ArcelorMittal SA

AEX:MT

Good afternoon, everyone. This is Daniel Fairclough from the ArcelorMittal Investor Relations team. Thank you for joining this call to discuss ArcelorMittal's performance and progress in 2024. Present on the call today, we have our CEO, Aditya Mittal; and our CFO, Genuino Christino.

Before we begin, I would like to mention a few housekeeping items. As usual, we will not be going through the results presentation, which we published this morning on our website. However, I do want to draw your attention to the disclaimers on Slide 23 of that presentation. Following some opening remarks from Aditya and Genuino, we will move directly to the Q&A session. [Operator Instructions]

And with that, I will hand over the call to Aditya.

Thanks, Daniel. Welcome, everyone, and thank you for joining today's call. Before I ask Genuino to comment on our financial performance, I want to spend a moment reviewing the progress we have made against our priorities. First, I will talk about safety. Across the company, our people are galvanized to improve our safety performance and achieve our goal of being fatality and injury-free. 2024 saw the completion of the dss+ group-wide safety audit and the recommendations, which focus on our risk management processes and establishing a consistent safety-first culture across all group operations.

I'm determined that we improve our safety performance this year and believe the detailed unit-specific road maps developed from the audit will support our efforts to do so. Reflecting on our strategic progress in 2024, we have achieved a great deal. We have faced challenges. As we all know, the cycle has not been in our favor. Yet despite those headwinds, we have delivered resilient results.

$2 billion of investable cash flow generation in this environment speaks to the progress we have made as a company. This has allowed us to invest countercyclically and reward our shareholders at the same time. Everyone at ArcelorMittal should take pride in this. Growth is an increasingly important theme for ArcelorMittal. This year, we will start to see the benefits of the organic investments we have been making over the last few years. The expected structural EBITDA impact from our portfolio of high-return strategic projects now stand at $1.9 billion. $400 million of this is due to be captured in 2025 with a further $600 million due in 2026. Our recently completed projects, the Vega coal mill complex in Brazil, the new hot strip mill in Mexico and the 1 gigawatt renewable project in India are performing well.

The fact that these projects are delivering new incremental EBITDA we expected should instill confidence that our strategic CapEx will add significant structural earnings and cash flow benefits. Similarly, the assets that we have acquired in recent periods, including Pecém in Brazil, Texas HBI facility and the stake in Vallourec are all performing well, adding further structural earnings and cash flow growth.

This growth supports higher shareholder returns. Over the past 4 years, our dividend has grown at a compound rate of 16%, reflecting our confidence in the outlook of our company. On top of our dividends, we have returned significant cash through our buybacks, allowing us to reduce our share count by 37% over the last 4 years, a rate unmatched by any of our peers. Our policy and capital return intentions are clear. On the theme of decarb, I want to highlight that ArcelorMittal's absolute carbon emissions today are approximately half the level of 2018. Much of this has been the result of our portfolio optimization and the steps that we have taken to shape our business around our most competitive assets.

As we move forward, we are determined to follow a transition pathway that is economic and ensures that we remain competitive. When it makes sense, we are making investments. The EF in Guyan and the revamp of our 2 EFs in Sistao are both good examples. These economic projects support our growing offering of low-carbon solutions to our customers under our XCarb brand. It is critical that we see Europe make swift progress in providing a policy environment that appropriately incentivizes the further investments required to accelerate decarbonization in Europe.

As I conclude, my message is quite simple. We are a transformed business. We have the best talent. We have excellent market positions in all the attractive geographies, including a unique exposure to India, and we have a reputation for quality and innovation that is unmatched by any of our peers. Our Tier 1 balance sheet is a strategic asset that underpins our consistent growth and continued value creation. I would like to take this opportunity to thank all our employees, customers and the shareholders for placing your trust in us. With that, I will now hand it over to Genuino to talk more about our financial performance.

Thank you, Aditya, and good afternoon, everyone. We delivered a resilient performance last year despite the challenging market backdrop. EBITDA was $7.1 billion for the year, which translates to $130 of EBITDA per tonne shipped. This is almost double the level of previous cycle lows, showing that the business and its earning capacity has structurally transformed.

The benefits of our optimized asset base and our relatively diversified exposures have also seen our results show significantly more stability than peers. This was particularly evident in the fourth quarter. Adjusted net income of $2.3 billion in 2024 represents a 4.4% return on the book value of Ebi, which now stands at $64 per share. Return on capital employed in 2024 was 6%. Considering where we are in the cycle, I believe both these figures are commendable. Moving on to cash flow. We generated over $2 billion of investable cash flow in 2024, bringing the total to $21 billion since 2021. Last year, we invested $1.3 billion in the high-return in strategic growth projects that Aditya described.

We returned $1.7 billion to shareholders, including the repurchase of 6% of our outstanding shares, and we invested a net $0.6 billion in M&A, including, of course, our 28% stake in Vallourec. Our performance provides strong evidence that ArcelorMittal can deliver value through all aspects of this deal cycle and is testament to the progress we have made in recent years. I believe this is reflected in the dividend increase to USD 0.55 per share.

This is a 10% increase on last year's dividend and brings the total increase since 2020 to over 80%. Finally, on the outlook, we are forecasting slightly positive apparent demand growth and are well positioned to benefit from any recovery. We are confident we will continue to generate positive cash flow this year and beyond, which will continue to be allocated via our established capital return policy. With that, Daniel, I believe we can move to the Q&A.

