ArcelorMittal S.A. Q1 2023 Earnings Call

May 4, 2023

Investor Relations team.

We also Mitchell Investor Relations team and as usual I'm joined on this call today.

As usual I'm joined on this call today by which I mean, the Christina our Chief Financial Officer.

Christina our Chief Financial Officer.

Before I hand over to Jim you know I'd like to mention a few housekeeping items first I want to refer everybody to the disclaimers on slide two of the results presentation that we published on our website. This morning I'd also like to remind everybody that today's call is being recorded and its scheduled to last up to 45 minutes.

Before I hand over to Jim you know I'd like to mention a few housekeeping items, Firstly I want to refer everybody to the disclaimers on slide two of the results presentation that we published on our website. This morning I'd also like to remind everybody that today's call is being recorded and it scheduled to last up to 45 minutes and finally I'll.

Finally, I'd just like to reiterate fronts. He's instructions if you would like to ask a question. Then please do press star one on your telephone keypad and we will take the questions in the order that we received them.

Just like to reiterate Crunchies instructions, if you would like to ask a question. Then please do press star one on your telephone keypad and we will take the questions in the order that we received them.

With that I'd like to hand over to Jim for his opening remarks.

Thank you Danielle and welcome everyone.

My remarks today will be brief and focus on our three points only.

The results results continued to demonstrate improved profitability relative to prior cycles growth.

Results.

<unk> continued to demonstrate improved profitability relative to prior cycles growth.

The capital we have allocated to growth is delivering and supporting higher normalized profitability for Salon, Midtown and the third point I will address capital returns.

The positive outlook for the business and for our free cash flow generation, we are launching.

Positive outlook for the business and for our free cash flow generation, we are launching.

A new buyback program.

Firstly on results.

As expected at the end of the Destock has supported a strong recovery in our shipment volumes. This has underpinned the sequential improvement in profitability.

As expected at the end of the Destock has supported a strong recovery in our shipment volumes. This has underpinned the sequential improvement in profitability a.

Per ton improved to 126.

EBITDA per ton improved to 126.

The first quarter, comparing very favorably with prior cycles. This further highlights the benefits of our cost actions and portfolio upgrades in recent periods secondly on growth.

First quarter, comparing very favorably with prior cycles.

This further highlights the benefits of our cost actions and portfolio upgrades in recent periods secondly on growth.

The quarter this quarter, we completed the acquisition of CSP in Brazil, adding 3 million tons of highest quality capacity at the bottom of the cost cuts you.

The quarter this quarter, we completed the acquisition of CSP in Brazil, adding 3 million tons of highest quality capacity at the bottom of the cost curve.

You will see the full impact on shipments and profitability in the second quarter.

Together with the text of HDI plant, we acquired last year and the contribution from the new Hot strip mill and in Mexico. Our investments are clearly supporting higher normalized profitability and our investments continue we have this quarter announced the formation of a JV with catheter with Ventas to develop.

Together with the text of HDI plant, we acquired last year and the contribution from the new Hot strip mill and in Mexico, Our investments are clearly supporting higher normalized profitability.

Our investments continue we have this quarter announced the formation of the JV with <unk> to develop 554 megawatt wind power project in Brazil with a modest equity contribution. This project can supply up to 38% of electricity needs in the country.

554 megawatt wind power project in Brazil, with a modest equity contribution this project can supply up to 38% of our electricity needs in the country.

Finally on capital returns our capital location and return policy is working very well we are growing the earnings power of the business through our strategic Capex and M&A and we are gearing the benefits of this of this to shareholders by buying back shares and reducing the share.

Finally on capital returns our capital allocation and return policy is working very well we are growing the earnings power of the business through our strategic Capex and M&A and we are gearing the benefits of this of this to shareholders by buying back shares and reducing the share count.

We have now bought back 31% of our equities since September 2020, and still developing the businesses strategically and maintaining a strong balance sheet.

We have now bought back 21% of our equities since September 2020, and still developing the businesses strategically and maintaining a strong balance sheet.

Given our positive outlook for the business and for free cash flow. We have today announced that we will buy back up to a further 85 million shares over the next two years.

Given our positive outlook for the business and for free cash flow. We have today announced that we will buyback up to a further 85 million shares over the next two years.

We see our shares as fundamentally undervalued and our buybacks we present, the best way for us to capitalize on the disconnect between our view on the outlook for Arcelor Mittal, and what is being priced today by the markets.

See our shares as fundamentally undervalued and our buybacks we present, the best way for us to capitalize on the disconnect between our view on the outlook for Arcelor Mittal, and what is being priced today by the markets.

With this brief opening remarks, then I think we can then move to the Q&A.

