Q1 2025 ArcelorMittal SA Earnings Call
Right.
Daniel: Good afternoon, everyone. This is Daniel <unk> from the Arcelormittal Investor Relations team.
Speaker Change: Thank you for joining this call to discuss also Mitchell's performance and progress during the first quarter 2025.
Speaker Change: Leading today's call will be our group CFO, Mr. Jimmy No Kristina.
Speaker Change: Before we begin I would like to mention a few housekeeping items.
Speaker Change: As usual, we will not be going through the results presentation, which was published this morning on our website.
Speaker Change: I would like to draw your attention to the disclaimer on slide number 19 of the presentation.
Speaker Change: Normal seven minute will make some opening remarks before we move directly to the Q&A session. So the idea is that the call will last $40 45 minutes.
Speaker Change: So if you would like to join the queue to ask a question. Please press star one on your telephone keypad.
Jeremy: Over to you Jeremy.
Jeremy: Thanks, Paul and welcome everyone and thanks for joining today's call.
Jeremy: As usual I will keep my remarks brief.
Want to focus this quarter on three key points.
Jeremy: Beginning with safety, which remains Paramount for our company.
Jeremy: We are now in the implementation phase of the recommendation of the safety audits, we completed last year and.
And early progress has been encouraging.
Jeremy: We anticipate that our journey to zero could take three years. The first year will be about setting the foundations for transformational change across the whole group here.
Jeremy: Years, two and three will be about embedding this jeans and ensure consistency discipline and results in every region.
Jeremy: I can't say with confidence that everyone across the company is working to become a fatality free and zero serious injuries company.
Jeremy: Weekly as possible.
Jeremy: Moving now to the financial performance I want to highlight our strong operational performance and cash flows.
Jeremy: Our operations are performing well.
Jeremy: Outperforming consistently.
Jeremy: The standout this quarter once all the mining segment, Liberia achieved records for both production and shipments.
Jeremy: And this is before the ramp up of new capacity in.
Jeremy: In Europe, our Nielsen are operating consistently across the cycle and this is supporting good cost performance.
North America, having resolved the issues that impacted production in Chile and Mexico.
Jeremy: This segment is now back to normal lines operating levels.
Jeremy: Our consistent operational performance has supported also resilient financial performance in a low cycle price environment.
Jeremy: EBITDA per ton of 116 in the quarter is double the level compared to previous cyclical lows.
As we have alluded to multiple times in the recent years, it's always a tough foreign company.
Jeremy: We have high graded our asset portfolio by divesting higher cost assets and acquired new assets that are well positioned to create value in all market environments. This has been well.
Jeremy: Demonstrated over the recent quarters with the structurally higher margins and greater earnings resilience moves.
Jeremy: Moving to cash flows.
Jeremy: The first quarter always six investments in working capital and this year is no different.
Jeremy: But excluding the seasonal working capital investment in our discretionary growth Capex.
Jeremy: Underlying free cash flow for the quarter was around 700 million.
Jeremy: This shows that even at the bottom of the cycle, we are generating good levels of cash flows.
Jeremy: That give us confidence to invest to support our strategic priorities.
Jeremy: As well as consistently return capital to shareholders.
Jeremy: Lastly, I will touch on tariffs and the outlook.
Jeremy: We are supportive of all airports to address the excess capacity in the global steel industry and the unfair trade practices that result from it.
Jeremy: As we said last quarter.
Jeremy: Specced impact subsection shortage with tariffs on our North America business to be largely neutral.
Jeremy: But on the positive side, we have seen other regions respond also Europe has strengthened in faith com.
Jeremy: India has introduced new safeguards ultimately arcelor mittal is well positioned to benefit from the continued push to create a level playing field in terms of trade.
Jeremy: On the outlook, we said last quarter that the impact of section 232.
That's on our North American business should be broadly neutral.
Jeremy: And including the benefits of higher prices to our caliber talent bench and this remains our expectation.
Jeremy: Encouragingly.
Jeremy: <unk> spreads have recovered from unsustainably low levels.
Jeremy: And this will be a strong support for results near term.
Jeremy: As a result, Q2, EBITDA should be clearly better than the first quarter.
Jeremy: While there is more uncertainty is the impact of tariffs we will have on demand customers clearly ice will themselves. The same question what I can say today is that our order book remains healthy.
Jeremy: But this is a risk that we are monitoring very closely and our business are prepared to adapt as necessary.
Jeremy: So to conclude my opening remarks.
Jeremy: It always in a strong position, both operationally and financially.
Jeremy: Despite the macro uncertainties, we will be maintaining our strategic course, delivering our strategic growth agenda, while it <unk> necessarily returning capital to our shareholders.
Jeremy: Our growth projects have good momentum.
Jeremy: The investments we have made we have been making for the past three years, we will contribute to a structurally higher EBITDA.
Jeremy: One 2 billion of which is expected to be captured over the next few years.
Jeremy: <unk> expansion project is on track and on budget the commissioning of the new state of the art, Yes at Calvert is underway.
Jeremy: And the development of our unique exposure to inkjet is progressing to schedule.
Jeremy: <unk> expansion is on schedule.
Jeremy: Our clearly defined capital return policy is working well and we will continue we have initiated a new long term share buyback program through 2013.
Jeremy: Returning capital to shareholders at the bottom of the cycle, while continuing to invest in growth is clear evidence of the progress somewhat Minto has made.
Jeremy: And demonstrates that our company can deliver value through all aspects.
Jeremy: Of the steel cycle.
Jeremy: With that I believe we can go to Q&A.
Speaker Change: Great. Thank you Jeremy.