Great. Thank you, Genuino. So we will take our first question from Ephrem at Citigroup.

Three quick questions. Firstly, with the plant non-green steel-related plant in Calvert to commence end of '27, does that mean anything for the second year at Calvert, either in terms of accelerating the time line or delaying the terms in terms of project complexity sequencing, et cetera?

That's the first one. Secondly, on CapEx, firstly, on the strategic growth of $1.3 billion to $1.5 billion, with new projects also coming into the pipeline like the electrical steel plant, should we expect it to remain at these kind of levels beyond 2026 as well as long as the balance sheet remains under geared and on the EUR 0.3 billion to EUR 0.4 billion of decarbonization CapEx after the Chairman's open letter of the FT, is it also right to think that it would remain for the foreseeable future at these levels unless there are major changes in the form of some regulatory support? And thirdly, a slightly pedantic question with the volume increase in Liberia from incremental 10 million tonnes to 15 million tonnes, why is the EBITDA potential only increasing from -- by about $100 million from $350 million? Has the underlying assumption on the cost or pricing there changed as well?

So a lot of questions, but let me take a stab at them. So in terms of Calvert, Alabama, look, I think the first headline is that we are in the process of commissioning our brand-new electric furnace. This is the most technologically advanced electric furnace in the United States with caster and hot strip mill with the capability of producing exposed automotive grades. So in our minds, it is game changing, it's just cutting edge, it's -- we've got a good cost base and then further strengthens our strong franchise that we have in the NAFTA region. We're building on that with electrical steel announcement this morning that we made. This is going to be 100% owned by ArcelorMittal. It's another world-class cutting-edge electrical steel facility for non-grade oriented steels for the premium automotive demand requirements with really good gauge capability and excellent quality characteristics.

We are also looking at a second EAF. And your question was, does the electrical steel facility delay that? I don't believe it materially delays the second EAF. I think what we're focused on is commissioning the first EAF and then utilizing the resources that we have for the first EAF in staffing the project for the second EAF. So that's fundamentally the plan. We're building -- we're commissioning the first year, building another world-class electrical steel facility in terms of electrical steels at Calvert and then we'll start on the second EAF.

In terms of the medium-term CapEx and decarb, look, fundamentally, it's a great question. Our focus remains to keep the overall CapEx envelope between $4.5 billion to $5 billion. That's really the focus. And we have the ability to modify where we spend our CapEx, right? So you saw in the third quarter, we announced we are not going ahead with the Monlebar project in Brazil. Instead, we substituted that with the electrical steel project in Calvert, Alabama. So similarly, I think you can expect developments like that where we see the market is changing or we can be more agile and dynamic in allocating where we want to invest our capital. And that also applies to decarb. I'm not suggesting that all this growth CapEx will go into decarb, but perhaps based on acceleration of policy regulation that we want. And in case that happens, we could have more than just $300 million of decarb CapEx per year.

In terms of Liberia, look, that's a very good question. We have not changed our long-term assumptions of iron ore, and they remain conservative, especially compared to spot today. The reason why you don't have the same delta, I mean, you have a similar delta in terms of volume growth. But the reason why it is slightly less is primarily because of quality considerations, right? The 5 million tonnes is a DSO product.

So it has a much lower Fe than the sinter feed product that we will make. And so as we blend, we get some revenue uplift. So maybe to explain more clearly, today, the concentrate can do 15 million tonnes of concentrate and 5 million tonnes of DSO. The original plan was we lose the 5 million tonne of DSO. And now the new plan is that we blend it and we have a 20 million tonne syn feed product. And so the delta is, obviously, there's a positive on the volume side, offset by some of the changes on the revenue side. So we can provide you with more detail on the math behind that.

So we'll move to take the next question from Patrick at Bank of America.

I'm sure you guys knew this was coming. If you saw kind of a reemergence of a threat of tariffs on Canada and Mexico from the U.S., how are you guys thinking about the potential impacts on Dofasco and Mexico?

Sure. So yes, Andrew, we were expecting this question to come. Thank you for asking it. Look, the high level first or the global perspective, and you guys all know this better than us, there's significant global overcapacity. And so any action to tackle that is welcome. We see similar actions underway in the European marketplace, similar in India. There have been actions already taken in Brazil. There's discussion for potentially some more, nothing has really materialized. And we see similar issues in the United States.

In terms of specifically the tariffs against Canada or Mexico, we've been there before. I think if you remember in 2018, 2019, when 232 was imposed, there was tariffs that came from -- there was tariffs on Canadian steel and Mexican steel. And roughly, it costed us about $100 million per quarter. But this was more than offset by revenue, right? So if you look at the revenue impact, it was far greater.

I'm not suggesting that, that would happen again in this period in time. But clearly, one mitigating factor would be the revenue impact on some of these tariffs. Secondly, I would just add that I talked about the Calvert EAF. So you heard about that. So we have much more slabs, which are domestically produced, which are melted and forward. So that's another mitigating factor. But fundamentally, I guess the last point I would make is that these discussions remain uncertain, what will end up happening. But the fundamental focus that we have as an organization is really to strengthen the NAFTA trading block. We see a lot of imports that are coming into Mexico and into Canada. And to the extent that the desire is fundamentally to strengthen NAFTA, that would be a net positive. And excuse me, Patrick, I got the names mixed up. So thank you for your question.

Great. Thanks, Patrick. So we'll move now to a question from Andrew at UBS.

