Industria
ArcelorMittal reports first quarter 2022 results
Luxembourg, May 5, 2022 - 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 for the three-month period ended March 31, 2022.
1Q 2022 Key highlights:
Financial highlights (on the basis of IFRS ):
Note: As previously announced, effective 2Q 2021, ArcelorMittal has amended its presentation of reportable segments to report the operations of ArcelorMittal Mines Canada ("AMMC") and Liberia within the Mining segment. The results of each other mine are accounted for within the steel segments that it primarily supplies; as from 2Q 2021 onwards, ArcelorMittal Italia is deconsolidated and accounted for as a joint venture.
Commenting, Aditya Mittal, ArcelorMittal Chief Executive Officer, said:
"Our first quarter performance was overshadowed by the war in Ukraine. Our focus has been on providing support to our 26,000 colleagues and their communities at a time of tragedy and hardship.
Notwithstanding this backdrop, further aggravated by rising inflationary pressures across the world, ArcelorMittal produced a strong first quarter performance. This is testimony to the resilience of our business model, characterized by diversity of geography, product category and vertical integration.
Our performance continues to be supported by consistent execution against our strategy. We have approved targeted investments in support of our decarbonization plans and continue to fund high-return projects in growth markets. This is achieved without compromising our balance sheet strength or returns to shareholders.
Market conditions are currently strong although we are now anticipating apparent steel consumption to contract slightly this year compared with 2021. Nevertheless, it is clear that the longer-term fundamental outlook for steel is positive. China's focus on decarbonization and removal of VAT-rebates on steel exports are encouraging; so too are the actions taken by governments to protect against the threats of unfair trade. And we know that steel will play a critical and vital role in the transition to a decarbonized and circular economy – there is no substitute.”
Sustainable development and safety performance
Health and safety - Own personnel and contractors lost time injury frequency rate
Protecting the health and wellbeing of employees remains the Company's overarching priority with ongoing strict adherence to World Health Organization guidelines (in respect of COVID-19), and specific government guidelines have been followed and implemented.
Health and safety performance based on own personnel and contractors lost time injury frequency ("LTIF") rate was 0.69x in the first quarter of 2022 ("1Q 2022”) as compared to 0.74x in the fourth quarter of 2021 ("4Q 2021") and 0.78x in the first quarter of 2021 ("1Q 2021").
A concerted effort is underway to improve health and safety across the group and strengthen our safety culture. We have completed a comprehensive review of our efforts to eradicate accidents and fatalities, and have started 2022 with a refreshed company-wide commitment to put this fully into action.
Corporate oversight of safety has been strengthened, our Global Health & Safety Council is sharing and promoting best practice, peer-to-peer mentoring between sites has been introduced, training (which was reduced as a necessary precaution during COVID-19) has been strengthened and we are prioritizing support for underperforming units.
The Company is also tightening guidelines for mandatory leadership shop floor presence (which similar to training was reduced as a necessary precaution during COVID-19). All leaders must now spend a certain minimum time on the shop floor every week – when they must carry out a safety layered evaluation. While the Company policy has always specified leaders to regularly spend time on the shop floor, setting out a higher minimum accepted level for senior leaders will help reinforce the culture of visible felt leadership which we know has weakened in some regions as a result of COVID-19.
Furthermore reporting of proactive KPIs such as potential serious injury frequency (PSIF) will be also be strengthened. Every segment is required to put in place a quality assessment process for PSIFs. Understanding clearly why PSIFs happen is vitally important to tightening processes, improving behaviours and preventing fatalities. Widespread use of what we call 'quarantining' will also now be in place across all operations where plants are put into 'quarantine' if a seriously unsafe incident takes place or the plant is deemed to be at risk of a serious incident or fatality.
A change to the Company's executive remuneration policy has been made to reflect this focus.
Own personnel and contractors - Frequency rate
Key sustainable development highlights:
Developments in support of our decarbonization plans:
Developments in support of humanitarian aid:
Analysis of results for 1Q 2022 versus 4Q 2021 and 1Q 2021
Total steel shipments in 1Q 2022 were 15.3Mt, -2.7% lower as compared with 15.8Mt in 4Q 2021 largely reflecting the impact of the war in Ukraine (ACIS down -20.3%) offset in part by improved NAFTA shipments +11.4%. Comparing to 1Q 2021 , and adjusting for the change in scope (i.e. excluding the shipments of ArcelorMittal Italia deconsolidated as from April 14, 2021), steel shipments in 1Q 2022 decreased by -1.6%: Europe +2.9% (scope adjusted), Brazil +5.9% offset in part by ACIS -20.2% and NAFTA -2.2%.
