Arcelormittal SA

Good afternoon, everyone. This is Daniel Fairclough from the ArcelorMittal Investor Relations team. Thank you for joining this call to discuss ArcelorMittal's performance and progress in 2024. Present on the call today, we have our CEO, Aditya Mittal, and our CFO, Germino Cristino. Before we begin, I would like to mention a few housekeeping items. As usual, we will not be going through the results presentation, which we published this morning on our website. However, I do want to draw your attention to the disclaimers on slide 23 of that presentation. Following some opening remarks from Aditya and Jermino, we will move directly to the Q&A session. So if you would like to ask a question, then please do press star 1 1 on your keypad to join the queue. So that instruction is star 1 1 to join the Q&A queue. And with that, I will hand over the call to Aditya.

Thanks, Daniel. Welcome everyone and thank you for joining today's call. Before I ask Jenrino to comment on our financial performance, I want to spend a moment reviewing the progress we have made against our priorities. First, I want to talk about safety. Across the company, our people are galvanized to improve our safety performance and achieve our goal of being fatality and injury free. saw the completion of the DSS Plus group-wide safety audit and the recommendations which focus on our risk management processes and establishing a consistent safety-first culture across all group operations. I'm determined that we improve our safety performance this year and believe the detailed unit-specific roadmaps developed from the audit will support our efforts to do so. Reflecting on our strategic progress in 2024, we have achieved a great deal. We have faced challenges. As we all know, the cycle has not been in our favor. Yet despite those headwinds, we have delivered resilient results. Two billion of investable cash flow generation in this environment speaks to the progress we have made as a company. This has allowed us to invest counter cyclically and reward our shareholders at the same time. Everyone at Arsura Mittal should take pride in this. Growth is an increasingly important theme for Arsura Mittal. This year, we will start to see the benefits of the organic investments we have been making over the last few years. The expected structural EBITDA impact from our portfolio of high-return strategic projects now stand at 1.9 billion. 400 million of this is due to be captured in 2025 with a further $600 million due in 2026. Our recently completed projects, the Vega coal mill complex in Brazil, the new hot strip mill in Mexico, and the one gigawatt renewable project in India are performing well. The fact that these projects are delivering new incremental EBITDA we expected should instill confidence that our strategic CAPEX will add significant structural earnings and cash flow benefits. Similarly, the assets that we have acquired in recent periods, including PESM in Brazil, Texas HBI facility, and the stake in BALOREC are all performing well, adding further structural earnings and cash flow growth. This growth supports higher shareholder returns. Over the past four years, our dividend has grown at a compound rate of 16%, reflecting our confidence in the outlook of our company. On top of our dividends, we have returned significant cash through our buybacks, allowing us to reduce our share count by 37% over the last four years, a rate unmatched by any of our peers. Our policy and capital return intentions are clear. On the theme of DCAP, I want to highlight that Arsura Mittal's absolute carbon emissions today are approximately half the level of 2018. Much of this has been the result of our portfolio optimization and the steps that we have taken to shape our business around our most competitive assets. As we move forward, we're determined to follow a transition pathway that is economic and ensures that we remain competitive. When it makes sense, we are making investments. The EF in Gihon and the revamp of our two EFs in Sistao are both good examples. These economic projects support our growing offering of low-carbon solutions to our customers under our X-Carb brand. It is critical that we see Europe make swift progress in providing a policy environment that appropriately incentivizes the further investments required to accelerate decarbonization in Europe. As I conclude, my message is quite simple. We are a transformed business We have the best talent. We have excellent market positions in all the attractive geographies, including a unique exposure to India, and we have a reputation for quality and innovation that is unmatched by any of our peers. Our Tier 1 balance sheet is a strategic asset that underpins our consistent growth and continued value creation. I would like to take this opportunity to thank all our employees, customers, and the shareholders for placing your trust in us. With that, I will now hand it over to Genuino to talk more about our financial performance.

Thank you, Aditya, and good afternoon, everyone. We delivered a resilient performance last year despite the challenging market backdrop. EBITDA was $7.1 billion for the year, which translates to $130 of EBITDA per ton shipped. This is almost double the level of previous cycle lows, showing that the business and its earning capacity has structurally transformed. The benefits of our optimized asset base and our relatively diversified exposures have also seen our results show significantly more stability than peers. This was particularly evident in the fourth quarter. Adjusted net income of 2.3 billion in 2024 represents a 4.4 return on the book value of equity, which now stands at $64 per share. Return on capital employed in 2024 was 6%. Considering where we are in the cycle, I believe both these figures are commendable. Moving on to cash flow, we generated over $2 billion of investable cash flow in 2024, bringing the total to $21 billion since 2021. Last year, we invested $1.3 billion in the high-return strategic growth projects that Aditya described. We retired $1.7 billion to shareholders, including the repurchase of 6% of our outstanding shares. And we invested a net $0.6 billion in M&A, including, of course, our 28% stake in Valrec. Our performance provides strong evidence that ArcelorMittal can deliver value through all aspects of the steel cycle and is testament to the progress we have made in recent years. I believe this is reflecting the dividend increase to 55 US cents per share. This is a 10% increase on last year's dividend and brings the total increase since 2020 to over 80%. Finally, on the outlook, we are forecasting slightly positive apparent demand growth and are well positioned to benefit from any recovery. We are confident we will continue to generate positive cash flow this year and beyond, which will continue to be allocated via our established capital return policy. With that, Daniel, I believe we can move to the Q&As.

Great. Thank you, Jan Wiener. So we will take our first question from Ephraim at Citigroup. Please go ahead, Ephraim.

