share of
$22.42 (EUR19.89 per share).
Outflows from lease principal payments and other financing activities
(net) were $84 million in 2Q 2019 as compared $72 million in 1Q 2019 and
$21 million in 2Q 2018. The increase 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 June 30, 2019, the Company's cash and cash equivalents amounted to
$3.7 billion as compared to $2.2 billion at March 31, 2019 and $2.4
billion at December 31, 2018.
Gross debt increased to $13.8 billion as of June 30, 2019, as compared
to $13.4 billion at March 31, 2019 and $12.6 billion in December 31,
2018. As of June 30, 2019, net debt decreased by $1.0 billion to $10.2
billion as compared to $11.2 billion as of March 31, 2019. Net debt as
of December 31, 2018, was $10.2 billion.
As of June 30, 2019, the Company had liquidity of $9.2 billion,
consisting of cash and cash equivalents of $3.7 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 June 30, 2019, the average debt maturity
was 4.7 years.
Key recent developments
-- On May 6, 2019, ArcelorMittal announced its intention to temporarily
reduce annualized European primary steelmaking production by 3Mt in the
2H 2019. These measures included temporarily idling production at its
steelmaking facilities in Kraków, Poland and reduce production in
Asturias, Spain as well as the slow down at ArcelorMittal Italia
following a decision to optimise cost and quality over volume in this
environment. Furthermore, on May 29, 2019, the Company announced
additional steps to adjust its European production levels to the current
market demand by a further 1.2Mt to take total annualized productions
cuts to 4.2Mt in 2H 2019. These include:
1. Reduce primary steelmaking production at its facilities in Dunkirk,
France and Eisenhüttenstadt, Germany;
2. Reduce primary steelmaking production at its facility in Bremen,
Germany in the fourth quarter of this year, where a planned blast
furnace stoppage for repair works will be extended;
3. Extend the stoppage planned in the fourth quarter of this year to
repair a blast furnace at its plant in Asturias, Spain.
ArcelorMittal stated that these actions were taken in light of difficult
operating conditions in Europe with a combination of weakening demand,
rising imports, high energy costs and rising carbon costs.
-- On May 29, 2019, ArcelorMittal published its first Climate Action report
in which it announced its ambition to significantly reduce CO2 emissions
globally and be carbon neutral in Europe by 2050. To achieve this goal
the Company is building a strategic roadmap linked to the evolution of
public policy and developments in low-emissions steelmaking technologies.
A target to 2030 will be launched in 2020, replacing the Company's
current target of an 8% carbon footprint reduction by 2020, against a
2007 baseline. The report explains in greater detail the future
challenges and opportunities for the steel industry, the plausible
technology pathways the Company is exploring as well as its views on the
policy environment required for the steel industry to succeed in meeting
the targets of the Paris Agreement.
-- In June 2017, ArcelorMittal signed an agreement for the lease (for a
period up to August 2023) and subsequent acquisition of Ilva's business
assets, providing for total maximum payments of EUR 1.8 billion. The
lease period started on November 1, 2018. According to the legal
framework in force at the time of signing and closing of the lease
agreement, Ilva's insolvency trustees, as well as the lessee and
purchaser of Ilva's assets, were granted protection from criminal
liability related to environmental, health and safety, and workplace
security issues at Ilva's Taranto plant, pending the timely
implementation of the EUR 1.15 billion environmental investment program
approved by the Italian Government in September 2017. In September 2017
and then August 2018 the Italian State Solicitor-General issued an
opinion confirming that the term of the protection coincided with the
term of the Company's environmental plan, namely to August 23, 2023. On
June 28, 2019, however, the Italian Parliament ratified a law decree
enacted by the Government, which has removed the protection for criminal
liability related to public health and safety, and workplace security
matters and, as from September 7, 2019, will also remove such protection
as it relates to environmental matters. ArcelorMittal considers that the
removal of this protection could impair any operator's ability to operate
the Taranto plant while implementing the environmental plan.
ArcelorMittal remains in discussions with the Italian authorities on this
matter, in view of reaching before September 7, 2019 an appropriate
solution compatible with the continued operation of the Taranto plant. No
assurance can be given at this stage as to the outcome of such
discussions.In addition, on July 9, 2019 the public prosecutor of Taranto
ordered the shutdown of blast furnace No. 2 of the Taranto plant. The
order was in the context of a procedure dating from a fatality in 2015,
as a result of which the blast furnace was put under seizure and
improvements were required to be undertaken by the Special Commissioners
as a condition to the continued operation of the blast furnace. The
timeline of the shutdown of blast furnace No. 2 remains to be determined
and will be set forth in a plan the judicial custodian appointed by the
public prosecutor of Taranto is currently preparing and whose
implementation would take 60 days. ArcelorMittal Italia is assessing
technical aspects and is working with the relevant authorities towards an
acceptable solution so that the blast furnace (which has an annual
production target of 1.5 million tonnes) may remain operational.