Sales in 1Q 2022 were $21.8 billion as compared to $20.8 billion for 4Q 2021 and $16.2 billion for 1Q 2021. As compared to 4Q 2021, the 5.0% increase in sales was primarily due to higher average steel selling prices (+7.5%, supported by positive automotive contract resets), and higher mining revenue primarily due to higher iron ore reference prices (+28.2%), offset in part by lower steel shipment volumes (-2.7%). Sales in 1Q 2022 were +34.8% higher as compared to 1Q 2021 primarily due to significantly higher average steel selling prices (+46.0%) offset in part by lower iron ore reference prices (-15.3%) and the impacts of scope changes.
Depreciation for 1Q 2022 was lower at $647 million as compared to $712 million for 4Q 2021 including impacts from foreign exchange but higher as compared to $601 million in 1Q 2021 driven by changes in the useful lives estimates for certain assets in Europe and Canada due to decarbonization projects, partially offset by foreign exchange benefit.
There were no impairment items for 1Q 2022 or 1Q 2021. Impairment reversal gain for 4Q 2021 amounted to $218 million following improved cash flow projections in the context of decarbonization plans in Sestao (Spain) partially reversing the impairment recognized in 2015.
Operating income for 1Q 2022 was $4.4 billion as compared to $4.6 billion in 4Q 2021 and $2.6 billion in 1Q 2021.
Income from associates, joint ventures and other investments for 1Q 2022 was $559 million as compared to $383 million for 4Q 2021 and $453 million in 1Q 2021. 1Q 2022 is higher than 4Q 2021 on account of results of AMNS Calvert and AMNS India and includes $117 million Erdemir annual dividend received (as compared to $89 million dividend received in 1Q 2021).
Net interest expense in 1Q 2022 was $51 million as compared to $49 million in 4Q 2021 and significantly lower than $91 million in 1Q 2021, reflecting savings following the repayment of bonds.
Foreign exchange and other net financing losses in 1Q 2022 were $140 million as compared to losses of $111 million in 4Q 2021 and $194 million in 1Q 2021. 1Q 2022 includes foreign exchange loss of $46 million compared to $30 million in 4Q 2021 and $118 million in 1Q 2021. 4Q 2021 included a charge of $61 million related to the repurchase of approximately $395 million in aggregate principal amount of the Mandatorily Convertible Subordinated Notes ("MCN") on December 23, 2021.
ArcelorMittal recorded an income tax expense of $555 million (including deferred tax benefit of $140 million) in 1Q 2022 as compared to $632 million (including deferred tax benefit of $46 million) in 4Q 2021 and $404 million (including deferred tax benefit of $165 million) for 1Q 2021.
ArcelorMittal recorded net income for 1Q 2022 of $4,125 million ($4.28 basic earnings per common share), as compared to net income of $4,045 million for 4Q 2021 ($3.93 basic earnings per common share), and a net income of $2,285 million for 1Q 2021 ($1.94 basic earnings per common share).
Analysis of segment operations
NAFTA
* NAFTA steel shipments include steel shipments sourced by the NAFTA segment from Group subsidiaries and sold to the Calvert JV that are eliminated on consolidation.
NAFTA segment crude steel production increased by +1.5% to 2.1Mt in 1Q 2022, as compared to 2.0Mt in 4Q 2021 despite the impact of the labour actions at ArcelorMittal Long Products Canada that negatively impacted 1Q 2022. As compared to 1Q 2021, crude steel production in 1Q 2022 declined -4.5% on account of these labour actions at ArcelorMittal Long Products Canada.
Steel shipments in 1Q 2022 increased by +11.4% to 2.5Mt, as compared to 2.2Mt in 4Q 2021, but declined by -2.2% as compared to 1Q 2021.
