Q2 2023 ArcelorMittal SA Earnings Call
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Ladies and gentlemen, thank you for standing by welcome and thank you for joining the Q2 analyst call of Arcelormittal.
Today's recorded presentation, all participants will be in a listen only mode. The presentation will be followed by a question answer session. If you would like to ask a question you May Press Star followed by one on you touched on telephone. Please note that the operator in control of that mute. Your line for your questions. Please press. The star can you put up Brazil, operator assistance I would now like to turn.
Comfort over to Daniel Fairclough, Vice President Investor Relations. Please go ahead.
Thank you Martin.
Good afternoon, everyone. Hi. This is on your final for me also mentioned Investor Relations team. Thank you very much for joining us on this call today to discuss our performance for the first half of 2023 I'm.
I'm joined on this call today, a biopsy Yep. That's your Metro CFO show me know Kristina and buy stuff in place.
Curious to see all of our mining segment.
Before we begin I would like to mention a few housekeeping items as usual, we will not be going through the results presentation that we published this morning on our website, but I do want to draw your attention to this.
Disclaimers on slide number two.
Patient.
We will be moving directly to the Q&A session. So if you would like to ask a question. Please do press star one on your telephone keypad joined the queue and with that I'll hand over to Jeff for opening remarks.
Thank you Danielle and welcome everyone. There's much I can highlight but I will keep my remarks brief and focused on three key messages.
Our results continue to reflect the structural improvements that we have made to our business.
We are making clear progress in the decarbonization agenda.
The investments, we're making to grow and develop our business.
Wish you very well for the future.
You expand them at long Beach points.
On structural improvement to the business. It is not just about the EBITDA improvement, but tania micki, but also the dramatically different capital cost of our balance sheet and the impact of the strong contribution from our equity investments that drive the structural improvement to our free cash and net income.
On pick up as a truly global multi region, you're pretty sure the scale and breadth of our business gives us many more options I remain convinced that we can develop the right set of solutions that will allow us to decarbonize their footprint effectively and at a competitive cost.
Right Yeah projects are progressing we're currently in the process of moving these projects when the pre feed stage to each stage, which includes the ordering of long lead time equipment.
Our smart carbon technologies are also progressing and we are strengthening our vertical integration of lower carbon supply chains by securing and developing some of the resources that we were required to decarbonize.
From a commercial standpoint.
<unk> solutions are gaining traction in the marketplace.
First to market with our ex Com brand of low emission solutions and customer interest continues to be very encouraging. This is reflected in the recent announcement that you get supply general motors with their ex carb ERP product.
On growth.
Our unique asset portfolio positions us very well to benefit from growth in demand for steel.
<unk> growth will be driven by mega trends, such as renewable energy transition.
Alrighty suspension developed economies, while in less mature markets high demand for steel will be driven by population growth and the desire to improve living standards. We will continue to invest in the very best opportunities to capture and benefit from disruption.
The investments we have made in recent periods are contributing over and above our expectations.
Hot strip mill in Mexico, delivering enhanced margins, our newly acquired assets in Brazil is performing well and the team there has identified synergies more than double the initial estimate.
H B asset in Texas achieved record performance in the first half producing 1 million tons of high quality H B.
In line with its nameplate capacity.
We are progressing our strong pipeline of high return strategic Capex projects.
<unk> iron ore project in Liberia, which has been redesigned to maximize the potential of our tier one resource.
With a greater understanding of the ore body. We're now working on the feasibility of producing direct quality of concentrate and the potential to take capacity to 30 million tons per annum.
Nevertheless, the capex for the 15 million tonne concentrate or has increased.
The redesign of the plant and associated equipment, good with our expectation that this will generate $350 million of EBITDA. That's conservative long run prices. This remains a very strong project.
In terms of the nearer term outlook inventories in the system remained low and this provides but did not.
And in automotive contrasts with those of the construction markets and we expect apparent demand for flat steel in Europe , and North America to be higher this year than in 2022.
We are well placed to Jeremy good levels of free cash to continue progressing a decarbonization and growth agenda and our capital returns program.
Now allows you to provide some more detail on our financial performance.