Speaker Change: A key developing already but just let me reiterate those instructions if you'd like to ask a question. Please press star one.
Speaker Change: On your telephone keypad.
Speaker Change: So we will take the first question from Alain at Morgan Stanley.
Alain: Hi, Thanks, Hi, Greg Hi, Hi, Hi, Thank you a couple of questions Firstly on.
Alain: The <unk> 25, you said you expected that to be clearly higher Q on Q do you mind, giving us the usual building blocks by division for the second quarter have you seen the full benefit of falling metal prices.
Alain: Lags suggests that we have to wait until Q3 before seeing the full benefit that's my first question. Thanks.
Alain: Yes islands, so yeah, so I believe that.
Alain: In Q2.
Alain: What is really encouraging is what we saw during developing during the first quarter right. So we saw trade action in Europe, we saw spreads recovering nicely I would say.
Alain: Hey.
Alain: Level of spreads in Europe were extremely weak in the second half of last year beginning of this year, we felt very nicely during the quarter. So that will be will provide strong support to our results.
Alain: Sure I will let.
Dan: Dan <unk> walk you through the moving parts that we use it usually do.
Alain: But that's.
Alain: That's going to be a strong support and in terms of core I mean, as you know because of the weighted average cost that we have.
Alain: We are still working through the high cost that we had I still left at the beginning.
Alain: Sure.
Alain: Beginning of $2020 20 for the first half of China portion of U S steel.
Alain: Some of that debt.
Alain: We are.
Alain: Working through so we will continue to see some support some cost support but.
Alain: I would say that is more modest.
Alain: So then how do you want to cover the moving parts.
Alain: Yes, sure Jeremy I think to focus your attention on the key themes for the second quarter.
Alain: Assuming the fed will support.
Alain: The results in the second quarter relative to the first quarter.
Alain: I think the key themes will be higher volumes and Theyre I'm, specifically talking about a seasonal recovery in Brazil, and also high volumes in Ukraine, and then a positive price cost effect and you really see that coming through in Europe.
Alain: Given the dynamics that Jim just talked about so we've had some good momentum within Europe, we've had that new safeguards and Thats really helped too.
Alain: Improved market sentiment and spreads have had benefited from that sentiment.
Alain: So we will see a positive price cost effect in Europe and you should also expect some improved results.
Alain: India and JV section.
Alain: Thank you. Thank you Daniela My second question is on North America do you know if the the new automotive component the exemptions that have been recently announced.
Alain: From from auto tariffs are applicable to Steve.
Alain: And on that on that question as well on the tariff absorption and the USTR absorb the tariff costs.
Alain: Group level or is it that they kind of at that level. Thank you.
Alain: Yes.
Alain: Let me so.
Alain: North America, so as we said last quarter.
Speaker Change: Hi, I was.
Speaker Change: In my opening remarks, so we still believe that after the impact of section two thirds recoveries will be.
Speaker Change: This will be neutral.
Speaker Change: Brian.
Speaker Change: The way for you to see that really will be to combine the results that youre seeing in our North American segment, plus the results of Covid that we.
Speaker Change: We disclose that we disclose separately right.
Speaker Change: Regarding the <unk> on how to understand is that there is noise stephane.
Speaker Change: So that's our that's our understanding there is still some clarification that needs to happen when it comes to derivative products. I think there is still some work that needs to be done that's required.
Speaker Change: What is really covered by that.
Speaker Change: But.
Speaker Change: That's how we are seeing right now.
Speaker Change: Thank you. Thank you very much.
Speaker Change: Great. Thanks for that so we will move to the next question from <unk> at Citigroup.
Speaker Change: Hi can you hear us.
Speaker Change: Yes again, so the question is on sort of the the new Green tea and steel plant.
Speaker Change: In India in the East coast conditions Putnam.
Speaker Change: The Indian versus closing timeline of 2029 for phase one and 2000 22033 for phase II I. Appreciate its early days with land acquisition being started et cetera, but those timelines cortex be realistic you know deal given the challenges with <unk> in India and related to that.
Speaker Change: Especially from the government data.
Speaker Change: In terms of.
Speaker Change: Facilitating.
Speaker Change: Against bottleneck flight land acquisition.
Speaker Change: Again, any especially in this difficult times.
Speaker Change: And is the decision on the side kind of really driven by the fact that it's the end of the iron ore slurry pipeline.
Speaker Change: Or is there anything else there. Thank you.
Speaker Change: Yes, hi.
Speaker Change: So this is a possibility.
Speaker Change: Second development for us or the company to open reading, a new Avenue for growth in India.
Speaker Change: And we're excited about that but of course, it's too early.
Speaker Change: <unk> been working very closely with the government should have access to this Atlanta estrogen knowing this is.
Speaker Change: <unk> difficult so.
Speaker Change: It's significant.
Speaker Change: Significant piece of land with access to the seed corn.
Speaker Change: So its really ideal we have we are going to be also close it should to.
Speaker Change: To the customer.
Speaker Change: That's part of the country access to iron ore as you said we have to be.
Speaker Change: Pipeline there ancillary pipelines.
Speaker Change: Thank the setup is very good so but and we.
Speaker Change: We are now at least at this stage is so you're going to be working also to obtained the environmental licenses and then of course after that follows the normal engineering work and I'm sure. We're going to have the opportunity to update you more as we progress I think it's early days, but I think.
Speaker Change: What is very.
Speaker Change: Very good and.
Speaker Change: The fact that we could thank.
Speaker Change: Thanks, Brian.
Speaker Change: If I can have a quick follow up question I mean, you've taken been banned then on Mon lavage.
Speaker Change: Spansion.
