ArcelorMittal SA Q1 FY2022 earnings call

• Consistently posted strong operating results with EBITDA over $5 billion for the fourth successive quarter, demonstrating business strength and diversification.
• JV and associates contributed 14% of net income, with book value of JVs at $12 billion.
• Strong net income of $4.1 billion and EPS of $4.28, the highest in over a decade, with benefits from share buyback visible.
• Delivered $1.5 billion free cash flow in Q1 despite $2 billion working capital investment, with net debt at record low.
• Announced an additional $1 billion buyback, bringing total to $2 billion, with $9.5 billion distributed to shareholders since September 2020.
• Focused on executing strategy, with progress seen in decarbonization projects like India's Greenko Group and Texas HBI acquisition.
• Ramp-up of hot strip mill in Mexico progressing well, expecting good contribution this year with potential $100 million impact.

ArcelorMittal reported strong financial results in Q1 '22. Net income was $4.1 billion with EPS of $4.28, the highest in over a decade. JV and associates contributed 14% of net income, with book value of JVs reaching $12 billion. The company delivered $1.5 billion of free cash flow in Q1 despite a $2 billion investment in working capital. Net debt is at a record low. A $1 billion additional share buyback was announced, bringing the total to $2 billion, with $9.5 billion distributed to shareholders since September 2020. Book value per share is $57 with trailing ROE of 36%.

• Expect strong second quarter with higher realized prices, stable to slightly higher volumes, but costs also rising.
• Capital allocation policy remains to distribute 50% of free cash flow after base dividend to shareholders via buybacks and dividends.
• Confidence in shipments growing year-over-year despite trimming demand forecast, expecting imports to decrease and market share gain.
• Decarbonization plans to continue with expectation of government funding reducing the $10 billion gross investment estimate.

• Impact of Ukraine conflict on operations in Kryviy Rih (running at ~20% metal capacity) and Kazakhstan, with potential logistics issues and need to redirect volumes.
• Liberian government reviewing concession agreements for mining operations in Liberia, which could affect the 10 million tonnes expansion program.
• Inflationary pressure affecting CapEx, with teams monitoring closely but risks of overruns present.

Q: On capital allocation, how linked is the $1 billion buyback to Q2 free cash flows?

A: Capital allocation policy hasn't changed; 50% of free cash flow after base dividend will go to shareholders, with buyback progress based on confidence in outlook and share price.

Q: On demand outlook and shipments, why is confidence shipments can grow despite trimmed demand forecast?

A: Confidence comes from normalizing for Q1 last year's disruptions, expecting imports to decrease and market share gain, with good order intake in Europe and healthy order book.

Q: Impact of Ukraine conflict on operations in Kryviy Rih and Kazakhstan?

A: Kryviy Rih has restarted one blast furnace at ~20% capacity, Kazakhstan facing redirection of volumes and potential logistics issues, but teams working to redirect.

Q: On Liberia's concession review, impact on 10 million tonnes expansion?

A: MDA is valid until 2030, in dialogue with government, amendments approved by Senate but lower house seeking changes, no immediate impact on projects.

Q: On HBI acquisition, potential returns?

A: Happy with asset quality, potential to add value with know-how, acquisition below replacement cost, integrates with existing facilities and has optionality for future expansion.

Q: On second quarter outlook by division, volumes and spreads?

A: Expect higher prices in Q2, volumes stable to slightly higher, but costs also rising, with strong second quarter expected despite cost increases.