Q1 2022 ArcelorMittal SA Earnings Call

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Welcome to the ocular <unk> conference call to conference will stop soon.

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You May go ahead Daniel.

Hi, good afternoon, and good morning, everybody and welcome to Oslo, Metals' first quarter 'twenty, two analyst and Investor call. This is Daniel Fairclough from the Alpha Mitchell Investor Relations team I'm joined on this call today by our CFO Jimmy No Kristina Jimmy.

Jimmy now and I hate to answer your questions on the first quarter results, which we published this morning alongside the presentation with detailed speaker notes on our website at today's call, which is being recorded and is scheduled to last up to 45 minutes and if you would like to ask a question. Then please do press star one on your telephone keypad and as usual we will of course.

Answer the questions in the order that they received.

Before we begin the Q&A session I'd like to hand over to Jim We know after some brief opening remarks.

Thank you Danielle.

Good morning, and good afternoon to everyone all having to spend just a minute or so.

Very brief opening remarks.

Oh numbers do the talking mostly.

So we are consistently posting strong operating results.

Our success this quarter was a bit of over $5 billion, demonstrating the strength of the business and all the densification.

Yet again nexgen contribution.

Z and associates on Covid.

Using 14% of net income.

Book value is ambitious.

It's better.

Vertical well gz's, reaching 12 P M.

These are very material business that they presented important cornerstones are all well globally.

Strong net income $4 1 billion.

E P S O $4 28.

Yeah I would also highlight that this is the highest EPS more than a decade.

Clearly the benefits of all the share buyback starts to become very visible well.

Reported nine months.

Value creation batteries, I forget to $57 a share.

Really I mean, we own 36%.

Really important strong free cash flow generation, so with a company that delivered $1 5 billion of free cash flow in the first quarter and this is despite it should be done investment in working cap.

You can see naturally bring down all of our net debt despite investments in working capital and returning cash to shareholders. That's a record level.

Oh confidence now.

It allows for the announcement of an additional 1 billion buyback, bringing the total to $2 $2 billion.

If we look back a little bit if you go back to September 2020, and by the time, we complete this extra billion volatile will have distributed.

Five we didnt have a choice shareholders.

Yeah, I'll focus on the consistent execution of our strategy and I think today's results and update is a clear indication of the progress we are making on all fronts.

So now then you I believe we can go straight to your questions.

Yes, Thanks, Jeremy as it will take the first question. Please from <unk> at Morgan Stanley . Please go ahead, yes. Thank you gentlemen, two questions from my side. Firstly is on capital allocation. So the 1 billion buyback that you've announced appear stephane predicated on your expectations after certain full year free cash flow and not necessarily on formula linked to you.

Q1 cash flows and if that is the case then should we expect the same order of magnitude buyback during Q2 or would you would your buyback program be more or less linked to your Q2 free cash flows that's the first one.

Hello So.

Okay.

I would say that Oh boy kept on location policy not really changed right I think our commitment is very clear.

So we want to distribute 50% of our free cash after paying the dividend we want to be doing now.

In June as you know 38 cents.

So 50% of that Foucault Chew I wish out of course.

When we look at our liquidity today, we look at the Q1 results and we look forward also to Q2.

And he didn't beyond we feel that are we are we feel very comfortable actually to top up the buyback because we are doing we look at the share price as well.

Right.

It seems like a very good time and an opportunity to be buying back shares. So we don't want you to wait to progress on that.

But that said that's basically it so there is no change in the capital location for them at scale.

Thank you and the second part of my question is on the other 50% of your free cash flow that you had stated you are willing to spend on renewables or decarbonization investments well. These investments what why these investments with future proof your business in the long run it sounds like it could be very low in the market might not be willing to reward you for making these investments initially.

And how do you balance out the need to make these investments versus how the market trades rebates you're stuck.

Yeah.

For us, it's all about reaching a good balance right. So I think I'll call Oh and returns have been very very high as we just as I just highlighted in my opening remarks.

0.5 again.

Yes.

Thanks.

2020 that that's quite a lot right and for us.

It's about getting this to the right Alice it's regarding cash flow shareholders, but it's also developing the business.

I think what we have demonstrated up to now if you look at what we announced in India. Our Guangzhou project. That's a very good example of that right. So it's a it's a we would consider that to be a high return project for Arcelormittal. I mean, we have disclosed that for this investment of about 600 million, we expect to get.

More than 70 million in EBITDA.

Straight away.

And then more benefits to level of the JV as well.

So you can see that the returns are good we're basically get back up and <unk> seen them in a couple of years.