Speaker Change: And do you announced that not just you have stocked up line, but you've kind of canceled.
Speaker Change: The project the expansion project can you give us some background as to why.
Speaker Change: Cancel the project after being probably about 20% through the project.
Speaker Change: Yeah.
Speaker Change: I think what you are trying to do is really we believe that.
Speaker Change: So that project was on hold for a number of years.
Speaker Change: And as we embarked again on the engineering work, we saw the courses would be too high would be prohibitive.
Speaker Change: And the teams are doing a good job exploring different optionality as options to continue to develop the business in Brazil.
Speaker Change: So it shouldnt be more cost effective.
Speaker Change: So that's why I think it was a combination of high costs and.
Speaker Change: The possibility that we have with the footprint that we have.
Speaker Change: To come up with options that might be more cost.
Speaker Change: <unk>.
Speaker Change: And just to confirm that.
Speaker Change: Yes.
Speaker Change: Just go ahead im.
Speaker Change: Sorry.
Speaker Change: And just to remind everybody that that was a decision taken last quarter. So that was a new event.
Speaker Change: <unk>.
Speaker Change: For this first quarter. It was a decision taken in Q4 and the impairment was taken in Q4.
Speaker Change: Yes. Thank you.
Speaker Change: Great.
Speaker Change: Next question from Tom at Barclays.
Speaker Change: Hi, Tom Please go ahead hi.
Speaker Change: Hi, Thanks for taking my questions two.
Speaker Change: For me as well please the first one just on North America.
Speaker Change: U.
Speaker Change: And then just you didn't talk too much about it around volumes or price cost I know theres a lot of moving parts around tariffs.
Speaker Change: When you say the impact of section 232 is going to be largely due to <unk> is that a guide or is that a comment towards earnings being quite stable in North America. It's Q2 or are there other moving parts like <unk>.
Speaker Change: Mexico domestic pricing kind of domestic pricing volumes.
Speaker Change: Any sort of main main comments around those would be interesting.
Speaker Change: Yeah, So maybe I can touch on that dental can complement but.
Speaker Change: I think what we are seeing is that in terms of volumes when we look at our order book.
Speaker Change: It remains quite healthy right.
Speaker Change: And then it's across.
Speaker Change: All of our customers.
Speaker Change: In North America, So order books our house.
Speaker Change: Our expectation is to see our average price is what you see.
Speaker Change: Reported also to move to move slightly up.
Speaker Change: Not as much as you would expect for Q U S company because of course, we also have operations in Canada, and Mexico, where prices have not really gone to the same level as what we can see today.
Speaker Change: In the U S. Right. So we have guiding for volumes North America to be stable prices to be.
Speaker Change: Lastly to be slightly up.
Speaker Change: But then you're going to see of course, the impact of tariffs right. So it is not.
So while its June quarter, one, but then we will have the full impact of the.
Speaker Change: Public targets.
Speaker Change: Results from Quanta true, but then again you will see offsets an offset at the level of cohort. That's why we are.
Speaker Change: <unk> for you to really look at the business on a combined basis look at NAFTA, but look also at college.
Speaker Change: Okay. So I think that was very comprehensive Jeremy so the only thing I would just reiterate is that the overall message here has not changed.
Speaker Change: So the same message that we gave last quarter.
Speaker Change: Understood. Thank you and then the other question just on Europe, let's see that was purchased.
Speaker Change: 600, Yale cuts in France in 2500 total in Europe.
Speaker Change: Can I just ask how this could potentially change youll footprint is that all going to be finishing downstream.
Speaker Change: And does that mean anything for your upstream footprint in Europe.
Speaker Change: You've had to Fotis basically idle for quite a while now in France, you've been juggling, a little bit with maintenance, but it's clearly not running at full utilization.
Speaker Change: Can we expect a permanent idling and all this all these costs kind of linked at all too.
Speaker Change: European.
Policy right around energy provision affect seaborne trade defenses that I think you mentioned in the press release.
Speaker Change: These job cuts at all linked to that.
Speaker Change: Yeah.
Speaker Change: I'd say that what we have seen this quarter, it's quite encouraging in terms of the new.
Speaker Change: Excellent plan, so all of the points that being on dress.
Speaker Change: At least conceptually.
Speaker Change: By the commission, it's all very very positive I would say the message on seaborne trade.
Speaker Change: First energy.
Speaker Change: So and then of course, when you combine that with the actions that.
Speaker Change: Operating impacting us today seems to be strengthening.
Speaker Change: Yes.
Speaker Change: The antidote.
Speaker Change: <unk>.
Speaker Change: Some.
Speaker Change: Export is solved.
Speaker Change: Good news right. So now I think we are in a stage, where we have to see the concrete actions linked shoe and execution of these steel action plan.
Speaker Change: No we have no plans to.
Speaker Change: <unk> change we are not looking at change our footprint in Europe. So it all remains.
Speaker Change: And I think the moment the momentum in Europe, I would say it's.
Speaker Change: More positive advantage was a couple of months ago.
Speaker Change: Okay. Thank you.
Speaker Change: Great. Thanks, Tom So we will move now to a question from Mark at Goldman Sachs. Please go ahead ma'am.
Speaker Change: Hey, good afternoon guys.
Mark: So just another one on Canada, and Mexico, and Youll touch on heading into the U S. You mentioned your order book is just fine, but can you just confirm you've actually been able to move high price volumes into the U S. And then just does that fully capture the GC and.
Speaker Change: And just on the Trump tariff relief auto.
Mark: The auto industry. What are you hearing from your from your customers kind of follow up with another question. Thanks.
