ArcelorMittal Q1 2025 Earnings Report

ArcelorMittal EPS Results

• Actual EPS: $1.04
• Consensus EPS: $0.71
• Beat/Miss: Beat by +$0.33
• One Year Ago EPS: $1.16

ArcelorMittal Revenue Results

• Actual Revenue: $14.80 billion
• Expected Revenue: $15.11 billion
• Beat/Miss: Missed by -$308.62 million
• YoY Revenue Growth: -9.10%

ArcelorMittal Announcement Details

• Quarter: Q1 2025
• Date: 4/30/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, April 30, 2025
• Conference Call Time: 9:30AM ET

ArcelorMittal (NYSE:MT), together with its subsidiaries, operates as integrated steel and mining companies in the United States, Europe, and internationally. It offers semi-finished flat products, including slabs; finished flat products comprising plates, hot- and cold-rolled coils and sheets, hot-dipped and electro-galvanized coils and sheets, tinplate, and color coated coils and sheets; semi-finished long products, such as blooms and billets; finished long products consisting of bars, wire-rods, structural sections, rails, sheet piles, and wire-products; and seamless and welded pipes and tubes. The company also provides mining products, such as iron ore lumps, fines, concentrates, pellets, and sinter feeds; and coking coal. It sells its products to various customers in the automotive, appliance, engineering, construction, energy, and machinery industries through a centralized marketing organization, as well as distributors. The company has iron ore mining activities in Brazil, Bosnia, Canada, Liberia, Mexico, South Africa, and Ukraine. ArcelorMittal S.A. was founded in 1976 and is headquartered in Luxembourg City, Luxembourg.

ArcelorMittal Q1 2025 Earnings Call Transcript

Presentation

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

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 first quarter twenty twenty five. Leading today's call will be our Group CFO, Mr. Gemino Cristino.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Before we begin, I would like to mention a few housekeeping items. As usual, we will not be going through the results presentation, which was published this morning on our website. However, I would like to draw your attention to the disclaimers on slide number 19 of that presentation. As normal, Shemrina will make some opening remarks before we move directly to the Q and A session. So the idea is that the call will last forty, forty five minutes.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

So if you would like to join the queue to ask a question, please do press star one one on your telephone keypad. Over to you, Gemini.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Thanks, Daniel, and welcome, everyone, and thanks for joining today's call. As usual, I will keep my remarks brief. I want to focus this quarter on three key points, beginning with safety, which remains paramount for our company. We are now in the implementation phase of the recommendations of the safety audit we completed last year, and early progress has been encouraging. We anticipate that our journey to zero could take three years.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

The first year will be about setting the foundations for transformational change across the whole group. Years two and three will be about embedding this change and ensure consistency, discipline, and results in every region. I can say with confidence that everyone across the company is working to become a fatality free and zero serious injuries company as quickly as possible. Moving now to the financial performance, I want to highlight our strong operational performance and cash flows. Our operations are performing well and they are performing consistently.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

The standout this quarter was our mining segment. Liberia achieved records for both production and shipments, And this is before the ramp up of new capacity. In Europe, our mills are operating consistently across the cycle, and this is supporting good cost performance. In North America, having resolved the issues that impacted production last year in Mexico, this segment is now back to normalized operating levels. Our consistent operational performance has supported also resilient financial performance in a low cycle price environment.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

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, Assalamu Mittal is a transformed company. 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 demonstrated over the recent quarters with structurally higher margins and greater earnings resilience. Moving to cash flows, the first quarter always sees investments in working capital and this year has been no different.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

But excluding the seasonal working capital investment and our discretionary growth CapEx, the underlying free cash flow for the quarter was around $700,000,000 This shows that even at the bottom of the cycle, we are generating good levels of cash flows. That gives us confidence to invest to support our strategic priorities, as well as consistently return capital to shareholders. Lastly, I will touch on tariffs and the outlook. We are supportive of our efforts to address the excess capacity in the global steel industry and the unfair trade practices that result from it. As we said last quarter, we expect the impacts of Section two thirty two tariffs on our North America business to be largely neutral.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

But on the positive side, we are seeing other regions respond also. Europe has strengthened its safeguards. India has introduced new safeguards. Ultimately, ASEAL Amitav is well positioned to benefit from the continued push to create a level playing field in terms of trade. On the outlook, we said last quarter that the impact of Section two thirty two tariffs on our North American business should be broadly neutral.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

And including the benefits of higher prices to our coverage joint venture, this remains our expectation. Encouragingly, EU spreads have recovered from unsustainably low levels, and this will be a strong support for results near term. As a result, Q2 EBITDA should be clearly better than the first quarter. What is more uncertainty is the impact of tariffs will have on demand. Customers clearly are asking themselves the same question.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

What I can say today is that our order book remains healthy, but this is a risk that we are monitoring very closely and our business are prepared to adapt as necessary. So to conclude my opening remarks, Solomitro is in a strong position both operationally and financially. Despite the macro uncertainties, we will be maintaining our strategic course, delivering our strategic growth agenda, while simultaneously returning capital to our shareholders. Our growth projects have good momentum. The investments we have made we have been making for the past three years will contribute to structurally higher EBITDA, 200,000,000.0 of which is expected to be captured over the next few years.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

