TIDMMT
Luxembourg, November 1, 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
nine-month periods ended September 30, 2018.
Highlights:
-- Health and safety: LTIF rate of 0.62x in 3Q 2018 as compared to 0.71x in
2Q 2018 and 0.67x in 3Q 2017
-- Operating income in 3Q 2018 decreased to $1.6 billion (which includes
$0.5 billion impairment primarily related to the Ilva remedy assets sale)
as compared to $2.4 billion in 2Q 2018, 26.9% higher YoY
-- EBITDA of $2.7 billion in 3Q 2018, 11.2% lower as compared to $3.1
billion in 2Q 2018, primarily reflecting lower steel shipments (-5.5%)
and the negative impact from hyperinflation accounting in Argentina ($0.1
billion); 3Q 2018 EBITDA up 41.8% YoY
-- Net income of $0.9 billion in 3Q 2018 as compared to $1.9 billion in 2Q
2018 and $1.2 billion in 3Q 2017
-- Crude steel production of 23.3Mt in 3Q 2018, up 0.5% vs. 2Q 2018 and down
1.4% vs. 3Q 2017
-- Steel shipments of 20.5Mt in 3Q 2018, down 5.5% vs. 2Q 2018 and down 5.4%
vs. 3Q 2017
-- 3Q 2018 iron ore shipments of 14.2Mt (-5.6% YoY), of which 8.5Mt shipped
at market prices (-6.1% YoY)
-- Gross debt of $13.0 billion as of September 30, 2018. Net debt as of
September 30, 2018 stable at $10.5 billion as compared to June 30, 2018
despite further working capital investment of $1.7 billion; net debt is
$1.5 billion lower when compared to net debt as of September 30, 2017
Financial highlights (on the basis of IFRS(1) ):
(USDm) unless otherwise
shown 3Q 18 2Q 18 3Q 17 9M 18 9M 17
Sales 18,522 19,998 17,639 57,706 50,969
Operating income 1,567 2,361 1,234 5,497 4,200
Net income attributable
to equity holders of the
parent 899 1,865 1,205 3,956 3,529
Basic earnings per share
(US$)(2) 0.89 1.84 1.18 3.89 3.46
Operating income/ tonne
(US$/t) 76 109 57 86 65
EBITDA 2,729 3,073 1,924 8,314 6,267
EBITDA/ tonne (US$/t) 133 141 89 131 98
Steel-only EBITDA/ tonne
(US$/t) 119 127 73 116 80
Crude steel production
(Mt) 23.3 23.2 23.6 69.8 70.4
Steel shipments (Mt) 20.5 21.8 21.7 63.6 64.2
Own iron ore production
(Mt) 14.5 14.5 14.2 43.5 42.9
Iron ore shipped at market
price (Mt) 8.5 10.0 9.1 27.7 27.2
--------------------------- ------ ------ ------ ------ ------
Commenting, Mr. Lakshmi N. Mittal, ArcelorMittal Chairman and CEO, said:
"As anticipated market conditions in the third quarter remained
favourable, resulting in significantly improved EBITDA for the first
nine months compared with 2017. We continue to see robust real demand
and healthy utilization rates across all steel segments.
"We continue to make good progress with the implementation of our Action
2020 plan, which will improve the performance of our existing business
and targets further growth in higher added value products. We are also
expanding our business through the execution of a targeted and
disciplined strategy to create long-term value. Within 6 months of
taking ownership of Votorantim we have captured a significant amount of
synergies, and have strengthened our long steel business in Brazil. We
are confident we will be similarly successful in integrating and
delivering rapid improvement at Ilva, Europe's single largest integrated
steel-making facility, which completed today. And in India, we have
recently been named the successful bidder for Essar Steel which provides
a unique opportunity to establish a meaningful production presence in
the world's fastest growing steel-market.
"The progress the industry and our Company has made is significant but
we remain cognizant of the challenges, including continued global
overcapacity, and we remain concerned with the high level of imports in
various markets. We continue to prioritize net debt reduction and a
strong balance sheet to ensure we can prosper in all market conditions."
Sustainable development and safety performance
Health and safety - Own personnel and contractors lost time injury
frequency rate
Health and safety performance, based on own personnel figures and
contractors lost time injury frequency (LTIF) rate was 0.62x in the
third quarter of 2018 ("3Q 2018") as compared to 0.71x for the second
quarter of 2018 ("2Q 2018") and 0.67x for the third quarter of 2017 ("3Q
2017").
Health and safety performance improved to 0.66x in the first nine months
of 2018 ("9M 2018") as compared to 0.74x for the first nine months of
2017 ("9M 2017").
The Company's efforts to improve its Health and Safety record remain
focused on both further reducing the rate of severe injuries and
preventing fatalities.
Own personnel and contractors - Frequency rate
Lost time injury frequency
rate 3Q 18 2Q 18 3Q 17 9M 18 9M 17
Mining 0.63 0.62 1.05 0.59 0.75
NAFTA 0.56 0.64 0.57 0.56 0.69
Brazil 0.39 0.35 0.45 0.39 0.42
Europe 0.76 1.02 0.79 0.88 1.05
ACIS 0.61 0.52 0.42 0.63 0.49
Total Steel 0.62 0.72 0.60 0.68 0.74
Total (Steel and Mining) 0.62 0.71 0.67 0.66 0.74
--------------------------- ----- ----- ----- ----- -----
Key sustainable development highlights for 3Q 2018:
-- Our safety video, titled "We choose the safest way", won a gold medal at
The Cannes Corporate Media & TV Awards in France in September 2018. The
innovative film had been made to mark ArcelorMittal's annual Health and
Safety Day in April this year.
https://corporate.arcelormittal.com/news-and-media/multimedia-gallery/video-gallery#we-choose-the-safest-way
https://corporate.arcelormittal.com/news-and-media/multimedia-gallery/video-gallery#we-choose-the-safest-way
-- ArcelorMittal won two Steelie Awards at the Annual Dinner of the World
Steel Association (worldsteel) on October 16, 2018.
-- ArcelorMittal Brazil, won the Steelie Award in the 'Excellence in
Sustainability' category for its water master plan which reduced
the Company's water intake by more than 6,000,000 m3 /year,
despite a 17% increase in production.
-- The Company also won the Steelie in the 'Excellence in Life Cycle
Assessment' category for its Steligence(R) concept. Steligence(R)
goes beyond relying on steel's excellent recycling credentials and
low embedded carbon content to earn a construction project its
sustainability designation. It offers developers, architects,
engineers and contractors a whole new way of thinking about
construction -- life cycle assessment -- to enable them to build a
truly circular economy.
-- The inaugural ResponsibleSteelTM Forum, held in Berlin on October 15,
2018, attracted over 80 delegates. Leading businesses from steel, mining,
automotive and other sectors met with social, environmental, and policy
organisations to debate key issues relating to the responsible sourcing
and production of steel. As a founding member of ResponsibleSteelTM,
ArcelorMittal is proud to be taking the lead in developing the world's
first multi-stakeholder sustainability certification program for the
global steel sector.
Analysis of results for the nine months ended September 30, 2018 versus
results for the nine months ended September 30, 2017
Total steel shipments for 9M 2018 were 63.6 million metric tonnes
representing a decrease of 1.0% as compared to 9M 2017, primarily due to
lower steel shipments in ACIS (-7.8%) offset in part by improvement in
Brazil (+8.0%), NAFTA (+1.1%) and Europe (+0.4%).
Sales for 9M 2018 increased by 13.2% to $57.7 billion as compared with
$51.0 billion for 9M 2017, primarily due to higher average steel selling
prices (+15.3%) offset in part by lower steel shipments (-1.0%).
Depreciation of $2.1 billion for 9M 2018 was higher as compared with
$2.0 billion in 9M 2017. FY 2018 depreciation is expected to be
approximately $2.9 billion (based on current exchange rates).
