Q3 2022 ArcelorMittal SA Earnings Call

[music].

As Daniel Fackler from the ASO Mitchell Investor Relations team I'm joined on this call today by our CFO shall we know Kristina.

I hand over to Jim I would like to mention a few housekeeping items, Firstly I want to refer everybody to the disclaimers that are on slide two of the results presentation that we published on our website. This morning I'd also like to remind everyone that this call is being recorded and its schedule to last up to 45 minutes. Finally, if you would like to ask a question then please.

Press Star one on your telephone keypad, and we went out and said the questions in the order in which they received with that I would like to hand over the call to Jim We know for some opening remarks.

Thank you Danielle and thank you and good afternoon everybody.

I will make some very brief remarks before we move to your to your questions I have basically three main points to make firstly on the current market situation.

So we have the man headwinds are being exacerbated by destocking through the value chain.

The destocking impact on apparent demand is very significant but we know from experience that it won last.

This gave us confidence that the apparent demand conditions will improve once the destocking phase reaches maturity.

My second point is on our response.

We are responding effectively by adapting our capacity for quarter, four and reducing fixed costs on the impacted homes.

At current spot levels variable cost.

And by that I mean, raw materials and energy on a per tonne basis are expected to decline.

In Q4.

The improvements we have made in recent periods are being tested by this difficult market environment, but results should demonstrate that our business is stronger and more resilient.

My final point is on the outlook.

Significant cash has been allocated to working capital investment in recent quarters.

This is now at peak, we believe and the expected working capital unwind should support free cash flow in a lower EBITDA environment.

Our balance sheet strength and expectation of consistently positive free cash flow underpin the continued execution of our strategy.

To grow and develop the business should be a safety leader in low carbon and steel and capture the growth opportunities in faster growing markets.

With that brief opening we are now ready.

To take the questions.

Great. Thanks, Jeremy we will take that for the first question. Please from Alain at Morgan Stanley .

Thanks Daniel.

Thank you two questions from my side. The first one is on the profit bridge for Q4, so besides the price indication indicators that we can see in our screens.

All of these moving parts that we need to consider before thinking about the EBIT bridges into next quarter, and perhaps an overview or by division that would be most helpful. That's my first question. Thank you.

Thank you thank you Ella.

I think.

And as I see quarter four right now are we going to continue to see to some extent some extent some of the same factors that we saw in quarter three.

Probably the most important aspect of the quarter will be the destocking that we expect will continue and probably accelerate.

As a result.

We will continue to see shipments being at the reduced levels that we saw in quarter three.

On a divisional basis.

We should be slightly lower in Europe .

Not not not really much but slightly lower in Europe .

In the auto divisions, my expectation is that we're going to be relatively flat, which I think it's a it's a good sign.

So prices, we know as spot prices have declined during the quarter and it will impact our realized prices in quarter four but more on the positive side of course raw materials also coming down we saw I don't know if price is down we saw.

Cotton prices quite significantly down during quarter, three and in Europe as we know.

<unk> prices have come down quite significantly from peak levels that we saw in August so that should help.

Help profitability of course in Q4, and then of course, we have to see what happens beyond that is has been very volatile.

<unk> seen as you know prices, reaching at peak levels, Yes price is more than 350 euros per megawatt.

And during few days recently, we saw prices as low as seven seven years. So.

We will see but we have a combination of a destocking.

Impacting the apparent steel demand and I would also like to say that in Europe .

The REO demand up to Q3 has actually.

<unk> has not really been the problem.

The problem has really been <unk>.

That really started in Q3, and we expect accelerates in Q4.

I'll stop here and see if you have any follow ups.

Thank you.

My first question. The second question is on working capital and capital returns if we assume that the current spot prices persist how much do you think you would be able to release in working capital in Q4 and throughout the balance of next year out of the 10 billion that you built and if youre free cash flow consisted entirely of working capital release next year would that give you enough confidence to continue your buyback program.

After may.

Yeah.

Hello, I'm working capital even for sure our expectation is to release working capital in the quarter for right and actually in quarter three looking only at inventories we have destocking as well the only reason why you still see any investment in Q3.

