Q3 2023 ArcelorMittal SA Earnings Call
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Ladies and gentlemen, thank you for standing by welcome and thank you for joining the Q3 analyst call. If arcelormittal throughout today's recorded presentation. All participants will be in decent only mode. The presentation will be followed by a question and answer session.
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I'd now like to turn the conference over to the management. Please go ahead.
Thank you. Good afternoon, everyone. This is Daniel backlog from me also Mitchell Investor Relations team. Thank you very much for joining us on this call today to discuss the third quarter and nine months 2023.
Before I hand directly to Mr. Mitchell I'd like to refer you to the presentation. We published this morning on our website.
Can I draw your attention to the disclaimers on slide number two of that presentation.
Debit right now handover the call to our executive Chairman Mr. Mitchell.
Okay.
Thank you Danielle.
Good day.
And thank you for joining us today for this Q3 earnings call.
I'm joined today by Albert do you think you could do Mcdonald our chief.
Financial officer, genuine ox Juno and our device precision Brett Davies, who is there.
As part of a strategic corporate has been shipped.
I didn't I would not not ultimately be present in the third quarter, but we wanted to speak with you all.
Given the tragic accident that took place on October 28.
Our Costa and Coke coal mining Kazakhstan.
Claimed the lives of four to six football leagues.
Thanks, It is positive.
Especially for the families of the victims and also for colleagues of the disease, who have lost friends and for the communities to which they will never get to.
It is next year, a little bit these groups the families colleagues and communities.
Our greatest focus is pizza sticks.
It goes without saying that it is also a very difficult time for the company.
We are global group.
He also commented.
Being in the anguish within the company at this table.
It means a diesel.
The outpouring of support shown by colleagues around the world for all of our colleagues in Kazakhstan has been increasing claims do you mind.
Yes.
Guidance.
You wouldn't want to know how big this extra time.
We are asking ourselves the same question.
And we will make sure we get them.
Oh good.
Help us implement the actions.
That will enable us to emerge stronger.
A full review of our health and safety program.
The progress has been made in the last two years is related to areas that need to be strengthened named Pete He is already underway.
We will ensure that whatever.
Lessons that can be learned alone.
We will ensure they talked about all aspects of her two positive Ken Fenton will be.
Kazakhstan has played an important role in the group since we acquired in 1995.
But over the course of this year, we have been in discussions with the government of Kazakhstan about the food chain on the spot.
Yeah.
Before the recent accident, we had signed a preliminary agreement with the government.
To take over the operations.
We are committed to completing this transaction estimates.
It is important for thousands of employees that would continue to incur again.
No.
As well as their families and communities.
Certainty and distribute here about the future.
Okay.
Our Kazakhstan operations have played an important role in just compute.
I sincerely hope you will have a long and successful.
With this I will hand over now to Greg.
To add some additional details on the steps we are taking from here.
Yeah.
Okay.
Yeah.
As Mr Mittal already said.
20th of October was the saddest day in the history of our assortment.
The families of our 46 colleagues have had their lives devastated.
The increase in loss of shared by all of our colleagues and our communities.
We know there is no adequate compensation for this loss.
We're doing everything in our bolivar to provide appropriate support.
Much of this is ensuring we fulfill our basic civic responsibility to properly look at to those who have lost loved ones.
Even during the process of transferring ownership to the government to Kazakhstan, We will continue to provide support for our communities as they navigate this tragedy.
Yes.
I'm sure like me you want to understand how this happened.
We don't have all the answers today, especially.
Special Commission has been initiated by the government to conduct the first phase investigation.
We are cooperating fully to assist in this investigation.
The commission is still taking evidence and we expect preliminary findings to be published soon.
It is only in Kazakhstan that we own and operate coal mines.
The less it is only appropriate at a time like this to these safety across the group and meet whatever improvements are required to ensure that every single one of our <unk> operations had zero jewelry.
Yes accidents.
We had already launched a major step change in our safety activities at the start of 2022.
The new strategy focused on the twin pillars of risk management and cultural change was developed for group wide implementation.
You will find more detail on that strategy in the presentation and the earnings release.
We can see that in the steel side of the business. The step change is delivering results.
Because of the efforts and commitment of our colleagues globally. This year, we have had no direct employee fatalities outside of C O. Yes.
