ArcelorMittal reports fourth quarter 2021 results
*Luxembourg, February 10, 2022 *- ArcelorMittal (referred to as “ArcelorMittal” or the “Company”) (MT (New York, Amsterdam, Paris, Luxembourg), MTS (Madrid)), the world’s leading integrated steel and mining company, today announced results^1,2 for the three-months and twelve-months period ended December 31, 2021.
*2021 Key highlights:*
· *Health and safety focus: *Protecting the health and wellbeing of employees remains the Company’s overarching priority; LTIF rate of 0.79x in FY 2021 vs. 0.61x in FY 2020^3
· *Robust financial performance:* FY 2021 operating income of $17.0bn^4 (vs. $2.1bn^4,5 in FY 2020) and EBITDA of $19.4bn (vs. $4.3bn in FY 2020)
· *Enhanced share value:* Basic EPS of $13.53/sh. Equity book value per share^22 increased to $51/sh (from $32/sh in FY 2020)
· *Financial strength:* The Company ended 2021 with gross debt of $8.4bn (vs. $12.3bn at the end of 2020), net debt of $4.0bn (vs. $6.4bn at the end of 2020) and returned to investment grade; pension/OPEB declined 20% to $3.7bn in Dec'21 vs. $4.6bn in Dec'20
· *Healthy net income: *$15.0bn^6 in FY 2021 includes share of JV and associates net income of $2.2bn (vs. $0.2bn in FY 2020) largely reflecting performance at AMNS India, AMNS Calvert and other investees
· *Strong FCF generation:* 9.2% higher steel shipments YoY on scope adjusted basis^21 led to a working capital investment of $6.4bn in FY 2021; despite this the Group generated $6.6bn free cash flow (FCF)^17 in FY 2021 ($9.9bn net cash provided by operating activities less capex of $3.0bn less minority dividends of $0.3bn)
· *Significant returns to shareholders:* The Company returned $6.7bn of capital to shareholders in FY 2021, reducing the fully diluted shares outstanding by 19%; 165m shares cancelled (120m shares in 2021 and 45m shares in Jan 2022)*Priorities & Outlook: *
· *Global leadership on addressing climate change:*
· The Company is progressing its plans to reduce the CO[2]e intensity of its global production by 25% by 2030 (including a 35% reduction in CO[2]e intensity in Europe) with a net investment of $0.3bn forecast in 2022
· 1st Smart Carbon projects to be commissioned in Ghent (Belgium) by end 2022
· 1st Hydrogen reduction project in Hamburg to start production 2024-2025; Further decarbonization projects announced during the year in Spain, Canada, Belgium and France
· New €1.7bn investment in Fos-sur-Mer & Dunkirk (France), enabling a reduction of ~40% or 7.8Mtpa CO2 emissions in France by 2030
· XCarb^TM Innovation Fund investments^12 in five technology partnerships during 2021 totaling $180m
· Sales of XCarb*® *green steel certificates targeted to increase to 0.6Mt run rate by end 2022
· *New 3 year $1.5bn Value plan to deliver commercial and business improvements*
· *Delivering strategic growth in support of higher sustainable returns*
· New $0.3bn pellet plant investment at Kryvyi Rih (Ukraine) to ensure sustainability, environmental compliance and improve productivity; new $0.2bn section mill in Barra Mansa (Brazil) to produce higher value added products and enhance the product mix
· $3.1bn strategic capex envelope to be spent between 2021-2024 (of which $0.2bn has been spent to date)^23 is estimated to add $1.1bn to future EBITDA^24
· 1st coils from the Mexico HSM produced in December 2021; strategic capex to increase in 2022 as growth projects in Brazil (Monlevade, Vega and Barra Mansa) and Ukraine, as well as Iron Ore mining (Liberia, Las Truchas, Serra Azul) advance
· *Building a track record of consistently returning capital to shareholders: *
· $7.2bn of capital returned to shareholders since September 2020
· The Board proposes to increase the annual base dividend to shareholders to $0.38/sh (to be paid in June 2022, subject to the approval of shareholders at the AGM in May 2022)
· The Company has announced a new $1.0bn capital return for 1H'22. Further authorization to repurchase shares will be sought from shareholders at the 2022 AGM
· *Market outlook is favorable*
· World ex-China apparent steel consumption ("ASC") in 2022 vs. 2021 is expected to grow 2.5-3%; the Company expects its steel shipments in 2022 to grow by 3% vs. 2021^21
· The Company expects strong EBITDA and FCF generation in 2022*Financial highlights (on the basis of IFRS*^*1,2**):*
*(USDm) unless otherwise shown* *4Q 21* *3Q 21* *4Q 20* *12M 21* *12M 20*
Sales 20,806 20,229 14,184 76,571 53,270
Operating income 4,558 5,345 1,998 16,976 2,110
Net income / (loss) attributable to equity holders of the parent 4,045 4,621 1,207 14,956 (733)
Basic earnings / (loss) per common share (US$) 3.93 4.17 1.01 13.53 (0.64)
Operating income/ tonne (US$/t) 289 366 116 270 31
EBITDA 5,052 6,058 1,726 19,404 4,301
EBITDA/ tonne (US$/t) 320 414 100 308 62
Crude steel production (Mt) 16.5 17.2 18.8 69.1 71.5
Steel shipments (Mt) 15.8 14.6 17.3 62.9 69.1
Total group iron ore production (Mt) 13.4 13.0 15.3 50.9 58.0
Iron ore production (Mt) (AMMC and Liberia only) 7.2 6.8 7.6 26.2 28.3
Iron ore shipment (Mt) (AMMC and Liberia only) 7.1 6.9 7.9 26.0 28.4
Number of shares outstanding (issued shares less treasury shares) (millions) 911 971 1,081 911 1,081
Note: As previously announced, effective 2Q 2021, ArcelorMittal has amended its presentation of reportable segments to report the operations of AMMC and Liberia within the Mining segment. The results of each other mine are accounted for within the steel segments that it primarily supplies; as from 2Q 2021 onwards, ArcelorMittal Italia is deconsolidated and accounted for as a joint venture.