With this brief opening remarks, then I think we can then move to the <unk>.

Great. Thank you Jeremy So we have a queue for the questions I will take the first question. Please from Alain at Morgan Stanley Go ahead. Please.

From my side Firstly, the usual question can you share with us the usual building blocks of your Q2, EBITDA, including prices on shipments by region, but also including those items such as the CSP contributions and the impact of the fires in Europe .

From my side Firstly, the usual question can you share with us the building blocks of your Q2, EBITDA, including prices and shipments by region, but also including those items such as the CSP contributions and the impact of the fires in Europe .

Just thinking about the building blocks until Q2, that's the first question. Thanks.

Yes. Thank you for the first question So let me.

Walk you through the moving the moving parts.

Walk you through the moving the moving parts, so let's start with Brazil.

Let's start with Brazil.

That's where we have the.

That's where we have the reconsolidation of CSP. So in Q1, you only have like 20 days of contribution so it's not much.

Consolidation of CSP. So in Q1, you only have like 20 days of contribution so it's not much.

The asset is performing extremely well.

It is performing extremely well as we have in our slide deck, you can see actually providing what is the run rate in terms of EBITDA in the second quarter. You can see that we are guiding for a run rate annualized Q2 of about $600 million.

We have in our slide deck, you can see actually providing what is the run rate in terms of EBITDA in the second quarter. You can see that we are guiding for a run rate annualized Q2 of about $600 million.

Which is way.

Which is.

Way above what we believe to be the.

Way above what we believe to be low.

Normalized levels for profitability for this business. So Q2, we will have the full consolidation. So you will see a meaningful impact in our shipments also our.

Normalized levels for our profitability for this business. So in Q2, we will have the full consolidation. So you will see a meaningful impact in our shipments.

Also our.

Our flat facility to bundle will be producing more as we have as we have seen a recovery of D. A.

The pricing, especially for high quality slabs, so shipments improving quite nicely in Brazil.

We will see prices in Brazil relatively at the segment level relatively stable.

We will see prices in Brazil relatively at a segment level relatively stable.

Cost is coming down.

So that's that's Brazil, if we moved to to not.

So naphtha as you can see our shipments in Q1, we had higher shipments to our JV in Calvert quarter on quarter, that's about 250 K tomorrow.

So naphtha as you can see in our shipments in Q1, we had higher shipments to our JV in Calvert quarter on quarter, that's about 250 K tomorrow.

So in the second quarter, our forecast for the demand in U S continues to to improve the apparent steel consumption in U S quarter on quarter.

No.

We will continue to do well in terms of shipments in NAFTA prices as we know it will be up given the lags and.

No.

We will continue to do well in terms of shipments in NAFTA prices as we know it will be up given the lags and.

And causes a slightly slightly lower.

Then moving to Europe Europe is.

We let me address.

We let me address the.

The two incidents that we had in Spain and.

In France.

In France. So we have two furnaces that are down as we can see in our release.

We have two furnaces that are down as you can see in our release.

So we are working relentlessly to.

So we are working relentlessly to mitigate the impacts of the two of the two incidents.

Mitigate the impacts of the two of the two incidents.

And looking at.

Production in Q2 crude steel production, even though we are going to be slightly lower I think we're going to be mitigated to a large extent the impacts of the of the two shutdowns.

Production in Q2 crude steel production, even though we are going to be slightly lower.

I think we're going to be mitigated to a large extent the impacts of the of the two shutdowns.

So we have brought one furnace up in force.

The furnace in Spain was only operating for about 30 days in <unk> and.

The furnace in Spain was only operating for about 30 days.

In Q1.

In.

In Q1.

So I think we're going to be able to mitigate ramping up the style, we are bringing materials from different parts of the group slabs from Brazil from from India.

So I think we're going to be able to mitigate ramping up so we are bringing materials from different parts of the group slabs from Brazil from from India.

So even though the headline.

<unk> will be slightly down our ability to produce will be.

At par with quarter one.

With quarter one.

However, as you can also see our results and you can see that we have de stocked in Europe in quarter one.

However, as you can also see our results and you can see that we have this stocked in Europe in quarter one.

You can see that the production numbers and shipment numbers are similar so we have this stopped and.

You can see that the production numbers and shipment numbers are similar so we have this stopped.

We're not going to be in a position to.

And we're not going to be in a position to.

Repeat the destock that.

You see it in quarter, one so the headline number shipments number for Europe will be down.

This is will be higher.

Prices will be higher.

And costs will be down. So overall, we believe the profitability of Europe should go up should go up nicely as well.

Yes, we are.

We should be doing better.

We should be doing better in terms of shipments.

