Signature Sponsor
ArcelorMittal Reports First Quarter 2020 Results

 

 

May 7, 2020 - Faced with a significant humanitarian challenge from the COVID-19 pandemic, the Company’s first priority has been to take all the necessary actions to safeguard the wellbeing of our people and to provide support to the extent required in the communities in which we operate

Economic activity and steel market conditions have significantly deteriorated since measures were introduced by governments worldwide to contain the COVID-19 pandemic

The Company has responded swiftly: aligning production to a lower order book, and taking measures to reduce all costs in line with exceptionally low capacity utilization levels

Highlights of 1Q 2020


Health and safety performance: LTIF rate2 of 1.01x in 1Q 2020

Improved operating performance in 1Q 2020 reflects the positive market developments prior to the escalation of the COVID-19 pandemic in March; operating loss of $0.4bn (vs. loss of $1.5bn in 4Q 2019); EBITDA increased to $1.0bn (4.5% higher than 4Q 2019)

Net loss of $1.1bn in 1Q 2020 (adjusted net loss of $0.6bn, excluding impairment and exceptional items)3

Strong cash management during the quarter, including a working capital investment limited to $0.1bn; gross debt of $13.8bn and a marginal increase in net debt to $9.5bn (down $1.7bn vs 1Q 2019)
 
Liquidity at the end of 1Q 2020 stood at $9.8bn (consisting of cash and cash equivalents of $4.3bn and $5.5bn of available credit lines5); further supplemented by a recently signed new $3bn credit facility5           

Outlook and Guidance

The Company has moved swiftly to secure its assets and match production to the evolving orderbook, with steel shipments for 2Q 2020 expected within the range of 13.5Mt to 14.5Mt; the actions taken to reduce all costs in line with reduced operating rates is expected to yield a reduction in fixed costs10 by 25%-30% in 2Q 2020, essentially maintaining fixed costs per-tonne at the 1Q 2020 level; EBITDA for 2Q 2020 is expected to be within the range of $0.4bn to $0.6bn

Certain cash needs of the business are now expected to be approximately $3.5bn in 2020 (vs. $4.5bn previous guidance), due to lower planned capex (reduced to $2.4bn from $3.2bn previous guidance) and lower taxes

Annual working capital needs will be determined by the extent market conditions recover in 2H 2020, but the Company still expects to release the $1bn in working capital previously targeted

The Company’s $2 billion asset portfolio optimization program continues to progress. Given suitable and viable buyers have expressed serious interest in certain assets, the Company remains confident in completing the program by mid-2021

While the impacts of COVID-19 have introduced unanticipated challenges, the Company continues to target achievement of its $7bn net debt objective in the near term

Against the backdrop of significant cost savings measures being taken across the business, the Board determined it both appropriate and prudent to suspend dividend payments until such a time as the operating environment normalizes.

Commenting, Mr. Lakshmi N. Mittal, ArcelorMittal Chairman and CEO, said:

"The improved operating performance in the first quarter has been considerably overshadowed by the COVID-19 crisis. Faced with a significant humanitarian challenge, the Company’s first priority has been to take all the necessary actions to safeguard the wellbeing of our people and to provide support to the extent required in the communities in which we operate. But we have also moved decisively to protect the business in the face of the completely unprecedented scenario we are facing where social and economic lockdown has contributed to a significant decline in demand. We moved swiftly to temporary idle furnaces, cutting production across markets and reducing operating and capital costs to match this environment. We have continued to meet remaining customer demand from a reduced level of production and are very thankful to our employees and stakeholders for their support in enabling plants to keep running.

“There are still too many uncertainties to accurately predict what the rest of the year holds. However, it seems likely that over the course of this month countries will start to announce details of their “exit” strategies. Whilst these are likely to be an easing, not an immediate ending of lockdown, construction and manufacturing are expected to be among the first sectors to be permitted to re-start operations and indeed we are seeing signs of customers re-starting production. Rigorous planning to ensure we can meet customer demand whilst protecting the health and safety of our people has been undertaken, leaning on the experience of our plants which have already been on this journey.

 “The remainder of this year will be challenging, but I am confident that ArcelorMittal has the experience and inherent resilience,  to manage through these difficult times. As a result of the hard work undertaken in recent years to strengthen the balance sheet, we went into the COVID-19 crisis with the lowest net debt since the creation of the Company, which is a matter of considerable comfort.