Thank you.
Barry.
Stupid things about our performance in the first half of 2023.
We generated $4 4 billion of EBITDA.
This is $155 a ton.
Tons shipped.
Is the highest it has been in any six month period.
Over the past 11 years, Bobby exceptional 18 month period from 2010, one to the midpoint of 2022.
It's probably like the inherent strength, we have built into our business in recent years.
Quality asset base and the value we are deriving from our recent acquisitions and the strategic road projects.
But we must look further down the P&L to really appreciate the full impact of all the actions. We have taken net income in the first half of stripping them because it's double the average of the last 11 years 2012 to 2022.
What does he drives off exchange, which is our board for improvement. It is the growing contribution from all of their needs.
It is the impact of our lower cost balance sheets, and then these impacts are being exploited by a consistent share buybacks.
The battery, we are creating as well yeah, yeah consistently delivering a solid return on our book value, which has been with $66.
Yeah.
I believe our performance provides evidence that oscillometer candidly, whether it'd be through all aspects of the through cycle.
We are consistently generating good levels of cash flow and to Echo Jeff's point, we are growing and developing.
Asia by investing in the most attractive.
That exists in our business, we continue to provide attractive levels of returns to our shareholders.
Share buyback programs.
And this is underpinned by a foundation of a strong investment grade balance sheet.
With that we are ready to take your questions.
Okay.
Great. Thank you Jimmy I think you have to check and so we have a queue of questions already and we will take first question from Alain at Morgan Stanley . Please go ahead.
Okay.
Yeah.
Building products that we need to think about with respect to carefree EBITDA I guess some of your peers have been referring to a more pronounced seasonality in Europe . During Q3 do you share that view and what does that mean for your shipments. That's the first question. Thanks.
Yes.
Well I think I'll, let me take your question, Okay, I think to me the best way to.
To talk about the sponsor is by referring to our order book.
In Europe , when I look at the other book for quarter, three and we've got a oh.
So we are now taking what is meaningful.
Okay.
So.
O olive and screens.
But only a two or three but talk a little bit about the second half.
Do you think the Pepsi bought expect of course within pizza.
These stocks at these plays into the second half of 2022.
<unk> begun to achieve a better second half.
And this year compared to 2020.
Thank you. Thank you and my second question is on CSP in Brazil.
Generically any bad debt write off more than double what you had guided for I think position, although the spread environment in Brazil appears to be quite ordinary.
Thank God it gets comments.
And Charles on synergies.
We're somewhat too conservative I, just talked about so where do you see the EBITDA run rates going forward.
That's a great question Ed.
I think it's safe to assume that that's been a great acquisition, we have inherited a great set of people are excellent assets.
The synergies as you mentioned not double I would at this point in time at that.
Can you keep at that level that we have guided to and use that as the base.
The company is also helping us improve our overall performance in Brazil.
So the synergies are two way system as soon as yourselves.
And another key part of this acquisition has also been some of the fiscal incentives.
And therefore overall it has been a good strategy for us to enhance the leadership position, we have in Brazil, and also investing in high quality assets and people.
Thank you.
Great. Thanks, and then several.
Well move now to the next question, which I believe is from Patrick of Bank of America.
Good afternoon. Thank you very much <unk> for the time just on the decarbonization on the.
Kind of approvals of the government subsidies or support how should we think about the timing of these projects now I know you said youre doing the feed work and starting to order the long lead items, but then when should we expect kind of going to be broken these projects to really kick off thanks.
Yeah.
Yeah.
Sure. Thank you Patrick so it's been a busy quarter in terms of our <unk> projects in Europe , I think as all of you know and as I mentioned in my remarks, we've got some.
The support from Spain, and Belgium.
From France, we are in discussions with these covenants on ensuring that the energy complex is competitiveness.
Does that mean.
The aggregate supply available and at the right price and the same for renewable energy.
That those discussions will be constructed.
Right at the right conclusion, so we're going through the details of all of that simultaneously we're not delayed.
We're moving from pre feed feed feed.
Feed stage, which means that we would have 90% fits into your own cost we're doing detailed engineering and also ordering long lead items.