Should be doing better in terms of shipments.

Prices should be relatively stable.

Rice's should be relatively stable.

Our costs should be should be down.

And our costs should be should be down.

So long answer.

Hello walking through all the moving parts here.

But I'll walk you through all the moving parts here.

Thank you that's very clear and the second question is on the buyback. So the announcement. This morning extends through May 2025, which is quite unusual in terms of timeframes.

Thank you that's all.

Very clear and the second question is on the buyback. So the announcement. This morning extends through May 2025, which is quite unusual in terms of timeframes granted that it doesn't really impact your buyback potential for 'twenty three because it's quite formulaic, but why not keep things simple and commit to a smaller buyback, but with a more defined and shorter timeframe.

Granted that it doesn't really impact your buyback potential for 'twenty, three because it's quite formulaic, but why not keep things simple and commit to a smaller buyback, but with a more defined and shorter timeframe.

Yes look I think we.

With this announcement today really we have two key messages. One one is that look we continue to believe that the business will continue to generate good levels of free cash flow.

This announcement today really we have two key messages. One one is look we continue to believe that the business will continue to generate good levels of free cash flow.

Right.

We want to continue to do what we have been doing which is to return 50% of the free cash flow to our shareholders. So we are not changing the policy that's the policies unchanged.

And second we want to continue to do what we have been doing which is to return 50% of the free cash flow to our shareholders. So we are not changing the policy that's policies unchanged.

I think what we saw before was that by doing.

What we saw before was that by doing.

Announcements for short periods of time people were taken that as a kind of an implied guidance for free cash flow and thats not something that we.

Announcements for short periods of time people were taking that as a kind of an implied guidance for free cash flow and thats not something that we.

Was not clearly our intention.

Not clearly our intention.

So I think the key messages really look the company will continue to generate free cash we will continue to distribute 50%.

And if you look at Q1 results.

So we have a free cash flow neutral, but after investing more than $800 million in working capital right. So we are guiding for a release of working capital for the year.

So we have a free cash flow neutral, but after investing more than $800 million in working capital right.

So we are guiding for a release of working capital for the year.

So and if you were to strip out the working capital investments in Q1, the company would generate.

And if you were to strip out the working capital investments in Q1, the company would be generating close to a billion dollars of free cash which is quite strong and we are.

Generating close to a billion dollars of free cash which is quite strong.

And we are still in recovery mode.

Still in recovery mode.

As we discussed.

Thank you.

Yeah.

Thank you.

Thanks, a lot.

The next question please from Tristan at BNP.

We'll move to the.

Next question, please from Tristan at BNP.

Yes, hi, Thank you for taking my question.

The first one is maybe just a little bit more on Europe .

Can you discuss a bit the timeline for the restart and the ongoing repair works taking place tanker can get <unk>.

Can you discuss a bit the timeline for the restart and the ongoing repair works taking place tanker can go on.

More specifically in Spain, I believe you had to use explosives to remove this solidified pig iron. So my first question is is the integration of the <unk>.

More specifically in Spain, I believe you had to use explosive to remove this solidified pig iron. So my first question is is the integrated furnace.

And as at risk and also you've maintained your group shipment guidance. Despite those significant shutdowns. So how confident are you that you will be able to mitigate that.

Furnace at risk.

And also you've maintained your group shipment guidance. Despite those significant shut down. So how confident are you that you will be able to mitigate that.

And catch up the volume loss in Europe , I think you mentioned stat from TSP.

Up to volume loss in Europe , I think you mentioned stat from TSP.

Is there any other part of the groups are will do better in terms of shipments.

Is there on the other part of the groups are well do better in terms of shipments.

There isn't a SaaS in terms of the timing and what you heard me now release is everybody is of course trying to get the furnaces back as soon as possible.

<unk> SaaS.

Terms of the time Anthony on what you have in our release is everybody is trying to get the furnaces back as soon as possible.

So we are giving June as is the date.

So we are giving June is as of date.

For the restart of <unk>.

For the restart of.

The finances, both Spain, and then Kirk.

Of the furnaces, both Spain, and then Kirk.

So you're right. So this is a complex process and its progressing well.

So youre right. So this is a complex process and its progressing well.

The procedures that are being used the standard in such cases.

The procedures that are being used.

Wondering in such cases I think we were also very pleased that despite the incident, we had no new.

I think we were also very pleased to despite the incident, we had no no injuries everybody was was safe and that's what we are trying also to keep doing this.

No injuries, everybody was was safe and that's what we are trying also to keep doing this.

The repairs of the two furnaces right and as I said I think when it comes to our shipment guidance and.

Yes.

