MT - ArcelorMittal S.A. (MT) Q4 2023 Earnings Call Transcript

2024-02-08 20:07:07 ET

ArcelorMittal S.A. (MT)

Q4 2023 Earnings Conference Call

February 08, 2024 9:30 AM ET

Company Participants

Daniel Fairclough – Investor Relations

Lakshmi Mittal – Executive Chairman

Aditya Mittal – Chief Executive Officer

Genuino Christino – Chief Financial Officer

Conference Call Participants

Alain Gabriel – Morgan Stanley

Tristan Gresser – BNP Paribas

Myles Allsop – UBS

Tom Zhang – Barclays

Maxime Kogge – Oddo

Moses Ola – JP Morgan

Timna Tanners – Wolfe Research

Patrick Mann – Bank of America

Bastian Synagowitz – Deutsche Bank

Andrew Jones – UBS

Presentation

Daniel Fairclough

Good afternoon, everyone. This is Daniel Fairclough from the ArcelorMittal Investor Relations team. Thank you for joining this call to discuss our performance and progress in 2023. Present on the call today, we have Mr. Mittal, our Executive Chairman; our CEO, Aditya Mittal; and our CFO, Genuino Christino. Before we begin, I would like to mention a few housekeeping items. As usual, we will not be going through the results presentation that we published this morning on our website, but I do want to draw your attention to the disclaimers on Slide 2 of that presentation. We will be moving directly to the Q&A session following some opening remarks. So if you would like to ask a question, then please do press star one on your keypad to join the queue.

With that, I will hand over to Mr. Mittal to begin the opening remarks.

Lakshmi Mittal

Thank you, Daniel, and welcome, everyone. We are working tirelessly to improve our safety performance and I’m convinced that we are on the right pathway. We must achieve our target of zero facilities -- fatalities and serious injuries as quickly as possible. Against the backup of a challenging economic and geopolitical environment, our financial results in 2023 are commendable. This shows the benefits of the actions we have been taking in recent years to structurally improve our business. Destocking is showing signs of coming to an end, and we are predicting growth this year in our core markets. Interest rates have peaked and there is a confidence they will come down this year. Inflation has already started to ease and energy prices have retreated from record highs. I look to ArcelorMittal’s future with great optimism. Our asset portfolio is lean and focused. Our recent acquisitions are performing strongly and the capital projects in which we have been investing will soon begin making a significant contribution to our regions. I want to thank this opportunity to thank all our employees for their efforts and contributions.

Over to you, Aditya.

Aditya Mittal

Thank you, and welcome, everyone. I want to talk first about safety and then the subject of growth and capital returns. Beginning with safety. As we committed at our third quarter results, we have now commissioned the comprehensive third-party independent audit of our safety practices and governance. There are three work streams well underway. The first is the on-site audit of our fatality prevention standards, the second stream is reviewing our process safety management systems and the third stream is a review of all of our safety governance practices. I’m confident that dss will support us in achieving our target of zero fatalities and serious injuries. Everyone at ArcelorMittal is fully aligned behind this objective.

After allocating significant capital to organic growth over the past three years, ArcelorMittal is now on the cusp of a step change in profitability. This year, we will commission high value-added lines in Brazil, a new electric furnace in the U.S., new electrical steel capabilities in Europe and iron ore projects in Brazil and Liberia. These projects represent the bulk of our strategic growth envelope, which in total is expected to add $1.8 billion to our EBITDA. Today, our asset portfolio is derisked and well positioned to capture the medium to long-term demand that we forecast. Steel is a vital enabler of the transition to new energy systems. Steel will be the foundation on which supply chain security is built and steel is vital to improving the living standards of growing populations in large parts of the world.

We estimate that these megatrends will drive approximately 300 million tons of additional steel demand ex-China over the next decade with the biggest contributors being India, Brazil and North America. Our asset portfolio is well aligned to these growth vectors. Going forward, we will define our EBITDA, including the share of JV net income. What you should appreciate is that 60% of our EBITDA is driven by assets in North America, India and Brazil. And if you include our Canadian mining operations, it is almost 75%. We have excellent market positions, and we have attractive opportunities to continue to invest and capture the growth in demand. In North America, we are developing our plans to add another electric furnace at Calvert and double the scale of our asset in Texas. In India, we’re currently doubling our capacity to 15 million tons with plans under development to eventually grow to 40 million tons.

In Brazil, we have a fantastic primary steelmaking position with the opportunities to add finishing capacity as domestic demand grows. In terms of capital returns, the value-creating impact that our growth investment has on every ArcelorMittal share has been significantly increased by our share buyback programs. It really is a massive achievement that we have repurchased one third of our equity over the last three years. We still have a large buyback program outstanding, and with the positive outlook for cash flow generation, we’re well positioned to continue taking advantage of our discounted valuation. The structural improvements we are making to profitability are feeding through into our base dividend. The change in our portfolio over the past 12 months supposes a further increase in the base dividend. Again, this should be seen as a clear statement on the progress we are making and the confidence we have in our outlook....

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