Just a follow up on that [indiscernible] question, I guess just to spell out the actual volume flows into the U.S., can you just give us the numbers around what's coming from Mexico? Obviously, there's a bit of large lab volumes, could you quantify that and any other products? And also how much is going from Dofasco into the U.S.? And anything from your report per sale? Just give us some volume numbers would be helpful.

And secondly, just on the Electrical Steel, can you just talk a little bit about the market for non-grown orientated? Like how you see that growing in the coming years? What -- is for any of the supply coming down the pipe? How tight do you expect that market be by the time this mill comes through? And can you just talk through a little bit of the market situation there, please?

Okay. Great. Thank you, Andrew. I'll talk about electrical steels and then I'll see if Genuino can provide you with any color on your volume requirements or volume question. In terms of the non-grade oriented electrical steel market, noise as we call it, today, the market is in deficit, a significant amount of the supply is through imports. So if you look at our volume, it's about 150,000 tonnes. It basically covers the import volume.

That's the first point. Second point I would make is that the market continues to grow. And we should not think of this as just electrical cars, we should think of this as a market, which is electrical cars plus hybrids because electrical steels go into both vehicles. And so there's still strong growth in hybrid vehicle demand and we'll be catering to that. The third point I would make is that, yes, there are some announcements of new capacity, but you really need to look at that capacity and what is the capability of that capacity to deliver the high-quality premium automotive material. And that, I think, is actually much shorter or much less than the overall market situation. So in that sense, I think we have a unique product offering with a very high quality capability and the market is there for our product. Genuino?

Yes. Thank you, Aditya. Andrew, As you know, we don't typically disclose the volumes that sort of close from Canada and Mexico to U.S. and vice versa. And that's why we are trying to be helpful by reconfirming the cost impact that we saw back then in 2018. When we look at the close today, they are similar, and that's why we continue to cut the $100 million that Aditya talked about on the cost side. And then, of course, we will see what happens on the other side of the equation, the revenue side.

So we'll now take question from Timna at Wolfe Research. Actually, I think, Timna might have just dropped off the call out. So we'll move directly to the next question, which we will take from Tristan at Exane BNP.

I have two. First, on the strategic projects. So this year, you expect a $0.4 billion EBITDA uplift from Vega, India and Liberia. But you also have 3 projects, I think they were supposed to be ramping up now, Mardyck, Barra Mansa, Serra Azul. And now they are due to be completed in 2025. So First, can you explain a bit the delay and why you don't expect at least some contribution for those 3 projects this year already?

Thank you, Tristan. Look, that's a very important question. So just on the high-level overview, we have -- we expect about $100 million of EBITDA contribution from these projects. And so instead of receiving that or getting that EBITDA contribution in 2025, that has been moved to 2026. And therefore, we expect $400 million EBITDA uplift in 2025, and now we expect $600 million uplift in 2026. So these are 3 different projects. So Mardyck is an electrical steel facility in Europe, which we are building. There were various reasons for delay. Predominantly, they had to do with equipment supply.

And also, I would say, a lack of experience in large-scale projects. right? In Europe, we have not been investing. So we had a project team and engineers, but there is a lack of experience. What we see is that when you have a project team which has done one project, the next project flows much more smoothly. In Serra Azul, we ran into certain mining difficulties, which has delayed that project. And Barra Mansa, again, is similar issues as Mardyck equipment as well as lack of project experience.

At the same time, in Brazil, which is very interesting for us, the flat operation delivered the Vega project on time and on budget, and that has ramped up in record time, actually faster than what we had anticipated or which was in our project approval process. So it's been a very interesting learning for us. where we see similar geographies, similar teams perform differently. And as a result, we -- just in December, we have created a new global projects team at the central level. There's an individual called Bart, who is spearheading that to bring in our global expertise to bear because we have the expertise. Fundamentally, Arcelor knows how to do projects. We have been delivering projects on time and on budget, but it's not uniform. And the task is really to bring that capability across the organization so we don't have further projects which get delayed. So I hope that helps answer the question.

And maybe just a quick follow-up on the projects. I don't see the doubling of HBI capability in Texas anymore in the release. Is that a project that you've definitively dropped? Or is it tied to decarb in Europe? So any comment there?

Yes. So it's a good question, and I'm glad you asked it. I think the projects that we have put in our presentation are in the medium-term pipeline. So they're not necessarily in the long-term pipeline. We have a few others like just to talk about Brazil for one, where we've talked about expanding our finishing operations. This is cold rolling in Galv. We're also thinking that since we are slab long to do a hot strip mill, and that's not in. So there are numerous examples in Liberia.

We have a very good resource body, an excellent resource body we can actually do more in Liberia. So the idea now is to hit 20 million tonnes, judge where we are, figure out what is the economics based on the long-term price of iron ore and then decide if we want to continue to grow. But those are all options that we have. In Texas, I think what we have done is we have focused our efforts on Calvert right now. So you heard me talk about the projects in Calvert, the electrical steel line, the new EAF. So after all of that, we will reevaluate Texas. And you're correct. It's also linked to progress on European decarb. So it's not that it's not there in the foreseeable future. It's just not there in the medium term.

All right. And if I could just squeeze one more on projects. Just the NGO line in Calvert, it seems the scope of the project is much larger than just an electrical line that can be $400 million CapEx. So I see the total CapEx is $1.2 billion. I see it includes a cold rolling mill and other equipment. So can you explain the capacity of the other equipment and explain the rationale of the investment? And does that replace existing capacity as well? And how should we think about it?