Sales in 1Q 2022 increased by +13.0% to $3.8 billion, as compared to $3.3 billion in 4Q 2021, primarily due to an increase in steel shipments offset in part by a -1.4% decrease in average steel selling prices (despite the positive impact of automotive contract resets). Sales increased by +48.2% in 1Q 2022 as compared to $2.5 billion in 1Q 2021 primarily on account of higher average steel selling prices (+55.5%).
Operating income in 1Q 2022 was $1,054 million as compared to $939 million in 4Q 2021 and $261 million in 1Q 2021.
EBITDA in 1Q 2022 of $1,147 million was +9.0% higher as compared to $1,052 million in 4Q 2021, primarily due to higher shipment volumes. EBITDA in 1Q 2022 was higher as compared to $332 million in 1Q 2021 mainly due to a significant positive price-cost effect.
Brazil
Brazil segment crude steel production declined by -2.5% to 3.0Mt in 1Q 2022 as compared to 3.1Mt in 4Q 2021 primarily due to planned maintenance in Acindar (Argentina). Production was stable as compared to 3.0Mt in 1Q 2021.
Steel shipments were stable at 3.0Mt in 1Q 2022 and 4Q 2021, and +5.9% higher as compared to 2.9Mt in 1Q 2021 due to higher export volumes.
Sales in 1Q 2022 decreased by -2.5% to $3.4 billion as compared to $3.5 billion in 4Q 2021, primarily due to a 0.9% decrease in average steel selling prices (-4.4% in local currency). Sales in 1Q 2021 were lower at $2.5 billion on account of lower average steel selling prices and lower steel shipments.
Operating income in 1Q 2022 of $674 million was lower as compared to $892 million in 4Q 2021 and $714 million in 1Q 2021.
EBITDA in 1Q 2022 decreased by -23.1% to $732 million as compared to $952 million in 4Q 2021, primarily due to a negative price-cost effect. EBITDA in 1Q 2022 was $732 million as compared to $767 million in 1Q 2021 primarily due to higher costs offset in part by higher steel shipments and average steel selling prices.
Europe
Europe segment crude steel production was stable at 8.7Mt in 1Q 2022 as compared to 8.6Mt in 4Q 2021, but lower by -10.4% as compared to 1Q 2021 due to the change in scope. Following the formation of a public-private partnership between Invitalia and AM InvestCo Italy renamed Acciaierie d'Italia Holding (ArcelorMittal's subsidiary party to the lease and purchase agreement for the ILVA business) , ArcelorMittal has deconsolidated the assets and liabilities as from mid-April 2021. Adjusted for this change of scope, crude steel production was stable in 1Q 2022 as compared to 1Q 2021.
Steel shipments in 1Q 2022 were stable at 8.3Mt as compared to 4Q 2021 and lower as compared to 9.0Mt in 1Q 2021. Adjusted for scope, shipments in 1Q 2022 were +2.9% higher as compared to 1Q 2021.
Sales in 1Q 2022 increased by +8.0% to $13.0 billion, as compared to $12.1 billion in 4Q 2021, primarily due to +9.7% higher average selling prices (supported by positive automotive price resets). Sales were higher than 1Q 2021 with the impacts of higher prices offsetting the change in scope, as discussed above.
Impairment charges for 1Q 2022 and 1Q 2021 were nil. Impairment reversal gain for 4Q 2021 amounted to $218 million following improved cash flow projections in the context of decarbonization plans in Sestao (Spain) (partially reversing the impairment recognized in 2015).
Operating income in 1Q 2022 was $2,081 million as compared to $1,886 million in 4Q 2021 (including impairment reversal gain as discussed above) and $599 million in 1Q 2021.
EBITDA in 1Q 2022 of $2,407 million increased by +19.1%, as compared to $2,021 million in 4Q 2021, primarily due to a positive price-cost effect with higher contract pricing more than offsetting higher raw material prices. 4Q 2021 was impacted by one-time charges of $55 million related to an early retirement scheme in Spain. EBITDA in 1Q 2022 increased significantly as compared to $898 million in 1Q 2021 primarily due to a positive price-cost effect.