“I am particularly grateful for the commitment shown by our teams in these recent weeks. Crises do tend to bring out the best in people and we have many examples of this, from our employees working in our plants to produce steels for essential products, to our facilities around the world looking to see how they can support their local communities, to our research and development teams harnessing their skills and expertise in ways quite unconnected with steel-making, for example in the design of 3D printers and ventilators. Together we will continue to navigate these extraordinary times and ensure that ArcelorMittal is able to secure the wellbeing of its people and its position as the world’s leading steel Company.”

Sustainable development and safety performance

Health and safety - Own personnel and contractors lost time injury frequency rate

Health and safety of the Company’s workforce is of paramount importance. Following the spread of COVID-19 pandemic, where possible, employees are working remotely and where assets continue to operate, we are following the recommendations of local governments as well as the World Health Organisation (‘WHO’). We continue to ensure extensive monitoring, sanitation and social distancing measures applied at all operations, alongside provision of essential personal protective equipment.

Health and safety performance2 (inclusive of ArcelorMittal Italia (previously known as Ilva)), based on own personnel and contractors lost time injury frequency (LTIF) rate was 1.01x in the first quarter of 2020 ("1Q 2020") as compared to 1.25x in fourth quarter of 2019 ("4Q 2019") and 1.14x as of the first quarter of 2019 ("1Q 2019").

Excluding the impact of ArcelorMittal Italia, the LTIF was 0.72x for 1Q 2020 as compared to 0.84x for 4Q 2019 and 0.66x for the first quarter of 2019 (“1Q 2019”).

The Company’s efforts to improve its health and safety record remain focused on both further reducing the rate of severe injuries and preventing fatalities.

Key sustainable development highlights for 1Q 2020:

We are attempting to harness our skills and resources in a useful and collaborative way to help address the challenges presented by COVID-19. Specifically, we have focused our actions on collaborating to address the severe lack of the required safety and medical equipment for the public health effort, including 3D printing face shields and ventilators in Europe and Brazil.

Our businesses across the world have now made cash and in-kind donations to various community and public health initiatives. We have also been utilizing our global network to help facilitate the transfer of equipment to and from regions most impacted; and coordinating private sector support to fight the pandemic in West Africa.

The Company is preparing a report on its 2030 target to reduce CO2 in Europe by 30%, laying out the constituent elements of its roadmap to 2030, including supportive policy frameworks to enable the roll out of technology. A second Group wide Climate Action report, with a new global CO2 target, is expected in 2H 2020.

The Company’s 2019 sustainability performance was published in the Factbook (the full Integrated Annual Review will be published in mid-May). Highlight includes:

In 2019 the Company avoided the emission of over 11 million tonnes CO2 in the cement industry through the sale of 15 million tonnes of blast furnace slag for use as cement – 19% more than in 2018. ArcelorMittal’s own CO2 footprint from its steelmaking operations fell by over 4.4% year on year.

The Company’s programme to certify 100% of its integrated sites in Europe against the ResponsibleSteel™ site standard started in 1Q 2020, and has been subsequently delayed due to COVID-19.

Analysis of results for 1Q 2020 versus 4Q 2019 and 1Q 2019

Total steel shipments in 1Q 2020 were 1.2% lower at 19.5Mt as compared with 19.7Mt for 4Q 2019 primarily due to lower steel shipments in Brazil (-13.5%) and ACIS (-12.4%), offset in part by an improvement in NAFTA (+10.1%) whilst Europe remained broadly stable. Total steel shipments in 1Q 2020 were 10.7% lower as compared with 21.8Mt for 1Q 2019. Excluding the impact of the remedy asset sales related to the ArcelorMittal Italia acquisition (completed June 30, 2019) steel shipments were 6.5% lower as compared to 1Q 2019.

During the latter part of 1Q 2020, the global escalation of the COVID-19 pandemic and subsequent measures introduced by governments worldwide to contain it has negatively impacted economic activity and industrial supply chains in many parts of the world. Consequently, the Company is experiencing a significant decline in industrial activity in all the geographic markets in which it operates. The Company has responded swiftly by significantly reducing production (including temporarily idling steelmaking and finishing assets) globally in alignment with reduced demand and government requirements. As a result, the Company expects a significant negative impact on volumes until industrial activity normalizes.

