ArcelorMittal reports second quarter 2020 and half year 2020 results

  • Analysts slides – EN – PDF
  • Earnings Release - EN - PDF
  • Analysts Webcast – 15.30 CET – Link
  • Web Q&A – EN– PDF

Highlights:

  • Health and safety: Protecting the health and wellbeing of employees remains the Company’s overarching priority; LTIF rate2 of 0.77x in 2Q 2020 and 0.91x in 1H 2020
  • Operating performance in 2Q 2020 reflects the negative impact of the COVID-19 pandemic primarily on the steel business, with reduced demand leading to a 23.7% sequential reduction in steel shipments (1H 2020 shipments 23% lower YoY)
  • Operating loss of $0.3bn in 2Q 2020 includes $0.2bn exceptional items3 (1H 2020 operating loss of $0.6bn includes $0.8bn impairment and exceptional items3)
  • EBITDA of $0.7bn in 2Q 2020 (1H 2020 EBITDA of $1.7bn)
  • Net loss of $0.6bn in 2Q 2020 (1H 2020 net loss of $1.7bn, with adjusted net loss of $0.9bn excluding impairment and exceptional items3)
  • Free cash outflow was limited to $0.4bn (net cash provided by operating activities of $0.9bn less $1.3bn capex) in 1H 2020 and included a working capital investment of $0.5bn
  • Gross debt of $13.5bn and net debt of $7.8bn as of June 30, 2020 (down $2.3bn vs June 30, 2019) the lowest level achieved since the ArcelorMittal merger
  • Liquidity at the end of 2Q 2020 stood at $11.2bn (consisting of cash and cash equivalents of $5.7bn and $5.5bn of available credit lines5)

Outlook:

  • While the speed and trajectory of the demand recovery post the COVID-19 pandemic remain uncertain, ArcelorMittal’s core markets are showing signs of recovery from exceptionally low levels
  • The Company will continue to align production levels to demand, with the ability and flexibility to restart hot idled capacity as the recovery progresses
  • Against the exceptional operating backdrop, the Company has taken a comprehensive series of actions to reduce all costs to protect profitability and cash flows. While these actions will continue, the Company is now developing its options for structural cost improvements to appropriately position the fixed cost base for the post COVID-19 operating environment, with more details to be announced with full year results
  • The Company continues to expect certain cash needs of the business to be approximately $3.5bn in 2020 and remains focused on its FY 2020 $1bn working capital efficiency target
  • Achievement of its $7bn net debt objective remains a priority, at which point the Company expects its capital allocation focus to shift from deleveraging towards cash returns to shareholders
  • The Company’s $2bn asset portfolio optimization program continues to progress, and with suitable and viable buyers having expressed serious interest in certain assets, the Company remains confident in completing the program by mid-2021
  • The Company’s European climate action report detailed the Smart Carbon and an Innovative DRI-based technology routes to reduce the European business carbon emissions by a targeted 30% by 2030 before reaching net zero in 2050

Financial highlights (on the basis of IFRS[1]):

Commenting, Mr. Lakshmi N. Mittal, ArcelorMittal Chairman and CEO, said:

“The first six months of the year, and particularly the second quarter, have been one of the most difficult periods in the history of the Company, with demand for steel considerably disrupted by the COVID-19 pandemic. I would like to thank our employees across the globe, who have demonstrated great resilience and strength of character to first look out for one another and then maintain operations to meet customer demand in these most challenging of environments."

“As a group we responded swiftly to protect our people, assets, profitability and cashflow, ensuring the Company is in as strong a position as possible to weather this very challenging period. We implemented a comprehensive range of measures that include reducing production, capex and fixed costs, as well as raising capital to further strengthen the balance sheet which has taken our net debt close to the level at which we will prioritize returns to shareholders."

 “There are now signs of activity picking up, especially in regions where lockdowns have ended, but clearly it is prudent to remain cautious about the outlook. Against this context, we are examining what structural changes might be required to ensure the Company is well configured to prosper in the coming years as demand recovers."