*Commenting, Aditya Mittal, ArcelorMittal Chief Executive Officer, said:*
“2021 was a strong year in which we accelerated progress on many fronts. The global economic rebound post initial COVID-19 restrictions being lifted supported buoyant demand in all markets delivering very high levels of profitability. This further strengthened our balance sheet and enabled the delivery of consistent returns for shareholders as well as targeted investment in our business. Recent investments, both organic and acquisitive, have long-term strategic value – with the Mexico hot strip mill set to ramp up this year, the construction of the Calvert EAF underway, and the AM/NS India joint venture performing well and poised to capture further opportunity in this fast-growing market.
The one area where we are not satisfied is safety. We want to do better and we have to do better. Across the organization all our efforts are focused on this most important outcome.
Perhaps most critically we intensified our commitments to decarbonize, recognizing that steel can and must make a significant contribution to achieving net zero. We stated an ambition to reduce our CO2e intensity by 25% by 2030 and continue to invest in multiple technology routes that will help us succeed. We launched our XCarb vision which includes an investment fund into the clean energy technologies that support this transformation. Working in collaboration with stakeholders, we were able to accelerate progress at a number of our plants in Europe and also in Canada. Our aim is to demonstrate what is possible by having the world’s first near zero-emissions steel plant.
We start 2022 ready to build on the progress already achieved for long-term sustainability and success. Industry fundamentals remain positive, supported by re-negotiated automotive contracts. Our balance sheet strength enables us to invest in the most compelling organic growth opportunities and continue our transition towards low emissions steelmaking. We see increasing evidence of stakeholder understanding and support for the transition to zero-carbon steel-making. We look forward to further building on this progress achieved, in 2022.”
*Sustainable development and safety performance*
*Health and safety - Own personnel and contractors lost time injury frequency rate*
Protecting the health and wellbeing of employees remains the Company’s overarching priority with ongoing strict adherence to World Health Organization guidelines (in respect of COVID-19), and specific government guidelines have been followed and implemented.
Health and safety performance based on own personnel and contractors lost time injury frequency ("LTIF") rate was 0.74x in the fourth quarter of 2021 ("4Q 2021") as compared to 0.76x for the third quarter of 2021 ("3Q 2021"). Prior period figures have not been recast for the ArcelorMittal USA disposal which took place in December 2020 and exclude ArcelorMittal Italia (which is now accounted for under the equity method) for all periods.
Health and safety performance in the twelve months of 2021 (“12M 2021”) was 0.79x as compared to 0.61x in the twelve months of 2020 (“12M 2020”).
The Company’s efforts to improve its health and safety record aim to strengthen the safety of its workforce with an absolute focus on eliminating fatalities. A change to the Company’s executive remuneration policy has been made to reflect this focus.
*Own personnel and contractors - Frequency rate*
*Lost time injury frequency rate* *4Q 21* *3Q 21* *4Q 20* *12M 21* *12M 20*
NAFTA 0.25 0.48 0.49 0.40 0.57
Brazil 0.30 0.10 0.16 0.22 0.28
Europe 1.09 1.38 1.35 1.19 1.07
ACIS 0.92 0.80 0.64 0.94 0.64
Mining — — 0.34 0.32 0.27
*Total* * 0.74 * * 0.76 * * 0.65 * * 0.79 * * 0.61 *
*Key sustainable development highlights:*
· On November 3, 2021, ArcelorMittal and the government of Quebec announced a CAD$205 million investment by ArcelorMittal Mining Canada (‘AMMC’) in its Port-Cartier pellet plant, enabling this facility to convert its entire 10 million tonne annual pellet production to direct reduced iron ("DRI") pellets by the end of 2025. The investment, in which the Quebec government will contribute through an electricity rebate of up to CAD$80 million, will enable the Port-Cartier plant to become one of the world’s largest producers of DRI pellets, the raw material feedstock for ironmaking in a DRI furnace and reduce the plant's CO[2]e by ~20% per annum. The project includes the implementation of a flotation system that will enable a significant reduction of silica in the iron ore pellets, facilitating the production of a very high-quality pellet.
· ArcelorMittal announced on December 9, 2021 a US$30 million investment in carbon recycling company, LanzaTech through its XCarb™ innovation fund, the fourth investment the Company has made through the fund since its launch in March 2021. The investment further expands ArcelorMittal’s relationship with LanzaTech, which commenced in 2015 when the Company first announced plans to utilise LanzaTech’s carbon capture and re-use technology at its plant in Ghent, Belgium. The €180 million Carbalyst® plant – ArcelorMittal’s flagship carbon capture and re-use technology project - is currently under construction, with commissioning expected before the end of 2022.
· ArcelorMittal announced on January 25, 2022 a $5 million investment in H2Pro through its XCarb™ innovation fund, bringing the fund’s total investment commitments to $180 million since its launch. H2Pro is developing a disruptive way of producing hydrogen from water, which offers superior energy efficiency to traditional water electrolysis technologies.
· ArcelorMittal was announced as a Supplier Sustainability Award winner by Ford Motor Company in their World Excellence Awards. The awards recognise companies that exceed expectations and achieve the highest levels of excellence in quality, cost, performance and delivery. ArcelorMittal’s commitment to IRMA (Initiative for Responsible Mining Assurance) was particularly acknowledged by Ford in making this award.
· On January 27, 2022, ArcelorMittal published its second Climate Advocacy Alignment Report which maps the policy positions of the 61 associations of which the Company is a member, against the objectives of the Paris agreement and the five policy priorities ArcelorMittal outlined in its second Climate Action Report.
*Analysis of results for the twelve months ended December 31, 2021 versus results for the twelve months ended December 31, 2020*
Adjusted for the change in scope (i.e. excluding the shipments of ArcelorMittal USA, sold on December 9, 2020, and ArcelorMittal Italia^13, deconsolidated as from April 14, 2021), steel shipments in 12M 2021 were 61.9 million metric tonnes (Mt), 9.2% higher as compared to 56.7Mt in 12M 2020 driven by the broad based recovery in demand following the impacts of COVID-19 in 2020. Adjusted for the change in scope, all segments experienced year on year shipment growth: Europe +8.9%, Brazil +24.3%, ACIS +4.8% and NAFTA +8.0%.
