Q3 2024 ArcelorMittal SA Earnings Call
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I will see you soon. Bye-bye!
Daniel Fairclough: Great. Good afternoon, everyone. This is Daniel Fairclough from the ArcelorMittal Investor Relations Team. Thank you for joining this call to discuss ArcelorMittal's performance and progress during the Q3 and 9 months of 2024. Leading today's call will be our Group CFO, Genuino Christino. Before we begin, I would like to mention a few housekeeping items. As usual, we will not be going through the results presentation, which we published this morning on our website. However, I do want to draw your attention to the disclaimers on slide two of that presentation. As usual, Genuino will be making some opening remarks before we move on to the Q&A session. If you would like to join the queue to ask a question, then please do press star 11 on your keypad. Over to you, Genuino.
Great.
Afternoon, everyone. This is Daniel on for me for me to Investor Relations team. Thank you for joining this call to discuss household Mitchell's performance and progress during the third quarter and nine months F. 'twenty 'twenty four.
Leading today's call will be our group CFO Jeremy No Kristina.
Leading today's call will be our group CFO Genuino Christino.
Before we begin I would like to mention a few housekeeping items as usual, we will not be going through the results presentation, which we published this morning on our website I went back I do want to draw your attention to the disclaimers on slide two of that presentation.
As usual.
I'll be making some opening remarks before we move on to the Q&A session.
Speaker Change: I would like to join the queue to ask your question and please do press star one on your keypad.
Jeremy: Obviously you Jeremy.
Genuino Christino: Thanks, Daniel, and welcome everyone. As usual, I will keep my remarks brief. I want to focus on three key themes, beginning first with safety. Across ArcelorMittal, our people are galvanized to improve our safety performance and achieve our goal of being fatality and serious injury-free as quickly as we can. We recently announced that the dss+ safety audit has been completed, culminating a clear set of six recommendations. The audit took nine months. We went right from top to bottom of the company. As we now move to the implementation phase, there is considerable work underway to transform the recommendations into very specific work plans that are tailored to each business unit. These work plans will support us in our journey to zero fatalities and safety results we are striving for. Moving to our financial performance, I want to highlight the benefits of our diversification.
Jeremy No: Thanks, Danielle and welcome everyone.
Speaker Change: As usual I'll keep my remarks brief I want to focus on three key themes.
Jeremy No: Beginning first with safety.
Speaker Change: Across our filler metal our people my telephone lines to improve our safety performance and achieve our goal of being fatality in serious injury three.
Speaker Change: Quickly as we can.
Speaker Change: We recently announced that the DSS blood safety audit has been completed culminating a clear set of six recommendations.
Speaker Change: It took nine months.
Speaker Change: And we went right from top to bottom of the company.
Speaker Change: As we now move to the implementation phase.
Speaker Change: His considerable work underway to transform the recommendations into very specific work plans.
Speaker Change: Thank you to each business unit.
Speaker Change: This work plans will support us in our journey to zero.
Speaker Change: Fatalities and safety results, we are striving for.
Speaker Change: Moving to our financial performance.
Speaker Change: I want to highlight the benefits of our diversification.
Genuino Christino: Our resilient performance this quarter reflects the progress we have made to high-grade our asset portfolio in recent periods. We have sold or exited several high-cost assets that are clearly struggling in the current environment. At the same time, we have added new assets to our portfolio that are well-positioned to create value, not just in good times, but in all market environments. Our results are a clear testament to this progress. Despite the evidently challenging market conditions, ArcelorMittal EBITDA per ton margin in Q3 of $118 per ton compares very favorably with our long-term averages. A key part of our resilience is our diversification. Diversification across products and markets and geographies. It is often underappreciated that North America is by far the biggest contributor to our EBITDA.
Speaker Change: Our resilient performance this quarter reflects the progress we have made to high grade our asset portfolio in recent periods.
Speaker Change: We have sold or exited.
Speaker Change: Several high cost assets assets that are clearly struggling in the current environment.
Speaker Change: At the same time, we have added new assets to our portfolio.
Speaker Change: Well positioned to create value not just single good times, but in all market environments.
Speaker Change: And our results are a clear testament to this progress.
Speaker Change: Despite the evidently challenging market conditions Arcelormittal EBITDA per ton margin in the third quarter.
Speaker Change: $182 per ton compares very favorably with our long term averages.
Speaker Change: A key part of our resilience is already densification.
Speaker Change: Diversification across products end markets and geographies.
Speaker Change: Is often underappreciated that North America is by far the biggest contributor to our EBITDA.
Genuino Christino: We have the leading franchise business in Brazil, where demand this year is very strong, and this is supporting good momentum for domestic prices and margins. Of course, we are exposed to India, the fastest-growing major economy globally. Diversification means that relative to our peers, our results are showing more stability. My final theme is the strategic execution. Our defined capital allocation and returns policy continues to deliver value for our shareholders. We are consistently investing to grow and develop the earnings capacity of ArcelorMittal. Since 2021, we have generated $20 billion of investable cash flows. This has allowed us to fund our portfolio of high-quality organic projects, take advantage of the best inorganic opportunities, return almost $12.6 billion of capital to shareholders, all while maintaining a very strong balance sheet. We have so far commissioned three strategic growth projects and all are performing well.
Speaker Change: We have the leading franchise business in Brazil, where demand is very strong and this supports and good momentum for domestic prices and margins and.
Speaker Change: Plus we are exposed to India.
Speaker Change: Fastest growing major economy globally.
Speaker Change: Execution means that relative to our peers our results are showing more stability.
Speaker Change: My final theme of the strategic execution.
Speaker Change: Our defined capital allocation and returns policy continues to deliver value for our shareholders.
Speaker Change: We are consistently investing to grow and develop the earnings capacity of our supplemental.
Speaker Change: Since 2021, we have generated 20 billion of investable cash flows.
Speaker Change: This has allowed us to fund our portfolio of high quality organic projects.
Speaker Change: Take advantage of the best inorganic opportunities.
Speaker Change: We returned almost $212 6 billion of capital to shareholders.
Speaker Change: All while maintaining a very strong balance sheet.
Speaker Change: We have so far cognition, three strategic growth projects and all are performing well.
Genuino Christino: Our Mexico hot strip mill continues to deliver a better-than-expected contribution to our results. The new cold mill complex in Brazil delivered its first high-quality coated coil at the beginning of Q3, in September, its first tons of Magnelis, ArcelorMittal's patented metallic coat coil that offers unparalleled corrosion protection. Our 1 gigawatt solar wind project started supply of renewable energy to AM/NS India in September. There is a lot more to come. As our presentation deck shows, we anticipate that our strategic growth projects will add a total of $1.8 billion of new EBITDA. $1 billion of this will come over the next 2 years, providing ArcelorMittal with a significant boost on top of the anticipated cyclical recovery. We continue to take advantage of our low valuation to our share buybacks. During Q3, we bought back another $280 million of stock.
Speaker Change: Our Mexico Hot strip mill continues to deliver a better than expected contribution to our results.
Speaker Change: New code New complex in Brazil delivered its first high quality quoted coil at the beginning of the quarter and then in September its first homes of Mcnally.
Speaker Change: <unk> patented metallic a cold call you that.
Speaker Change: <unk> unparalleled corrosion protection.
Speaker Change: And our one gigawatt solar wind project started supply of renewable energy to <unk> Si India in September.
Speaker Change: But there is a lot more to come.
Speaker Change: The presentation deck shows we anticipate that our strategic growth projects will add a total of $1 8 billion of new EBITA.
Speaker Change: 1 billion of this will come over the next two years.
Speaker Change: Providing us at La <unk> with a significant boost on top of the anticipated cyclical recovery.
Speaker Change: And we continue to take advantage of our north valuation to our share buybacks.
Speaker Change: During the third quarter, we bought back in all the $280 million up stock.
Genuino Christino: We have reduced the share count by almost 6% this year, bringing the total reduction to 37% over the past four years. As our presentation shows, our all-in cash yield remains very favorable for shareholders. Dividends and buybacks so far this year are $1.4 billion. With another $200 million dividend payment due in Q4, the total yield so far this year is almost 8% of our current market capitalization. Returning significant capital to shareholders at the bottom of the cycle while continuing to invest in growth is clear evidence of the progress ArcelorMittal has made. To conclude my opening remarks, we are delivering resilient results, and our performance continues to provide evidence that ArcelorMittal can deliver value through all aspects of the steel cycle. Our results, free cash generation, and a strong balance sheet provides a strong platform for our strategic growth projects.
Speaker Change: We have reduced the share count by almost 6% this year.
Bringing the total reduction to 37% over the past four years.
As all presentation shows our all in cash yield remains very favorable for shareholders.
Speaker Change: Evidenced in buyback so far this year at $1 4 billion.
And we've been not that 200 million dividend payment due in the fourth quarter. The total yield so far this year, it's almost 8% of our current market capitalization.