When the assets will continue to generate value for for many more years right and then also the strategic importance will be integrated to renewables. So we do believe that until the time this will prove to be important.

And that's exactly what we are doing.

So for now.

Of course in excess for now has been has been used for deleveraging and you can see that this quarter and that's and that's really where we are today.

Thank you.

Okay.

Thanks, I'll answer we'll move now to set up.

Please go ahead.

Hi, good afternoon. Thanks for taking my questions today I have a couple of questions regarding the demand outlook and expectations.

Good morning, he significantly trimmed your demand forecast for the year could you give us at all.

Color on what drives confidence at shipment can still grow on a year over year basis. That's what it is that predicated on expected share gains versus imports.

And then second question if I may on a short term view absolutely in the course of Q1, we saw steel prices surged, we hear about widespread panic buying over that appear to be reversing course at present in certain regions. What are you hearing from customers and what the stake of order intake and price negotiations. Thank you.

Okay. So so what give us confidence that our shipments will be higher. So I think it's important just to I would just call attention to a couple of points right.

It's important to take note that Oh in Q1 of last year, we still had.

Are you bumping consolidated and listen to our April right. So so we need to adjust for that.

And also of course, we are saying that this will be the case once we adjust for.

For Gregory.

And then if you do that if you if you were to normalize our shipments in quarter. One for this true schooled changed so one scope change and one as a result of the conflict.

And Russia, Ukraine, you'll see that our shipments actually rising.

And and always Spectation is that that should also be the case for full year and you're right I think what we saw as she was.

And key parts of our business in regions surge of imports and that was true in most of the regions because of the extended lead times.

Hi, Hi, Hi, a pricing environment. So we saw an increase in imports that we expect will come down this year. So.

I always spectation when you start to see that actually if you look at all businesses in the in Brazil, we see that the market share of imports Oh expectation is that it has come down already in Q1, we.

We see the same in Europe . So always spectation is that imports will come down we will take some domestic players in general we would take some market share of imports. This.

And then on the order intake I think its good that it remains quite quite good of course, we have very good visibility now.

If you talk about the euro at Kohl's.

To mid summer, let's see.

And the order intake has been a continuous should be good and the order book is healthy at this point.

Thank you I I'd kind of Europe can you provide any additional color, perhaps in the North American region as well.

I'm sorry can you repeat your question.

Sorry can you provide a bit more color on just the other regions beyond Europe , particularly on North America, and where you see buyer behavior. Please.

Yeah.

North America and U S.

As you saw I mean, we have an entre to change all of our forecast.

Right. We we we we believe that we had a we had a bit of a slow start to Q1, but did it actually improved so we did quite well I think in terms of shipments as you can see in quarter one.

So all of our forecast is for four U S are not really changing.

So it's I would say we actually saw PMI is in April actually continued to rise right. So it continues to be quite high.

So we see a demand.

It's at very good levels are enough to.

Okay. Thank you very much.

Thanks, Seth So we'll move now to Patrick at Bank of America.

Okay.

Thanks, very much I had two questions. One was just on the shipments in Europe . So you know I I understand year on year, you've de consolidated ilva, but you know pretty much flat on the fourth quarter and the first quarter is usually quite a good shipment quarter.

How should we think about it going forward.

It's usually the strongest in the first half weaker in the second half.

Is there any recovery into two Q versus the first quarter or why is it not up and buy more let's say quarter on quarter.

And then the second question is just on Decarbonization in Europe in these plans.

Are they kind of depend on natural gas in the intermediate phase and then and also electricity in terms of electric arc furnaces.

Is it are you starting to be concerned around decarbonization strategy in Europe , given Russia, and given natural gas and electricity prices.

Okay. Thank you. Thank you Patrick first one your question in Europe .

And this is something that we discuss.

Before Pat shrink what happened really was that Q4 was.

Particularly strong because in Q3, we had several issues.

And logistics.

And we had and therefore, we had a we had shipments that moved from Q3 to Q4.

Right and so Q4 was I would say higher than it would have been if we if we had managed to ship. Our Q3 production. That's why you don't really see that.

An improvement now so much you're right. So typically seasonality, we would see Q1 being better than that in Q4, but that's that's the reason.

And then on to <unk> question I think it's a very good question and it's something that of course, we have been debating quite a lot internally as well, but I would say that it is at this point, we don't believe that what we are seeing is a weekend steel conclude that it's something structural.

Right I think governments in Europe , the understanding Barton.

Bringing cost of gas power to more normal levels and and actually when you look at forward Cubs.