So it's all incremental capacity. So there's no replacement. There's no cold rolling mill line for nongrain-oriented steel products. So this is really electrical steam line. Perhaps you're comparing it to the Mardyck facility, which is roughly the amount you quoted a bit more than that, but let's use that as a reference. So there are 2 or 3 key differences. The first and most important is the U.S. is a greenfield site, right?

So we have to do the full construction of the facility, including the whole building. In Mardyck, we were able to utilize an existing building. So construction costs are quite expensive, and that adds. Number two, and importantly, the line in the U.S. has even more capability than the line in Europe. And that is a market function. We see that the U.S. market is moving to higher grades for this primarily because of the SUV segment and other unique characteristics of the North American marketplace. And so you need more capable equipment, more equipment, more rolling capability, and that obviously adds to cost.

And the third is obviously, construction costs, manpower costs, steel costs and other costs are higher in the U.S. than they are in Europe. So those are the primary 3 factors when you make your comparison on the electrical steel line in France and then versus the one that we're building in Alabama.

So we'll move now to our next question, which we will take from Alain at Morgan Stanley.

Just one question. It's on the buyback program. You are in the final phases of completing your existing program and you expect a positive free cash [indiscernible] in 25%, your share price is trading at a steep discount to fair value. What comes next? What are you thinking going forward? You do have a clear framework. But the question is, are you willing to also stretch your balance sheet to seize the opportunity at the moment? How should we think about it going forward?

Okay. Great. Thank you, Alain. So as you heard from us and as you saw from our release, we have done quite a lot in terms of returning capital to shareholders. We think we're unmatched by any peer. That's what we said. So we have bought back 37% of the company. Since 2020, we have generated about $21 billion of cash and about $13 billion, $13.2 billion has been returned to shareholders. So that's very, very significant. We have also increased our base dividend by $0.10 to $0.55 per share.

That reflects the buybacks that we have done. It also reflects the underlying resilience/benefits of the growth projects that are underway in the company. So you can see that the direction of travel is very clear. We're very focused on returning capital to shareholders. And I think we've done an excellent job in that over the last few years. Going forward, we believe our policy serves us very well in which we take the free cash, subtract the minimum dividend and then half of the remaining free cash is returned as capital to shareholders. We think that allows the company to continue to grow, develop its business and also return a significant amount of capital/cash to shareholders. So we're very comfortable with the policy that we have in place.

So we'll move to the next question, which we'll take from Matt at Goldman Sachs.

I'm just -- I'm keen to get a better understanding on the rationale for the timing of this expansion in Liberia. Has your demand outlook for center feed changed? Or has this decision been taken to provide the infrastructure for flexibility and product spec in the future, just given some of the pressures we're seeing on high-grade iron ores currently? And then with this spend, are you upsizing the infrastructure to 20 million tonnes? Or will this also now provide a more capital-efficient pathway for that incremental 10 million tonnes that you may consider in the future?

Yes. Thank you, Matt. So let me just give you a high level. It will help explain, I hope your concerns or your question. So we had a new mining team that joined under that leadership. I think the first thing that has been delivered, and you guys have all seen this, is safe operations and record volumes in Q4 in Mines Canada as well as strong volumes in Iberia in the fourth quarter. We expect that to continue. The team is doing a great job. And the second task that we asked them apart from safe and reliable operations was to relook at the Liberian project.

And the team that has joined was at ArcelorMittal a few years ago. So you can go through the names. And so they've come back. And their thought process was that we should not stop the DSO product. So if you remember, the original project was that we have -- DSO is basically run a mine. We have 5 million tonnes of volume of that presently in Liberia. We start up the concentrator and we stopped the DSO. So the net increase in volume is about 10 million tonnes. So 2 things. Number one, the resource and reserve base is much greater, so we can run product for longer. And number two, we felt that the concentrate product doesn't have such a good market acceptability as sinter feed. And so you bring the 2 ideas together, and we felt that we could maintain a 20 million tonne output mine versus a 15 million tonne, which would require investments in port, infrastructure, rail, some blending capability.

And instead of doing just 15 million tonne concentrate, we are now going to do more sinter feed and a little bit of DSO and a little bit of concentrate. And so that's really the new concept. In terms of capability beyond, right now, the investments are there for 20 million tonnes. But when you make certain investments, the ability to expand capacity, obviously, is not as expensive because there's been a lot of work done on the port side, for example, as part of this 20 million tonne expansion. So I hope that helps answer your question, Matt.

Yes, that's loud and clear. So really a margin-driven decision, which makes a lot of sense. I have a couple of others, if I may. Just on the Calvert EAF that you're commissioning, when can we expect that to reach full capacity? And you touched on sort of an earlier comment just on some slab being sourced domestically. Assuming the CAF is up and running and you keep that domestic contract in place, how much are you importing into Calvert on the slab side? And then just on -- more broadly across the portfolio, we've seen in some of your key markets, particularly places like Brazil, just the FX depreciation. How should we be thinking about this in terms of a cost tailwind, just given some of your raw materials are all, I guess, priced in U.S. dollars? Are you seeing much of a cost tailwind there?

Sure. So in terms of Calvert, as I mentioned earlier and perhaps you were there, Matt, this is really producing automotive quality steels, exposed quality product. And so there's a qualification process with automotive. And that is a normal -- that is normal, but that causes the ramp-up to be slower. So we are anticipating roughly 12 months from today for full ramp-up, full volume of that facility. In terms of the specifics of volume, I don't know if Genuino can provide you with more color. I think we don't really disclose volume. And I'll get him to answer the ForEx question on Brazil.