Mark: Yes, I would just say that that outflows have not changed we continue to be exactly the same.
Mark: And.
Mark: And.
Mark: Each contract.
Mark: Uh huh.
Mark: They have their own.
Mark: Pauses and condition. So I, what I would say to you is honoring all of these contracts assignment that in some cases.
Mark: We are the important records will pay the Taurus in some other cases customers.
Mark: So it's.
Mark: It really varies.
Mark: So, but I think what is important is that given the quality of the assets we have.
Mark: Massive for U S.
Mark: So we are able to keep supplying the Oems and we are not seeing any change there right and as I said the order book remains healthy.
Mark: Healthy.
Mark: And it's probably early days right, but.
<unk>.
Mark: So what we are seeing right now.
Mark: It's I would say stable.
Speaker Change: That's great. Thanks, gentlemen.
Mark: And then just on met coal.
Mark: Obviously, you've touched on this this is helping on spreads, but we're seeing some minus get into a bit of distress.
Mark: We'd also be open to acquiring high quality steelmaking coal production for <unk>.
Mark: You just supply security.
Mark: Never thought something that as you know, we don't really comment on M&A.
Mark: It's not something that is high on our agenda at this point.
Mark: That's all from me thank you.
Speaker Change: Great. Thanks, Matt.
Speaker Change: So taking the next question from Patrick at Bank of America.
Speaker Change: Go ahead Patrick.
Patrick: Thanks very much.
Speaker Change: Good day.
Speaker Change: Daniel.
Speaker Change: Maybe the first question I just can you just talk us through the sort of the change in the technical aspects of the share buyback. So I. Appreciate there's no change to the capital allocation policy, but the previous one was was 85 million shares of a two year authorization for 85 million shares, but this does $10 million.
Speaker Change: She is tranche.
Speaker Change: Can you just talk us through kind of the thinking.
Speaker Change: Why it's changed effectively thanks.
Speaker Change: That's the first question.
Speaker Change: Do you want to talk about.
Speaker Change: Yes, sure Jeremy I think.
Speaker Change: Ken.
Ken: The fact is we've done at nine separate share buybacks since we.
Ken: Started the buyback programs in September of 2020.
Ken: So the.
Ken: <unk>.
Ken: So the so it's clear that.
Ken: <unk>.
Ken: Our policy is clear.
Ken: And the application of our policy.
Ken: It's also very clear so we're.
Ken: Extremely happy with what we've been able to achieve.
Ken: We've been able to buy back 38% of the company.
Ken: It obviously.
Ken: Attractive points of the cycle.
Ken: A good average price level. So like you said in your question.
Ken: <unk>.
Ken: The policy is unchanged, we will continue to return.
Ken: Yes.
Ken: Minimum 50%.
Ken: Yes.
Ken: Post dividend cash flow to shareholders through buybacks, but the idea was that.
Ken: <unk>.
Ken: We've now made this announcement is through 2030.
Ken: We will execute the first tranche of 10 million chats and then we will start the next tranche of 10 million shares straight after that so you can kind of forget about that side of things.
Ken: And just look at the policy.
Ken: Look at your expectations for the business the cash flow that we're going to generate and that should that inform your expectations for <unk>.
Ken: How many shares.
Ken: Going to be buying back.
Ken: That's correct.
Ken: That is thanks very much and then the second question I wanted to ask a little bit on the Liberia iron ore expansion I mean, I think last year, you shipped three and a half million tons from from <unk>.
Ken: Obviously, it's picking up to 10, and then going to capacity of <unk>.
Ken: I mean does that really only had 450 million.
Ken: Additional EBITDA if I look at the long term margins of the mining division, it's sort of closer to 50% on EBITDA.
Ken: And so sort of additional $16 5 million tonnes.
Ken: It kind of implying at current prices only about 25% to 26% margin. So.
Ken: Yes, I mean are you being conservative around pricing is at a higher cost because of the concentrating where because of additional.
Ken: Is there anything.
Ken: Any reason why it should be lower margin than the balance of your mining division effectively thanks.
Ken: Yeah. So.
Ken: So first of all I think the project is going extremely well.
Ken: Alluded to at the beginning.
Ken: No opening remarks.
Ken: We are actually a balance you really start the first line, which is also quite exciting.
Ken: And we are talking about a very high quality material.
Ken: Patrick.
Ken: The 400 keeps a million dollars that we have been quoting and thats really based on long term prices right in that as we know.
Ken: Though lower than what we have been enjoying in recent quarters. So this $100 range. So the part.
Ken: Based on the long term prices.
Ken: Is much lower so to the extent that west prices remain where they are.
Ken: We should be able to.
Ken: Print higher higher results from from Liberia.
Ken: But there is no reason to assume that the quality of the material will be.
Ken: On the contrary, we believe that it's going to be a very high.
Ken: <unk> product so.
Ken: Very excited about that.
Ken: Yes, it's quite transformational agent distributors, so you've got the.
Ken: The economies of scale at a much bigger operation.
Ken: Obviously neutralizes the.
Ken: The cost of concentration and then we get a rich products and we will be able to.
Ken: Capture.
Ken: Rich price for that material in the market. So just to confirm what you were saying.
Ken: The.
Ken: The guidance that we've given for this project to $450 million.
Ken: Capacity.
Ken: Pretty conservative based on conservative long run pricing and but even based on that and you can see the very attractive economics of the project.
Ken: In the.
Ken: The good returns on the investment that we're making but.
Ken: Should prices hold anything like where they are today.
Ken: Then there would be quite significant upside to that $4 50.
Ken: Number.
Ken: Great. Thank you very much.
Speaker Change: Great. Thank you. So we will move to the next question, which should be from coal at Jefferies.