You are if you go out and look at the prices are in and you know two three years from now you actually see that prices are kind of coming back to to normal Atlas. So I think that is and so the market still believes that.

This is something that should be something temporary of course, it's very difficult to predict how long.

But we don't see that as being structural for us of course, it's going to be very important to make sure that we have competitive gas and power prices Chu Chu.

<unk> two.

It was a cute these plants.

Yeah.

Got it thank you very much.

Thanks, Patrick So we'll move now to our two Kosten at credit Suisse.

Thank you very much two questions also from my side and one has to probably start with the impact from the Ukraine conflict and my question here is not only can you give us some kind of indications on the operations and creep Murray, but also the Kazakhstan operations, because as far as I understood. It you.

Previously sourced some raw materials from Russia for Kazakhstan, and also had some say it from Kazakhstan over to Russia did those stop.

Are you able to redirect those volumes that's the first one and the second one is on Liberia, we have recently seen the news that the Liberian Oh government will review the concession agreements for your mining operations again could you give us an update what that will mean.

Mean for your 10 million tonnes of expansion program there. Thank you.

Yeah. Thank you. So just a quick overview of where we are in Ukraine. Today, I mean I'm sure you have been following us and.

So we have restart it.

One of the three blast furnaces that we have.

That's the smallest blast furnace. So we are today running at about 20% of all of them.

Metal capacity.

So its not much but it's a it's a start.

I think we see a lot of motivation from all our employees to be back in <unk> to be helping bringing back some economic activity. So we are supporting that the mines that we're running at levels close to 35%. So we have actually increased production.

We are running at about 60% now right.

But and the idea is to produce a T. A it's still a steel mill to be producing basically pig iron. So its blast furnace, it's basically producing pig iron.

So the activities are going to be a quite limited I would say for some time that that's all the spectation.

And then and Tammy tell you right. So it was certainly a significant part of our production into Russia.

That has stopped since the beginning of the conflict.

So the team has a challenge in front of them, which is of course to find alternative markets for these products and so far they are doing a great job I would say.

So looking in both directions, the east and west.

So there will be some implications for profitability is in.

And in all likelihood be gonna be spending a beach a bit more on logistics.

So you can expect that going forward, there will be some impact, but not much so I think the and and and and I think the team has demonstrating the Pos and the POS probably you remember we had similar issues with Iran, and and the team did a good job and in final tentative places for selling the materials.

<unk>.

And tell me tell we are self sufficient as you know in coal we have also our own iron ore mines. So that is not a lot of dependence on on Russia raw materials. So we don't see that as a problem.

This is actually more of a problem for Ukraine, because Ukraine was also buying more coal from from Russia.

So that's one of the constraints to that that the industry in Ukraine will need to find.

That's when we shouldn't.

And we don't believe that it shouldn't be a problem provided that you have the logistics to get them out to you is in and out.

On the just a quick follow up before you go on Liberia, the pig iron volumes.

I guess they go out of the country.

And sold somewhere could you say, where it goes and I believe I assume it goes out by a train and not ship.

Yeah, that's correct Oh, sorry, it goes it goes by shrinking it goes by train.

Okay.

Basically it goes it goes to Portland.

And then Liberia so.

So we I think it's very important to understand that we have a I M. D. A that it's valid right. So yeah.

And that doesn't expire until 2030, so it's about the MTA. We we have a it's an M D that give us also the ability to expand.

The the concession is one out of 25 years.

So.

The amendments that we are discussing with the government right now we believe that it's an interest because of your body basically provides.

Some more information on neutralization of infrastructure assets to rail and port.

So we are in dialogue with the government. So as you know these amendments that were approved by the government there were essential.

The volume in for validation it was approved by the Senate.

The lower house has put some.

Some change so I think we are in the process of waiting for the outcome of this of this discussion, but we don't believe that it will have an impact on all projects will be continuing to move forward there.

Perfect. Thank you very much for the update.

Pleasure.

Thanks, Carsten So we'll take the next question. Please from Alan at Jefferies Go ahead Alan.

Yeah, Thanks, and good afternoon, two from my side. The first one is on the announced <unk> acquisition and I. Appreciate the deals done yet, but can you just speak and give us.

Most of what you can say about how you see the potential returns from that investment.

Even in the context of your general hurdle rates do you think about the projects.

Yeah, I'm not sure.

So first of all I think we are very very happy with this this move.

As you said, it's early days, so we have not yet completed the acquisition.

So we have done extensive due diligence so very happy with the quality of the asset I think investments were made.

To address environmental our byproducts are so some more investments were made.

So we feel that we have potential we can with our knowhow that we experience in running a similar plants.