“It has also become clear in recent months that governments around the world will align efforts to stimulate the economic recovery with the transition to a low carbon economy. ArcelorMittal recently published its roadmap to reduce emissions by 30% in Europe by 2030 and we were encouraged to see last week’s proposal by the European Council to introduce a carbon border adjustment. Technologically we know that it should be possible to produce carbon neutral steel, but success is co-dependent on policy, of which the carbon border adjustment is an important component, as is access to EU funds."

“In conclusion, it has been an unexpectedly challenging period for everyone. The remainder of the year will no doubt continue to be challenging but I believe we are well prepared to increase production and capture the improvement in demand when it comes.”

Second quarter 2020 earnings analyst conference call

ArcelorMittal management (including CEO and CFO) will host a conference call for members of the investment community to present and comment on the three-month and six-month period ended June 30, 2020 on: Thursday July 30, 2020 at 9.30 ET; 14.30 BST and 15.30 CET.

The dial in numbers are:

To listen to the earnings release webcast live, please visit the results section on our website here

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.

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 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. ArcelorMittal also presents Adjusted net (loss) / income as it believes it is a useful measure for the underlying business performance excluding impairment and exceptional items. 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. Such non-GAAP/alternative performance measures may not be comparable to similarly titled measures applied by other companies. 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.

[2] Excluding the impact of ArcelorMittal Italia, the LTIF was 0.5x for 2Q 2020 as compared to 0.72x for 1Q 2020 and 0.68x for 2Q 2019.

[3] Impairment charges for 1Q 2020 were $92 million and relate to the permanent coke plant closure in Florange, France, at the end of April 2020. Exceptional items for 2Q 2020 of $221 million consist of inventory charges in NAFTA. Exceptional items of $457 million for 1Q 2020 primarily include inventory related charges in NAFTA and Europe due to a weaker steel pricing outlook driven by COVID-19 impacts. The Company considered the impact of the COVID-19 outbreak as an impairment indicator at the end of June 30, 2020 for certain steel operations where the recoverable amounts were not significantly higher than their carrying amounts in the last value-in-use impairment test of 2019. Accordingly, it updated future cash flow projections to reflect latest forecasts available for 3Q 2020 and 4Q 2020 and, as a result, concluded that no impairment charge was required as of June 30, 2020.

[5] 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. During the fourth quarter of 2019, ArcelorMittal executed the option to extend the facility to December 19, 2024. The extension was completed for $5.4 billion of the available amount, with the remaining $0.1 billion remaining with a maturity of December 19, 2023 as of June 30, 2020. The facility may be further extended for an additional year in December 2020. As of June 30, 2020, the $5.5 billion revolving credit facility was fully available. On May 5, 2020, ArcelorMittal and a syndicate of banks signed a credit facility with tranches of $0.7 billion and €2.1 billion (the “New Credit Facility”). Subsequently, the Company's share offering, which closed on May 14, 2020, and the mandatorily convertible notes offering, which closed on May 18, 2020, resulted in the cancellation of commitments of an equivalent amount under the credit facility that ArcelorMittal had entered into on May 5, 2020. Subsequently, on July 17, 2020, ArcelorMittal sent a cancellation notice for all unused amounts under the facility. The cancellation notice was effective on July 22, 2020. As of such date, the facility was terminated.

About ArcelorMittal

ArcelorMittal is the world's leading steel and mining company, with a presence in 60 countries and primary steelmaking facilities in 18 countries. In 2019, ArcelorMittal had revenues of $70.6 billion and crude steel production of 89.8 million metric tonnes, while iron ore production reached 57.1 million metric tonnes. Our goal is to help build a better world with smarter steels. Steels made using innovative processes which use less energy, emit significantly less carbon and reduce costs. Steels that are cleaner, stronger and reusable. Steels for electric vehicles and renewable energy infrastructure that will support societies as they transform through this century. With steel at our core, our inventive people and an entrepreneurial culture at heart, we will support the world in making that change. This is what we believe it takes to be the steel company of the future. 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/

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