Luxembourg, November 9, 2023 - ArcelorMittal (referred to as "ArcelorMittal" or the "Company" or the "Group") (MT (New York, Amsterdam, Paris, Luxembourg), MTS (Madrid)), the world's leading integrated steel and mining company, today announced results1 for the three-month and nine-month periods ended September 30, 2023.
Commenting, Aditya Mittal, ArcelorMittal Chief Executive Officer, said:
"On October 28, 2023, we suffered a catastrophic accident at the Kostenko coal mine in Kazakhstan that took the lives of 46 colleagues. We mourn their passing and deeply regret the devastation caused to the families of the victims. We are doing everything in our power to support them, and our communities at this difficult time.
"The only course of action is to ensure that we take a hard look inside our Group, identify the gaps that exist and strengthen our safety actions, processes and culture to ensure that we prevent all serious accidents. For this reason, we are commissioning a comprehensive independent 3rd party safety audit, the key recommendations of which will be published in due course.
"We are committed to learning from this tragedy and taking the appropriate action so that we emerge a better, safer Company."
3Q'23 financial results:
- 3Q 2023 was impacted by a negative price-cost effect and a -3.7% sequential decrease in steel shipments to 13.7Mt (scope adjusted2 -4.3% lower vs. 3Q 2022), resulting in a decline in operating income to $1.2bn in 3Q 2023 (vs. $1.9bn in 2Q 2023)5
- Despite the challenging market environment, the Company continues to demonstrate structurally improved profitability: EBITDA of $1.9bn in 3Q 2023 (vs. $2.6bn in 2Q 2023); EBITDA/t was $136/t, well above the longer-term historical averages for the Group, reflecting the benefits of portfolio optimization and strategic projects
- Similarly, net income remains well above longer term historical averages at $0.9bn in 3Q 2023 (vs. $1.9bn in 2Q 2023) reflecting the lower cost balance sheet and significant contribution from the share of JV and associates net income ($0.3bn in 3Q 2023 vs. $0.4bn in 2Q 2023)
- This is reflected in the 3Q 2023 basic EPS of $1.11/sh and the last 12 months rolling ROE3 of 9.4%; book value per share4 stands at $66/sh
- The Company ended the quarter with net debt of $4.3bn (gross debt of $10.5bn less cash and cash equivalents of $6.3bn) which is $0.2bn lower than at the end of June 30, 2023; and strong liquidity at end of September 30, 2023 of $11.8bn
- The Company has repurchased 26.2m shares during 9M 2023 including 7.1m from the current 85m share buy back program
Outlook
- The Company remains positive on the medium/long-term steel demand outlook and supported by its strong financial position remains focused on safety and executing its strategy of growth with capital returns
- FY 2023 capex is expected to be towards the mid-point of the previously communicated guidance range ($4.5bn-$5.0bn); strategic growth projects remain on track and estimated to deliver $1.3bn of additional normalized12 EBITDA; the Company's decarbonization projects are progressing; and our XCarb products are gaining commercial momentum
- The Company continues to expect a working capital release for the year (9M 2023 working capital investment of $0.9bn) and expects 4Q 2023 FCF to remain healthy
Financial highlights (on the basis of IFRS1):
(USDm) unless otherwise shown | 3Q 23 | 2Q 23 | 3Q 22 | 9M 23 | 9M 22 |
Sales | 16,616 | 18,606 | 18,975 | 53,723 | 62,953 |
Operating income | 1,203 | 1,925 | 1,651 | 4,320 | 10,578 |
Net income attributable to equity holders of the parent | 929 | 1,860 | 993 | 3,885 | 9,041 |
Basic earnings per common share (US$) | 1.11 | 2.21 | 1.11 | 4.59 | 9.76 |
Operating income/tonne (US$/t) | 88 | 136 | 122 | 102 | 244 |
EBITDA | 1,865 | 2,605 | 2,660 | 6,292 | 12,903 |
EBITDA /tonne (US$/t) | 136 | 183 | 196 | 149 | 298 |
Crude steel production (Mt) | 15.2 | 14.7 | 14.9 | 44.4 | 45.8 |
Steel shipments (Mt) | 13.7 | 14.2 | 13.6 | 42.3 | 43.3 |
Total Group iron ore production (Mt) | 10.7 | 10.5 | 10.6 | 32.0 | 34.6 |
Iron ore production (Mt) (AMMC and Liberia only) | 6.7 | 6.4 | 6.9 | 19.8 | 21.1 |
Iron ore shipment (Mt) (AMMC and Liberia only) | 6.3 | 6.6 | 6.9 | 20.3 | 21.1 |
Shares outstanding fully diluted basis in millions | 838 | 839 | 816 | 838 | 816 |
Safety and sustainable development
Devastating accident in Kazakhstan
ArcelorMittal has been devastated by the sequence of fatal accidents in Kazakhstan, culminating most recently in the disastrous explosion at the Kostenko mine on October 28, 2023, resulting in 46 deaths. These accidents took place despite intensified focus over the past two years on improving safety across the Group.
