ArcelorMittal(MT) - 2024 Q2 - Quarterly Report

Report Highlights Q2 2024 Key Highlights ArcelorMittal reported resilient Q2 2024 results with $1.9 billion EBITDA, $0.5 billion net income, and $5.2 billion net debt Q2 2024 Key Financial and Operational Metrics | Metric | Value | Quarter | Note | | :--- | :--- | :--- | :--- | | EBITDA | $1.9 billion | 2Q 2024 | vs. $2.0 billion in 1Q 2024 | | EBITDA/tonne | $134/tonne | 2Q 2024 | Reflects structural improvements | | Steel Shipments | +3.2% | 2Q 2024 | vs. 1Q 2024 | | Net Income | $0.5 billion | 2Q 2024 | vs. $0.9 billion in 1Q 2024, impacted by non-cash mark-to-market on Vallourec shares | | Net Debt | $5.2 billion | End of Q2 | Gross debt of $11.1 billion, Cash of $5.9 billion | | LTIF Rate | 0.57 | 2Q 2024 | Improved safety performance | - Over the past 12 months, the company generated $2.6 billion in investable cash flow, investing $1.5 billion in strategic growth projects and returning $1.8 billion to shareholders[2] Strategic Objectives Progress The company advances strategic objectives via organic growth, portfolio optimization, and shareholder returns, with projects adding $1.8 billion EBITDA potential by 2026 and share count reduced by 36% since 2020 - Strategic growth projects are estimated to add $1.8 billion to the Company's EBITDA potential by the end of 2026. Key projects nearing completion include Calvert EAF (US), Serra Azul (Brazil), electrical steel (France), and capacity expansion in Liberia[3] - The Sustainable Solutions segment is progressing towards doubling its EBITDA in the next 5 years. The acquisition of Italpannelli and the investment in Vallourec are estimated to add a further $0.2 billion to EBITDA potential in 2025[3] - The company maintains a commitment to shareholder returns, with a base dividend of $0.50/share in 2024 and a policy to return a minimum of 50% of post-dividend free cash flow through share buybacks. The fully diluted share count has been reduced by 36% since September 2020[3] CEO Commentary - CEO Aditya Mittal highlighted good progress in H1 2024, emphasizing the near completion of a comprehensive safety audit which will be instrumental in achieving safety goals[6] - Strategic growth projects and recent acquisitions have an estimated potential to increase EBITDA by $2.0 billion, with several projects like Vega CMC and the India renewables project now coming online[7] - Demand for low-carbon steel products like XCarb® is growing, and the company is expanding its climate solutions portfolio with new brands like HyMatch® for hydrogen pipelines and acquisitions in the insulation panel market[8] - Financial performance in Q2 was similar to Q1, reflecting subdued economic sentiment. However, low inventory levels are expected to support apparent steel demand growth ex-China of 2.5% to 3% this year[9] Safety and Sustainable Development Health and Safety Employee health and safety remain top priority, with an improved LTIF rate of 0.57 in Q2 2024 and a comprehensive safety audit nearing completion Lost Time Injury Frequency (LTIF) Rate | LTIF Rate | 2Q 24 | 1Q 24 | 2Q 23 | | :--- | :--- | :--- | :--- | | Total | 0.57 | 0.61 | 0.73 | - A company-wide safety audit by dss+ is progressing on schedule, covering fatality prevention, process risk management, and safety governance. The groundwork, completed in July, included 155 onsite audits, 14 risk assessments, and ~300 interviews with leadership and personnel[11][15] Sustainable Development ArcelorMittal advances decarbonization with new EAF and 1GW renewables, expanding low-carbon products like HyMatch® and aiming to double XCarb® sales in 2024 - Construction has started on a 1.1 million tonne Electric Arc Furnace (EAF) at the Gijón plant in Spain, a key part of the European decarbonization program[16] - The 1GW renewables project in India has begun commissioning, which will supply over 20% of the AMNS India Hazira plant's energy needs[16] - The company launched the HyMatch® steel brand for hydrogen transport pipelines and acquired Italpannelli to expand its exposure to insulation panels for low-carbon buildings[17] - Sales of XCarb® recycled and renewably produced (RRP) low-carbon steel products are on track to double in 2024 compared to 2023[17] Financial Performance Analysis H1 2024 vs H1 2023 Analysis ArcelorMittal's H1 2024 performance declined, with sales down 12.3% to $32.5 billion, EBITDA down 25.7% to $3.8 billion, and a $1.3 billion free cash outflow H1 2024 vs H1 2023 Financial Summary | Metric | 1H 2024 | 1H 2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $32.5 billion | $37.1 billion | -12.3% | | Operating Income | $2.1 billion | $3.1 billion | -32.1% | | EBITDA | $3.8 billion | $5.1 billion | -25.7% | | Net Income | $1.4 billion | $3.0 billion | -51.2% | | Basic EPS | $1.80 | $3.47 | -48.1% | - The