The Iberia expansion project is on track and on budget. The commissioning of the new state of the art EAF at Calvert is underway, and the development of our unique exposure to India is progressing to schedule with the Phase I expansion at Hazira on schedule. Our clearly defined capital return policy is working well and will continue. We have initiated a new long term share buyback program through 2013. Returning capital to shareholders at the bottom of the cycle, while continuing to invest in growth is clear evidence of the progress Acevedo has made and demonstrates that our company can deliver value through all aspects of the steel cycle.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

With that, Daniel, I believe we can go to Q and As.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Great. Thank you, Gemino. We have a queue developing already, but just let me reiterate those instructions. If you'd like to ask a question, please do press 11 on your telephone keypad. So we will take the first question from Alain at Morgan Stanley.

[Alain Gabriel, Analyst at Morgan Stanley]

Thanks. Good afternoon, everyone. Hi. Thank you. A couple of questions.

[Alain Gabriel, Analyst at Morgan Stanley]

Firstly, Genoine, on the 2Q twenty five, you said you expect EBITDA to be clearly higher on Q. Do you mind giving us the usual building blocks by division for the second quarter? And have you seen the full benefit of falling met coal prices? Or do lags suggest that we have to wait until Q3 before seeing the full benefit? That's my first question.

[Alain Gabriel, Analyst at Morgan Stanley]

Thanks.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Yeah. Hi, Alon. So, yeah. So I believe that in Q2, as I said, what is really encouraging is what we saw during developing during the first quarter, right? So we saw trade actions in Europe.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

We saw spreads recovering nicely, I would say. And as we were saying, the level of spreads in Europe were extremely weak in the second half of last year, beginning of this year, recovering nicely during the quarter. So that will provide strong support to our results in quarter two. I will let Daniel to walk you through the moving parts that we usually do, but that's going to be a strong support. And in terms of COVID, mean, as you know, because of the weighted average cost that we have, we are still working through the high cost that we had still at the beginning of twenty twenty, 'twenty four, the first half of 'twenty four.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

So we are still there are still some of that that we are working through. So we'll continue to see some support, some core support, but I would say that is more modest. So Daniel, do you want to cover the moving parts?

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Yeah, sure, Jermina. I think to focus your attention on the key themes for the second quarter, as Jermina said, will support the results in the second quarter relative to the first quarter. And so I think the key themes will be higher volumes and there I'm specifically talking about a seasonal recovery in Brazil and also higher volumes in Ukraine and then a positive price cost effect. And you'll really see that coming through in Europe given the dynamics that Gemino just talked about. So we've had some good momentum within Europe.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

We've had the new safeguards that's really helped to improve market sentiment and spreads have benefited from that sentiment. So we'll see a positive price cost effect in Europe and you should also expect some improved results in the Indian and JV section.

[Alain Gabriel, Analyst at Morgan Stanley]

Thank you. Thank you, Daniel. My second question is on North America. Do you know if the new automotive component exemption that have been recently announced from auto tariffs are applicable to steel? And on that question as well, on the tariff absorption in The U.

[Alain Gabriel, Analyst at Morgan Stanley]

S, do you absorb the tariff costs at the group level or is it at the culvert level? Thank you.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Yeah, Alan. So me so North America, so as we said last quarter, and I was covering my opening remarks, so we still believe that the impact of Section two thirty two TARRIS will be largely neutral, right? And the way for you to see that really will be to combine the results that you're going to see in our North American segment, plus the results of COVID that disclose separately, right? Regarding the tariffs on auto parts, I mean, our understanding is that there is no stacking. So that's our understanding.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

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 there to clarify what is really covered by that. But that's how we are seeing it right now.

[Alain Gabriel, Analyst at Morgan Stanley]

Thank you. Thank you very much.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Great. Thanks, Alain. So we'll move to the next question from Efraim at Citigroup. Hi, Efraim. Can you hear us?

[Ephrem Ravi, Managing Director at Citi]

Yes. I can. So the question is on sort of the new greenfield steel plant in India in the East Coast in Vishakhapadnam. The Indian press is quoting a timeline of 2029 for phase one and 2020 02/1933 for phase two. Appreciate it's early days with land acquisition being started, etcetera, but would those timelines quoted be realistic in our view given the challenges with greenfield in India?

[Ephrem Ravi, Managing Director at Citi]

And related to that, anything special from the government either in terms of facilitating against bottlenecks like land acquisition? And again, any special fiscal terms? And is the decision on the site kind of really driven by the fact that it's the end of the iron ore slurry pipeline, or or is there anything else there? Thank you.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Yeah. Hi. Hi, Efren. So this is, of course, a very exciting development for us, for the company. It opens really a new avenue for growth in India.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

So we're excited about that. But, of course, it's the early days. So we've working very closely with the government to have access to this piece of land. As you know, in India, this is extremely difficult. So it's a significant piece of land with access to the seafront.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

So it's really ideal. We have, we are going to be also closer to the customers in that part of the country, access to iron ore. As you said, we have the pipelines there, the slurry pipelines. So I think the setup is very good. But we where we are now at this stage is so we're going to be working now also to obtain the environmental licenses.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

And then of course, after that follows the normal engineering work. And I'm sure we're to have the opportunity to update you more as we progress. I think it's early days, but I think what is very good is the fact that we could obtain this plan.