The loss in payables was greater.

The reduction in inventories, which is natural when you are in at this point.

Of the cycle, where we are adjusting production as you know adjusting also our procurement for changes. So we have that initial impact on payables and then moving into quarter four our expectation is that.

We will see significant release of working capital.

And then in 2023 I think based on what we know today looking at all the key leading indicators that we have I think it's a fair assumption that we can also be releasing working capital in 2023, I think it's early days to say to try to quantify how much but you know very well so up to now in the less.

Less nine.

Seven quarters, we have invested $10 billion so that is there.

Money that it's on our balance sheet and if market conditions remain challenging and.

In an environment of lower prices.

I think it's the first dictation that the company will release.

Our working capital next year should provide a good.

<unk> to free cash flow as we have been saying consistently and our and our intention is to keep our capital allocation policy. So to the extent that we generated free cash flow next year, then I think you should expect.

That the company will just continue to climb.

Paul is that so far we see has been very successful.

Thank you.

Thanks, a lot so I will move to the next question. Please from Tristan at BNP Paribas go ahead, Jason.

Yes, hi, Thank you for taking my questions, maybe the first one I think pushing a bit on the guidance.

Last time during Covid, we also had volumes falling significantly in a high level of uncertainty at the time you provided some helpful EBITDA guidance range.

Is there maybe a range you could share for Q4 or maybe if you could tell us if you feel comfortable with current consensus for the full year at $14 billion. Thank you.

Yes, I think.

As you know, we don't really provide that.

Quantitative guidance calls for a bit that the circumstances are very very different and I don't think we can compare what we what we have today and what we had back in 2020 so.

Would not be drawn into providing very specific guidance.

Sorry for that.

Alright.

Fair enough.

So the second question maybe.

On the Catholics and operations.

Can you give us an update on the situation I've seen in the release that volumes have picked up.

So how is the split between profitability between Ukraine, Kazakhstan, and South Africa in Q3, how you expect moving that forward.

More of a long term question.

Given your focus on sustainability and safety and.

And especially now given the context in the CIS region, how do you view your operation in Kazakhstan, how strategic are they and is the objective to invest more there or at some point maybe consider other options. Thank you.

Yeah, So I would say.

Because <unk> operations did well we had a good quarter.

So we have basically in terms of the order book in terms of production the company was able to.

Uh huh.

Achieve its goals. So we had a good quarter performance from a shipment point of view profitability point of view.

Exporting materials from out of out of out of the <unk>.

Kazakhstan.

Ukraine. Unfortunately, the situation, even though on the ground nothing has really changed the assets continue to be safe.

If it stays.

As we know market conditions have deteriorated.

We are facing more now blackouts in terms of power availability, but we continue to run the operations at a reduced capacity is still running one blast furnace at about 20% of the capacity.

And so far it's also recovering from some of the.

Labor issues that we faced in quarter two so.

I would say that stability in Ukraine and improvement in Kazakhstan in South Africa.

Regarding the strategic importance of.

Well, because I extend I think.

We are investing we have been investing and will continue to invest to bring this facility up to the mark.

There are challenges of course.

But we believe that with the <unk>.

Energy that the team has put on on this.

The investments behind we're going to be able to bring this facility.

The levels that it is.

Okay. Thank you.

Thanks, Kristen several moves to the next question. Please from Myles at UBS go.

Go ahead Myles.

Alright, thank you.

Just a couple of things that toll on order books, you know, how we called I am as you look.

Looking into 2023.

What's the best case in terms of the length of this destocking is as you look at the market today.

Yes.

Order book is so.

So key are taken into account.

Oh.

Our forecast for their parents to consumption right of course, they are not as high as they were before but in line with our expectations for.

Our finished steel consumption.

We discussed is going to be again weak as a result of the Destocking now the duration is very really very hard to say when it ends.

In our view it really started in Q3 already visible in Q3 of course and especially in Europe .

So we believe that probably we are going through the worst of the destocking now in quarter four.

