Luxembourg, February 5, 2016 – ArcelorMittal (referred to as “ArcelorMittal” or the “Company”) (MT (New York, Amsterdam, Paris, Luxembourg), MTS (Madrid)), the world’s leading integrated steel and mining company, today announced results[i] for the three and twelve month periods ended December 31, 2015.
- Health and safety performance improved in FY 2015 with annual LTIF rate of 0.81x as compared to 0.85x in FY 2014
- FY 2015 EBITDA of $5.2 billion; EBITDA of $1.1 billion in 4Q 2015, 18.4% lower as compared with 3Q 2015
- FY 2015 net loss of $7.9 billion including $4.8 billion of impairments (primarily due to mining impairments) and $1.4 billion of exceptional charges (primarily related to the write-down of inventory following the rapid decline of international steel prices[ii])
- Excluding these exceptional and non-cash items, FY 2015 adjusted net loss was $0.3 billion as compared to adjusted net income of $0.4 billion in FY 2014
- Net debt lower at $15.7 billion as of December 31, 2015 as compared to $16.8 billion as of September 30, 2015; net debt was $0.1 billion lower as compared to December 31, 2014
- Liquidity stood at $10.1 billion as of December 31, 2015 as compared to $9.6 billion as of September 30, 2015
- Giving effect to the announced sale of ArcelorMittal’s stake in Gestamp for €875 million, liquidity would be $11.1 billion as of December 31, 2015 and net debt $14.7 billion
- FY 2015 steel shipments of 84.6Mt (-0.6% YoY); 4Q 2015 steel shipments of 19.7Mt down -6.8% versus 4Q 2014
- FY 2015 iron ore shipments of 62.4Mt (-2.0% YoY), of which 40.3Mt shipped at market prices (+1.4% YoY); 4Q 2015 iron ore shipments of 15.6Mt (-4.2% YoY), of which 9.9Mt shipped at market prices (-0.5% YoY)
- FY 2015 iron ore unit cash costs reduced by 20% YoY, exceeding the 15% target for 2015
Strategic progress in 2015:
The Company has continued to make progress on its strategic objectives during 2015, including:
- Europe: Continued focus on cost optimization and leveraging benefits of restructuring
- NAFTA: North American asset optimization underway; Calvert ramp up progressing well with automotive certifications ongoing and increased capacity utilisation
- ACIS: Capturing benefits of continued currency devaluation and overall good operational performance in CIS; good government cooperation, tariff support and renegotiation of iron ore supply agreement in South Africa
- Mining: Expanded mining volumes at ArcelorMittal Mines Canada (AMMC); FY 2015 iron ore production up +10.9% to 25.9Mt whilst further reducing mining cash costs (4Q 2015 AMMC concentrate FOB cash cost below $25/t)
- Further developed its automotive steel franchise including: investment approval to increase HRC and HDG capacity in Krakow, Poland; commercial automotive coils produced in VAMA, China; new product launches i.e. Fortiform® being used by selected car manufacturers; and S-in motion® roll out for pickup trucks
- Further reduced cash requirements: FY 2015 capex reduced to $2.7 billion from $3.7 billion in FY 2014; FY 2015 net interest reduced to $1.3 billion from $1.5 billion in FY 2014
- As a result, despite challenging market conditions, the Company was able to achieve its objective of making progress on net debt in 2015; net debt declined to its lowest level since the ArcelorMittal merger
Action 2020 plan:
The Company has today published details of its Action 2020 plan. The Action 2020 plan represents a strategic roadmap for each of ArcelorMittal’s main business segments. The Action 2020 plan is over and above the Company’s ongoing management gains plan and seeks to deliver real structural improvements unique to ArcelorMittal’s business. The Action 2020 plan targets a return to >$85/t EBITDA absent any recovery in steel spreads and raw materials prices from current levels. The Action 2020 plan targets a further structural EBITDA improvement of approximately $3.0 billion. Upon full achievement of the plan, the Company would expect to deliver free cash flow in excess of $2.0 billion annually.
Outlook and guidance:
As indicated at 3Q 2015 results, a combination of Company actions and known developments is expected to support EBITDA in 2016 by $1.0 billion relative to the 4Q 2015 annual run-rate level. Due to order book and the time lag required for lower raw material costs to positively impact cost of sales, EBITDA is expected to sequentially decline in 1Q 2016. Based on the assumption of prevailing raw material costs and spot steel spreads, the Company expects FY 2016 EBITDA to be in excess of $4.5 billion. This guidance does not capture any upside to current market conditions.