Yes. Sure. Matt, the FX question, the way we look at it, and you're absolutely right. So we saw a very significant FX volatility during this quarter. the Brazilian real depreciated significantly, but also the euros, it was across the board. As we know, I mean, the steel industry, it's primarily a dollar business. And so then what we normally see is that following a depreciation, domestic prices tend to then be corrected to reflect the new exchange rates.

And then unless the change is so significant that can impact the economies, it tends to be positive to our business, right? Because your cost base in dollars then goes down, your revenues just adjust to the new exchange rates. And then in the medium to long term, your business is just more profitable. So that's what we see -- that's what we typically see when we have significant devaluations.

So we will move to the next question, which I think will take from Dominic at JPMorgan.

I just have a few questions. We're starting to see signs of green shoots on pricing in Europe and the U.S. and obviously, some discussions around maybe some import restrictions coming in, in Europe. So I just wondering if you could just maybe give us a little bit more color on how you're seeing kind of orders evolving. That would be my first question. Second question, you mentioned your working capital optimization for 2025.

I just wonder if you could put -- maybe put a quantum on that in terms of what you think is an optimal working capital, carryforward number into 2025? And then final question, just we're getting a lot of questions incoming around Ukraine. And so just as things stand today, could you just maybe give us a sense of how quickly you could return or return production back to the market and if it would come with an incremental cost, specifically CapEx?

I'll answer Ukraine and then I'll get to answer the rest. So in terms of Ukraine, it's obviously been very difficult for our employees and all of us actually to just watch what has happened to our people and to our facilities. As you know, we're operating at about 30% of its capacity. We are breakeven on an EBITDA basis, but we are losing cash. We have been losing cash since day 1 of the invasion, and that's been -- that's amplified the difficulty. In terms of moving forward, clearly, we would hit cash breakeven, assuming we double utilization rates.

That's our expectation. So that would take the facility to about 3 million tonnes. That's still at 60% of utilization rate. So there's -- it's still less -- much less than where we were before. To go beyond that would require CapEx. At this point in time, I think it's a bit early to speculate on what that CapEx would be and how we would do it. I think it also depends on how quickly demand returns, what happens in terms of the rebuild plan and what type of piece is actually delivered.

So I think I would leave you with a thought that we can quickly bring it back to cash breakeven to a 3 million tonne rate. Obviously, depending on prices and stuff like that, it could be even better than cash breakeven. And then future steps, we will discuss and elaborate with all of you once there is more clarity. Genuino?

Yes, sure. So let me start with Europe then. So in Europe, as we all know, there are important developments that we should see the conclusions very soon. One -- an important one, of course, is the antidumping investigation against a few Asian countries. So that, of course, can be quite positive to the extent that it's confirmed.

Then a second piece that is also -- can be also very important is the review of safeguards that we also expect to be completed very soon. So -- and then what we see right now is the competitiveness of imports given where prices are in Europe, it's not so attractive. From our position, our order book for quarter 1 is almost -- it's basically completed.

And I think everybody is looking forward for the trade actions that should potentially improve quite significantly the situation in Europe. In the U.S., I think the situation is -- we are starting to see also price announcements, which is good. We will see how it develops. In terms of working capital, I think what we are guiding is that based on what we can see today, current market conditions, we don't expect to invest in working capital in 2025. Our expectation is to see some release. We are not quantifying that amount right now. But at current market conditions, we should see some release. We are building inventories, slab inventories that will be used in one of our facilities in Europe that we're going to need to rely. So we are building that inventory that we will then, of course, release during the year. And as we know also in the first half of 2024, raw materials were more expensive. So we are still working through that. So that should also benefit working capital in 2025.

So we'll move now to take the next question, which will be from Phil at KeyBanc.

Automotive in North America and Europe, just broadly, what are you seeing this year? What are you expecting in those markets and regions?

Yes. So we are seeing more stability in North America, Phil. 2024 was a year where it was relatively stable. For us, we gained some market share. We were pleased with that. In Europe, we saw a decline in production, right, 6%, 7%. Some destocking that happened also in the fourth quarter. So the base case for Europe in 2025 with a modest decline in production. That's the latest forecast.

But there are some offsets. So we have offsets in Brazil, where we continue to see an increase stability in North America and then a small decline in Europe.

And just a second question, if I may. Calvert, you've talked about a lot today, a lot of good color, which we appreciate. Has there been any meaningful start-up costs within the results associated with the commissioning of that mill?

So Phil, to let you know, I mean this is the JV. So at this point in time in quarter 4, not really.

So we'll move to the next question, which we will take from Bastian at Deutsche Bank.

I've got two questions left, please. My first one is just on your European performance. I guess most of those would have been pretty amazed by your ability to preserve literally flat margins in Europe in a spot environment where hot-rolled coil spreads have come off by about $100 versus the last few quarters. So what exactly has allowed you to perform as well? And has there been any benefits such as energy cost repayments or anything else which supported your cost performance here? And then also, can we expect your margins to already have reflected the low point in the cycle here, which I guess was the second half of last year? That is my first question.

Yes. Bastian, we are actually very pleased with the performance of our European business given the current market conditions. And I think what really explains the performance is a very strong cost performance, right? The fact that if you look at our production numbers in quarter 4 compared to last year, you can see that there is a significant improvement.

