February 06, 2020 01:00 ET | Source: ArcelorMittal S.A. ArcelorMittal S.A.

Luxembourg, February 6, 2020 - 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 results1 for the three-month and twelve-month periods ended December 31, 2019.

Financial highlights (on the basis of IFRS1):

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

“2019 was a very tough year, clearly reflected in our significantly reduced profitability. However, our cash generation remained strong helping to reduce net debt to the lowest ever level. This demonstrates the contribution of our Action2020 programme which was designed to ensure ArcelorMittal can be cash flow positive through all aspects of the steel cycle. We expect to make further deleveraging progress this year.

“Maintaining a strong balance sheet and reaching our net debt target is a clear priority for ArcelorMittal. Having now completed the acquisition of Essar Steel India in partnership with Nippon Steel, we have also secured a new opportunity for the group in the fast-growing Indian market. The asset is performing well and offers considerable brownfield potential aligned with the country’s ambition to triple crude steel production over the next ten years.

“We also continue to invest strategically in research and development, including lower carbon steel-making processes and low carbon products. Steel has the potential to significantly reduce its carbon emissions, but new policy will be vital. In this regard we are encouraged by the position adopted by the new European Commission, including their support for a carbon border equalisation.

“Although market conditions remain challenging, there are encouraging early signs of improvement particularly in our core markets of US, Europe and Brazil. With inventory levels having reached a very low level following a period of de-stocking, we are seeing customers return to the market, supporting an improved pricing environment.”

Sustainable development and safety performance

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

Health and safety performance2 (inclusive of ArcelorMittal Italia (previously known as Ilva)), based on own personnel and contractors lost time injury frequency (LTIF) rate was 1.25x in fourth quarter of 2019 ("4Q 2019") as compared to 1.36x in the third quarter of 2019 (“3Q 2019”). LTIF (inclusive of ArcelorMittal Italia) in the twelve months of 2019 (“12M 2019”) was 1.21x.

Excluding the impact of ArcelorMittal Italia, the LTIF was 0.84x for 4Q 2019 as compared to 0.82x for 3Q 2019 and 0.70x for the fourth quarter of 2018 (“4Q 2018”). LTIF (excluding the impact of ArcelorMittal Italia) for 12M 2019 was 0.75x as compared to 0.69x for twelve months of 2018 ("12M 2018").

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

Own personnel and contractors - Frequency rate

Key sustainable development highlights for 4Q 2019:

Analysis of results for the twelve months ended December 31, 2019 versus results for the twelve months ended December 31, 2018

Total steel shipments for 12M 2019 were 84.5 million metric tonnes representing an increase of 0.8% as compared to 83.9 million metric tonnes in 12M 2018, primarily due to higher steel shipments in Europe (+3.2%) due to the impact of the consolidation of ArcelorMittal Italia as from November 1, 2018, offset in part by the remedy asset sales related to the  ArcelorMittal Italia acquisition (completed June 30, 2019) and ongoing weak demand driven by macroeconomic headwinds including declines in automobile production. Weaker domestic apparent demand conditions led to lower shipments in NAFTA (-5.1%), while weaker export markets led to lower shipments in ACIS (-1.7%) and Brazil (-2.4%). Excluding the impact of ArcelorMittal Italia, Votorantim, and remedy asset sales, steel shipments in 12M 2019 were 1.4% lower as compared to 12M 2018.

Sales for 12M 2019 decreased by 7.1% to $70.6 billion as compared with $76.0 billion for 12M 2018, primarily due to lower average steel selling prices (-9.6%) offset in part by higher steel shipments (+0.8%) and higher marketable iron ore selling price (+34.3%).

Depreciation of $3.1 billion for 12M 2019 was higher as compared with $2.8 billion in 12M 2018. Depreciation charges for 2019 include the depreciation of right-of-use assets recognized in property, plant and equipment under IFRS 16 "Leases"4, which were previously recorded as lease expenses in cost of sales and selling, general and administrative expenses. FY 2020 depreciation is expected to be approximately $3.0 billion (based on current exchange rates).

Impairment charges for 12M 2019 were $1.9 billion related to impairment of the fixed assets of ArcelorMittal USA ($1.3 billion), following impairment assessments performed in the second and fourth quarters of 2019, primarily resulting from decreases in the near-term average selling price assumptions, remedy asset sales for the ArcelorMittal Italia acquisition ($0.5 billion) and impairment charges in South Africa ($0.1 billion). Impairment charges net of purchase gains for 12M 2018 were $810 million and included $0.7 billion primarily related to Ilva acquisition and the remedy asset sales for the Ilva acquisition and $0.1 billion related to the remedy package required for the approval of the Votorantim acquisition5.

Exceptional items for 12M 2019 were charges of $828 million as compared to charges of $117 million for 12M 2018. Exceptional items for 12M 2019 primarily include inventory related charges in NAFTA and Europe following a period of exceptionally weak steel pricing. Exceptional items for 12M 2018 primarily consisted of $113 million in charges related to a blast furnace dismantling in Florange (France), $60 million in charges related to the new collective labour agreement in the US (including a signing bonus), a $146 million provision taken in 1Q 2018 in respect of a litigation case that was paid in 3Q 20186 offset in part by PIS/COFINS tax credits13 related to prior periods recognized in Brazil of $202 million.