Speaker Change: Returning significant capital to shareholders at the bottom of the cycle, while continuing to invest in growth is clear evidence of the progress Arcelormittal has made.
Speaker Change: To conclude my opening remarks, we are delivering resilient results and our performance continues to provide evidence that arcelormittal can deliver value to all aspects of the steel cycle.
Speaker Change: Our results free cash generation and a strong balance sheet provides a strong platform fall with strategic growth projects.
Genuino Christino: The projects delivered so far are achieving the results we anticipated, and there is a lot more to come. The projects we will be commissioning over the next two to three years will provide significant structural upside to our EBITDA and cash flows on top of any cyclical recovery. All the benefits to our shareholders are being compounded by our continued share buyback. With that, we are now ready to take your questions. Daniel?
Speaker Change: The projects delivered so far.
Achieving the results, we anticipated and there is a lot more to come.
Speaker Change: The projects, we will be commissioning over the next two to three years, we will provide significant structural upside to our EBITDA and cash flows on top of any cyclical recovery.
Speaker Change: And all the benefits to our shareholders are being compounded by our continued share buyback.
So with that.
Speaker Change: We are now ready to take your questions Daniel.
Daniel Fairclough: Great. Thank you, Genuino. We have a queue of questions already, but just to remind everybody, if you would like to ask a question, please do press star 11 on your keypads to join the queue. We'll move to the first question, please. The first question we will take is from Ephrem at Citi. Please go ahead, Ephrem.
Daniel: Great. Thank you Jeremy.
Daniel: Have a queue of questions already but just to remind everybody.
Daniel: If you would like to ask a question. Please press star one on your key pads to join the queue.
Daniel: So we will move to the first question. Please.
Daniel: And the first question, we will take is from F. From Citi. Please go ahead.
Ephrem Ravi: Thank you. Three short questions. Firstly, on Calvert, obviously, you've had this deal with Nippon. For how long would that deal be valid for? It could take a long time for the deal to get approved. Associated with that the second EAF at Calvert, is that effectively on hold until the whole transaction completes, or is there a possibility that you can start it or start construction even if the deal is not completed? Secondly, on Monlevade. Obviously, you have put that project on hold as well, but the overall EBITDA of $1.8 billion from investments hasn't changed. Can you just give us a sense as to how big the EBITDA contribution from that was supposed to be? Just so that we can get a sense as to how big or small that was.
Speaker Change: Thank you.
Speaker Change: So pleased short questions firstly.
On <unk>, obviously, you've had this deal with Nippon.
Daniel: So how long would that.
Daniel: The valid for I E could take a long time for the deal to get approved.
Daniel: And associated with that.
Speaker Change: Yes caliber does that effectively on hold.
Daniel: Till the.
Daniel: The whole transaction completes or is that a possibility that you can start it.
Daniel: Start construction even.
Speaker Change: Deal is not completed.
Secondly on.
Speaker Change: One one level it'd be I mean, obviously you have put that project on hold as well.
Speaker Change: The overall EBITDA of $1 8 billion from investments has <unk>. So can you just give us a sense as to hold the EBITDA contribution from that was supposed to be.
Speaker Change: We can get a sense as to how big or small.
Speaker Change: That to us.
Genuino Christino: Sure, Ephrem, let me start with the last part of your question, Mona. I think that's a good example of the discipline that we want to make sure that we employ in all of our CapEx projects. As you know, this is a project that we started years ago. We stopped the project. We started the engineering. As we completed the engineering work, we realized that the investments would need to be higher. We felt that it was just prudent to put it on hold. We do have options in Brazil to continue to develop the business and in a less CapEx intensive. As you know, the Monlevade project, initially the benefits expected with the project was $200 million.
Speaker Change: Sure let.
Speaker Change: Let me start with the last part of your question.
Speaker Change: I think Thats a good example of the discipline that we.
Speaker Change: We want to make sure that we employ in all of our Capex projects. As you know this is a project.
Speaker Change: We started years ago with project and restart of the engineering and as we complete the engineering work, we realize that the investments we need to be higher.
Speaker Change: And therefore, we felt that it was just prudent.
<unk> put it on hold we do have auctions in Brazil.
To continue to develop the business.
Speaker Change: Less capex intensive.
Speaker Change: As you know one of our project.
Speaker Change: Initially again.
Speaker Change: Benefits as expected with the project from about $200 million.
Genuino Christino: You're right, you don't see a change in the overall $1.8 billion targets because we're going to be announcing soon, Ephrem, new investments that will basically offset Monlevade. That's why we are keeping the overall EBITDA target the same. Then as we release Q4 results, we will talk more about the new investments. Regarding Calvert, the focus right now is really on completing the first year. Everybody there in that facility is very much focused on that. Of course, we have the discussion, the deal with Nippon Steel that is dependent on them closing that transaction. On our facility, everybody's focused on the project, continue to service our clients. Nothing changed. As you know, as we started the first EAF, a lot has already been done, foreseen the second EAF.
Speaker Change: And Youre right you don't see a change in the overall $1 billion targets, because we are going to be.
Speaker Change: Announcing so ethane.
Daniel: New investments.
Daniel: That will basically offset all of it. So that's why we are keeping the overall target the same and then as it is.
Daniel: It relieves Q4 results, we will talk more about the new the new investments.
Daniel: Regarding Calvert. So the focus right now is really on completing the first year right. So everybody that that facility is very much focused on that.
Daniel: Of course, we have the discussion the deal with Nippon steel that is dependent on them closing that transaction.
Daniel: Or consider to everybody's focus on the project continuing to service our clients so nothing changed.
Daniel: So as you know as we sponsored.
Daniel: Because a.
Daniel: A lot has already been done.
Daniel: In the second year, but at this point in time.
Genuino Christino: At this point in time, we have not yet taken the decision to move ahead with that second EAF, although of course that's always something contemplated.
Daniel: Not yet.
The decision to move ahead with the second half although of course, that's always something concentrated.
Ephrem Ravi: Thanks. If I can squeeze just one more question. Ukraine, can you tell us what you're producing right now? If there is a ceasefire or peace in Ukraine, how much upside in terms of volume can you bring on within a short period of time?
Speaker Change: Thanks, if I can squeeze just one more question.
Daniel: Wayne.
Wayne: Can you tell us what you have what you're producing right now.
Speaker Change: And if that is.
Speaker Change: A cease fire or piece of new clean how much upside from volume can you kind of bring on within a short period of time.
Genuino Christino: Yeah. The situation in Ukraine remains very similar to what we discussed in our previous call. We are producing right now, we had about 40% of the capacity there. We are producing a range of 500kt per quarter. Clearly, if we were to see a stabilization of the situation and of the war, we should be in a position to ramp up the production. Initially, I would think at least to 3 million tonnes, and then we would need to see then after that how to bring all the furnaces back up again.
Speaker Change: Yes, so the situation in Ukraine remains.
Speaker Change: That is similar to what we discussed in our previous call.
So we are producing right now.
We added about 40% of the capacity.
Speaker Change: So we are producing around a 500 kt per quarter.
Speaker Change: So clearly if we want to see a stabilization of the situation that I won't be what we should be in a position to ramp up production.
Speaker Change: Sure.
Speaker Change: At least two or 3 million tons and then we will.
Speaker Change: Would need to see them after that how are we how how to bring all the finances back up again.
Ephrem Ravi: Thank you.
Speaker Change: Thank you.
Daniel Fairclough: Great. Thanks, Ephrem. We'll now move to the next question, which we will take from Alain at Morgan Stanley. Please go ahead, Alain.
Speaker Change: Great. Thanks Efrain several.
Speaker Change: Ill move to the next question.
Speaker Change: We will take from it.
Speaker Change: At Morgan Stanley. Please go ahead.
Daniel Fairclough: Yes, thank you. Thanks, Daniel, for taking my questions. Two questions from my side as well. First question is on the buyback. You still have less than $300 million to complete your current program, which is likely to conclude much earlier than the May deadline. I appreciate that we still have some time to cross that bridge, how are you thinking about the next program at the end? Is it fair to expect a similar buyback program to be launched in February 2025? That's my first question.
Speaker Change: Yes. Thank you thanks, Danielle for taking my questions two questions from my side as well. So first question is on the buyback you still have less than $300 million to complete your current program, which is likely to conclude much earlier than the may deadline.
Speaker Change: Appreciate that we still have some time to cross that bridge, but how are you thinking about the next program at yearend is it fair to expect a similar buyback program to be launched in 2025. That's my first question.
Genuino Christino: Well, first of all, I think we are very pleased with our capital allocation policy. It's working very well. I think we are really taking advantage of the weak share price. We bought back 37% of the company this year, 6%, as I was saying during my opening remarks. Looking forward, of course, the focus is first completing the remaining program. We still have 12 million shares to buy. I guess the message is that our policy will not change. When I look forward, I'm very optimistic about the capacity of the group to continue to generate free cash flow, especially when we look at the projects that we talked about. The fact that we commissioned Vega, that we started our renewable project in India, that we're going to have Liberia also starting up soon.