So I think the teams are hopeful that we can start to see some improvement in terms of at least.

Closing the gap between the apparent steel consumption in view of demand.

Quarter, one on ones, but again.

It's very hard really true to be precise on that.

Okay. That's helpful. Maybe just on the auto side, a couple of things we could clarify what's the latest with the Liberia expansion now the Arnold prices have fallen and does that become.

More marginal project and then also when we think about Ukraine I presume there is no temptation to export I know, while the blast furnaces are down, but I just want to double check that that was the case.

Yeah.

In Ukraine start with your second question in Ukraine, and we have been operating the mines. So there was talk to during quarter three for some time.

More needed to help with the.

The cash flows in this talk.

The mine is running again, so we are running at about 30% and this iron ore what is what has not been consumed locally than it has been transferred to our operations.

In Poland, primarily.

So that has been the case already now for quite some time.

And Liberia.

As you can imagine when we run this.

Projects, our long term assumptions are quite conservative.

Right. So we never really Oh, let's see what happens, but we don't run.

When we go through the approval process for the for this project, we have a very conservative assumptions. So what we are seeing now in the market prices I don't know coming down it doesn't really change the prospects for this for this project we are continuing to see it quite as strategic for US we have invested heavily on the infrastructure and the pause.

So it just makes sense to complete this project as fast as we can.

Okay.

He is the best case in terms of seeing the new Tom's rampart.

Well.

So.

We are on target with all of them for the first for the first.

First phase.

<unk> thousand 'twenty 'twenty four I believe so then you can double check here for me, but I think it's fun.

Q4 of 2024.

Okay.

Thank you Daniel.

Yeah.

We can double check.

Okay. Thank you.

Thank you.

Sorry, I was just mixing my papers up that but in the meantime, we'll just move to the next question from Patrick at Bank of America. Please go ahead Patrick.

Thanks, Daniela Hi, Jeanine.

Two questions. Please.

First is just about.

The inventory charges that you've taken out of EBITDA can you just talk about the thinking.

Adjusted EBITDA can you just talk about the thinking there because it kind of feels and that we're only of accounting.

Positive margin sales in the EBITDA right because.

We write down inventory take it out of adjusted EBITDA put it in as an exceptional item.

And then when you sell it.

Then for recoverable value in the fourth quarter, it's going to come through.

Sort of zero margin or maybe slightly positive margin.

So does that does that the right way to treat that amount and then the second question is just on working capital I think as a follow up from our lens question. So.

We've spoken about the $10 billion.

I mean is that.

Excess.

High working capital because prices.

And volumes are good.

How much of that.

$10 billion should we expect to reverse in short is it the full $10 billion.

Or is there a portion that is kind of structural.

Yeah.

First one on the inventory write down I think what we are trying to do and this is consistent what we have done in the past.

FICO stand as it is the case now.

And I have for us.

You have to basically mark here inventories at cost or net realizable values. If thats a net realizable value is slow right. So at the end of the quarter. When we had this significant change we can go through all of our inventories and basically even raw materials, we convert that into <unk>.

Finished goods and then we look at the prices that we believe you're going to be able to to sell and to the extent that we believe does not going to be able to recover the cost of inventory then we round. It down we haven't you have these evaluations.

That's really what happened.

This quarter.

So it doesn't really belong in the operations of quarter, three and that's why I'm, giving the size we are showing it separately. So that you guys can have a good sense of the.

The true underlying performance of the business during the quarter and then.

Going forward.

Right so to the extent that we were right with our assumptions in terms of prices.

Then the stance when we sell it they will have zero contribution to our EBITDA going forward.

I suppose the point is that if we only did this at the end of the year right.

Your EBITDA would be $500 million less.

But.

Writing it down now and then excluding it from EBITDA and then selling it at zero margin next quarter.

It never goes through EBITDA.

Makes sense, but yes, I mean, I understand what you're saying in terms of write downs are typically excluded so so.

And then just on the working capital the quantity to expect to reverse.

Well I think a lot of the investments that were made they were made as a result of the higher prices selling prices raw material prices.

And in terms of volumes.