If you look at the overall timescale.
Projects.
<unk> applied for approval two years late.
We're getting approvals from various governments to your doctor.
So it's safe to say that there are already two years delayed in terms of implementation of these projects clearly and that's to me. It's been done some work that's been done.
On pre feed feed but there is there is an implied a debate.
And normally capex or is this magnitude.
It takes approximately three to four years. So you should factor that in as you as you see us moving from precede defeat as these projects would be on the marketplace fully commissioned three to four years from now.
We will obviously keep you updated as we finalize the feed work the actual time schedule as well as where we ended up with respect to covenants.
Thanks, and if I could maybe have one follow up just I.
You spoke a little bit about how you have a global footprint.
I suppose access to different energy markets, and if I think about.
No.
The other partner in the H B I panza attending to stop the decarbonization journey by using H B I from from Texas and you. Obviously now have slabs in Brazil, we've seen interest in German.
Our production facilities, where again looked at the partner wanted the potential partner wanted to ship slabs.
There to be resolved.
How do you balance up kind of making green iron in Europe , where energy prices are very high versus I suppose leveraging your global footprint, perhaps you've got access to lower energy costs and maybe getting.
Getting green, Ireland hadn't shipping either green idle slabs to Europe , and not doing the actual I am making in Europe , how do you balance those two things it must be quite.
Difficult.
[laughter] after.
That's all thank you for the question because you're highlighting the strength of our ceramic.
Lastly, our strength, we can bring and snatched firmer so we can bring.
H B I from Texas, as I mentioned, but it's hitting record production to the plant is running normally.
Well so we have all of these opportunities. We also have a mini mill in Europe , it's not like we don't have a it's not a large meeting room, but it's at $1 2 million tonnes.
So it is just now Spain. So we have a lot of these capabilities and that's why we can move quickly to the market. Then we can commercialize our products, which we're doing both in Europe and NAFTA.
In terms of how do we judge it so we're looking at it holistically.
We are looking at Okay. What is the net capital cost included.
Uh Huh, yeah, the total cost of making these products and some of our facilities versus bringing in some of these products from outside.
On that basis, which we find competitive.
Which we find is the most competitive those other projects, which will see the light at the end of the day and so that's how we're thinking about it. So we're not looking at our advantages in isolation, it's absolutely part of the mix. It makes it more challenging it makes it more difficult because it's not easy to predict markets markets are volatile prices are volatile.
He used to provides us make certain boxes in which we operate to ensure that we have the most competitive capex and the most competitive opex deliver low cost high low cost from a carbon perspective.
But high quality steel to do our best.
Tumors.
Thank you.
Alright, Thanks, Patrick So I'll move now to next question from <unk> from Citi.
Got it.
Hi, Thanks, two questions Firstly, the Catholics guidance for both the.
The Brazilian lung products plant in <unk> and it has been increasing I understand there's some reshuffling of school, but.
Are you also seeing general kind of cost increase your main projects affecting the capex guidance and also a separate question on like the.
I'll, just kind of mentioned that option allocated 30 million tons.
What's changed in the scoping of the project.
Stand around glad to kind of enable that 40 million tons to happen.
And the second question.
In the slide deck. It goes with the C. A slide on direct electrolysis.
First time I think.
In terms of like eight of the first.
Indeed, 40 to 80000 tons of five fleets by 2027, you always talked about got it.
More like a tiny fortyish type of decarbonization part.
I mean back then.
Got it.
Possibly going to be brought forward.
Yeah.
Okay, great. There's a lot of questions either go through them.
No wonder that and Liberia, our unique so I would not use them as examples of what's happening.
And the rest of our assortment the why are they unique.
Because both the projects were stopped for different reasons, but both projects were stopped and started.
And as these programs have been restarted I'll talk about the specific email for example to your question in Iberia, We had had the chance to reexamine the great you treat the ore body as well as what we want to do in terms of the future. It depends very focused that we want more Dr. Concentrate.
And therefore, we have actually changed how we want to grind the ore so that we can produce even higher quality steels and that has required.
Investment in the equipment its civil works as well backup infrastructure as well as the backup power plant and so the cost side. That's great. So the majority of the cost increase in.