[Ephrem Ravi, Managing Director at Citi]

Sorry. If I can have a quick follow-up question. I mean, you've taken the impairment on Mondelezade expansion, and you announced that not just you have not stopped the plan, but you've kind of canceled the the the project the expansion project. Can you give us some background as to why you've kind of canceled the project after being probably, what, 20% through

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Yeah. Well, I think what we are trying to do there, Ethan, is really we believe that so that project was on hold for a number of years. And as we embarked again on the engineering work, we saw that the causes would be too high and would be prohibitive. And the teams doing a good job exploring different optionalities, options to continue to develop the business in Brazil, so which should be more cost effective. So that's why I think it was a combination of the high cost and possibility that we have with the footprint that we have to come up with options that might be more cost efficient.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

And just to confirm that, to confirm that, Gemino, sorry. And and just to remind everybody that that was a decision taken last quarter. So that wasn't a new event, for for this first quarter. It was a a decision taken in q four, and and the impairment was taken in q four.

[Ephrem Ravi, Managing Director at Citi]

Yes. Thank you.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Great. So we'll move to the next question from Tom at Barclays. Hi, Tom. Please go ahead.

[Tom Zhang, Equity Research Analyst at Barclays Capital]

Hi, Assumi. Thanks for taking my questions. Two from me as well, please. The first one, just on North America. You I noticed you didn't talk too much about it around volumes or price cost.

[Tom Zhang, Equity Research Analyst at Barclays Capital]

I know there's a lot of moving parts around tariffs, but when you say the impact of Section two thirty two is going to be largely neutral to you, is that a guide or is that a comment towards earnings being quite stable in North America into Q2? Or are there other moving parts like Mexico domestic pricing, Canada domestic pricing, volumes? Any sort of your main main comments around those would be interesting.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Yeah. So maybe I can touch on that, Daniel can complement. But I think what we are seeing is that in terms of volumes, when we look at our order book, it remains quite healthy. Right? And that is across all our customers in North America.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

So order books are healthy. So our expectation is to see our average price is what you see reported also to move slightly up, not as much as you would expect S. Company because of course we also have operations in Canada and Mexico where prices have not really gone to the same levels as what we can see today in The U. S.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Right? So we have, we are guiding for volumes in North America to be stable, prices to be slightly up. But then you're going to see, of course, the impact of tariffs, right? So it's not so much in quarter one, but then we will have the full impact of tariffs in our results in quarter two. But then again, you will see offset an offset at the level of COVID.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

That's why we are guiding for you to really look at the business on a combined basis, look at NAFTA, but look also at COVID.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

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. So same message that we gave last quarter.

[Tom Zhang, Equity Research Analyst at Barclays Capital]

Understood. Thank you. And then the other question just on Europe. Let's see. There was this potential 600 job cuts in France and 1,400 total in Europe.

[Tom Zhang, Equity Research Analyst at Barclays Capital]

Can I just ask how this could potentially change your footprint? Is that all going to be finishing downstream? And does that mean anything for your upstream footprint in Europe? Because I know you've had a furnace basically idle for quite a while now in France. You've been juggling a little bit with maintenance, but it's clearly not been running at full utilization.

[Tom Zhang, Equity Research Analyst at Barclays Capital]

Do we expect a permanent idling? And are these are these cuts kind of linked at all to European, policy, right, around energy provision and effective CBAM trade defenses that I think you mentioned in the press release? Yeah. Are these job cuts at all linked to that? Thanks.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Yeah. Well, I would say that what we have encouraging in terms of the new action plan. So all the points that have been addressed, at least conceptually by the Commission, it's all very, very positive, I would say. The message on CBOM, trade, access to energy. So, and then of course, when you combine that with the actions that are already impacting us today, which is the strengthening of safeguards, the antidumping on some exporters.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

That's all good news, right? So now I think we are in a stage where we have to see the concrete actions linked to and execution of the Steel Action Plan. So we have no plans here to change. We are not looking at changing our footprint in Europe, so it all remains. And I think the momentum in Europe, I would say it's more positive than it was a couple of months ago.

[Tom Zhang, Equity Research Analyst at Barclays Capital]

Okay, clear. Thank you.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Great. Thanks, Tom. So we'll move now to a question from Matt at Goldman Sachs. Please go ahead,

[Matt Greene, Head of European Metals & Mining Equity Research at Goldman Sachs]

Hey. Good afternoon, guys. So just another one on Canada and Mexico and the auto tonnes heading into The U. S. You mentioned your order book is fine, but can you just confirm you've actually been able to move higher priced volumes into The U.