ACIS
ACIS segment crude steel production in 1Q 2022 was -9.0% lower at 2.5Mt as compared to 2.7Mt in 4Q 2021 primarily due to suspension of production in Ukraine . At the onset of the war in Ukraine, the Company announced the suspension of operations to protect its people and assets. Since then we have slowly restarted operations, and are currently operating one of three blast furnaces. Blast furnace No.6 (approximately 20% of Kryvyi Rih capacity), was restarted on April 11, 2022 (to resume low levels of pig iron production). Iron ore production is currently running at about 50-60% capacity.
Steel shipments in 1Q 2022 decreased by -20.3% to 2.1Mt as compared to 2.6Mt in 4Q 2021 and were lower by -20.2% as compared to 1Q 2021, mainly due to the impacts of Ukraine.
Sales in 1Q 2022 decreased by -17.9% to $2.1 billion as compared to $2.5 billion in 4Q 2021, primarily due to lower steel shipments offset in part by +5.6% higher average steel selling prices.
Operating income in 1Q 2022 was significantly lower at $280 million (due to the factors as discussed above) as compared to $439 million in 4Q 2021 and $535 million in 1Q 2021.
EBITDA of $385 million in 1Q 2022 was -30.8% lower as compared to $557 million in 4Q 2021, primarily due to lower steel shipments and higher costs. EBITDA in 1Q 2022 was lower as compared to $645 million in 1Q 2021 due to higher costs and lower steel shipments offset in part higher average steel selling prices.
Mining
Note: Mining segment includes iron ore operations of ArcelorMittal Mines Canada and ArcelorMittal Liberia.
Iron ore production decreased in 1Q 2022 by -3.2% to 6.9Mt as compared to 4Q 2021 and was -4.8% lower as compared to 1Q 2021. Lower production in 1Q 2022 was primarily due to seasonally lower production driven by severe weather conditions in AMMC.
Iron ore shipments decreased in 1Q 2022 by -6.3% to 6.7Mt as compared to 7.1Mt in 4Q 2021, primarily driven by seasonally lower shipments at AMMC (severe weather and associated logistics issues) and a rail incident in Liberia. 1Q 2022 iron ore shipments decreased by -10.2% as compared to 1Q 2021 primarily due to lower rail haulage and port shipments driven by severe weather conditions at AMMC and the rail incident in Liberia.
Operating income in 1Q 2022 increased to $511 million as compared to $343 million in 4Q 2021 but was lower as compared to $779 million in 1Q 2021.
EBITDA in 1Q 2022 increased by +41.8% to $567 million as compared to $400 million in 4Q 2021, largely reflecting the positive impact of higher iron ore reference prices (+28.2%), higher quality premia and lower freight costs offset in part by lower iron ore shipments (-6.3%). EBITDA in 1Q 2022 was lower as compared to $838 million in 1Q 2021, primarily due to lower iron ore reference prices (-15.3%) and lower shipments (-10.2%).
Joint ventures
ArcelorMittal has investments in various joint ventures and associate entities globally. The Company considers the Calvert (50% equity interest) and AMNS India (60% equity interest) joint ventures to be of particular strategic importance, warranting more detailed disclosures to improve the understanding of their operational performance and value to the Company.
Calvert
* Production: all production of the hot strip mill including processing of slabs on a hire work basis for ArcelorMittal group entities and third parties, including stainless steel slabs; ** Shipments: including shipments of finished products processed on a hire work basis for ArcelorMittal group entities and third parties, including stainless steel products; *** EBITDA of Calvert presented here on a 100% basis as a stand-alone business and in accordance with the Company's policy, applying the weighted average method of accounting for inventory.
Calvert's hot strip mill ("HSM") production during 1Q 2022 totaled 1.1Mt, higher as compared to 4Q 2021 (impacted by a planned shutdown) and -10.9% lower than 1.3Mt in 1Q 2021.
Steel shipments in 1Q 2022 were +11.3% above 4Q 2021 due to improved automotive demand as well as non-auto recovering from the seasonally weak 4Q 2021.
EBITDA*** during 1Q 2022 of $327 million (100% basis) was +21.1% higher than $270 million in 4Q 2021, largely due to higher steel shipments.
AMNS India
Crude steel production in 1Q 2022 decreased by -6.3% to 1.7Mt as compared to 1.8Mt in 4Q 2021 primarily due to planned maintenance. Crude steel production in 1Q 2022 decreased by 5.2% as compared to 1.8Mt in 1Q 2021.
