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Share Name | Share Symbol | Market | Type |
---|---|---|---|
ArcelorMittal | EU:MT | Euronext | Ordinary Share |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.03 | -0.12% | 24.30 | 24.23 | 24.35 | 24.68 | 24.16 | 24.50 | 1,804,974 | 16:40:00 |
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 results1 for the three-month and six-month periods ended June 30, 2019.
Highlights:
Strategic actions:
Outlook:
Financial highlights (on the basis of IFRS1):
(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:
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 acquisition5.
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 settled6.
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 2018Total 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 Canada7 (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 €750 million 5-year, 3% bond at maturity; and offset in part by $1.6 billion cash received from the issuance of two new bonds (€750 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 €400 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 (€80 million) at an approximate average price per share of $22.42 (€19.89 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 lines8. 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
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.
Outlook and guidanceBased 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 Position1
In millions of U.S. dollars | Jun 30,2019 | Mar 31,2019 | Dec 31,2018 | |||
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 sale9 | 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 sale9 | 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 Operations1
Three months ended | Six months ended | |||||||||
In millions of U.S. dollars unless otherwise shown | Jun 30,2019 | Mar 31,2019 | Jun 30,2018 | Jun 30,2019 | Jun 30,2018 | |||||
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 items6 (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 flows1
Three months ended | Six months ended | |||||||||
In millions of U.S. dollars | Jun 30,2019 | Mar 31,2019 | Jun 30,2018 | Jun 30,2019 | Jun 30,2018 | |||||
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 items6 | — | — | — | — | 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 / unit | Project | Capacity / details | Actual completion |
NAFTA | Indiana Harbor (US) | Indiana Harbor “footprint optimization project” | Restoration of 80” HSM and upgrades at Indiana Harbor finishing | 4Q 2018 (a) |
Ongoing projects
Segment | Site / unit | Project | Capacity / details | Forecasted completion |
ACIS | ArcelorMittal Kryvyi Rih (Ukraine) | New LF&CC 2&3 | Facilities upgrade to switch from ingot to continuous caster route. Additional billets of up to 290kt over ingot route through yield increase | 2019 |
Europe | Sosnowiec (Poland) | Modernization of Wire Rod Mill | Upgrade rolling technology improving the mix of HAV products and increase volume by 90kt | 2019 |
NAFTA | Mexico | New Hot strip mill | Production capacity of 2.5Mt/year | 2020(b) |
NAFTA | ArcelorMittal Dofasco (Canada) | Hot Strip Mill Modernization | Replace existing three end of life coilers with two states of the art coilers and new runout tables | 2021(c) |
NAFTA | Burns Harbor (US) | New Walking Beam Furnaces | Two new walking beam reheat furnaces bringing benefits on productivity, quality and operational cost | 2021 |
Brazil | ArcelorMittal Vega Do Sul | Expansion project | Increase hot dipped / cold rolled coil capacity and construction of a new 700kt continuous annealing line (CAL) and continuous galvanising line (CGL) combiline | 2021(d) |
Brazil | Juiz de Fora | Melt shop expansion | Increase in meltshop capacity by 0.2Mt/year | On hold(e) |
Brazil | Monlevade | Sinter plant, blast furnace and melt shop | Increase in liquid steel capacity by 1.2Mt/year;Sinter feed capacity of 2.3Mt/year | On hold(e) |
Mining | Liberia | Phase 2 expansion project | Increase production capacity to 15Mt/year | Under review(f) |
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
(USD million) | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 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 definitionsUnless 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 tonnesMarket-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 incomeOn-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 ChinaShipments: 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 €118 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: | ||||
Location | Toll free dial in numbers | Local dial in 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 StatementsThis 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 ArcelorMittalArcelorMittal 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/
EnquiriesArcelorMittal investor relations: Europe: +44 207 543 1128; Americas: +1 312 899 3985; Retail: +44 207 543 1156; SRI: +44 207 543 1156 and Bonds/credit: +33 1 71 92 10 26.
ArcelorMittal corporate communications (E-mail: press@arcelormittal.com) +44 0207 629 7988. Contact: Paul Weigh +44 203 214 2419
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