Tycho: Tycho. Please go ahead.
Tycho: Thanks for taking the question.
Tycho: Some color on how you're seeing that.
Tycho: European markets developing yes, I mean margins are looking a lot better into the second quarter. We've got a lot of safeguards. How do you. How are you looking at your mill system to either.
Tycho: <unk> volumes, if you order books remain healthy and secondly, how do you think some of the players that have idled capacity or.
Speaker Change: <unk> had some challenges at the moment, Mike to react to the mall.
Tycho: Favorable spreads into the second quarter. Thank you.
Mike: Yeah, So what I would say.
Tycho: And it's that.
Mike: I think so.
Mike: <unk>.
Mike: Demand in Europe, as we have been discussing.
Mike: And.
Mike: And you have our forecast for this year, which remains unchanged and.
Mike: And we have a forecast of about neutral to about 2% increase.
Mike: What is really helping and supporting the demand right now.
Mike: <unk> that we talked about in terms of training.
Mike: So we started to see some reduction of import which is extremely positive.
Mike: We will not see the full impact of the new trade actions until quarter, three because thats, how that is a bit of a transition. There. So our expectation is that imports will continue to trend down.
Mike: To be seen but thats, our expectation, allowing then.
Mike: Mastic players to regain some market share.
Mike:
Mike: It was lost.
Mike: With.
Mike: Exports from China and other countries. So that's that's very good. So we retained of course as part of our operations ability to regain market share. So we are not constrained.
Mike: And regarding capacity that is iron ore I would just say that giving dcs system in Europe, it's not so easy for people to bring back capacity because then.
Mike: They will incur very high.
Mike: <unk> costs as well so that's something to keep in back of your mind.
Mike: But of course, we cannot comment on what others will do but I would say that what do we can see right now it's quite positive.
Mike: Thank you and then.
Mike: Maybe just following on that last point around the.
Mike: The cost for you to restart idled capacity have you heard anecdotally.
Mike: How competitors might be facing in kind of high yield debt markets, just considering they're a little bit more challenging.
Mike: <unk> to potentially starting up some of that capacity will it be more challenging for them to get the financing in startup.
Mike: Some of the capacity in your view.
Mike: Well I'm not going to comment with those sort of things I don't have volatility in the market right for the markets, what kind of clothes for high yield, but I think thats just temporary of course, so I think thats.
Mike: Just a question I'm afraid I'm going to I'm going to need to ask.
Mike:
Mike: The other companies.
Mike: Okay, I understand and then.
Mike: Just following up on the comment around.
Mike: India and JV sequentially improving into.
Mike: The second quarter.
Mike: The U S market is clear concerning the price dynamics with Calvert, but would you mind, just giving some color on that.
Mike: Dynamics impacting the India JV with.
Mike: The safeguard actions for India. Thank you.
Mike: Yeah well.
Mike: I think the story there is really intact right. We continue to see good growth so apparent steel consumption forecast.
Mike: <unk> remains the same so we don't expect it.
Mike: Growth of about 7% this year.
Mike: Good.
Mike: And as we discussed so we have the safeguards in place from April which is supporting prices, we have already seen prices.
Mike: Recovering from low levels that we had in quarter, one so that should support.
Mike: The results of our JV ing.
Mike: Going into the second quarter and as we have also pointed to you in our release.
Mike: So Q Q1, we had some maintenance work, which is now completed.
Mike: So we're going to be back to full operations that should support costs as well.
Mike: So we are looking for an improvement in terms of profitability.
Mike: And then.
Mike: Sure.
Mike: More importantly, as we have been discussing is the progress on the projects going well on track.
Mike: Which is also quite encouraging.
Mike: So thats the dynamics.
Mike: And then asking you're asking right.
Mike: Thank you.
Carl: Great. Thanks, Carl So we will move to the next question now, which will take from Boris at Capa sugar out.
Mike: Please go ahead.
Boris: Hello can you hear me.
Mike: Yes, we can hi, Ross, yes perfect.
Speaker Change: Thank you for taking my questions. The first one is on the free cash flow. So the press release that you.
Mike: Positive free cash flow.
Mike: Stable Capex envelope.
Mike: <unk> contribution from the strategic project and some working capital condition can you can you.
Mike: Some details on working cap just to help us.
Bob: Thanks, Bob.
Mike: And the second question is on China.
Bob: China has been under pressure for some time now.
Bob: Do you expect to your Cvs in the acreage reasons to expect subsidiaries.
Bob: Whats your view on the markets, where we have heard about potential production cuts.
Bob: Yes.
Bob: In terms of the working capital.
Bob: We are keeping all.
Bob: Our message.
Bob: The previous quarter as well no change there.
Bob: The investment that Youre seeing quite a while and seasonal I mean, it happens every year.
Bob: And our expectation is that holding up we should still see the moving parts, but we should.
Seen some release.
Bob: But it's always difficult to be precise because there are many moving parts.
Bob: And a lot will depend on what happens really in the last couple of months.
Bob: But because the actions.
Bob: We will have a rely and other financing costs in the second quarter. We are building slabs for that so it will be.
Bob: We are working through that.
Bob: We also discussed at the very beginning of the call you still some high cost coming from the first half of 2020 call because of the weighted average cost.
Bob: So we still believe that the all in all we will be in a position to reduce debt.
Bob: Congress here, which is supportive for free cash flows should not forget that.
Bob: Liberia expansion.
In the second half.
Bob: Primarily right, even though the performance in quarter, one was really outstanding.
Bob: But it's.
Second half events and will support results in the second half.
Bob: So that's why we feel.