Operating loss for 12M 2019 was $627 million as compared to an operating income of $6.5 billion in 12M 2018, primarily impacted by weaker operating conditions (negative price-cost effect in steel segments) reflecting both the decline in steel prices and higher raw material costs (due in particular to supply-side developments in Brazil) and impairment and exceptional items as discussed above, offset in part by improved mining segment performance (driven by higher seaborne iron ore reference prices +34.3%). The raw material prices increased during 12M 2019 and for the most part of the year remained disconnected from steel fundamentals, compressing steel spreads to unsustainably low levels.

Income from associates, joint ventures and other investments for 12M 2019 was lower at $347 million as compared to $652 million for 12M 2018 driven by lower profitability of Calvert and Chinese investee. Income in 12M 2019 included dividend income from Erdemir of $93 million as compared to $87 million in 12M 2018.

Net interest expense was lower at $607 million for 12M 2019, as compared to $615 million in 12M 2018. The Company expects full year 2020 net interest expense to be approximately $0.5 billion.

Foreign exchange and other net financing losses were $1.0 billion for 12M 2019 as compared to losses of $1.6 billion for 12M 2018. Foreign exchange gain for 12M 2019 was $4 million as compared to losses of $235 million in 12M 2018. 12M 2019 includes non-cash mark-to-market losses related to the mandatory convertible bond call option following the market price decrease of the underlying shares totalling $356 million as compared to a loss of $501 million in 12M 2018.

ArcelorMittal recorded an income tax expense of $459 million for 12M 2019 as compared to tax benefit of $349 million for 12M 2018. The difference originates from a deferred tax benefit recorded mainly in Luxembourg in 2018.

ArcelorMittal’s net loss for 12M 2019 was $2.5 billion (or $2.42 basic loss per common share), as compared to a net income in 12M 2018 of $5.1 billion (or $5.07 basic earnings per common share).

Analysis of results for 4Q 2019 versus 3Q 2019 and 4Q 2018

Total steel shipments in 4Q 2019 were 2.3% lower at 19.7Mt as compared with 20.2Mt for 3Q 2019 primarily due to lower steel shipments in Europe (-4.2%), NAFTA (-2.1%) and Brazil (-3.3%), offset in part by an improvement in ACIS (+9.8%, across Ukraine and Kazakhstan). Total steel shipments in 4Q 2019 were 2.5% lower as compared with 20.2Mt for 4Q 2018. Excluding the impact of the ArcelorMittal Italia acquisition and the remedy asset sales, steel shipments were 0.2% lower as compared to 4Q 2018.

Sales in 4Q 2019 were $15.5 billion as compared to $16.6 billion for 3Q 2019 and $18.3 billion for 4Q 2018. Sales in 4Q 2019 were 6.7% lower as compared to 3Q 2019 primarily due to lower average steel selling prices (-7.0%) and lower steel shipments (-2.3%), lower realized iron ore pricing following lower seaborne reference prices and the reduced premia for high grade product including pellet11, offset in part by higher market-priced iron ore shipments (+14.8%). Sales in 4Q 2019 were 15.4% lower as compared to 4Q 2018 primarily due to lower average steel selling prices (-16.2%), lower steel shipments (-2.5%) and lower market-priced iron ore shipments (-3.2%) offset in part by higher seaborne iron ore reference prices (+24.3%).

Depreciation for 4Q 2019 was higher at $802 million as compared to $766 million for 3Q 2019. Depreciation for 4Q 2019 was higher than $723 million in 4Q 2018 primarily due to the impact of IFRS 16.

Impairment charges for 4Q 2019 were $830 million and related to impairment of the fixed assets of ArcelorMittal USA ($0.7 billion) following impairment assessments performed during the quarter, primarily resulting from a further decrease in the near-term average selling price assumption and in South Africa ($0.1 billion, primarily related to the fixed assets of Newcastle Works in South Africa following lower domestic volumes). Impairment charges for 3Q 2019 were nil. Impairment charges net of purchase gains for 4Q 2018 were $215 million3 and primarily related to Ilva and the remedy asset sales for the Ilva acquisition.

Exceptional items for 4Q 2019 of $828 million primarily include inventory related charges in NAFTA and Europe following a period of exceptionally weak steel pricing. Exceptional items for 3Q 2019 were nil. Exceptional items for 4Q 2018 were $29 million primarily related to income of $202 million for PIS/COFINS tax credits related to prior periods recognized in Brazil, offset in part by $113 million in charges related to a blast furnace dismantling in Florange (France), and $60 million related to the new collective labour agreement in the US (including a signing bonus).