Speaker Change: Yeah, well so.
Speaker Change: First of all I think we are very pleased right with our capital allocation policy, it's working very well.
Speaker Change: I think we are really taking advantage of the.
Speaker Change: The weak share price.
Speaker Change: We bought back 37% of the company this year, 6% as I was saying in my opening remarks, and looking forward I mean of course. The focus is first completing the remaining program, we still have 12 million shares to buy.
Speaker Change: And.
Speaker Change: The message is that our policy will not change so.
Speaker Change: And when I look forward.
Speaker Change: I'm very optimistic about the capacity of the group to continue to generate free cash flow, especially by night.
Speaker Change: Look at the projects that we.
Speaker Change: We talked about the fact that the commission background can you start with our renewable.
Speaker Change: <unk>.
Speaker Change: We're going to have like BD, obviously, starting up soon.
Genuino Christino: We will have another USD 500 million of EBITDA coming through next year and another USD 500 million in 2026. That provides a lot of comfort that the group should be in a position to continue to generate strong free cash flow. Our policy, as you know, 50% will be returned back to our shareholders, minimum 50%. We're going to be closing the year with net debt at low levels, well under control. I think that places us very well to continue to do the buybacks. We have the authorization from our shareholders, but let's first complete the existing program and then discuss the second for the next program.
Speaker Change: So we will have another $500 million of EBITDA coming through next year and another 500 in 2026 debt, providing a lot of comfort that the group should be in a position to continue to generate strong free cash flow.
Speaker Change: Our policy is as low as you know, 50% will be returned back to shareholders is minimal.
Speaker Change: <unk>.
Speaker Change: So we're going to be closing the year with net debt at low levels well under control. So I think that plays very well to continue to do.
Speaker Change: Buybacks.
Speaker Change: We have the authorization from our shareholders.
Speaker Change: But let's first complete the existing program and then.
Speaker Change: Discuss the second or the next the next program.
Daniel Fairclough: Thank you very much, Genuino. Now the second question is on the decarb spending that has been very immaterial so far year to date, and I would say two or three years to date. Many investors are worried that we will hit a wall of spending into the end of the decade. Firstly, do you still stand by your $10 billion target through 2030? Secondly, when are we likely to hear more about the specifics of your decarb plans? Thank you.
Speaker Change: Thank you very much gentlemen on the second question is on <unk>.
Speaker Change: That has been very immaterial so far.
Speaker Change: Year to date, and I would say two or three years to date. Many investors are worried that we will hit the wall of spending into the end of the decade. So firstly do you still stand by your 10 billion targets through 2017, and then secondly, when are we likely to hear more about the specifics of your Descartes flat. Thank you.
Genuino Christino: Well, the way I see it, I think we have been doing quite a lot. Where we are today, we continue, of course, with our engineering work, so we continue to develop that. As we said in the previous quarter, we should be in a position to provide some more color towards the end of the year. That remains. Look, I think we have been doing quite a lot. We have the EAF in LĂ©hon that we are building. We have now a portfolio of 2 giga of renewable projects. We talked about India. We have another 1 giga in Brazil and Argentina. We are investing in Sestao in Spain, so we're going to be doubling the current capacity of that facility, which is also green steel. I think we are doing a lot.
Speaker Change: Yeah.
Speaker Change: The way I see it I think we have been doing quite a lot.
Speaker Change: And.
Speaker Change: Where we are today I mean, we continue of course with our engineering work. So we've continued through.
Speaker Change: Develop that as we've said in the previous quarter, we should be in a position to provide some more color.
Speaker Change: Towards the.
Speaker Change: The end of the year.
Speaker Change: So that remains.
Speaker Change: But I think we have been doing quite a lot.
Speaker Change: So we have.
Speaker Change: And the one that we are building.
Speaker Change: We have now a portfolio or two gigawatt of renewable projects, we talked about <unk>, we have another one gigawatt in Brazil and Argentina.
Speaker Change: We are investing and styling, Spain. So we are going to be doubling the capacity currently current capacity of that facility, which is also green steel.
Speaker Change: So I think we're doing a lot and then of course, we are which is extremely important here just to make sure that we have the right policies in place. So that we can justify the large investments in Europe, and we have been talking about that I think we have been very clear that we.
Genuino Christino: Of course, which is extremely important here, is to make sure that we have the right policies in place so that we can justify large investments in Europe, right? We have been talking about that. I think we have been very clear that we need a number of things in place. We need a strong CBAM. We need strong protection to the industry so that once we invest, these assets will be in a position to compete in a level playing field.
Speaker Change: We need a number of things in place we need a strong seaborne we need strong protection to the industry. So that was swing bass.
Speaker Change: Assets will be in a position to compete.
Speaker Change: In a level playing field.
Daniel Fairclough: Thank you, Eugenio. Basically, a follow-up to this question is, do you stand by your $10 billion by 2030, given we know what we know today?
Speaker Change: Thank you gentlemen, so basically a follow up to this question is do you stand by your $10 billion by 2030, given we know what we know today.
Genuino Christino: Yeah, I think we are not changing that. That number remains our best guess.
Speaker Change: Yes, I think we are not changing that.
Speaker Change: That number remains our best guess.
Daniel Fairclough: Thank you. Thank you very much. Just to remind everybody, obviously, that's a gross number, pre-government funding. On an ArcelorMittal basis, it would be about $5 billion. We'll move now to the next question, which we will take from Tom Zhang at Barclays. Please go ahead, Tom.
Speaker Change: Thank you. Thank you very much.
Speaker Change: And just to remind everybody obviously, that's a gross number.
Speaker Change: Pre government funding.
Speaker Change: On a.
Speaker Change: Also mutual basis, it would be about $5 billion.
Speaker Change: Yeah.
Speaker Change: But.
Speaker Change: We'll move now to the next question.
Speaker Change: Which we will take from Tom.
Speaker Change: Tom Zhang at Barclays. Please go ahead Tom.
Tom Zhang: Hi, Eugenio. Thanks for taking our questions. Two from me, I will take them one by one. First, maybe just the usual walk that you guys give quarterly, raw material costs, pricing, volumes by division, if that is okay, into Q4.
Tom Zhang: Hi afternoon. Thanks for taking my questions two from me I'll take them one by one firstly.
Speaker Change: First maybe just to usual.
Speaker Change: Did you guys give quarterly raw material costs price and volumes by division if that's okay into Q4.
Genuino Christino: Daniel?
Joe: Hi, Joe.
Daniel Fairclough: Yeah, sure, Daniel. I think looking to Q4, we can go into more detail if you would like, but looking at Q4, there are clearly some pluses and there are some minuses, but I think the overall picture is broadly similar to Q3. On the positive side of the equation, we should see the benefit of high volumes in Europe and higher iron ore shipments. On the other side of the equation, we'll have the impact of lower spot prices, particularly in North America, and seasonally lower shipment volumes in Brazil. As I say, some pluses and some minuses, but the overall picture broadly similar to Q3.
Jeremy: Yes sure Jeremy.
Jeremy: So I think looking to the fourth quarter, we can go into more detail, if you'd like but 10 looks.
Jeremy: Looking at the fourth quarter, there were clearly some.
Jeremy: And there is some minuses, but I think the overall picture is broadly similar to the third quarter.
Jeremy: So on the positive side of the equation and we should see the benefit of higher volumes in Europe.
Jeremy: Higher iron ore shipments.
Jeremy: On the other side of the equation.
Jeremy: The impact of lower spot prices, particularly in North America, and then seasonally lower shipment volumes in Brazil, So as I say, some pluses and minuses at the overall picture broadly similar to the third quarter.
Tom Zhang: Got it. Thank you. Just the second one was, it's a bit early to start talking about it, but obviously at the moment until Calvert is up and running, you don't have upstream, you only have the Corpus Christi assets, DRI, but 40%, 50% of the USMCA sales number for you is still in the US, i.e., material, I guess, from Mexico and Canada. One, is that number roughly right, so the 40% to 50%? Can you just talk about any backup options that you guys have already been thinking about if under the new administration, material starts to become more difficult to send in, particularly from Mexico? Thanks.
Speaker Change: Got it. Thank you and then just the second one was.
Jeremy: Yes.
Jeremy: It's a bit early to start talking about it but.
Jeremy: Obviously at the moment until <unk> is up and running you don't have upstream you would have.
Jeremy: Corpus Christi assets, Cri, but east 40, 50% of the U S MCA.
Jeremy: Sales number for you is still in the U S.
Speaker Change: <unk>, I guess from Mexico and Canada.
Speaker Change: One is that number roughly right sort of 40%, 50% and then can you just talk about any backup options that you guys have already been thinking about if.
Speaker Change: Under the new administration materials starts to become more difficult to said that particularly for Mexico.