Impairment charges for 9M 2018 were $595 million primarily related to
the remedy asset sales for the Ilva acquisition and $86 million related
to the agreed remedy package required for the approval of the Votorantim
acquisition(3) . Impairment charges for 9M 2017 were $46 million in
South Africa.
Exceptional charges for 9M 2018 were $146 million related to a provision
taken in 1Q 2018 in respect of a litigation case that was settled in 3Q
2018(4) . Exceptional charges for 9M 2017 were nil.
Operating income for 9M 2018 was higher at $5.5 billion as compared to
$4.2 billion in 9M 2017 driven by improved operating conditions.
Operating results for 9M 2018 and 9M 2017 were impacted by impairment
and exceptional charges as discussed above.
Income from associates, joint ventures and other investments for 9M 2018
was $425 million as compared to $323 million for 9M 2017. Income from
associates, joint ventures and other investments in 9M 2018 increased
primarily on account of improved performance of a Chinese investee and
higher annual dividend income from Erdemir of $87 million as compared to
$45 million in 9M 2017. 9M 2018 includes $132 million impairment of
ArcelorMittal's investment in Macsteel (South Africa) following the
announced sale of its 50% stake in May 2018. Upon closing of the
transaction, the charge is expected to be offset by currency translation
gains. 9M 2017 includes a gain from disposal of ArcelorMittal USA's 21%
stake in the Empire Iron Mining Partnership(5) ($133 million), offset in
part by a loss on dilution of the Company's stake in China Oriental(6)
and the recycling of cumulative foreign exchange translation losses
incurred in connection with the disposal of the 50% stake in Kalagadi(7)
($187 million).
Net interest expense was lower at $475 million for 9M 2018, as compared
to $635 million for 9M 2017, driven by debt repayment and lower cost of
debt. The Company expects full year 2018 net interest expense of
approximately $0.6 billion reflecting the benefits of liability
management exercises completed in 2017 and 2018.
Foreign exchange and other net financing losses were $1.0 billion for 9M
2018 as compared to gains of $0.2 billion for 9M 2017. Foreign exchange
losses for 9M 2018 were $227 million primarily related to the effect of
the depreciation of the U.S. dollar in 1Q 2018 against the euro on the
Company's euro denominated debt(8) as compared to foreign exchange gains
of $463 million in 9M 2017, primarily related to the effect of the
depreciation of the U.S. dollar against the euro on the Company's euro
denominated deferred tax assets and euro denominated debt. 9M 2018
includes non-cash mark-to-market losses related to mandatory convertible
bond call option totalling $0.1 billion as compared to gains of $0.6
billion in 9M 2017. 9M 2018 includes $0.1 billion premium expense on the
early redemption of bonds as compared to $0.4 billion in 9M 2017.
ArcelorMittal recorded an income tax expense of $362 million for 9M 2018
as compared to $551 million for 9M 2017. The current tax expense of $730
million for 9M 2018 as compared to $449 million for 9M 2017 is primarily
driven by the higher results in a number of countries. The deferred tax
benefit of $368 million in 9M 2018 as compared with a deferred tax
expense of $102 million for 9M 2017 is the result of recording in 9M
2018 a deferred tax asset primarily due to the expectation of higher
future profits mainly in Luxembourg, following the share capital
conversion.
ArcelorMittal's net income for 9M 2018 was $4.0 billion, or $3.89 basic
earnings per share, as compared to a net income in 9M 2017 of $3.5
billion, or $3.46 basic earnings per share.
Analysis of results for 3Q 2018 versus 2Q 2018 and 3Q 2017
Total steel shipments in 3Q 2018 were 5.5% lower at 20.5Mt as compared
with 21.8Mt for 2Q 2018 primarily due to lower steel shipments in Europe
(-7.7%), NAFTA (-5.0%) and ACIS (-2.3%) offset in part by an improvement
in Brazil (+9.4%).
Total steel shipments in 3Q 2018 were 5.4% lower as compared with 21.7Mt
for 3Q 2017 primarily due to 11.2% lower steel shipments in ACIS
(primarily in Ukraine and Kazakhstan), Europe (down -4.0% mainly due to
operational issues in France and slower ramp up following blast furnace
reline in Poland) and NAFTA (-2.5%), offset in part by higher shipments
in Brazil (+5.4%).
Sales in 3Q 2018 were $18.5 billion as compared to $20.0 billion for 2Q
2018 and $17.6 billion for 3Q 2017. Sales in 3Q 2018 were 7.4% lower as
compared to 2Q 2018 primarily due to lower steel shipments (-5.5%),
lower average steel selling prices (-0.7%) and lower market-priced iron
ore shipments (-14.4%). Sales in 3Q 2018 were 5.0% higher as compared to
3Q 2017 primarily due to higher average steel selling prices (+12.8%)
offset by lower steel shipments (-5.4%), lower market-priced iron ore
shipments (-6.1%) and lower seaborne iron ore reference prices (-6.2%).
Depreciation for 3Q 2018 was lower at $653 million as compared to $712
million for 2Q 2018 and $690 million in 3Q 2017 primarily due to the
appreciation of the US dollar against the Euro and the reduction of
depreciation due to the reclassification of Ilva remedies recorded as
assets held for sale beginning May 2018.
Impairment charges for 3Q 2018 were $509 million primarily related to
remedy asset sales for the Ilva acquisition. Impairment charges for 2Q
2018 and 3Q 2017 were nil.
Operating income for 3Q 2018 was $1.6 billion as compared to $2.4
billion in 2Q 2018 and $1.2 billion in 3Q 2017. Operating results for 3Q
2018 were impacted by impairment charges as discussed above.
Income from associates, joint ventures and other investments for 3Q 2018
was $183 million as compared to $30 million for 2Q 2018. 2Q 2018 was
negatively impacted by a $132 million impairment of ArcelorMittal's
investment in Macsteel (South Africa) following the announced sale of
its 50% stake in May 2018. Upon closing of the transaction, the charge
is expected to be offset by currency translation gains. Income from
associates, joint ventures and other investments for 3Q 2017 of $117
million includes the recycling of the cumulative foreign exchange
translation losses in connection with the disposal of the 50% stake in
Kalagadi ($187 million) offset by a gain on disposal of ArcelorMittal
USA's 21% stake in the Empire Iron Mining Partnership ($133 million).
Net interest expense in 3Q 2018 was $152 million as compared to $159
million in 2Q 2018 and $205 million in 3Q 2017. Net interest expense was
lower in 3Q 2018 as compared to 3Q 2017, primarily due to debt
repayments and lower cost of debt.
Foreign exchange and other net financing losses in 3Q 2018 were $475
million as compared to losses of $390 million for 2Q 2018 and gains of
$132 million in 3Q 2017. Foreign exchange gain for 3Q 2018 was $9
million as compared to a loss of $309 million in 2Q 2018 and a gain of
$181 million in 3Q 2017(8) . 3Q 2018 includes non-cash mark-to-market
losses of $114 million related to the mandatory convertible bonds call
option as compared to gains of $91 million in 2Q 2018 and $327 million
in 3Q 2017. 3Q 2018 and 3Q 2017 also include premium expenses on the
early redemption of bonds of $0.1 billion and $0.2 billion,
respectively.
ArcelorMittal recorded an income tax expense of $178 million for 3Q 2018
as compared to an income tax benefit of $19 million for 2Q 2018 and an
income tax expense of $71 million in 3Q 2017. The tax benefit of 2Q 2018
is the result of recording a deferred tax asset primarily due to
expectation of higher future profits mainly in Luxembourg, following the
share capital conversion.
ArcelorMittal recorded a net income for 3Q 2018 of $899 million, or
$0.89 basic earnings per share, as compared to a net income for 2Q 2018
of $1.9 billion, or $1.84 basic earnings per share, and a net income for
3Q 2017 of $1.2 billion, or $1.18 basic earnings per share.