The repairs of the two furnaces right and as I said I think when it comes to our shipment guidance and.

Telling our I.

Telling a law.

I think we are doing everything we can to mitigate the impacts right. So we had of course, a strong first quarter because of the destock that we saw more.

We are doing everything we can to mitigate the impacts right. So we had of course, a strong first quarter because of the destock that we saw more from from stocks.

From stocks.

So we remain at this point optimistic that we're going to be able to achieve our targets and of course depend.

So we remain at this point too optimistic that we're going to be able to achieve our targets of course.

Depending on how it progresses, we will update you, but at this point in time we.

It depends on how it progresses, we will update you, but at this point in time we.

We don't see anything.

Okay.

<unk>, what we discussed at the time, although earnings Q4 earnings.

When compared to what we discussed at the time of our earnings Q4 earnings.

If anything the situation has improved so.

At this point, we remain optimistic that we can deliver on that.

Alright, that's very clear and if I could follow up.

Alright, that's very clear and if I could follow up on another question, maybe bigger picture there on the energy strategy.

Another question, maybe bigger picture there on the energy strategy.

Could you discuss a bit your strategy when it comes to vertical integration towards the energy I think you have announced projects in India, Brazil, Europe is probably the region, which will see first the higher need for green power.

So could you give us an update on the current projects I think you signed an Mou in Germany, you part of the consortium in Spain.

So could you give us an update on the current projects I think you signed an Mou in Germany, you're part of a consortium in Spain.

But when you look at those project <unk> project in Belgium, France et cetera.

But when you look at those projects <unk> projects in Belgium, France et cetera.

Do you plan to solve the energy side of the equation.

Continental Europe .

Yes, So look I think we continue to look at the projects in Europe as well.

Yes look I think we continue to look at the projects in Europe as well.

And I can tell you we have gone through several of them. So far we have not yet come to a point, where we feel we can.

We can go ahead right. So thats not its not like in Brazil, and India, where you can clearly see that you can achieve a good level good levels of returns.

We can go ahead right. So it's not like in Brazil or in Innerwear, you can clearly see that you can achieve a good level good levels of returns.

But we continue to explore the projects in Europe the options right now.

Good thing is that we are seeing a normalization right. So we are seeing gas prices normalizing coming back now to levels that are closer to prewar levels. We are seeing the power cost is also coming down.

Good thing is that we are seeing a normalization right. So we have seen gas prices normalizing.

Back now to levels that are closer to pre war.

<unk>.

Seeing the power cost is also coming down.

I think the European governments, they understand the importance to keep our costs too.

I think the European governments, they understand the importance to keep a cautious too.

Two levels.

Keith.

The competitiveness of the European industry.

Keith.

The competitiveness of the European industry.

So I think we will continue to explore the possibilities, but as we discussed in a couple of quarters ago. I think we are going to engage in signed contracts when they make economic sense and so far we have not yet been able to chew.

So I think we will continue to explore the possibilities, but as we discussed in a couple of quarters ago. I think we were going to engage in signed contracts when they make economic sense and so far we have not yet been able to chew.

Find good projects in Europe , where we can justify the investments and then.

Of course, we continue to look for Ppas ways too.

Securely.

CQC.

Energy needs of.

Of the footprint.

Okay.

Alright, thank you.

Okay.

Great. Thank you interest and so we'll move to the next question. Please from Patrick at Bank of America.

Thank you very much.

I just wanted to ask if you could give us your outlook for steel spreads and margins.

Prices, maybe for the rest of the year.

We're seeing the end of Destocking.

<unk> seen the end of Destocking.

If prices move up.

Spreads open up.

Prices, especially in Europe seem to kind of stalled in the last month or so.

I mean, when you look at the market outlook from here for the remainder of the year.

I mean, when you look at the market outlook for from <unk> for the remainder of the year.

What are you what are you expecting or what do you think are the key things that you're monitoring thanks very much.

Yes, Patrick Patrick as you know.

Yes, Patrick Patrick as you know, we don't really comment on.

We don't really comment on.

On the evolution of prices I think.

On the evolution of spot prices I think.

I mean looking at.

Evolution of the indexes today and as you rightly said, we have the European prices relatively stable now for a couple of weeks at good levels of course, we have prices in U S is still holding up quite well.

Pollution of the indexes today and as you rightly said, we have the European prices relatively stable now for a couple of weeks at good levels.

Of course, we have prices in U S is still holding up quite well.

And we are seeing raw materials coming down right. So we are seeing coal prices down quite significantly.

I don't know prices as well.

If anything at this point, what we see is that stress.

Improving.

I think I would also point that.

What is probably quite relevant in this discussion is.

The level of inventories that we've seen the system today right, so even though.