[Matt Greene, Head of European Metals & Mining Equity Research at Goldman Sachs]

S? And then just if that fully captured the duty? And just on the Trump tariff relief for auto, the auto industry, what are you hearing from your customers? And I'll follow-up with another question. Thanks.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Yeah, I would just say, Matt, that outflows, they have not changed. They continue to be exactly the same. And each contract, they have their own causes and conditions. What I would say to you is that we are of course honoring all these contracts. So in some cases, we are the import of records, we will pay the tariffs, in some other cases, our customers.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

So it really varies. So, but I think what is important is that given the quality of the assets we have in Canada, Mexico, US, So we are able to keep supplying the OEMs. So we are not seeing any change there. Right. And as I said, the order book remains good, healthy.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

And it's probably early days, right? But we, so what we are seeing right now, it's, I would say stable.

[Matt Greene, Head of European Metals & Mining Equity Research at Goldman Sachs]

That's great. Thanks, Gingerino. And then just on met coal, obviously, you've touched on this is helping on spreads, but we're seeing some miners get into a bit of distress. Would AustroMittal be open to acquiring high quality steelmaking coal production for future supply security?

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Ned, it's not something that is as you know, we don't really comment on MMA, and it's not something that is high on our agenda at this point.

[Matt Greene, Head of European Metals & Mining Equity Research at Goldman Sachs]

That's all for me. Thank you.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Great. Thanks, Matt. So we'll take the next question from Patrick at Bank of America. Please go ahead, Patrick.

[Patrick Mann, Vice President at Bank of America Merrill Lynch]

Thanks very much, and good day, Gianluino, Daniel. Maybe the first question, 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 85,000,000 shares over two years and now it's authorization for 85,000,000 shares, but this 10,000,000 shares tranche. Can you just talk us through kind of the thinking how and why it's changed effectively? Thanks.

[Patrick Mann, Vice President at Bank of America Merrill Lynch]

That's the first question.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Do you want to talk about it, Daniel?

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Yeah. Sure, Jeremy. So I think, look, fact is we've done nine separate share buybacks since we started the buyback programs in September of twenty twenty. So it's clear that our policy is clear and the application of our policy is also very clear.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

So we're extremely happy with what we've been able to achieve. We've been able to buy back 38 of the company at obviously attractive points of the cycle and at a good average price level. So like you say in your question, the policy is unchanged. We will continue to return a minimum 50% of post dividend cash flow to shareholders through the buybacks. But the idea is that we've now made this announcement.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

It's through 02/1930. We will execute the first tranche of 10,000,000 shares and then we'll start the next tranche of 10,000,000 shares straight after that. So you can kind of forget about that side of things and just look at the policy, look at your expectations for the business, the cash flow that we're going to generate and that should then form your expectations for how many shares we're going to be buying back. Hopefully that's clear.

[Patrick Mann, Vice President at Bank of America Merrill Lynch]

Yes, 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 3,500,000 tons from and obviously, it's picking up to 10,000,000 then going to capacity of 20,000,000. I mean, does that really only add $450,000,000 additional EBITDA?

[Patrick Mann, Vice President at Bank of America Merrill Lynch]

I mean if I look at the long term margins of the Mining division, it's sort of closer to 50% on EBITDA. And so sort of additional 16,500,000 tons, it kind of implying at current prices only about a $25.26 percent margin. So yes, I mean, you being conservative around pricing? Is it higher cost because of the concentrating or because of additional is there anything you know, any reason why it should be lower margin than the balance of your mining division effectively? Thanks.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Yeah. So first of all, think the project is going extremely well as we alluded to at the beginning, now opening remarks. So we are actually about to really start the first line, which is also quite exciting. And we are talking about here very high quality material, Patrick. So the four fifty million dollars that we have been quoting, I mean, that's really based on long term prices, right?

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

And that's, as we know, lower than what we have been enjoying in recent quarters. So in this $100 range. So the pocket is based on the long term prices, which is much lower. So to the extent that of course prices remain where they are, then we should be able to print higher results from Liberia. But there is no reason to assume that the quality of the material will be inferior.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

On the contrary, we believe that it's going to be a very high quality product. So we're very excited about that.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Yeah, it's quite transformational, isn't it Jim? You get the economies of scale at a much bigger operation and that largely neutralizes the cost of concentration and then we get a richer product and we'll be able to capture a richer price for that material in the market. So just to confirm what Jermina was saying, guidance that we've given for this project of $450,000,000 at capacity, that's very conservative. It's based on conservative long run pricing. But even based on that you can see the very attractive economics of the project and the good returns on the investment that we're making.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

But should prices hold anything like where they are today then there would be quite significant upside to that $450,000,000 number.

[Patrick Mann, Vice President at Bank of America Merrill Lynch]

Great. Thank you very much.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Great. Thank you. So we will move to the next question which should be from Cole at Jefferies. Hi Cole, please go ahead.

[Cole Hathorn, Senior Vice President- Equity Research Analyst at Jefferies Financial Group]

Afternoon. Thanks for taking the question. I'd just like some color on how you're seeing the European market developing here. I mean margins are looking a lot better into the second quarter. We've got a lot of safeguards.