Analysis of segment operations
NAFTA
(USDm) unless otherwise
shown 3Q 18 2Q 18 3Q 17 9M 18 9M 17
Sales 5,367 5,356 4,636 15,475 13,701
Operating income 612 660 256 1,580 1,030
Depreciation (132) (131) (125) (395) (381)
EBITDA 744 791 381 1,975 1,411
Crude steel production
(kt) 5,723 5,946 5,904 17,533 17,882
Steel shipments (kt) 5,512 5,803 5,655 16,874 16,684
Average steel selling
price (US$/t) 896 853 741 843 740
------------------------ ----- ----- ----- ------ ------
NAFTA segment crude steel production decreased by 3.8% to 5.7Mt in 3Q
2018 as compared to 5.9Mt in 2Q 2018.
Steel shipments in 3Q 2018 decreased by 5.0% to 5.5Mt as compared to
5.8Mt in 2Q 2018. Shipments were lower primarily due to weak market
conditions in the US.
Sales in 3Q 2018 were stable at $5.4 billion as compared to 2Q 2018,
primarily due to higher average steel selling prices +5.0% (for flat
products +4.3% and long products +5.2%) offset by lower steel shipment
volumes as discussed above.
Operating income in 3Q 2018 of $612 million was lower as compared to
$660 million in 2Q 2018 and higher as compared to $256 million in 3Q
2017.
EBITDA in 3Q 2018 decreased by 6.0% to $744 million as compared to $791
million in 2Q 2018 primarily due to lower steel shipment volumes offset
in part by a positive price-cost effect. EBITDA in 3Q 2018 increased by
95.2% as compared to $381 million in 3Q 2017 primarily due to a
significant positive price-cost impact.
Brazil
(USDm) unless otherwise
shown 3Q 18 2Q 18 3Q 17 9M 18 9M 17
Sales 2,103 2,191 2,059 6,282 5,503
Operating income 374 369 128 958 431
Depreciation (71) (74) (74) (214) (218)
Impairment -- -- -- (86) --
EBITDA 445 443 202 1,258 649
Crude steel production
(kt) 3,158 3,114 2,797 9,073 8,221
Steel shipments (kt) 3,097 2,831 2,940 8,411 7,788
Average steel selling
price (US$/t) 714 728 651 730 660
------------------------ ----- ----- ----- ----- -----
Brazil segment crude steel production increased by 1.4% to 3.2Mt in 3Q
2018 as compared to 3.1Mt in 2Q 2018.
Steel shipments in 3Q 2018 increased by 9.4% to 3.1Mt as compared to
2.8Mt in 2Q 2018, driven by improved domestic demand and higher export
volumes in both flat and long products. 2Q 2018 steel shipments were
adversely impacted by a nationwide truck strike (0.1Mt).
Sales in 3Q 2018 decreased by 4.0% to $2.1 billion as compared to $2.2
billion in 2Q 2018, due to lower average steel selling prices (-2.0%)
and negative impact from hyperinflation accounting in Argentina, offset
in part by higher steel shipments (+9.4%).
Operating income in 3Q 2018 was slightly higher at $374 million as
compared to $369 million in 2Q 2018 and higher than $128 million in 3Q
2017.
EBITDA in 3Q 2018 was stable at $445 million as compared to $443 million
in 2Q 2018 with the benefit of higher shipment volumes offset by the
impact of hyperinflation accounting in Argentina ($0.1 billion) and
forex headwinds. EBITDA in 3Q 2018 was 120.2% higher as compared to $202
million in 3Q 2017 primarily due to a positive price-cost effect driven
by improved market demand.
Europe
(USDm) unless otherwise
shown 3Q 18 2Q 18 3Q 17 9M 18 9M 17
Sales 9,559 10,527 9,196 30,727 26,598
Operating income 100 853 546 1,533 1,834
Depreciation (262) (292) (302) (872) (865)
Impairment (509) -- -- (509) --
Exceptional charges -- -- -- (146) --
EBITDA 871 1,145 848 3,060 2,699
Crude steel production
(kt) 10,841 11,026 11,248 33,113 33,457
Steel shipments (kt) 9,709 10,516 10,116 30,922 30,790
Average steel selling
price (US$/t) 776 800 723 793 690
------------------------ ------ ------ ------ ------ ------
Europe segment crude steel production decreased by 1.7% to 10.8Mt in 3Q
2018 as compared to 11.0Mt in 2Q 2018 primarily impacted by a power
outage in ArcelorMittal Méditerranée (Fos-sur-Mer, France),
and a slower ramp up following a blast furnace repair in Poland.
Steel shipments in 3Q 2018 decreased by 7.7% to 9.7Mt as compared to
10.5Mt in 2Q 2018, primarily on account of a seasonal slowdown and
operational disruptions mentioned above.
Sales in 3Q 2018 were $9.6 billion, 9.2% lower as compared to $10.5
billion in 2Q 2018, with lower steel shipments, as discussed above, and
3.0% lower average steel selling prices (broadly stable in local euro
currency).
Operating income in 3Q 2018 was lower at $100 million as compared to
$853 million in 2Q 2018 and $546 million in 3Q 2017. Operating income in
3Q 2018 was impacted by a $509 million impairment expense primarily
related to remedy asset sales for Ilva acquisition.
EBITDA in 3Q 2018 decreased by 23.9% to $871 million as compared to
$1,145 million in 2Q 2018 primarily due to lower steel shipment volumes
and foreign exchange translation impact. EBITDA in 3Q 2018 improved by
2.7% as compared to 3Q 2017 primarily due to positive price-cost effect
offset in part by lower steel shipments (-4.0%).
ACIS
(USDm) unless otherwise
shown 3Q 18 2Q 18 3Q 17 9M 18 9M 17
Sales 1,989 2,129 1,941 6,198 5,582
Operating income 371 312 159 973 326
Depreciation (76) (85) (80) (234) (232)
Impairment -- -- -- -- (46)
EBITDA 447 397 239 1,207 604
Crude steel production
(kt) 3,560 3,087 3,669 10,047 10,846
Steel shipments (kt) 2,986 3,057 3,362 9,072 9,840
Average steel selling
price (US$/t) 597 621 515 609 505
------------------------ ----- ----- ----- ------ ------
ACIS segment crude steel production in 3Q 2018 increased by 15.3% to
3.6Mt as compared to 3.1Mt in 2Q 2018 primarily due to recovery in
Ukraine following operational issues impacting 2Q 2018 production.
Steel shipments in 3Q 2018 decreased by 2.3% to 3.0Mt as compared to
3.1Mt in 2Q 2018, primarily due to lower steel shipments in Kazakhstan
and South Africa.
Sales in 3Q 2018 decreased by 6.6% to $2.0 billion as compared to $2.1
billion in 2Q 2018 primarily due to lower average steel selling prices
(down 4.0% primarily impacted by the devaluation of the South African
rand) and lower steel shipments (-2.3%).
Operating income in 3Q 2018 was higher at $371 million as compared to
$312 million in 2Q 2018 and $159 million in 3Q 2017.
EBITDA in 3Q 2018 increased by 12.8% to $447 million as compared to $397
million in 2Q 2018 primarily due to a positive price-cost effect. EBITDA
in 3Q 2018 was significantly higher as compared to $239 million in 3Q
2017, primarily due to a positive price-cost effect offset in part by
lower steel shipments (-11.2%).
Mining
(USDm) unless otherwise
shown 3Q 18 2Q 18 3Q 17 9M 18 9M 17
Sales 1,008 1,065 1,029 3,097 3,074
Operating income 179 198 238 619 832
Depreciation (102) (107) (103) (316) (308)
EBITDA 281 305 341 935 1,140
Own iron ore production
(a) (Mt) 14.5 14.5 14.2 43.5 42.9
Iron ore shipped externally
and internally at market
price (b) (Mt) 8.5 10.0 9.1 27.7 27.2
Iron ore shipment - cost
plus basis (Mt) 5.6 4.6 5.9 14.9 16.4
Own coal production (a)
(Mt) 1.5 1.6 1.5 4.6 4.8
Coal shipped externally
and internally at market
price (b) (Mt) 0.7 0.7 0.6 1.8 2.2
Coal shipment - cost plus
basis (Mt) 0.9 0.9 0.9 2.7 2.7
---------------------------- ----- ----- ----- ----- -----
(a) Own iron ore and coal production not including strategic long-term
contracts.