Sales for 12M 2021 increased by 43.7% to $76.6 billion as compared with $53.3 billion for 12M 2020, primarily due to higher average steel selling prices (+54.2%) and higher iron ore prices which more than offset the changes in scope.
Depreciation of $2.5 billion for 12M 2021 was lower as compared with $3.0 billion in 12M 2020 largely due to the change of scope. The FY 2022 depreciation expense is expected to be approximately $2.7 billion (based on current exchange rates) primarily driven by changes in the useful lives estimates for certain assets in Europe and Canada due to decarbonization projects.
Impairment gain for 12M 2021 amounted to $218 million following improved cash flow projections in the context of decarbonization plans in Sestao (Spain) (partially reversing the impairment recognized in 2015). Whilst 12M 2020 included a net impairment gain of $133 million^4.
Exceptional items for 12M 2021 of $123 million relate to expected costs for the decommissioning of the dam at the Serra Azul mine in Brazil. Exceptional items for 12M 2020 were net gains of $636 million related to the gain on disposal of ArcelorMittal USA ($1.5 billion) partially offset by site restoration and termination charges following the permanent closure of a blast furnace and steel plant in Krakow (Poland) totaling $146 million and inventory related charges in NAFTA and Europe ($0.7 billion).
Operating income for 12M 2021 of $17.0 billion was primarily driven by positive steel price-cost effects and higher iron ore reference prices. Operating income for 12M 2020 of $2.1 billion was positively impacted by impairment and exceptional net gains totaling $0.8 billion as discussed above and negatively impacted in particular by the effects of the COVID-19 pandemic.
Income from associates, joint ventures and other investments^14 for 12M 2021 was $2.2 billion as compared to $234 million for 12M 2020. 12M 2021 income is significantly higher on account of improved contribution from AMNS India^7 and AMNS Calvert (Calvert)^8 and other equity and joint-ventures investments as well as the annual dividend received from Erdemir of $89 million. 12M 2020 income from associates included a $211 million impairment of the Company's investment in DHS (Germany).
Net interest expense in 12M 2021 was lower at $278 million as compared to $421 million in 12M 2020 following debt repayments and liability management.
Foreign exchange and other net financing losses were $877 million for 12M 2021 as compared to losses of $835 million for 12M 2020.
ArcelorMittal recorded an income tax expense of $2.5 billion for 12M 2021 (including $493 million deferred tax benefit) as compared to $1.7 billion for 12M 2020 (which included $827 million deferred tax expense).
ArcelorMittal’s net income for 12M 2021 was $14,956 million, or $13.53 basic earnings per common share, as compared to a net loss in 12M 2020 of $733 million, or $0.64 basic loss per common share.
*Analysis of results for 4Q 2021 versus 3Q 2021 and 4Q 2020*
Total steel shipments in 4Q 2021 were 15.8Mt, 7.9% higher as compared with 14.6Mt in 3Q 2021 following the reversal of the production constraints and order shipment delays which impacted 3Q 2021: Europe +10.3%, Brazil +7.2% and ACIS +9.7%, although NAFTA was down -3.3%.
Adjusted for the change in scope (i.e. excluding the shipments of ArcelorMittal USA and ArcelorMittal Italia^21), steel shipments in 4Q 2021 increased 8.5% as compared to 4Q 2020: Europe +9.4%, Brazil +17.8% and ACIS +9.4% offset in part by NAFTA (-5.8%).
Sales in 4Q 2021 were $20.8 billion as compared to $20.2 billion for 3Q 2021 and $14.2 billion for 4Q 2020. As compared to 3Q 2021, the 2.8% increase in sales was primarily due to higher steel shipment volumes (+7.9%) offset in part by lower average steel selling prices (-2.4%), and lower mining revenue primarily due to lower iron ore reference prices (-32.3%). Sales in 4Q 2021 were +46.7% higher as compared to 4Q 2020 primarily due to significantly higher average steel selling prices (+60.1%) offset in part by lower iron ore reference prices (-17.1%) and the impacts of scope changes.
Depreciation for 4Q 2021 was $712 million as compared to $590 million for 3Q 2021 primarily driven by changes in the useful lives estimates for certain assets in Europe and Canada due to decarbonization projects, and stable as compared to $711 million in 4Q 2020.
Impairment gain for 4Q 2021 amounted to $218 million following improved cash flow projections in the context of decarbonization plans in Sestao (Spain) (partially reversing the impairment recognized in 2015). There were no impairment items for 3Q 2021. Impairment expenses in 4Q 2020 were $331 million related to the revised future cashflow expectations of plate assets in Europe.
Exceptional items for 4Q 2021 were nil. Exceptional charges for 3Q 2021 of $123 million related to expected costs for the decommissioning of the dam at the Serra Azul mine in Brazil. Exceptional items in 4Q 2020 of $1.3 billion related to gain on the sale of ArcelorMittal USA^5 offset by site restoration and termination charges related to the closure of the steel shop and blast furnace at Krakow (Poland).
Operating income for 4Q 2021 was $4.6 billion as compared to $5.3 billion in 3Q 2021 and $2.0 billion in 4Q 2020 (impacted by the exceptional and impairment items as discussed above). The decreased operating income for 4Q 2021 as compared to 3Q 2021 reflects a negative price-cost effect which more than offset higher shipments in steel segments and the impacts of lower iron ore reference prices which more than offset higher iron ore shipments in the Mining segment.
Income from associates, joint ventures and other investments for 4Q 2021 was $383 million as compared to $778 million for 3Q 2021 and $7 million in 4Q 2020. 4Q 2021 is significantly lower on account of weaker results from AMNS India^7, AMNS Calvert^8, and Chinese investees^14.
Net interest expense in 4Q 2021 was lower at $49 million as compared to $62 million in 3Q 2021 and $88 million in 4Q 2020, mainly due to savings following the repayment of bonds.
