ArcelorMittal reports second quarter 2017 and half year 2017 results

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Luxembourg, July 27, 2017 – 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 six month periods ended June 30, 2017.

Highlights:

  • Health and safety: LTIF rate of 0.72x in 2Q 2017; 1H 2017 LTIF of 0.78x stable YoY
  • Operating income of $1.4 billion in 2Q 2017; 1H 2017 operating income of $3.0 billion, 38.1% higher YoY
  • EBITDA of $2.1 billion in 2Q 2017; 1H 2017 EBITDA of $4.3 billion, 61% higher YoY
  • Net income of $1.3 billion in 2Q 2017; 1H 2017 net income of $2.3 billion as compared to $696 million in 1H 2016
  • Steel shipments of 21.5 Mt in 2Q 2017, up 2% vs. 1Q 2017; 1H 2017 steel shipments of 42.5Mt, down 2.4% YoY. Steel shipments down 1.2% on a comparable basis
  • 2Q 2017 iron ore shipments of 15.2Mt (-0.9% YoY), of which 9.5 Mt shipped at market prices (-1.2% YoY); 1H 2017 market price iron ore shipments at 18.1Mt; up 4.3% YoY
  • Net debt decreased to $11.9 billion as of June 30, 2017, as compared to $12.1 billion as of March 31, 2017 due to positive free cash flow[2] (+$0.6 billion) (despite investment in working capital) offset in part by foreign exchange losses (-$0.4 billion)

Key strategic developments:

  • Advancing our leadership position:
    • ArcelorMittal launched two new advanced high strength steel products Usibor® 2000 and Ductibor® 1000 to the market, furthering our industry leading offering to automotive customers; in addition, the new Jet Vapor Deposition line at Liege highlights ArcelorMittal’s technology leadership
    • Action 2020 progress ongoing: Transformation program in Europe progressing well; we are now operating from a more efficient, resized footprint and utilising enhanced digitalization of operations to drive productivity improvements and support maintenance excellence
  • Investing with focus and discipline:
    • ArcelorMittal selected to become the new owner of Ilva, a significant opportunity to create value for our shareholders by leveraging ArcelorMittal’s strengths to realise Ilva’s potential as a Tier 1 supplier to European and Italian steel customers. Additionally, ArcelorMittal Brasil S.A. announced the acquisition of Votorantim S.A. long steel businesses in Brazil[3] to strengthen the Company’s long product capability and product leadership
  • Strategic investments completed in line with the continuous shift towards higher added value products:
    • Completed slab yard expansion project at Calvert (US), and Galvaline investment at Dofasco (Canada), increasing our galvanised sheet capability; and commissioned the ArcelorMittal Krakow (Poland) hot rolling mill extension for increased HRC and HDG capacity
  • Balance sheet progress:
    • Net debt was lower by $0.8 billion YoY despite a $2.8 billion investment in working capital over the last 12 months reflecting improved market conditions;
    • S&P and Moody’s credit rating upgrades reflecting ongoing progress towards achieving our financial priority of an investment grade credit rating

Outlook:

Looking to the outlook, current market conditions are improved compared to twelve months ago with steel spreads currently at healthy levels. The demand environment is positive, as evidenced by the highest readings from the ArcelorMittal weighted PMI Index since April 2011, which suggests that steel shipments in 2H 2017 will be higher than would normally be suggested by seasonality alone.

The Company now expects that the cash needs of the business (excluding working capital and premiums paid to retire debt early of $0.2 billion (not included in previous guidance)) in 2017 to be approximately $4.6 billion (as compared to $5.0 billion previous guidance). Given the liability management exercise and lower average debt, we now expect interest expense to decline to $0.8 billion in 2017 (as compared to $0.9 billion from previous guidance and $1.1 billion in FY 2016). While capex expectation for 2017 remains at $2.9 billion (from $2.4 billion in 2016), the Company expects lower cash taxes and contributions to fund pensions and other cash expenses to be lower than previous guidance.

Given the improved market conditions, the Company now expects a full year 2017 investment in working capital of approximately $1.5 billion (as compared to previous guidance of approximately $1.0 billion).

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

(USDm) unless otherwise shown 2Q 17 1Q 17 2Q 16 1H 17 1H 16
Sales 17,244 16,086 14,743 33,330 28,142
Operating income 1,390 1,576 1,873 2,966 2,148
Net income attributable to equity holders of the parent 1,322 1,002 1,112 2,324 696
Basic earnings per share (US$)[4] 1.30 0.98 1.13 2.28 0.88
Operating income/ tonne (US$/t) 65 75 85 70 49
EBITDA 2,112 2,231 1,770 4,343 2,697
EBITDA/ tonne (US$/t) 98 106 80 102 62
Steel-only EBITDA/ tonne (US$/t) 83 83 73 83 56
Crude steel production (Mt) 23.2 23.6 23.1 46.8 46.3
Steel shipments (Mt) 21.5 21.1 22.1 42.5 43.6
Own iron ore production (Mt) 14.7 14.0 13.5 28.7 27.6
Iron ore shipped at market price (Mt) 9.5 8.7 9.6 18.1 17.4

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

“We have materially improved our financial performance in the first half of 2017, and continue to make important progress on our Action 2020 plan. The recently announced acquisition of Ilva represents a unique opportunity to create value for our shareholders. Looking ahead demand remains strong in our core markets supporting robust order books and healthy levels of steel spreads. However, it remains a matter of concern that we are not able to capture the full benefits of this demand growth due to continued high levels of imports. We continue to work towards achieving a comprehensive trade solution in response to unfair imports.”

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[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 appendix 7, 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 and the ratio of net debt to EBITDA 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 appendix 7, 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 cashflow reconciliation provided in appendix 7.
[3]On February 23, 2017, ArcelorMittal Brasil S.A. and Votorantim S.A. announced the signing of a definitive agreement, pursuant to which Votorantim’s long steel businesses in Brazil, Votorantim Siderurgia, will become a subsidiary of ArcelorMittal Brasil and Votorantim will hold a minority stake in ArcelorMittal Brasil. Votorantim’s long steel operations in Argentina (Acerbrag) and Colombia (PazdelRío) were not included in the transaction. The combination of the businesses will result in a long product steel producer with annual crude steel capacity of 5.6 million metric tonnes and annual rolling capacity of 5.4 million metric tonnes. The transaction is subject to regulatory approvals in Brazil, including the approval of the Brazilian anti-trust authority CADE. Until closing, ArcelorMittal Brasil and Votorantim Siderurgia will remain fully separate and independent companies.
[4]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 current shares are 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 and are considering the share consolidation.