ArcelorMittal reports second quarter 2019 and half year 2019 results

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Overig advies 01/08/2019 07:37
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 results[1] for the three-month and six-month periods ended June 30, 2019.

Health and safety: LTIF rate[2] of 1.26x in 2Q 2019 and 1.19x in 1H 2019
Operating loss of $0.2bn in 2Q 2019 including $0.9bn of impairments ($0.3bn related to the remedy asset sales for the ArcelorMittal Italia acquisition and $0.6bn impairment of the fixed assets of ArcelorMittal USA following a sharp decline in steel prices and high raw material costs); 1H 2019 operating income of $0.6bn including $1.1bn of impairments[3]
EBITDA of $1.6bn in 2Q 2019; 1H 2019 EBITDA of $3.2bn, -42.6% lower YoY reflecting a negative price-cost effect
Net loss of $0.4bn in 2Q 2019 (including $0.9bn of impairments[3]); 1H 2019 net loss of $33 million (including $1.1bn of impairments[3])
Steel shipments of 22.8Mt in 2Q 2019, up 4.3% vs. 1Q 2019 and up 4.8% vs. 2Q 2018; 1H 2019 steel shipments of 44.6Mt, up 3.5% YoY largely reflecting the impact of the ArcelorMittal Italia acquisition
2Q 2019 iron ore shipments of 15.5Mt (+6.1% YoY), of which 9.9Mt shipped at market prices (-1.0% YoY); 1H 2019 iron ore shipments of 29.3Mt (+3.0% YoY), of which 19.1Mt shipped at market prices (-0.4% YoY)
Gross debt of $13.8bn as of June 30, 2019 as compared to $13.4bn as of March 31, 2019. Net debt decreased by $1.0bn during the quarter to $10.2bn as of June 30, 2019, due in part to M&A proceeds and working capital release ($0.4bn) (despite higher raw materials costs and higher steel shipments). Excluding IFRS 16 impact[4], net debt as of June 30, 2019 was $1.5bn lower YoY

Strategic actions:
Given weak demand and high import levels in Europe, the Company has taken steps to align its European production levels to the current market demand. As a result of previously announced European production curtailments, approximately 4.2Mt of annualized production curtailment is scheduled for 2H 2019
Further temporary cost initiatives undertaken to navigate the current weak market backdrop
Excluding IFRS 16 impact, net debt at the end of June 30, 2019 was the lowest level achieved since the ArcelorMittal merger. Deleveraging remains the Group’s priority.
Cash needs of the business for 2019 have been reduced by $1.0bn to $5.4bn, due to lower expected capex and tax and others
To complement the expected deleveraging through FCF generation, the Company has identified opportunities to unlock up to $2bn of value from its asset portfolio over the next two years

The Company now expects global steel demand in 2019 to grow +0.5% to +1.5% (ex-China steel demand growth of +0.5% to +1.0%; US +0% to +1.0%; and Europe to contract by between -2.0% to -1.0%)
Against this backdrop and considering scope changes (ArcelorMittal Italia acquisition, remedy asset sales and European production curtailments) steel shipments are still expected to increase YoY, which should provide support for the Group's Action 2020 program

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

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.

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