Foreign exchange and other net financing losses in 4Q 2021 were $111 million as compared to losses of $339 million in 3Q 2021 and $270 million in 4Q 2020. 4Q 2021 includes foreign exchange loss of $30 million (compared to $22 million gain in 3Q 2021) and $13 million non-cash mark-to-market loss related to the mandatory convertible bonds call option (loss of $68 million in 3Q 2021 and gain of $59 million in 4Q 2020). 4Q 2021 also includes a charge of $61 million related to the repurchase of approximately $395 million in aggregate principal amount of the Mandatorily Convertible Subordinated Notes ("MCN") on December 23, 2021. 3Q 2021 included an $82 million charge in connection with a revised valuation of the put option granted to Votorantim^20 and a $153 million loss (primarily consisting of interest and indexation charges) relating to a legal claim (for which the Company is exploring its legal options, including an action to set aside the decision) at ArcelorMittal Brasil from the Votorantim acquisition^20.
ArcelorMittal recorded an income tax expense of $632 million in 4Q 2021 as compared to $882 million in 3Q 2021 and $358 million for 4Q 2020.
ArcelorMittal recorded net income for 4Q 2021 of $4,045 million ($3.93 basic earnings per common share), as compared to net income of $4,621 million for 3Q 2021 ($4.17 basic earnings per common share), and a net income of $1,207 million for 4Q 2020 ($1.01 basic earnings per common share).
*Analysis of segment operations*^*2, 18*
*NAFTA*
(USDm) unless otherwise shown *4Q 21* *3Q 21* *4Q 20* *12M 21* *12M 20*
Sales 3,329 3,423 3,204 12,530 13,668
Operating income 939 925 1,507 2,800 1,684
Depreciation (113) (70) (102) (325) (537)
Impairment items — — — — 660
Exceptional items — — 1,460 — 998
EBITDA 1,052 995 149 3,125 563
Crude steel production (kt) 2,046 1,994 4,180 8,487 17,813
Steel shipments (kt) 2,205 2,280 4,134 9,586 17,902
Average steel selling price (US$/t) 1,341 1,303 714 1,128 702
NAFTA segment crude steel production increased by 2.6% to 2.0Mt in 4Q 2021, as compared to 3Q 2021 primarily due to recovery post operational disruptions (including the impact of hurricane Ida) in Mexico during 3Q 2021. Adjusted for scope (excluding the impact of ArcelorMittal USA which was sold in December 2020), crude steel production declined 0.7% year on year.Steel shipments in 4Q 2021 decreased by 3.3% to 2.2Mt, as compared to 2.3Mt in 3Q 2021 primarily due to weaker demand in North America. Adjusted for scope, steel shipments were 5.8% lower year on year.
Sales in 4Q 2021 decreased by 2.8% to $3.3 billion, as compared to $3.4 billion in 3Q 2021, primarily due a decrease in steel shipments (as discussed above) offset in part by a 2.9% increase in average steel selling prices. Sales increased in 4Q 2021 compared to $3.2 billion in 4Q 2020.
Operating income in 4Q 2021 was $939 million as compared to $925 million in 3Q 2021 and $1,507 million in 4Q 2020 which was positively impacted by the $1.5 billion exceptional gain^5 on the sale of ArcelorMittal USA.
EBITDA in 4Q 2021 of $1,052 million was 5.8% higher as compared to $995 million in 3Q 2021, primarily due to a positive price-cost effect offset in part by lower shipment volumes as noted above. EBITDA in 4Q 2021 was higher as compared to $149 million in 4Q 2020 mainly due to a significant positive price-cost effect.
*Brazil*
*(USDm) unless otherwise shown* *4Q 21* *3Q 21* *4Q 20* *12M 21* *12M 20*
Sales 3,452 3,606 1,905 12,856 6,336
Operating income 892 1,164 296 3,798 777
Depreciation (60) (59) (51) (228) (228)
Exceptional items — (123) — (123) —
EBITDA 952 1,346 347 4,149 1,005
Crude steel production (kt) 3,117 3,112 2,868 12,413 9,539
Steel shipments (kt) 3,034 2,829 2,575 11,695 9,410
Average steel selling price (US$/t) 1,049 1,196 702 1,030 634Brazil segment crude steel production was stable at 3.1Mt in 4Q 2021 and in 3Q 2021, and higher as compared to 2.9Mt in 4Q 2020.
Steel shipments in 4Q 2021 increased by 7.2% to 3.0Mt as compared to 2.8Mt in 3Q 2021, primarily due to delivery of shipments that had been delayed at the end of the previous quarter. Steel shipments were 17.8% higher in 4Q 2021 as compared to 2.6Mt in 4Q 2020.
Sales in 4Q 2021 decreased by 4.3% to $3.5 billion as compared to $3.6 billion in 3Q 2021, following a 12.3% decrease in average steel selling prices offset in part by higher steel shipments. Sales in 4Q 2020 were $1.9 billion impacted by the COVID-19 pandemic.
Operating income in 4Q 2021 of $892 million was lower as compared to $1,164 million in 3Q 2021 and higher as compared to $296 million in 4Q 2020. Operating income in 3Q 2021 was impacted by exceptional items of $123 million related to expected costs for the decommissioning of the dam at the Serra Azul mine in Brazil.
EBITDA in 4Q 2021 decreased by 29.3% to $952 million as compared to $1,346 million in 3Q 2021, primarily due to a negative price-cost effect and a negative currency translation effect offset in part by higher steel shipments. EBITDA in 4Q 2021 was significantly higher as compared to $347 million in 4Q 2020 primarily due to a positive price-cost effect and higher steel shipments.
*Europe*
*(USDm) unless otherwise shown* *4Q 21* *3Q 21* *4Q 20* *12M 21* *12M 20*
Sales 12,079 11,228 7,604 43,334 28,071
Operating income /(loss) 1,886 1,925 (444) 5,672 (1,439)
Depreciation (353) (284) (356) (1,252) (1,418)
Impairment items 218 — (331) 218 (527)
Exceptional items — — (146) — (337)
EBITDA 2,021 2,209 389 6,706 843
Crude steel production (kt) 8,621 9,091 9,110 36,795 34,004
Steel shipments (kt) 8,325 7,551 8,569 33,182 32,873
Average steel selling price (US$/t) 1,110 1,098 695 986 655Europe segment crude steel production was 5.2% lower at 8.6Mt in 4Q 2021 as compared to 9.1Mt in 3Q 2021 (due to planned maintenance) and was lower by 5.4% compared to 4Q 2020. Following the formation of a public-private partnership between Invitalia and AM InvestCo Italy renamed Acciaierie d’Italia Holding (ArcelorMittal’s subsidiary party to the lease and purchase agreement for the ILVA business), ArcelorMittal has deconsolidated the assets and liabilities as from mid-April 2021. Adjusted for this change of scope, crude steel production increased by 5.1% in 4Q 2021 as compared to 4Q 2020.