Sales in 1Q 2020 were $14.8 billion as compared to $15.5 billion for 4Q 2019 and $19.2 billion for 1Q 2019. Sales in 1Q 2020 were 4.3% lower as compared to 4Q 2019 primarily due to lower steel shipments (-1.2%) due in part to COVID-19 impacts, and lower market-priced iron ore shipments (-11.0%). Sales in 1Q 2020 were 22.6% lower as compared to 1Q 2019 primarily due to lower average steel selling prices (-13.8%), lower steel shipments (-10.7%) due in part to COVID-19 impacts, and lower market-priced iron ore shipments (-6.2%) offset in part by higher seaborne iron ore reference prices (+9.1%).

Depreciation for 1Q 2020 was lower at $771 million as compared to $802 million for 4Q 2019 and higher than $733 million in 1Q 2019. FY 2020 depreciation is expected to be approximately $3.0 billion (based on current exchange rates).
Impairment charges12 for 1Q 2020 were $92 million and relate to the permanent closure of the coke plant in Florange (France), at the end of April 2020. Impairment charges for 4Q 2019 were $830 million and related to impairment of the fixed assets of ArcelorMittal USA ($0.7 billion) and in South Africa ($0.1 billion). Impairment charges for 1Q 2019 were $150 million related to the remedy asset sales for the ArcelorMittal Italia acquisition.

Exceptional items of $457 million for 1Q 2020 primarily include inventory related charges in NAFTA and Europe due to a weaker steel pricing outlook driven by COVID-19 impacts. Exceptional items of $828 million for 4Q 2019, primarily include inventory related charges in NAFTA and Europe following a period of exceptionally weak steel pricing. Exceptional items for 1Q 2019 were nil.

Operating loss for 1Q 2020 was $353 million as compared to $1,535 million in 4Q 2019 and an operating income of $769 million in 1Q 2019. Operating results for 1Q 2020 and 4Q 2019 were impacted by impairment charges and exceptional items as discussed above.

Income from associates, joint ventures and other investments for 1Q 2020 was $142 million as compared to $20 million for 4Q 2019 and $208 million in 1Q 2019. 1Q 2020 income was positively impacted by income from AMNS India9. 1Q 2019 was positively impacted by the dividend declared by Erdemir of $93 million.

Net interest expense in 1Q 2020 decreased to $115 million as compared to $140 million in 4Q 2019 and $161 million in 1Q 2019. Interest costs decrease in 1Q 2020 was primarily due to savings after bond repayments at the end of 4Q 2019.

Foreign exchange and other net financing losses in 1Q 2020 were $451 million as compared to $117 million for 4Q 2019 and $231 million in 1Q 2019. Foreign exchange loss for 1Q 2020 was $111 million as compared to foreign exchange gain of $130 million and loss of $48 million, in 4Q 2019 and 1Q 2019, respectively. 1Q 2020 includes non-cash mark-to-market losses of $118 million related to the mandatory convertible bonds call option following the market price decrease of the underlying share; such losses amounted to $52 million in 4Q 2019 and $6 million in 1Q 2019. 1Q 2020 also includes early bond redemption premium expenses of $66 million.

ArcelorMittal recorded an income tax expense of $340 million in 1Q 2020 as compared to $125 million for 4Q 2019 and $135 million for 1Q 2019. Income tax expense in 1Q 2020 includes deferred tax expense of $178 million.

ArcelorMittal recorded a net loss for 1Q 2020 of $1.1 billion (or $1.11 basic loss per common share), as compared to a net loss for 4Q 2019 of $1.9 billion (or $1.86 basic loss per common share), and a net income for 1Q 2019 of $0.4 billion (or $0.41 basic earnings per common share).

NAFTA segment crude steel production increased by 4.6% to 5.5Mt in 1Q 2020 as compared to 5.3Mt in 4Q 2019, partly due to recovery following planned outages both in flat and long product operations during 4Q 2019 due to weak demand.

Steel shipments in 1Q 2020 increased by 10.1% to 5.5Mt as compared to 5.0Mt in 4Q 2019, primarily due to a 12.2% increase in flat steel shipments following the end of destocking which had suppressed demand in the prior quarter. Steel shipments started to decline towards the second half of March 2020 due to weaker demand driven by the COVID-19 pandemic.