We have seen a recovery in volumes in quarter. One we don't believe that this is really being driven by restocking when we look at it that way.

We have seen a recovery in volumes in quarter. One we don't believe that this is really being driven by restocking when.

When we look at the data.

Look at inventory levels in Europe , and U S across across the regions, where we operate.

We look at inventory levels in Europe , and U S across across the regions, where we operate.

We believe that inventory levels are quite low.

I actually believe that inventory.

<unk> are quite low.

Which should then continued to support.

Parents steel consumption going forward, which is.

The apparent steel consumption going forward, which is.

Which is a good sign.

Something that should continue to support the business.

Thanks, and maybe just related to that.

What are you seeing on imports we have seen kind of increased exports out of China in particular.

What are you seeing as imports into your key regions.

Yeah, well, so far to have come down right so meaningful it's in.

Yeah.

So far they have come down right, so meaningful what's seen in.

In Europe .

And you as they are trained they have.

They remain of course elevated in Europe , but below in terms of looking at the market share of imports in Europe . They are below.

They remain of course elevated in Europe , but below in terms of looking at the market share of imports in Europe . They are below what they were in Q1 of last year.

What they were in Q1 of last year.

We have seen also a decline in the U S.

Also some decline in Brazil, so so far it's visible right, but that's of course always a point for us to be more.

Also some decline in Brazil, so so far it's not visible right, but that's of course always the point for us to be watching.

King.

Thank you very much.

Thanks, Patrick So we will move now to a question from Tom at Barclays Go ahead Tom.

Thanks, Patrick So we will move now to a question from Tom at Barclays.

Afternoon, Thanks, very much for taking my questions.

Just the first one with Calvert I saw you raised the capex guidance slightly highlighting enlarged and inflation could you just confirm what the enlarged group is and then whether or not we should think about any read across from inflation in steel sort of other capex budgets in particular, the 10 billion decarbonization budget.

Just the first one with Calvert I saw you raised the capex guidance slightly highlighting and large scope and inflation could you just confirm what the enlarged pills and then whether or not we should think about any read across from inflation into your sort of other capex budgets in particular, the 10 billion decarbonization budget.

That's the first question, yes sure.

Yes, we have updated the capex so from hundreds of about $1 billion.

And yeah. So as you know I mean this is a project that is being designed for 3 million tons.

And yeah. So as you know I mean this is a project that has been designed for 3 million tons.

And as we as we go ahead and execute the first phase it makes sense for us prepared part of the second phase.

And as we as we go ahead and execute the first phase it makes sense for us prepare parts of the second phase.

So thats the scope.

So thats the scope and then there is always there is a component here of inflation as well.

And then there is always there is a component here.

Inflation as well.

When it comes to the big number the $10 billion.

When it comes to the big number the $10 billion that's.

Our our best estimate at this point.

Yeah.

So we are.

Where we are right now in this process is so we are going through the proceeds of the.

Where we are right now in this process is so we are going through the proceeds of the projects in Europe .

Projects in Europe .

The Canadian project as well.

On the Canadian project as well.

And our intention is to release the next climate report, where we will provide an update on the status of those.

And our intention is to release the next climate report, where we will provide an update on the status of that.

Our forecasts and it should be I would expect this process to be completed and released by end of this year or beginning of next year.

Our forecasts and it should be I would expect this process to be completed and released by end of this year beginning of next year.

Yes.

Perfect. Thank you and then just quickly on Brazil, you mentioned CSP is running more than double normalized profitability right now so I guess the export flat demand is quite strong.

But if I sort of piece that together with the earnings I guess the conclusion that made the domestic market is a little bit softer do you think thats, a fair assessment and if so any thoughts on sort of mix changes in the coming quarters in Brazil. Thanks.

Yes.

I think we will.

I think we are we remain.

<unk>.

Comfortable with the guidance that we provided at the time over Q4 results. We are seeing apparent steel consumption in Brazil, improving this year, both flat and long.

Also driven by the end of the destock that also impacted the Brazilian business last year.

Also driven by the end of the destock that also impacted the Brazil business last year.

So I think domestically when I look at our volumes.

Quarter on quarter, they have tapped so all.

Quarter on quarter, they have worked out so.

So relatively stable year on year. So I think there is.

So relatively stable year on year.

So I think there is.

I would see the start of the year in Brazil, maybe not as strong as we had hoped.

I would say the start of the year in Brazil, maybe not as strong as we had hoped.

But when we look at the performance of the business. It has been good.

So we remain.

We are not changing our guidance.

Okay, and no changes to sort of mix in Q2 versus Q1 as well.