Steel shipments in 1Q 2022 were stable as compared to 4Q 2021 and 1Q 2021.
AMNS India EBITDA of $470 million (100% basis) was +8.0% higher as compared to $435 million in 4Q 2021, with the contribution from external sale of pellets from the newly commissioned Odisha plant offset in part by a negative price cost impact.
Liquidity and Capital Resources
Net cash provided by operating activities for 1Q 2022 was $2,034 million as compared to $4,154 million in 4Q 2021 and $997 million in 1Q 2021. Net cash provided by operating activities in 1Q 2022 includes a working capital investment of $2,047 million as compared to working capital release of $22 million in 4Q 2021 and a working capital investment of $1,634 million in 1Q 2021. 1Q 2022 working capital requirements were driven by relatively robust finished steel prices including positive automotive contract price resets and elevated raw material prices. Based on current market conditions, the Company expects a further working capital investment in 2Q 2022.
Capex of $529 million in 1Q 2022 compares to $1,145 million in 4Q 2021 and $619 million in 1Q 2021. Capex for FY 2022 is still expected to total $4.5 billion. Capex outside of strategic capex and decarbonization projects is now expected to be $2.9 billion in 2022, having been lowered by $0.2 billion due to reduced activity in Ukraine. Decarbonization capex is expected to be $0.3 billion in 2022 (net of government support). Capex on strategic envelope projects has been increased by $0.2 billion to $1.3 billion to include the renewables project in India. The pellet plant project in Ukraine has been temporarily suspended.
Net cash used in other investing activities in 1Q 2022 was $77 million as compared to $90 million in 4Q 2021 as compared to net cash provided by other investing activities of $887 million in 1Q 2021. 1Q 2022 cash outflow primarily relates to the acquisition of the Scottish scrap recycling business John Lawrie Metals Ltd. 4Q 2021 cash outflow primarily relates to the $45 million investment through the XCarb™ innovation fund (including carbon recycling company, LanzaTech). 1Q 2021 cash inflow primarily relates to $0.6 billion cash received from the sale of 40 million Cleveland Cliffs shares and the recovery of the cash collateral (short-term deposits) for the TSR receivables retained in ArcelorMittal USA after its disposal.
Net cash used in financing activities results from movements in debt (including commercial paper) issuance and repayments, share buy backs, dividends and lease payments. Net cash used in financing activities in 1Q 2022 was $185 million as compared to $2,990 million in 4Q 2021 and $1,338 million in 1Q 2021. In 1Q 2022, net cash used in financing activities includes an inflow from commercial paper portfolio offset by the reimbursement of an outstanding bond paid at maturity. In 4Q 2021, net cash used in financing activities includes an inflow of $0.1 billion from commercial paper portfolio. In 1Q 2021, net cash used in financing activities includes an outflow of $0.6 billion primarily related to $0.3 billion decrease of commercial paper portfolio. During 1Q 2022, ArcelorMittal repurchased 18.3 million shares for a total value of $569 million of which $504 million was paid by the end of March 2022 with $65 million settled in early April 2022. During 4Q 2021, ArcelorMittal repurchased 59.2 million shares for a total value of $1.8 billion. In addition, the Company repurchased $395 million in aggregate principal amount of its 5.50% Mandatorily Convertible Subordinated Notes ("MCN") due 2023 for an aggregate repurchase price of $1,196 million, equivalent to repurchasing approximately 36.6 million shares (based on the minimum conversion ratio). During 1Q 2022, 4Q 2021 and 1Q 2021, the Company paid dividends of $12 million, $21 million and $65 million, respectively, to minority shareholders. Outflows from lease payments and other financing activities were $48 million in 1Q 2022 as compared to $53 million in 4Q 2021 and $49 million in 1Q 2021.
Gross debt increased to $8.7 billion as of March 31, 2022, as compared to $8.4 billion as of December 31, 2021 and $11.4 billion as of March 31, 2021. Net debt declined by $878 million to $3.2 billion as of March 31, 2022 as compared to $4.0 billion as of December 31, 2021 and $5.9 billion as of March 31, 2021.