Quantities are relatively limited.

Patrick.

Well my expectation is.

Given where prices are.

Yeah.

My expectation is that we should be able to recover.

The large majority of towards the $10 billion as we move.

As we move into 2023 and beyond.

Got it. Thank you those are my questions. Thanks.

Thank you.

Thanks, Patrick.

Move now to Tom at Barclays.

Afternoon, guys. Thanks, very much for taking my questions. The first one just as a sort of slight follow up to Patrick's on the inventory write downs I'm slightly surprised that there wasn't any taken and especially the U S. But to an extent also a system, Brazil given spot prices have been pretty weak in those areas as well.

Not a risk of further write downs come in Q4 were those just not large enough for you to report as an exceptional item and actually those are included in the EBITDA numbers that's.

That's my first question.

Well I think Thats, a good question and I think it shows.

The change.

Because if you look back in prior years previous cycles. When we also had to take a.

Regarding inventories Youre right at that point in time, we had also launch amounts revaluation in NAFTA, primarily because of the O U S business that as you know we sold if you look at the profitability of the businesses in NAFTA.

In Q3, you'll see that it's it's it's different from what we enjoyed in Europe , and Brazil, as well and we have to Uh huh.

I hope, it's clear that in Europe .

That's really where you have very.

Very high energy cost so cost is a higher <unk>.

Don't really have the same issues in some other parts of the world. So.

That's why you really see this being.

In Europe and not in some other parts of the group.

Can we have more.

Yes.

Right now this is our best estimate right. So we would need to record more write downs only to the extent that.

Selling prices continued to move down.

So we will see but for.

Now this is our best estimate.

Right. Okay. So there might be some in that but it's not reported as exceptional.

Because if I sort of look at Asus for example, I see a similar issue.

In any case, maybe just moving on to the U S business. I mean, you mentioned earlier you see volume stable in all areas, except Europe into Q4, which is kind of surprising from my side. If I look at your slides, let's say U S flat apparent steel consumption down 10% year on year.

Hey, Steve.

Q3 shipments were still okay.

Up a little bit year on year, so that.

Rough math implies sort of down 15% to 20% decline in NAFTA shipments for Q4.

Which is obviously not what you were saying earlier I mean are you taking market share from.

Although mileham subtle as a female.

Babs is true just to clarify so when I say relatively stable in the same quarter on quarter.

Yeah, right, so quarter on quarter of expectations that shipments in <unk>.

Not that should be relatively stable. So let's keep in mind that we have different business. There's enough. So we have our Mexican operations Canadian operations right. So our expectation is.

Relatively stable volumes there.

It is also the case in Brazil.

And also in C I S.

Right, but if I just say.

Say stable NAFTA shipments in Q4 that means that's up 4% year on year, and Youre, saying the U S will be down 10% in terms of steel consumption. So is that you're taking market share or are you, saying kind of door in Mexico is going to be stronger.

How do I, how do I fit those two statements together.

Yes, I think I think that's that's the case so.

Our expectation is to do a little bit better in Mexico.

Canada and and so that's so I would not suggest that we are taking market share but.

I think we will be doing better in some of the other parts of the business.

Okay. Thank you I'll turn it back.

Thanks, Tom.

The next question from Rochus at Kepler.

Yes, hi, good afternoon, thanks for taking the questions.

A couple from my side one is on your remarks at the beginning of biology.

That there would be maybe early next year at a point, where from where our parents to demand could train better when the Destocking is complete.

When we look at the whole year of 2023, and we think about you know a reversal of working capital outflow stock movements.

The decline in real demand.

We'd like to see.

See what your view is on the moving parts on net.

Net.

Net imports in Europe .

We have been seeing structure decreasing exports over the last decade.

And also kind of a you know.

Growth in imports over the last 10 years. So what would you what is your thinking from here on now.

How net imports.

Most likely trending in 2023.

Yeah.

I think that's a good question <unk> and as you know we have seen imports rising in Europe , right, taking more market share from domestic mills.

And probably one of the reasons we were.

Of course.

Selling prices premiums in Europe .