Well I think in terms of the mix I mean, what you can expect of course is more exports.

Well I think in terms of the mix.

I expect of course is more exports.

Ryan we're gonna be exports more slabs.

Because that's the product with the highest prices in Q2, especially high quality slabs.

Because that's the product with the highest prices in Q2, especially high quality slab. So.

You're going to have the contribution from from CSP. So in Q1, you will have about 200 kt of shipments from CSP and then we are running at full capacity. So it's 3 million tons facilities Ken.

So you're going to have the contribution from from CSP. So in Q1, you have about 200 Kt of shipments from CSP and then we are running at full capacity. So it's 3 million tons facility. So you Ken.

What is the impact in terms of shipments coming from CSP.

And as I said at the beginning.

And as I said at the beginning we should also be ramping up production in tomorrow.

Should also be ramping up production in tomorrow.

For moist slab exports. So I think what you will see us.

For more slab exports.

Think what you will see us.

It makes that is more geared towards exports, but in Q2 in particular the exports of slabs. They will enjoy if you look at the Brazilian slab prices.

It makes that is more geared towards exports, but.

Q2 in particular, the exports of slabs that we will enjoy if you look at the Brazilian slab prices.

It will.

It will we will.

They are quite profitable.

Understood. Thank you very much I'll turn it back.

Yeah.

Understood. Thank you very much I'll turn it back.

Thanks, Tom So I'll move now to a question from Myles at UBS.

Thanks, Tom So we'll move now to a question from Myles at UBS.

Great.

Couple of questions could you just give us a sense of what the largest scope is in Liberia is it more tons.

Is there another phase to the expansion that you're preparing for that.

Yes.

Thank you and thank you for the question so.

We are really looking at the product.

Really looking at the product.

That's one we're also looking at infrastructure.

That's one.

Also looking at infrastructure.

The port.

So I would I would say its big basically the quality of the product.

The infrastructure.

I would say those are probably the main the main scope of change that we are contemplating.

Okay, and then in terms of timing is it still on track.

And I.

I presume the size is unchanged in terms of the.

I presume the size is unchanged in terms of the potential expansion.

Total expansion.

Yes, the sizes at this point, it's unchanged 15 million tons and we are on track for.

End of 2024.

Okay.

You talked about.

Inventories what about your order books have you seen a meaningful change in the length of the order books.

Any region over the last sort of.

A few months I mean, I guess, given the prices of stagnating and starting to drift down I presume.

A few months I mean, I guess, given the prices of stagnating and starting to drift down I presume that there's been.

<unk>.

A little bit of a shortening too politically.

A little bit of a shortening to order goods in certain.

Certain regions.

No not really.

The order books are strong they are good.

And then looking at Europe .

Yeah.

They have increased during the quarter.

Okay.

They have increased during the quarter.

So we are looking at.

So.

Looking at.

I think we have good visibility now at lease end.

End of August so we are well advanced with our bookings for quarter three so I think thats good.

End of August So we are well advanced with our bookings for our quarter three so I think thats good.

In U S. As you know lead times extended above what would be considered normal levels. So.

In U S. As you know lead times.

Extended.

Above what would be considered normal levels. So.

So I think the order books.

They are looking they are looking good.

Okay. That's helpful. Thank you.

Thanks, Myles So we'll take the next question from Phil at Keybanc go ahead.

Thanks, Myles So we'll take the next question from Phil at Keybanc go.

Paul.

Go ahead Scott.

Hey, thanks very much.

Okay. Thanks very much.

Very substantial pickup in naphtha volumes year on year can you isolate how much of that was due to the new Mexican Hot strip mill, and perhaps some more volume off of that.

<unk> substantial pickup in NAFTA volumes year on year can you isolate how much of that was due to the new Mexican Hot strip mill, and perhaps some more volume off of that.

Yeah, well it feels like we are running at about 60% of capacity right in in Mexico.

Yeah.

Yeah, well feel that we are running at about 60% of capacity right.

In Mexico.

Ronnie.

So ronny.

It's 350, kt more or less per quarter now.

So of course before we were more producing these labs.

Alright.

We were just at the beginning of <unk>.

The city at the beginning of it.

The ramp up.

Of the ramp up.

So that's one.

So thats why.

I think when you look at the volumes year on year not enough.

So.

We are doing better.

On year end.

Canada, and Mexico right. So we had a very good strong production levels in Mexico.

Which is supporting the ramp up of the of the <unk>.

Hot strip mill.

And also as I discussed maybe at the beginning.

<unk> also more shipments of slabs from NAFTA true covered our JV.

Alright.

So.

So even near the number is not that different so it doesn't really explained improvements in shipments year on year.