Bob: Comfortable and confident that the group will be generating free cash.
Bob: This year.
Bob: Yeah.
Bob: Perhaps I can take that.
Bob: A question on China.
Bob: <unk>.
Bob: Clearly the.
Bob: The demand situation in China continues to be challenging.
Bob: And we continue to see very weak.
Bob: Reds and elevated.
Bob: From China, So and there was a lot of talk of incremental stimulus.
Bob: Reaction to to everything that's going on at the moment.
Bob: Hopefully that will come hopefully that will be oriented towards more steel intensive parts of the economy.
Bob: It can have the maximum impact on <unk>.
Bob: Our consumption.
Bob: But.
Bob: That's all.
Bob: Uncertain and Thats why we continue to.
Bob: Strong assets and.
Bob: Lobbying efforts within all of the countries that we are operating to make sure.
Bob: Businesses in our industries.
Bob: Appropriately protected.
Bob: Those risks.
Bob: Excess capacity in China.
Bob: So as a follow up on that do you expect what kind of further measures can we expect in Europe.
Bob: Yes.
Bob: Yeah.
Speaker Change: Well I think as we discussed I think there is a lot of wouldn't use in Europe.
Bob: Steel.
Bob: Fan just announced I think that is a law that will be.
Bob: As we move forward I think what's going to be very important for us.
Bob: The new trade actions because thats been noticed safeguards comes to an end next year. So.
Bob: This is an important piece of the whole puzzle. So this coming summer.
Bob: I think that is the law that will be.
Bob: Worked out in Europe.
Bob: And the second part of the second part of the year I think what is really encouraging is that now.
Bob: Now it's clear that that is.
Bob: Good understanding of the challenges that we.
Bob: We face in Europe, but the industry is facing and that's always very critical so whilst we honestly speaking the same language and we all understand the shoes and we can work together to resolve them.
Bob: What is encouraging about everything that has been published and as I said I think now.
Bob: We want to see the detailed plans and implementation.
Bob: Great.
Bob: Paris, So we'll move to the next question.
Bob: We will take from Baskin.
Bastian: Deutsche Bank, Hi, Bastian. Please go ahead.
Bastian: Yes. Good afternoon. Thanks for taking my questions I've got two questions left the first one is just on the JV business and as he called it specifically do you see on the startup of the new work.
Bastian: From what I understand I think you will start production shortly.
Bastian: Volume target or protection targets, you could maybe share with us for this year.
Bastian: And then secondly, you spend a little time talking about the tariff impact on NAFTA, but I think thats. Another one five to 2 million tons of slabs from Brazil into Calvert as well I think you did around.
Bastian: Half a million tons of shipments in the first quarter.
Bastian: With the cost of the east.
Bastian: For the tariffs on these will be taken whether it be taken can calvert the.
Bastian: The Brazilian segment and also have you been able to build any slip inventory ahead of the tariffs maybe you can help us on the current inventory runway at Ann and Calvert close all my questions.
Bastian: Yeah. So we are not giving you right. So that we are now in the process of commissioning.
Bastian: Which is also extremely important for our business.
Bastian: North America, particularly now.
Bastian: Everything that we just talked about trade.
Bastian: Timely.
Bastian: We're not giving a target for them in terms of production what I would say is we.
Bastian: Our expectation is that this should take us about.
Bastian: 12 months.
Bastian: B.
Bastian: The full run rate.
Bastian: So I would expect that by the end of the year, we should be at the very high level.
Bastian: Run rate already.
Bastian: And then of course in parallel we start.
Bastian: It's a vacation obligation process with customers.
Bastian: This is a process that we will be running in parallel and regarding these labs, you're right. So of course, we are importing slabs into the United States for call. It.
Bastian: But I would point to two points. So one is.
Bastian: We have seen.
Bastian: Declining slab prices.
Bastian: So.
Bastian:
Bastian: So call that will be.
Bastian: <unk> being the cost of the salaries for the imported slabs, so you're going to see that as part of the Calvert performance North in Brazil Calvert.
Bastian: But despite that given.
Bastian: Given how.
Bastian: How quickly prices moved.
Bastian: In the United States.
Bastian: It will be it will more than offset that it will help also to offset.
Bastian: Some of the costs that we talked about we will incur in Canada.
Bastian: Understood. So basically bottom line no real impact on the Brazilian business itself from that from what you say.
Bastian: No that's right.
Bastian: Understood. Okay, and then maybe just coming back to the sort of just kicking in.
Bastian: I mean this is the startup of the Es itself is going is that going according to plan and timeline is still I think you started to ramp it up late last year, so, but I guess, the 12 month, you're referring to I guess, it's probably starting basically with the first smelting process is that correct I E. Like whenever you stopped the melting busy 12 months from that.
Bastian: Yes.
Bastian: That's a good reference.
Bastian: Bastian So right now we are going through testing all the equipment right and then you put it all together you have the bus.
Bastian: <unk>, which we are anticipating by the end of.
Bastian: Second quarter, and then from there.
Bastian: Start counting.
Bastian: The ramp up.
Bastian:
Bastian: That's how it works.
Bastian: Got you okay. Thank you.
Bastian: Great. Thanks Bastian.
Bastian: So I think we're going to have time for just a few more question Jeremy So the first of those that we will take from Max.
Bastian: <unk>.
Bastian: Oh absolutely.
Tristan: Mistaken sorry, looking at my screen, So it's actually sorry Tristan.
Speaker Change: BNP Paribas Exxon high interest and please go ahead.
Speaker Change: Hey, Hi, Thank you. Thanks for taking my questions first on the Capex, you mentioned that <unk> carb investment, which fits within your 455 billion Capex envelope.
