ArcelorMittal reports fourth quarter 2017 and full year 2017 results

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Algemeen advies 31/01/2018 08:57
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.

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.”

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