Genuino Christino: Yeah, Tom. Look, as I said, I think it's early days, right? What we saw in the first term of President Trump, he was extremely supportive to the industry. I think a lot of what we see happening in the US today comes from the fact that he put in place Section 232, that he renegotiated the NAFTA agreement. Of course, now USMCA was part of his legacy. It was all very supportive to the industry in US and to North America overall. We saw the consequences of that in other parts of the world as well. We hope that as he comes back now and is doing his second term, that we will probably most likely see that support continuing.
Jeremy: Yes.
Jeremy: Hi.
Jeremy: As I said I think it's early days right.
Jeremy: And what we what we saw in the first.
Speaker Change: Stubhub President Trump he wasn't extremely supportive to the industry.
Speaker Change: Also I think a lot of what we see happening and you asked whether it comes from the fact that he put in place section 232.
Speaker Change: Renegotiated NAFTA agreement across now U S MCA.
Speaker Change: Part of his legacy.
Speaker Change: It was all very supportive to the industry in U S.
Speaker Change: North America overall.
Speaker Change: We saw the consequences of that.
Speaker Change: In other parts of the.
Speaker Change: Award as well.
Speaker Change: So we hope that.
Speaker Change: As he comes back now and he is doing his second term.
Speaker Change: We will probably most likely see.
Speaker Change: So thats that supports continuing.
Genuino Christino: It will be very interesting to see also how the other regions and the other governments respond to that. So I think it's early days really to talk about the flows between Mexico, Canada, to the US and vice versa. The way we see it today, They are on a similar basis when you look at Canada, Mexico, and US. I think we will have to wait and see how it develops.
Speaker Change: And it will be very interesting to see also how the autumn region. The other governments respond to respond to that.
Speaker Change: So I think it's early days to talk about the <unk>.
Speaker Change: Close between Mexico, Canada, and U S and vice versa. The way, we see it today to close.
Speaker Change: Barry.
Speaker Change: On a similar basis when you look at Canada.
Speaker Change: Mexico and the U S.
Speaker Change: But I think what we'll have to wait and see how how how it develops.
Tom Zhang: Okay. Fair enough. Thanks a lot, Rebecca.
Speaker Change: Okay fair enough. Thanks, I'll turn it back.
Daniel Fairclough: Great. Thanks, Tom. We'll move to the next question now, which we will take from Patrick at Bank of America. Hi, Patrick. Go ahead.
Paul: Great. Thanks, Paul.
Speaker Change: So we will move to the next question.
Speaker Change: Which we will take from Patrick.
America: America, Hi, Patrick go ahead.
Patrick Mann: Hey, good afternoon. Thanks very much for the opportunity. Can you maybe just touch a little bit on how we should think about the automotive business going into next year? Spot prices are a little bit lower. How should we think about that aspect of, in particular Europe, the sort of pricing into next year? I suppose given the backdrop that it looks a lot of auto suppliers are under a lot of pressure, and we're seeing a lot of restructuring and a lot of it looks structural rather than cyclical. Maybe, yeah, just a bit of context, how important is that business to Europe overall, and how should we think about it into 2025? Thank you.
Patrick: Hey, good afternoon, thanks, very much for the opportunity can you maybe just touch a little bit on how we should think about the automotive business going into next year or so.
Speaker Change: Prices are a little bit lower so how should we think about that.
Speaker Change: Aspect of in particular Europe.
Speaker Change: Sort of pricing into next year and I suppose given the backdrop that it looks a lot of auto suppliers are under a lot of pressure and we are seeing a lot of restructuring.
Speaker Change: A lot of it look structural rather than cyclical.
Speaker Change: So maybe just a bit of context, how important is that business to Europe.
Speaker Change: Overall, and how should we think about it into 2025. Thank you.
Genuino Christino: Patrick, that's another benefit of our diversification. When we look at our auto business in 2024, what we see is, as we all know, we are going through some destocking in Europe. Production in Europe will be lower compared to the previous year. At the same time, we are seeing growth in Brazil and Argentina, and we are seeing more stability really in North America. When we look at our business as a whole, there are pluses and minuses, right? Looking forward, our base case today is that we're going to see some stability in terms of volumes compared to this year. When it comes to prices, of course, it's too early. We have not yet really started all these negotiations. Our focus is the same, right?
Speaker Change: Yeah, So Patrick.
Speaker Change: Patrick.
Patrick: The benefit of our diversification so when when we look at our auto business in 2020 for what we see is as we all know.
Patrick: We have gone through some destocking in Europe, So our production in Europe will be lower compared to the previous year.
Patrick: But at same time, we are seeing growth in Brazil, and Argentina, we are and we are seeing more stability.
Patrick: In North America.
Speaker Change: So when we look at our business as a whole there are pluses and minuses right.
Speaker Change: Looking forward.
Speaker Change: Our base case today is that we're going to see some stability in terms of volumes compared to this year.
Speaker Change: And when it comes to prices of course, it's too early we have not yet really started all of these negotiations, but our focus is the same varieties to make sure as you know we invest heavily in making sure that we develop the grades.
Genuino Christino: Is to make sure we, as you know, we invest heavily in making sure that we develop the grades, that we have the technology that will help support the OEMs with their objectives. Our focus is make sure that we are rewarded for that. Our focus is more on the margins that we can secure as we sign these contracts. We remain, of course, optimistic that it's not going to change, that we will be able to sign contracts that will reward the company for the investments that we make.
Speaker Change: That we have the technology that will help.
Speaker Change: Help support the Oems, we pay our objectives and our focus is make sure that we are rewarded for that so our focus is more on the margin that we can see Q.
Speaker Change: As we find is this contract. So we remain of course optimistic that its not going to change that we'll be able to sign contracts that will reward the company for.
Speaker Change: The investments.
Speaker Change: We make.
Patrick Mann: Got it. Thank you. If I could have a follow-up, please. Just on sustainable solutions, can you give us an update on that business? Obviously, revenue is down year on year, and it's an area that you were looking to grow. Just thinking about how do you think about that going forward? Some steer would be helpful. Thank you.
Speaker Change: Got it. Thank you and then if I could I have a follow up just on sustainable solutions can you give us.
Speaker Change: An update on that business.
Speaker Change: Obviously revenue is down year on year, and it's a it's an area that you were looking to grow so just thinking about how do you think about that going forward. Some steel would be helpful. Thank you.
Genuino Christino: Yeah, sure. I think you see a decline in Q3, which to some extent is also linked to seasonality. We expect to be doing better in Q4. More importantly here, Patrick, is we have the 1 gig of renewable project that we talked about, so that will add close to $100 million next year to sustainable solutions. We talked about, and you can see now there are some other renewable projects that we started in Brazil, so that will continue to support. We have completed the acquisition of in our construction business in Europe, so that will also provide support next year. I think we are on track to double the profitability of this segment over the next couple of years.
Speaker Change: Sure Yeah, I think you'll see a decline in quarter, three which to some extent is also linked to the seasonality of when you expect to be doing better in Q4.
Speaker Change: More importantly.
Speaker Change: We have the one giga renewable projects that we talked about so that's the labs.
Speaker Change: Close to $100 million next year to sustainable solutions. So we talked about and you can see in our deck. Some other renewable projects that we started in Brazil. So that will continue to support we.
Speaker Change: We have completed the acquisition of <unk>.
Speaker Change: In our construction business in Europe. So that will also provide support next year. So I think we are on track to double the profitability of this segment over the next couple of years.
Patrick Mann: Thank you. Hello?
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Okay.
Genuino Christino: Yes.
Speaker Change: Yes.
Daniel Fairclough: Hi, Genuino. Sorry about that. My system just crashed.
Speaker Change: Hi, Jamie I'm, sorry about that my my assistant just crushed.
Genuino Christino: No problem at all.
Speaker Change: No problem.
Daniel Fairclough: I think we're ready to take the next question, which is from Andrew at UBS. Hi, Andrew. Go ahead.
Speaker Change: So I think we're ready to take the next question which is.
Speaker Change: From Andrew I'd say UBS Hi, Andrew go ahead.
Andrew Jones: Thanks, Daniel. Yeah. Just want to push a bit more on one of the previous questions around the decarb and just how you think about when you basically press the trigger. You mentioned that you'd like to see a stronger CBAM. Obviously, we've got a structure in place for the CBAM. I'm wondering what more you want to see from the structure of that to cause you to invest, and what other factors are you looking for in particular? Do we need to see more on the infrastructure side, whether it comes to hydrogen, whether we're talking about sufficient renewable energy? What factors are you looking for before you actually pull the trigger?
Andrew: Thanks Danielle.
Speaker Change: Just want to push a bit more on one of the previous questions around <unk> and just how you think about.
Speaker Change: When you basically presby bestbuy trigger maiden you mentioned.
Speaker Change: Like to see.