The Company is providing medical, emotional and financial support to the colleagues rescued from the accident. Assistance to bereaved families includes covering all funeral and memorial expenses, a one-off payment equivalent to ten years' salary, purchasing housing, repaying personal loans (deceased and family members), and covering education fees for children up to the age of 23. In addition, the Company is providing post-traumatic psychological support and developing individual health recovery plans.
ArcelorMittal has owned ArcelorMittal Temirtau since 1995, and over the last 20 years has invested over $5 billion capex into the maintenance and enhancement of the asset, including safety. Much of the safety spend in recent years has been directed to our mining business, for state-of-the-art sensors to monitor gas levels and personnel tracking systems so we can identify the location of miners at all times, and drilling equipment that enables us to study and better understand the geology of our mines. We have also significantly enhanced the volume and quality of our safety training, working with external experts. We are devastated, that despite our considerable efforts we have had 5 fatal accidents in the last two years.
We are commissioning a comprehensive 3rd party audit of all our safety practices
A full internal review of ArcelorMittal's Group-wide safety program is underway. In addition, the Company is in the process of commissioning a 3rd party to undertake a comprehensive audit of all the Group's safety practices. The scope of the audit will cover our complete management of health and safety: from policies, governance, processes and procedures, standards, in field assessments of both occupational health and safety and process safety, training, competencies, and our performance. The recommendations of the audit will be published.
While the audit is underway, we are building on and accelerating our existing safety improvement activities
In recent years, the Company has relaunched its safety strategy with a focus on twin pillars of risk management and cultural change:
- The Group's health and safety policy strengthened and relaunched, including enhanced governance at the Board Sustainability Committee, since the beginning of 2022
- In April 2023, an external consultant conducted a safety perception survey (covering 220,000 personnel including contractors), resulting in new bespoke action plans developed for all sites and segments
- Leaders have been required to demonstrate more progress in safety culture maturity, with mandatory leadership shop floor presence, and site safety training programs
- We have intensified training/coaching programs, including with external support, to improve quality of leadership's safety routines (i.e. shop floor interactions) as well as increased cross training to benchmark and align best practices
- Fatality Prevention Standards ("FPS") are internally audited and will now be externally audited
- Where seriously unsafe incident takes place or a plant is deemed to be at risk of a serious incident or fatality, we have established a ‘quarantine' process of intensified communication and safety interactions
The Group's steel operations (excluding CIS) are fatality free for own employees in 2023 year-to-date15 and including contractors, the fatality frequency rate ("FFR") has also considerably improved and is 40% better than the record World Steel Association average.
Sustainable development highlights:
- ArcelorMittal renewable energy projects continue to progress supporting the decarbonization of our facilities in India, Brazil and Argentina:
- ArcelorMittal's renewable energy project (975MW nominal capacity) in India is progressing and on track for completion in 1H 2024. Installation has started with >10% of solar panels installed, 10 windmills have been erected (representing 10% of total) and transmission lines are being rolled out with ~50% of the towers in place. Once complete, the project is expected to provide over 20% of AMNS India's Hazira plant electricity requirements reducing carbon emissions by ~1.5Mt per year;
- In Brazil, construction of 554MW wind power project JV with Casa dos Ventos starting in 4Q 2023 with completion expected in 2025. The JV is expected to provide 38% of ArcelorMittal Brasil's future electricity needs in 2030; and
- In Argentina, the $0.2 billion JV with PCR (the first hybrid solar and wind energy project in the country) entered commercial operations in October 2023 generating 36MW and is expected to add a further 75MW by year end. This is anticipated to provide >30% of Acindar's electricity requirements in 2024.