(b) Iron ore and coal shipments of market-priced based materials include
the Company's own mines and share of production at other mines, and
exclude supplies under strategic long-term contracts.
Own iron ore production in 3Q 2018 was stable at 14.5Mt as compared to
2Q 2018, due to lower volumes in Liberia on account of heavy rains
offset by higher production at Ukraine. Own iron ore production in 3Q
2018 increased by 1.6% as compared to 3Q 2017 primarily due to higher
production in Liberia and Ukraine offset in part by lower production in
Kazakhstan and Mexico. Own iron ore production for 9M 2018 increased by
1.4% primarily due to Liberia (which remains on track to produce
approximately 5Mt in 2018), offset in part by lower production in
AMMC(9) (lower yield from a new mix of ore bodies following pit wall
instability issue which first occurred in 4Q 2017).
Market-priced iron ore shipments in 3Q 2018 decreased by 14.4% to 8.5Mt
as compared to 10.0Mt in 2Q 2018, primarily driven by lower
market-priced iron ore shipments in Ukraine primarily due to logistical
constraints, AMMC (lower available inventory following the pit wall
instability issue that first occurred in 4Q 2017) and Liberia
(additional handling/logistic constraints for the new Gangra product
during the wet season). Due to these revised expectations at Liberia and
AMMC, market-priced iron ore shipments are now expected to grow by
approximately 5% in 2018 as compared to 2017 (down from the previous
guidance of 10% year-on-year growth). Market-priced iron ore shipments
in 3Q 2018 decreased by 6.1% as compared to 3Q 2017 driven by lower
shipments in AMMC, Brazil and Mexico offset in part by higher shipments
in Liberia and Ukraine.
Own coal production in 3Q 2018 decreased by 6.2% to 1.5Mt as compared to
2Q 2018 primarily due to lower Princeton (US) mines production. Own coal
production in 3Q 2018 decreased by 0.7% as compared to 3Q 2017 primarily
due to lower production at Princeton offset in part by higher production
at Kazakhstan.
Market-priced coal shipments in 3Q 2018 were stable at 0.7Mt as compared
to 2Q 2018. Market-priced coal shipments in 3Q 2018 increased by 13.4%
as compared to 3Q 2017 primarily due to increased shipments at
Kazakhstan.
Operating income in 3Q 2018 decreased to $179 million as compared to
$198 million in 2Q 2018 and $238 million in 3Q 2017.
EBITDA in 3Q 2018 decreased by 8.1% to $281 million as compared to $305
million in 2Q 2018, primarily due to the impact of lower market-priced
iron ore shipments. EBITDA in 3Q 2018 was lower as compared to $341
million in 3Q 2017, primarily due to the combined effects of lower
market-priced iron ore shipments and lower seaborne iron ore reference
prices (-6.2%) offset in part by higher market-priced coal shipments
(+13.4%).
Liquidity and Capital Resources
For 3Q 2018, net cash provided by operating activities was $634 million
as compared to $1,232 million in 2Q 2018 and $763 million in 3Q 2017.
The lower net cash provided by operating activities during 3Q 2018
reflects lower earnings and includes working capital investment of
$1,713 million (largely reflecting a seasonal inventory build in Europe
and a replenishment of inventory in Ukraine following production losses
incurring in the first half of 2018), as compared to a working capital
investment of $1,232 million in 2Q 2018. The 9M 2018 working capital
investment of $4.8 billion compared to a working capital investment of
$3.5 billion in 9M 2017 also largely reflects the price effect of
improved market conditions experienced during the first nine months of
the year.
Net cash used in investing activities during 3Q 2018 was $601 million as
compared to $556 million during 2Q 2018 and $563 million in 3Q 2017.
Capital expenditures increased to $781 million in 3Q 2018 as compared to
$616 million in 2Q 2018 and higher as compared to $637 million in 3Q
2017. FY 2018 capital expenditure is expected to be $3.7 billion. Cash
provided by other investing activities in 3Q 2018 of $180 million
primarily includes cash received from Enerfos JV and the second
installment of disposal proceeds from ArcelorMittal USA's 21% stake in
the Empire Iron Mining Partnership ($44 million). Cash provided by other
investing activities in 2Q 2018 of $60 million primarily relates to the
release of restricted cash related to the Mandatory Convertible Bond due
to contractual renegotiation. Investing activities in 3Q 2017 primarily
included the first installment of disposal proceeds from ArcelorMittal
USA's 21% stake in the Empire Iron Mining Partnership ($44 million).
Net cash used by financing activities in 3Q 2018 was $597 million as
compared to net cash provided by financing activities of $352 million
and $514 million in 2Q 2018 and 3Q 2017, respectively. In 3Q 2018, $543
million primarily include payments relating to bond repurchases pursuant
to cash tender offers ($0.6 billion). In 2Q 2018, $474 million
primarily includes the proceeds from a $1 billion short-term loan
facility entered into on May 14, 2018 offset by repayment of a EUR400
million ($491 million) bond at maturity on April 9, 2018. In 3Q 2017,
$587 million primarily included borrowings and commercial paper, offset
in part by a $0.5 billion repayment of drawings under the asset-based
revolving credit facility at ArcelorMittal USA.
During 3Q 2018, the Company paid dividends of $37 million to minority
shareholders in ArcelorMittal Mines Canada. During 2Q 2018, the Company
paid dividends of $101 million to ArcelorMittal shareholders. During 3Q
2017, the Company paid dividends of $80 million primarily to minority
shareholders in ArcelorMittal Mines Canada and in Bekaert (Brazil).
As of September 30, 2018, the Company's cash and cash equivalents
amounted to $2.5 billion as compared to $3.1 billion at June 30, 2018
and $2.8 billion at December 31, 2017.
Gross debt decreased to $13.0 billion as of September 30, 2018, as
compared to $13.6 billion at June 30, 2018 and increased as compared to
$12.9 billion in December 31, 2017.
As of September 30, 2018, net debt remained stable at $10.5 billion as
compared to June 30, 2018 despite the $1.7 billion investment in working
capital. Net debt as of December 31, 2017 was $10.1 billion. Net debt as
of September 30, 2018 was $1.5 billion lower as compared to $12.0
billion as of September 30, 2017.
As of September 30, 2018, the Company had liquidity of $8.0 billion,
consisting of cash and cash equivalents of $2.5 billion and $5.5 billion
of available credit lines(10) . The $5.5 billion credit facility
contains a financial covenant not to exceed 4.25x Net debt / EBITDA (as
defined in the facility). As of September 30, 2018, the average debt
maturity was 3.9 years.
Key recent developments
-- Further to ArcelorMittal being named the H1 Resolution Applicant (the
preferred bidder) on October 19, 2018, Essar Steel India Limited's
('ESIL') Committee of Creditors ('CoC') announced on October 26, 2018,
that it had approved the Company's Resolution Plan for ESIL by issuing
the Company with a Letter of Intent ('LOI') stating that the Company had
been identified as the Successful Applicant. The Resolution Plan includes
an upfront payment of 42,000 crore Indian rupees (c. $5.7 billion)12
towards ESIL's resolution debt, with a further 8,000 crore Indian rupees
(c. $1.1 billion)12 of capital injection into ESIL to finance capex in
support of operational improvement, increased production levels and
deliver enhanced levels of profitability. The Company's Resolution Plan
details are as follows:
-- The Company's intention is to increase ESIL's finished steel
shipments to 8.5 million tonnes over the medium-term. This will be
achieved by initially completing ongoing capital expenditure
projects and infusing expertise and best practice to deliver
efficiency gains, and then through the commissioning of additional
assets, while simultaneously improving product quality and grades
to realise better margins;
-- A long-term aspiration is to increase finished steel shipments to
between 12 and 15 million tonnes through the addition of new iron
and steelmaking assets, in order that ESIL can play an active role
and fully benefit from the anticipated growth in the Indian steel
industry.
