Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ArcelorMittal SA (MT, Financial) has shown resilience in financial performance despite macro and micro challenges, with EBITDA per ton of $140 in the first half of 2024.
- The company has a strong balance sheet, enabling a focus on strategic execution and growth projects.
- Significant investments in strategic growth projects, including upstream resources and high-growth markets like India, are expected to provide structural upside to EBITDA and cash flows.
- ArcelorMittal SA (MT) has consistently returned capital to shareholders, with $1.1 billion returned through buybacks and dividends in the first half of 2024.
- The company is making progress in safety improvements, with a safety audit on track to be finalized this quarter.
Negative Points
- The European market remains challenging with declining real demand, and the company has revised downwards its apparent steel consumption forecast for Europe for 2024.
- Prices in the US have come down significantly, which could impact profitability.
- The company faces ongoing challenges in Ukraine, including power availability and logistics issues.
- The macroeconomic climate remains uncertain, affecting the company's ability to predict future performance accurately.
- There are concerns about the sustainability of current steel spreads, with prices eating into the cost curve.
Q & A Highlights
Q: How do you see the business developing for your Europe division over the next quarter, and what does that mean for your Q3?
A: The market backdrop in Europe is challenging with declining real demand. However, we expect apparent steel consumption to be at least flat or slightly positive. For Q3, we anticipate normal seasonality without extraordinary changes. In the US, prices have come down significantly, but we expect a rebalancing.
Q: When should we expect an update on the synergies from the Vallourec acquisition?
A: The deal should close in Q3. Post-acquisition, we will focus on supporting Vallourec's management and exploring potential synergies. We will provide more details once we are actively involved with Vallourec's board.
Q: How do you plan to manage the impact of the blast furnace restart in Mexico and the performance of other divisions like Ukraine and South Africa?
A: The plant operations in Mexico are up and running, but the blast furnace will take about two months to restart. Ukraine performed well in Q2 despite challenges, and we expect some restocking in Europe for the year.
Q: What are your thoughts on the new trade barriers in Brazil and their impact on your business?
A: The new quotas should provide some support, but more needs to be done to address the high levels of imports. We have adjusted our production to meet demand and believe the trade measures will help stabilize the market.
Q: Can you provide an update on your decarbonization CapEx plans for 2025?
A: We do not expect a material step-up in CapEx related to decarbonization projects in 2025. Our focus remains on completing engineering studies and securing government support to ensure these projects are cost-competitive.
Q: How do you plan to manage your net debt and free cash flow in the second half of the year?
A: We expect to be free cash flow positive in the second half, with a reversal of working capital investments. Net debt will increase in Q3 due to the Vallourec acquisition but should come down by year-end, maintaining a strong balance sheet.
Q: What is the impact of low-cost imports from China on your India JV, and how is the Indian government responding?
A: The Indian government is aware of the challenges posed by low-cost imports from China and is focused on supporting the domestic industry. We expect protectionist measures to be introduced to ensure the industry can continue to develop.
Q: What are the key drivers for the expected 10 million tonne increase in iron ore production in 2025?
A: The key drivers include better volume performance in the second half of 2024, the ramp-up of Liberia's production, and the Sorriso asset. We expect a significant step-up in volume from Liberia in 2025.
Q: How do you plan to manage your European flat footprint and the potential need for blast furnace closures?
A: We are currently running all furnaces except one in Fos. We will adjust capacity based on demand and have the flexibility to reduce capacity if needed. However, we do not see the need for major maintenance or closures at this time.
Q: What is the expected impact of the strategic projects commissioned in the second half on EBITDA?
A: We expect some positive impact in the second half from the Vankor project in Brazil and the India renewables commissioning. This will significantly accelerate in 2025, contributing to a $500 million incremental benefit from strategic projects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