Operating loss for 4Q 2019 was $1.5 billion as compared to an operating income for 3Q 2019 of $297 million and an operating income of $1.0 billion in 4Q 2018. Operating results for 4Q 2019 and 4Q 2018 were impacted by impairment charges net of purchase gains and exceptional items as discussed above.

Income from associates, joint ventures and other investments for 4Q 2019 was $20 million as compared to $25 million for 3Q 2019. Income from associates, joint ventures and other investments for 4Q 2018 of $227 million was positively impacted by $0.1 billion in currency translation gains following the disposal of ArcelorMittal’s investment in MacSteel (South Africa).

Net interest expense in 4Q 2019 was $140 million as compared to $152 million in 3Q 2019 and $140 million in 4Q 2018.

Foreign exchange and other net financing losses in 4Q 2019 were $117 million as compared to $524 million for 3Q 2019 and $556 million in 4Q 2018. Foreign exchange gain for 4Q 2019 was $130 million as compared to foreign exchange loss of $112 million and $7 million, in 3Q 2019 and 4Q 2018, respectively. 4Q 2019 includes non-cash mark-to-market losses of $52 million related to the mandatory convertible bonds call option; such losses amounted to $243 million in 3Q 2019 and $443 million in 4Q 2018.

ArcelorMittal recorded an income tax expense of $125 million in 4Q 2019 as compared to $185 million for 3Q 2019 and $711 million income tax benefit for 4Q 2018. The income tax benefit for 4Q 2018 includes a $0.8 billion deferred tax benefit recorded mainly in Luxembourg.

ArcelorMittal recorded a net loss for 4Q 2019 of $1.9 billion (or $1.86 basic loss per common share), as compared to net loss for 3Q 2019 of $0.5 billion (or $0.53 basic loss per common share), and a net income for 4Q 2018 of $1.2 billion (or $1.18 basic earnings per common share).

NAFTA segment crude steel production decreased by 7.0% to 5.3Mt in 4Q 2019 as compared to 5.7Mt in 3Q 2019, partly due to planned outages both in flat and long product operations adjusting to weaker demand.

Steel shipments in 4Q 2019 decreased by 2.1% to 5.0Mt as compared to 5.1Mt in 3Q 2019, primarily due to a 2.9% decline in flat steel shipments.

Sales in 4Q 2019 decreased by 8.5% to $4.0 billion as compared to $4.4 billion in 3Q 2019, primarily due to a 7.8% decline in average steel selling prices (with flat and long products down 7.4% and 6.8%, respectively) and the ongoing supply chain destock resulting in lower steel shipments.

Impairment charges for 4Q 2019 were $700 million related to a further impairment of the fixed assets of ArcelorMittal USA following impairment assessments performed during the quarter, primarily resulting from a further decrease in the near-term average selling prices assumption. Impairment charges for 3Q 2019 and 4Q 2018 were nil.

Exceptional items for 4Q 2019 were $200 million and relate to inventory related charges following a period of exceptionally weak steel pricing. Exceptional items for 4Q 2018 were $60 million related to the new collective labour agreement in the US (which included a signing bonus).

Operating loss in 4Q 2019 was $912 million as compared to $24 million in 3Q 2019 and an operating income of $310 million in 4Q 2018. Operating results for 4Q 2019 and 4Q 2018 were impacted by the impairment and exceptional items as discussed above.

EBITDA in 4Q 2019 of $140 million was broadly stable as compared to $123 million in 3Q 2019 with the negative impact from lower average steel selling prices and steel shipment volumes offset by lower costs following the decline in raw material costs including lower iron ore pellet premiums. EBITDA in 4Q 2019 decreased by 71.9% as compared to $497 million in 4Q 2018 primarily due to negative price-cost effect and lower steel shipments.

Brazil segment crude steel production decreased by 6.7% to 2.5Mt in 4Q 2019 as compared to 2.7Mt for 3Q 2019, primarily due to decline in long products. Flat steel production remained stable following the ongoing stoppage of ArcelorMittal Tubarão's blast furnace #2 in response to deteriorating export market conditions.

Steel shipments in 4Q 2019 decreased by 3.3% to 2.7Mt as compared to 2.8Mt in 3Q 2019, primarily due to seasonality and lower exports of long products. Overall long products shipments decreased by 10.4% while flat products improved by 2.6%.

Sales in 4Q 2019 remained stable at $1.9 billion as compared to 3Q 2019. Sales in 4Q 2019 were impacted by 7.2% lower average steel selling prices and lower steel shipments while 3Q 2019 sales were negatively impacted by hyperinflation impact in Argentina.

Exceptional items for 4Q 2018 was an income of $202 million related to PIS/COFINS tax credits for prior periods recognized in Brazil.

Operating income in 4Q 2019 declined to $177 million as compared to $196 million in 3Q 2019 and $398 million in 4Q 2018. Operating results for 4Q 2018 were impacted by the exceptional gain as discussed above.

EBITDA in 4Q 2019 decreased by 6.9% to $240 million as compared to $258 million in 3Q 2019 primarily due to lower steel shipments. EBITDA in 4Q 2019 was 14.1% lower as compared to $280 million in 4Q 2018 primarily due to lower steel shipment volumes (-11.0%).