In Liberia is because of that and obviously as the project has been delayed there is known.
Sure.
In terms of.
Monday about again the project was stopped in 'twenty.
We're thinking about this project almost 12 years ago. So a long time I'm going to stop it ordered equipment, a long time ago and as we started the project. We have spent more money on automation and they've done a lot more engineered engineering Civil works and then that explain top of the cost. It leaves the other half will be seen.
So I would not use that as an example, its clearly what has happened in terms of inflation and scope increases.
<unk> is not good news in Liberia, it's still okay, because we're relatively okay. Because we have an increasing level of EBITDA from the project, but overall a these are not good developments and obviously has the company been very book is to minimize the cost and make sure that these projects remain.
Cost competitive and meet our return thresholds and then they do it.
Nevada apart from the facility being franchise using our own iron ore to expand we also bought an increased level of discipline incentive.
Compensate some of these cost increases, but but again I don't want to provide any excuses for that.
In terms of the Capex overrun its it's therefore restrict it to this overall the other projects are proceeding well.
For example, Theres a nice cited in our deck what are we ask three other projects in Brazil, one of the big or the other environment side of things terrorism. All of them are on schedule. All of them are on track. So I would encourage you to think of these as isolated.
Issues in.
In terms of direct electrolysis that we're starting to pilot. So now we are at.
We pass through all the stages and then obviously, we would have the ability to produce 40 to 50000 tons of plate.
Correct electrolysis plate steel.
Thank I would still suggest that the since.
On the experimental stages, but clearly you are making progress.
We think of Dr. Bhatt as an organization, we have three avenues, one of US foods direct yet staged and spoke about that but we're also focused and are developing capability on the smart carbon grid.
Smart carbon which is basically capturing the carbon or <unk> seen the carbon from integrated route.
And storing it or sequestering, it or converting it into something else and we're also making progress on the smart carbon grid and the third is what you highlighted which is the direct in the trunk.
I Hope I've tried to answer all of your questions. Let me know if you need any further clarification.
Thank you.
Okay.
Thanks, a lot for them as well now move to our next question from Tristan at Exane BNP.
Yes, hi, Thank you for taking my questions.
First one is on volumes.
In the past quarter, you guided for steel shipments increased by 5% this year excess ESP in Ukraine, and you've got now you can add up for the year or so.
And you've seen also some operational disruption in Europe . So do you expect to be able to grow group volumes organically. This year and if you could give us maybe some color by division.
Let's say neutral in each of Q3 are more specific to ACI, yes, Europe , maybe binding vote.
We expect a sequential pick up there. That's my first question. Thank you.
Yes.
This fall.
Yeah absolutely.
We are we are not.
The previous guidance of improving shipments by 5% organically, we've been deemed at least we did face some delays in bringing back the two photos and some benefits or more.
Visual inspectors and wants to be able to.
Do that Baidu.
Mood mid to end June .
So we have today yeah.
So the furnaces are back now.
Only recently restarted them.
And then of course walls between developers too.
Yeah.
Consumption forecast is for the U S. As we have.
Lochinvar presentation. Nevertheless, we still expect to be.
At least flat.
Organic basis.
And then once you have that.
You have the Oh.
So that's 2%.
Dan.
I think it's fair to say that we would still expect to be at least 5% above.
Looking at the chance for quarter three.
By region I think the trains that we have seen that.
Quite similar.
So we do expect to see shipments to be relatively stable across the divisions and you'll see of course, the normal seasonality in Europe .
But I will just caution but of course, our shipments into China.
Lower because we were constrained in terms of capacity. So we don't predict that into account so our volumes.
Relatively stable I think we have a chance to do a little bit.
So yes, we will see and then mining we should we should be doing better in terms of volumes.
So the big phase on some of our.
The unplanned maintenance and banks, Canada, and all those great strides in Liberia that I would not expect to repeat so we should be doing better there.
So that's in a nutshell homeless in shipments per se.
Okay.
That's that's very clear and helpful.
My second question is it is a public funding and you manage to unlock significant public funding in recent months, which is really causing it but it seems those grants have some clawbacks attached to it if the project generates a extra net revenues can.