But when you think about it quarter on quarter, we have increased by about 250, K T shipments of slabs.

From our segment to Calvert JV.

Thanks, and just as a follow up if you I think you may have given some.

Color on what you think CSP might contribute.

Earlier in your script, if so can you reiterate that thanks so much.

Yes, I think we are very pleased with the acquisition as I said.

So we shipped we consolidated 20 days of the business.

In Q1, that's about 200 kt of shipments.

So the company is running full.

Or in the process of integrated with our existing Brazilian operations.

You have in our deck, we are providing what is the run rate annualized run rate in Q2, which is a bit the level of about $600 million.

Your lines.

The true run rate.

So doing extremely well.

Thank you.

Thank you Phil.

So we'll move to the next question please from Rochus at Kepler.

Yes, hi.

Thanks for taking my question.

One maybe one question on working capital I think the coupon built was less than.

What we have seen in previous Q1s.

Can you probably provide a little bit of.

A breakdown on the moving parts.

Why it was more limited.

Already a reflection of.

The production issues in Europe that you ship more from from inventory and maybe referring to that point can you give us directionally. Some indication of how we should all think about second quarter working capital, we see prices up room nights down maybe a further drawing down inventory.

Yes that would be my first part of your question yes.

Okay.

The.

Q1 has not really impacted has been impacted by the incidents that we've talked about in Spain and <unk>.

As we discussed clearly we were in.

Recovery mode demand strong.

We did the stock from especially from from Europe , and you can see that right. When you look at the production numbers in Q1 shipment numbers in Q1.

It's very feasible that we de stocked.

But that was just.

To make sure that we could follow the market right.

So maybe thats why you don't see more meaningful.

Impact in working capital.

The main driver really was the higher shipments.

And then we remain confident at this point, so we're going to be able to to.

Our release working capital in 2023 per quarter.

Look I think we are seeing at this more on really neutral.

We are not seeing a significant investment in Q2.

And for full year, our expectation is to chew two releases, especially as we still continue to work through.

The costs are high energy costs, and say now it's still impacting the causes of our.

Our metal stock so as we work through that.

So then our expectation is that all costs on the balance sheet should continue to come down and that should provide support working capital release, and then of course, but as we know this is really driven by what happens in the last.

Our weeks of the year to some extent.

So we have the holidays in December so.

So we'll see so at this point.

We still believe that we should see.

Working capital release at the end of the year.

Okay that makes sense and then the second question is around Acs.

If I got that correctly on your.

Believes this morning, obviously, you're crying cleaner is now back to crude steel, making I think previously it was more.

Pigs pig iron only.

Can you provide an update on <unk>.

The main utilization rates on the mine on the steel parts.

And as obviously it is a bit of a step towards a bit more normality.

When shall we think about the breakeven into green and also maybe a Kazakhstan, which also are probably still not where it has been before so if you can talk walk. So there's two elements of Acs will be great.

Yeah sure Ross as we discuss Q4 was extremely challenging for Kazakhstan for Ukraine, right because of the lack of energy power. So production was quite low.

We have seen since has seen an improvement of availability of power in the country.

Sure.

Uh huh.

So we have actually restarted the second furnace now so we are actually running now and we will run for some time at least two finances.

So we have increased the crude steel capacity.

Ukraine from about 20 to about 40%.

So that's that's good development, we will continue to sell pig iron. So we're not going to see all of that in our crude student numbers because the intention is to continue to.

Sell pig iron it's a good product for us at the moment, but you will see an improvement also in could you still in shipments as a result of the second furnace so about 40%.

And then we have the mine has also run quite well in quarter. One we also increased production.

So back to levels close to 40%.

So I think good developments in Ukraine, so far touch wood.

So the company is not very far from being breakeven at EBIT level. It was actually positive in Q4 in terms of free cash.

And it's all in.

A marginally negative in Q1, so I think the teams have been doing a great job in not only keeping the assets running production, but also making sure that they can.

<unk>.

What they can't undergo under control.

And in Kazakhstan I think.

We are going through.

Maintenance with one of our <unk>.

You can you can see now released that we mentioned.

Most of US have gone up because we are having.

So by some some external cost we are going through this maintenance work.

That should.

The resolve soon and.

Our expectation is that because external from now we should.

Continue to see improvements.

We are optimistic that for quarter, two we should see better numbers for you guys.

Okay that sounds great. Thank you very much.

Thank you alright. Thanks.

Alright, Jeremy Thanks Rochus.

So we've got one question remaining.

And it's from Bastian at Deutsche Bank.

Yes.

Can you just had a quick follow up question on NAFTA, which I thought was very impressive.

That prices have dropped over the in the first quarter.

