Luxembourg, January 31, 2018 – ArcelorMittal (referred to as “ArcelorMittal” or the “Company”) (MT (New York, Amsterdam, Paris, Luxembourg), MTS (Madrid)), the world’s leading integrated steel and mining company, today announced results[1] for the three month and twelve month periods ended December 31, 2017.
Highlights:
- Health and safety performance improved in FY 2017 with annual LTIF rate of 0.78x vs. 0.82x in FY 2016
- FY 2017 operating income of $5.4 billion (+30.6% YoY); operating income of $1.2 billion in 4Q 2017 (+52.7% YoY)
- FY 2017 EBITDA of $8.4 billion (+34.4% YoY); EBITDA of $2.1 billion in 4Q 2017 (+28.9% YoY)
- FY 2017 net income of $4.6 billion, higher as compared to $1.8 billion for FY 2016
- FY 2017 steel shipments of 85.2Mt (+1.6% YoY); 4Q 2017 steel shipments of 21.0Mt (+4.7% YoY)
- FY 2017 iron ore shipments of 57.9Mt (+3.5% YoY), of which 35.7Mt shipped at market prices (+6.1% YoY); 4Q 2017 iron ore shipments of 14.3Mt (+5.4% YoY), of which 8.4Mt shipped at market prices (+3.8% YoY)
- Gross debt of $12.9 billion as of December 31, 2017. Net debt decreased to $10.1 billion as of December 31, 2017, lower as compared to $12.0 billion as of September 30, 2017 and $11.1 billion as of December 31, 2016
Strategic progress in 2017:
- Action 2020 delivered a further $0.6 billion contribution to 2017 operating results
- Investing in high return opportunities: Anticipated ILVA (Italy), Mexico hot strip mill (HSM) and Brazil long business
- Cash flow from operating activities less capex (FCF)[2] of $1.7 billion despite working capital investment of $1.9 billion and $0.4 billion premium to repay bonds
- Cash requirements of the business limited to $4.4 billion, slightly below target (interest of $0.8 billion; capex of $2.8 billion slightly below guidance of $2.9 billion; cash taxes, pensions and other cash costs totalling $0.8 billion)
- Improvement on leverage ratio: Net debt/EBITDA reduced to 1.2x in FY 2017 versus 1.8x in FY 2016
Capital allocation framework priorities:
- The Company will continue to prioritize deleveraging and believes that $6 billion is an appropriate net debt target that will sustain investment grade metrics even at the low point of the cycle
- The Company will continue to invest in opportunities that will enhance future returns. By investing in these opportunities with focus and discipline, the cash flow generation potential of the Company is expected to increase
- The Board has agreed on a new dividend policy which will be proposed to the shareholders at the AGM in May 2018. Given the current deleveraging bias, dividends will begin at $0.10/share in 2018 (paid from 2017 results). Once it achieves net debt at or below its target, the Company is committed to returning a portion of annual FCF to shareholders
Outlook and guidance:
- Market conditions are favorable. The demand environment remains positive (as evidenced by the continued high readings from the ArcelorMittal weighted PMI) and steel spreads remain healthy.
- The Company expects cash needs of the business (capex, interest, cash taxes, pensions and other cash costs) excluding working capital investment to increase in 2018 to approximately $5.6 billion. The expected increase in capex to $3.8 billion in 2018 from $2.8 billion in 2017 largely reflects the Mexico HSM project, anticipated ILVA capex, as well as other projects.
Financial highlights (on the basis of IFRS[1]):
| (USDm) unless otherwise shown | 4Q 17 | 3Q 17 | 4Q 16 | 12M 17 | 12M 16 |
|---|---|---|---|---|---|
| Sales | 17,710 | 17,639 | 14,126 | 68,679 | 56,791 |
| Operating income | 1,234 | 1,234 | 809 | 5,434 | 4,161 |
| Net income attributable to equity holders of the parent | 1,039 | 1,205 | 403 | 4,568 | 1,779 |
| Basic earnings per share (US$)[3] | 1.02 | 1.18 | 0.40 | 4.48 | 1.87 |
| Operating income/ tonne (US$/t) | 59 | 57 | 40 | 64 | 50 |
| EBITDA | 2,141 | 1,924 | 1,661 | 8,408 | 6,255 |
| EBITDA/ tonne (US$/t) | 102 | 89 | 83 | 99 | 75 |
| Steel-only EBITDA/ tonne (US$/t) | 89 | 73 | 68 | 82 | 65 |
| Crude steel production (Mt) | 22.7 | 23.6 | 21.8 | 93.1 | 90.8 |
| Steel shipments (Mt) | 21.0 | 21.7 | 20.0 | 85.2 | 83.9 |
| Own iron ore production (Mt) | 14.4 | 14.2 | 13.9 | 57.4 | 55.2 |
| Iron ore shipped at market price (Mt) | 8.4 | 9.1 | 8.1 | 35.7 | 33.6 |
Commenting, Mr. Lakshmi N. Mittal, ArcelorMittal Chairman and CEO, said:
“The combination of improving market fundamentals and delivery against our strategic objectives contributed to a successful year for the Company. Action 2020 has delivered half of its targeted EBITDA gains and we have succeeded in transforming the Company’s balance sheet. While we will retain a deleveraging bias, we are also investing selectively in opportunities that will strengthen the foundations of sustainable value creation. The market environment remains supportive but the industry must continue to address the twin challenges of overcapacity and unfair trade.”
[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 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 measures. ArcelorMittal presents EBITDA, and EBITDA/tonne, which are non-GAAP financial measures and defined in the Condensed Consolidated Statement of Operations, as additional measurements 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 as an additional measurement to enhance the understanding of its financial position, changes to its capital structure and its credit assessment. ArcelorMittal also presents free cash flow, which is a non-GAAP financial measure defined 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. Non-GAAP financial 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 measures may not be comparable to similarly titled measures applied by other companies.
[2] Free cash flow for the full year 2017 totalled $1.7 billion including cash flow from operations of $4.6 billion less capex of $2.8 billion
[3] At the Extraordinary General Meeting held on May 10, 2017, the ArcelorMittal Shareholders approved a share consolidation based on a ratio 1:3, whereby every three shares were consolidated into one share (with a change in the number of shares outstanding and the accounting par value per share). The figures presented for the basic and diluted earnings per share reflect this change.