But if you move forward with all your projects year Ies projects in Europe, and France, Spain, Germany, Belgium.
Speaker Change: We feel it's difficult to see how it would fit and you wouldn't go above $5 billion. So its just wondering how we should look at.
Speaker Change: $5 billion is that a hard target is it like 50%.
Speaker Change: Post dividend free cash flow target is that the way to think about it.
Speaker Change: Please go ahead.
Speaker Change: I think as it Kenny mentioned I mean.
Speaker Change: Many large projects right.
Speaker Change: And we're not going to do it all the same time.
Speaker Change: So this will happen gradually we should not forget that.
Speaker Change: Our transformation to this new.
Speaker Change: Green steel is going to take the case right.
Speaker Change: So you should expect that this will be once we can see that we have derived conditions. The right policies as we have been talking about and we have been very vocal about it.
Speaker Change: Once we have that in place. So then we wound up being a position then to start investments, but that should happen gradually and thats why we feel confident that we should be able to accommodate that within <unk>.
Speaker Change: The existing envelopes.
Speaker Change: We have been.
Speaker Change: Using now for a couple of years.
Speaker Change: Alright, and could there be upside as well to subsidies I think the key action plans also refers to the additional help is it something you can.
Speaker Change: I expect.
Speaker Change: Well I think that's going to be part of the dialogue with.
Speaker Change: The governments.
Speaker Change: I think as I said, the fact that there's a good understanding of some of these shows.
Speaker Change: We are facing in Europe. So we are encouraged by that.
Speaker Change: This will be part of the dialogue, but at this point in time I really don't have any more news on that front to share with you.
Speaker Change: Okay, that's clear.
Speaker Change: Quick question just also on Cadbury there is a news feed is a process ongoing regarding the acquisition of U S scale by Nippon Steel if the new U S administration.
Speaker Change: Here's the deal National security grounds, but does not see an antitrust issue.
Speaker Change: Couldnt lipids he'll walk back from the agreement.
Speaker Change: Selling the 50% stake to you in just trying to understand if this is kind of a black and white scenario.
Speaker Change: There is some some great as well.
Speaker Change: Tristan I will not speculate on that I think let's wait and see what finally happens with that deal.
Speaker Change: Sure.
Speaker Change: Uh huh.
Speaker Change: So let us see I don't think we have much to add to that.
Speaker Change: Tariffs that have been agreed so, let's just wait and see what.
Speaker Change: But as the final conclusion of the review by features such as a new review ongoing.
Speaker Change: It's my understanding reading the news.
Speaker Change: So we will.
Speaker Change: Wait to see what happens now.
Speaker Change: Alright, thank you.
Speaker Change: Great. Thank you Vincent so.
Speaker Change: We'll have.
Speaker Change: The next question will be from Max.
Speaker Change: Hi, Max Please go ahead.
Max: Yes, good afternoon.
Max: Yes. So my first question is on defense because this is a theme that has grown in importance for fall 14 vessels in recent weeks in recent months and could you talk us through your own defense exposure. My understanding is that you said some have you pledged wind is the only segment, where you at <unk> or is there anything else we should be.
Max: <unk>.
Max: You wanted to.
Max: Talk about it now yes.
Max: Yes sure.
Max: I think we.
Max: We have touched on this.
Max: A little bit and a lot of recent meetings.
Max: And yes in this deal is the is the sort of focus points.
Max: Defense exposure.
Max: Do have leading market positions.
Max: I think when we think about.
Max: Defense It isn't a big steel consumer.
Max: So when.
When we when.
Max: When you compare the.
Max: The focus on.
Max: Defense versus the German infrastructure, Bill then clearly the German infrastructure Bill will be.
Max: Much more impact.
Max: So for <unk>.
Max: Steel demand degradation.
Max: <unk> two long term however, I think the focus on defense is indicative of this sort of renewed.
Max: Focus.
Max: Europe, and the commission level and that we need.
Speaker Change: Need to be.
Max: And.
Max: Able to defend ourselves in order to be able to defend ourselves we need to have a strong healthy steel industries to be able to supply that that material.
Max: And I think for us that would be the biggest takeaway that it's just indicative of.
Max: This broad and move.
Max: Europe and at the commission level to think more strategically.
Max: <unk>.
Max: About domestic industries.
Max: Okay, Okay clear and second question is on yet.
Max: In addition, the agenda so you've highlighted a number of positive changes in Europe over recent months.
Max: And yet you haven't reactivated your plants to Decarbonize in Europe, So what would be relieved.
Max: The major triggers for you to <unk>, two really reactivate these plants would be a much higher energy costs.
Max: Would it be confirmation that simple.
Max: <unk> got system will be replaced by a new one that is at least as effective is it the introduction of the <unk> port rule.
Max: What steps do you see as critical for you to resume.
Max: <unk>.
Max: I must say maybe I'll take this one I think it's all kind of all of the above.
Max: Right. So you touched on a number of important points.
Max: The safe.
Max: Our hope is that the commission will go even a step further.
Max: As you know domestic meal has lost a lot of market saturation parts.
Max: And we would really welcome measures that would take us or take the market share of imports back too.
Max: Brian levels so.
Max: A long way to go there.
Max: Then <unk> of course, it's quite important rights and.
Max: Access to LNG competitive advantage as well so I would.
Max: And I'll just list is three.
Max: And mounted influenced as we know it's also quite effective.
Max: Also something that we would welcome.
Max: Because then you can really make sure that.
Max: You are avoiding C convention.
Max: That's quite good.
Max: So I'll leave at that.
Max: Thank you Daniel.