Steel shipments in 4Q 2021 increased by 10.3% to 8.3Mt as compared to 7.6Mt in 3Q 2021 and were lower as compared to 8.6Mt in 4Q 2020 (+9.4% on a scope adjusted basis). Steel shipments in 4Q 2021 include delivery of orders delayed last quarter and logistic constraints partly linked to the severe floods in Europe in July 2021.
Sales in 4Q 2021 increased 7.6% to $12.1 billion, as compared to $11.2 billion in 3Q 2021, primarily due higher shipments and 1.1% higher average selling prices. Sales in 4Q 2020 were $7.6 billion impacted by the COVID-19 pandemic.
Impairment gain for 4Q 2021 amounted to $218 million following improved cash flow projections in the context of decarbonization plans in Sestao (Spain) (partially reversing the impairment recognized in 2015). Impairment charges for 3Q 2021 were nil. Impairment charges for 4Q 2020 were $331 million following the revised future cashflow expectations of plate assets.
Exceptional items for 4Q 2021 and 3Q 2021 were nil. Exceptional items for 4Q 2020 were $146 million related to site restoration and termination charges following the closure of the blast furnace and the steel plant in Krakow (Poland).
Operating income in 4Q 2021 was $1,886 million as compared to $1,925 million in 3Q 2021 and an operating loss of $444 million in 4Q 2020 (impacted by impairments/exceptional items as discussed above).
EBITDA in 4Q 2021 of $2,021 million decreased 8.5%, as compared to $2,209 million in 3Q 2021, primarily due to a negative price-cost effect including higher energy prices and one-time $55 million provision related to an early retirement scheme in Spain, offset in part by higher steel shipments. EBITDA in 4Q 2021 increased significantly as compared to $389 million in 4Q 2020 primarily due to a positive price-cost effect.
*ACIS*
*(USDm) unless otherwise shown* *4Q 21* *3Q 21* *4Q 20* *12M 21* *12M 20*
Sales 2,539 2,419 1,553 9,854 5,737
Operating income 439 808 233 2,705 209
Depreciation (118) (112) (133) (450) (492)
Exceptional items — — — — (21)
EBITDA 557 920 366 3,155 722
Crude steel production (kt) 2,694 3,014 2,673 11,366 10,171
Steel shipments (kt) 2,597 2,367 2,373 10,360 9,881
Average steel selling price (US$/t) 810 864 511 780 464
ACIS segment crude steel production in 4Q 2021 was 10.6% lower at 2.7Mt as compared to 3.0Mt in 3Q 2021 due to planned and unplanned maintenance in Ukraine and South Africa. Crude steel production in 4Q 2021 was broadly stable at 2.7Mt as compared to 4Q 2020.
Steel shipments in 4Q 2021 increased by 9.7% to 2.6Mt as compared to 2.4Mt as at 3Q 2021, mainly due to delivery of exports delayed at the end of the previous quarter. 4Q 2020 steel shipments were 2.4Mt.
Sales in 4Q 2021 increased by 5.0% to $2.5 billion as compared to $2.4 billion in 3Q 2021, primarily due to higher steel shipments offset in part by 6.3% lower average steel selling prices. Sales in 4Q 2020 were $1.6 billion impacted by the COVID-19 pandemic.
Operating income in 4Q 2021 was $439 million as compared to $808 million in 3Q 2021 and $233 million in 4Q 2020.
EBITDA of $557 million in 4Q 2021 was 39.5% lower as compared to $920 million in 3Q 2021, primarily due to a negative price-cost effect, including higher energy prices and maintenance costs, offset in part by higher steel shipments. EBITDA in 4Q 2021 was higher as compared to $366 million in 4Q 2020, primarily due to positive price-cost effects and higher steel shipments.
*Mining *
*(USDm) unless otherwise shown* *4Q 21* *3Q 21* *4Q 20* *12M 21* *12M 20*
Sales 824 1,153 937 4,045 2,785
Operating income 343 741 502 2,371 1,247
Depreciation (57) (56) (60) (228) (243)
EBITDA 400 797 562 2,599 1,490
Iron ore production (Mt) 7.2 6.8 7.6 26.2 28.3
Iron ore shipment (Mt) 7.1 6.9 7.9 26.0 28.4
Given the sale of ArcelorMittal USA in December 2020, the Company is no longer presenting coal production and shipments in its earnings releases.
Iron ore production (AMMC and Liberia only) increased in 4Q 2021 by 4.3% to 7.2Mt as compared to 6.8Mt in 3Q 2021 and was 6.1% lower as compared to 4Q 2020. Higher production in 4Q 2021 was primarily due to higher Liberia production following recovery due to the impact of locomotive incidents and heavy seasonal monsoon rains in the prior quarter.
Iron ore shipments increased in 4Q 2021 by 2.8% as compared to 3Q 2021, primarily driven by improvement in Liberia offset in part by lower shipments at AMMC, and decreased by 10.2% as compared to 4Q 2020 (due to lower shipments in both AMMC and Liberia).
Operating income in 4Q 2021 decreased to $343 million as compared to $741 million in 3Q 2021 and $502 million in 4Q 2020.
EBITDA in 4Q 2021 decreased by 49.8% to $400 million as compared to $797 million in 3Q 2021, largely reflecting the negative impact of lower iron ore reference prices (-32.3%) offset in part by higher iron ore shipments (+2.8%). EBITDA in 4Q 2021 was lower as compared to $562 million in 4Q 2020, primarily due to lower iron ore reference prices (-17.1%) and lower shipments.