Europe segment crude steel production decreased by 13.4% to 9.0Mt in 4Q 2019 as compared to 10.4Mt in 3Q 2019.  As previously announced in May 2019, the 4.2Mt annualized flat steel production curtailments to bring supply in line with addressable demand that took effect in part in 3Q 2019 were completed as scheduled in 4Q 2019 including curtailments at Krakow (flat production down 16% vs prior quarter). Europe segment crude steel production decreased by 22.0% to 9.0Mt in 4Q 2019 as compared to 11.6Mt in 4Q 2018 (18.7% lower excluding the impact of ArcelorMittal Italia and sale of remedy assets).

Steel shipments in 4Q 2019 decreased by 4.2% to 9.3Mt as compared to 9.7Mt in 3Q 2019 primarily driven by lower flat steel shipments (-5.5%) driven by ongoing weak demand driven by macroeconomic headwinds including declines in automobile production. Steel shipments were 8.0% lower in 4Q 2019 as compared to 4Q 2018 (4.0% lower excluding the impact of ArcelorMittal Italia and sale of remedy assets).

Sales in 4Q 2019 were $8.0 billion, 8.6% lower as compared to $8.8 billion in 3Q 2019, with 4.7% lower average steel selling prices (flat and long products prices down 4.7% and 6.1%, respectively) and lower steel shipments, as discussed above.

Impairment charges net of purchase gains for 4Q 2019 were $28 million. Impairment for 3Q 2019 was nil. Impairment charges net of purchase gains for 4Q 2018 were $215 million primarily related to Ilva and the remedy asset sales for the Ilva acquisition.

Exceptional items for 4Q 2019 were $456 million and primarily include inventory related charges following a period of exceptionally weak steel pricing. Exceptional items for 4Q 2018 were $113 million related to a blast furnace dismantling in Florange (France).

Operating loss in 4Q 2019 was $649 million as compared to an operating loss in 3Q 2019 of $168 million and an operating income of $98 million in 4Q 2018. Operating results for 4Q 2019 and 4Q 2018 were impacted by impairment charges and exceptional items as discussed above.

EBITDA in 4Q 2019 of $158 million was broadly stable as compared to $143 million in 3Q 2019. The negative impact from lower volumes and lower average selling prices was offset by lower costs, including the benefit of reduced high-cost capacity, the impact of declining raw material basket prices and lower iron ore pellet premium.

EBITDA in 4Q 2019 decreased by 78.9% as compared to $749 million in 4Q 2018 primarily due to negative price-cost effect and losses of ArcelorMittal Italia.

For the purposes of comparison with previous periods it should be noted that the EBITDA contribution of ArcelorMittal Italia (former Ilva assets) for 12M 2019 deteriorated by $0.6 billion vs. 12M 2018 consolidated as from November 1, 2018.

ACIS segment crude steel production in 4Q 2019 decreased by 13.8% to 3.0Mt as compared to 3.5Mt in 3Q 2019 primarily due to lower production in Ukraine and South Africa following weak market conditions.

Steel shipments in 4Q 2019 increased by 9.8% to 3.0Mt as compared to 2.7Mt as at 3Q 2019, due to improvements in Kazakhstan following maintenance of the hot strip mill and timing of shipments in Ukraine (both impacting 3Q 2019), offset in part by lower shipments in South Africa due to weaker demand.

Sales in 4Q 2019 decreased marginally by 1.3% to $1.6 billion as compared to $1.7 billion in 3Q 2019 primarily due to lower average steel selling prices (-13.6%), offset in part by higher steel shipments.

Impairment charges for 4Q 2019 was $0.1 billion primarily related to the fixed assets of Newcastle Works in South Africa following lower domestic volumes.

Exceptional items for 4Q 2019 were $76 million and primarily include closure costs related to Saldanha and retrenchment costs in relation to announced Section 189 process in Saldanha (South Africa).

Operating loss in 4Q 2019 was $238 million as compared to operating income of $35 million in 3Q 2019 and $121 million in 4Q 2018.

EBITDA decreased by 65.1% to $45 million in 4Q 2019 as compared to $128 million in 3Q 2019 primarily due to negative price-cost effect offset in part by higher steel shipment volumes. EBITDA in 4Q 2019 was lower as compared to $198 million in 4Q 2018, primarily due to negative price-cost effect offset in part by higher steel shipment volumes.

      (a)    Iron ore and coal shipments of market-priced based materials include the Company’s own mines and share of production at other mines

Own iron ore production in 4Q 2019 increased by 9.5% to 14.8Mt as compared to 13.6Mt in 3Q 2019, primarily due to higher production at ArcelorMittal Mines Canada7 (AMMC) following an electrical failure in the prior quarter which led to a temporary stoppage of the concentrator and a seasonal recovery in production at ArcelorMittal Liberia (following rainy season during the prior quarter). Own iron ore production in 4Q 2019 decreased by 0.7% as compared to 4Q 2018 primarily due to higher production in Kazakhstan offset part by lower AMMC production.