And while we cannot yet see the statement include contractors, we are nevertheless, 40% better than the World Steel Association record.
But this was not enough to stop these accidents happening.
Given where we stand today I cannot conclude that we have every single aspect covered.
Or that our organization is setup optimally to achieve the transformation as swiftly as we must.
We need to do much more.
The only appropriate course of action.
Yeah hard look inside our group identify the gaps that exist and strengthen our actions processes and culture to ensure that an accident of this magnitude.
Never happens again.
Therefore, we're also commissioning an independent third party comprehensive global safety audit with key recommendations will be published in due course.
Yeah.
We know that going forward, we will be judged more on what we do than what we see.
We are committed to taking all the steps necessary to learn from this tragedy and sure. It is never repeated and emerge a better safer.
Yeah.
General you know that now make some further remarks.
Okay.
Thank you Richard.
I must also begin by expressing my sincere condolences to the families and friends of our colleagues who died from the accident on the 20th of October.
The accidents that we have experienced in the coal mines have been deeply troubling to the company and to the cause that governor.
It's fair to say that over the course of the year, we have space not only an increasingly difficult trading environment, but also an increasingly paas operating environment.
We know that on disruptive second of October we signed a non binding agreement with the government of Kazakhstan to transfer the assets to the Kazakh States.
Discussions have been ongoing for many months already and it became increasingly clear that the government was again interest in owning and operating this asset.
To help you understand the performance and financial contribution of Kazakhstan 12 group, we have provided some relevant information in today's earnings release and accompanying slide deck.
And I hope that you will appreciate there due to the ongoing negotiations, we will not be able to comment further on todays call.
As soon as there is a final agreement it will be communicated.
The appropriate channels.
As we have today and also quickly results I'll also make some comments on the financial performance, although I'll keep my remarks brief.
Our financial performance continues to reflect the structural improvements we have talked about in recent quarters.
Despite the impacts of weaker average selling prices and seasonally lower volumes.
EBITDA per ton in quarter three was $136.
For the first nine months it was $149.
This compares well with the long term history of our group showing the benefits of our higher grade asset portfolio.
But looking at the beta alone only shows part of our financial improvement.
If you look at our long term history. The average annual net income pre exceptional items was about $2 billion.
Our run rate this quarter was almost double this long term average level. This captures the improvement in EBITDA the much bigger contribution of our joint ventures in particular, India and the benefits of our lower cost balance sheet.
Net debt this quarter, but declined to $4 3 billion and we finished the quarter with excellent liquidity of $11 8 billion.
Our guidance on working capital and Capex is unchanged.
Investing point 9 billion working capital year to date, we expect this to more than reversed in the final quarter.
We expect our capex to be in the middle of our four five to 5 billion guidance range.
Looking forward.
Quarter, four will be impacted by the lowest spread levels, we have experienced in recent months.
But the levels reached in recent weeks are unsustainable and sustainable and supply will respond.
And what are the real demand environment suite in aggregate inventories in the system remained low.
And we have seen in recent years that when inventories are low are shifting sentiment can quickly translate to Bryan Texas.
The longer term fundamental picture remains positive our strong balance sheet and expectation of consistently positive free cash flow underpins. The continued execution of our strategy we.
We will continue to invest in our operations to improve our safety and environmental performance and supply the growing needs of our customers for low carbon steel solutions.
We will continue to advance our strategic growth projects to support higher normalized profitability.
And we will continue to implement our defined capital allocation policy, which allows us to advance our strategic and growth agendas, while consistently returning capital to shareholders through our share buybacks.
With our opening remarks now concluded we do not take your questions.
Daniel Please go ahead.
Thank you Jeremy.
I'm, sorry, if I can just.
Reiterate the instructions from the operator, if you'd like to join the queue to ask a question. Please press star one on your telephone keypads, we do have a number of.
It's already in the queue and we will take the first question. Please from Alain at Morgan.
Stomach.
Yes. Good afternoon, everyone two questions from my side I'll take them one at a time firstly a question on capital allocation you seem to have posed your buyback program since last August and M&A opportunities may emerge in the current environment and if these opportunities come your way how do you think about balance sheet capacity and the leverage that you're willing to take on.