Speaker Change: Our strong and obviously, we've got a structure in place for the seed them I'm wondering what.
Speaker Change: Will you want to see from.
Speaker Change: The structure of that to.
Speaker Change: Cause you to invest in.
Speaker Change: What are the factors are you looking for in particular.
Speaker Change: Do we need to see more on the infrastructure side, whether it comes to hydrogen.
Speaker Change: What level, we're talking about.
Speaker Change: Sufficient renewable energy.
Speaker Change: Factors are you looking for before you actually pull the trigger and is now here.
Andrew Jones: Is there a scenario where if you don't see that sufficient return on capital, and you don't see enough support on some of those projects in the higher cost jurisdictions in terms of energy, such as Germany or maybe Belgium, is there a?
Speaker Change: If you don't see that sufficient return on capital and you don't see that support on some of those projects and the higher cost jurisdictions in terms of energy, such as Germany or Belgium.
Speaker Change: Belgium Israel.
Andrew Jones: Scenario where you just do not spend that money and you actually essentially run these assets for cash and don't do those investments. Is that a realistic scenario?
Speaker Change: Synovia, where you just do not spend that money and you actually.
Speaker Change: We've owned these assets for cash.
Speaker Change: Yes, MTV as investments made it is not avail of X <unk>.
Speaker Change: Yeah.
Genuino Christino: Andrew, I think you touched on all the points, right? I think, as I said, I think it's very important that as we embark on some of these projects that we can be sure that we're going to remain competitive, right? That we want to be able to run the assets and be competitive. For that today, as we know, the competition in Europe is not fair. We are paying for CO2 costs that nobody else is paying. We still have the high energy costs, we don't have yet availability of renewable power insufficient or hydrogen. I think you touched on all the points that I think it's also clear to all the governments that is really what is required for the industry to be able to invest. First of all, I think we need to have strong protection in Europe because we have China.
Speaker Change: Andrew I think you touched on all the points right. So I think it's getting as I said I mean, I think it's very important that as we embark on some of these projects that we.
Speaker Change: That we can be sure that we're gonna be remain competitive right and that the assets will be able to do we want to be able to run the assets and be competitive and put out today as we know the.
Speaker Change: The competition in Europe is not bad.
Speaker Change: We are being pursued to causes that nobody else in Spain.
Speaker Change: Do you have the high energy cost as we don't have yet the availability of renewable power sufficient or hydro insurance. So I think you touched on all the points that I think it's also a cleared through all the governments there.
Speaker Change: That is really what is required for the industry to be able to shrink bass first of all I think we need to have strong protection in Europe.
Speaker Change: As we have China, we just saw the numbers right the October numbers from China, Florida.
Genuino Christino: We just saw the numbers, right? October numbers from China, a lot of exports. I think that needs to be taken very seriously and quickly by the authorities in Europe and across the world, quite frankly. Until we can see that, then it's very hard really to take a decision to invest. We are hopeful that we'll see progress. We have the first review of CBAM coming up soon. We will see finally what the government takes into account. That is, as you can see, Europe there is also very active in showing the needs and what needs to happen so that we can have, again, a level playing field in Europe. Again, I think the competition today is just not fair.
Speaker Change: Exports.
Speaker Change: I think that needs to be taken very seriously and quickly bye bye.
Speaker Change: By the authorities in Europe.
Speaker Change: And across the world quite quite frankly.
Speaker Change: So until we see we can see that that is very hard really to take a decision to join <unk> passed and we are hopeful that we'll see progress.
Speaker Change: We have it because we view of seaborne coming up soon and we will see finally, what the government takes into account so that any sense you can see.
Speaker Change: <unk> is also very active in ensuring the needs and what needs to happen. So that we can have again.
Speaker Change: A level playing field in Europe again, I think the competition today is just not buckhead.
Andrew Jones: Okay, that's clear. Just a second question on Ilva. Obviously, it's no longer your asset, but we've seen news about them restarting blast furnaces. They're talking about ordering DRI equipment, and it seems as though things are moving there and there's going to be more volume in the market from Ilva in the near term into next year and potentially longer term as they build that DRI capacity. To what extent are you concerned about that supply growth coming at a time of obviously weak demand?
Speaker Change: Okay, that's clear and just a second question on.
Speaker Change: Obviously, it's no longer your assets, we've seen news about restarting blast furnaces that are talking about ordering DIY equipment. It seems.
Speaker Change: Things are moving that's going to be more volume in the market.
Speaker Change: All of that.
Speaker Change: In the near term and into next year.
Speaker Change: Steve longer term if they build that DIY capacity are you to what extent you're concerned about that supply growth coming at us out of obviously weak demand.
Genuino Christino: Yeah. Look, to be honest, Andrew, our number one concern right now is imports. As I said, I think the level of imports in Europe is just too high, and that should be really the first priority, just to get that under control, and that's really the most critical piece here for us.
Speaker Change: Yeah look to be honest, Andrew our number one concern right now is imports as.
Speaker Change: As I said I think the level of imports in Europe are just too high.
Speaker Change: And that should be the intermediate the first priority is to get that under control.
Speaker Change: Meaning.
Speaker Change: What are the most critical piece for us.
Speaker Change: Okay.
Andrew Jones: Okay, fair enough. Thanks.
Speaker Change: Okay.
Speaker Change: Thanks.
Daniel Fairclough: Thanks, Andy. We'll move now to the next question, and we'll take that question from Dominic at JPMorgan. Go ahead, Dominic.
Speaker Change: Thanks, Amie, so I'll leave that to the next question.
Speaker Change: And we'll take that question from Dominic.
Speaker Change: J P Morgan.
Speaker Change: Go ahead domenic.
Dominic O'Kane: Hi, guys. Thanks for taking my question. Just some simple questions. Just on working capital for Q4, is it reasonable to assume that we see a full unwind of the $1.5 billion that you've built so far in the first nine months of the year? Second question, similar question on the previous question around CapEx, but if I look away from decarb CapEx specifically and look at the regions, Europe first nine months is still about 50% of your CapEx. As you look into 2024, are you seeing opportunities to maybe bring down some of the European CapEx or is that not on the agenda? Yeah, those are my two questions. Thank you.
Speaker Change: Hi, guys. Thanks for taking my question just some simple questions just on working capital for key full is it reasonable to assume that we see a full unwind of the $1 5 billion.
Speaker Change: Built so far.
Speaker Change: And the first nine months of the year.
Speaker Change: Second question similar question on the previous question around Capex, but if I, if I look away from the Cob Capex, specifically look at the regions Europe first nine months still about 50% of your Capex as you look into 2024.
Speaker Change: Seeing opportunities to maybe bring down some of the European capex or is that not on the agenda.
Speaker Change: Yes that was my two questions. Thank you.
Genuino Christino: Yeah. Dominic, so on the working capital, you're right. That's our guidance, that we should release a similar number as we have invested up to now. We are doing this very carefully because as we have pointed out in our release, at some point, we're going to see a cyclical recovery, right? We want to make sure that the business well-funded and they have the working capital that they need, as and when we see this cyclical rebound. On CapEx, I think it's very important to your point because when you look at the data that we are generating in Europe, you see the CapEx there. You can see that our segment is doing well. We are generating good levels or decent levels of free cash flow in Europe.
Speaker Change: Yeah, Hi, Dominic so on the working capital you're right I mean, that's our guidance.
Speaker Change: We should re needs are.
Speaker Change: A similar number as we have invested up to now.
Speaker Change: And I'm doing this very carefully because as we have.
Speaker Change: I pointed out in our release at some point, we're going to see a cyclical recovery right and.
Speaker Change: So we want to make sure that the business.
Speaker Change: Well funded and they have the working capital needs as and when we see it as a cyclic.
Speaker Change: Cyclical rebound.
Speaker Change: Hum.
Speaker Change: One on Capex.
Speaker Change: I think it's that important to your point because when you look at the different that would generate in Europe, you see the Capex that you can see that our segment as well.
Speaker Change: We are generating levels, good levels or different levels of free cash flow in Europe.
Genuino Christino: We can talk about that in more detail, but you also have growth CapEx in Europe, right? That's basically our new electrical steel project in Mardyck that we are investing. We're going to be completing the first phase of the project towards the end of this year, and then there is the second phase that will happen in 2025. Overall, if I can talk about CapEx for next year, and as you can see now, you have basically three components. Our expectation is we will, of course, be in a position to update you more as we complete the budget, the strategy cycles. In our Q4 numbers, we will be in a position to update you with more precision. Our expectation at this point in time is that the CapEx number for next year will not change significantly.
Speaker Change: But you should also we can talk.
Speaker Change: Talk about that in more detail, but you also have a growth capex and you're right and that's basically our new electrical steels project and Marty you are investing so we're going to be completing the first phase of the project towards the end of this year and then that is the second phase that.
Speaker Change: That will happen in 2020.
Speaker Change: Hi.