- ArcelorMittal continues to expand the grades of steel available under the XCarb recycled and renewably produced ("RRP") umbrella. On July 18, 2023, ArcelorMittal launched low-carbon emissions steel plate (up to 18 tonnes) for the civil engineering sector (e.g. box girders for road and rail bridges). The steel is produced using almost 100% scrap steel and 100% renewable electricity, resulting in approximately 60% lower CO2 emissions compared with steel made via the conventional steelmaking route (blast furnace).
- ArcelorMittal's decarbonization projects, transforming from blast furnace to DRI EAF, are advancing to FEED stage. ArcelorMittal has approved the capex to commence onsite preparation works at Dunkirk (France) and Gent (Belgium) and to increase the connectivity to third- party energy supplies in anticipation of future increased requirements. These are the first steps in ArcelorMittal's plan to decarbonize our assets towards our overarching aim of being net zero by 2050.
Analysis of results for 3Q 2023 versus 2Q 2023 and 3Q 2022
Total steel shipments in 3Q 2023 were -3.7% lower at 13.7Mt as compared with 14.2Mt for 2Q 2023, reflecting lower shipments in NAFTA (-3.0%), Europe shipments (-10.1%) reflecting seasonality and inventory replenishment offset in part by improved volume in ACIS (+13.4%). Total steel shipments in 3Q 2023 were +0.8% higher as compared with 13.6Mt in 3Q 2022. Excluding the impacts of ArcelorMittal Pecém, steel shipments in 3Q 2023 were -4.3% lower as compared to 3Q 2022.
Sales in 3Q 2023 were -10.7% lower at $16.6 billion as compared to $18.6 billion in 2Q 2023 and lower than $19.0 billion for 3Q 2022. As compared to 2Q 2023, sales were impacted by lower average steel selling prices (-7.5%) and lower steel shipment volumes (as discussed above). Sales in 3Q 2023 were -12.4% lower as compared to 3Q 2022 primarily due to lower average steel selling prices (-12.5%).
Depreciation for 3Q 2023 was lower at $662 million, slightly lower than $680 million for 2Q 2023, but higher than $628 million in 3Q 2022 (largely due to the consolidation of ArcelorMittal Pecém).
There were no exceptional items for 3Q 2023 and 2Q 2023. Exceptional items for 3Q 2022 of $0.4 billion included $0.5 billion of non-cash inventory related charges to reflect the net realizable value of inventory under IFRS with declining market prices in Europe and partially offset by a $0.1 billion purchase gain on the acquisition of a Hot Briquetted Iron (‘HBI') plant in Texas.
On October 22, 2023, ArcelorMittal signed a preliminary non-binding agreement to transfer ownership of ArcelorMittal Temirtau14 to the Republic of Kazakhstan. The ArcelorMittal Temirtau assets are recorded on ArcelorMittal's balance sheet as of September 30, 2023 at a value of $1.8 billion; neither this agreement nor the accident at the Kostenko mine on October 28, 2023, had a retrospective impact on this carrying value as both events are considered as non-adjusting subsequent events. The functional currency of ArcelorMittal Temirtau is the Tenge and therefore carrying values are subject to foreign exchange translation gains and losses recognized in equity upon translation into the US dollar, the currency in which ArcelorMittal's financial statements are presented. Since the acquisition of this asset in 1995, ArcelorMittal has recorded approximately $1.3 billion of foreign exchange losses in equity. Upon disposal of the foreign operation, such cumulative foreign exchange differences are recycled in profit and loss (i.e. total equity remains unchanged). Additionally, if and when a binding agreement is entered into and the transaction is closed, ArcelorMittal Temirtau's net assets will be deconsolidated.
Operating income for 3Q 2023 was $1.2 billion as compared to $1.9 billion in 2Q 2023 and $1.7 billion in 3Q 2022. The lower operating income in 3Q 2023 as compared to 2Q 2023 reflected a decline in steel spreads (as the pace of the decline in steel prices was greater than the reduction in the raw material basket) and lower steel shipments.
Income from associates, joint ventures and other investments for 3Q 2023 was $285 million as compared to $393 million in 2Q 2023 (which included $0.1 billion income from AMNS India arising from recognition of a deferred tax asset) and $59 million in 3Q 2022. 3Q 2023 results improved as compared to 3Q 2022 with higher contributions from AMNS India and Calvert.
Net interest expense in 3Q 2023 was $31 million as compared to $47 million in 2Q 2023 and $37 million in 3Q 2022.