So we're going to be able to add value to enter this plant and and improve the the results.

We feel that it's a of course agreed to put tune into true.

Integrate with our existing facilities called but its the most obvious one.

But we have here, which is quite interesting also for the future. So there is you have it.

Space land.

That can potentially also it creates optionality for the future for the group in terms of increasing capacity of this plant.

And and it would also highlighted that if we do that in the future.

And then Arcelormittal would 100% so.

Are those still keep 20% only of this existing existing asset.

I would also say that we believe that we have done this acquisition for a price that is below replacement cost.

Right, So I haven't seen and depress our very high multiples.

I don't believe that that's.

Probably the right way to look at it because we believe that profitability over this over this site will be better.

And of course, the security integration two high quality metallics.

To be quite important, especially NAFTA and it paves the way for its very strong footprint in enough to.

Thanks can you can you remind us what your somebody.

Hurdle rates or what do you think about investments for IRR I understand you can't tell us specifically about this project, but what is kind of the minimum level you would think about.

Hello, So our projects. We will also we will have a rate of about 15% right.

That's what we tried to achieve in most of all investments here as I said I think that probably the right way to look at this is what is the replacement cost right.

What is the potential of this site what it does right. So it basically so once you once you integrate that into call. It. So you have a very low carbon footprint.

That will be we will have secured its supply metallics high quality metallics are.

Competitive cost of course this is a city that is in Texas. So you have the lowest.

Cost of gas.

The World. It's a state that is also has also a lot of potential for renewable power.

You have also to think about the order benefits Oh. This after this acquisition. So that's why we feel.

We are very excited about this opportunity.

Okay and last one from me that you highlighted in your opening remarks, the yeah I think it was.

$12 billion in the book value of the JV, but I think realistically, it's hard to say that would be reflected in the share price today.

What are what are the options or what are you considering to crystallize some of that value perhaps.

Hello.

That's a good question because I think it's not only the G fees I think we have discussed that into Pos right and look at the valuation of Arcelormittal.

Right, So little and look at the multiples were talking about multiples look at the multiples of US a lot of it though right I think our focus there is really to continue to develop the jv's.

And I think we are doing a fantastic job in India, So, making good progress that tremendous asset look at Calvert.

Also a tremendous potential and in doing quite quite well, but it's not only the children Jv's I mean, all of all of the G fees.

Been performing quite well, all Chinese Japanese and European Jv's.

So I think the only thing we can do right now is to keep showing the benefits of this JV is there.

<unk> and <unk>.

Have to hope that at some point the market will realize that they have in front of them a very high quality company asset base that is.

Extremely good we are delivering very strong results. So that's all we can hope at this point.

Thank you.

Yeah.

Just to add to that as well I mean, I think there's probably more that we can do on the investor education side, and particularly to help the market appreciate.

The the quality of the assets are in India.

The quality of the management team that the specifics around the plans for growth.

So I think it's certainly a planned later this year to invite analysts and investors down to India to see firsthand the.

The work that's underway at the success that so what do you mean achieved Ah and why it was so passionate about the the growth potential of that business and hopefully that that can also be one of the catalysts for a greater appreciation by the market for us and for the value is not just that asset, but the broader portfolio, that's a JV and associates.

Yes.

And we will move now to the next question from Andrew at UBS.

Okay.

Hi, James Yeah people my questions are answered but.

Just a couple more first of all just on the to get outlook by Division could you just give us an idea for how you're thinking about volumes and spreads in each of the nice divisions and how we should think about that.

And then just secondly, big picture I mean.

A follow up to some of these questions around the M&A and use of cash aside from the 50% residual free cash flow guidance buybacks what are the main priorities.

The big picture by Seattle, Portland in Haynesville that they're going to say it is.

At renewables as Monte integration is it.

Access.

Balance sheet excess cash from the parent company getting them to places like India.

Yeah.

What are the main priorities that you think about in broad.

Broad strokes, thanks, a lot.

Okay.

Yeah, Andrew so.

Let me start with the second quarter.

So clearly AR is as we all know.

We would expect prices bids on what have been a sense, especially since you know beginning of March.

We would expect all prices overall to rise right realized prices should be should be stronger in the second quarter.

ER volumes, Oh expectation is for volumes should be stable.

Stable slightly up Spectation.

We hope that we can do better than.

And then Q1.

But I would say stable to a to a marginally higher.

And then we should not forget that causes people continuing to rise as well right. So we have not yet seen the full extent.

The extent of the cost increases as.

As we in Q1.

Of course, we benefited from the weighted average cost inventories.