-- On July 1, 2019, ArcelorMittal announced the completion of the sale to
Liberty House Group ('Liberty') of several steelmaking assets that form
the divestment package the Company agreed with the European Commission
('EC') during its merger control investigation into the Company's
acquisition of Ilva S.p.A. The assets included in the divestment package
are: ArcelorMittal Ostrava (Czech Republic), ArcelorMittal Galati
(Romania), ArcelorMittal Skopje (Macedonia), ArcelorMittal Piombino
(Italy), ArcelorMittal Dudelange (Luxembourg) and several finishing lines
at ArcelorMittal Liège (Belgium). The total net consideration
(consisting of amounts payable upon closing and subsequently in part
contingent upon certain criteria, net of EUR 110 million placed in
escrow) for the assets payable to ArcelorMittal is EUR740 million subject
to customary closing adjustments. Of this total amount, EUR610 million
was received on June 28, 2019. The Company has deposited EUR110 million
in escrow to be used by Liberty for certain capital expenditure projects
to satisfy commitments given in the EC approval process.
-- On July 4, 2019, ArcelorMittal announced the completion of an issuance of
EUR250 million of its 2.250% notes due January 17, 2024 (the "Notes"),
which will be consolidated and form a single series with the existing
EUR750 million 2.250 per cent. notes due January 17, 2024, originally
issued on January 17, 2019. At the time of pricing the "tap" issuance,
the yield to maturity (representing the actual annual cost of the
issuance for ArcelorMittal) was 0.984%. The issuance closed on July 4,
2019. The Notes were issued under ArcelorMittal's EUR10 billion wholesale
Euro Medium Term Notes Programme. The proceeds of the issuance will be
used for general corporate purposes.
-- On July 4, 2019, the National Company Law Appellate Tribunal ("NCLAT") of
India disposed of the various appeals pending before it while approving
the Company's resolution plan for the acquisition of Essar Steel India
Limited ("ESIL"). Several appeals have been filed before India's Supreme
Court challenging the NCLAT's order and on July 22, 2019, India's Supreme
Court further stayed the implementation of the NCLAT's order pending a
hearing of the appeals on August 7, 2019. The transaction closing is now
expected 3Q 2019.
-- On July 11, 2019, ArcelorMittal completed the pricing of its offering of
US$750 million aggregate principal amount of its 3.600% notes due 2024
(the "Series 2024 Notes") and US$500 million aggregate principal amount
of its 4.250% notes due 2029 (the "Series 2029 Notes"). The proceeds to
ArcelorMittal (before expenses), amounting to approximately $1.2 billion,
will be used for general corporate purposes including future repayment of
existing indebtedness and to partially pre-fund commitments under the
Essar acquisition financing facility. The issuance closed on July 16,
2019.
-- On July 30, 2019, ArcelorMittal announced that it has given notice that
it will redeem all of the outstanding 5.125% Notes due June 1, 2020 and
5.250% Notes due August 5, 2020 on August 30, 2019. Following prior
tender offers, there is currently the following outstanding principal
amount of 5.125% Notes and 5.250% Notes, respectively: US$324,229,000
(original issuance of US$500,000,000) and US$625,630,000 (original
issuance of US$1,000,000,000).
Outlook and guidance
Based on year-to-date growth and the current economic outlook,
ArcelorMittal expects global apparent steel consumption ("ASC") to grow
further in 2019 by between +0.5% to +1.5% (slightly revised down from
previous expectation of +1.0% to +1.5% growth). By region:
ASC in US is expected to grow marginally by between +0.0% to +1.0% in
2019, with healthy non-residential construction demand offset by ongoing
weakness in automotive demand and a slowdown in machinery demand (a
moderation of growth versus +0.5% to +1.5% previous estimate). In Europe,
ASC is expected to contract by between -2.0% to -1.0% with ongoing
automotive demand weakness primarily due to lower exports (versus -1.0%
to 0.0% previous estimate). In Brazil, ASC growth in 2019 is forecasted
in the range of +1.5% to +2.5% (a moderation of growth versus +3.0% to
4.0% previous estimate) as domestic GDP has slowed, as well as impacts
of Argentinian recession and delayed growth in infrastructure spend
until pension reform is passed. In the CIS, expected ASC growth is
unchanged at +1.0% to +2.0% in 2019. Overall, World ex-China ASC is
expected to grow by approximately +0.5% to +1.0% in 2019 (a moderation
versus previous estimate of +1.0% to +2.0%).