[Cole Hathorn, Senior Vice President- Equity Research Analyst at Jefferies Financial Group]

How do you how are you looking at your mill system to either increase volumes if your order books remain healthy? And secondly, how do you think some of the players that have idle capacity or have some challenges at the moment might react to the more favorable spreads into the second quarter? Thank you.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Yeah. So what I would say is that I think in terms of demand in Europe, we have been discussing, And you have our forecast for this year, which remains unchanged, and we have a forecast of about neutral to about 2% increase. I think what is really helping and supporting the demand right now is the change that we talked about in terms of trade. So we started to see some reduction of imports, which is extremely positive. We will not see the full impact of the new trade actions until quarter three, because that's how that is a bit of a transition there.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

So our expectation is that imports will continue to trend down, of course to be seen, but that's our expectation, then domestic players to regain some market share that was lost with such exports from China and other countries. So that's very good. So we retain, of course, as part of our operations, the ability to regain market share, we are not constrained there. And regarding capacity that is idle, I would just say that giving DTS system in Europe, it's not so easy for people to bring back capacity because then they will incur very high CO2 costs as well. So that sounds just something to keep in the back of your mind.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

But of course, we cannot comment on what others will do. But I would say that what we can see right now is quite positive.

[Cole Hathorn, Senior Vice President- Equity Research Analyst at Jefferies Financial Group]

Thank you. And then maybe just following on that last point around the costs for CO2 to restart idle capacity. Have you heard anecdotally how competitors might be facing in kind of high yield debt markets just considering they're a little bit more challenging relating to potentially starting up some of that capacity? Will it be more challenging for them to get the financing and start up some of the capacity in your view?

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Well, I'm not gonna comment. We just said that there is a lot of volatility in the market, right? So the markets were kind of closed for high yield, but I think that's just temporary, of course. So I

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

think

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

that's a question that I'm afraid you're going to need to ask the other companies.

[Cole Hathorn, Senior Vice President- Equity Research Analyst at Jefferies Financial Group]

Okay, I understand. And then just following up on the comment around India and JV sequentially improving into the second quarter. The U. S. Market is clear considering the price dynamics with COVID, but would you mind just giving some color on the dynamics impacting the India JV with the safeguard actions for India?

[Cole Hathorn, Senior Vice President- Equity Research Analyst at Jefferies Financial Group]

Thank you.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Yeah. Well, India is I think the story there is really intact, right? We continue to see good growth. So, our parents' consumption forecast remains the same. So, we still expect a growth of about 7% this year.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

So, that's extremely good. And as we discussed, so we have the safeguards now in place from the April, which is supporting prices. We have already seen prices recovering from low levels that we had in quarter one. So that should support the results of our JV in India going to the second quarter. And as we have also pointed to you in our release, so Q1 we had some maintenance work, which is now completed.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

So we're going to be back to full operations. So that should support costs as well. So we are looking for an improvement in terms of profitability in India in quarter two. And more importantly, as we have been discussing, is the progress on the projects going well, on track, which is also quite encouraging. So, that's the dynamics in India that we are seeing right now.

[Cole Hathorn, Senior Vice President- Equity Research Analyst at Jefferies Financial Group]

Thank you.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Great. Thanks, Carl. So, we will move to the next question now, which we'll take from Boris at Kepler Cheuvreux. Hi, Please go ahead.

[Boris Bourdet, Equity Research Analyst at Kepler Cheuvreux]

Hello. Can you hear me?

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Yes, we can. Hi, Boris.

[Boris Bourdet, Equity Research Analyst at Kepler Cheuvreux]

Yes. Perfect.

[Boris Bourdet, Equity Research Analyst at Kepler Cheuvreux]

Thank you for taking my questions. The first one is on the free cash flow. So the press release reads that you remain positive for free cash flow with a stable CapEx envelope, the incremental contribution from the strategic projects and some working capital optimization. Can you bring some details on working cap just to help us in the modeling part? And second question is on China.

[Boris Bourdet, Equity Research Analyst at Kepler Cheuvreux]

China has been under pressure for some time now. Do you do you see do you have any good reasons to expect some stimulus? What's your view on that market where we have heard about potential production cuts?

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Yes. So Boris, in terms of the working capital, we are keeping message of the previous quarter as well. No change there. I mean, of course, the investment that you see in quarter one is seasonal. I mean, it happens every year.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

And our expectation is that for full year, we should still see there are moving parts, but we should still see some release. But it's always difficult to be precise because there are of course many moving parts and a lot will depend on what happens really in the last couple of months of the year. But because of actions, like we will have a relying of a furnace in France in the second quarter, we built slabs for that. So we'll be working through that. And as we also discussed at the very beginning of the call, still some high costs coming from the first half of twenty twenty four because of the weighted average cost.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

So we still believe that all in all, we will be in a position to release working capital this year, which is, of course, supportive of free cash flows. Should not forget that Liberia, the expansion is the second half primarily, right, even though the performance in quarter one was really outstanding. But it's a second half event, so we'll support results in the second half. So that's why we feel comfortable and confident that the group will be generating free cash this year.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Perhaps I can take the question on China. So, the demand situation in China continues to be challenging and we continue to see very weak spreads and elevated from China. So there is a lot of talk of incremental stimulus in reaction to everything that's going on at the moment and hopefully that will come. Hopefully that will be oriented towards more steel intensive parts of the economy so that it can have the maximum impact on steel consumption. But you know that's all uncertain and that's why we continue our strong efforts and lobbying efforts within all of the countries that we are operating to make sure that our businesses and our industries are appropriately protected from those risks of excess capacity in China.