Thank you. Three quick questions. Firstly, with the plant non-green steel-oriented plant in Calvert to Commons end of 27, does that mean anything for the second year at Calvert, either in terms of accelerating the timeline or delaying the terms in terms of project complexity, sequencing, et cetera? That's the first one. Secondly, on CAPEX, firstly on the strategic growth of 1.3 to 1.5 billion, But new projects also coming into the pipeline, like the electrical steel plant, should we expect it to remain at these kind of levels beyond 2026 as well, as long as the balance sheet remains undergeared and on the 0.3 to 0.4 billion of decarbonization capex after the chairman's open letter in the EFT? Is it also right to think that it would remain for the foreseeable future at these levels unless there are major changes in the form of some regulatory support? And thirdly, a slightly pedantic question, with the volume increase in Liberia from incremental 10 million tons to 15 million tons, why is the EBITDA potential only increasing by about 100 million from 350? Has the underlying assumption on the cost of pricing there changed as well? Thank you.

Okay. Hi, Ephraim. It's nice to hear from you. So a lot of questions, but let me take a stab at them. So in terms of Calvert, Alabama, look, I think the first headline is that we are in the process of commissioning our brand new electric furnace. This is the most technologically advanced electric furnace in the United States with Castor and Hot Strip Mill with the capability of producing exposed automotive grades. So in our minds, it is game changing. It is cutting edge. It's got a good cost base and further strengthens our strong franchise that we have in the NAFTA region. We're building on that with the electrical steel announcement this morning that we made. This is going to be 100% owned by Ars Vermittal. It's another world-class cutting edge electrical steel facility for non-grade oriented steels for the premium automotive demand requirements with really good gauge capability and excellent quality characteristics. We are also looking at a second EF, and your question was does the electrical steel facility delay that? I don't believe it materially delays the second EF. I think what we're focused on is commissioning the first EF and then utilizing the resources that we have for the first EF and staffing the project for the second EF. So that's fundamentally the plan. We're commissioning the first EF. building another world-class electrical steel facility in terms of electrical steels at Calvert, and then we'll start on the second EF. In terms of the medium-term CAPEX and DCAP, fundamentally, it's a great question. Our focus remains to keep the overall CAPEX envelope between $4.5 to $5 billion. That's really the focus. And we have the ability to modify where we spend our are CapEx, right? So you saw in the third quarter, we announced we're not going ahead with the Monlevard project in Brazil. Instead, we substituted that with the electrical steel project in Calvert, Alabama. So similarly, I think you can expect developments like that, where we see the market is changing, or we can be more agile and dynamic in allocating where we want to invest our capital. And that also applies to VCOG. I'm not suggesting that all this growth capex will go into DCAB, but perhaps based on acceleration of policy regulation that we want, and in case that happens, we could have more than just 300 million of DCAB capex per year. In terms of Liberia, look, that's a very good question. We have not changed our long-term assumptions of iron ore, and they remain conservative, especially compared to spot today. The reason why you don't have the same delta, I mean, you have a similar delta in terms of volume growth, but the reason why it is slightly less is primarily because of quality considerations, right? The 5 million ton is a DSO product, so it has a much lower FE than the Synthafit product that we will make. And so as we blend, we get some revenue uplift, right? So maybe to explain more clearly, today the concentrate can do 15 million tons of concentrate and 5 million ton of DSO. The original plan was we lose the 5 million ton of DSO. And now the new plan is that we blend it and we have a 20 million ton centrifuge product. And so the delta is obviously there's a positive on the volume side offset by some of the changes on the revenue side. So we can provide you with more detail on the math behind that.

Thank you. That's clear.

Great. Thanks, Ekrem. So we'll move to take the next question from Patrick at Bank of America. Please go ahead, Patrick.

Thanks very much for the question, and I'm sure you guys knew this was coming. If we saw kind of a reemergence of a threat of tariffs on Canada and Mexico from the U.S., how are you guys thinking about the potential impacts on Glasgow and Mexico? Thanks.

Sure. So, yeah, Andrew, we were expecting this question to come. So thank you for asking it. Look, the high level first or the global perspective, and you guys all know this better than us, the significant global overcapacity. And so any action to tackle that is welcome. We see similar actions underway in the European marketplace, similar in India. There have been actions already taken in Brazil. There's discussion for Potentially some more. Nothing has really materialized. And we see similar issues in the United States. In terms of specifically the tariffs against Canada or Mexico, we've been there before. I think if you remember in 2018, 2019, when 232 was imposed, there was... tires that came from, there was tires on Canadian steel and Mexican steel.

roughly it costed us about $100 million per quarter.

But this was more than offset by revenue, right? So if you look at the revenue impact, it was far greater. I'm not suggesting that that would happen again in this period of time, but clearly one mitigating factor would be the revenue impact on some of these tariffs. Secondly, I would just add that I talked about the Calvert EEF. So you heard about that. So we have much more slabs, which are domestically produced, which are melted and poured. So that's another mitigating factor. But fundamentally, I guess the last point I would make is that these discussions remain uncertain, what will end up happening. But the fundamental focus that we have as an organization is really to strengthen the NAFTA trading block. We see a lot of imports that are coming into Mexico and into Canada. And to the extent that the desire is fundamentally to strengthen NAFTA, that would be a net positive. And excuse me, Patrick, I got the names mixed up. So thank you for your question.

No problem. Thank you, Aditya. Thank you.

Great. Thanks, Patrick. So we'll move now to a question from Andrew at UBS. Please go ahead, Andrew.

Thanks, I can see why you mixed those up. Just to follow up on that Farah question, I guess, just to... ...

Just give around what's coming from Mexico. Thank you. and any other product. It's not also how much is going from the fast go into the U.S.