In China, ASC growth forecast has increased to between +0.5% to +1.5% in
2019 (versus previous estimate of +0.0% to +1.0%) as real estate demand
remains resilient.
The Group's steel shipments are expected to increase in 2019 versus 2018
due to these demand expectations, the positive scope effect of the
ArcelorMittal Italia and Votorantim acquisition (net of the remedy
assets sales for the ArcelorMittal Italia acquisition now complete), the
expectation that 2018 operational disruptions (both controllable and
uncontrollable) will not recur, offset in part by European production
curtailments.
Market-priced iron ore shipments for FY 2019 are expected to be broadly
stable as compared to FY 2018 with increases in Liberia and AMMC to be
offset by lower volume in Mexico (in part due to the end of life of the
Volcan mine).
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 approximately $5.4 billion in
2019 versus $6.4 billion previous guidance. Whilst no significant delays
to growth investments are expected, the Company has reduced overall
expected capex across all segments in FY 2019 by $0.5 billion and now
expects FY 2019 capex to be $3.8 billion (versus previous guidance of
$4.3 billion). Interest expense in 2019 is expected to be $0.65 billion
(no change) while cash taxes, pensions and other cash costs are now
expected to be $1.0 billion (versus previous guidance of $1.5 billion).
As announced with the full year 2018 results in February 2019, the $1
billion excess working capital accumulated in 2018 is expected to be
released in full over the course of 2019. Given the 1H 2019 working
capital investment of $0.2 billion this implies a release of $1.2
billion in 2H 2019.
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)
Jun 30, Mar 31, Dec 31,
In millions of U.S. dollars 2019 2019 2018
------------------------------------------------- ------- ------- ---------
ASSETS
Cash and cash equivalents 3,656 2,246 2,354
Trade accounts receivable and other 5,048 5,131 4,432
Inventories 20,550 20,583 20,744
Prepaid expenses and other current assets 3,123 3,000 2,834
Assets held for sale(9) 122 1,950 2,111
Total Current Assets 32,499 32,910 32,475
Goodwill and intangible assets 5,480 5,549 5,728
Property, plant and equipment 36,725 36,647 35,638
Investments in associates and joint ventures 5,026 5,000 4,906
Deferred tax assets 8,412 8,318 8,287
Other assets 4,224 4,236 4,215
Total Assets 92,366 92,660 91,249
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt and current portion of long-term
debt 3,107 2,739 3,167
Trade accounts payable and other 14,418 14,232 13,981
Accrued expenses and other current liabilities 5,549 5,699 5,486
Liabilities held for sale(9) 35 828 821
Total Current Liabilities 23,109 23,498 23,455
------- ------- -------
Long-term debt, net of current portion 10,723 10,591 9,316
Deferred tax liabilities 2,284 2,337 2,374
Other long-term liabilities 12,139 11,945 11,996
Total Liabilities 48,255 48,371 47,141
Equity attributable to the equity holders of
the parent 42,033 42,286 42,086
Non-controlling interests 2,078 2,003 2,022
Total Equity 44,111 44,289 44,108
Total Liabilities and Shareholders' Equity 92,366 92,660 91,249
------------------------------------------------- ------- ------- -------
ArcelorMittal Condensed Consolidated Statement of Operations(1)
Three months ended Six months ended
------------------------------------------
In millions of U.S. dollars unless Jun 30, Mar 31, Jun 30, Jun 30, Jun 30,
otherwise shown 2019 2019 2018 2019 2018
---------- ---------- ---------- ---------- ----------
Sales 19,279 19,188 19,998 38,467 39,184
Depreciation (B) (766) (733) (712) (1,499) (1,423)
Impairments (B) (947) (150) -- (1,097) (86)
Exceptional items(6) (B) -- -- -- -- (146)
------ ------ ------ ------ ------
Operating (loss) / income (A) (158) 769 2,361 611 3,930
Operating margin % (0.8)% 4.0% 11.8% 1.6% 10.0%
Income from associates, joint
ventures and other investments 94 208 30 302 242
Net interest expense (154) (161) (159) (315) (323)
Foreign exchange and other net
financing loss (173) (231) (390) (404) (564)
(Loss) / income before taxes
and non-controlling interests (391) 585 1,842 194 3,285
Current tax expense (225) (180) (240) (405) (524)
Deferred tax benefit 211 45 259 256 340
Income tax (expense) / benefit (14) (135) 19 (149) (184)
(Loss) / income including non-controlling
interests (405) 450 1,861 45 3,101
Non-controlling interests (income)