As of March 31, 2022, and December 31, 2021, Company had liquidity of $11.1 billion and 9.9 billion, respectively. March 31, 2022 liquidity consisted of cash and cash equivalents of $5.6 billion (December 31, 2021 cash and cash equivalents of $4.4 billion) and $5.5 billion of available credit lines . As of March 31, 2022, the average debt maturity was 5.7 years.
Key recent developments
Capital return
On April 26, 2022, ArcelorMittal announced the completion of the $1.0 billion share buyback program it had announced on February 11, 2022.
The Company is now announcing an increase in its 2022 buyback program to $2.0 billion (of which $1.0 billion has been completed) and, following shareholder approval at the AGM, the $0.38/share base dividend will be paid in June 2022.
Outlook
Whilst we have updated our forecasts for apparent steel consumption (ASC) to reflect developments since 4Q 2021 results, with the exception of CIS, we have not changed our production plans and shipment forecasts - i.e. excluding CIS, we expect scope-adjusted shipments in 2022 to be above 2021 levels.
Based on the current economic outlook, ArcelorMittal now expects global apparent steel consumption (“ASC”) to contract slightly in 2022 (by up to -1.0%) vs. the previous forecast for slight growth (of up to +1%). By region:
How long strong market conditions will prevail remains uncertain and subject to many factors, but it is clear that the longer-term fundamental outlook for steel is positive. China's focus on decarbonization and removal of VAT-rebates on steel exports are encouraging; so too are the actions taken by governments to protect against the threats of unfair trade. And we know that steel will play a critical and vital role in the transition to a decarbonized and circular economy – there is no substitute.
ArcelorMittal Condensed Consolidated Statement of Financial Position
ArcelorMittal Condensed Consolidated Statement of Operations
ArcelorMittal Condensed Consolidated Statement of Cash flows
Appendix 1: Product shipments by region
Note: “Others and eliminations” are not presented in the table
Appendix 2a: Capital expenditures
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.
For projects in which the targeted addition to EBITDA is indicated, such amount is based on numerous assumptions as to selling prices and input costs in particular.
Completed projects
Ongoing projects
a) On September 28, 2017, ArcelorMittal announced a major $1.0 billion investment program at its Mexican operations, which is focused on building ArcelorMittal Mexico's downstream capabilities, sustaining the competitiveness of its mining operations and modernizing its existing asset base. The program is designed to enable ArcelorMittal Mexico to meet the anticipated increased demand requirements from domestic customers, realize in full ArcelorMittal Mexico's production capacity of 5.3Mt and significantly enhance the proportion of higher added-value products in its product mix. The main investment will be the construction of a new hot strip mill. Upon completion, the project will enable ArcelorMittal Mexico to produce c.2.5Mt of flat rolled steel, long steel c.1.5Mt 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 hot strip mill project commenced late 4Q 2017, and the first coils were produced at the end of 2021 with ramp up progressing as per plan. Current potential EBITDA benefit in 2022 of ~$0.1bn. The project is estimated potentially to add approximately $250 million in EBITDA on full completion and post ramp up. The hot skin pass mill (HSPM) is expected to be completed in 2H 2022. In addition to the HSM project, a push pull pickling line (PPPL) is to be constructed to capture additional domestic volume through hot rolled pickled and oiled products. The PPPL has a capacity of up to 0.75Mtpa, and the first pickled and oiled coils are expected to be produced by 2H 2024.
b) Investment in ArcelorMittal Dofasco (Canada) to modernize the hot strip mill. The project is to install two new state of the art coilers and runout tables to replace three end of life coilers. The strip cooling system will be upgraded and include innovative power cooling technology to improve product capability. The project is estimated to be completed in 1H 2022. The project is estimated to potentially add >$25 million of EBITDA on full completion and post ramp up.
c) Investment to replace #5 Hot-Dip Galvanizing Line Galvanneal coating capability with 160kt/year Aluminum Silicon (AluSi®) capability for the production of ArcelorMittal's patented Usibor® Press Hardenable Steel for automotive structural and safety components. With the investment, ArcelorMittal Dofasco will become the only Canadian producer of AluSi® coated Usibor®. This investment complements additional strategic North America developments, including a new EAF and caster at Calvert in the US and a new hot strip mill in Mexico, and will allow to capitalize on increasing Auto Aluminized PHS demand in North America. The project is expected to be completed in 2022, with the first coil planned for 2H 2022. The project is estimated to potentially add >$40 million of EBITDA on full completion and post ramp up.