Sales in 1Q 2020 increased by 7.1% to $4.3 billion as compared to $4.0 billion in 4Q 2019, primarily due to a 10.1% increase in steel shipments offset in part by a decline in average steel selling prices (with flat and long products down 2.6% and 2.5%, respectively).

Exceptional items for 1Q 2020 of $241 million primarily include inventory related charges due to a weaker steel pricing outlook driven by COVID-19 impacts. Exceptional items of $200 million in 4Q 2019 primarily included inventory related charges following a period of exceptionally weak steel pricing.

Operating loss in 1Q 2020 was $120 million as compared to a loss of $912 million in 4Q 2019 and an operating income of $216 million in 1Q 2019. Operating results for 1Q 2020 and 4Q 2019 were impacted by exceptional items noted above, and operating results for 4Q 2019 were also impacted by impairment charges related to a further impairment of the fixed assets of ArcelorMittal USA.

Despite the negative impact of COVID-19, EBITDA in 1Q 2020 of $247 million was higher as compared to $140 million in 4Q 2019 primarily driven by the positive impact of higher steel shipment volumes offset in part by a negative price-cost effect. EBITDA in 1Q 2020 decreased by 29.5% as compared to $350 million in 1Q 2019 primarily due to negative price-cost effect offset in part by higher steel shipments.

The escalation of the COVID-19 pandemic during the latter part of 1Q 2020 has impacted ArcelorMittal's key end markets in the US and Canada. The Company has responded immediately by significantly adapting its capacity. The Company has to date announced the safe and orderly temporary blow down of blast furnace No.3 at ArcelorMittal Dofasco, Canada, blast furnace No.6 at ArcelorMittal Cleveland and blast furnace No.4 at Indiana Harbor in the United States with the necessary precautions taken to preserve the assets for future production.

In order to mitigate in part the effect of weaker demand on production levels, the Company is temporarily reducing fixed costs (including alignment of the workforce to demand) and implementing other cost saving measures.

Brazil

Brazil segment crude steel production increased by 7.6% to 2.7Mt in 1Q 2020 as compared to 2.5Mt for 4Q 2019, which had been impacted by planned maintenance in the Long products business.

Steel shipments in 1Q 2020 decreased by 13.5% to 2.4Mt as compared to 2.7Mt in 4Q 2019, primarily due to seasonality and lower flat product exports. Overall long products shipments decreased by 7.7% while flat products declined by 17.7%.

Sales in 1Q 2020 declined by 16.3% to $1.6 billion as compared to $1.9 billion in 4Q 2019. Sales in 1Q 2020 were impacted by 13.5% lower steel shipments offset in part by 2.2% higher average steel selling prices.

Operating income in 1Q 2020 declined to $150 million as compared to $177 million in 4Q 2019 and $239 million in 1Q 2019.

EBITDA in 1Q 2020 decreased by 8.8% to $219 million as compared to $240 million in 4Q 2019 primarily due to lower steel shipments (including initial COVID-19 impacts) offset in part by a positive price-cost effect. EBITDA in 1Q 2020 was 29.2% lower as compared to $309 million in 1Q 2019 primarily due to lower steel shipment volumes (-18.4%).

The effects of the COVID-19 pandemic and government response and containment efforts have been felt in Latin America regions later than in some other regions. Nevertheless, end markets and in particular automotive have now been increasingly impacted. The Company is in the process of reducing production further with the idling of ArcelorMittal Tubarão's blast furnace #3 from April 21, 2020, together with production curtailments in Argentina and in long product capacity in Brazil, to match demand levels.

In order to mitigate in part the effect of weaker demand on the production levels, the Company is temporarily reducing fixed costs (including alignment of the workforce to demand) and implementing other cost saving measures.

Europe


Europe segment crude steel production increased by 9.8% to 9.9Mt in 1Q 2020 as compared to 9.0Mt in 4Q 2019 with increases in both long and flat products as production began to normalize following destock-driven curtailment in 4Q 2019. Europe segment crude steel production decreased by 19.9% to 9.9Mt in 1Q 2020 as compared to 12.4Mt in 1Q 2019 (12.2% lower excluding the impact of remedy assets associated with the ArcelorMittal Italia acquisition).

Steel shipments in 1Q 2020 remained stable at 9.3Mt as compared to 4Q 2019 primarily driven by higher flat steel shipments (+2.9%) offset by lower long products shipments (-6.6%). Steel shipments were 19.5% lower in 1Q 2020 as compared to 1Q 2019 (12.0% lower excluding the impact of remedy assets associated with the ArcelorMittal Italia acquisition). Steel shipments in Europe started to decline in the latter part of March due to the COVID-19 containment measures implemented in the various countries.