In the context of your capital allocation framework. That's my first question.
Excuse me this is the operator.
Uh huh.
Let me start again, I think I was on mute.
Ah.
Ah Yes, Alan Thank you for your question let.
Let me.
Yeah.
So I guess you guys can hear me.
Operator can you guys hear me so let me start again, thank you for your question.
We're very proud.
Proud of our strong balance sheet, we remain very focused on retaining an investment grade credit rating.
We think they're very important strategically and we've seen the capital allocation policy that we outlined over the last two years has worked.
Increasingly well and.
In the last two years, we have bought back over 30% of the business.
We have been able to invest in our strategic Capex and at the same time, we've been able to grow the business, we acquired a fantastic facility in Texas.
In Corpus Christi, as you know, which supports our D car backwards, we acquired a very well invested facility in Brazil, the largest facilities are performing well and achieving normalized EBIT.
The $500 million. So we believe that our strong balance sheet the.
Our focus on retaining that along with the capital allocation policy that we have outlined allows us to both grow the business develop their business as well as return capital to shareholders.
Thank you My second question is on Kazakhstan, I guess, you mentioned, you're constrained and say, but my question is more of an accounting one I'm not sure. If generally no you cannot you are able to answer that.
Are you able to give us a bit more granularity on the balance sheet the impact of a potential deconsolidation of these assets you talked about 1.8 billion of book value.
Presume this could be at risk if you give away the assets and then as an extension to this one how much provisions and other liabilities that are attached to the Kazakh assets. Thank you.
Yes.
As we highlighted we're not going to be in a position as this negotiation.
It's happening with the government and we're not going to be able to comment much I mean, we tried to provide you and.
With some more.
Numbers for the operation.
So that you can better understand what is the contribution of these assets to our consolidated numbers. So you have the book value is there.
And we will have to wait to see what the final outcome of the negotiations before we can.
Comment more.
Understood. Thank you.
Great. Thanks, a lot.
I will move to the next question please from Tristan at BNP.
Yes, hi, Thank you for taking my questions I have two.
The first one is on the U S market I notice in the slide in your presentation that you can you paint a pretty optimistic assessment of the demand environment there.
I think you referred to a 9% upside potential for flat steel demand, which I think is more than what you have for for India. So could you elaborate a bit there. It's my understanding that higher spending in the U S will benefit more long steel products and flat steel except plates.
So we'd like to have your thought there and second.
You purchased.
<unk> facility in Texas that Youre spending more at Calvert.
How attractive is the U S market and how does that fit in your capital allocation strategy I'll start there.
Sure Kristen. Thank you for the question, maybe I'll take the second half of year for the second question that you asked and ill get January another two to revert on the first.
In terms of the U S.
And Mr emphasize that the U S is one of our largest single country markets.
If you exclude India. It is the largest single country market and we have an excellent franchise business, we supply to the most demanding customers not only from our operations in Calvert, Alabama, but from other facilities that we have.
We continue to invest in the U S.
As you are aware, we are finishing our electric arc furnace project at Calvert, We finished in 2020 for.
That both strengthen the facility further and bring significant benefits.
Our business and as you mentioned, we have acquired an <unk> facility in Corpus Christi, Texas, It's doing really well at nameplate capacity for struggling for many many years.
It really enables us to move forward in terms of Decarbonizing, our business because as Youre aware <unk> provides low cost.
Green Metallics.
Relatively lower carbon metallics.
And Optionality too.
Green it in different technologies.
So the U S market remains important we are focused on it and I'll ask Jean Reno to talk to you a little bit about the.
The growth forecast.
Thank thank you Tristan I think some of the numbers that you are coursing.
What you see now is line is really our projects for 2032.
So then you'll see that we expect that the demand in U S growth supported by.
No we have different programs announced by the Gorgon large very large programs.
Probably totaling more than two trillion of investments over the next years, so that will support demand for steel, but if you see the level of growth in media. Its superior right. So we expect that the demand in Mena will almost.
Double from where we are today. So that's almost 100 million tons of growth and that's why we are we are investing.
Much in India trying to double the capacity now from seven to 15 million tons.
And with some more.
Plans ahead of us.