Can you. Please explain how it work and also one of your peer in Germany manage to unlock some opex subsidy as well, which I believe is V. A conditional payment mechanism.
Are you also looking into this type of support and do you go is there a good chance also to get this kind of opaque subsidy outside Germany.
Yeah.
Yeah.
Yeah.
Thank you for the question I think it's very important I think the headline from our side is that the approvals that we have received from Spain.
Spain, France, and Belgium are comparable and what are what are we asking when we're asking for a half capex support 50% of the investment.
Capital investment to be supported by this government introduces grants and that's really what we have seen the headline number I knew in Belgium, it's not the same.
Other things that are that meet the project equally affected.
In terms of OPEC support we're not asking for OPEC support.
So what we have seen perhaps others do is different than what we're asking our focused on capex support.
We think that makes the most sense for us.
And that has been the dialogue 17, you'd see we are in discussions with these governments.
I mentioned in my previous answer to ensure that there is a competitive reliable energy source and that includes both hydrogen as well as renewable energy.
You know we are entering a new sheet prices in Europe prices for high prices for all of the tile and we need to get some stability and visibility on that I would die outside to say that.
I've already mentioned that these discussions are going well.
And I expect maybe not in all jurisdictions, but at least in some of these jurisdictions that we will come to the right conclusion and move forward.
Very clear thank you.
Okay. Thanks for that.
Well move now to.
The next question from Andrea with UBS.
Hi, gents, Thanks, Kathy I just want to follow up on a couple of things first of all just on the Capex and licensing strategic Capex hike.
I guess, we've seen decent size inflation on some of your rifle.
He doesn't know what my boss Green clean store projects I'm wondering how you're sort of still fell about 10 billion additional gross capex number looks like.
Mmm has increased the both these projects are also delayed.
So the overall impact on an annual basis is no changing.
So the guidance, we provide on strategic Capex per year continues. So there is no increase in 24 25, due to Brazil or <unk> <unk>.
In terms of the <unk>, the 10 billion that you referred to <unk>.
Target of that capital investment history, reduce our global carbon emissions by 25 per cent.
And that remains the focus yes, I agree with you there has been information and <unk> see some of that information as well.
We are very focused on a few payments as we think about our plan to reduce your carbon footprint by 25 per cent can we repurpose or <unk> alright.
Alright, some of this and I think there was a note of your question very clearly to talk to you about <unk>, sometimes a deep cut right energy Sab's H B I in Texas. So can we knew some of our assets that we already have to achieve the same goals. Obviously, we're very focused on value engineering, what can we do knowing that.
All of these things are costing more how can we value engineer to make sure that the cost increases is does not that significant we talked about technology development or you're on new technologies capability that we can develop.
So the focus remains to achieve a 25% reduction in carbon emissions with a 10 day in a capital.
And that is what we are looking towards.
Okay.
Julia.
Sent me back to some of the third quarter dynamics.
Yeah. So on that Angela So we talked about the problems right by by region and again here in terms of spreads Friday. So sorry can I. Please see the same dynamics across all business as well.
No prices and <unk> moderator during the during the second quarter.
That's all results in two three.
Prices have declined and so that we can have an impact but at the same time costs have come down and install a nice reduction in terms of coking coal prices I dunno motivating to some extent so that will provide some.
Relief, but overall a vanilla.
<unk> have have motivated then new York because of the production.
Limitations that'd be <unk> <unk> physician should be slightly better also in the second quarter.
Mmm, Okay, I'll try to pull up a sorry.
Yeah.
Okay. Thank you very much.
Alright excellent time.
Someone will be up to the next question from front to back.
Hey, good afternoon, how are Ya.
Good how are you.
Thank you.
First question is just on the Mexico Roger.
Roger.
How much progress in leather.
Whether or not you've reached critical.
Critical mass in terms of your your output.
[laughter], it's a it's a great question. So so that makes it 100 now has has been surpassed our expectations. It sounds like it's overall profitability and how it's it's it's good for you to the marketplace.
It was a critical mass and the equipment is is is capable but at this point in time some of the plans.
