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ArcelorMittal SA Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- The company is in a competitive position in its business regarding its cost base.
- The company returned $1.7 billion to shareholders, including the repurchase of 6% of its outstanding shares and invested a net $0.6 billion in M&A, including its 28% stake in Vallourec.
- The company is pleased with the performance of its European business given the current market conditions.
- The company is focused on returning capital to shareholders and has done an excellent job in that over the last few years.
- The company has a unique exposure to India and a reputation for quality and innovation that is unmatched by any of its peers.
- The company has been losing cash since the invasion.
- The company sees similar issues in the United States.
- The company saw a very significant FX volatility during Q4.
- The company has a lack of experience in doing large-scale projects in Europe.
- The company expects volumes to improve, especially in Liberia and another strong performance in Mines Canada.
- The company expects about $100 million of EBITDA contribution from these projects.
- The company expects shipments to be higher.
- The company expects some positive volume pickup in Europe.
- The company is confident to continue to generate positive cash flow this year and beyond.
Q&A Highlights from ArcelorMittal SA Earnings Call Q4 2024
- Analyst asked about the increase in EBITDA potential from 15 million tonnes of volume in Liberia.
- The company's management explained that the increase in EBITDA potential is due to the cost savings from the new electric furnace and hot strip mill, which are expected to be game-changing and have a good cost base. Additionally, the company is looking at a second EAF, which is not expected to materially delay the first EAF. The company's focus remains to keep the overall CapEx envelope between $4.5 billion to $5 billion, and they have the ability to modify where they spend their CapEx. The company also mentioned that they have not changed their long-term assumptions of iron ore and they remain conservative, especially compared to spot today.
- The company's management explained that the increase in EBITDA potential is due to the cost savings from the new electric furnace and hot strip mill, which are expected to be game-changing and have a good cost base. Additionally, the company is looking at a second EAF, which is not expected to materially delay the first EAF. The company's focus remains to keep the overall CapEx envelope between $4.5 billion to $5 billion, and they have the ability to modify where they spend their CapEx. The company also mentioned that they have not changed their long-term assumptions of iron ore and they remain conservative, especially compared to spot today.
- Analyst asked about the volume numbers for Dofasco and the US and any volume numbers from Europe or Brazil.
- The company's management said that they cannot provide volume numbers for Dofasco and the US, but they can provide color on the volume requirements. They mentioned that the market for non-grain-oriented electrical steel, NOES, is in deficit and a significant amount of the supply is through imports. The market continues to grow and the company expects to cater to the demand for both electrical cars and hybrids. The company also mentioned that there are some announcements of new capacity, but the capability of that capacity to deliver high-quality premium automotive material is much shorter than the overall market situation.
- The company's management said that they cannot provide volume numbers for Dofasco and the US, but they can provide color on the volume requirements. They mentioned that the market for non-grain-oriented electrical steel, NOES, is in deficit and a significant amount of the supply is through imports. The market continues to grow and the company expects to cater to the demand for both electrical cars and hybrids. The company also mentioned that there are some announcements of new capacity, but the capability of that capacity to deliver high-quality premium automotive material is much shorter than the overall market situation.
- Analyst asked about the market for non-grain-oriented electrical steel, NOES, and how the company sees it growing in the coming years.
- The company's management mentioned that the market for non-grain-oriented electrical steel is expected to grow due to the increasing demand for electrical cars and hybrids. They also mentioned that the company has a unique product offering with a very high-quality capability and the market is there for their product.
- The company's management mentioned that the market for non-grain-oriented electrical steel is expected to grow due to the increasing demand for electrical cars and hybrids. They also mentioned that the company has a unique product offering with a very high-quality capability and the market is there for their product.
- Analyst asked about the cost impact of the flows from Canada and Mexico into the US and vice versa.
- The company's management reconfirmed the cost impact that they saw back in 2018, which was a $100 million. They also mentioned that the flows today are similar to what they were in 2018, and that they will see what
- The company's management reconfirmed the cost impact that they saw back in 2018, which was a $100 million. They also mentioned that the flows today are similar to what they were in 2018, and that they will see what
- Analyst asked about the total CapEx of $1.2 billion, including the cold rolling mills and other equipment, and asked for an explanation of the capacity of the other equipment and the rationale behind the investment.
- Aditya Mittal explained that the investment is for an electrical steel line in the US, which is a greenfield site, requiring full construction of the facility. The line has more capability than the one in Europe and is needed due to the US market's move to higher grades for SUVs. Construction costs, manpower costs, steel costs, and other costs are higher in the US than in Europe.
- Aditya Mittal explained that the investment is for an electrical steel line in the US, which is a greenfield site, requiring full construction of the facility. The line has more capability than the one in Europe and is needed due to the US market's move to higher grades for SUVs. Construction costs, manpower costs, steel costs, and other costs are higher in the US than in Europe.
- Analyst asked about the expected timeline for the full capacity ramp-up of the Calvert EAF facility.
- The company anticipates a full ramp-up of the Calvert EAF facility within 12 months from the current date.
- The company anticipates a full ramp-up of the Calvert EAF facility within 12 months from the current date.
- Analyst asked about the impact of FX volatility on the company's business in Brazil.
- The company sees a positive impact on its business due to the depreciation of the Brazilian real against the dollar. The cost base in dollars goes down, and the company's revenues adjust to the new exchange rates, making the business more profitable in the medium- to long-term.
- The company sees a positive impact on its business due to the depreciation of the Brazilian real against the dollar. The cost base in dollars goes down, and the company's revenues adjust to the new exchange rates, making the business more profitable in the medium- to long-term.
- Analyst asked about the factors contributing to the company's strong cost performance in Europe.
- The company attributed its strong cost performance to a significant improvement in production numbers compared to the previous year, and a good performance in terms of fixed costs, which supported its results in quarter four and the whole of 2024.
- The company attributed its strong cost performance to a significant improvement in production numbers compared to the previous year, and a good performance in terms of fixed costs, which supported its results in quarter four and the whole of 2024.
- Analyst asked about the current trends in the Indian market and what positives or negatives the company sees for 2025.
- The company sees a strong foundation in India with high-quality assets, engaged and committed teams, and world-class facilities. They are investing upstream in iron ore capability, pellet plants, and downstream automotive facilities. The company is confident that appropriate safeguard action will be taken by the government to support growth, as the Indian government has a clear strategic direction towards self-reliance.
- The company sees a strong foundation in India with high-quality assets, engaged and committed teams, and world-class facilities. They are investing upstream in iron ore capability, pellet plants, and downstream automotive facilities. The company is confident that appropriate safeguard action will be taken by the government to support growth, as the Indian government has a clear strategic direction towards self-reliance.
- Analyst asked about the company's plans in Canada and whether they see the situation as sufficiently supportive to continue with their decarbonization expenses.
- The company is progressing with their decarb plans in Europe, with an electric furnace coming on stream in Gijón and furnaces being revamped in Sestao. They are waiting for appropriate regulatory framework to continue on decarbonizing their European business. The company is cognizant of the CapEx envelope and expects to stay within it. They are also waiting for clarity on the regulatory environment in Canada, which is connected to the United States and the upcoming elections in 2025.
- The company is progressing with their decarb plans in Europe, with an electric furnace coming on stream in Gijón and furnaces being revamped in Sestao. They are waiting for appropriate regulatory framework to continue on decarbonizing their European business. The company is cognizant of the CapEx envelope and expects to stay within it. They are also waiting for clarity on the regulatory environment in Canada, which is connected to the United States and the upcoming elections in 2025.