Appendix 6: 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:
LTIF: Lost time injury frequency rate equals lost time injuries per 1,000,000 worked hours, based on own personnel and contractors.
EBITDA: operating income plus depreciation, impairment expenses and exceptional items.
Free cash flow: net cash provided by operating activities less purchases of property, plant and equipment and intangibles.
Net debt: long-term debt, plus short term debt, less cash and cash equivalents, restricted cash and short-term investments (including those held as part of assets/liabilities held for sale).
Gross debt : long-term debt, plus short term debt, plus cash and cash equivalents, restricted cash and short-term investments (including those held as part of assets/liabilities held for sale).
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.
Foreign exchange and other net financing costs: include foreign currency swaps, bank fees, interest on pensions, impairments of financial instruments and revaluation of derivative instruments, and other charges that cannot be directly linked to operating results.
Average steel selling prices: calculated as steel sales divided by steel shipments.
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).
Operating working capital: trade accounts receivable plus inventories less trade and other accounts payable
Capex: includes the acquisition of intangible assets (such as concessions for mining and IT support) and includes payments to fixed asset suppliers.
S eaborne iron ore reference prices: refers to iron ore prices for 62% Fe CFR China.
Own iron ore production: Includes total of all finished production of fines, concentrate, pellets and lumps (excludes share of production and strategic long-term contracts).
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.
EBITDA/tonne: calculated as EBITDA divided by total steel shipments.
Steel-only EBITDA: calculated as EBITDA less Mining segment EBITDA.
Steel-only EBITDA/tonne: calculated as steel-only EBITDA divided by total steel shipments.
Iron ore unit cash cost: includes weighted average pellet and concentrate cost of goods sold across all mines.
Liquidity: includes back-up lines for the commercial paper program.
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 Distribution Solutions (renamed Downstream Solutions from January 1, 2016) are excluded.
Operating segments: The NAFTA segment includes the Flat, Long and Tubular operations of USA, Canada and Mexico. The Brazil segment includes the Flat operations of Brazil, and the Long and Tubular operations of Brazil and its neighboring countries including Argentina, Costa Rica, Trinidad and Tobago and Venezuela. The Europe segment comprises the Flat, Long and Tubular operations of the European business, as well as Downstream Solutions. The ACIS division includes the Flat, Long and Tubular operations of Kazakhstan, Ukraine and South Africa.
YoY : Refers to year-on-year
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”). The interim financial information included in this announcement has been also prepared in accordance with IFRS applicable to interim periods, however this announcement does not contain sufficient information to constitute an interim financial report as defined in International Accounting Standards 34, “Interim Financial Reporting”. The numbers in this press release have not been audited. The financial information and certain other information presented in a number of tables in this press release have been rounded to the nearest whole number or the nearest decimal. Therefore, the sum of the numbers in a column may not conform exactly to the total figure given for that column. In addition, certain percentages presented in the tables in this press release reflect calculations based upon the underlying information prior to rounding and, accordingly, may not conform exactly to the percentages that would be derived if the relevant calculations were based upon the rounded numbers. This press release also includes certain non-GAAP financial measures.
See appendix 5: Reconciliation of net loss to adjusted net (loss)/ income for details of exceptional items and impairments.
On February 5, 2016 ArcelorMittal announced it had sold its 35% stake in Gestamp Automoción ("Gestamp") to the majority shareholder, the Riberas family, for a total cash consideration of €875 million. The transaction is unconditional and payment is expected to be made to ArcelorMittal within six months. In addition to the cash consideration, ArcelorMittal is expected to receive in 2Q 2016 a payment of $11 million as a 2015 dividend. ArcelorMittal will continue its supply relationship with Gestamp through its 35% shareholding in Gonvarri, a sister company of Gestamp. ArcelorMittal sells coils to Gonvarri for processing before they pass to Gestamp and other customers. Further, ArcelorMittal will continue to have a board presence in Gestamp, collaborate in automotive R&D and remain its major steel supplier.
Includes proceeds from Gestamp sale $1.0 billion; Rights issue $3.2 billion and premium paid on early repayment of debt subsequent to rights issue of $0.1 billion.
Based on exchange rate (€/$ 1.1250).