We are.
We are increasingly level of production of slapstick you can make in Mexico City <unk>, It's gonna be bottleneck has shifted outstrip now to actual slapped production, which is where it should be now inez.
As as we make further progress on the upstream new Mexico will be increasing production.
<unk> also going into Calvert and sent off all other capacities.
<unk>. So we we were pleasantly surprised <unk> nice market acceptance and that's why the button that got shipped it to the to the E. D. S facility there.
So so yeah. So it's all good use in terms of the Mexican Australia [noise].
Thank you and then just as a follow up is when you look at Europe .
Do you have any.
<unk> annual contracts with resetting the second half of 40 told me through yours or any reset luxury isolated the 24.
So in Europe .
The majority of all contracts the the the reset.
Beginning of the year.
And we do we had some some some contract out to resetting at the beginning of the second quarter.
The large majority <unk> contracts.
So.
Not much needed to be to reset.
The secondhand.
Thank you.
Alright, Thanks, though several next question from Boston at Deutsche Bank.
Yes, good afternoon at all thanks for taking my question I've got two left and the first one is on a medicine India.
<unk> everything with a ton of more than $330, which is pretty impressive to say at least uhm given the current price environment and I guess I'm considering that the large.
<unk> has been coming over from your Nathan.
From China. So I was wondering if I could <unk> you could just give us a quick update on the key trends, which you're seeing.
Quota he hadn't I also the second half and whether you expect to keep fees from right ski in the short term.
Last question.
Yeah, great. Thank you. Thank you for highlighting that just eight minutes is a success story.
We have been able to ramp up production and you'll be able to improve the quality, we had great customer acceptance.
That you're that you're bringing to the Indian market place and you'll get an.
Authenticate doing business as well so this quarter will be inaugurated C. G M for the rich.
Galvanizing line, which will allow us to put the smack down this product.
Next year will be doing automotive and as you know we are in the midst W facility.
Treatment downstream to produce 14 million tons of high quality steel and close to the site.
Country. So overall the company does really well.
In terms of as a result, I would expect the results to remain elevated most of this year, we have benefits really low gas prices.
<unk> entered into the 20th.
Purely relative to the rest of the energy complex. These contracts are quite favorable team.
And that has been supporting supporting it's perfect profitability in the second quarter and will continue to support its profitability into the pit.
Into the second half.
I don't know <unk> I would like to provide any more specifics on that.
No I think that personal victory Cedric transfer <unk>.
Okay Yeah.
Yeah, just a quick follow up on that one maybe I can tell you all highlighted gas gas was always one of the key <unk>. When you <unk> I guess one of the key points was you wanted to renegotiate the gas contract how does this work like in.
And your price mechanism is it a floating prices with a fixed price how does it work for Ya.
Yeah. So we it's it's a combination of the above <unk> market price gas. So there's no it's not.
Deal with the government or anything like that so we are out there in the market.
Between 20 and resign roughly in three to five year contracts in this contracts were in place and and so.
Avoid the spike in energy, which has impacted obviously other gaspin producers around the world, but the 80 minutes avoided it. So that's how I think about it in theory. Some of this is her only chance so as prices normalized will be extending so.
The company's underneath you've been exposed to international gas mortgage that has been changed but security, we have a longer duration and fixed prices and more stable prices, which allows a business <unk>.
Okay. That's that's very helpful. And then my second question is <unk> you have coded. Please so I remember that it was supposed to be on track in March.
I'll just being late unreasonably short notice cause like I started trying for the second half of this year. So what's behind this in <unk> C. S. P exposition tying to it because it gives you a bit more flexibility on your set supply of supplying the short term.
<unk> one point and then secondly, with this with a lot of capacity at once that is finished is there any plan to also extend kollwitz protocol capability as well.
So just just overall in terms of Calvert and supplies you right V E project is delayed.
This is primarily just doing construction work and then finding the right skills set I need people to do the the critical jobs I would not read anything more into it than just that and and so as as time went by will realize that this project is gonna get delayed and.
We do appreciate you today to inform.
In terms of overall, probably capability at <unk> are still focused on the second yes.