ESIL is an integrated flat steel producer, and the largest steel company
in western India. Its current level of annualised crude steel production
is c. 6.5 million tonnes. ESIL also has iron ore pellet facilities in
the east of India, with current annual capacity of 14 million tonnes per
annum.
In-line with ESIL's corporate insolvency process, the Company's
Resolution Plan must now be formally accepted by India's National
Company Law Tribunal ('NCLT') before completion, which is expected
before the end of 2018.
After completion, ArcelorMittal will jointly own and operate ESIL in
partnership with Nippon Steel & Sumitomo Metal Corporation ('NSSMC'),
Japan's largest steel producer and the third largest steel producer in
the world, in-line with the joint venture formation agreement signed
with NSSMC on 2 March 2018. ArcelorMittal and NSSMC expect to finance
the joint venture through a combination of partnership equity
(one-third) and debt (two-thirds), and ArcelorMittal anticipates that
its investment in the joint venture will be equity accounted.
-- On October 17, 2018, the Company announced that it had approved a payment
of 7,469 crore rupees (c. $1 billion, subsequently paid) to the financial
creditors of Uttam Galva and KSS Petron to clear overdue debts in order
that the offer it submitted for ESIL on April 2, 2018 would be eligible
and considered by ESIL's CoC.
-- On October 12, 2018, ArcelorMittal announced that it had received a
binding offer from Liberty House Group for the acquisition of
ArcelorMittal Ostrava (Czech Republic), ArcelorMittal Galati (Romania),
ArcelorMittal Skopje (Macedonia) and ArcelorMittal Piombino (Italy). The
four assets are part of a divestment package the Company agreed with the
European Commission ('EC') during its merger control investigation into
the Company's acquisition of Ilva S.p.A ('Ilva'). Transaction closing is
subject to the completion of the Company's acquisition of Ilva (now
completed), and conditional on EC approval and the conclusion of
consultations with local and European Works Councils. Negotiations are
ongoing with buyers regarding the sale of the other assets -
ArcelorMittal Dudelange in Luxembourg, and several finishing lines in
Liege, Belgium - included in the divestment package.
-- On September 6, 2018, ArcelorMittal announced that it had reached a
provisonal labour agreement (now ratified) with Ilva's trade unions. The
agreement represented an important milestone in AM Investco Italy S.r.l
(AM Investco)'s proposed acquisition of Ilva (now completed). The key
terms of the agreement are as follows:
The labour agreement details a solution for every member of Ilva's
existing workforce.
-- ArcelorMittal has committed to initially hire 10,700 workers based on
their existing contractual terms of employment.
-- In addition, between 2023 and 2025 ArcelorMittal has committed to hire
any workers who remain under Ilva's extraordinary administration.
Legal completion of the transaction and formal commencement of AM
Investco's lease and purchase agreement for Ilva took place on November
1, 2018.
-- On September 5, 2018, ArcelorMittal announced the expiration and the
final results of its tender offers to purchase for cash, for a combined
aggregate purchase price (exclusive of accrued Interest) of up to
$750,000,000, its outstanding 7.0% notes due 2039 and 6.750% notes due
2041. ArcelorMittal purchased notes in an amount of $622 million in
connection with such tender offers ($428 million of the notes due 2039
and $194 million of the notes due 2041).
Regulatory filing
-- On August 3, 2018, ArcelorMittal published its half-year report for the
six-month period ended 30 June 2018. The report is available on
http://corporate.arcelormittal.com/
http://corporate.arcelormittal.com/ under Investors > Financial reports >
Half-year reports, and on the electronic database of the Luxembourg Stock
Exchange ( http://www.bourse.lu/ www.bourse.lu/). The report has also
been filed on Form 6-K with the U.S. Securities and Exchange Commission
(SEC) and is available on http://corporate.arcelormittal.com/
http://corporate.arcelormittal.com/ under Investors > Financial reports >
SEC filings.
Outlook and guidance
The following global apparent steel consumption ("ASC") figures reflect
the Company's 2018 estimates, which remain unchanged from those
presented in connection with the half year 2018 results announcement in
August 2018.
Market conditions remain favorable; the demand environment remains
positive (as evidenced by the continued readings from the ArcelorMittal
weighted PMI which signal expansion in demand) and together with the
benefits of structural supply side reform is supporting healthy steel
spreads.
Based on year-to-date growth and the current economic outlook,
ArcelorMittal expects global ASC to grow further in 2018 by between
+2.0% to +3.0%. By region: ASC in US is expected to grow +2.0% to +3.0%
in 2018, driven by demand in machinery and construction. In Europe, the
strength in machinery and construction end markets is expected to
support ASC growth of between +2.0% to +3.0% in 2018. In Brazil, 2018
ASC growth is forecast in the range of +5.5% to +6.5%. In the CIS, ASC
is expected to grow +2.0% to +3.0% in 2018 reflecting strong consumption,
particularly a rebound in auto sales and production in Russia. Overall,
World ex-China ASC is expected to grow by approximately +3.0% to +4.0%
in 2018. In China, overall demand is expected to grow by between +1.0%
to +2.0% in 2018, as real estate demand continues to surprise on the
upside and ongoing robust machinery and automotive demand, offset in
part by a slowdown in infrastructure.
The Company expects that certain cash needs of the business (excluding
working capital investment) will total approximately $5.8 billion in
2018. This includes capital expenditures of $3.7 billion; net interest
expenses of $0.6 billion reflecting the ongoing benefits of liability
management exercises completed in 2017 and 2018 and certain other cash
needs (primarily taxes) to total $1.5 billion (excluding an exceptional
item relating to a one-time litigation expense ($0.1 billion) and
premium expenses on the early redemption of bonds ($0.1 billion)).
Given the current market conditions the Company now expects a working
capital investment of approximately $3.0 billion to $3.5 billion for the
full year 2018, implying a significant release in 4Q 2018.
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. Deleveraging remains a priority given the
Company's $6 billion net debt target. The Company has resumed dividends
to shareholders in May 2018 and bought-back $0.2 billion of shares in
March 2018. The Company is committed to an increase in shareholder
returns once the Group's net debt target of $6 billion is achieved.