Speaker Change: But overall, if I can talk about Capex for next year and as you can see now that you have basically three components.
Speaker Change: I always Spectation is one of course being in a position to update you more as we complete the budget and strategy strategies cycles.
Speaker Change: And in our Q4 numbers will be in a position to update you with more precision, but our expectation at this point in time is that the Capex number for next year will not change significantly.
Dominic O'Kane: Thank you. Very clear.
Speaker Change: Thank you Becky.
Daniel Fairclough: Great. Thanks, Dominic. We'll move to our next question, and we'll take that from Boris at Credit Suisse. Please go ahead, Boris.
Speaker Change: Great. Thanks, Dominic So we'll move to our next question I will take that from Paris at Kepler Cheuvreux. Please.
Speaker Change: Please go ahead.
Boris Bourdet: Hello, thank you for taking my questions. The first one is on Europe. I was quite impressed by the margin resilience here in a period where we've seen a lot of warnings. I suppose you're already on some part of it. In this context, we see more and more M&A in Europe with partnerships. Salzgitter made an announcement about one of its main shareholders planning to make a takeover bid, and we see Tata Steel trying to form partnerships with British Steel. I was wondering if you had some target opportunity there for some of your assets and if you started to see some opportunities. On a second question on the M&A front, there were news flow about some interest in your South African assets. Could you elaborate a bit and comment on those reports? Thank you.
Speaker Change: Hello, Thank you for taking my question.
Speaker Change: The first one is on Europe.
Speaker Change: Quite impressed by the.
Speaker Change: The margin resilience.
Speaker Change: In a period, where we see all the coal we've seen a lot of Walgreens.
Speaker Change: Suppose you already answered part of it.
Speaker Change: In this context, we see it more and more M&A.
Speaker Change: We start now shapes Suski made an announcement about one of its main shareholders.
Speaker Change: Planning to make a takeover bid every citizen crude.
Speaker Change: Trying to form partnerships with <unk> BCG. So I was wondering if you had some.
Speaker Change: Some Toyota opportunity therefore to fill some of your assets.
Speaker Change: You started to see some opportunities.
Speaker Change: And.
Speaker Change: Also on the.
Speaker Change: Second question on the M&A front, there were news flow about something.
Speaker Change: So I'm interested in your South African asset so could you elaborate if you can comment on those.
Speaker Change: Thank you.
Genuino Christino: Yeah. First, on Europe, I think we are pleased with our performance in Europe. The teams are doing a great job operationally, reliability. You can see that we are running our furnaces well. That of course supports our costs. We can bring costs down, so we can achieve management gains. I think teams are doing a very good job in these very challenging market conditions. Having said that, in terms of M&A, I think we are happy with our footprint. That's the bottom line. In South Africa, we are not contemplating any change there.
Speaker Change: Yeah. So.
Speaker Change: So first.
Speaker Change: Hum.
Speaker Change: On Europe I think we are pleased with our performance in Europe and the teams are doing a great job.
Speaker Change: Operational reliability.
Speaker Change: Can see that we are running our financed as well so that of course supports our costs, we can bring costs down.
Speaker Change: So we can achieve a management gang.
Speaker Change: I think teams are doing a very good job in this very challenging market conditions, having said that in terms of M&A I think we are we are.
Speaker Change: With our footprint.
Speaker Change: So that's oh, that's the bottom line.
Speaker Change: In South Africa.
Speaker Change: We are not contemplating any any any any change there.
Boris Bourdet: Okay, thank you.
Speaker Change: Okay. Thank you.
Daniel Fairclough: Great. Thanks, Boris. We'll take the next question now. We'll move to Tristan at BNP Paribas. Please go ahead, Tristan.
Bruce: Great. Thanks Bruce.
Speaker Change: So we'll take the next question not so we'll move to trusted BMP power about.
Kristen: Go ahead Kristen.
Tristan Gresser: Yeah. Hi, thank you for taking my questions. First one is on North America. Could you remind us the volumes and the type of products you ship to the US from Mexico, from Canada, from Europe, and Brazil, please? Also, if with Trump you're getting back tariffs against Mexico, what are your options to mitigate that risk? How flexible can you be? More specifically, regarding the US trade case against Canada on hot-dip galvanized imports, how confident are you that Canada will not face tariffs there? I'd start there.
Kristen: Yes, hi, Thank you for taking my questions.
Kristen: First one is on North America could you remind us the volumes and the type of products you ship to the U S.
Speaker Change: From Mexico from Canada from Canada from Europe.
Speaker Change: In Brazil. Please.
Speaker Change: Also.
Speaker Change: With Trump.
Speaker Change: Youre getting back Terrace against Mexico, what are your options to mitigate that risk how flexible can you be more specifically regarding the U S trade case against Canada Hot dip galvanized imports Uh huh.
Speaker Change: Confident are you that Canada will not face carriers there.
Speaker Change: Start there.
Genuino Christino: I mean, we have to wait, Tristan, of course, for the outcome of the investigation, right? Of course, we will cooperate. We will be part of the process. Of course, what we sell from Canada into the US, these are contracts that are in place for many, many years, mostly to the OEMs. We don't believe that we are causing any injury. Of course, we will participate, and we will have to wait to see how it plays out. As you know, I think you know very well our flows, we bring slabs to Calvert from Mexico and from Brazil. We buy some also domestically. We will have, of course, the EAF now coming up, that will be extremely positive for our operations in US.
Speaker Change: Yeah look I mean, we have to wait obviously southwest part of the outcome of the investigation Ryan. So of course, we will call Greg will be able to be part of the process.
Speaker Change: So.
Speaker Change: Of course, what we felt from Canada into the U S.
Speaker Change: Ah contract that I'm thankful momentum and yes.
Speaker Change: Mostly through the Oems.
Speaker Change: So we don't believe that cause any injury, but of course, we will participate in Ghana, and we will have to wait to see.
Speaker Change: How it plays out and then.
Speaker Change: You know I think you know very well close so we bring slabs to Calvert from from Mexico, and Brazil, we buy it so I'm also domestically.
Speaker Change: And we won't have a cost.
Speaker Change: Now coming up so that will be.
Speaker Change: An extremely positive for operations in U S. So we will have melted and who are in steel.
Genuino Christino: We will have now the full steel in the US. 1.5 million tons will give us feed. We will have capabilities to do exposed parts, and we will have everything that is required for that. That should provide a good boost to our operations in US. Calvert, of course, we still need to buy these slabs. At this point in time, I think it's too early to talk about. We have options, right? We have Mexico, which is part of North America, part of the USMCA. We have Brazil, and we have other options as well. We can bring raw materials from Europe if we have to. At this point in time, I think it's just too early to speculate on that.
Speaker Change: One 5 million tons will give us speed.
Speaker Change: We won't have capabilities to do it.
Speaker Change: Both Bob and we will have everything that is required for that so that should provide a good boost to our oh operations in U S. But.
Speaker Change: But a call but of course, we still need to buy the glass.
Speaker Change: So at this point in time I think it's too early to talk about Oh.
Speaker Change: We have auctions right. So we have Mexico, which is part of the North America product with MCA.
Speaker Change: And we have all the auctions as well we can bring our materials from Europe, you have true, but at this point in time I think it is too early.
Speaker Change: Great on that.
Tristan Gresser: Okay. Could you share the slab supply that you're getting for Calvert at the moment? How much volume is coming from Mexico or Brazil?
Speaker Change: Okay and could you share the slab supply that you're getting for our Calvert at the moment, how much volume's coming from Mexico and Brazil.
Genuino Christino: I don't think it's something that we are disclosing, Tristan.
Speaker Change: I don't think it's something that we are disclosing them.
Tristan Gresser: Okay. All right. My second question is on Europe and again, on decarb. When you talk about +free cash flow past 2024, should we think it as a firm target that you absolutely want to achieve, or is it more kind of an aspiration? You talk about the level playing field, but let's say, would you be okay if down the line there is a level playing field that require investment, that require you to be -free cash flow for a couple of years? Is that something that you could contemplate, or you really want to be in that +free cash flow setup for the medium term?
Speaker Change: Okay, Okay and my second question is on Europe, and again on <unk>.
Speaker Change: So when you talk about positive free cash flow past 2024 should.
Speaker Change: Should we think it has a firm target that you absolutely want to achieve or is more kind of an aspiration you took about the level playing field, but let's say would you be okay. If down the line. There is a level playing field that require investment may require you to be negative free cash flow for a couple of years, that's something that you could contemplate or.
Speaker Change: You really want to be in that.
Speaker Change: Positive free cash flow set up for the medium term.
Genuino Christino: Well, that has to be the objective, Tristan. Of course, we want our business to be sustainable. I think that's key, right? Sustainability is really the key word. If we feel that we have a sustainable business, a strong business, we have to protect invest. That's what we have always done. Europe, it's an important market. It's a big market, and it's not going to disappear, right? We are perpetuating that as long as we have the right conditions.