This will continue to enhance our ability to approach the U S market place and continues reprieves value at product before the Apple obviously as you know as automotive capable. So we planned to produce automotive upgrades through the street, we have the right <unk> equipment that you've invested in.
To ensure that we're capable of doing that.
In terms of overall slabs you have to see SPV, we now have more slabs as a group.
If you look at what we're trying to achieve in my answers in Mexico and wish you a very.
Comfortable with this exposure sounds very happy with <unk> physician very happy with October out some applicability statement Mexican snap capability. So very happy with you as well looks like we have as we develop purposes.
Okay. Thank you.
Thanks, Patsy So let me now to a question from <unk>.
I notice that you increase your.
Guidance for <unk> perfect from 215 onto it up to 315, you can put on.
I did not understand the white <unk> copies and Samsung I assume the.
<unk> for for Iron ore prices are awesome <unk>, perhaps can you <unk>.
Yeah, let me pick it up with fundamentally it's all the three that you talked about.
So with with the changes we can produce a higher grade product and.
And clearly the diet product, we generate more premium.
And and would you believe that the pricing of that premium and overall price deck has changed as well.
So we we updated our assumptions and <unk> from $250 million to $350 million. If you look at our assumptions figuring the model, it's been much lower than my iron pricey needs today alright.
Illinois price you today is much more elevated in the longterm assumptions.
The acid is a tier one <unk>, so well invest it.
And your best resource body will be well invested mine.
It's low cost.
Right away, we have phone access and therefore, you should expect higher levels of profitability, even in terms of our our estimate.
Iron ore pricing in our estimate of $350 million of EBITDA. It.
Lower than consensus assumptions.
We've also made other improvements changed how we do with the <unk> and all of that Uhm logistical side and that also adds to the <unk> the cost of the product. So so I hope I provided you with enough color.
<unk> and <unk>, you need you seem to be very satisfied with it but a few weeks ago.
You actually can you <unk>. So I was wondering what you.
<unk> on the thing is it.
And that's why I decided to set your appointment on that.
We don't see any reason for us to take any down in there and you lost it is performing very well we had a record production.
Is quite strong as as we <unk>.
<unk> I cannot really comment on the reasons why.
Decided to take him.
Oh of course.
Perhaps the last one you I'm on for some milk with another.
Confronts regarding the did you need because it was feel that my clothes for for them to come in time. If that's something you can do you think that's behind you know and that's the.
The risk of <unk> completely pick it up.
Yeah. Thanks for your question, let me just explain the situation.
Fundamentally there was an inspection that occurred which identify the dust levels were too high.
And we obviously did not agree we have a lot of remedial actions on that.
On the way.
It went to the court and the court August two sided with US the onus is on us to implement all the actions we are busy doing a busy implementing all of these directors and it is also important to recognize that the.
Industrial acquirements had been moving goalpost.
So it's not that this has been noncompliance for a long period of time, the cheese regulations and with the new regulations are still entering the actions and and in a court has signed up with us So as long as we implement those actions, which we absolutely intend to do I do not see further risk over on the facility has reduced its level of destinations with my dramatic.
So if you if you look at what has happened in the last few years has been sent.
For example, overall in terms of the core facilities in other areas.
Companies on the right track the impurity it remains work in progress.
Okay. Thank you.
Thank you <unk>.
So I think I did hear about time for a couple of follow up questions. The first of which will take from Tom <unk>.
[noise] hi, guys. Thanks, so much for your <unk> I'm just too from my side. The first one just on China exports Uhm do you attribute the increase to international price differentials Uhm.
He was a little bit that's I guess that makes is working against you.
European H L C prices quite a bit about China do you think that got disclosed or do you still see sort of risks.
I've tried exports <unk>.
That is successful.
Well, let me take his phone yeah. So we have seen of course the level of exports from China Verizon.
The Zip code Sir.
Yeah.
Recently, we have seen the government.
Action to control the level of production, which is a very good news.
You have seen also forecast for the mailing plan has been changed so to the extent that we see a correction and production now.
<unk>.
At.
The level of exports come down <unk>.
And of course, there is also discussion about new similar speeches social all his goodness and returns.