ArcelorMittal Condensed Consolidated Statement of Financial Position(1)
Sep 30, Jun 30, Dec 31,
In millions of U.S. dollars 2018 2018 2017
--------------------------------------- ------- ------- -------
ASSETS
Cash and cash equivalents 2,482 3,100 2,786
Trade accounts receivable and other 4,561 4,839 3,863
Inventories 18,380 17,745 17,986
Prepaid expenses and other current
assets 2,799 2,802 1,931
Assets held for sale(11) 2,587 2,943 179
Total Current Assets 30,809 31,429 26,745
Goodwill and intangible assets 5,329 5,451 5,737
Property, plant and equipment 34,027 34,290 36,971
Investments in associates and joint
ventures 4,863 4,711 5,084
Deferred tax assets 7,487 7,496 7,055
Other assets 3,288 3,587 3,705
Total Assets 85,803 86,964 85,297
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt and current portion
of long-term debt 4,662 4,556 2,785
Trade accounts payable and other 11,797 12,418 13,428
Accrued expenses and other current
liabilities 4,864 4,893 5,147
Liabilities held for sale(11) 722 846 50
Total Current Liabilities 22,045 22,713 21,410
Long-term debt, net of current portion 8,280 8,963 10,143
Deferred tax liabilities 2,483 2,506 2,684
Other long-term liabilities 10,405 10,447 10,205
Total Liabilities 43,213 44,629 44,442
Equity attributable to the equity
holders of the parent 40,590 40,320 38,789
Non-controlling interests 2,000 2,015 2,066
Total Equity 42,590 42,335 40,855
Total Liabilities and Shareholders'
Equity 85,803 86,964 85,297
--------------------------------------- ------- ------- -------
ArcelorMittal Condensed Consolidated Statement of Operations(1)
Nine months
Three months ended ended
In millions of U.S. dollars Sep 30, Jun 30, Sep 30, Sep 30, Sep 30,
unless otherwise shown 2018 2018 2017 2018 2017
Sales 18,522 19,998 17,639 57,706 50,969
Depreciation (B) (653) (712) (690) (2,076) (2,021)
Impairment (B) (509) -- -- (595) (46)
Exceptional charges (B) -- -- -- (146) --
Operating income (A) 1,567 2,361 1,234 5,497 4,200
Operating margin % 8.5% 11.8% 7.0% 9.5% 8.2%
Income from associates,
joint ventures and other
investments 183 30 117 425 323
Net interest expense (152) (159) (205) (475) (635)
Foreign exchange and other
net financing (loss)/
gain (475) (390) 132 (1,039) 209
Income before taxes and
non-controlling interests 1,123 1,842 1,278 4,408 4,097
Current tax expense (206) (240) (116) (730) (449)
Deferred tax benefit /
(expense) 28 259 45 368 (102)
Income tax (expense) /
benefit (178) 19 (71) (362) (551)
Income including non-controlling
interests 945 1,861 1,207 4,046 3,546
Non-controlling interests
(income) / loss (46) 4 (2) (90) (17)
Net income attributable
to equity holders of the
parent 899 1,865 1,205 3,956 3,529
Basic earnings per common
share ($)(2) 0.89 1.84 1.18 3.89 3.46
Diluted earnings per common
share ($)(2) 0.88 1.83 1.18 3.87 3.45
Weighted average common
shares outstanding (in
millions)(2) 1,014 1,013 1,020 1,016 1,020
Diluted weighted average
common shares outstanding
(in millions)(2) 1,019 1,018 1,023 1,021 1,023
OTHER INFORMATION
EBITDA (C = A-B) 2,729 3,073 1,924 8,314 6,267
EBITDA Margin % 14.7% 15.4% 10.9% 14.4% 12.3%
------ ------ ------ ------ ------
Own iron ore production
(Mt) 14.5 14.5 14.2 43.5 42.9
Crude steel production
(Mt) 23.3 23.2 23.6 69.8 70.4
Steel shipments (Mt) 20.5 21.8 21.7 63.6 64.2
--------------------------------- ------ ------ ------ ------ ------
ArcelorMittal Condensed Consolidated Statement of Cash flows(1)
Nine months
Three months ended ended
Sept Sept
Sep 30, Jun 30, Sep 30, 30, 30,
In millions of U.S. dollars 2018 2018 2017 2018 2017
Operating activities:
Income attributable to
equity holders of the
parent 899 1,865 1,205 3,956 3,529
Adjustments to reconcile
net income to net cash
provided by operations:
Non-controlling interests
(loss) / income 46 (4) 2 90 17
Depreciation and impairment 1,162 712 690 2,671 2,067
Exceptional charges(4) -- -- -- 146 --
Income from associates,
joint ventures and other
investments (183) (30) (117) (425) (323)
Deferred tax (benefit)
/ expense (28) (259) (45) (368) 102
Change in working capital (1,713) (1,232) (801) (4,814) (3,530)
Other operating activities
(net) 451 180 (171) 770 (184)
Net cash provided by operating
activities (A) 634 1,232 763 2,026 1,678
Investing activities:
Purchase of property,
plant and equipment and
intangibles (B) (781) (616) (637) (2,149) (1,783)
Other investing activities
(net) 180 60 74 316 (116)
Net cash used in investing
activities (601) (556) (563) (1,833) (1,899)
Financing activities:
Net (payments) / proceeds
relating to payable to
banks and long-term debt (543) 474 587 194 604
Dividends paid (37) (101) (80) (188) (120)
Share buyback -- -- -- (226) --
Other financing activities
(net) (17) (21) 7 (58) (48)
Net cash (used in) / provided
by financing activities (597) 352 514 (278) 436
Net (decrease) / increase
in cash and cash equivalents (564) 1,028 714 (85) 215
Cash and cash equivalents
transferred (to)/from
assets held for sale -- (23) -- (23) 13
Effect of exchange rate
changes on cash (56) (104) 9 (143) 42
Change in cash and cash
equivalents (620) 901 723 (251) 270
Free cash flow (C=A+B) (147) 616 126 (123) (105)
------------------------------- ------ ------ ------ ------ ------
Appendix 1: Product shipments by region
(000'kt) 3Q 18 2Q 18 3Q 17 9M 18 9M 17
Flat 4,885 5,011 4,820 14,707 14,512
Long 774 969 984 2,664 2,658
NAFTA 5,512 5,803 5,655 16,874 16,684
Flat 1,695 1,494 1,766 4,589 4,812
Long 1,415 1,345 1,181 3,855 2,992
Brazil 3,097 2,831 2,940 8,411 7,788
Flat 6,855 7,553 7,098 22,112 21,957
Long 2,798 2,942 2,954 8,701 8,673
Europe 9,709 10,516 10,116 30,922 30,790
CIS 1,879 1,861 2,297 5,606 6,628
Africa 1,102 1,199 1,065 3,468 3,212
ACIS 2,986 3,057 3,362 9,072 9,840
--------- ----- ------ ------ ------ ------
Note: "Others and eliminations" are not presented in the table
Appendix 2a: Capital expenditures
(USDm) 3Q 18 2Q 18 3Q 17 9M 18 9M 17
NAFTA 155 110 95 425 282
Brazil 59 36 79 142 191
Europe 298 226 213 837 713
ACIS 141 117 114 375 262
Mining 116 119 132 342 316
Total 781 616 637 2,149 1,783
------- ----- ----- ----- ----- -----
Note: "Others and eliminations" 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 capital expenditures.
Completed projects in most recent quarter
Segment Site / unit Project Capacity / details Actual
completion
Europe ArcelorMittal Modernisation Revamp finishing to 2Q 2018
Differdange of finishing achieve full capacity
(Luxembourg) of "Grey rolling of Grey mill at 850kt/y
mill"
Europe Gent & Liège Gent: Upgrade Increase 400kt in 2Q 2018
(Europe Flat HSM and new Ultra High Strength
Automotive UHSS furnace Steel capabilities
Program) Liège:
Annealing line
transformation
------- ----------------- ----------------- ------------------------ -----------
Ongoing projects
Segment Site / unit Project Capacity / details Forecasted
completion
NAFTA Indiana Harbor Indiana Harbor Restoration of 80" 2018(a)
(US) "footprint optimization HSM and upgrades at
project" Indiana Harbor finishing
ACIS ArcelorMittal New LF&CC 2&3 Facilities upgrade 2019
Kryvyi Rih (Ukraine) to switch from ingot
to continuous caster
route. Additional
billets of 290kt over
ingot route through
yield increase
Europe Sosnowiec (Poland) Modernization Upgrade rolling technology 2019
of Wire Rod improving the mix
Mill of HAV products and
increase volume by
90kt
NAFTA Mexico Build new HSM Production capacity 2020(b)
of 2.5Mt/year
NAFTA ArcelorMittal Hot Strip Mill Replace existing three 2020(c)
Dofasco (Canada) Modernization end of life coilers
with two states of
the art coilers and
new runout tables.