Foreign exchange and other net financing loss in 3Q 2023 was $224 million as compared to $133 million in 2Q 2023 and $247 million in 3Q 2022. 3Q 2023 included a foreign exchange loss of $99 million as compared to $60 million in 2Q 2023 and $108 million in 3Q 2022.
ArcelorMittal recorded an income tax expense of $272 million (including deferred tax benefit of $10 million) in 3Q 2023, as compared to an income tax expense of $231 million (including deferred tax benefit of $85 million) in 2Q 2023 and an income tax expense of $371 million (including deferred tax benefit of $23 million) in 3Q 2022.
ArcelorMittal recorded net income in 3Q 2023 of $929 million as compared to $1,860 million in 2Q 2023 and $993 million for 3Q 2022.
ArcelorMittal's basic earnings per common share for 3Q 2023 was lower at $1.11 as compared to $2.21 in 2Q 2023 and stable compared to $1.11 in 3Q 2022.
Analysis of segment operations
NAFTA
(USDm) unless otherwise shown | 3Q 23 | 2Q 23 | 3Q 22 | 9M 23 | 9M 22 |
Sales | 3,188 | 3,498 | 3,438 | 10,036 | 10,851 |
Operating income | 520 | 662 | 616 | 1,637 | 2,487 |
Depreciation | (125) | (127) | (114) | (378) | (300) |
Exceptional items | — | — | 92 | — | 92 |
EBITDA | 645 | 789 | 638 | 2,015 | 2,695 |
Crude steel production (kt) | 2,122 | 2,244 | 2,126 | 6,542 | 6,246 |
Steel shipments* (kt) | 2,527 | 2,604 | 2,339 | 7,974 | 7,248 |
Average steel selling price (US$/t) | 1,043 | 1,116 | 1,191 | 1,049 | 1,278 |
* NAFTA steel shipments include slabs sourced by the segment from Group companies (mainly the Brazil segment) and sold to the Calvert JV (eliminated in the Group consolidation). These shipments can vary between periods due to slab sourcing mix and timing of vessels. 3Q'23 393kt 2Q'23 360kt; 3Q'22 241kt; 9M'23 1,227kt and 9M'22 901kt
NAFTA segment crude steel production declined by -5.4% to 2.1Mt in 3Q 2023 as compared to 2.2Mt in 2Q 2023 primarily due to maintenance in Long Products Canada, and was stable as compared to 3Q 2022.
Steel shipments in 3Q 2023 decreased by -3.0% to 2.5Mt as compared to 2.6Mt in 2Q 2023 and were +8.0% higher than 3Q 2022 primarily due to higher slab shipments sourced from Brazil and sold to Calvert JV (+1.4% year-on-year excluding this effect).
Sales in 3Q 2023 decreased by -8.8% to $3.2 billion, as compared to $3.5 billion in 2Q 2023 primarily on account of lower average steel selling prices (-6.5%) and lower steel shipments (-3.0%). Sales declined by -7.3% in 3Q 2023 as compared to $3.4 billion in 3Q 2022 primarily on account of lower average steel selling prices (-12.4%) offset in part by higher steel shipment volumes (+8.0%).
Exceptional items for 3Q 2022 of $0.1 billion were the purchase gain recognized on the acquisition of the HBI plant in Texas.
Operating income in 3Q 2023 decreased by -21.4% to $520 million as compared to $662 million in 2Q 2023 and was -15.6% lower as compared to $616 million in 3Q 2022.
EBITDA in 3Q 2023 of $645 million was -18.2% lower as compared to $789 million in 2Q 2023, primarily due to a negative price-cost effect and lower steel shipments. EBITDA in 3Q 2023 was broadly stable as compared to $638 million in 3Q 2022.
Brazil6
(USDm) unless otherwise shown | 3Q 23 | 2Q 23 | 3Q 22 | 9M 23 | 9M 22 |
Sales | 3,560 | 3,826 | 3,486 | 10,454 | 10,838 |
Operating income | 414 | 553 | 598 | 1,290 | 2,473 |
Depreciation | (87) | (105) | (57) | (264) | (186) |
EBITDA | 501 | 658 | 655 | 1,554 | 2,659 |
Crude steel production (kt) | 3,669 | 3,732 | 2,969 | 10,453 | 9,094 |
Steel shipments (kt) | 3,599 | 3,583 | 2,837 | 10,119 | 8,877 |
Average steel selling price (US$/t) | 932 | 1,001 | 1,137 | 970 | 1,137 |
Brazil segment crude steel production decreased by -1.7% to 3.7Mt in 3Q 2023 as compared to 2Q 2023. On a scope adjusted basis (i.e. excluding the impact of ArcelorMittal Pecém consolidated as from March 9, 2023), 3Q 2023 crude steel production of 2.9Mt declined by -2.7% as compared to 3.0Mt in 3Q 2022.