Market-priced iron ore shipments in 4Q 2019 increased by 14.8% to 9.6Mt as compared to 8.4Mt in 3Q 2019, primarily driven by higher shipments in AMMC and seasonal pick up in market-priced iron ore shipments in Liberia. Market-priced iron ore shipments in 4Q 2019 were 3.2% lower as compared to 4Q 2018 driven by lower shipments in AMMC and Brazil, offset by higher shipments in Ukraine. Market-priced iron ore shipments for 12M 2019 declined by 1.4% as compared to 12M 2018, marginally below the stable year on year guidance due to slow ramp-up of the concentrator in AMMC.

Market-priced iron ore shipments for FY 2020 are expected to be stable as compared to FY 2019.

Own coal production in 4Q 2019 of 1.4Mt decreased 6.2% as compared 3Q 2019 primarily due to lower production at Princeton (US) and in Temirtau (Kazakhstan). Own coal production in 4Q 2019 increased by 4.1% to 1.4Mt as compared to 1.3Mt in 4Q 2018 due to higher production at Temirtau (Kazakhstan) offset in part by lower Princeton production.

Market-priced coal shipments in 4Q 2019 remained stable at 0.7Mt as compared to 3Q 2019 and 4Q 2018.

Operating income in 4Q 2019 decreased by 29.0% to $185 million as compared to $260 million in 3Q 2019 and decreased by 23.3% as compared to $241 million in 4Q 2018.

EBITDA in 4Q 2019 decreased by 19.1% to $301 million as compared to $372 million in 3Q 2019, primarily due to the impact of lower seaborne iron ore reference price (-12.8%), lower iron ore quality premia, as well as the impact of lower seaborne marketable coking coal prices (-13.5%), offset in part by higher market-priced iron ore shipments (+14.8%). EBITDA in 4Q 2019 was 12.2% lower as compared to $343 million in 4Q 2018, primarily due to lower market-priced iron ore shipments (-3.2%), lower iron ore quality premia as well as the impact of lower seaborne marketable coking coal prices (-36.9%), offset in part by higher seaborne iron ore reference prices (+24.3%).

For 4Q 2019 net cash provided by operating activities was $2,932 million as compared to $328 million in 3Q 2019 and $2,170 million in 4Q 2018. Net cash provided by operating activities in 4Q 2019 includes in part a working capital release of $2,600 million as compared to a working capital investment of $203 million in 3Q 2019 and a working capital release of $430 million in 4Q 2018.

The 12M 2019 working capital release of $2.2 billion was driven by inventories, sales prices and raw material costs as well as improved receivables. The 12M 2018 working capital investment was $4.4 billion.

Net cash used in investing activities during 4Q 2019 was $1,751 million as compared to $816 million during 3Q 2019 and $1,926 million in 4Q 2018. Capex decreased to $815 million in 4Q 2019 as compared to $941 million in 3Q 2019 and $1,156 million in 4Q 2018. FY 2019 capex was $3.6 billion marginally above the guidance of $3.5 billion. The Company maintains the ability to adapt its capex plans to the operating environment and now expects FY 2020 to be approximately $3.2 billion.

Net cash used in other investing activities in 4Q 2019 of $936 million primarily includes the final net $0.6 billion contribution to the AMNS India JV and $0.4 billion cash outflow in relation to the Indian rupee rolling hedge10 entered into in connection with the acquisition of Essar Steel India (neutralising the $0.4 billion collected since the hedge was entered into during 2018 and 2019). In aggregate, including the $1.0 billion paid out in relation to this transaction in 4Q 2018 brings ArcelorMittal’s total equity contribution to the JV of $1.6 billion.

Net cash provided by other investing activities in 3Q 2019 of $125 million primarily includes net proceeds from the sale of our remaining 2.6% stake in Gerdau ($116 million cash received following sale of 30 million shares) and final installment of disposal proceeds from ArcelorMittal USA's 21% stake in the Empire Iron Mine Partnership ($44 million), offset by the quarterly lease payment for ArcelorMittal Italia. Cash used in other investing activities in 4Q 2018 of $770 million primarily includes $1.0 billion investment for the Uttam Galva and KSS Petron debts (India), quarterly lease payment for Ilva acquisition offset in part by MacSteel (South Africa) disposal proceeds ($220 million).

Net cash provided by financing activities in 4Q 2019 was $19 million as compared to $659 million in 3Q 2019 and net cash used in financing activities in 4Q 2018 of $411 million (primarily included repayment of short-term facilities).

In 4Q 2019, net cash provided by financing activities includes a net inflow of $126 million primarily related to the bond issuance of €1.5 billion ($1,640 million) via 2 tranches: €750 million with 3.5 year maturity (May 2023) at 1% and €750 million with 6 year maturity (November 2025) set at 1.75%, offset by repurchases via tender offer (€318 million of the €600 million 2.85% Notes due 2020 outstanding (52.99%) and €214 million of the €500 million 3.0% Notes due 2021 outstanding (42.90%)) and make whole redemption of the remaining outstanding amount ($756 million) of the 5.5% Notes due 2021. In 3Q 2019, net cash provided by financing activities includes a net inflow of $804 million primarily related to the net issuance and early redemption of bonds. In 4Q 2018, $406 million outflows primarily include repayment of short-term facilities.