As a result of the strong demand that we enjoyed for most of the last two years.

More recently, we have seen a decline in imports, which pretty much is a function of the arbitrage that existed for importers.

Basically.

Is it appeared right. So when you look at Asia prices and you add all the logistic cost to get the materials into Europe .

Then I think that the incentive for.

Imports are greatly reduced.

That is a.

Thats, how what we are seeing right now.

So we'll see how it evolves but.

The dynamics that we are seeing right now.

Alright and linked with stat.

What how should we think about.

The impact of energy costs with that overall lead to somewhat higher prices in Europe or shall we assume that if that persists next year and beyond.

Industry margins will be over a logo.

Yeah.

Well I mean.

As you know the energy crisis.

Crisis call. It it's really in European phenomenon right now right. So.

And the whole industry in Europe is exposed to the same to the same dynamics some news more more than than others.

And that's why you see the industry as a whole are responding.

If you look at it I think in September you can see that as a significant reduction in production.

In Europe . So the industry is responding to that and that's probably also an important fact to hear them because.

I think the market will start to see more of the impact of the cuts going forward. So that should also help.

In terms of rebalancing supply to demand.

Demand.

Right so.

I don't really want to speculate because as we were discussing this.

Spot prices for natural gas at least for some time were extremely low.

You look at the average prices that we have right now in Q4, our prices are of course, not yet back too far from the levels that we had back before the war, but it has come down quite a lot.

So we'll see what happens next year, but I think this is this is not specific to any particular company. It's an industry problem. It's I would even say, it's an European problem and it's something that.

We believe that governments will need to address I think that's it.

Extremely important.

For the industry not only for the steel industry, but for the entire industry in Europe .

Okay and.

Jimmy No I'm, just if I got that right. What you said before technically win during these times of higher energy costs.

When you put steel on inventory it means stay higher energy costs are baked into the <unk>.

At cost valuation.

Or in your books.

At the end of the day.

Correct correct.

Yes, so the revaluation.

It's always it's always done rock was take into account everything fixed costs everything so it's the full EBITDA close.

Okay, great. Thank you.

Thanks, Rochus. So we'll move now to Bastian at Deutsche Bank go ahead Boston.

Thanks, David and good afternoon all.

I wanted to ask two quick questions. Please.

Just first of all on volumes and also your volume for the molecule come from what I understand you take out another blast furnace and force in France.

So I understand that correctly that will happen towards the end of the fourth quarter.

And then would obviously suggest that you expect you want to be potentially flat or worse and if I understood you correctly.

Youll expecting destocking to ease in the first quarter.

Could you maybe help us to reconcile this are there any plans.

That he may actually bring back capacity at other places that would be my first question.

Yeah.

And we are.

I think it's important also to put in perspective right. So.

Some of the finances that we brought down I think there is a combination here of <unk>.

Maintenance that would happen regardless, so that's the case with one of our furnaces in Dunkirk that is known for about six weeks, so that tenants will be back.

Towards the end of.

And the end of the quarter right and then some of the order.

Idling furnaces, it's really as a response to the current very weak apparent steel.

Demand that we are seeing.

And we are also doing it to some extent to control and make sure that we don't end up ourselves with more inventories than then why do we need it and in the company as a company we will retain a lot of flexibility because we can bring back to finances relative.

Relatively quickly in case, our spectation of better parents to consumption demand next year really materialized.

And our position we're going to be in a position to do that I think what is important is the message is that we are also.

Of course focus on making sure that we retain market share.

So I would not like in this call that you guys walk away with the idea that we are taking more pain than the rest of the industry. So a lot of focus on making sure that we retain market share.

Okay. Thank you. Thanks for clarifying and then my second question is on Cotwo certificates, if we look at your shipment volumes.

Mostly been training week already and then.

With your production cuts.

Potentially be left with some excess yield certificates.

Just to confirm did you did you hold onto any excess locations here just given the relevance of those also for I guess the next couple of years. So I have been have you been possibly selling some into the market as you used to do at some point over the last couple of years.

Yes.

Ah.