*Joint ventures*
ArcelorMittal has investments in various joint ventures and associate entities globally. The Company considers the Calvert (50% equity interest) and AMNS India (60% equity interest) joint ventures to be of particular strategic importance, warranting more detailed disclosures to improve the understanding of their operational performance and value to the Company.
*Calvert*^*8*
*(USDm) unless otherwise shown* *4Q 21* *3Q 21* *4Q 20* *12M 21* *12M 20*
Production (100% basis) (kt)* 1,068 1,239 1,057 4,802 4,038
Steel shipments (100% basis) (kt)** 1,052 1,203 1,005 4,547 3,912
EBITDA (100% basis)*** 270 397 62 1,091 197
* Production: all production of the hot strip mill including processing of slabs on a hire work basis for ArcelorMittal group entities and third parties, including stainless steel slabs.
** Shipments: including shipments of finished products processed on a hire work basis for ArcelorMittal group entities and third parties, including stainless steel products.
*** EBITDA of Calvert presented here on a 100% basis as a stand-alone business and in accordance with the Company's policy, applying the weighted average method of accounting for inventory.
Calvert’s hot strip mill ("HSM") production during 4Q 2021 totaled 1.1Mt as compared to 1.2Mt in 3Q 2021. 4Q 2021 HSM production was 13.8% lower than 3Q 2021 mainly driven by a planned maintenance outage in November.
Steel shipments in 4Q 2021 were 12.6% below 3Q 2021 due to HSM maintenance outage and weak demand.
EBITDA*** during 4Q 2021 of $270 million (100% basis) was lower as compared to $397 million in 3Q 2021, largely due to lower steel shipments, unfavorable sales mix and higher slab weighted average cost partially offset by higher sales prices.
*AMNS India*^*7*
*(USDm) unless otherwise shown* *4Q 21* *3Q 21* *4Q 20* *12M 21* *12M 20*
Crude steel production (100% basis) (Kt) 1,847 1,891 1,888 7,393 6,616
Steel shipments (100% basis) (Kt) 1,731 1,765 1,779 6,914 6,261
EBITDA (100% basis) 435 551 274 1,996 697
Crude steel production in 4Q 2021 decreased by 2.3% to 1.8Mt as compared to 1.9Mt in 3Q 2021. Steel shipment in 4Q 2021 decreased 1.9% to 1.7Mt as compared to 1.8Mt in 3Q 2021.
AMNS India EBITDA of $435 million (100% basis) was 21% lower as compared to $551 million in 3Q 2021 primarily due lower steel selling prices and higher costs (including coking coal and power costs).
*Liquidity and Capital Resources*
Net cash provided by operating activities for 4Q 2021 was $4,154 million as compared to $2,442 million in 3Q 2021 and $1,416 million in 4Q 2020. Net cash provided by operating activities in 4Q 2021 includes a working capital release of $22 million as compared to a working capital investment of $2,896 million in 3Q 2021 and a working capital release of $925 million in 4Q 2020. 4Q 2021 did not see anticipated working capital release due to relatively robust finished steel prices, elevated raw material prices and lower than anticipated inventory reduction. Based on current market conditions together with impacts from higher automotive contract price resets, the Company expects a further working capital investment in 1Q 2022. The 2022 full year working capital requirements will be determined by market dynamics and are expected to be consistent with EBITDA evolution (with the aim to return working capital rotation days to targeted levels by year-end).
Capex of $1,145 million in 4Q 2021 compares to $675 million in 3Q 2021 and $668 million in 4Q 2020. Capex of $3.0 billion^19 in FY 2021 is below the previous guidance of $3.2 billion.
Net cash used in other investing activities in 4Q 2021 was $90 million as compared to net cash provided by other investing activities of $1,184 million in 3Q 2021 and $262 million in 4Q 2020. 4Q 2021 cash outflow primarily relates to the $45 million investment through the XCarb™ innovation fund (including carbon recycling company, LanzaTech). 3Q 2021 cash inflow primarily relates to $1.3 billion cash received from the redemption of preferred shares (the equivalent of 58.3 million common shares) of Cleveland Cliffs following a final review of the notice of the redemption, partially offset by other investments including those as part of the XCarb^TM Innovation fund. 4Q 2020 cash inflow relates to $0.5 billion proceeds from the sale of ArcelorMittal USA offset in part by an investment in short term deposits related to such sale.
Net cash used in financing activities in 4Q 2021 was $2,990 million as compared to $2,740 million in 3Q 2021 and $2,227 million in 4Q 2020. In 4Q 2021, net cash used in financing activities includes an inflow of $0.1 billion from commercial paper portfolio. Net cash used in financing activities includes an outflow of $0.8 billion in 3Q 2021 and $1.5 billion in 4Q 2020 mainly due to bond repayments.
During 4Q 2021, ArcelorMittal repurchased 59.2 million shares for a total value of $1.8 billion. In addition, the Company repurchased $395 million in aggregate principal amount of its 5.50% Mandatorily Convertible Subordinated Notes ("MCN") due 2023 for an aggregate repurchase price of $1,196 million. The MCN repurchase was equivalent to repurchasing approximately 36.6 million shares (based on the minimum conversion ratio).
During 4Q 2021 and 4Q 2020, the Company paid dividends of $21 million and $16 million, respectively, to minority shareholders. During 3Q 2021, the Company paid total dividends of $185 million of which $28 million was withholding taxes paid on dividends to ArcelorMittal shareholders in 2Q 2021 and $157 million mainly paid to the minority shareholders of ArcelorMittal Mines Canada^9 (AMMC) and ArcelorMittal Kryvyi Rih.
Outflows from lease payments and other financing activities were $53 million in 4Q 2021 and $46 million in 3Q 2021. Outflows from lease payments and other financing activities were $218 million for 4Q 2020 and included $135 million paid to Banca Intesa^15.
Gross debt increased by $152 million to $8.4 billion as of December 31, 2021, as compared to $8.2 billion as of September 30, 2021 and $12.3 billion as of December 31, 2020. As of December 31, 2021, net debt increased to $4.0 billion as compared to $3.9 billion as of September 30, 2021, primarily driven by returns to shareholders offset by free cash flows.