During 4Q 2019, the Company paid dividends of $21 million mainly to minority shareholders in Bekaert (Brazil). During 3Q 2019, the Company paid dividends of $61 million mainly to minority shareholders in ArcelorMittal Mines Canada. During 4Q 2018, the Company paid dividends of $32 million primarily to minority shareholders in Bekaert (Brazil).

Outflows from lease payments and other financing activities (net) were $86 million for 4Q 2019 and $84 million for 3Q 2019 respectively, as compared to $27 million inflow in 4Q 2018. The increase year-on-year is as a result of the first-time application of IFRS 16 effective from January 1, 2019, as the repayments of the principal portion of the operating leases are presented under financing activities (previously reported under operating activities). 4Q 2018 also included the net proceeds from transactions with minority shareholders primarily in relation to the ArcelorMittal Italia transactions.

As of December 31, 2019, the Company’s cash and cash equivalents amounted to $5.0 billion as compared to $3.6 billion as of September 30, 2019 and $2.4 billion as of December 31, 2018.

Gross debt remained stable at $14.3 billion as of December 31, 2019, as compared to September 30, 2019 and increased as compared to $12.6 billion in December 31, 2018. As of December 31, 2019, net debt decreased by $1.3 billion to $9.3 billion as compared to $10.7 billion as of September 30, 2019 primarily driven by positive free cash flow (including the substantial 4Q 2019 working capital release), the sale of a 50% stake in shipping business ($0.4 billion)12 offset in part by the payment on the Essar Steel India acquisition and Indian rupee hedge.

As of December 31, 2019, the Company had liquidity of $10.5 billion, consisting of cash and cash equivalents of $5.0 billion and $5.5 billion of available credit lines8. The $5.5 billion credit facility contains a financial covenant not to exceed 4.25x Net debt / LTM EBITDA. As of December 31, 2019, the average debt maturity was 5.3 years.

The Company remains focussed on achieving its 2020 targets. The Company is four-fifths of the way along the Action2020 journey, with ongoing progress achieved in 2019 on its strategic Action2020 plan. We made further Action2020 gains in 2019 of $0.4 billion through cost/mix improvement, taking cumulative progress to $2.0 billion since 2016. Since market conditions have frustrated the Group’s efforts to increase volumes by the targeted amount, the Group has identified a further $1.0 billion of cost improvement plans to be targeted in 2020 as it seeks full achievement of the $3.0 billion Action2020 EBITDA improvement target.  Approximately one-third of these incremental savings will be from fixed cost reductions, including logistic savings and restructuring (i.e. Saldanha closure in South Africa). The remaining two-thirds of the improvements are targeted variable costs improvements including purchasing gains, yield, fuel rate and energy consumption improvements mainly in the US and Europe.

Key to the success of the roadmap, and ArcelorMittal Europe’s ambition to be carbon neutral by 2050, will be supportive policy to ensure a global level playing field and so ArcelorMittal supports the European Commission’s Green Deal, and believes the right market mechanisms are a critical part of enabling the deployment of low-emissions steelmaking. This includes a carbon border equalization complementary to the existing Emissions Trading System ("ETS") and the Just Transition Fund, to invest in research, innovation and green technology.

ArcelorMittal intends to progressively increase the base dividend paid to its shareholders, and, on attainment of the net debt target, return a percentage of free cash flow annually. Given the improving balance sheet strength and ongoing deleveraging, the Board proposes the base dividend for 2020 (in respect of 2019) of $0.30 per share which will be proposed to the shareholders at the Annual General Meeting in May 2020.

Based on the current economic outlook, ArcelorMittal expects an expansion in global apparent steel consumption (“ASC”) in 2020 by +1.0% to +2.0% (versus growth of +1.1% in 2019).

Supply chain destocking constrained demand in our core markets, particularly for flat products, and the Company estimates that World-ex China ASC declined by 0.8% in 2019. China had a better than expected year with ASC estimated to have increased by 3.2%. Whilst acknowledging the risks and uncertainties, ArcelorMittal believes that there are signs that the real demand slowdown is beginning to stabilise, and the supportive inventory environment means that we are more optimistic on the apparent demand outlook for 2020. By region:

The China and global ASC forecast reflect the Company’s base case view of the impact of Coronavirus. Absent a degradation of the situation and/or a further extension of the holiday period, we believe the effect of the Coronavirus will likely have a short-term negative demand impact in China and to a lesser degree elsewhere. Our current view is that the vast majority of the impact on 1Q 2020 demand is expected to be recovered throughout the remainder of the year. Our perspective on the fundamentals of the Chinese steel market remain unchanged.