decline in performance was driven by a negative price-cost effect from lower steel selling prices and reduced shipment volumes, including the impact of an illegal blockade at Mexican operations[19][20] - Net debt increased to $5.2 billion from $2.9 billion at year-end 2023, following a $1.3 billion free cash outflow which included a $1.6 billion working capital investment and $1.1 billion in shareholder returns[22] Q2 2024 vs Q1 2024 Analysis Q2 2024 sales were stable at $16.2 billion, but EBITDA decreased 4.8% to $1.9 billion, with net income falling to $504 million due to non-cash items Q2 2024 vs Q1 2024 Financial Summary | Metric | 2Q 2024 | 1Q 2024 | Change | | :--- | :--- | :--- | :--- | | Sales | $16.2 billion | $16.3 billion | -0.2% | | Operating Income | $1.0 billion | $1.1 billion | -2.4% | | EBITDA | $1.9 billion | $2.0 billion | -4.8% | | Net Income | $0.5 billion | $0.9 billion | -46.3% | | Basic EPS | $0.63 | $1.16 | -45.7% | - The decrease in EBITDA was primarily due to weaker results in North America, India, and the Mining segment, partially offset by improved performance in Europe[24] - Net income was significantly impacted by a non-cash mark-to-market loss of $173 million on Vallourec shares, reversing a gain of $181 million from the previous quarter[25] Segment Performance Analysis North America North America's Q2 2024 performance was severely impacted by a Mexican blockade, resulting in a 33.7% EBITDA decrease to $467 million and 0.4 million tonnes volume loss North America Segment Performance | Metric (million USD) | 2Q 24 | 1Q 24 | Change | | :--- | :--- | :--- | :--- | | Sales | 3,162 | 3,347 | -5.5% | | EBITDA | 467 | 705 | -33.7% | | Steel Shipments (kilotonnes) | 2,468 | 2,796 | -11.7% | - An illegal blockade at the Lázaro Cárdenas plant in Mexico, which began on May 24, 2024, caused the company to halt its blast furnace and mining operations. This resulted in an estimated loss of ~0.4 million tonnes in volume and ~$0.1 billion in EBITDA for Q2 2024[31] Brazil Brazil's segment EBITDA increased 4.3% to $413 million in Q2 2024, driven by a strong 14.4% rise in steel shipments Brazil Segment Performance | Metric (million USD) | 2Q 24 | 1Q 24 | Change | | :--- | :--- | :--- | :--- | | Sales | 3,243 | 3,051 | +6.3% | | EBITDA | 413 | 396 | +4.3% | | Steel Shipments (kilotonnes) | 3,637 | 3,180 | +14.4% | Europe Europe's segment EBITDA recovered significantly in Q2 2024, increasing 34.8% to $462 million due to positive price-cost effects and higher shipments Europe Segment Performance | Metric (million USD) | 2Q 24 | 1Q 24 | Change | | :--- | :--- | :--- | :--- | | Sales | 7,822 | 7,847 | -0.3% | | EBITDA | 462 | 343 | +34.8% | | Steel Shipments (kilotonnes) | 7,407 | 7,236 | +2.4% | - The increase in operating income and EBITDA was primarily due to a positive price-cost effect, as lower costs offset the decline in average steel selling prices[38] India and JVs Income from India and JVs decreased to $181 million in Q2 2024, mainly due to lower contributions from AMNS India and Calvert - Income from associates, joint ventures, and other investments was $181 million in Q2 2024, down from $242 million in Q1 2024, mainly due to lower contributions from AMNS India and Calvert[40] AMNS India AMNS India's EBITDA declined to $237 million in Q2 2024 due to negative price-cost effects and a 6.2% reduction in shipments AMNS India Performance (100% basis) | Metric (100% basis) | 2Q 24 | 1Q 24 | Change | | :--- | :--- | :--- | :--- | | Sales (million USD) | 1,580 | 1,815 | -12.9% | | EBITDA (million USD) | 237 | 312 | -24.0% | | Shipments (kilotonnes) | 1,892 | 2,016 | -6.2% | Calvert Calvert's EBITDA decreased 11.6% sequentially to $166 million in Q2 2024, primarily due to a negative price-cost effect Calvert Performance (100% basis) | Metric (100% basis) | 2Q 24 | 1Q 24 | Change | | :--- | :--- | :--- | :--- | | Sales (million USD) | 1,244 | 1,236 | +0.6% | | EBITDA (million USD) | 166 | 188 | -11.6% | | Shipments (kilotonnes) | 1,145 | 1,131 | +1.2% | Sustainable Solutions Sustainable Solutions segment EBITDA increased 36.6% to $95 million in Q2 2024, driven by seasonal strength and strategic project advancements Sustainable Solutions Segment Performance | Metric (million USD) | 2Q 24 | 1Q 24 | Change | | :--- | :--- | :--- | :--- | | Sales | 2,891 | 2,889 | +0.1% | | EBITDA | 95 | 70 | +36.6% | - The 1GW India renewables project has begun commissioning and is expected to add $0.1 billion to Group EBITDA after full ramp-up[49] - The acquisition of Italpannelli's Italian and Spanish businesses was completed, doubling ArcelorMittal Construction's panel capacity and providing access to new markets[50] Mining Mining segment EBITDA fell 30.4% to $216 million in Q2 2024, due to lower iron ore prices and reduced shipments from