d) In February 2021, ArcelorMittal announced the resumption of the Vega Do Sul expansion to provide an additional 700kt of cold-rolled annealed and galvanized capacity to serve the growing domestic market. The ~$0.35 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. First equipment arriving on site and progressing in accordance with plan. Civil works and erection of acid regeneration plant and repair and inspection line is well advanced. The project is expected to be completed in 4Q 2023 and estimated potentially to add >$0.1 billion of EBITDA on full completion and post ramp up.
e) ArcelorMittal Liberia has been operating a 5Mt direct shipping ore (DSO) since 2011 (Phase 1). In 2013, the Company had started construction of a Phase 2 project that envisaged the construction of 15Mtpa of concentrate sinter fines capacity and associated infrastructure; this project was then suspended due to the onset of Ebola in West Africa and the subsequent force-majeure declaration by the onsite contracting companies. On September 10, 2021, ArcelorMittal signed with the Government of the Republic of Liberia an amendment to its Mineral Development Agreement which is currently under the legislative ratification process. Detailed construction design is well advanced. Main civil works contract progressing to plan, whilst tenders for key construction contracts and remaining equipment are underway. Under this project, first concentrate product is expected in late 2023, ramping up to 15Mtpa thereafter. The capex required to conclude the project, previously estimated at approximately $0.8 billion, is under review given impacts of inflation and enlarged scope. Under the agreement, the Company has further expansion opportunities up to 30Mtpa. Other users may be allowed to invest for additional rail capacity. The project is estimated potentially to add approximately $250 million of EBITDA on full completion and post ramp up.
f) ArcelorMittal Mexico is investing ~$150 million to increase pellet feed production by 1Mtpa to 2.3Mtpa and improve concentrate grade in Las Truchas. This project will enable concentrate production to the blast furnace (BF) route (2.0Mtpa) and DRI route (0.3Mtpa) for a total of 2.3Mtpa. Primary target is to supply ArcelorMittal Mexico steel operations with high quality feed. Procurement of long lead time items (mills and pumps) and early works have started. Detailed engineering is ongoing. Road works are in progress. Production start-up is estimated in 2H 2023 and estimated potentially to add approximately $50 million of EBITDA on full completion and post ramp up.
g) Approximately $350 million investment at Serra Azul (Brazil) to construct facilities to produce 4.5Mtpa of DRI quality pellet feed to primarily supply ArcelorMittal Mexico steel operation. The project will allow to mine the compact itabirite iron ore. Environmental and operations licenses have been cleared. Detailed engineering is ongoing, hiring of drilling, earthworks and civil and procurement of main equipment are ongoing. Auxiliary buildings civil works has been initiated. Project start-up is estimated in 2H 2023. The project is estimated potentially to add ~$100 million of EBITDA on full completion and post ramp up.
h) The Monlevade upstream expansion project consisting of the sinter plant, blast furnace and meltshop has recommenced in late 2021, following the anticipated improvement in Brazil domestic market. Detailed engineering is ongoing. Piling and civil works are under negotiation. Technical discussions have been started with erection companies. The project is estimated to be completed in 2H 2024 with a capex requirement of approximately $0.5 billion. The project is estimated potentially to add >$0.2 billion of EBITDA on full completion and post ramp up.
i) Investment in ArcelorMittal Kryvyi Rih to build a new 5.0Mtpa pellet plant which, together with the ongoing modernization of Sinter Plant 2, will ensure that all sinter operations in Kryvyi Rih are compliant with dust emissions environmental regulations and will enable cost reduction, quality and productivity improvement. In addition, the project will enable a CO2 footprint improvement by 750kt CO2/yr. First pellet was initially expected to be produced in 4Q 2023 with a capex requirement of approximately $0.3 billion; however revised completion date and budget will depend on when the project can be effectively resumed due to the Russian invasion of Ukraine. The project is estimated potentially to add approximately $70 million in EBITDA on full completion and post ramp up.