[Boris Bourdet, Equity Research Analyst at Kepler Cheuvreux]

As a follow-up on that, do you expect what kind of further measures can we expect in Europe?

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Well, I think as we discussed, I think there is a lot of good news in Europe. We've still plan and just announced. I think that is a lot that will be announced as we move forward. I think what's going to be very important for us is the new trade actions because as we know the safeguards comes to an end next year. So this is an important piece of the whole puzzle.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

So this is coming in summer. CBIMB, I think there is a lot that will be worked out in Europe in the second part of the year. I think what is really encouraging is that now it's clear that there is a good understanding of the challenges that we face in Europe, that the industry is facing Europe, right? And that's always very critical. So once we are all speaking the same language, we all understand the issues, then we can work together to resolve them.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

And so I think that's what is encouraging about everything that has been published. And as I said, I think now we want to see the detailed plans and implementation.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Great. Thanks, Boris. So we'll move to the next question, which we will take from Bastian at Deutsche Bank. So hi, Bastian. Please go ahead.

[Bastian Synagowitz, Equity Research - Global Coordinator at Deutsche Bank]

Yeah. Good afternoon. Thanks for taking my questions. I've got two questions left actually. The first one is just on the JVs business and actually, Karl, that specifically initially on the start up of the Niue EF.

[Bastian Synagowitz, Equity Research - Global Coordinator at Deutsche Bank]

From what I understand, I think you will start actual production shortly. Is there a broad volume target or production target you could maybe share with us for this year? And then secondly, you spent a lot of time talking about the tariff impact on naphtha, but I think there's another 1,500,000 to 2,000,000 tonnes of slab supply from Brazil into Calvert as well. I think you did around 5,000,000 tons of shipments in the first quarter. So will the cost for these for the tariffs on these will be take will that be taken in Calvert or in the Brazilian segment?

[Bastian Synagowitz, Equity Research - Global Coordinator at Deutsche Bank]

And also, have you been able to build any slab inventory ahead of the tariffs? So maybe you can help us on the current inventory runway there in COVID. Those are my questions.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Yes. So we are not giving you're right. That we are now in the process of commissioning the AF, which is also extremely important for our business in North America, particularly now everything that we just talked about trade. So that's very timely. We're not giving a target for this in terms of production.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

What I would say is that we our expectation is that it should take us about twelve months to be at full run rate. So, I would expect that by the end of the year, we should be at a very high level of run rate already. And then of course, in parallel, we start the certification, the homologation process with customers. So this is a process that we will be running in parallel. And regarding these labs, you're right.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

So of course, we are importing these labs into The United States for COVID. But I would point to two points. One is that we have seen a decline in slab prices. So COVID will be, of course, paying the cost of the tariffs for the imported slabs. So you're going to see that as part of the COVID performance, not in Brazil, COVID.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

But despite that, given how quickly prices moved in The United States, it will more than offset that. It will help also to offset some of the causes that we talked about we will incur in Canada.

[Bastian Synagowitz, Equity Research - Global Coordinator at Deutsche Bank]

Understood. So basically bottom line, no real impact on the Brazilian business itself from that, from what you say?

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

No. That's right.

[Bastian Synagowitz, Equity Research - Global Coordinator at Deutsche Bank]

Understood. Okay. And then maybe just coming back to the EAS setup. Just checking in, I mean, this is the startup of the EAS itself. Is it going is that going according to plan and timeline?

[Bastian Synagowitz, Equity Research - Global Coordinator at Deutsche Bank]

And so I think you started to ramp it up late last year. So but I guess the twelve months you're referring to, I guess, is probably starting basically with the first melting process. Is that correct? I like, whenever you start the melting, it's basically twelve months from then?

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Yeah. I think that's that's that's a good reference, Basia. So right now, we are going through testing all the equipments. Right? And then you put it all together.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

You have the first slab, which we are anticipating by the end of second quarter. And then from there, you start counting the ramp up. That's how it works.

[Bastian Synagowitz, Equity Research - Global Coordinator at Deutsche Bank]

Got you. Okay. Thank you.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Great. Thanks, Sebastian. So I think we're gonna have time for just a few more questions, Jeremy knows. So the first of those we will take from Max at ODDO. Oh, actually, I'm mistaken.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Sorry, looking at my screen. It's actually Tristan at BNP Paribas Exant. Hi, Tristan. Please go ahead.