Then, of course, in the steel industry, when you are producing well, then, of course, your costs come down. I think we had a good performance also in terms of fixed costs, and that is supporting our results in quarter 4 and the whole of 2024. We had a much better year in terms of operations.

And then just my second question is on your footprint. And I guess you've done a lot of changes here over the last few years. I guess, the recent ones in terms of the service centers you've been closing in France, obviously were slightly smaller in nature. But are there any further footprint steps, which you're currently looking at more closely, be it either on the restructuring side, the divestments or be it also on the accusatory side?

What was the last word of your sentence, divestments or?

So basically acquisitions, i.e., like, I guess, is there anything meaningful you currently have on the radar in terms of restructuring or divestments or acquisitions?

Okay. Great. So in terms of Europe, just to provide a little bit more context, Fundamentally, as you know, there are 3 policy issues in Europe. The first is high energy prices, which is impacting the European steel industry. The second is trade. If you look at 4, 5 years ago, imports were 15%, now imports are 27%. And this is because the quotas and the safeguard keep on increasing while apparent steel consumption has not. What are the actions that are being undertaken? One, there's an antidumping case. The second is the safeguard measures themselves are being reviewed. And the third after trade is really climate regulation. And again, there is a lot of discussion on climate regulation that the CBAM needs to be fair and equitable to the domestic European steel industry.

Assuming those things pan out, the way we would hope. I think the actions that we need to take to further improve the competitiveness and concentrate our operations and improve productivity will be more limited in nature. To the extent that those actions don't pan out, then clearly, we will need to act to restore competitiveness to our business. We know how to do it. We've done it in the past, and then we've been embarking on such a strategy. So I hope that answers your question on how we think about our European business and how we can maintain competitiveness going forward.

So we'll move to the next question, which we will take from Boris at Kepler Cheuvreux.

Maybe as a follow-up on that one, Mr. Mittal, you've been very straightforward regarding these issues European -- the European footprint faces. How would you say that you have the feeling to have been listened by the European Commission? That's my first question. And second question would be on the Vallourec stake. Today, you have 28%. It's a great asset. You bought at a reasonable price. And now that you have some time -- you've spent some time with the Vallourec team, how do you see the future there in terms of synergies? And why not buy the entire company?

Sure. So in terms of your first question, yes, obviously, we have listened to, but listening is not enough, right? There needs to be action. And that's what we are looking forward to action in the first half of this year. There has been some action. However, if you had noticed last week, the CSRD regulations were postponed and changed, so that's positive. But we need specific action to support the steel industry of Europe. Energy may take longer because it's a geopolitical issue. But clearly, action on trade, which is under control of European regulators as well as CBAM is critical. So there is no change in our thought process. We need this to continue our decarb journey. We need this to continue to maintain all of our operations.

And there is sympathy, but clearly, we want to see the actions accomplished. In terms of Vallourec, you're right, it's a great company. It's a great asset. The management team is doing a great job. We're very happy with our stake. And at this point in time, we have no intentions of increasing it further.

So we'll move to the next question, which we're going to take from Cole at Jefferies.

I've got 2 on my side. The first one is just on India. I'd love to get your thoughts on the current trends you're seeing in the market there and what are the key positives or potential negatives that you're seeing into 2025? And then the second question is a bit of a longer one, but I'd love to hear your thoughts on how you think about it. Your Slide #2, you've been calling out for a while kind of structurally higher margins through the cycle. And you've talked about your disposals of businesses and how you've repositioned. But should we think about this into the future that your new CapEx projects are more value over volume focused. This even at the bottom of the cycle being $130 EBITDA per tonne, is this kind of marking the new trough for you, hopefully, through the cycle? How do you think about that kind of value proposition going forward?

Okay. Great. Thank you. Let me talk about India. In terms of India, we had a great investor visit a few months ago, where people could see that we have a very high-quality asset with a very engaged, passionate and committed team. Our facilities are world-class. They are coastal facilities with very good iron ore linkages.

So we have a very, very strong foundation to build on. We are presently building on that. We are doubling the capacity, but it's not only just doubling the capacity. We are investing upstream in terms of iron ore capability and pellet plants, but we're also investing downstream because we are in the process of commissioning downstream automotive facilities, the cold rolling mill lines, Galv lines. So there is a significant upgrade to the quality and capability of the mill. We're also bringing new products like Magnelis. In terms of the short term, the short term is difficult in India. The market is flooded with imports. Like other parts of the world because of the overcapacity that exists in the global steel industry.

What is the government doing? The government is evaluating safeguard action. We should hear the results of their investigation in the first quarter of this year. If you were to ask how confident are you that the safeguards would support growth, I'm quite confident. The reason why I'm confident is because the India has a very clear strategic direction. They call it Atmanirbhar Bharat, which basically translates into self-reliance. The reason why we invested in the country in the first place was because of the shift in policy where the Indian government is very clear that they need to make steel domestically.

Other competitors have spoken out loud that if appropriate safeguard action is not put in place, then it will be difficult for them to continue to expand and to cater to domestic demand. And therefore, I do believe that appropriate action will be taken. It will allow us to continue our growth plan and build on a very excellent foundation that we have in the country already. In terms of your second question on structurally higher margins, look, the short answer is yes, because we are not really growing crude steel capacity, right? If you look at the projects that we're doing, they're all value-add in nature, whether it's the electrical steel capability in Calvert or even vertical integration in mining supports our business as it lowers the overall see-through cost of our product offering, whether it's all the downstream investments we are doing in Brazil. In Calvert also, to the extent that we are growing EAF, we already have the finishing capability.