That's what we have been doing it and it was also done last year.

So the business as we know everybody's short in Europe right. So.

Companies have different hedging strategies different hedging books, we have ours.

And last year, what we did was every quarter.

Then on the shortage, we were just going out and buying the certificates for.

To cover that shortage and Thats exactly what we continue to do this year. So on a quarterly basis, we measure we see what is the shortage.

Go and buy.

So we are not touching on.

Our hedging position.

We have been to some extent lucky because as you know given the volatility with the energy markets and you have the prices have come down.

We took advantage of that so I think we have it we are achieving this year relatively good average price for <unk>.

Over the.

The shortage of the year.

But that's it.

Okay. Thank you.

Thanks, Bastian. So we'll move now to the next question from Max Go ahead, Mike.

Yes, good afternoon.

I think the question was already partially answered, but some clarification is was that a full year. So it seems that youre much more aggressive than your competitors in terms of curtailing capacity.

Also be players in Europe have not announced such plans.

Two two most verifone is so yeah isn't sales of research.

I mean.

Decline much more.

Significantly in the quarters ahead than the competitors and isn't too that you're late on even on any potential.

Upturn in demand on does that help.

Much time would you need to bring back.

Idled furnaces are back into operation.

If demand picked up so that with method with question.

Yes, Mark I mean, as I was saying.

In addition, as our focus on <unk>.

Shane.

Production to demand.

Our focus on maintaining our market share.

Right and then when you look at the production that for September for Europeans.

Can see that on average September was down by about 17% and that's what we are guiding also for quarter point in terms of production cuts. So I think.

The industry overall seems to be again I cannot speak for the competition, we're looking at that.

Just that.

The industry is.

Doing the same.

There can be different types of announcements and in our case given the size of the operational footprint, we have the flexibility to bring Darwin finance and then work on reducing the associated fixed costs.

And if you don't have that flexibility then you can run.

Youre tools at lower levels without necessarily bring it completely down so.

So I think thats, probably what is happening looking at data that is available.

So I think we're going to be in a position to continue to.

Service the market.

Finally, and again pretty much focusing on.

Our overall market share.

Yes.

Okay.

Just going.

Going back to your Capex guidance. It does seem significantly trimmed out from from four to $3 $5 billion.

Excluding FX that is zero point.

Five.

Curt.

No.

I mean can you get more specific on the delays you have identified.

In your presentation and whats itself.

Delays in <unk>.

Extending the.

The revised guidance I mean does it does the investment versus the <unk>.

Voluntary cuts that you're undertaking.

More difficult background.

Yeah.

Yeah. Thank you think amongst I think that's a very good asset.

Very good question and I think by the fed.

Message is that we are not changing or slowing down any of our strategic capex.

Given the.

In my opening remarks, I was making the comments on.

The strength of the balance sheet.

The change to our Capex forecast guidance.

It's really linked mostly timing really I mean, you talked about the effects. There is an FX component here, that's about 200 million that we have identified.

Hi, Dan to find that as we know we have seen significant effects change during the quarter.

So it's more timing, it's really about our ability to mobilize contractors, but I think we are.

Gaining speed and that's why you see our guidance for quarter. Four there is an acceleration we are guiding for about $1 5 billion to be spent in Q4.

And then when you look at our.

The second half of 2022, we are giving us an indication that it's probably a good number for 2023 of course, we are in early stage of our budget cycle, and we will provide more clarity and guidance on 2023 Capex.

As we report results, our Q4 results, but I think thats a that is a good reference.

At the moment.

So.

Some of the reduction in strategic Capex.

Really spread out in some projects in Brazil, we face some delays in Nevada and <unk>.

Again, as I've said mobilization.

Contractors, primarily.

And also in our project in India, but we don't believe that it should cause delays at this point in time.

Assessing that but.

We believe that we should be able to catch up.

Okay. That's great. Thank you.

Okay.

Thanks, Max So we'll move to our last question actually which is from Moses at J P. Morgan got message.

Hi, Thank you very much for taking my question so piece.

For me I wanted to start with the energy hedges that you've you've touched on so.