The Company expects certain cash needs of the business (including capex, interest, cash taxes, pensions and certain other cash costs but excluding working capital movements) to total $4.5 billion in 2020 versus $5.0 billion in 2019. The Company maintains the ability to adapt its capex plans to the operating environment and now expects FY 2020 to be $3.2 billion (down from $3.6 billion in 2019). Interest expense in 2020 is expected to be $0.5 billion (versus $0.6 billion in 2019) while cash taxes, pensions and other cash costs are expected to be stable at $0.8 billion (versus 2019).

The Group released $2.2 billion in working capital in 2019 (versus working capital investment of $4.4 billion in 2018). Whilst we do not at this stage want to give a firm target or specific guidance for working capital needs in 2020 (due to the fact that it is so dependent on operating conditions towards the end of the year), should market conditions remain at current levels then there is the potential to reduce working capital by a further $1 billion.

As previously announced in the 2Q 2019 results, and in line with our ongoing efforts to optimize our asset portfolio, we have identified opportunities to unlock $2 billion of value from the portfolio over the next 2 years. The Company has made good progress to date and has achieved ~$0.6 billion (including Gerdau stake sale ($0.1 billion) and the sale of a 50% stake in Global Chartering Ltd which is expected to reduce net debt in total by $0.5 billion ($0.4 billion in 4Q 2019 and $0.1 billion early 2020). We remain engaged in active discussions with interested parties on several additional opportunities.

Given the ongoing focus on delivering the $1 billion of identified cost improvement plans in order to fully achieve the Action2020 targets, the potential for a circa $1 billion working capital release assuming market conditions remain at current levels, together with further progress on portfolio optimisation efforts, the Company is optimistic that it can achieve its $7.0 billion net debt objectives by year end 2020 which would provide strong foundations for improved shareholder returns going forward.

ArcelorMittal intends to progressively increase the base dividend paid to its shareholders, and, given the resilient cash flow and progress towards its net debt target, the Board proposes a base dividend of $0.30 per share for 2020 (in respect of 2019) which will be proposed to the shareholders at the Annual General Meeting in May 2020.

ArcelorMittal Condensed Consolidated Statement of Financial Position1

ArcelorMittal Condensed Consolidated Statement of Operations1

ArcelorMittal Condensed Consolidated Statement of Cash flows1

Appendix 1: Product shipments by region

Note: “Others and eliminations” are not presented in the table1

Note: “Others” are not presented in the table1

Appendix 2b: Capital expenditure projects

The following tables summarize the Company’s principal growth and optimization projects involving significant capex.

Completed projects in most recent quarters

a) On September 28, 2017, ArcelorMittal announced a major $1.0 billion, investment programme at its Mexican operations, which is focused on building ArcelorMittal Mexico’s downstream capabilities, sustaining the competitiveness of its mining operations and modernizing its existing asset base. The programme is designed to enable ArcelorMittal Mexico to meet the anticipated increased demand requirements from domestic customers, realize in full ArcelorMittal Mexico’s production capacity of 5.3 million tonnes and significantly enhance the proportion of higher added-value products in its product mix, in-line with the Company’s Action2020 plan. The main investment will be the construction of a new hot strip mill. Upon completion, the project will enable ArcelorMittal Mexico to produce c. 2.5 million tonnes of flat rolled steel, long steel c. 1.8 million tonnes and the remainder made up of semi-finished slabs. Coils from the new hot strip mill will be supplied to domestic, non-auto, general industry customers. The hot strip mill project commenced late 4Q 2017 and is expected to be completed in 2021.

b) Investment in ArcelorMittal Dofasco (Canada) to modernize the hot strip mill. The project is to install two new state of the art coilers and runout tables to replace three end of life coilers. The strip cooling system will be upgraded and include innovative power cooling technology to improve product capability. The project is expected to be completed in 2021.

c) In August 2018, ArcelorMittal announced the resumption of the Vega Do Sul expansion to provide an additional 700kt of cold-rolled annealed and galvanized capacity to serve the growing domestic market. The three-year ~$0.3 billion investment programme to increase rolling capacity with construction of a new continuous annealing line and CGL combiline (and the option to add a ca. 100kt organic coating line to serve construction and appliance segments), and upon completion, will strengthen ArcelorMittal’s position in the fast growing automotive and industry markets through Advanced High Strength Steel products. The investments will look to facilitate a wide range of products and applications whilst further optimizing current ArcelorMittal Vega facilities to maximize site capacity and its competitiveness, considering comprehensive digital and automation technology. Project completion is expected at the end of 2022.

d) Although the Monlevade wire rod expansion project and Juiz de Fora rebar expansion were completed in 2015, both the melt shop expansion (in Juiz de Fora) and the sinter plant, blast furnace and meltshop (in Monlevade) projects are currently on hold and are expected to be completed upon Brazil domestic market recovery.

e) ArcelorMittal had previously announced a Phase 2 project that envisaged the construction of 15 million tonnes of concentrate sinter fines capacity and associated infrastructure. The Phase 2 project was initially delayed due to the declaration of force majeure by contractors in August 2014 due to the Ebola virus outbreak in West Africa, and then reassessed following rapid iron ore price declines over the ensuing period. ArcelorMittal Liberia has completed the detailed feasibility study to identify optimal concentration solution for utilizing resources at Tokadeh and other deposits and is working on the final investment submission.