So when you have decided this these this volume of investments in the U S. All of these investments expected to happen over the next couple of years I think it's fair to assume that everybody will benefit not only the loan producers for everybody who benefits.
We'll see more warehouses more roads more everything right. So I would expect that the whole industry will benefit from that.
Alright.
That's clear and if I could just.
Follow up with also a high topic question, it's on China, I think the demand and export situation in China has been pretty negative this year with the real estate market normalizing.
Do you believe this production and export trends are here to stay or is that just temporary and how is the situation in our view difference in 2015 16, and what can you do to limit the negative impact on your operation.
And if things were to last would you contemplate further restructuring in Europe, or Brazil, that's been hard hit by Chinese export. Thank you.
Yes, Thank you three side you're right.
I think we are seeing of course, a significant increase in exports from China. We continue to believe that that's not structural.
If you look at the level of profitability today in China, We believe that only a small number of companies can actually make money in this environment level up spreads are extremely low.
Two low actually.
We started to see some production cuts.
And the numbers show some progress and if you see the situation seems up to some extent similar to what we saw in the last F. 2022, when production was really running high in the first half and then we saw significant production cuts in the second half of 2022, and then overall for the year.
Productions didn't change much.
We will see now what happens the remainder of the year clearly in this environment, it's tough right.
Many companies to make money.
So we don't believe that China wants to go back to 2015 16 situation.
You'll recall that trigger a number of trade actions.
You will see finally, what happens all assets I mean, you mentioned, Brazil, a very.
Now assets of <unk>.
Very high quality cost competitive and I'm sure, we're going to be in a position to continue to.
To service those markets.
Alright, Thank you very much.
Thanks, Justin So we'll now move to the next question from Patrick at Bank of America.
Alright, Good day I just have two very quick follow up questions from.
The previous question so.
You did say in terms of balance sheet strength.
Want to keep investment grade balance sheet, a strong balance sheet, just remind us is there an absolute net debt numbers should we still think about $7 billion.
As the ceiling there.
And the second follow up question is just.
If I look at what the government of Kazakhstan is saying around the timing of the transfer of that business. They.
They are saying they want to get it done in November.
Have you got any comments around the timing.
And then I've got one other question after that but I'll stop for the quick follow ups.
Yeah.
Sure.
Thank you Patrick.
Patrick I think you heard my comments quite well.
So there's not much more to add.
We're very focused on our balance sheet retaining investment grade credit rating and at the same time.
We're very supportive of our capital allocation policy. It has worked really well.
In terms of the net debt target.
It depends on what the earning power of the business is fundamentally to the extent that that changes we will update our net debt target, but you should you should assume that we are focused on a strong balance sheet investment grade credit rating investment grade credit rating as well as maintaining our capital allocation framework.
In terms of our Kazakhstan, I think Jim you talked a lot about it in his opening remarks, there is not much more to add.
I think all parties are working diligently to expedite.
The cost of this transaction.
Okay. Thanks, very much and then Mike I suppose new question.
You're saying structurally the business is more profitable.
$136 a ton.
EBIT.
In a very weak market is much better than previous down cycles.
I suppose just thinking forward to next year.
Especially in Europe auto production. This year has been really strong and it looks like the backlog of orders is coming to an end and possibly we might see some contraction in auto production next year do you think this could take another leg down in terms of where that trough EBITDA is in other words.
Are we being.
It's flat to buy very strong auto production this year.
And that could weaken into next year or how are you thinking about the autos market for for 2024. Thanks.
Yes, that's right.
Let me take this one well it's really too early to talk about next year in terms of auto negotiations.
And some in some cases, we have started discussions about it's still early in the process.
Our focus really when it comes to this contract is to make sure that we have a win win.
Negotiation with our customers.
We are focused on making sure that we are rewarded by the by the quality of the products and services that we deliver.
And that has always been a focus and I think that's well understood.
So I would not be overly concerned about that right now.
Youre right. So we'll see what happens so I would just point that inventory levels are still low.
So that can be also opportunities for them to replenish some of the investors I cannot speak for them, but.
This year has been good it has been strong we have been actually shipped more than what we had anticipated at the beginning of the year.
We will see how it plays out.
Next year.
Okay. Thank you very much.