So you should also expect that crosses food wise.

There will be some some higher energy costs as well in Europe .

But clearly when you look at our just.

Just kind of spreads prices.

Offsetting that.

Yeah.

Okay.

Net net you're talking about is some small expansion in spread in addition to staples slash site.

Yes, hi.

I'm, sorry, I'm not trying to suggest them that I'm, saying that we are clearly expecting a strong second quarter I think that's quite clear from all of our guidance.

I'm, not suggesting that it's high or low.

I'm, just giving you the components, yes, higher prices are stable to higher shipments.

And and higher costs.

And of course.

Not really I think you should also expect that when I talk about high as shipments you have to take into account the situation in Ukraine.

The fact that in Q1 still had at least a almost two months. So just kind of normal operations there.

You have to take that into account.

Yeah. So those are those are the high level moving parts central.

And then in terms of eliminate question I think this is something that we have discussed quite extensive and you also last quarter.

I think.

We don't want of course to compromise on our balance sheet. So I think we have a very balanced capital allocation policy and I think the focus is on de carbonization right. So you have seen.

The announcement regarding Texas.

So you have greencore in India, even though technically it's not an M&A.

It will be showing our capex, but that's the kind of things that are we have been focused on.

You probably saw soy small acquisition of a scrap company and and U K.

It's small but it shows how we see the importance of trying to improve all of the vertical integration to renewables and ensure mechanics.

Okay makes sense. Thank you.

Thanks, Andre So we'll move now to Bastian of Deutsche Bank.

Yeah, Thanks, and good afternoon.

I have one question on your non core holdings here I think you still have your stake in dealing on the business hopefully struggled over the last couple of years and now we've got this massive rally in plate and there's probably also much improved prospects in end market, such as energy and defense, both of which telling us quite exposed to so it's probably if they have to.

Say that the value, which is tied up there has increased what are you looking to do here because this may be an evolving opportunity window for you to realize value in an asset which is probably noncore, if you've managed to sort of sort out the very complex covenant structure.

People are interested in your perspective here.

Yeah, but I think that's a good point and you're right. So as you know in the past we actually took some impairment then the performance was for sometime now.

But it has changed a lot.

You rightfully pointed out and I think the potential it's good given the transition to more renewables.

The demand for place.

So I think that it's good so at this point in time I don't think we are looking at are any anything else. So.

With the holding the asset and are.

In constant dialogue with the management team there.

So yeah, so that is no.

Changing the strategic direction right.

Okay. Thanks. Thanks, so much just one question actually just this company an entity also under your scope of decarbonization targets.

No. It's it's a company that we don't have we don't have control over this company right. So we have oh.

We have a significant stake, but oh, it's not controlled by us.

Okay understood. Thank you.

Yeah.

Thanks, Bastian. So we'll take the next question from grant at Bloomberg Intelligence.

Good afternoon. Thanks for taking my questions two specific questions on decarbonization and the first one is on on the your latest announcements in France way, you've increased or accelerated the investment in decarbonization.

Just curious to know I think initially you sit at Dunkirk you were going to save about $2 8 million a million tons of C O two.

<unk> jumped to 7.8.

And it seems to be for a fairly marginal additional investment. So I'm just keen to understand the dynamics there and how that's how that's increased quite significantly.

So that would be my first question and then just a point of clarity on on the Decarbonization. Your initial 10 billion estimate.

Can you just remind me.

That was that.

Exclusive of any government funding that you would've gone towards that so it's 10 billion and any government funding would reduce that total amount just as a point of clarity. Please. Thank you.

Yeah, So let me take that.

Second part of your question. So maybe then maybe you can.

<unk> tried to find the reconciliation of the CEO true targets for us, but I can also talk about it.

So it had 10 billion.

So that's so what we have announced for this decade right. So this is what we believe we're going to be spending from.

From now to 2030.

And we believe that we're going to be spending about 35% of all this money in the next five years.

And this is a gross number.

So always spectation is to get from governments, yeah funding in the range of 50% right and.

So and up to now we have announced including all of these projects. So we have announced projects in in in France and Spain.

And and in Belgium, and also in Canada, where I think we are well ahead now because we have confirmation from the investments from the Canadian government. So we have.

Secured investments in the range of 900 million Canadian dollars, so that it's about 50% of the announced investment there.

So we are I think they have a very good dialogue if the member states in the process now is in the hands of the commission.

And we expect to hear back from them relatively soon.

So that's on a second part of your question do you happen to know what the.

I think it's part of the question.