Given the change of UGI gas consumption, 30% year on year, but could you give.

Give us some color on I guess the absolute impact.

The hedges sequentially and.

What are your plans on energy consumption into Q4, and 2023 and to help with that could you just provide how much of your energy.

Purchased one small.

Yeah.

That's a good question and I.

We went to some extent lucky.

We will of course in this rising.

Market in terms of energy prices I think reacted fast.

We locked in a good part of our consumption for quarter, one quarter two to some extent also quarter three.

And if you see our deck you can see that in each one and we basically managed to keep our costs and we have been talking about it our cost relatively stable compared shoe.

Quarter four of 2021.

Of course, we cannot keep up as prices continue to rise.

And you see the $300 million impact and quarter and quarter three.

But because prices were rising our ability to continue to hedge as much as we would like for quarter four.

Not there and it was at some point it became riskier because prices were very high. So we have we have not hedged much quarter four.

Some but not much.

As a result, we are benefiting from the very low spot prices that we've seen.

So my expectation is that the average spot price is that you can see on your screen.

Should basically reflect what we have for quarter four.

And then.

Two one.

I would expect the same thing.

The environment is such today that it is hard because you have to get.

And the commission and the member States in Europe discussing caps.

So it's unclear really what kind of measures we will be in place.

It just makes it harder for you to go out and and locking in prices knowing also that to the forward prices they remain higher than spot prices today.

Yes.

Yes. Thank you and then also say given you.

Curtailments, so what's been the impact on your fixed and variable costs and how do you expect that to.

It evolved into Q4, basically how much of your fixed costs.

Become variable into into Q4.

Hey.

Yes, I think thats, one one of the key aspects of <unk>.

Idling some of the capacity you match production to demand.

And then you can also focus on verticalizing, our fixed cost as much as possible we discuss.

I don't have the same schemes that we had back in 2020 at the time of Covid, but we do have schemes still available to us in most countries, where we operate so the focus is on working with the unions will take all employees.

To have as much of the fixed cost.

Moved for as long as our hour.

Our finances are down.

It's a significant percentage I'm not going to be specific.

But we believe that we can remove a good part of the fixed cost.

But.

Fixed cost, but Don as we bring down capacity Bill.

We will be impacted so fixed cost per ton will increase as we as we reduce capacity.

But it's still economically is the right decision.

Thanks, and just because you touched on it just then how some of your.

Labor agreements.

<unk> in Europe , and also in Brazil into.

Into 2023.

Well I think this is a challenge that everybody will face this as inflation has been high.

I think this is going to be a hot topic, not only for us but for everybody in 2023.

And it's going to be a discussion with the unions with our employees to find what is the what is the right balance where we are.

We attend the needs, but we also make sure that the company remains competitive remains viable.

So it's going to be.

Fine tune I'm trying to find that balance.

And on top of that as we have discussed at the beginning of the year our management game plans.

We launch we continue to track and follow that very closely.

We continue to work on productivity I think the company started really has always been has always done well and working on.

Improving productivity and I expect us to continue to do that to mitigate some of the <unk>.

Cost inflations that.

That is happening and everybody will need to we need to face.

And those expectations included in.

Future Capex assumptions as well.

Well, yes, yes.

At this point because we are working on this strategic capex off for some time.

So we have a good idea of cost is associated with these projects.

We also saw effects, bringing down some of this capex.

So there are some offsetting aspects as well and it's not only <unk>.

Everything is negative. So there are also some positive effects that Scott.

Okay. Thank you very much.

Thank you.

Great. Thanks.

And that was our last question actually Jeremy that's how I will hand, the call back to you.

Thank you Daniel and thank you everyone for joining our call today.

I think we had a good discussion around how we are responding to the market challenge.

I hope that you take away one message and it's one message is consistency.

Consistency in our focus on safety and industry leadership.

Consisting our free cash flow generation and consistency between how we allocate our capital to growing and developing arcelormittal.

While continuously returning capital.

Our shareholders.

Yes.

Thank you very much thank you very much.

Yeah.

[music].