Thanks, Patrick So we'll move now to a question from Boston at Deutsche Bank Go ahead.
Yes, thanks, and good afternoon all.
Also thanks for giving us that color on <unk> could you maybe help us with the <unk> number which <unk> has been contributing in the course of the third quarter. Please that's my first question.
Robust.
If you look at our slide what we have been what we said is we do.
Do you what is what has been the average contribution of EBITDA for the group in terms of EBITDA of about $300 million.
Our capex about $250 million per year.
And and we have seen that this year because of the.
Challenging market environment and operational environment that we have faced the profitability of the business the bit of the business is negative.
But we're not going to breakdown. The results you can see I mean, what is look at nine months you will see that.
We have Ukraine, and Kazakhstan negative.
Offset in part by by South Africa, but that gives you.
An indication of the magnitude that it has been negative this year for us.
Could you at least tell us and I suppose it's also been negative last quarter, but could you at least give us some direction guidance, whether it's been negative last quarter.
It was negative last quarter as well.
Okay. Thank you.
Second question is on the pollution fee Act and DSM I.
That's a very preliminary framework and its probably very early days, but it would still be great. If you could give us your thoughts on that and how it would be impacting your business.
Sorry.
Go ahead Jim.
Yes. My question is on the pollution fee Act in the U S, which I thought was basically.
We have initiated what's pocket published about a week ago and it seems to be a bit of a response to the conversations which have helped on the European and U S. I think green skillet and aluminum trade agreement, which apparently has failed and I think that deadline has been shifted out but from my understanding there has been no new proposal mate.
The pollution PX.
Which I think is also aiming to basically.
Put a charge on imports or basically tried to find that mechanism tool to basically protect the U S market against material, which is not coping with the emission standards, which the U S market hassle just in case, you've got any early thoughts on this and how it would be impacting your business given that you also shipping quite a bit off amount.
Net of material from both.
Obviously, Brexit, Brazil, Mexico, and also Canada just in case, you've got any early thoughts.
That would be great.
Yes.
Nothing specific to be honest with you I think it's very early days, but clearly the direction of travel.
Is that.
Critical leading economies are moving towards a more fair based trading system.
What does what does that really mean it means to the extent that industries and companies are decarbonising.
How can to ensure that they can compete effectively with other inputs and so there needs to be a level playing field and I think you see some of that in the C. Band that has been launched in Europe, It's under trial period and up to two years, there will be costs.
I believe in the U S also examining how best to ensure that there is a level playing field and we have a fair trading system.
Okay. Thank you maybe just on the European C band because I saw on your slides you say.
But there is already a penalty relating to the not related to the noncompliance with the reporting rules.
For the CFM, all said the transition periods.
Understanding that there is not financial penalty at this point, but maybe I'm wrong, maybe you could just briefly.
Yes.
Provide a bit of color on that as well.
Yeah, a button my understanding is that you're right. So they will not be paying now for these first two years.
Zero to pause, but to the extent that it failed to report then there can be some financial penalties to be established we don't we don't know exactly how this is going to work it's still relative.
We're relatively new in the first three quarters of the room.
<unk>, yet been being worked out and the commission and values statement member States is still a line on how this is going to happen.
But our understanding is that if someone imports and it doesn't report it Ken and Bennington is subject to two penny.
But thats not the same as painful for Dakota.
Okay, great. Thanks.
Okay next question.
We'll move now to a question from Max.
Go ahead Mark.
Yes. Good afternoon. So my first question is on the Ukraine can you failed the current utilization rate in iron ore.
Semifinal semifinished products at.
What are the steps actually towards the step up in production.
I understand the blast furnace, <unk> and maintenance, but.
When it's done when its completed at the end of the year there could be a significant increase in production. So could you could you give us a bit more color on that.
Yes, Mark if I can.
To be honest the situation has not really changed much.
Continue to operate one blast furnace.
Hum.
Only one five months.
Sure.
And we continue to run the mines at about 40% 45% of <unk>.
<unk>.
The challenges continue to be logistics to get the raw materials and to get the finished products out.
The products that we are producing today.
In terms of finished products being sold.
Absolutely.
And to some neighboring countries, where we can still have access to logistics. So that remains really the main challenge.
And we have to see how it evolves the situation is as seamless as we all know.