Speaker Change: That has to be the objective truth, then of course, we want our business to be.
Speaker Change: It can be sustainable I think that scheme, Brian Tim Goss sustainability is really the key the key what if we feel that we have a sustainable business a strong business. We are prepared to invest and ER and that's why we have always always been so Europe is it's an important market.
Speaker Change: Big markets and I'm not going to disappear right. So I think it's.
Speaker Change: So we have to get through this.
Speaker Change: As long as we have the right conditions.
Tristan Gresser: Okay. Thank you. Maybe just a quick last one. Mexico, you mentioned at the EAF story, but was there a blast furnace outage as well due to the strike? Has it restarted already?
Speaker Change: Thank you and maybe just a quick last one Mexico, you mentioned that the yes, sorry that was there a blast furnace outage as well Gee to describe to you has it restarted already.
Genuino Christino: Yeah. In Mexico, Northern Mexico, the biggest part of the business is the flat business, which has started almost immediately after the end of the blockade. It was mid-July, that is up and running. The blast furnace, which is a smaller part of the business, has not yet started. It should be started anytime soon. It's a blast furnace. It's a 1 million tons furnace. It's a small furnace, and to do it safely, we have to go through some maintenance work, and that's why it's taking a bit longer. We should be in a position to start that the next days.
Speaker Change: Yeah. So in massacres annoying the biggest part of the business as a direct business, which has started immediately almost immediately after the end of the blockade was mid July so that is up and running.
Speaker Change: The blast funding, which is a smaller part of the business has not yet started it should be started anytime soon.
Speaker Change: I used the blast furnace, it's a it's a million tons.
Speaker Change: It's a small finance.
Speaker Change: And to do it thankfully we have true.
Speaker Change: Go through some maintenance work.
Speaker Change: And that's why it's taking a bit longer, but we should be in a position to restart that.
Speaker Change: The next day.
Tristan Gresser: Perfect. Thank you very much.
Speaker Change: Perfect. Thank you very much.
Daniel Fairclough: Great. Thanks, Tristan. We've got two more questions, Genuino. The first we will take from Matt at Goldman Sachs. Please go ahead, Matt, you can hear us.
Speaker Change: Great. Thanks Kristen.
Speaker Change: Got two more questions Jeremy note. The first we will take from.
Speaker Change: Got it got among sacks. Please go ahead much can Harris.
Matt Greene: Thanks. Good afternoon. My first one just on Brazil, the positive PCE that you've seen this quarter. I guess some of that's the tariffs flowing through, but I'm just interested on you've also ramping up the Vega CMC. I guess into year-end and trying to think about 2025. You've stated that this project should bring $100 million EBITDA, but I think that's on a more normalized basis. As we stand today, is there upside or downside to that number? Can you just provide some color as to the timing as to when we could see that full ramp-up delivered?
Dan: Thanks, Dan and good afternoon.
Speaker Change: My first one is just on Brazil.
Speaker Change: Positive PC that you've seen this quarter I guess some of thats the tariffs flowing through but just interested on.
Speaker Change: You are also ramping up the Vega CMC.
Speaker Change: I guess into year end and just trying to think about 2025.
Speaker Change: You stated that this project should bring a $100 million EBITDA, but I think thats on a more normalized basis. So as we stand today is there upside or downside to that number and can you just provide some color as to the timing as to when we could see that full ramp up delivered.
Genuino Christino: Yeah. Matt, the $100 million is probably a good number for next year. We are very pleased with the ramp-up of the facility. It's been done on a record basis, I would say. We should be closing the year already, probably around 80%. I think the $100 million, it's a good number for you to take into your models for next year in Brazil. We are pleased, of course, with the overall performance in Brazil. I mean, Q3 was really great. Economically, the country is doing well. GDP is strong this year. We have low unemployment rates. It's a good setup right now. Apparent steel consumption will grow well this year. It's a good setup at the moment.
Speaker Change: Yeah.
Speaker Change: There hasn't been and it's probably a good number for next year. We are very pleased with the ramp up of the facility. It's.
Speaker Change: It's being done on a record pace I would say.
Speaker Change: We should be closing the year already probably around 80%. So I think the 100 million it's oh.
Speaker Change: It's a good number for you to take them through your models for next year in Brazil. We are pleased of course with the overall performance in Brazil, I mean Q3 was really great.
Speaker Change: Economically the country is doing well GDP is strong this year.
Speaker Change: We have low unemployment rate.
Speaker Change:
Speaker Change: It's a it's a good setup right now so apparent steel consumption will grow well this year.
Speaker Change: So it's it's a it's a good setup at the moment.
Matt Greene: Okay. That's great. Thank you. Just moving on to Liberia, it looks like you're delivering first concentrate, I guess, this quarter. How's the commissioning of the concentrate gone? Can you just provide us color as to has it performed in line with expectations in terms of product quality and useful standby, I guess the ramp-up of that expansion into next year?
Speaker Change: Okay. That's great. Thank you and then Tim.
Speaker Change: Maybe on the library itself it looks like you had delivering first concentrate this.
Speaker Change: I guess this quarter say.
Speaker Change: How is the commissioning of the concentrate again can you just provide country has to has it performed in line with expectations in terms of product quality.
Speaker Change: And do you still standby I guess the ramp up of that expansion into next year.
Genuino Christino: Yeah. The focus is of course on the project. Everybody is focused on that and adding the first concentrate end of this year. As you can imagine, it's a large project, a lot of challenges, but we are progressing. We feel optimistic. Let's see how it goes. That's an important project for us. As you know, we have three models. We start with 5 million tons, and then we will have a second one and third one in 2025. We remain optimistic that we're going to be in a position to start to see significant contribution from Liberia next year minimum.
Speaker Change: Yes. So the focus is of course on the project that everybody is focused on that and having the class concentrate end of this year.
Speaker Change: So as you can imagine it's a large project.
Speaker Change: A lot of challenges, but we are progressing we feel optimistic.
Speaker Change: So let's see how it.
Speaker Change: It calls.
Speaker Change: But that's an important project for us. So as you know we have three models. So let me start with 5 million tons and then we'll have a second one and third one and 2025.
Speaker Change: So we remain optimistic that we're going to be in a position to start to see significant contribution from Liberia next.
Speaker Change: Next next year.
Matt Greene: That's great. Okay, thank you. Perhaps we'll squeeze one last hypothetical question with Calvert, and I guess just having full ownership and I guess importantly, operatorship and ignoring tariffs and all the moving parts out at the moment. Having this asset and control of this asset, does this unlock any synergies that across the broader North American or sort of ArcelorMittal portfolio that you can maybe touch on?
Ed: That's great. Okay. Thank you Ed.
Ed: Squeeze one last hypothetical question with good with Calvert and.
Speaker Change: I guess, just having full ownership and I guess importantly, operator ship, ignoring tariffs and all the moving parts out there at the moment, but having this asset and control of this asset does this unlock any synergies that.
Speaker Change: Across the broader North American oil.
Speaker Change: Sort of Mattel portfolio.
Speaker Change: You can maybe touch on.
Genuino Christino: Look, as we know, Calvert is the most capable finishing facility in North America, right? It makes, of course, good sense for us to own 100% of the asset to the extent that Nippon has to divest. Having said that, this is not really about synergies. It's just about owning 100% of this asset in a region that is very important for ArcelorMittal. We talked about in the past projects that we are developing right now for the region. To the extent that Nippon can complete their own transaction, we will be pleased to own 100% of Calvert.
Speaker Change: As we know covered is the most capable of finishing facility in North America right.
Speaker Change:
Speaker Change:
Speaker Change: Uh huh.
Speaker Change: It makes of course.
Speaker Change: Good sense for us to own 100% of the answer to the extent that one has to have to divest.
Speaker Change: But having said that this is not really about synergies.
Speaker Change: It's just about.
Speaker Change: Owning 100% of disaster in a region that is very important for us from a metal.
Speaker Change: And we've talked about in the past projects that we are developing right now for the region.
Speaker Change: And so.
Speaker Change: So to the extent that.
Speaker Change: And if one can complete the AWN transaction, we will be pleased to own 100% of I'll call. It.
Matt Greene: That's right. That's all for me. Thank you.
Speaker Change: That's great.
Speaker Change: That's all for me thank you.
Daniel Fairclough: Great. Thanks, Matt. We will take our last question now, Genuino, and we'll take it from Maxime. Please go ahead, Maxime.
Speaker Change: Alright, Thanks, Bob So are we.
Speaker Change: We'll take our last question now Jeremy and I will take it from Max.
Speaker Change: So please go ahead Max.
Maxime Kogge: Yeah. Good afternoon, all. First question is on Calvert precisely. Can you talk us through the financial implications of the deal? Nippon Steel highlighted a circa $ -1.5 billion impact on the balance sheet. Should we expect the same kind of impact on your own balance sheet + this time? Can we just add the corrective EBITDA contribution as reflected in the disclosure you give to your own EBITDA? Is there some kind of elimination we should do to take into account the snap shipment from Brazil and from Mexico?