As of December 31, 2021 and September 30, 2021, the Company had liquidity of $9.9 billion, consisting of cash and cash equivalents of $4.4 billion and $5.5 billion of available credit lines^10. As of December 31, 2021, the average debt maturity was 5.8 years.
*Key recent developments*
· On February 4, 2022, ArcelorMittal announced plans for the acceleration of its decarbonization plan with a €1.7 billion investment in its Fos-sur-Mer and Dunkirk sites in France (while maintaining equivalent production capacities), supported by the Government. This investment will enable a transformation of steelmaking in France and a total reduction of close to 40% or 7.8Mtpa in ArcelorMittal’s CO2 emissions in France by 2030. Specifically, in Fos-sur-Mer, ArcelorMittal will build an Electric Arc Furnace (EAF). This new unit will complement the ladle furnace announced last March and supported by France’s recovery plan, ‘France Relance’. In Dunkirk, ArcelorMittal will build a 2.5Mt Direct Reduction of Iron (DRI) unit to transform iron ore using hydrogen instead of coal. This DRI will be coupled with an innovative technology electric furnace and complemented by an additional Electric Arc Furnace (EAF). Other investments are already under way to continue to increase the proportion of scrap steel used. The new industrial facilities will be operational starting in 2027 and will gradually replace 3 out of 5 of ArcelorMittal’s blast furnaces in France by 2030 (2 out of 3 in Dunkirk, 1 out of 2 in Fos-sur-Mer).· On January 14, 2022, ArcelorMittal announced that 45 million treasury shares had been cancelled to keep the number of treasury shares within appropriate levels. As a result of this cancellation, ArcelorMittal now has 937,809,772 shares in issue (compared to 982,809,772 before the cancellation). Details on share buyback programs can be found at: https://corporate.arcelormittal.com/investors/equity-investors/share-buyback-program.· On December 29, 2021, ArcelorMittal announced that it had completed the fifth share buyback program announced on November 17, 2021 under the authorization given by the annual general meeting of shareholders of June 8, 2021 (the "2021 AGM Authorization"). By market close on December 28, 2021, ArcelorMittal had repurchased 34,080,049 shares for a total value of €885,729,034.96 (equivalent to $999,999,819.63) at an approximate average price per share of €25.99. This brought the total advance as part of its prospective 2022 capital return to shareholders (to be funded from 2021 surplus cash flow under the capital return policy announced February 2021) to $3.2 billion including $2 billion of share buy backs completed and $1.2 billion payments related to the MCN as described below.· On December 22, 2021, ArcelorMittal announced that it had determined the final repurchase price for its previously announced repurchases of $395 million of its 5.50% Mandatorily Convertible Subordinated Notes due 2023 (the "Notes"). The aggregate repurchase price that ArcelorMittal paid for those Notes was $1,196 million. The transactions closed on December 23, 2021. The repurchase of this aggregate principal amount of Notes is equivalent to repurchasing approximately 36.6 million shares of ArcelorMittal common stock that would otherwise be issuable at maturity under the Notes (at the minimum conversion ratio). Pursuant to the purchase agreements the repurchased Notes have been cancelled and therefore will not convert into common shares of the Company. Following completion of the repurchases, approximately $608 million aggregate principal amount of the Notes remain outstanding.· On December 9, 2021, the Company announced it had made a $30 million investment in carbon recycling company, LanzaTech through its XCarb™ innovation fund, the fourth investment the Company has made through the fund since its launch in March 2021. The investment further expands ArcelorMittal’s relationship with LanzaTech, which commenced in 2015 when the Company first announced plans to utilise LanzaTech’s carbon capture and re-use technology at its plant in Ghent, Belgium.· On November 17, 2021, ArcelorMittal announced that it had completed the fourth share buyback program announced on July 29, 2021 under the 2021 AGM Authorization. By market close on November 16, 2021, ArcelorMittal had repurchased 67,404,066 shares for a total value of €1,881,270,528.80 (equivalent to US$2,199,999,614.74) at an approximate average price per share of €27.91. On the same day, the Company commenced a new share buyback program in the amount of $1 billion under the 2021 AGM Authorization.*Cost improvement *
In 2021, the Company achieved $0.6 billion of fixed cost savings relating to its previously announced $1 billion structural improvement plan. Savings were achieved through productivity gains and footprint optimization (following closures at Krakow, coke plant in Florange, and Saldanha); and SGA savings including a 20% reduction in corporate office costs including headcount reduction. The Company did not make progress against its plan related to repairs and maintenance ("R&M") spend following the decision taken to maintain R&M spend at higher levels to ensure operational reliability.
The Company is now announcing a new 3-year $1.5 billion value plan focused on creating value through well-defined commercial and operational initiatives. This plan does not include the impact of strategic projects (which will be followed separately). The plan includes commercial initiatives, including volume/mix improvements and operational improvements (primarily in variable costs). The plan aims at protecting the EBITDA potential of the business from rising inflationary pressures; improving its relative competitive position vis-a-vis its peers and supporting sustainably higher profits.
*Capital return *
In line with the Company's capital return policy, the Board recommends an increase of the base annual dividend to $0.38/share (from $0.30/share paid in 2021) to be paid in June 2022, subject to the approval of shareholders at the AGM in May 2022.
Given the favorable outlook for free cashflow in 2022, the Company has initiated a new $1 billion share buy-back program for 1H 2022. This is the maximum based on the authorization provided by shareholders at the AGM in June 2021. Additional authorization to repurchase shares will be sought from shareholders at the 2022 AGM (subject to cash generation).
The remaining surplus cash has accrued to the balance sheet in 2021. This headroom to our balance sheet targets provides strategic optionality to consider M&A in support of our strategic targets or further additional returns to shareholders in the future.
*Financial calendar for 2022*
· General meeting of shareholders: May 4, 2022: ArcelorMittal Annual General Meeting ("AGM")
· Earnings results announcements: May 5, 2022: Earnings release 1Q 2022; July 28, 2022: Earnings release 2Q and half year 2022; November 10, 2022: Earnings release 3Q and nine-months 2022
*Outlook*
Based on the current economic outlook, ArcelorMittal expects global apparent steel consumption (“ASC”) in 2022 to grow between +0% to +1.0% (versus growth of +4% in 2021).