Jamie: Great. Thanks, Jamie So we have time I think for.
Speaker Change: One last question at which we're going to take from Andrew.
Speaker Change: UBS Hi, Andrea Please go ahead.
Speaker Change: Hi can you hear me okay.
Speaker Change: Yes.
Speaker Change: Good good.
Speaker Change: A follow up to the last question. So it makes sense I mean, one thing that.
Speaker Change: I was encouraged by the steel action plan, but one thing I am less clear on is what can actually be done to address the biggest problem, which to me seems like it's the high energy cost issue right now.
Speaker Change: Many of the countries around Europe, I mean from your perspective.
Speaker Change: What can actually be achieved.
Speaker Change: Through the steel action plan.
Speaker Change: Changes in regulation could actually make a difference to it.
Speaker Change: To that because ultimately if you're going to make these investments in green steel that's a key building block. So I mean do you see any material change.
Speaker Change: Come from this which is going to.
Speaker Change: Impact on yield.
Speaker Change: To make those investments.
Speaker Change: Andrew I think.
Speaker Change: I'm not so sure that I follow.
Speaker Change: 100% of quest.
Speaker Change: Question in zinc.
We're trying to establish.
Speaker Change: But I think as we just discussed I think the.
Speaker Change: With the action plan, we cannot address some of these fundamental issues such as the very high level of imports.
Speaker Change: And as we know it's just not the level of imports is just that it's extremely unfair right.
Speaker Change: Messick meals because.
Speaker Change: Domestic mills are painful in the high <unk> and nobody else's pain.
Speaker Change: Of course, we have also the situation in China, we've been extremely low prices that it's very hard to rationalize to defend.
Speaker Change: Alright suites.
Speaker Change: Competition is today for the European Muse clearly.
Speaker Change: <unk>, yeah, so to the extent that we can address that.
Really extremely supportive tried even if even if demand remains where it is.
Speaker Change: If we can just allow the domestic news to recover some market share loss that will be extremely positive we should see that as an increase in apparent steel consumption for the domestic mills, so that shouldnt be quite important and then of course, we have the energy discussion.
Speaker Change: Which it continues to be an issue so.
Speaker Change: Power prices across Europe continue to remain elevated.
Speaker Change: And if you want to go through this transition and we want to have more eas.
Speaker Change: We would need to have better transmission lines, we will have we will need to have.
Speaker Change: Access to more competitive prices so.
Speaker Change: All of that is actually to summit is covered by the <unk>.
Speaker Change: Something that was announced so.
Speaker Change: But again since we discuss.
Speaker Change: Key point will really be now.
Speaker Change: Details and and implementation.
Speaker Change: I guess just to follow up so I mean, my question was more on well connection plan actually deliver in terms of tangible reductions in energy cost because maybe some help on transmission.
Speaker Change: Make a small change.
Speaker Change: Ultimately does it make enough of a change on given your loan portfolio trends.
Speaker Change: Those are the model of may be doing beyond making outside Europe, where power cost so just naturally lower.
Unimportant gain potentially make more sense, how do you think about that.
Speaker Change: Yes, I think you're right.
Speaker Change: What what governments can do with this is also part of it.
Speaker Change: Part of the plan is allowing us as an example.
Speaker Change: Contracts for defense.
Speaker Change: Which should then.
Speaker Change: Address.
Speaker Change: Some of the structural issues right so contracts for difference.
Speaker Change: Facilitating access to Ppas.
Speaker Change: Measures that governments and you know can take.
Speaker Change: Sure.
Speaker Change: Provide.
Speaker Change: Local mills competitive price right.
Speaker Change: Your question is we.
Speaker Change: Do it in Europe do we do it outside of Europe, I think that is something to be seen right. I think we have we did shaw.
Speaker Change: Really what it comes out concretely.
Speaker Change: And then we're going to be in a position through the side I think arcelormittal is well positioned because we have across our footprint.
Speaker Change: In different locations.
Speaker Change: Texas is a good example, right. So we have the right plan.
Speaker Change: We have the possibility to expand we have access to natural gas. So we'll have the auction.
Speaker Change: At this point I think its early so we just need to really understand completely the change and then we're going to be in a position to take that take a call on it.
Speaker Change: No that's great. Thank.
Speaker Change: Thank you very much.
Speaker Change: Okay.
Speaker Change: Daniel.
Jimmy: Thank you Jimmy Thanks, So that's our last question so with that I will hand back to you for closing remarks. Thank you.
Speaker Change: Thank you Danielle and thank you everyone before we close I want to reiterate my message is from the beginning of the call Firstly.
Speaker Change: I'd say with confidence that everyone across the company is working to become a fatality free and zero serious injuries company as quickly as possible.
Speaker Change: Secondly, our operations are performing well consistently.
Speaker Change: Together with our high graded portfolio. This is enabling our company to deliver resilient results in a higher margins underlying cash flow generation remains strong.
Speaker Change: At all points of the cycle, demonstrating the material transformation of us long itself.
Speaker Change: Actually our business is well positioned both operationally and financially to navigate.
Speaker Change: Market uncertainties without changing strategic course, our growth projects have good momentum and we will provide unique upside to us along with EBITDA and cash flow and.
Speaker Change: And our capital return policy that has enabled us to buyback 38% of the company over the last four and a half yes.
Speaker Change: Increased dividends per share by 85% over the same period is unchanged.
Speaker Change: With that said I will close today's call. If you need anything further please do reach out to Daniel and his team I look forward to speaking with you soon stay safe and keep those along you'll save as well. Thank you.
Speaker Change: Okay.
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Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: So.
Speaker Change:
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