So on a per tonne basis, the shipments are not really increasing. This is us moving upstream to capture more of the value, make it melted and poured in the U.S., making EAF quality green steels for the marketplace. So fundamentally, the idea is exactly that, structurally higher margins, which creates a much better quality business and a much better dynamic for us as we ride through the cycles of the steel industry.

And then maybe just to be helpful and keep the thread going here. Could you just remind us of some of the actions you've done maybe over the last 5 years that have improved the margins of the Mittal Steel business?

Sure. many, many actions. I think the biggest one is how we have changed our portfolio, right? And so if you saw, we also announced that absolute carbon emissions are down 50%. So that reflects how our portfolio has shifted to higher-quality assets, which are higher quality because of their cost position as well as their quality position in terms of product. So that, I think, is the overarching theme. We have rounded out that asset base with very good acquisitions.

So for example, Pecem in Brazil was built at a cost which is a 3x multiple of what we bought it for. It's a world-class lab asset. It's really low cost, highest quality with multiple growth options. So that's also another example of how we have upgraded our asset portfolio. We talked about Vallourec. Look, that's a great asset. It's delivering well. The stock has done well. It has a good return. I expect it to have a good cash return as well as time goes by. So that's another example. The hot strip mill in Mexico is another very good example where we had a slab plant in Mexico that's a very strong market. We invested in the hot strip mill. It's a great hot strip mill, and you can see that the profitability of Mexico, which is reflected in NAFTA has fundamentally changed, and this is for the domestic Mexican market. It's not for exports to the U.S. So these are a few of the examples.

We obviously had our management gains program. We did a lot of portfolio optimization in Europe and in other places. We don't talk a lot about the continuous improvement, the impact of the R&D and innovation in the company, but all of that translates through. And so that's why you can see that we continue to perform well. We continue to perform or perform at the highest level, and I should say, actually outperform the competition in the regions in which we operate. And that's fundamentally the dynamic of our business and our company.

So we're moving up against time here. But I think we've got time for another couple of quick questions. So we'll take the first from Timna at Wolfe Research.

I'm sorry, I dropped off earlier. So I just wanted to ask a few maybe quick ones. One is on the electrical steel in the U.S. The grain-oriented steel is really the tight one. Is it possible that you also make that? Or are you just going to focus on nonongrain? That's one question. And the other one is probably not as quick, but on the growth forecast, people watch your forecast very closely. Of course, you don't include what you think happens in China. So I'd just like to get a little more of your thoughts about China since we've been dancing around this global oversupply. Do you think that they rectify that? Do you think exports could shrink this year? Just your thoughts there, please.

Sure. In terms of the electrical steel facility, it is nongrain. So that's our focus. And these are different markets, right? The Ghost product goes into transformers and the electric grid. The nongrain basically goes into automotive. And the reason why that market has changed, I mean, non-grain always existed. But the reason why it has changed is because of electric cars as well as hybrid vehicles. And the quality requirements that they have is very different from the usual, I should say, or the commodity type nongrain electrical steels. This is really premium and there's a good price point. And equally important is it continues our franchise, right? We are the leading automotive supplier in the NAFTA market, looking at the quality and technical capability that we have, and this continues that franchise that we have as ArcelorMittal. In terms of China, look, the high levels are that China is exporting 110 million tons of steel.

These are record levels. We saw this last in 2015, 2016. But fundamentally, the company did well. We generated over $2 billion of investable free cash flow in spite of 110 million tonnes of Chinese exports. Going forward, I expect a lot of trade action to level the playing field, whether it's the U.S./NAFTA or Europe or Brazil or India. And perhaps the trade action spurs reduction in overcapacity or reduction of exports in China. That's really the base case, not so focused on what is happening in terms of China, but perhaps the trade actions for capacity rationalization. So I hope that provides you with the flavor of our thought process.

So we'll move now to take the next question, which is from Max at ODDO, and then we'll take one final question after that.

First question is on the bridge from Q4 to Q1 EBITDA. Can you provide some insight on the moving parts. Traditionally, Q1 has a better seasonality, higher volumes, especially in North America and Europe than Q4. So can we expect an uptick in EBITDA in Q1 versus Q4?

Yes, Max, let me take this one. So you're right. So going through the regions, starting with the U.S., our expectation is to see some better shipments. I mean, as we normalize production in [indiscernible] as well so our expectation is for shipments to be higher. And then in terms of prices and costs, we expect to be relatively stable. In Brazil, we also believe that shipments should be relatively stable and prices and costs as well. In Europe, we do expect some positive also volume pickup, but prices, as we know, in Europe, they took longer to start to show some recovery. We will see our end up being slightly lower in Q1, higher volumes, slightly lower prices and relatively stable costs. On the mining side, we do expect another strong performance. We are expecting also volumes to improve, especially in Iberia and another strong performance in Mines, Canada.

And second and last one is on the decarbonization agenda. So you're suspending your actions in Europe. But could you give us an update on Canada? Do you see the situation as sufficiently supportive to carry on with your decarbonization expenses there? I think you were planning to complete the transition from 2026 to 2028. Are you still on track to do that yet?

Great. Thank you. So I would say suspended is a very strong word in terms of our Europe decarbon plans. I would say that we are progressing. We have an electric furnace, which is coming on stream in Gun as well as we are revamping the furnaces in Sestao. So we have some product coming out, both long and flat, which is decarbonized in nature. In terms of our plans, we are waiting for appropriate regulatory framework to continue on decarbonizing our existing European business. So I think I talked about this a lot in terms of energy, trade and CBAM. We need preconditions to continue that and to accelerate the decarb journey in Europe.