Impairment charges for 4Q 2015 were $4.7 billion including $3.4 billion within the Mining segment consisting of: $0.9 billion with respect to goodwill and $2.5 billion primarily related to fixed assets mainly due to a downward revision of cash flow projections relating to the expected persistence of a lower raw material price outlook at: ArcelorMittal Liberia ($1.4 billion); Las Truchas in Mexico ($0.2 billion); ArcelorMittal Serra Azul in Brazil ($0.2 billion); ArcelorMittal Princeton coal mining operations in the United States ($0.7 billion); and $1.4 billion within the Steel segments consisting of: fixed asset impairment charges of $0.2 billion related to the intended sale of the Long Carbon facilities in the US (ArcelorMittal LaPlace, Steelton and Vinton within the NAFTA segment), $0.4 billion primarily in connection with the idling for an indefinite time of the ArcelorMittal Sestao plant in Spain (Europe segment), and $0.8 billion related to: NAFTA: Deployment of asset optimization programs at Indiana Harbor East and West in the United States ($0.3 billion); Brazil: ArcelorMittal Point Lisas in Trinidad and Tobago ($0.2 billion) which had been indefinitely idled; and ACIS: Saldanha plant in South Africa as a result of its revised competitive outlook ($0.3 billion).
Effective January 1, 2016, the Company discontinued the use of the SICAD rate (13.5VEF/$ as of December 31, 2015), which was eliminated by the Venezuelan government, and applied the DICOM rate (previously known as SIMADI) which was 273 VEF/$ at March 31, 2016 to translate the financial statements of its Venezuelan operations from VEF to USD.
Under the amended agreement, between Sishen Iron Ore Company Pty) Ltd and ArcelorMittal South Africa the latter will pay market price (EPP) for iron ore and will therefore no longer contribute towards stripping costs. Accordingly at December 31, 2015, the “deferred stripping pre-payment asset” was derecognised and written off through profit and loss.
As reported in prior periods, and dating back to 2007, the Competition Commission (“the Commission”) has referred five cases to the Competition Tribunal and is formally investigating one further complaint against ArcelorMittal South Africa. The Company has since engaged with the Commission and has made significant progress regarding a possible overall settlement and is in the process of finalizing a detailed settlement agreement. Whilst the draft settlement agreement is still subject to final approval by the Commission and the Competition Tribunal, a provision of R1,245 million representing the present value of a proposed administrative penalty of R1,500 million has been recognized. The Company has, subject to certain conditions being agreed upon with the Commission, proposed to pay the administrative penalty over a period of 5 years subject to appropriate interest.
Following the sale of a 5% stake to Valin Group as a result of the exercise of the third put option on February 8, 2014, the Company’s interest in Hunan Valin decreased from 20% to 15%. On August 6, 2014, the Company exercised the fourth and final instalment, which subsequently led to the decrease in its stake in Hunan Valin from 15% to 10%. The Company received cash from the third and fourth instalment of $108 million both in the fourth quarter of 2014 and first quarter of 2015, respectively.
On December 9, 2013, ArcelorMittal signed an agreement with Kiswire Ltd. for the sale of its 50% stake in the joint venture Kiswire ArcelorMittal Ltd in South Korea and certain other entities of its steel cord business in the US, Europe and Asia for a total consideration of $169 million. The net proceeds received in 2Q 2014 were $39 million being $55 million received in cash during the quarter minus cash held by steel cord business. Additionally, $28 million of gross debt held by the steel cord business had been transferred. During 1Q 2015, the Company received $45 million and the final instalment of $47 million received in 2Q 2015.
On January 15, 2016, ArcelorMittal South Africa completed a rights offer for ZAR 4.5 billion fully underwritten by ArcelorMittal followed by an issuance of new shares on January 18, 2016. Out of the 692,307,693 rights offer shares which were offered to shareholders, a total of 471,604,240 new ArcelorMittal shares, being 68.1% of the rights offer, were applied for in terms of the rights offer. ArcelorMittal subscribed for its proportional entitlement of the rights offer of 342,133,922 shares amounting to ZAR 2,223,870,495 and, pursuant to its underwriting obligation, subscribed for a further 220,655,076 new ArcelorMittal South Africa shares, amounting to ZAR 1,434,257,994. As a result of this transaction, the shareholding interest of ArcelorMittal in ArcelorMittal South Africa increased from 52.02% to 70.55%.
Assets and liabilities held for sale, as of March 31, 2016 and as of December 31, 2015, include the carrying value of ArcelorMittal Algeria (investment stake of 49%), ArcelorMittal Tebessa (investment stake of 49%), ArcelorMittal Pipes and Tubes Algeria (70% control), the USA long product facilities at Steelton, Vinton and ArcelorMittal LaPlace and some activities of ArcelorMittal downstream solutions in the Europe segment.
Exceptional charges for 4Q 2015, primarily included $0.8 billion inventory related charges following the rapid decline of international steel prices and $0.1 billion of litigation and other costs in South Africa.
Effective 1Q 2016, changes in operating working capital in the cashflow statement includes certain other amounts payable that were previously classified as part of the other operating activities line. Prior period figures have been recasted accordingly.