Sales in 1Q 2020 were $7.7 billion, 4.7% lower as compared to $8.0 billion in 4Q 2019, with average steel selling prices 2.3% lower, primarily due to lower flat products prices (down 3.1%).

The coke plant in Florange, France, was closed at the end of April 2020, in order to reduce costs. As a result, impairment charges of $92 million were booked in 1Q 2020. Impairment charges for 4Q 2019 were $28 million. Impairment charges for 1Q 2019 were $150 million related to the remedy asset sales for the ArcelorMittal Italia acquisition.

Exceptional items for 1Q 2020 of $191 million primarily include inventory related charges due to a weaker steel pricing outlook driven by COVID-19 impacts. Exceptional items for 4Q 2019 of $456 million primarily included inventory related charges following a period of exceptionally weak steel pricing. Exceptional charges for 1Q 2019 were nil.

Operating loss in 1Q 2020 was $426 million as compared to a loss of $649 million for 4Q 2019 and an operating income of $11 million in 1Q 2019. Operating results for 1Q 2020, 4Q 2019 and 1Q 2019 were impacted by impairment charges and exceptional items as discussed above.

Despite the effects COVID-19, EBITDA in 1Q 2020 of $204 million was 29.5% higher as compared to $158 million in 4Q 2019. This was largely due to a positive sales mix (higher flat products shipments and lower long products shipments). EBITDA in 1Q 2020 decreased by 56.5% as compared to $470 million in 1Q 2019 primarily due to 19.5% lower steel shipments (12.0% lower excluding the impact of the remedy asset sales related to the ArcelorMittal Italia acquisition).

The COVID-19 pandemic containment measures began impacting European industrial activity in mid-March. The Company first announced measures on March 19, 2020 to reduce production and the temporary idling of steelmaking and finishing assets across its European operations. Production reduction measures have been undertaken in Italy, France, Spain, Germany, Belgium and Poland.

In order to mitigate in part the effect of weaker demand on the production levels, the Company is temporarily reducing fixed costs (including alignment of the workforce to demand) and implementing other cost saving measures.

ACIS

ACIS segment crude steel production in 1Q 2020 remained broadly stable at 3.0Mt as compared to 4Q 2019 primarily due to lower production in Kazakhstan (due to weather related disruptions) offset by improved volumes in Ukraine and South Africa.

Steel shipments in 1Q 2020 decreased by 12.4% to 2.6Mt as compared to 3.0Mt as at 4Q 2019, mainly due to the decline of shipments in Ukraine (4Q 2019 was positively impacted by timing of shipments postponed from 3Q 2019).

Sales in 1Q 2020 decreased by 11.4% to $1.4 billion as compared to $1.6 billion in 4Q 2019 primarily due to lower steel shipments (-12.4%) offset in part by higher average steel selling prices (+2.5%).

The 4Q 2019 results included impairment charges of $0.1 billion related to the Newcastle steel works in South Africa as well as $76 million of exceptional items related to South Africa including the closure costs of Saldanha and retrenchment costs related to the Section 189 process.

Operating loss in 1Q 2020 was $60 million as compared to loss of $238 million in 4Q 2019 (including the impairment charges and exceptional items as discussed above) and an operating income of $64 million in 1Q 2019.

EBITDA was broadly stable at $47 million in 1Q 2020 as compared to $45 million in 4Q 2019 primarily due to a positive price-cost effect offset by lower steel shipment volumes (due in small part to COVID-19 impact). EBITDA in 1Q 2020 was lower as compared to $145 million in 1Q 2019, primarily due to negative price-cost effect and COVID-19 impact.

The direct COVID-19 impact in the CIS region was limited in 1Q 2020 although more stringent lockdown measures have since been implemented, and production has since been reduced in the Ukraine and Kazakhstan due to demand weakness. ArcelorMittal South Africa has taken several steps (including significant production cuts across all operations) to support the country's lockdown (i.e. restrictions on activity limited only to essential services) that has since ended on April 30, 2020, which required the closure of all offices and operations across the country, except essential operational staff required for care and maintenance to avoid damage to plant and equipment. Since May 1, 2020 South Africa is operating within a partial lockdown environment which will be lifted in phases. ArcelorMittal will adopt a phased response to restarting operations and only then ramping up production as the demand for steel returns.