Quite fragile.
But thats. The good thing is the assets continue to be well kept.
And we continue to support our employees.
And the teams are doing a great job in <unk>.
Managing this very very challenging situation.
Okay.
And last question is on your Decarbonization strategy, some heightened churn I've seen that in Brazil, just signed an Mou with the local electricity company to evaluate the feasibility of an extra plant. So I wonder how far would you be actually willing to insult hydrogen production. It is something that you think will be essentially outsourced.
Two external providers or is that something that you could do also on your own and for significant part of your needs in terms of <unk>.
Yeah.
Yes. Thank you for the question just very quickly on <unk> Big picture as all of you are aware, our <unk> technology leader.
We have genomic capabilities.
The ability in terms of R&D.
Have a globally diversified workforce, which I believe is the best in industry and along with that.
Fact that we have different pockets of energy and.
Global asset base, I think we're extremely well positioned to lead the way in terms of how we decarbonize steel.
Steel processes as well as SKU product.
In terms of what we are doing to vertically integrate into the energy space.
Focus so far has been our renewable energy there is a nice slide where we have three three projects that we have started in India, and Brazil and in Argentina. These are excellent projects. When you look through the seats. We returned the benefit to the steam facility as well as renewable.
Standalone return.
More than exceed our investment hurdles.
In terms of hydrogen and other sources I think look its preliminary we're evaluating.
To the extent that we can meet our investment hurdles and they create value for us in the long run and further support as we Decarbonize our business we.
We will clearly look at them and inform you accordingly.
Okay.
Okay. Thank you.
Yes.
Great. Thanks, Max So I'll now move to a question from Timna at Wolfe Research.
Alright, thanks, so much hope everyone's doing well.
Thank you for an update on Calvert timing, but also in in that.
Next steps Calvert and also another large electric.
Electric arc furnace, adding capacity, how youre thinking about the scrap market certainly the HDI facility have helped but it seems like a lot of additional scrap demand around the corner would love your thoughts.
Sure.
Thank you Timna.
Uh huh.
The calendar year project is proceeding well.
We expect to have a startup.
By the first half of 'twenty.
24.
It's an excellent project because it's got a lot of secondary metallurgy and can produce the highest grades and supported by our facility in Corpus Christi and Texas. As you mentioned, we will be able to do low carbon high quality automotive products. So really this would lead the way in terms of the U S.
Steel business in the U S steel industry, and really having a low carbon base.
For high quality exposed automotive applications.
In terms of scrap I do agree with you that it's harder and harder to find good quality scrap Brian scrap in the United States.
And that is why I think our strategy of investing in Texas.
Sure we have the strategic asset, where we have good quality high quality I should add low carbon metallics.
Dividends.
Okay. Thanks for that and then if I could one more.
Conditions are you thinking about to consider restarting for mcgwire idled assets.
It's a question of seasonality you think or can you give us a little more color on what you're looking for there.
Yeah, Timna, let me let me take this one I mean, what we can give right now and we have basically maintenance.
Two of our finances wildfires and.
In Germany, it's going to be down for 30 days for maintenance and then we have a relying.
In Belgium for about 70 days.
And then after that is finance that should be up and running.
The only finance that is currently down for market conditions due to market conditions as for us and we will wait a bit more to take a decision to restart the credits.
But other than that.
And for the maintenance work that will be constraining our production in Q4 as we have highlighted in our earnings release.
The auto facilities.
<unk>.
Okay I'll leave it there thank you.
Alright, Thanks, Tim.
We'll move now to a question from Andrew.
At UBS go ahead Andrew.
Hi, John I, just wanted to touch on the M&A topic again I think.
But clearly we will try to ask about central maximum leverage ratios and things like that you talked about adding power estimates for a multiple of EBITDA and also if you're thinking about acquisitions in Spain.
Is your would you consider using a significant milestone given the fact that obviously it trades pretty even lower multiple.
That's what it may depress point of the cycle.
And how do you think about use of stock at an M&A and.
We are holding tiptoeing around the topics but.
Great and then what are you able to tell us about.
The links to Geos.
Yourselves to honestly.
As at March produced in the U S and then.
Also these downturn.
In India the dose.
In the press as well can you just give us an idea about.