Reducing the cash requirements of the business:
The Company targets a reduction of the cash requirements of the business in 2016 by in excess of $1.0 billion as compared to 2015. The components of this reduction include:
- lower capex spend (FY 2016 capex is expected to be approximately $2.4 billion as compared to $2.7 billion in FY 2015);
- lower interest expenses (FY 2016 net interest is expected to be approximately $1.1 billion as compared to $1.3 billion in FY 2015);
- no dividend payment in respect of the 2015 financial year; and
- lower cash taxes.
As a result, the level of EBITDA required for free cash flow breakeven would reduce to $4.5 billion, thus helping to ensure that the Company continues to generate positive free cash flow, reduce net debt and maintain strong liquidity.
Financial highlights (on the basis of IFRS[i]):
|(USDm) unless otherwise shown||4Q 15||3Q 15||4Q 14||12M 15||12M 14|
|Operating (loss)/ income||(5,331)||20||569||(4,161)||3,034|
|Net loss attributable to equity holders of the parent||(6,686)||(711)||(955)||(7,946)||(1,086)|
|Basic loss per share (US$)||(3.72)||(0.40)||(0.53)||(4.43)||(0.61)|
|Own iron ore production (Mt)||15.5||15.4||16.7||62.8||63.9|
|Iron ore shipped at market price (Mt)||9.9||10.3||9.9||40.3||39.8|
|Crude steel production (Mt)||21.6||23.1||23.2||92.5||93.1|
|Steel shipments (Mt)||19.7||21.1||21.2||84.6||85.1|
|Steel-only EBITDA/tonne (US$/t)||51||57||75||56||69|
Commenting, Mr. Lakshmi N. Mittal, ArcelorMittal Chairman and CEO, said:
“2015 was a very difficult year for the steel and mining industries. Although demand in our core markets remained strong, prices deteriorated significantly during the year as a result of excess capacity in China. Throughout the year we have rigorously focused on implementing a series of measures aimed at reducing costs and ensuring the business is adapted for these tough market conditions. As a result of these measures we succeeded in ending the year with net debt slightly below the end of 2014 despite significantly lower EBITDA.
“Regrettably we have announced a disappointing net loss which includes non-cash impairment charges on our mining assets as a result of the very considerable fall in the iron-ore price. Our mining business is fully focused on adapting to this low price environment and has reduced cash costs by 20% compared with an initial target of 15%. A further 10% is targeted for 2016.
“Looking ahead, although we have started to see a recovery in Chinese steel spreads from 2015 lows, 2016 will be another difficult year for our industries. It is clear that China has a challenge to restructure its steel industry for a lower growth economy but we are somewhat encouraged by recent comments concerning capacity closures. Until this situation is fully addressed the effective and swift implementation of trade defence instruments will be critical and we expect to see more positive rulings in this regard during the year.
“Our priority is to ensure we deliver on our financial targets and strategic projects. We have today announced a new strategic plan for the period to 2020 following a detailed analysis of performance improvement potential across the group. “Action 2020” sets out specific targets for each business segment which combined aim to achieve a further $3.0 billion of EBITDA improvement potential and enable the business to generate $2.0 billion of annual free cash flow.
“Reducing net debt remains an important priority and given market conditions it is prudent to take proactive steps to accelerate progress. We have today announced the sale of our minority shareholding in Gestamp, and are taking further steps to reduce net debt.
“In conclusion, there is no doubt these are challenging times but we are confident that ArcelorMittal is taking all the right actions and has the right assets, the right strategy and the right balance sheet to deliver on the targets identified and cement our position as the world’s leading steel company.”
[i]The financial information in this press release has been prepared consistently with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The interim financial information included in this announcement has been also prepared in accordance with IFRS applicable to interim periods, however this announcement does not contain sufficient information to constitute an interim financial report as defined in International Accounting Standards 34, “Interim Financial Reporting”. The numbers in this press release have not been audited. The financial information and certain other information presented in a number of tables in this press release have been rounded to the nearest whole number or the nearest decimal. Therefore, the sum of the numbers in a column may not conform exactly to the total figure given for that column. In addition, certain percentages presented in the tables in this press release reflect calculations based upon the underlying information prior to rounding and, accordingly, may not conform exactly to the percentages that would be derived if the relevant calculations were based upon the rounded numbers. This press release also includes certain non-GAAP financial measures.
[ii]The exceptional charge of $909 million in 4Q 2015 relates to write-down of inventory following the rapid decline of international steel prices. The Company tested the recoverability of its inventories by comparing the production cost with the estimated selling prices for finished goods. Inventories under work in progress and raw materials were similarly tested after estimating the completion costs. Net realizable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated costs necessary to complete the sale. The exceptional charge of $527 million in 3Q 2015 includes $27 million of retrenchment costs in South Africa as well as $0.5 billion related to such write-down of inventory.