/ loss (42) (36) 4 (78) (44)
Net (loss) / income attributable
to equity holders of the parent (447) 414 1,865 (33) 3,057
Basic (loss) / earnings per common
share ($) (0.44) 0.41 1.84 (0.03) 3.01
Diluted (loss) / earnings per
common share ($) (0.44) 0.41 1.83 (0.03) 2.99
Weighted average common shares
outstanding (in millions) 1,014 1,014 1,013 1,013 1,016
Diluted weighted average common
shares outstanding (in millions) 1,014 1,017 1,018 1,013 1,021
OTHER INFORMATION
EBITDA (C = A-B) 1,555 1,652 3,073 3,207 5,585
EBITDA Margin % 8.1% 8.6% 15.4% 8.3% 14.3%
Own iron ore production (Mt) 14.6 14.1 14.5 28.7 29.1
------ ------ ------ ------ ------
Crude steel production (Mt) 23.8 24.1 23.2 47.8 46.5
------ ------ ------ ------ ------
Steel shipments (Mt) 22.8 21.8 21.8 44.6 43.1
------------------------------------------ ------ ------ ------ ------ ------
ArcelorMittal Condensed Consolidated Statement of Cash flows(1)
Three months ended Six months ended
Jun 30, Mar 31, Jun 30, Jun 30, Jun 30,
In millions of U.S. dollars 2019 2019 2018 2019 2018
-------------------------------------- ------- --------- ------- ---------- ---------
Operating activities:
(Loss)/income attributable to
equity holders of the parent (447) 414 1,865 (33) 3,057
Adjustments to reconcile net income
to net cash provided by operations:
Non-controlling interests income/
(loss) 42 36 (4) 78 44
Depreciation and impairments 1,713 883 712 2,596 1,509
Exceptional items(6) -- -- -- -- 146
Income from associates, joint
ventures and other investments (94) (208) (30) (302) (242)
Deferred tax benefit (211) (45) (259) (256) (340)
Change in working capital 353 (553) (1,232) (200) (3,101)
Other operating activities (net) 430 444 180 874 319
Net cash provided by operating
activities (A) 1,786 971 1,232 2,757 1,392
Investing activities:
Purchase of property, plant and
equipment and intangibles (B) (869) (947) (616) (1,816) (1,368)
Other investing activities (net) 305 254 60 559 136
Net cash used in investing activities (564) (693) (556) (1,257) (1,232)
Financing activities:
Net proceeds / (payments) relating
to payable to banks and long-term
debt 468 (136) 474 332 737
Dividends paid (204) (46) (101) (250) (151)
Share buyback -- (90) -- (90) (226)
Lease payments and other financing
activities (net) (84) (72) (21) (156) (41)
Net cash provided by / (used in)
financing activities 180 (344) 352 (164) 319
Net increase / (decrease) in cash
and cash equivalents 1,402 (66) 1,028 1,336 479
------ ----- ------ ------ ------
Cash and cash equivalents transferred
from/(to) assets held for sale 21 (11) (23) 10 (23)
------ ----- ------ ------ ------
Effect of exchange rate changes
on cash 17 (15) (104) 2 (87)
--------------------------------------
Change in cash and cash equivalents 1,440 (92) 901 1,348 369
Free cash flow (C=A+B) 917 24 616 941 24
-------------------------------------- ------ ----- ------ ------ ------
Appendix 1: Product shipments by region
(000'kt) 2Q 19 1Q 19 2Q 18 1H 19 1H 18
--------- ------ ------ ------ ------ --------
Flat 4,732 4,750 5,011 9,482 9,822
Long 873 721 969 1,594 1,890
NAFTA 5,438 5,319 5,803 10,757 11,362
Flat 1,563 1,699 1,494 3,262 2,894
Long 1,236 1,194 1,345 2,430 2,440
Brazil 2,785 2,880 2,831 5,665 5,314
Flat 8,824 8,647 7,553 17,471 15,257
Long 2,883 2,821 2,942 5,704 5,903
Europe 11,811 11,553 10,516 23,364 21,213
CIS 2,064 1,617 1,861 3,681 3,727
Africa 1,113 1,049 1,199 2,162 2,366
ACIS 3,182 2,662 3,057 5,844 6,086
--------- ------ ------ ------ ------ ------
Note: "Others and eliminations" are not presented in the table
Appendix 2a: Capital expenditures
(USDm) 2Q 19 1Q 19 2Q 18 1H 19 1H 18
------- ----- ----- ----- ----- -------
NAFTA 144 182 110 326 270
Brazil 80 84 36 164 83
Europe 337 353 226 690 539
ACIS 115 137 117 252 234
Mining 125 115 119 240 226
Total 869 947 616 1,816 1,368
------- ----- ----- ----- ----- -----
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
focussed on building ArcelorMittal Mexico's downstream capabilities,
sustaining the competitiveness of its mining operations and modernising
its existing asset base. The programme is designed to enable
ArcelorMittal Mexico to meet the anticipated increased demand
requirements from domestic customers, realise 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. Deep
foundation essentially complete. Building erection ongoing. Working with
EPC consortium on productivity improvements.