Max: Good afternoon.
Max: First question is on kind of a precisely can you talk us through the financial implications of the deal because Nippon still highlighted.
Max: <unk>, one 5 billion negative impact on the balance sheet should we expect the same kind of.
Max: Impact on your own balance sheet positively this time and can we just add the current EBITDA contribution as reflected in the in the disclosure you gave to your own EBITDA or is there some kind of.
Max: Elimination, we should do to take into account.
Speaker Change: This is a slap shipments from Brazil and from Mexico.
Genuino Christino: Yeah. Max, what I suggest we do is, let us wait to see whether the transaction closes, and then we're going to be in a position to walk you through the account implications. Clearly, we don't have any write-downs, any payments. Let's wait until the transaction closes, and then we can walk you through the account implications from the transaction.
Max: Yes Max.
Speaker Change: As we do with that.
Speaker Change: And that is.
Speaker Change: Let us wait to see.
Speaker Change: What does the transaction closed and then we're going to be in a position to.
Speaker Change: I'll walk you through would be.
Speaker Change: Accounting implications clearly we don't we don't have any any write downs and impairments.
Speaker Change: Well, let's wait until the transaction closes and then we can.
Speaker Change: Walk you through.
Speaker Change: The accounting implications longer transaction.
Maxime Kogge: Okay. That's fair. Second question is on Vallourec. I think you were a bit reluctant so far to give more color on the synergies as long as you had not closed the acquisition, which was the case at the last presentation in late July. Now that you have closed the deal, can you talk us through the same way of potential synergies you expect to achieve on Vallourec? As you know the company now for a few months, have you progressed in that direction?
Speaker Change: Okay. That's fair and second question is on value. Rick I think you were between 10, so far to give more color on the synergies is noncash net clause.
Speaker Change: This acquisition, which was the case at the last results presentation in July but now that you have to.
Speaker Change: Close the deal.
Speaker Change: Can you talk us through the same the same way off.
Speaker Change: With synergies you expect to achieve on the <unk> I mean as you know the company now for a few months.
Speaker Change: Have you progressed in that direction.
Genuino Christino: Well, what I would say is that we are pleased with their position. Next, what we see today, it's in line with our expectations. The company continues to perform well. No bad news. That's good news. As we discussed, this is not a transaction that was done based on synergies. Because we are a minority shareholder. We have, of course, an important stake, but still we have a minority. We don't have control. All we are doing is, of course, we are open to work together. We have areas where they are present, we are present. To the extent that we can work together, we will. To the extent that it's a win-win, that it's good for Vallourec shareholders, it's good for ArcelorMittal shareholders, we're going to be open to explore.
Speaker Change: Well.
Speaker Change: So what I would say is that we are we are pleased scooping acquisition next we.
Speaker Change: What we see today, it's in line with all the expectations. So the company continues to perform well.
Speaker Change: So no no no no bad news so that's good news.
Speaker Change: And asked me discuss I mean, this is not a transaction that was done.
Speaker Change: Based on synergies right because we are a minority shareholder we have of course, an important stake, but still we are a we have a minority.
Speaker Change: So we don't have control so.
Speaker Change: So all we're doing is of course, we are open to work together, we have are areas, where we have where they are present, we are present and to the extent that we can work together with them to.
Speaker Change: To the extent that it's a win win that it could fall below that shareholders could force kilometre shareholders. We're gonna be welcome to explore but at this point in time.
Genuino Christino: At this point in time, I don't have anything to report to you on that front.
Speaker Change: I don't have anything to report to you on that front.
Maxime Kogge: Okay. That's fair. The last one is on Ukraine. There's the possibility of a truce, but there's also the possibility of Russia progressing further. Notably, the city of Pokrovsk is under threat from Russia, and it's a main coal center in the region. Are you sourcing yourself some coal from this mine, and would you be able to accept the shipments with another supply? Perhaps related to that, you have just idled one personal there, and you have just reopened it. Can you explain why you did step back there?
Speaker Change: Okay, That's fair and the last one is on Ukraine. So as it was.
Speaker Change: Speaking of the truth, but this is a possibility for a sheppard with <unk>.
Speaker Change: Notably the city of booklets isn't the threat from Russia and its the main call center in the region.
Speaker Change: Sophie Nielsen some some code from just from this mine and would you be able to offset those.
Speaker Change: And so shipments resume with another.
Speaker Change: <unk>.
Speaker Change: Perhaps we could do that job just idled one plus one is there.
Speaker Change: Just reopened it so can you explain why you did them.
Speaker Change: Kind of step back.
Genuino Christino: Yeah. Well, as we know, the situation in Ukraine, it's volatile. It's changing every day. I think the teams are doing the best they can. What we experienced more recently is that the price of energy has been very high, and therefore we are just optimizing the flows, the production, so to save on energy costs. That's why you're going to see this volatility in terms of production for as long as the situation lasts. We do have the possibility to bring the raw materials from different sources if that happens with the scenario that you just described. We have the connections with Poland. We have the port that is open, that it's operating. We do have possibilities there if we lose connection with that part of the country.
Speaker Change: Yeah well.
Speaker Change: As we know the situation in Ukraine.
Speaker Change: It's all timing.
Speaker Change: It's changing every day, so I think the teams are Duane.
Speaker Change: They can.
Speaker Change: What we experienced more recently is that the price of <unk>.
Speaker Change: And then she has been very high.
Speaker Change: And therefore, we had just optimizing the flows the production so to say on energy costs. So that's why you're going to see this volatility in terms of production.
Speaker Change: As long as the situation.
Speaker Change: Laughs.
Speaker Change: So we do have the possibility to bring raw materials from different sources that happens with the fan out getting just described.
Speaker Change: So we have the connections in Poland, we have the the board.
Speaker Change: Board is open.
Speaker Change: So we do have a possibility.
Speaker Change: If we lose connection with that part of the country.
Maxime Kogge: Okay. That's clear. Thank you.
Speaker Change: Okay. That's clear so thank you.
Daniel Fairclough: Thanks, Matt. Actually, we've got time for one follow-up question. I have Jeremy now, so we will take that from Bastian at Deutsche Bank. Hi, Bastian, please go ahead with your follow-up.
Pat: Thanks Pat.
Speaker Change: We've got time for one follow up question I Hope Jim we do so we will take that from Bastian at Deutsche Bank.
Bastian Synagowitz: Yeah, good afternoon all. Thanks for taking my question. I only have a quick one, which is a follow-up on Ukraine as well. Can you maybe just remind us what is the capacity you have available there at the moment? If you would go from where you're currently running to full capacity, is there any major investments needed at this point? Then related to that, maybe could you put this into the context of the wider, I guess, Ukrainian context in terms of what the capacity then has there pre-war, the way you perceive it, and basically how much capacity is available there in the broader market versus what unfortunately, obviously has been taken out? Those are my questions.
Genuino Christino: Yeah. Bastian, we are running two furnaces. At the moment, we are running one furnace. We are running at about, as I said, at about 40%. Historically, before the war, we were north of 4 million tons, 4.5 million tons. We do have the possibility to increase capacity from 40% to maybe 70%, and then beyond that point, that would require some investments. Clearly, we have the potential here to ramp up if we see the conditions, if we see markets, if it makes economic sense. That's the situation right now.
Bastian Synagowitz: Okay. Thank you. I guess pre-war, I think Ukraine obviously has been pretty much like a 20, 22 million tons production country hub. How do you see the feasibility of the whole market now given the current situation versus before?
Genuino Christino: It's all yet very fragile, Bastian.
Bastian Synagowitz: Sure.
Genuino Christino: As we know, a big part of the industry was destroyed. That has not changed. The markets, I have to say, it's fragile. Everybody's facing the same situation. We have high energy costs, which is then holding developments there. I think we have to wait a bit to see how things stabilize in Ukraine. Let's hope for peace and that we can start rebuilding the country.
Bastian Synagowitz: Okay. Understood. Thank you.
Daniel Fairclough: Thank you, Bastian. That's our last question, Genuino. I'll hand back the call to you for any closing remarks.
Genuino Christino: Thank you, Daniel, and thank you, everyone. Before we close, I want to reiterate my message from the beginning of the call. Firstly, the whole ArcelorMittal organization is organized to improve safety performance. Secondly, our resilient results in the face of challenging markets continue to demonstrate structural improvements. Returning significant capital to shareholders at the bottom of the cycle while continuing to invest in growth is clear evidence of the progress ArcelorMittal has made. There is much to anticipate. Our projects have good momentum and will provide unique upside to EBITDA and cash flows on top of any cyclical recovery. If you need anything further, please do reach out to Daniel and his team, and I look forward to speaking with you soon. Stay safe and keep those around you safe as well. Thank you very much.