Canadian wildfires Mining Segment Performance | Metric (million USD) | 2Q 24 | 1Q 24 | Change | | :--- | :--- | :--- | :--- | | Sales | 641 | 729 | -12.1% | | EBITDA | 216 | 311 | -30.4% | | Iron Ore Production (million tonnes) | 5.9 | 6.5 | -9.2% | - Performance was driven down by lower iron ore reference prices and reduced shipment volumes. Production was impacted by wildfires in Canada and maintenance activities[52] Outlook - The company believes current market conditions, characterized by low steel spreads and aggressive exports from China, are unsustainable. With low inventory levels, particularly in Europe, a rebound in apparent demand is expected once real demand recovers[4][56] - The forecast for 2024 World ex-China apparent steel consumption (ASC) growth has been revised down to a range of +2.5% to +3.0% from the previous +3.0% to +4.0%[56] 2024 Apparent Steel Consumption Growth Forecast by Region | Region | 2024 Apparent Steel Consumption Growth Forecast | Previous Forecast | | :--- | :--- | :--- | | US (Flat) | +1.0% to +3.0% | +1.5% to +3.5% | | Europe (Flat) | +0.0% to +2.0% | +2.0% to +4.0% | | Brazil | +1.0% to +3.0% | +0.5% to +2.5% | | India | +7.5% to +9.5% | +6.5% to +8.5% | | China | -1.0% to +1.0% | +0.0% to +2.0% | - Capex for 2024 is expected to be within the $4.5-$5.0 billion range, including $1.4-$1.5 billion for strategic growth projects[4][58] - The company anticipates a reversal of the $1.6 billion working capital investment from H1 2024 by year-end, which will support free cash flow generation[4] Financial Statements Condensed Consolidated Statements of Financial Position ArcelorMittal's total assets were $90.8 billion as of June 30, 2024, with total liabilities at $36.5 billion and net debt at $5.2 billion Condensed Consolidated Statements of Financial Position | (In millions of U.S. dollars) | Jun 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | 31,008 | 33,240 | | Total Assets | 90,847 | 93,917 | | Total Current Liabilities | 20,306 | 21,769 | | Total Liabilities | 36,548 | 37,849 | | Total Equity | 54,299 | 56,068 | | Total Liabilities and Shareholders' Equity | 90,847 | 93,917 | Condensed Consolidated Statements of Operations Q2 2024 sales were $16.2 billion, with net income of $504 million; H1 2024 sales reached $32.5 billion, net income $1.4 billion Condensed Consolidated Statements of Operations | (In millions of U.S. dollars) | Three months ended Jun 30, 2024 | Six months ended Jun 30, 2024 | | :--- | :--- | :--- | | Sales | 16,249 | 32,531 | | Operating income | 1,046 | 2,118 | | Net income attributable to equity holders | 504 | 1,442 | | Basic earnings per common share ($) | 0.63 | 1.80 | | EBITDA | 1,862 | 3,818 | Condensed Consolidated Statements of Cash Flows H1 2024 net cash from operations was $973 million, down from $3.0 billion, resulting in a $1.3 billion free cash outflow after $2.2 billion capex Condensed Consolidated Statements of Cash Flows | (In millions of U.S. dollars) | Six months ended Jun 30, 2024 | Six months ended Jun 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | 973 | 3,036 | | Purchase of property, plant and equipment | (2,221) | (1,998) | | Net cash used in investing activities | (2,004) | (3,884) | | Net cash used by financing activities | (546) | (2,839) | | Free cash flow | (1,332) | 973 | Supplementary Information Capital Expenditures and Strategic Projects H1 2024 capital expenditures totaled $2.2 billion, supporting key strategic growth projects expected to significantly contribute to future EBITDA Capital Expenditures by Segment | Capex by Segment (million USD) | 1H 2024 | 1H 2023 | | :--- | :--- | :--- | | North America | 211 | 237 | | Brazil | 414 | 382 | | Europe | 718 | 633 | | Sustainable Solutions | 240 | 139 | | Mining | 497 | 372 | | Total | 2,221 | 1,998 | - Recently completed projects include the ArcelorMittal Vega Do Sul expansion in Brazil and the commissioning of the 1GW renewables project in India, together expected to contribute $0.2 billion to EBITDA[64] - Ongoing strategic projects, such as the Liberia mine expansion and AMNS India debottlenecking, are forecasted to be completed between 2H 2024 and 2H 2026[65] Debt Profile As of June 30, 2024, ArcelorMittal's gross debt was $11.1 billion and net debt $5.2 billion, with an average maturity of 6.9 years and a 0.7x Net debt to LTM EBITDA ratio Gross Debt Maturity Profile | (USD billion) | 2024 | 2025 | 2026 | 2027 | ≥2028 | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total gross debt | 1.6 | 1.8 | 1.3 | 1.9 | 4.5 | 11.1 | Net Debt Reconciliation | (million USD) | Jun 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Gross debt | 11,127 | 10,681 | | Cash and cash equivalents | (5,903) | (7,783) | | Net debt | 5,224 | 2,898 | - The average debt maturity as of June 30, 2024, is 6.9 years[66]