[Tristan Gresser, Head of Steel equity Research at BNP Paribas]

Hey, hi, thank you. Thanks for taking my questions. First on the CapEx, you mentioned that any de carbon investment would fit within your $4,500,000,000.05000000000 dollars CapEx envelope, But if you move forward with all your projects, your IES projects in Europe, in France, Spain, Germany, Belgium, it really feels difficult to see how it would fit and you would not go above EUR 5,000,000,000. So I was just wondering how we should look at this 5,000,000,000. Is that a hard target?

[Tristan Gresser, Head of Steel equity Research at BNP Paribas]

Is it a bit like your 50% plus dividend free cash flow target? Is that the way to think about it?

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Tristan, as you can imagine, I mean, these are very large projects, right? So and we're not going to do it all at the same time. So this will happen gradually. We should not forget that the transformation, right, to this new green steel is going to take the case. Right?

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

And so you should expect that this will, once a week, can see that we have the right conditions, the right policies as we have been talking about, and we have been very vocal about it. Once we have that in place, so then we're going to be in a position then to start investments, but that should happen gradually. And that's why we feel confident that we should be able to accommodate that within the existing envelopes that we have been using now for couple of years.

[Tristan Gresser, Head of Steel equity Research at BNP Paribas]

Alright. And and could there be upside as well to to subsidies? I think the the action plans also refers to to additional help. Is is that something you can expect?

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Well, I think that's going to be part of the dialogue with the with the governments. I I think, as as I said, the fact that that if you could understand some of the issues that we are facing in Europe, so we are encouraged by that, and 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.

[Tristan Gresser, Head of Steel equity Research at BNP Paribas]

Okay. That's clear. And a quick question just also on Calvert. There is a new SPIUS process ongoing regarding the acquisition of USTL by Nippon Steel. If the new US administration clears the deal on national security grounds but does not see an antitrust issue, could Nipun see a walk back from the agreement of selling the 50% stake to you?

[Tristan Gresser, Head of Steel equity Research at BNP Paribas]

I'm just trying to understand if this is kind of a black or white scenario or if there is some gray as well.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Tristan, I I will not speculate on that. I think let's wait and see what finally happens with that deal. So let let us see. I don't think we have much to add to that. You know the terms that have been agreed.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

So let's just wait and see what is the final conclusion of the review by CPS. There is a new review ongoing. That's my understanding reading the news. So we will wait to see what happens there.

[Tristan Gresser, Head of Steel equity Research at BNP Paribas]

All right.

[Tristan Gresser, Head of Steel equity Research at BNP Paribas]

Thank you.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Great. Thank you, Tristan. So we will have the next question will be from Max at OTO. Please go ahead.

[Maxime Kogge, Equity Analyst at ODDO BHF]

Yeah. Good afternoon, both of you. Yes. So so my first question is on on defense because this is a theme that has grown in importance for for for investors in in recent weeks, in recent months. And could you talk us through your own defense exposure?

[Maxime Kogge, Equity Analyst at ODDO BHF]

My understanding is that you sell some heavy plates when the steel is the only segment where you're active or is there anything else we should be aware of?

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

You want to talk about it Daniel?

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Yeah, sure. So, I think we have touched on this a little bit in a lot of recent meetings. So, yes, industrial is the sort of focus point of our defense exposure. They do have leading market positions. I think when we think about defense, it isn't a big steel consumer.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

So when you compare the focus on defense versus bill, then clearly the German infrastructure bill will be much more impactful for steel demand over the medium to long term. However, I think the focus on defense is indicative of this sort of renewed focus at Europe and at the commission level that we need to be able to defend ourselves. And in order to be able to defend ourselves, need to have strong healthy steel industries to be able to supply that material. So I think for us that would be the biggest takeaway that it's just indicative of this broader move at Europe and at the commission level to think more strategically about domestic industries.

[Maxime Kogge, Equity Analyst at ODDO BHF]

Okay. Okay. Clear. And second question is on decarbonization agenda. So you've highlighted a number of positive changes in Europe over recent months, and yet you haven't reactivated your plans to decarbonize in Europe.

[Maxime Kogge, Equity Analyst at ODDO BHF]

So what would be really the major triggers for you to envisage to really reactivate these plans? Would it be a much higher energy cost? Would it be confirmation that the safeguard system will be replaced by a new one that is at least as effective? Is it introduction of the melt and port rule? What step do you see as critical for you to resume these investments?

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Must say maybe I'll take this one. Think it's kind of all of the above, right? So you touched on a number of important points on the safeguards. Our hope is that the Commission will go even a step further. As you know, domestic meals lost a lot of market share to imports, and we would really welcome measures that would take us or take the market share of imports back to prior levels.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

So it's still a long way to go there. Then CBOM, of course, it's quite important, right? And then access to energy, competitive energy as well. So I would, for now, just list these three. And melted in pool, as we know, is also quite effective.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

It's also something that we would welcome because then you can really make sure that you are avoiding circumventions, and that's quite good. So I will leave at that. Back to you, Daniel.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Great. Thanks, Jim. So we have time, I think, for one last question, which we're going to take from Andrew at UBS. Hi, Please go ahead.