For the Chinese market.
Industry.
<unk>, what kind of woman.
This submitted <unk> effective it's going to take some time.
<unk> on the ground, so I'll basically with the theater names that.
Thursday consumption is going to be relatively flat.
If that happens really cannot support us in 2024.
<unk>.
The second quarter of 2024.
That makes sense. Thank you and then the other question was just maybe a little bit more on the guidance. So on slide seven U E.
<unk> <unk> <unk> H, one has been at 155, so well above that long said average line that you put the 120.
But given the sort of commentary on spread compression.
M B P.
T M I, let's see if the lowest basically ever since you know.
Apart from Covid and G F C.
Is it fair to say the H T V <unk> should be trending below the 120 average or do you think this is a new sort of floor level fee.
<unk> macro headwinds.
Thanks.
So this is not something that I mean like you never know.
Any specific on that.
I mean, I I think it's clear in Latvia trying to highlight its <unk> over the last couple of years I can get very very clear.
Really <unk>.
But I'm not gonna.
Be specific in terms of bank will pick up the phone guidance in the in the second half.
I would just add that you've been a very negative picture [laughter].
Data that you pointed to as accurate so I'm not arguing with the data, but I think the positive also is.
[noise] trees in the system.
Alright, so maybe rehab those P M I V days and all of that but fundamentally what we don't have.
Let me real demand is going sideways is inventory destocking that'd be lines during the fourth quarter of last year and so can demand is Israel.
We expect secondhand <unk> said earlier volumes to be better than second half 2022.
Otto is strong relatively in this marketplace or those getting well, it's all set in so the weakness that receiving the construction seconds.
That's right yeah. Thank you Sir.
It takes you to make sure I was just sort of.
Reference.
Mm okay. Thank you that's that's helpful [laughter].
<unk> I think I'll move now for our last question.
At the moment stomach got on I ended up.
My question for me its own hearing. So you have you have had them at the target of around seven by the end of the past, but we've been consequently, we know that that before the last wide of course, the business of Mexico. That's all that's being equal where would you like your not that to be at the end of next to you in the next 12 months in the context of your projects to buy back program secret meditation.
That's my question.
No. Thank you well.
As you know, we don't really have a a bag of swollen at.
All we have been seeing is that.
I wanted to cross Oh, well <unk> unlimited five seven different wallets.
So we're gonna be within that range.
You said I think the password.
Finish infrastructure in Russia.
The <unk> <unk> balance sheet.
<unk>.
But I think this is very comfortable with the level of <unk>, we have that they allowed to confidential sofas.
And security strategy.
So we can get them all relax.
Let's see.
What has happened in the dark blue and we remain.
<unk> <unk>.
Thank you.
Excellent. Thank you sorry about the last of our questions. We get your Sir I'm going back to you to consult.
Okay great.
First of all thank you very much for all your questions and interested in the company.
Currently might've been remarks wanted to highlight two teams I hope you take that destruction appointment to our earnings profile. The fact that we're making progress on D cards are very focused on reducing carbon emissions continue.
Catholics envelope.
<unk> I'm.
Making that possible, which which we also talked about and also her email real growth agenda, I know disorder, we go into Liberia and <unk>.
If you just look at what we have achieved test in history, well in Brazil, Texas.
<unk> positive contribution we talked about the Mexico trip now.
About 80 minutes, how 'bout that is doing so there's real tangible progress on a growth agenda. All this gross project.
Performing our expectations and EBITDA guidance or you would have thought over what I provided so it's all very good news so.
My standpoint, and I said, it and the last second to last question I think.
No the second half of 2020.
Three is not like the second half of 2022. So overall markets are also.
Also constructed and clearly most critical to US is is progressing in in our business.
Sure that we can keep that to that market.
<unk>, hi qualities to your products in the marketplace and structural improvements to our business. So with that I just wanna. Thank everyone again and wish everyone. Saint holidays. In case, you guys are taking some time off.
Thank you.
Ladies and gentlemen, the conflict has not concluded at G mail disconnected telephone. Thank you for joining and have a pet day goodbye.
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[noise] mm.
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