NAFTA Burns Harbor New Walking Two new walking beam 2021
(US) Beam Furnaces reheat furnaces bringing
benefits on productivity,
quality and operational
cost
Brazil ArcelorMittal Expansion project Increase hot dipped 2021(d)
Vega Do Sul / cold rolled coil
capacity and construction
of a new 700kt continuous
annealing line (CAL)
and continuous galvanising
line (CGL) combiline
Brazil Juiz de Fora Melt shop expansion Increase in meltshop On hold(e)
capacity by 0.2Mt/year
Brazil Monlevade Sinter plant, Increase in liquid On hold
blast furnace steel capacity by
and melt shop 1.2Mt/year;
Sinter feed capacity
of 2.3Mt/year
Mining Liberia Phase 2 expansion Increase production Under
project capacity to 15Mt/year review(f)
------- --------------------- ------------------------ --------------------------- -----------
a) In support of the Company's Action 2020 program that was launched
at its fourth quarter and full-year 2015 earnings announcement, the
footprint optimization project at ArcelorMittal Indiana Harbor is now
complete, which has resulted in structural changes required to improve
asset and cost optimization. The plan involved idling redundant
operations including the #1 aluminize line, 84" hot strip mill (HSM),
and #5 continuous galvanizing line (CGL) and No.2 steel shop (idled in
2Q 2017) whilst making further planned investments totalling $200
million including a new caster at No.3 steel shop (completed in 4Q 2016),
restoration of the 80" hot strip mill and Indiana Harbor finishing are
ongoing. The full project scope is expected to be completed in 2018.
b) On September 28, 2017, ArcelorMittal announced a major US$1 billion,
three-year investment programme at its Mexican operations, which is
focussed on building ArcelorMittal Mexico's downstream capabilities,
sustaining the competitiveness of its mining operations and modernising
its existing asset base. The programme is designed to enable
ArcelorMittal Mexico to meet the anticipated increased demand
requirements from domestic customers, realise in full ArcelorMittal
Mexico's production capacity of 5.3 million tonnes and significantly
enhance the proportion of higher added-value products in its product mix,
in-line with the Company's Action 2020 plan. The main investment will be
the construction of a new hot strip mill. Construction will take
approximately three years and, upon completion, will enable
ArcelorMittal Mexico to produce c. 2.5 million tonnes of flat rolled
steel, long steel c. 1.8 million tonnes 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 project commenced
late 4Q 2017 and is expected to be completed in the second quarter of
2020. The Company expects capital expenditures of approximately $350
million with respect to this programme in 2018.
c) Investment in ArcelorMittal Dofasco (Canada) to modernise 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 expected to be
completed in 2020.
d) In August 2018, ArcelorMittal announced the resumption of the Vega
Do Sul expansion to provide an additional 700kt of cold-rolled annealed
and galvanised capacity to serve the growing domestic market. The
three-year investment programme to increase rolling capacity with
construction of a new CAL 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.
e) Although the Monlevade wire rod expansion project and Juiz de Fora
rebar expansion were completed in 2015, the Juiz de Fora melt shop
project is currently on hold and is expected to be completed upon Brazil
domestic market recovery.
f) ArcelorMittal Liberia has moved ore extraction from its depleting
DSO (direct shipping ore) deposit at Tokadeh to the nearby, lower
impurity DSO Gangra deposit with planned production of 5Mt in 2018. The
Gangra mine, haul road and related existing plant and equipment upgrades
have now been completed. Following a period of exploration cessation
caused by the onset of Ebola, ArcelorMittal Liberia recommenced drilling
for DSO resource extensions in late 2015. During 2016, the operation at
Tokadeh was right-sized to focus on its "natural" Atlantic markets. The
originally planned phase 2 project of 15Mtpa of concentrate sinter fine
ore product was delayed in August 2014 due to the declaration of force
majeure by contractors following the Ebola virus outbreak, and then
reassessed following rapid iron ore price declines over the ensuing
period since.
Now that mining at the Gangra deposit has commenced, ArcelorMittal
Liberia has launched a feasibility study to identify the optimal
concentration solution in a phased approach for utilising the
significant lower grade resources at Tokadeh. The results of the
feasibility study are expected at the end of 2018.
ArcelorMittal remains committed to Liberia where it operates a full
value chain of mine, rail and port and where it has been operating the
mine on a DSO basis since 2011. The Company believes that ArcelorMittal
Liberia presents a strong, competitive source of product ore for the
international market based on continuing DSO mining and subsequent shift
to a high grade, long-term sinter feed concentration phase.
Appendix 3: Debt repayment schedule as of September 30, 2018
(USD billion) 2018 2019 2020 2021 2022 >=2023 Total
Bonds -- 0.9 1.9 1.3 1.5 2.2 7.8
Commercial paper 1.0 0.5 -- -- -- -- 1.5
Other loans 1.6 0.8 0.2 0.4 0.2 0.5 3.7
Total gross debt 2.6 2.2 2.1 1.7 1.7 2.7 13.0
----------------- ---- ---- ---- ---- ---- ------ -----
Appendix 4: Reconciliation of gross debt to net debt
Sep 30, Jun 30, Dec 31,
(USD million) 2018 2018 2017
Gross debt 12,942 13,519 12,928
Gross debt held as part of the liabilities
held for sale 79 82 --
Gross debt (including those held
as part of the liabilities held for
sale) 13,021 13,601 12,928
Less:
Cash and cash equivalents (2,482) (3,100) (2,786)
Cash and cash equivalents held as
part of the assets held for sale (23) (23) --
Net debt (including those held as
part of the assets and the liabilities
held for sale) 10,516 10,478 10,142
------------------------------------------- ------ ------ ------
Appendix 5: 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.
EBITDA: operating income plus depreciation, impairment expenses and
exceptional income/ (charges).
EBITDA/tonne: calculated as EBITDA divided by total steel shipments.
Exceptional 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) / gain: include foreign
currency exchange impact, bank fees, interest on pensions, impairments
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 (used in) operating
activities less capex.
Gross debt: long-term debt, plus short-term debt.
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
Market-priced tonnes: represent amounts of iron ore and coal from
ArcelorMittal mines that could be sold to third parties on the open
market. Market-priced tonnes that are not sold to third parties are
transferred from the Mining segment to the Company's steel producing
segments and reported at the prevailing market price. Shipments of raw
materials that do not constitute market-priced tonnes are transferred
internally and reported on a cost-plus basis.
Mining segment sales: i) "External sales": mined product sold to third
parties at market price; ii) "Market-priced tonnes": internal sales of
mined product to ArcelorMittal facilities and reported at prevailing
market prices; iii) "Cost-plus tonnes" - internal sales of mined product
to ArcelorMittal facilities on a cost-plus basis. The determinant of
whether internal sales are reported at market price or cost-plus is
whether the raw material could practically be sold to third parties
(i.e. there is a potential market for the product and logistics exist to
access that market).
Net debt: long-term debt, plus short-term debt less cash and cash
equivalents (including those held as part of assets and liabilities held
for sale).
Net debt/EBITDA: refers to Net debt divided by last twelve months EBITDA
calculation.
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 USA, Canada and Mexico. The Brazil segment includes the
Flat, Long and Tubular operations of Brazil and its neighboring
countries including Argentina, Costa Rica and Venezuela. The Europe
segment comprises the Flat, Long and Tubular operations of the European
business, as well as Downstream Solutions. The ACIS segment includes the
Flat, Long and Tubular operations of Kazakhstan, Ukraine and South
Africa. Mining segment includes iron ore and coal operations.
Own iron ore production: includes total of all finished production of
fines, concentrate, pellets and lumps and includes share of production
(excludes strategic long-term contracts).
PMI: refers to purchasing managers index (based on ArcelorMittal
estimates)
Seaborne 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.
Steel-only EBITDA: calculated as Group EBITDA less Mining segment
EBITDA.
Steel-only EBITDA/tonne: calculated as steel-only EBITDA divided by
total steel shipments.
Working capital change (working capital investment / release): trade
accounts receivable plus inventories less trade and other accounts
payable.
YoY: refers to year-on-year.
Footnotes
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 measures 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 change in working capital as additional measures to enhance the
understanding of its financial position, changes to its capital structure
and its credit assessment. The Company's guidance as to its working
capital investment (or the change in working capital included in net cash
provided by operating activities) for the full year 2018 is based on the
same accounting policies as those applied in the Company's financial
statements prepared in accordance with IFRS. 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. At the Extraordinary General Meeting held on May 10, 2017, the
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).