I think you talked about volumes already but what what else has been driving it and also by when do you expect that new Hot Rolling mill in Mexico to be fully ramped up given that the market and also the temporary closure.

It seems very supportive that is my question.

Yes.

That's true.

That's one.

The ramp up is really going as per plan right and I think the teams at <unk>.

Now to develop products getting the certification so.

Our expectation is that we'll continue.

To ramp up in the second in the second half.

We will see.

We should be moving from 62, I hope, we're going to be at least above 70%. So I think this is a process that will continue.

But as I said in the focus remains the same.

As in Q4.

Product development getting the certification.

With the existing customers.

And.

<unk> continued to increase.

Production and Youre right. So I'm, sorry is really focused on in our in our control but.

NAFTA I am not sure that I got your question.

So can you maybe elaborate that.

Yes sure.

As I said I was just very impressed by your strong performance in NAFTA you, obviously had very good volume. So that's an obvious driver, but then I guess realized prices probably have still been coming down I would've thought maybe not that much cost really someone I was wondering what else other than volumes has been driving that very strong performance in the fourth quarter. When you are.

Actually you had to dawn settlement on realized prices.

And has there ever been any mix effect of what's been driving it.

Yes, I think two things so we had a very good.

Cost performance.

Cost performance was excellent.

And then of course, you also have a better contribution from our Texas facility.

The marginally higher shipments, including the shipments to our JV.

So I would say really.

<unk>.

The cost performance was extremely good.

After doing during the quarter.

And also of course.

The contribution from the Hot strip mill, So you really start to see.

See the benefits of that right. So as we are running at this levels of 600.

6% capacity, so that is really starting to be more and more visible in the results.

Okay, perfect and just on the fixed cost side do we expect to retain that cost performance in the second quarter.

Well.

Yes, we do.

Okay excellent. Thank you.

Thank you very much.

Great. Thanks, Bastian, so we actually have.

One last question, that's coming from Max at Auto. So please go ahead. Thanks.

One last question that's come in for Max at Auto. So please go ahead. Thanks.

Hey, good afternoon, just a quick question on mining costs.

Hey, good afternoon, just a quick question on mining where costs.

Increased quite significantly in Q1.

2022, I wondered whether this was somehow isolated issue expected.

2022, I wondered whether this was somehow.

Somehow isolated issue expected.

Completion.

This is close to completion.

To continue in the coming quarters in that segment.

Segment.

<unk>, you're looking at what is your reference.

Yes.

Max you are looking at what is your reference is quarter on quarter to.

One quarter ago.

Quarter on quarter.

Yeah.

I think that.

Yeah.

I think that.

So to say decreased to $200 million.

So to say decreased $200 million, but EBITDA increased just one with me undue now.

Manav.

First one on with me undue now.

Because of.

Increasing costs.

I think a couple of moving parts there I would say cause causes are not really the main the main driver.

I think a couple of moving parts there.

I would say four quarters or not really the main the main driver.

I would say, it's more we have seen pellet premiums down.

Right.

Significantly quarter on quarter, and as you know a lot of our shipments from mines, Canada is.

Pellets.

We lose we lose on that.

So I think those.

Look at the evolution of the profitability.

Maybe.

There can be maybe some some impacts coming from cost, but I would not say that the other main.

Main drivers there.

The main drivers there.

Okay.

That's clear thank you.

Thank you.

Okay.

Jimmy I, perhaps just on that last question, it's just worth emphasizing that it's.

Within our mining segment, it's not necessarily a good idea to take sort of revenues.

EBITA.

EBITDA divided by tons and see if others.

Thereby tons and see if others are.

As the cost performance of the business because there can be changes from quarter to quarter.

On the sales on a on a deliberate basis versus an F&B basis. So.

On the sales on a on a deliberate basis versus an <unk> basis. So.

Some quarters.

That can be a revenue increase because we're selling on a delivered basis.

There can be a revenue increase because we're selling on a delivered basis, but then there's a matching cost increases cost increase because we have to accommodate the freight cost as well.

And cost increases our cost increase because we have to accommodate the freight cost as well.

I think always the best thing is just to look at the EBITDA.

Evolution relative to like you said, how the iron ore price in the pilot.

Is it bolt.

Liam you bolt.

Rather than just taking revenue less EBITA.

Rather than just taking revenue less EBITA is.

So as your benchmark for costs.

As your benchmark for costs.

And that was our last question.

That was our last question.

How about you know what you mean.

Hum back too much I mean it.

Well, that's great just wanted to thank everybody and I hope to see you soon in our quarter two results. Thank you very much guys.

ArcelorMittal S.A. Q1 2023 Earnings Call

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