[Andrew Jones, Analyst at UBS Group]

Hi. Can you hear me okay?

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Yes.

[Andrew Jones, Analyst at UBS Group]

Good. Good. It's actually, a follow-up to the to the last question, to some extent. I mean, one thing that I and I was encouraged by the state action plan, but one thing I'm 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 in many of the countries around Europe. I mean, from your perspective, what can actually be achieved through the steel action plan from changes of regulation could actually make a difference to that?

[Andrew Jones, Analyst at UBS Group]

Because ultimately, if you're going to make these investments in green steel, that's the key building block. So I mean, do you see any material change that could come from this, which is going to impact upon your ability to make those investments?

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Andrew, I think I'm not so sure that I follow 100% of your question and the link you were trying to establish. But I think as we just discussed, I think the if with the steel action plan, we can address some of these fundamental issues such as the very high level of imports. And as we know, it's just not the level of imports. It's just that it's extremely unfair, right, with the domestic mills because domestic mills are paying for the higher CO2 costs than nobody else is paying. Of course, we have also the situation in China with extremely low prices that it's very hard to rationalize, to defend.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Right? So it's really the competition is today for the European mills, clearly it's extremely unfair. So to the extent that we can address that, that will really be extremely supportive, right? Even demand remains where it is, if we can just allow the domestic mules to recover some market share loss, that would be extremely positive. We should see that as an increase in apparent steel consumption for the domestic mules, right?

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

So that should be quite important. And then of course we have the energy discussion, which continues to be an issue. So power prices across Europe continue to be elevated. And if you want to go through this transition and we want to have more EIS, we will need to have better transmission lines. We will need to have access to more competitive prices.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

And all of that is actually, to some extent, it's covered by the selection plan that was announced. But again, as we discussed, the key point will really be now the details and implementation.

[Andrew Jones, Analyst at UBS Group]

I guess just to follow-up to that. Mean, question was more on what can the action plan actually deliver in terms of tangible reductions in energy costs because maybe some help on transmission might make a small change, but ultimately, does it make enough of a change? And given your global footprint, does a model of maybe doing the iron making outside Europe where power costs are just naturally lower and importing in potentially make more sense. And how do you think about that?

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Yeah. I think you're right. So what what governments can do, and this is also part of part of the plan is allowing, as as an example, contracts for difference, which should then address some of the structural issues. Right? So contracts for difference, facilitating access to PPAs.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

So there are measures that governments in Europe can take today to provide the local meals competitive price. Right? Your question is, do we do it in Europe? Do we do it outside of Europe? I think that is something to be seen, right?

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

I think we have really to first see really what comes out concretely from the plan. And then we're going to be in a position to decide. I think AcelorMittal is well positioned because we have, of course, our footprint in different locations. Texas is a good example, right? So we have our DRI plant there.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

We have the possibility to expand. We have access then to gas. So we'll have the option. But at this point, I think it's early. So we just need to really understand concretely the change, and then we're going to be in a position to take a call on it.

[Andrew Jones, Analyst at UBS Group]

No, that's great. Thank you very much.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

You're on mute, Daniel.

[Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance at ArcelorMittal]

Thank you, Jeremy. So that's our last question. So with that, I will hand back to you for closing remarks. Thank you.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Thank you, Daniel, and thank you everyone. Before we close, I want to reiterate my messages from the beginning of the call. Firstly, I say with confidence that everyone across the company is working to become a fatality free and zero serious injuries company as quickly as possible. Secondly, our operations are performing well consistently. Together with our high graded portfolio, this is enabling our company to deliver resilient results in a high margins.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

Underlying cash flow generation remains strong at all points of the cycle, demonstrating the material transformation of us along with no. Lastly, our business is well positioned both operationally and financially to navigate market uncertainties without changing strategic course. Our growth projects have good momentum and will provide unique up upside to AccelorMittal's EBITDA and cash flow. And our capital return policy that has enabled us to buy back 38% of the company over the last four point five years and increase dividends per share by 85% over the same period is unchanged. With that said, I will close today's call.

[Genuino Christino, Executive VP & CFO at ArcelorMittal]

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 around you safe as well. Thank you.

Participants

Executives

• Daniel Fairclough, Head of Investor Relations & VP of Corporate Finance
• Genuino Christino, Executive VP & CFO

Analysts

• Alain Gabriel, Analyst at Morgan Stanley
• Ephrem Ravi, Managing Director at Citi
• Tom Zhang, Equity Research Analyst at Barclays Capital
• Matt Greene, Head of European Metals & Mining Equity Research at Goldman Sachs
• Patrick Mann, Vice President at Bank of America Merrill Lynch
• Cole Hathorn, Senior Vice President- Equity Research Analyst at Jefferies Financial Group
• Boris Bourdet, Equity Research Analyst at Kepler Cheuvreux
• Bastian Synagowitz, Equity Research - Global Coordinator at Deutsche Bank
• Tristan Gresser, Head of Steel equity Research at BNP Paribas
• Maxime Kogge, Equity Analyst at ODDO BHF
• Andrew Jones, Analyst at UBS Group