ArcelorMittal South Africa has implemented several cost reduction measures in response. These actions follow the critical steps already taken during 2019 to ensure the sustainability of ArcelorMittal South Africa. Similarly, in the CIS, in order to mitigate in part, the effect of weaker demand on production levels, the Company is temporarily reducing fixed costs (including alignment of the workforce to demand) and implementing other cost saving measures.

Mining

Own iron ore production in 1Q 2020 decreased by 3.0% to 14.4Mt as compared to 14.8Mt in 4Q 2019. The lower production was due to seasonal factors, unplanned maintenance and slowdown related to COVID-19 restrictions at ArcelorMittal Mines Canada4 (AMMC), offset in part by improved production at ArcelorMittal Liberia. Own iron ore production in 1Q 2020 increased by 2.3% as compared to 1Q 2019 primarily due to higher production in Brazil (mainly due to temporary suspension of Serra Azul operation in 1Q 2019 post the Brumadinho incident) and Kazakhstan offset in part by lower AMMC production as explained above.

Market-priced iron ore shipments in 1Q 2020 decreased by 11.0% to 8.6Mt as compared to 9.6Mt in 4Q 2019, primarily driven by lower shipments in AMMC (due to seasonality, unplanned maintenance and COVID-19 pandemic restrictions). Market-priced iron ore shipments in 1Q 2020 were 6.2% lower as compared to 1Q 2019 driven by lower shipments in AMMC and Liberia offset by higher shipments in Brazil and Ukraine.

Own coal production in 1Q 2020 of 1.3Mt decreased by 2.6% as compared to 4Q 2019 primarily due to lower production at Princeton (US) and Temirtau (Kazakhstan). Own coal production in 1Q 2020 increased by 8.9% to 1.3Mt as compared to 1.2Mt in 1Q 2019 primarily due to higher production at Temirtau (Kazakhstan).

Market-priced coal shipments in 1Q 2020 improved to 0.8Mt as compared to 0.7Mt in 4Q 2019 and 1Q 2019.

Operating income in 1Q 2020 decreased by 8.8% to $168 million as compared to $185 million in 4Q 2019 and decreased by 46.2% as compared to $313 million in 1Q 2019.

EBITDA in 1Q 2020 was broadly stable at $297 million as compared to $301 million in 4Q 2019, as the impact of lower market-priced iron ore shipments (-11.0%) in part due to COVID-19 impact on the market was largely offset by lower freight costs. EBITDA in 1Q 2020 was 29.2% lower as compared to $420 million in 1Q 2019, primarily due to lower market-priced iron ore shipments (-6.2%), lower coking coal reference prices  and significantly lower iron ore pellet premia offset in part by higher seaborne iron ore reference prices (+9.1%).

The impact of the COVID 19 pandemic on the group's mining operations has to date been largely at ArcelorMittal Mines Canada. A directive from the Québec Government restricted mining activities to a minimum level in the province of Québec, Canada, from March 24, 2020 until May 3, 2020. ArcelorMittal Mining Canada has now resumed normal operations. Nevertheless, it is not expected to be possible to recover all the volumes that have been impacted (including volume loss due to unplanned maintenance) and accordingly market-priced iron ore shipments for FY 2020 are now expected to be 5-10% lower as compared to FY 2019 (from previous guidance of stable year on year).

Liquidity and Capital Resources

For 1Q 2020 net cash provided by operating activities was $594 million as compared to $2,932 million in 4Q 2019 and $971 million in 1Q 2019. Net cash provided by operating activities in 1Q 2020 includes a small working capital investment of $109 million, significantly reduced compared to 1Q 2019 due to cash conservation measures taken plus a reduction in activity levels compared to a working capital release of $2.6 billion in 4Q 2019 and a working capital investment of $553 million in 1Q 2019.

Net cash used in investing activities during 1Q 2020 was $755 million as compared to $1,751 million during 4Q 2019 and $693 million in 1Q 2019. Capex of $850 million in 1Q 2020 compares to $815 million in 4Q 2019 and $947 million in 1Q 2019. As described previously, the Company has responded to the COVID-19 impact with actions taken to reduce production and is adapting its capex plans to the operating environment. All non-essential capex has been suspended, while the Mexico hot strip mill project, the agreed Italian projects and certain projects to reduce CO2 emissions continue.