3. On April 20, 2018, following the approval by the Brazilian antitrust
authority - CADE of the combination of ArcelorMittal Brasil's and
Votorantim's long steel businesses in Brazil subject to the fulfilment of
divestment commitments, ArcelorMittal Brasil agreed to dispose of its two
production sites of Cariacica and Itaúna, as well as some wire
drawing equipment of ArcelorMittal Brasil and ArcelorMittal
Sul-Fluminense. The sale was completed early May 2018 to the Mexican
Group Simec S.A.B. de CV. A second package of some wire drawing equipment
of ArcelorMittal Brasil and ArcelorMittal Sul-Fluminense were sold to the
company Aço Verde do Brasil as part of CADE's conditional approval.
4. In July 2018, as a result of a settlement process, the Company and the
German Federal Cartel Office agreed to a EUR118 million ($146 million)
fine to be paid by ArcelorMittal Commercial Long Deutschland GmbH ending
an investigation that began in the first half of 2016 into antitrust
violations as concerns the ArcelorMittal entities that has been under
investigation. The payment was made in August 2018.
5. On August 7, 2017, ArcelorMittal USA and Cliffs Natural Resources
("Cliffs") agreed that Cliffs would acquire ArcelorMittal USA's 21%
ownership interest in the Empire Iron Mining Partnership for $133 million
plus assumptions of all partnership liabilities. The payment of $133
million will be made in 3 equal installments with the first payment of
$44 million received in August 2017, the second payment received in
August 2018 and the final payments to be received in 2019.
6. On January 27, 2017 China Oriental completed a share placement to restore
the minimum 25% free float as per HKEx listing requirements. Following
the share placement, ArcelorMittal's interest in China Oriental decreased
from 47% to 39%, as a result of which ArcelorMittal recorded a net
dilution loss of $44 million.
7. On August 25, 2017, following a sales agreement signed on October 21,
2016, ArcelorMittal completed the sale of its 50% shareholding in
Kalagadi Manganese (Proprietary) Limited to Kgalagadi Alloys
(Proprietary) Limited for consideration to be paid during the life of the
mine, which is contingent on the financial performance of the mine and
cash flow availability. The investment classified as held for sale as of
December 31, 2016 had a nil carrying amount as it was fully impaired in
2015 but the Company recycled upon disposal accumulated foreign exchange
translation losses of $187 million in income from associates, joint
ventures and other investments.
8. Following the May 16, 2018 approval of the Extraordinary General Meeting
to convert the share capital of the ArcelorMittal parent company from
Euro to US dollar, the Euro denominated tax losses and the related
deferred tax asset (DTA) held by the ArcelorMittal parent company were
translated into US dollars. The Company designated its euro denominated
debt as a hedge of certain euro denominated net investments in foreign
operations. Following this change, periodic revaluations of such external
euro-denominated debt are recorded in other comprehensive income rather
than the statement of operations. The conversion of the euro denominated
DTA was effective as of January 1, 2018, whilst the impacts on euro
denominated debt has been applied prospectively from April 1, 2018. As a
result, the Company's statement of operations no longer has foreign
exchange exposure to euro denominated debt and DTA.
9. ArcelorMittal Mines Canada, otherwise known as ArcelorMittal Mines and
Infrastructure Canada.
10. On December 21, 2016, ArcelorMittal signed an agreement for a $5.5
billion revolving credit facility (the "Facility"). The agreement
incorporates a first tranche of $2.3 billion maturing on December 21,
2019, and a second tranche of $3.2 billion maturing on December 21, 2021.
The Facility may be used for general corporate purposes. As of September
30, 2018, the $5.5 billion revolving credit facility was fully available.
11. Assets and liabilities held for sale, as of September 30, 2018 and June
30, 2018, include the Ilva remedy package assets (as previously disclosed
in the 2Q 2018 earnings release), Macsteel investment (South Africa) and
carrying value of the USA long product facilities at Steelton
("Steelton"). Assets and liabilities held for sale, as of December 31,
2017, include the carrying value of Steelton and Frydek Mistek assets in
Czech Republic (which was sold in 1Q 2018).
12. Converted with the rate of 73.2 Indian rupees / $1
Third quarter 2018 earnings analyst conference call
ArcelorMittal management (including CEO and CFO) will host a conference
call for members of the investment community to discuss the third
quarter period ended September 30, 2018 on: Thursday November 1, 2018 at
10.30am US Eastern time; 2.30pm London time and 3.30pm CET.
The dial in numbers are:
-----------------------------------
Toll free dial Local dial in
Location in numbers numbers Participant
------------------
+44 (0)203 364
UK local: 0800 0515 931 5807 72199342#
------------------
US local: 1 86 6719 2729 +1 24 0645 0345 72199342#
------------------
US (New York): 1 86 6719 2729 + 1 646 663 7901 72199342#
------------------
France: 0800 914780 +33 1 7071 2916 72199342#
------------------
Germany: 0800 965 6288 +49 692 7134 0801 72199342#
------------------
Spain: 90 099 4930 +34 911 143436 72199342#
------------------
Luxembourg: 800 26908 +352 27 86 05 07 72199342#
------------------- ------------------ ------------------ ---------------
A replay of the conference call will be available for
one week by dialing: +49 (0) 1805 2047 088; Access
code 522468#
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 an industrial footprint in 18 countries.
Guided by a philosophy to produce safe, sustainable steel, we are the
leading supplier of quality steel in the major global steel markets
including automotive, construction, household appliances and packaging,
with world-class research and development and outstanding distribution
networks.
Through our core values of sustainability, quality and leadership, we
operate responsibly with respect to the health, safety and wellbeing of
our employees, contractors and the communities in which we operate. For
us, steel is the fabric of life, as it is at the heart of the modern
world from railways to cars and washing machines. We are actively
researching and producing steel-based technologies and solutions that
make many of the products and components people use in their everyday
lives more energy efficient.
We are one of the world's five largest producers of iron ore and
metallurgical coal. With a geographically diversified portfolio of iron
ore and coal assets, we are strategically positioned to serve our
network of steel plants and the external global market. While our steel
operations are important customers, our supply to the external market is
increasing as we grow. In 2017, ArcelorMittal had revenues of $68.7
billion and crude steel production of 93.1 million metric tonnes, while
own iron ore production reached 57.4 million metric tonnes.
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:
https://www.globenewswire.com/Tracker?data=EgmiTFlRtUMy15eOBu6KU4URTyGSwtOrZ2_Z4YNwr5BqTTdMP28waD7r2UbsZzs9cH_z7-8NAt5JvdUit-fMAd5q8II56n6nvRQbsuO_KNI1MO4Op5ZFNTtt97GUDPtL
http://corporate.arcelormittal.com/
Enquiries
ArcelorMittal investor relations: Europe: +44 207 543 1128; Americas: +1
312 899 3985; Retail: +44 207 543 1156; SRI: +44 207 543 1156 and
Bonds/credit: +33 1 71 92 10 26.
ArcelorMittal corporate communications (E-mail:
https://www.globenewswire.com/Tracker?data=K3TVSxl1_xxgLpau7MeWA1ZSFn13kE-4HS51aL7x3jKhbD1thLpP4aYmvqmtiem0-WnswT0J5-6rtk2dukZbSgF_SAC15y6Hdsh0rs8__FA=
press@arcelormittal.com) +44 0207 629 7988. Contact: Paul Weigh +44 203
214 2419; France Tel: +33 153 70 94 17.
Attachment
-- ArcelorMittal reports third quarter 2018 and nine months 2018 results
https://prlibrary-eu.nasdaq.com/Resource/Download/bed824ec-1656-4f50-848b-9acbae0afaea
(END) Dow Jones Newswires
November 01, 2018 02:15 ET (06:15 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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