The reconciliation to the seven point I can confirm to 7.8, but I don't have a bridge from our from the original number two to that so if it's okay. Ground's I'll follow up with you after the call having spoken to the team.

Oh no. That's brilliant. Thank you and then just just again just not to be too pedantic.

In terms of the acquisitions for instance in your in the H B I planted that's not included in the $10 billion you got it to the 10 billion is exclusively for your own investments as it were.

That's correct, that's correct and grant.

Thank you thanks very much.

Great. Thanks.

I will.

Look now at JP Morgan.

Hi.

Daniel Thanks for taking my questions two from me Firstly just.

To follow up on the Kohl's of the questions on sort of excess capital one specifically on M&A.

And you'll comment earlier, just around Macau being cheap.

I think we can all see.

Theater for multiple weeks free cashflow yields real very cheap.

I mean investors.

It's about M&A if it comes up in pretty much all conversations I have about the investment thesis.

If I was being critical.

Don Corpus Christi, which correlates with I think it's a good acquisition, but we're saying renewables M&A pop up store for India. The scrap company you mentioned in UK. It it doesn't necessarily appear that there is.

Actually our strategy on and on where or what is being spent on M&A can you maybe just clear up what the priorities are here from an M&A front and I suppose what's that have got questions on the floor of a life potentially selling an asset or flattening out in Brazil.

Is that something that could potentially be an asset of interest went up.

Yeah look so maybe I would just say that.

Uh huh.

And I think we havent been giving this message very consistently that we don't want to compromise what we have achieved right. So we will continue to be very diligent.

Focusing on making sure that the balance sheet continues to be strong as you know we have a net.

Net debt limit as well.

We have imposed on ourselves.

And I think you can see the level of returns that we are.

You know returning to shareholders I think that is.

We believe that it's unprecedented really in the industry right. So not nine quantify.

And for US, it's all about again, reaching the right balanced where we developed a business, where we return cash to shareholders.

And we have been very clear as well that are.

Improving or accelerating the decarbonization is it strategic.

We have said also that are achieving this level of vertical integration within renewables metallics.

And definitely believe in the future loop payoffs nicer than and we actually have seen that when we did this move to be more integrated to iron ore.

Right.

So I think the strategy for Muslim Mala.

10 point, it's it's clear.

Yeah.

I hope it helps a lot.

Sorry, just the last part of my question was that the.

Sure.

On slide no.

Brazil.

Some press articles have suggested.

You might be interested in that can you.

Comment within the bounds of what you might you can say about that.

And no comments on that.

Okay No problem and then second question is just.

On the buyback a two or three.

The sanctions are part of the question. Firstly can you concern didn't meet how family and not participating in buyback.

And secondly.

Given the quantum of free cash flow and your capital allocation process around return.

Is there some form or do we breached some from a technical effect that will cap out.

Share buyback level in future periods in terms of potential ownership from the family or intend solved index Whiting.

And then steadily.

Your approval yesterday for the buyback I think is 10% amortization of the share balance.

Which.

Luckily significantly lower than what they.

The shareholder returns could be this year.

I'm just trying to think about how we should be framing additional returns.

Don't have approval for for the buyback.

Yeah.

So the first part of your question I think that's in our press release. So the Mittal family has decided not to tender or not to participate into share buyback.

Similarly to what they decided to do with the previous one.

All right.

I I am not aware.

We looked at our we may hit any any any limitations here with them.

So.

I don't believe that that's a that's an issue.

And and the 10% to 10% I think is important it's very standard in Europe right. That's what normally.

You get the proxy advisers also to support.

In 2021, and we did more because of course, we had the divestments as well to return.

Yeah.

The first building that we did and that'll be completed in April that was still part of the old authorization and to the 10% that we have now.

It's a it's a all available so.

So that I think that's that's that's important but you should not read much into that I mean, that's as I said, it's just very standard percentage and they forget to the conclusion that okay. That's not that's not enough and we can always go back and ask for more authorization.

And you probably saw as well that we have asphalt relation to cancel shares.

And which is has been of course, the whole point here that we.

Goodbye and and canceling.

Okay, and just quickly on that last point.

If with the Mammoth tree.

How how would that be traded is that.

Form part of.

The amortization of shares.

Well I mean, if you look at our presentation that it's one hum.

Please showing the evolution of our share count.

And that includes the M C B S well, Brian as you know we have we have bought partially already the EMS put.

Put into occasions are part of the M C b.

So we'd see the M. C me any buyback of the MCP very similar to a share buyback.

No.

Focus right now is has been on on there.

The outstanding AR chefs.

But that remains I mean, as we have done already to time that remains a remains a another offshore though the amounts now are much much much smaller right.