Maintenance capex spend is expected to be lower to match the reduced operating rates. Consequently, the previous FY 2020 capex guidance of approximately $3.2 billion has now been reduced to $2.4 billion.

Net cash provided by other investing activities in 1Q 2020 of $95 million includes $127 million from the sale of the 50% stake in Global Chartering Limited (GCL)8 offset in part by the revised quarterly lease payment under the amended ArcelorMittal Italia agreement signed in March 2020. Net cash used in other investing activities in 4Q 2019 of $936 million primarily included the final $0.6 billion equity contribution to the AMNS India JV and $0.4 billion cash outflow upon the close out of the Indian rupee rolling hedge entered into in connection with the acquisition of ESIL7.

Net cash used in financing activities in 1Q 2020 was $386 million as compared to net cash provided by financing activities in 4Q 2019 of $19 million and net cash used in financing activities in 1Q 2019 of $344 million. Net cash used in financing activities in 1Q 2020 includes a net outflow primarily related to the make whole redemption of the remaining outstanding amount ($659 million) of its 6.250% Notes due February 25, 2022.

In 4Q 2019, net cash provided by financing activities included net inflow of $126 million primarily related to the bond issuances of €1.5 billion ($1,640 million), offset by debt repurchases via tender offer and a make whole redemption of bond. In 1Q 2019, net outflow of debt repayments and issuances of $136 million included $1 billion repayment of amounts borrowed in connection with the purchase of the Uttam Galva and KSS Petron debts, $0.9 billion repayment of the €750 million 5-year, 3% bond at maturity; offset in part by $1.6 billion cash received from two new bond issuances and $0.2 billion of commercial paper issuance.

During 1Q 2020, the Company paid dividends of $103 million mainly to minority shareholders of ArcelorMittal Mines Canada (AMMC) as compared to $21 million in 4Q 2019 mainly paid to the minority shareholders in Bekaert (Brazil). During 1Q 2019, the Company paid dividends of $46 million to minority shareholders in AMMC (Canada).

Outflows from lease payments and other financing activities (net) were $59 million for 1Q 2020, $86 million for 4Q 2019 and $72 million in 1Q 2019.

As of March 31, 2020, the Company’s cash and cash equivalents amounted to $4.3 billion as compared to $5.0 billion as of December 31, 2019 and $2.2 billion as of March 31, 2019. Gross debt declined to $13.8 billion as of March 31, 2020, as compared to $14.3 billion as of December 31, 2019 and increased as compared to $13.4 billion as of March 31, 2019. As of March 31, 2020, net debt increased marginally to $9.5 billion as compared to $9.3 billion as of December 31, 2019.

As of March 31, 2020, the Company had liquidity of $9.8 billion, consisting of cash and cash equivalents of $4.3 billion and $5.5 billion of available credit lines5. Confirming the continued strong support of its key relationship banks, on May 5, 2020 ArcelorMittal and a syndicate of banks signed a new $3 billion credit facility5 further supplementing its liquidity. Both the $5.5 billion and $3.0 billion credit facilities contain a financial covenant not to exceed 4.25x Net debt / LTM EBITDA. As of March 31, 2020, the average debt maturity was 5.2 years.

Key recent developments

On May 5, 2020, ArcelorMittal and a syndicate of banks signed a credit facility with tranches of $0.7 billion and €2.1 billion (the “New Credit Facility”). The Credit Facility further enhances the Company's already strong liquidity position of $9.8 billion as of March 31, 2020, including a $5.5 billion revolving credit facility, which remains undrawn and is available until December 2024. The New Credit Facility has a maturity of 12 months and can be used for general corporate purposes. While the Company has no immediate need to draw on this New Credit Facility, it provides additional financial flexibility in the current extraordinary circumstances.
    
On March 17, 2020, AMNS Luxembourg Holding S.A. (“AMNS”), the parent company of the AMNS India joint venture in partnership with Nippon Steel Corporation (“NSC”), entered into a $5.146 billion ten-year term loan agreement with Japan Bank for International Cooperation (“JBIC”) and MUFG BANK, LTD., SUMITOMO MITSUI BANKING CORPORATION, MIZUHO BANK EUROPE N.V., and SUMITOMO MITSUI TRUST BANK, LIMITED (LONDON BRANCH). The proceeds of the loan have been used to refinance in full the amounts borrowed by AMNS in connection with the acquisition of ArcelorMittal Nippon Steel India Limited (formerly known as Essar Steel India Limited), including the amounts borrowed under the $7 billion bridge term facilities agreement guaranteed by ArcelorMittal. ArcelorMittal is the guarantor of the debt in proportion to its ownership interest (60%).