3. Investment in ArcelorMittal Dofasco (Canada) to modernise 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. Engineering and equipment manufacturing is
complete. Construction activities for coiler are on track. Runout table
installation work originally scheduled for April 2019 will be effectively
carried out during April 2020 shut down due to change in design and delay
in manufacturing. The 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
galvanised 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.
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 is currently conducting detailed engineering
following the feasibility study in order to be ready to progress to the
next stage of the project. The investment case will be assessed in 2H
2019.
Appendix 3: Debt repayment schedule as of June 30, 2019
(USD billion) 2019 2020 2021 2022 2023 >=2024 Total
Bonds -- 1.8 1.3 1.5 0.6 3.3 8.5
Commercial paper 1.3 0.2 -- -- -- -- 1.5
Other loans 0.6 1.0 0.7 0.5 0.4 0.6 3.8
Total gross debt 1.9 3.0 2.0 2.0 1.0 3.9 13.8
----------------- ---- ---- ---- ---- ---- ------ -----
Appendix 4: Reconciliation of gross debt to net debt
Jun 30, Mar 31, Dec 31,
(USD million) 2019 2019 2018
------------------------------------------------ ------- ------- ---------
Gross debt (excluding that held as part of the
liabilities held for sale) 13,830 13,330 12,483
Gross debt held as part of the liabilities held
for sale -- 96 77
Gross debt 13,830 13,426 12,560
Less:
Cash and cash equivalents (3,656) (2,246) (2,354)
Cash and cash equivalents held as part of the
assets held for sale -- (21) (10)
------
Net debt (including that held as part of the
assets and the liabilities held for sale) 10,174 11,159 10,196
------------------------------------------------ ------
Net debt / LTM EBITDA -- -- 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.
Crude steel production: steel in the first solid state after melting,
suitable for further processing or for sale.
EBITDA: operating income 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. 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. 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 twelve months ended December 31, 2018, 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 1.26x for 2Q 2019 and 1.14x for 1Q 2019. Health
and safety figures excluding ArcelorMittal Italia were 0.68x for 2Q 2019
as compared to 0.66x for 1Q 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. Management performed its quarterly analysis of impairment
indicators, and a downward revision of cash flow projections for
ArcelorMittal USA resulted from the weaker than anticipated operating
environment in the US, including lower than expected steel prices, lower
ASC and high raw material costs. 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 1H 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 replaced 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 June 30, 2019,
the $5.5 billion revolving credit facility was fully available.
9. Assets and liabilities held for sale, 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 March
31, 2019 and 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.
Second quarter 2019 earnings analyst conference call
ArcelorMittal will hold a conference call hosted by Mr. Lakshmi Mittal,
Chairman and CEO and Aditya Mittal, President and CFO to discuss the
three month and six-month period ended June 30, 2019 on: Thursday August
1, 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 81958122#
US local: 1 86 6719 2729 +1 24 0645 0345 81958122#
-----------------
France: 0800 914780 +33 1 7071 2916 81958122#
Germany: 0800 965 6288 +49 692 7134 0801 81958122#
Spain: 90 099 4930 +34 911 143436 81958122#
Luxembourg: 800 26908 +352 27 86 05 07 81958122#
------------------ ---------------------
A replay of the conference call will be available for one week by dialling:
+49 (0) 1805 2047 088; Access code 2524123#
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
https://www.globenewswire.com/Tracker?data=VXJy4sDPeo_nc0enaZWkE97hxzywYr0uy_YhLkwt6oQnhRknbAeK0ysJ1ZJrc2gVd7NS8cmE8w8VULCWMqR-2rjiMHjBJaRzvicTARbThPg=
) +44 0207 629 7988. Contact: Paul Weigh +44 203 214 2419
Attachment
-- ArcelorMittal reports second quarter 2019 and half year 2019 results
https://ml-eu.globenewswire.com/Resource/Download/26f6ae50-0444-4075-be37-25488534d70c
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August 01, 2019 01:15 ET (05:15 GMT)
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