Okay understood. Thanks, a lot for that.

Yeah.

Great. Thanks.

Now to Rochus at Kepler go ahead workers.

That's how I am thanks for that.

My question I have some to arch the onus on on scrap I guess, you flagged a small acquisition before.

Can you give us a bit of a sense for it.

Are you know the kind of longer term ambitions. There you know it's the first small step in this thing gets pretty small compared to your backwards integration and TWA Renault for example.

And I was also interested to see what the relative.

Our peerless off buying external scrip companies versus for example, pushing.

The circle.

Economy model by you know brokering deals with customers in directly getting bank prime scrap that B plus.

First question.

Yeah Brook, and Seth So we do that as well right. So we have a number of contracts.

To get back scrap and this is something that we have been doing for quite some time of course normally it's high quality scrap that we can use in our sled.

Business.

So that is not changing.

Thank God. It's it's it's this is really a small I mean theres acquisition is small in the market in Europe as you know.

It's very.

We'll rise I mean.

That if two exceptions.

So for us we always.

So let me Oh real close with this acquisition we want to.

I think it will also improve our Oh, Oh and Knowhow here, what we can do what we cannot do learning from this the.

The management teams.

So I think at this stage, it's probably very early to to set targets for this Uh huh.

This initiative.

Okay. Okay. Okay understood and then the second part is on H B I again on the deal in Texas.

I guess are you you mentioned that one direction of the output will be towards the Calvert.

So I guess this will be kind of a hot charging off H b I into D.

Yeah, Yeah, and Calvert, which is probably not the same model youre doing them. If you are the deal right plants, but maybe correct me if I'm wrong.

So what would be the kind of thinking why it makes it tends to kohl's charge H B I and how shall I think about the further development of the pellets side do you would you rather think about you know purely growing that metallics exposure or could it also mean that you could have missed it.

Yeah.

To cope with Chris deciding in different direction.

Oh broken so we look at all of this right and the hot charging or charging the cold call. It called H B I of course, the hot theorize. So you do have some savings right and if you have that presuming T. If you can do that that's a hard charging that's.

Normally could.

But it doesn't change the economics, so much the economics for us here right. So.

It is a great opportunity to do the integration.

And yeah. So I think that's our that's how we are seeing it so it does change a bit but it doesn't fundamentally change its who will not change.

Change the decisions here.

And then I I think we have the optionality as I discussed at the beginning so we have acquired as I said, so we have a great. So strategic advantage I would say we talked about the gas we haven't bought.

Which is a nearby so you can you can very easily transport materials either to covert to Europe .

It's very competitive freight rates.

So we have the land so yeah, we can.

It creates a lot of Optionality point of view.

Okay.

Very good and then maybe finally I'm on your working capital.

Yes, you're saying in your statement today that you expect further working capital built.

How shall we think about the magnitude in the second quote a west as Q1 and probably any any color on.

What might happen in the rest of tier.

Yeah.

Well as we discuss Suez, we expect prices steel prices should be it should be generally higher raw material prices to be higher so.

It's spectation is not investment in working capital.

I would expect a what was the number two would be.

A little bit lower than what we spent in Q1.

So not more but less.

Right and and.

In portfolio as you know I mean, it's a at this point, we are not providing that guidance.

I would just say that I'm told is money that we have been investing in working capital and.

Almost all of it on account of prices sits on our balance sheet right now.

And you can see that so it really depends.

How you see the evolution of the bit of the company in the second half right. So you show more bearish Dan you should also expect that there will be release of working capital in each of them more.

Optimistic then assuming that there can be some investments it's also realistic.

So that's how I would encourage you to think about it.

Should you should expect that there will be always a correlation between our EBITDA and working capital investments. So all release, but at this point in time that is very significant amount of value that has been kind of.

That we have on the balance sheet on this.

Of course.

Okay. Thanks for clarifying that.

Thanks, Rochus as it will take the next question from Phil at Keybanc.

Okay. Thank you.

Wanted to confirm that the the outlook for stable volumes excludes excludes Ukraine.

Yeah, that's correct I think that's what we are writing as well.

You have to assume that because even the pig iron that we are producing right now we don't really count that as a shipment.

It's a byproduct it's.

It's a semi finished product.

A lot of steel product technically.

So we don't count that as part of our shipments.

Okay. So and then of course as we discussed we're running at about 20%. So you have to take that into account that's correct.

Okay.

And then just a follow up and I apologize if I missed it but where were you all on our progress on the hot strip mill ramp and in Mexico. Thank you.