On March 9, 2020, ArcelorMittal redeemed all of the outstanding $659 million of its 6.250% Notes due February 25, 2022 for a total aggregate purchase price including accrued interest and premium on early repayment of $725 million.
    
On March 4, 2020, ArcelorMittal announced that AM InvestCo and the Ilva Commissioners had signed an amendment (the ‘Amendment Agreement’) to the original lease and purchase agreement for Ilva. The Amendment Agreement outlines the terms for a significant investment by Italian state-sponsored entities into AM InvestCo, thereby forming the basis for an important new partnership between ArcelorMittal and the Italian government. The equity investment by the Italian Government in Ilva, to be captured in an agreement (the ‘Investment Agreement’) to be executed by November 30, 2020, will be at least equal to AM InvestCo’s remaining liabilities against the original purchase price for Ilva. The Amendment Agreement is structured around a new industrial plan for Ilva, which involves investment in lower-carbon steelmaking technologies. In the event that the Investment Agreement is not executed by November 30, 2020, AM InvestCo has a withdrawal right, subject to an agreed payment. Final closing of the lease and purchase agreement is now scheduled by May 2022, subject to various conditions precedent.
    
On March 3, 2020, ArcelorMittal published its annual report for the year ended December 31, 2019. The report has been filed with the electronic database of the Luxembourg Stock Exchange (www.bourse.lu) and is available on corporate.arcelormittal.com under "Investors > Financial reports > Annual reports".
    
On March 3, 2020, ArcelorMittal filed its Annual Report for 2019 on Form 20-F with the U.S. Securities and Exchange Commission (SEC). The report is now available on ArcelorMittal's website. ArcelorMittal will send a hard copy of the Annual Report for 2019 on Form 20-F, which includes the audited financial statements, to shareholders free of charge upon request.           

Dividend

Against the backdrop of significant cost savings measures being taken across the business, the Board determined it both appropriate and prudent to suspend dividend payments until such a time as the operating environment normalizes. As a result, no dividend from 2019 results will be proposed to shareholders at the Annual General Meeting now scheduled in June 2020.

Outlook and guidance

The Company has moved swiftly to secure its assets and match production to the evolving orderbook, with steel shipments for 2Q 2020 expected to be within the range of 13.5Mt to 14.5Mt; the actions taken to reduce all costs in line with reduced operating rates are expected to yield a reduction in fixed costs10 by 25%-30% in 2Q 2020 as compared to 1Q 2020, essentially maintaining fixed costs per-tonne at the 1Q 2020 level; as a result EBITDA for 2Q 2020 is expected to be within the range of $0.4 billion to $0.6 billion.

Given this uncertainty, the Company has withdrawn its forecasts for apparent steel consumption and consequently expects steel shipments in 2020 to be below the 2019 level.

The Company will continue to make ongoing decisions to adjust production in various geographies in accordance with the level of steel demand and government requirements.

The Company expects certain cash needs of the business (including capex, interest, cash taxes, pensions and certain other cash costs but excluding working capital movements) to total $3.5 billion in 2020 versus the $4.5 billion previous guidance. This includes a reduction of FY 2020 capex to $2.4 billion (down from the previous guidance of $3.2 billion). Interest expense in 2020 is expected to remain at $0.5 billion while cash taxes, pensions and other cash costs are expected to be $0.6 billion (versus previous guidance of $0.8 billion).

Whilst it cannot at this stage provide specific guidance for working capital needs in 2020 (due to the fact that it will be determined by the extent market conditions recover in 2H 2020) the Company still expects to release the $1 billion in working capital as previously targeted.

While the impacts of COVID-19 have introduced unanticipated challenges, the achievement of the Company's $7 billion net debt objective remains a key near term target.

Despite the challenges caused by COVID-19, the Company’s $2 billion asset portfolio optimization program continues to progress. Given that suitable and viable buyers have expressed serious interest in certain assets, the Company remains confident in completing the program by mid-2021.

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