Economic activity improved in 2021 as lockdown measures eased and the global steel industry benefiting from a favorable supply demand balance, supporting increasing utilization and improve demand. Although there is some moderation of the tight market conditions (and subject to pandemic-related macroeconomic uncertainties), the Company expects overall ASC to grow in 2022 versus 2021 with regional differences highlighted below:
· In the US, ASC is expected to grow within a range of +1.0% to +3.0% in 2022 (versus an estimated +20% growth in 2021). Automotive is expected to grow strongly as semi-conductor shortages ease and manufacturing sectors are supported by strong order backlogs and low inventory of finished goods. Infrastructure expected to grow due to beginnings of support from the $1.2 trillion infrastructure plan.
· In Europe, ASC is expected to grow within a range of +0% to +2% in 2022 (versus an estimated +14% growth in 2021), automotive expected to grow strongly, with moderate growth in infrastructure and construction to support underlying demand.
· In Brazil, ASC is expected to decline in 2022 in the range of -8 to -10% (versus a healthy +23.0% estimated growth in 2021). While ASC is expected to decline due to destocking, real demand is expected to increase moderately in 2022 with a recovery in automotive output offset by weakness in other steel-consuming sectors.
· In the CIS, ASC in 2022 is expected to grow within a range of +0% to +2% (versus a +3.0% estimated growth in 2021).
· In India, ASC in 2022 is expected to grow within a range of +6% to +8% (versus +17.0% estimated growth in 2021).
· As a result, overall World ex-China ASC in 2022 is expected to grow within the range of +2.5 to +3.0% (versus +11% in 2021) supported by mild growth in our core developed markets and stronger growth in India offset by weakness in Brazil.
· In China, overall demand is expected to continue to decline in 2022 to -2% to +0% (versus an estimated decline of -2% in 2021) weak real estate is partially offset by a mild pick-up in infrastructure.Given the mild growth anticipated in ex-China ASC in 2022 vs. 2021 (+2.5 to +3.0% as described above), the Company expects steel shipments in 2022 to grow by approximately +3% vs. 2021 levels (including some mix benefits and recovery post logistics issues in 2021).
In addition, capex is expected to increase from $3.0 billion in 2021 to $4.5 billion in 2022. Including $0.2 billion of carry-over from 2021, capex outside of strategic capex is expected to be $3.1 billion in 2022. Decarbonization capex is expected to be $0.3 billion in 2022 (net of government support). Capex on strategic envelope projects is expected to be $1.1 billion, including: the mix/growth investments at Vega and Monlevade in Brazil; iron ore projects at Liberia, Serra Azul and Las Truchas; and the pellet plant project in Ukraine and new section mill in Barra Mansa (Brazil).
Based on current market conditions (including support from automotive contract resets that have already occurred) the Company expects strong cash flow generation in 2022 and has announced a proposed increase in the base annual dividend to $0.38/share from $0.30/share to be paid in June 2022, (subject to the approved of shareholders at the AGM in May 2022) and a new $1.0 billion capital return program by 1H 2022.
*ArcelorMittal Condensed Consolidated Statement of Financial Position*^*1 *
*In millions of U.S. dollars* *Dec 31,*
*2021* *Sept 30,*
*2021* *Dec 31,*
*2020*
*ASSETS*
Cash and cash equivalents and restricted funds 4,371 4,381 5,963
Trade accounts receivable and other 5,143 5,572 3,072
Inventories 19,858 18,806 12,328
Prepaid expenses and other current assets 5,567 4,421 2,281
Asset held for sale^11 — — 4,329
*Total Current Assets* * 34,939 * * 33,180 * * 27,973 *
Goodwill and intangible assets 4,425 4,309 4,312
Property, plant and equipment 30,075 29,599 30,622
Investments in associates and joint ventures 10,319 10,134 6,817
Deferred tax assets 8,147 7,787 7,866
Other assets^16 2,607 3,082 4,462
*Total Assets* * 90,512 * * 88,091 * * 82,052 *
*LIABILITIES AND SHAREHOLDERS’ EQUITY*
Short-term debt and current portion of long-term debt 1,913 1,796 2,507
Trade accounts payable and other 15,093 14,108 11,525
Accrued expenses and other current liabilities 7,161 7,527 5,596
Liabilities held for sale^11 — — 3,039
*Total Current Liabilities* * 24,167 * * 23,431 * * 22,667 *
Long-term debt, net of current portion 6,488 6,453 9,815
Deferred tax liabilities 2,369 1,953 1,832
Other long-term liabilities 6,144 6,933 7,501
*Total Liabilities* * 39,168 * * 38,770 * * 41,815 *
Equity attributable to the equity holders of the parent 49,106 47,116 38,280
Non-controlling interests 2,238 2,205 1,957
*Total Equity* * 51,344 * * 49,321 * * 40,237 *
*Total Liabilities and Shareholders’ Equity* 90,512 88,091 82,052
*ArcelorMittal Condensed Consolidated Statement of Operations*^*1*
*Three months ended* *Twelve months ended*
*In millions of U.S. dollars unless otherwise shown* *Dec 31, *
*2021* *Sept 30, *
*2021* *Dec 31, *
*2020* *Dec 31, *
*2021* *Dec 31, *
*2020*
Sales * 20,806 * * 20,229 * * 14,184 * * 76,571 * * 53,270 *
Depreciation (B) (712) (590) (711) (2,523) (2,960)
Impairment items (B) 218 — (331) 218 133
Exceptional items (B) — (123) 1,314 (123) 636
*Operating income (A)* * 4,558 * * 5,345 * * 1,998 * * 16,976 * * 2,110 *
Operating margin % 21.9 % 26.4 % 14.1 % 22.2 % 4.0 %
Income from associates, joint ventures and other investments 383 778 7 2,204 234
Net interest expense (49) (62) (88) (278) (421)
Foreign exchange and other net financing loss (111) (339) (270) (877) (835)
*Income befor