Maybe potential rationale on how you think about those assets. Thank you.
Yes. Thank you.
I don't think you guys are doing.
Turning to ask you directly indirectly many times.
But as you are aware, we cannot comment on M&A.
In terms of your question on capital discipline on SMA a good one.
I think I said, it but you asked a nuance I will elaborate further we are focused on retaining a strong balance sheet focused on retaining our investment grade credit rating and focused on our capital allocation policy as I mentioned, we have bought back more than 30% of the business.
So really it would not make sense for us to be issuing shares I think you highlighted.
The multiple discrepancy we've also talked about the book value per share we talk about the growth we talked about how in this environment. The margin per ton remains good if you look through our net income and it's very very strong.
And it's $4 $5 in last nine months on an Apache share basis, and Thats because we have these excellent joint ventures as well you alluded to India.
India is doing really well, it's very strong business, we're growing it we're investing to double the assets. If you visit you would see lots and lots of Queens.
And the underlying business is very strong because it has a low cost base, we have our own iron ore, we have our own pelletizing everything is coastal.
Make.
High quality products, there we are starting up.
Our automotive capable.
Living in gout lines as well, so I think thats the complete picture on our strategic plan and therefore capital allocation policy, which we take hassle free cash flow and returning it to shareholders as appropriate I think it would not be appropriate for us to be issuing shares in this environment.
That's very clear.
But do you have.
East coast violence in the $7 billion in the past us at that time.
Okay. Thanks for a.
To keep a strong balance sheet to keep fighting Chris investment credit rating is for a maximum point that you put on that I mean, if you exited two times EBITDA was about would that be.
No go or with it.
Can you give us any steer on that.
Yeah look I think the focus remains strong balance sheet investment grade to the extend that we develop the business grow the business with can you evaluate that.
But really you should look at this company will be maintaining.
Retaining its investment grade credit metrics.
It's hard for me to be more explicit than that.
But I think that provides you that is a good framework for what we're trying to achieve.
Okay. Thank you.
Alright, Thanks, Sandeep, so I'll move to the last question actually which is from Moses at J P. Morgan.
For taking my question just wanted to ask on the working capital so the build here.
In this quarter.
Just trying to understand the reasons for that field, if any of it was to do with.
Building inventories.
Capacity curtailment and if so how much of those inventories are finished.
Finished goods inventories versus semi finished goods.
Just to give us a steroid and essentially what we can expect to unwind in Q4, given obviously.
Weak demand environment currently.
Yeah.
Yes, Hi, <unk>, So let me take this one.
So there are a couple of reasons for the review of inventories in Q3. One is of course, we had the incident scene.
With two financings in Europe.
So as a result, we draw from inventories to supply customers in the first half.
So we got to a point, where we had to start.
Replenishing, our internal inventories and as I have said it and another and another question, we do have maintenance work.
In quarter, four and two furnaces. So it was also important to prepare for that.
So most of the replenish.
Replenishment that youll see on the metal stock side.
And.
As we have guided up to Q3, we have invested about $900 million in working capital and our expectation is to more than reverse that in Q4.
So that should give you an indication of the potential.
Inflow coming from working capital in Q4, I hope that helps.
That's good thank you very much.
Great. Thanks, guys.
Our last question, so I'll hand, the call back to you.
Okay. Thank you Daniel Thank you everyone for joining the call today.
I just wanted to reiterate.
I know, it's very difficult time for all of US the tragedy in the pain of Kazakhstan is very wrong.
We're doing everything we can to support the communities and our colleagues who are deeply impacted perhaps really devastated.
At the same time, we're working very very hard all the leaders in the company are focused on improving our.
Safety practices.
Across the board.
We're also going to use the support of a third party independent.
Which will do a comprehensive audit looking at governance practices looking at policies processes, what we do on the shop floor, our audits good enough training exercises.
And we will be publishing those recommendations.
I can assure you we take this very seriously extremely seriously and we are all more than committed more than 100% committed on improving our global safety performance with that thank you very much for your time and look forward to talking to us.
Yes.
Okay.
Ladies and gentlemen, the conference has now concluded and you may disconnect. Your telephones. Thank you for joining and have a pleasant day goodbye.
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Okay.
Okay.
Yes.
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