j) New ~$0.25 billion investment in sections mill at Barra Mansa (Brazil) with 400ktpa production capacity. The aim of the project is to deliver higher added value products (HAV) (Merchant Bar and Special Bars) to increase domestic market share in HAV products and to enhance profitability. Main equipment is under negotiation with bidders, contract for disassembling of old mill to open space for the new equipment has been awarded. The project commenced in 2022 and is expected to be completed by 1Q 2024. The project is estimated potentially to add $0.1 billion of EBITDA on full completion and post ramp up.
k) This $0.6 billion investment, combining solar and wind power, will be supported by Greenko's hydro pumped storage project, which helps to overcome the intermittent nature of wind and solar power generation. The project is owned and funded by ArcelorMittal. Greenko will design, construct and operate the facilities in Andhra Pradesh, Southern India. AMNS India will enter into a 25 year off-take agreement with ArcelorMittal to purchase 250 MW of renewable electricity annually from the project, resulting in over 20% of the electricity requirement at AMNS India's Hazira plant coming from renewable sources, reducing carbon emissions by approximately 1.5Mt per year. The project commissioning is expected by mid-2024 and estimated potentially to add $70 million of EBITDA (excluding savings at AMNS India) upon completion. The Company is studying the option to develop a second phase which would double the installed capacity.
Appendix 3: Debt repayment schedule as of March 31, 2022
Appendix 4: Reconciliation of gross debt to net debt as of March 31, 2022
Appendix 5: Adjusted net income as of March 31, 2022
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:
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.
EPS: refers to basic or diluted earnings/loss per share.
EBITDA: operating results plus depreciation, impairment items and exceptional items.
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: include foreign currency exchange impact, bank fees, interest on pensions, impairment 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 less dividends paid to minority shareholders
Gross debt : long-term debt and short-term debt (including that held as part of the liabilities held for sale).
Impairment items: refers to impairment charges net of reversals.
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.
Net debt: long-term debt and short-term debt 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 EBITDA (as used in the Company's financial reporting) over the last twelve months.
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 Canada, Mexico; and also includes all Mexico mines. The Brazil segment includes the Flat, Long and Tubular operations of Brazil and its neighboring countries including Argentina, Costa Rica, Venezuela; and also includes Andrade and Serra Azul captive iron ore mines. The Europe segment includes the Flat, Long and Tubular operations of the European business, as well as Downstream Solutions, and also includes Bosnia and Herzegovina capital iron ore mines. The ACIS segment includes the Flat, Long and Tubular operations of Kazakhstan, Ukraine and South Africa; and also includes the captive iron ore mines in Ukraine and iron ore and coal mines in Kazakhstan). Mining segment includes iron ore operations of ArcelorMittal Mines Canada and ArcelorMittal Liberia.
Own iron ore production: includes total of all finished production of fines, concentrate, pellets and lumps and includes share of production.
Price-cost effect: a lack of correlation or a lag in the corollary relationship between raw material and steel prices, which can either have a positive (i.e., increased spread between steel prices and raw material costs) or negative effect (i.e., a squeeze or decreased spread between steel prices and raw material costs).
ROE: refers to "Return on Equity" which calculated as trailing twelve-month net income attributable to equity holders of the parent divided by the average equity attributable to the equity holders of the parent over the period.
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.
Working capital change (working capital investment / release): Movement of change in working capital - trade accounts receivable plus inventories less trade and other accounts payable.
Footnotes
First quarter 2022 earnings analyst conference call
ArcelorMittal management will host a conference call for members of the investment community to present and comment on the three-month period ended March 31, 2022 on:
Thursday May 5, 2022 at 9.30am US Eastern time; 14.30pm London time and 15.30pm CET.
Join the call via telephone using the participant code 7995055# or alternatively use the live audio webcast link.
https://interface.eviscomedia.com/player/1142/
Please visit the results section on our website to listen to the reply once the event has finished https://corporate.arcelormittal.com/investors/results
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 primary steelmaking facilities in 16 countries. In 2021, ArcelorMittal had revenues of $76.6 billion and crude steel production of 69.1 million metric tonnes, while iron ore production reached 50.9 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/
Enquiries
ArcelorMittal investor relations: +44 207 543 1128; 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) +44 207 629 7988. Contact: Paul Weigh +44 203 214 2419
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