Steel shipments in 3Q 2023 at 3.6Mt was stable as compared to 2Q 2023 and +26.8% higher as compared to 2.8Mt in 3Q 2022 primarily due to the impact of ArcelorMittal Pecém. On a scope adjusted basis (i.e. excluding ArcelorMittal Pecém), steel shipments in 3Q 2023 increased by +2.1% as compared to 3Q 2022.
Sales in 3Q 2023 decreased by -6.9% to $3.6 billion as compared to $3.8 billion in 2Q 2023, primarily due to a -6.9% decrease in average steel selling prices. Sales in 3Q 2023 were +2.1% higher than $3.5 billion at 3Q 2022 primarily on account of the impact of ArcelorMittal Pecém offset in part by -18.1% decline in average steel selling prices.
Operating income in 3Q 2023 of $414 million was -25.2% lower as compared to $553 million in 2Q 2023 and -30.9% lower than $598 million in 3Q 2022.
EBITDA in 3Q 2023 decreased by -24.0% to $501 million as compared to $658 million in 2Q 2023 due to negative price-cost effect. EBITDA in 3Q 2023 was -23.6% lower than $655 million in 3Q 2022 primarily due to negative price-cost effect offset in part by the contribution from ArcelorMittal Pecém.
Europe
(USDm) unless otherwise shown | 3Q 23 | 2Q 23 | 3Q 22 | 9M 23 | 9M 22 |
Sales | 8,894 | 10,518 | 10,694 | 30,315 | 37,186 |
Operating income | 160 | 556 | 158 | 1,093 | 4,302 |
Depreciation | (313) | (309) | (300) | (916) | (952) |
Exceptional items | — | — | (473) | — | (473) |
EBITDA | 473 | 865 | 931 | 2,009 | 5,727 |
Crude steel production (kt) | 7,475 | 6,943 | 7,998 | 22,197 | 24,948 |
Steel shipments (kt) | 6,538 | 7,274 | 7,079 | 21,564 | 23,380 |
Average steel selling price (US$/t) | 1,020 | 1,097 | 1,150 | 1,059 | 1,222 |
Europe segment crude steel production increased by +7.7% to 7.5Mt in 3Q 2023 as compared to 6.9Mt in 2Q 2023, which had been impacted by the blast furnace outages in Gijon, Spain (BF A) and Dunkirk, France (BF4). The two furnaces were restarted in mid-July 2023, but due to slow ramp ups, crude steel production in 3Q 2023 was -6.5% lower as compared to 8.0Mt in 3Q 2022. 4Q 2023 production will be impacted by production cuts including BF1 at Fos (France), reline of BF#A at Gent (Belgium) and planned maintenance of BF#2 at Bremen (Germany).
Steel shipments decreased by -10.1% to 6.5Mt in 3Q 2023 as compared to 7.3Mt in 2Q 2023 primarily due to seasonal demand impacts including weaker construction-related demand and metal stock replenishment. These same factors and the weaker economic environment impacted shipments in 3Q 2023 which were -7.7% lower as compared to 7.1Mt in 3Q 2022.
Sales in 3Q 2023 declined by -15.4% to $8.9 billion, as compared to $10.5 billion in 2Q 2023, primarily due to a -7.1% decrease in average steel selling prices and a -10.1% decline in steel shipments. Sales declined by -16.8% as compared to $10.7 billion in 3Q 2022 primarily due to lower average steel selling prices (-11.3%) and lower steel shipments (-7.7%).
Exceptional items for 3Q 2022 of $473 million related to non-cash inventory charges under IFRS to reflect the net realizable value of inventory in light of declining market prices.
Operating income in 3Q 2023 was $160 million as compared to $556 million in 2Q 2023 and $158 million in 3Q 2022.
EBITDA in 3Q 2023 of $473 million decreased by -45.3% as compared to $865 million in 2Q 2023, mainly due to lower steel shipments and a negative price-cost effect. EBITDA in 3Q 2023 decreased by -49.2% as compared to $931 ...