ArcelorMittal SA Q2 FY2024 earnings call

• Safety: Across ArcelorMittal, efforts are underway to improve safety, with a third-party safety audit ending in Q3 and actions/recommendations being developed. - Financial Performance: Faced macro and nickel challenges but showed resilience, with EBITDA/tonne of $140 in H1 2024, stable Q2 operating results, and slightly positive free cash flow after strategic investments. - Strategic Execution: Focus on growth projects, realizing acquired assets' potential, and returning capital to shareholders. Invested nearly $3 billion in strategic growth projects over 3.5 years, including upstream resources, high-growth markets, and higher margin products. Completed Brazil's Vega complex and began commissioning India's 1-gigawatt renewables project. Expect to conclude Vallourec acquisition in Q3, added Italpannelli for construction growth. Returned $1.1 billion via buybacks and dividends in H1 2024.

In the first half of 2024, ArcelorMittal's EBITDA/tonne stood at $140. The operating results for the second quarter were broadly stable compared to the first quarter, despite challenges in certain segments. Free cash flow during the quarter was slightly positive, but after investment in strategic growth projects, the annualized run rate of investible cash flow was approximately $1.7 billion. For the Brazil segment, the new complex at Vega began commissioning. In North America, Q3 is expected to see lower spot prices compared to Q2, with volumes stable to marginally lower quarter-on-quarter. The Brazil segment is anticipated to have stable volume and pricing in Q3 relative to Q2. Europe will experience lower volumes following normal seasonal patterns for both flat and long products, with a lagged impact of lower prices but also the benefit of lower raw material costs coming through. India and JVs are expected to see improved volumes in Q3 due to reduced maintenance in Q2, though prices may be slightly lower quarter-on-quarter. Mining volumes are expected to improve relative to the second quarter, though price outlook is less certain.

• Europe: Anticipates normal seasonality in Q3 with lower volumes, and apparent due consumption in second half expected slightly better than last year. - U.S.: Prices have come down significantly and are expected to rebalance. - Vallourec: Expect acquisition conclusion in Q3, and will explore synergies. - CapEx: H2 CapEx guidance is $4.5 billion to $5 billion, and confident of being within range. - Working Capital: Expect $1.6 billion reversal in H2, with more in Q4 due to seasonality.

• Macroeconomic challenges impacting financial performance. - Uncertainty in steel prices and market conditions across regions. - Impact of trade barriers and policies on business operations. - Dependence on government support for decarbonization CapEx and potential difficulties in achieving economic returns.

Q: On the outlook for Europe division over the next quarter, how do you see the business developing?

A: The market backdrop in Europe is challenging with declining real demand, but apparent due consumption is expected to be at least flat or slightly positive in the second half compared to last year, with normal seasonality in Q3.

Q: What does the moving part for the business in Europe and U.S. for Q3 mean?

A: In Europe, volumes will be lower following normal seasonal patterns; in North America, there will be lower spot prices in Q3 relative to Q2 volumes, with lagged impact of lower prices and other factors affecting different segments.

Q: When should we expect an update on Vallourec synergies?

A: Expect to conclude acquisition in Q3, and will explore synergies then.

Q: On the buyback, how responsive are you to share price levels?

A: Policy is to return cash to shareholders, not trying to time the market, and will consider next steps when crossing remaining authorization.

Q: Thoughts on steel spreads and what stops them being unsustainable?

A: Potential catalysts include improvement in apparent demand, confidence, and supply-side actions like capacity cuts or reduced import penetration.

Q: Clarification on H2 working capital and Mexico impact?

A: Expect $1.6 billion working capital reversal in H2, with more in Q4; Mexico volume impact in Q3 similar to Q2 at ~400,000 tonnes and ~$0.1 billion profitability impact.

Q: On sustainable solutions doubling EBITDA by 2028, is Vallourec included?

A: Vallourec is an equity stake in JVs, and Italpannelli and India renewables contribute but more work needed to reach 2028 target.

Q: CapEx underspend risk and inventory lead times?

A: Confident of being within H2 CapEx range; lead times are short in weak demand, but could shorten with demand pickup.

Q: India JV self-funding and iron ore volumes?

A: JV is self-funding with good profitability and low cash needs; expect ~10 million tonne iron ore increase in 2025 from Liberia and Serra Azul.

Q: Blast furnace maintenance and demand turn in Europe?

A: Running most furnaces, no major maintenance foreseen in second half, and will adjust capacity as needed based on demand.

Q: Mining wildfire impact and Liberia rail?

A: Canada fire impacts resolved, expect improvement in Q3; Liberia rail issues resolved, expecting normal volumes in Q3.

Q: Argentina economic climate impact?

A: Argentina faced weak demand in H1 due to economic challenges, but optimistic for improvement with government stability.

Q: Decarbonization CapEx and engineering progress?

A: 2025 CapEx not expected to step up significantly, most is for engineering studies; government support will help reduce impact as projects accelerate.

Q: Strategic projects EBITDA commissioning?

A: Some projects commissioned in H2 2024 will have EBITDA impact, with significant acceleration in 2025 and $500 million incremental benefit in full year 2025.

Q: XCarb and product mix replication?

A: XCarb scrap-based process can replicate ~80% of industry customers' flat-roll product mix, but decarbonization plans continue despite XCarb progress.