Yeah. Thank you. Thank you for the question Phil I think they're all very excited with the progress there in Mexico.

So.

We are going to we are in Q2, we should be reaching about 40% in terms of run rate.

And in Q3, we should always Spectation is that we should be moving about 60%.

And then.

We start Oh, we have already started and we should be.

Moving on bad to the trials with industrial accounts trying to get the certifications or more locations.

But we are very pleased with the progress so far.

We have actually indicated in our release that we expect already a good contribution this year coming from the Hot strip mill.

We have indicated that it can be he's a range of $100 million this year.

Thank you.

Thanks, So just talking about there is more detail on page 24 of the results stack. So it has a couple of charts on the ramp up and also just the numbers that Jim you know just confirmed.

And so we will now move to the next question from Divesture Goldman Sachs.

Hi divestiture.

And just a second.

Okay.

Okay. Dennis you May go ahead now.

Thank you.

Last question is could you provide some more detail on mill utilization across each division during the basketball is huh.

You know how much impact.

Hi, Angie coffee all right on the Bahia from crisis hop on on utilization.

How do you expect utilization to evolve over the next call.

Uh huh.

Okay.

Yeah.

We don't disclose the capacity utilization, but what we have been saying and it has not really changed if you look at all of that business are across the board we have been running a fool.

And it was also the case this quarter.

Our longs business in Europe , we did announce that we will because of the high energy cost are deciding to not operate the finances at certain point in time during the day when prices are very high.

But that has not really had a material impact on our production overall I think what we have seen in the long business in Europe is that prices have also steel prices have also moved up.

To reflect the higher prices. So I think we have not really seen a squeeze in terms of profitability in Q1, I guess I guess Q4.

Uh Huh I think we have also done a good job when managing the energy prices overall.

In Q1 against Q4, as we discussed in the previous call.

Because of all the hedges that we did not really see a significant increase in costs.

In terms of gas.

In Europe .

And when I think about the quarter too.

But we will see some increases in costs coming from LNG and including I.

I guess and.

And Paula.

But that should not really be so significant.

So that's oh, we have seen it.

So thank you.

Second one is when I said that our capex forecast.

Full cost have been maintained and do you see any inflationary pressure affecting topics or have you already factored in and marginal safety and protection.

Well typically we do have some some some some some contingencies embedded in all of our projects right I think it's a it's a very good point and and is this something that we have been monitoring very closely so far so good.

But it's it's something to watch out.

All the teams are aware of that are there.

Risks of course.

But so far I think the teams are doing a good job.

We have also been active in projects, where we are more exposed to currencies as an example.

So we have been also hedging that when we see opportunities to try to make sure that we deliver on the the budget rates.

So we are taking actions, but wherever we can.

But that is always a risk in this environment you can have some overruns, even though today.

That's not the case.

Thank you.

Great. Thanks, So we're running up against time here, but I think we've got time for one last question from alone from auto and then any other photos will take offline after the call.

Oh I'm sorry go ahead, yes.

Sorry, Thanks for taking my question I guess coming back to the valuation of the game.

It seems like despite all your efforts are in the market is really not willing to recognize the value inside the film itself.

I think the stock is trading at a two times EV to nominate EBITDA, we've just oh, it just doesn't make any sense. So.

My question May sound, a bit provocative, but why not just take the company private.

Well.

So I think we share your views that devaluation is oh, it's really very very low but we are.

This is not something that is being considered.

Okay. Thank you.

Yeah, and perhaps I can just complement Jimmy no. Obviously you know it's a it's a recurring theme it is something that.

We're very conscious of that.

Management and the board are very conscious of as well.

And it's it's difficult to rationalize is clearly very frustrating.

But.

I think what we can do.

222, some will take advantage of that is to just continue with our capital returns continue without share buybacks.

That is one way of sort of capitalizing on this very discounted valuation and I know when we looked at this last year.

The amount of shares that we were able to repurchase and the impact that that had on the.

The book value per share, but also the intrinsic value on a per share basis was very very significant and very demonstrated at the this sort of.

Value creation that we can achieve through our share repurchases.

If we can continue doing that and then then at least we can take advantage of this discounted valuation.

Whilst it's that whilst of course, making up of your assets to add to rectify and trade it.

More at multiples, which would be a better reflecting if the size scale and diversity.

Leadership and qualities that awesome until the house.

At that time is the last of the questions that we have there were a couple of follow ups, but I think we will take those offline. Jim you know so I'll hand back to you for any closing comments.

So thank you Dan and thanks, everyone for your interest for your questions and speak to you guys. Soon thank you very much.