And I also mentioned that overall, we are cognizant of the CapEx envelope, the medium-term CapEx envelope of $4.5 billion to $5 billion. So we expect it to be within that envelope. In terms of Canada, it's a similar questions are there related to the regulatory environment, which are also connected to what happens with the United States. as well as what happens in the elections in Canada, which are forthcoming in 2025. So I don't expect significant progress in Canada until we have clarity on some of these questions that exist. So I hope that helps. I don't know if there's anything more, Genuino, you want to add on this question.

No, Aditya. I think you touched on everything.

Okay. And perhaps at a higher level regarding [ caps ], you think that because you are kind of more cautious both in Canada or in Europe, but despite that, are you still thinking that decarbonization is economically viable? Or are you facing some constraints than perhaps you were not expecting a few years ago when you launched these initiatives?

Yes, sure. So I think the key word or the key thought to take away is economic decarbonization. Clearly, we believe it is important for the global steel industry and for us to decarbonize. There's no 2 ways about that. However, it has to be economic for our industry. Otherwise, how are we going to afford it and maintain output and maintain jobs, right? It's not possible.

And what has changed in the last few years is that the pace of policy and regulation has slowed down. There has not been the type of action that we had expected. On top of it, specifically in Europe, you have seen an energy crisis unfold, which has also delayed how you decarbonize because when you decarbonize, what are you doing? You're fundamentally substituting coal, coking coal with natural gas and electricity. And as you know, in Europe, natural gas has gone through the roof and so has electricity. and coking coal as a global commodity has not had that same price action that the other 2 have had. And so it makes it very difficult to move forward without an appropriate regulatory framework.

So that's how I would describe it. So the focus of the company is economic decarb. It doesn't mean we're not doing anything. I mean we've done a lot, right? 50% of absolute emissions are down from 2018. Share of EAF is going up from 18% to 25% in the last 6 years. The monies that we have spent on decarb is generating EBITDA. And most importantly, our product offering in the marketplace of car products, which is fundamentally net zero green steel continues to increase, right? It's doubling now.

And so I think we are in a good position when it comes to our customers. We're in a competitive position in our business when it comes to our cost base. But -- and just to underline this theme, we have the capability, whether it's people or technology or knowledge to decarbonize. We just need the appropriate policy framework to make it economically viable.

Great. So we're going to try and squeeze in one final follow-up question from Tristan at BNP Exane.

Just on the steel action plan. When you talk about the things you need to see in Europe, the CBAM fix, more trade support, other industry have pushed also regarding the time line of certain regulation like the ETS phaseout. Do you believe that is something on the table at the moment? Do you need to see that? And lastly, just a quick update on South Africa, given there's been a lot of headlines that would be helpful as well.

Sure. Look, in terms of regulation, our focus is CBAM and trade to the extent that the freelances that that's what you're talking about get extended, that's net positive for the competitiveness of the European steel industry. However, that is not necessarily a precondition. The precondition is really appropriate trade action and appropriate CBAM policy. I think those preconditions are much more than just about decarb. They're also about the viability, sustainability of the European business. So perhaps that's why we have much more focus on those 2 initiatives. And you're right, the Mario Drug report on the new green industrial deal has really kickstarted a process within the European Commission, within European governments to reexamine.

I think events in the U.S. has accelerated all of that discussion. And clearly, I think the question was asked, are they listening? Yes, of course, they are listening. Key and most important is the actions that they take. In terms of South Africa, look, the headlines are around the long business. And if you look at the long business in South Africa, it's a good operation. It's a good facility. It has been challenged by a scrap imbalance.

So what has happened over the years is there is an export tax on scrap. And because there is an export tax on scrap, many mills who are utilizing scrap are much more competitive because scrap is very cheap in South Africa relative to other metallics and the integrated operation of Newcastle has become uncompetitive. And that is not a story of yesterday. It's a story that has been going on for the last few years. And we've been working with the government to try and make that facility competitive, and we have realized we can't. There's not enough support. There's not enough conditions.

There's no change in the scrap regulations. And therefore, we've taken the decision to shut it down. The other business, the flood business remains viable. So this remains a continuing discussion with the South African government to ensure that the overall AMSA remains viable, healthy and competitive. I don't know, Genuino, was there anything else you wanted to add?

No, I think that's a very good summary, Aditya. And then, of course, South Africa is a listed company. These results today. You can also see the earnings release that you have more information there, but that's fundamentally where we are in this process.

Great. Thanks. So that was our last question. So I'll hand back to you, Aditya, for any concluding remarks.

Okay. Great. Thank you. Let me just reiterate some of our key messages. I hope you have appreciated that our performance demonstrates that we are a transformed company. I know there were a few questions on that on our cycle through see-through EBITDA of $130. As I said before, I passionately believe we have the best talent in the steel industry. And we are harnessing this talent to outperform the competition. And if you look at our numbers on a region-by-region basis, we do really, really well.

We have a very strong balance sheet that allows us to continue to grow in a countercyclical fashion and has allowed us to return capital to shareholders. Looking to the medium and longer term, the outlook for our business is clearly positive. We're well positioned to capture demand in growth markets through our strategic investments in India, Brazil and the U.S. These are all very exciting opportunities for us. With that, I will close today's call, and I look forward to speaking with you soon. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.