Appendix 3: Debt repayment schedule as of December 31, 2019

Appendix 4: Reconciliation of gross debt to net debt

Unless indicated otherwise, or the context otherwise requires, references in this earnings release report to the following terms have the meanings set out next to them below:

Adjusted net (loss) / income: refers to reported net (loss) / income less impairment and exceptional items. Apparent steel consumption: calculated as the sum of production plus imports minus exports. Average steel selling prices: calculated as steel sales divided by steel shipments. Cash and cash equivalents: represents cash and cash equivalents, restricted cash and short-term investments. Capex: represents the purchase of property, plant and equipment and intangibles. Crude steel production: steel in the first solid state after melting, suitable for further processing or for sale. EBITDA: operating results plus depreciation, impairment expenses and exceptional items. EBITDA/tonne: calculated as EBITDA divided by total steel shipments. Exceptional items: income / (charges) relate to transactions that are significant, infrequent or unusual and are not representative of the normal course of business of the period. Foreign exchange and other net financing (loss) / gain: include foreign currency exchange impact, bank fees, interest on pensions, impairment of financial assets, revaluation of derivative instruments and other charges that cannot be directly linked to operating results. Free cash flow (FCF): refers to net cash provided by operating activities less capex. Gross debt: long-term debt, plus short-term debt (including that held as part of the liabilities held for sale). Long-term debt and short-term debt include IFRS 16 “Leases” liabilities impact. Liquidity: cash and cash equivalents plus available credit lines excluding back-up lines for the commercial paper program. LTIF: lost time injury frequency rate equals lost time injuries per 1,000,000 worked hours, based on own personnel and contractors. MT: refers to million metric tonnes Market-priced tonnes: represent amounts of iron ore and coal from ArcelorMittal mines that could be sold to third parties on the open market. Market-priced tonnes that are not sold to third parties are transferred from the Mining segment to the Company’s steel producing segments and reported at the prevailing market price. Shipments of raw materials that do not constitute market-priced tonnes are transferred internally and reported on a cost-plus basis. Mining segment sales: i) “External sales”: mined product sold to third parties at market price; ii) “Market-priced tonnes”: internal sales of mined product to ArcelorMittal facilities and reported at prevailing market prices; iii) “Cost-plus tonnes” - internal sales of mined product to ArcelorMittal facilities on a cost-plus basis. The determinant of whether internal sales are reported at market price or cost-plus is whether the raw material could practically be sold to third parties (i.e. there is a potential market for the product and logistics exist to access that market). Net debt: long-term debt, plus short-term debt less cash and cash equivalents (including those held as part of assets and liabilities held for sale). Long-term debt and short-term debt include IFRS 16 “Leases” liabilities impact Net debt/LTM EBITDA: refers to Net debt divided by last twelve months (LTM) EBITDA calculation. Net interest expense: includes interest expense less interest income On-going projects: refer to projects for which construction has begun (excluding various projects that are under development), even if such projects have been placed on hold pending improved operating conditions. Operating results: refers to operating income/(loss). Operating segments: NAFTA segment includes the Flat, Long and Tubular operations of USA, Canada and Mexico. The Brazil segment includes the Flat, Long and Tubular operations of Brazil and its neighbouring countries including Argentina, Costa Rica and Venezuela. The Europe segment comprises the Flat, Long and Tubular operations of the European business, as well as Downstream Solutions. The ACIS segment includes the Flat, Long and Tubular operations of Kazakhstan, Ukraine and South Africa. Mining segment includes iron ore and coal operations. Own iron ore production: includes total of all finished production of fines, concentrate, pellets and lumps and includes share of production. PMI: refers to purchasing managers index (based on ArcelorMittal estimates) Seaborne iron ore reference prices: refers to iron ore prices for 62% Fe CFR China Shipments: information at segment and group level eliminates intra-segment shipments (which are primarily between Flat/Long plants and Tubular plants) and inter-segment shipments respectively. Shipments of Downstream Solutions are excluded. Steel-only EBITDA: calculated as EBITDA total less Mining segment EBITDA. Steel-only EBITDA/tonne: calculated as steel-only EBITDA divided by total steel shipments. Working capital change (working capital investment / release): Movement of change in working capital - trade accounts receivable plus inventories less trade and other accounts payable. YoY: refers to year-on-year.

Appendix 6: Adjusted net (loss) / income

Fourth quarter 2019 earnings analyst conference call

ArcelorMittal management (including CEO and CFO) will host a conference call for members of the investment community to present and comment on the three-month and twelve-month periods ended December 31, 2019 on: Thursday February 6, 2020 at 9.30am US Eastern time; 14.30pm London time and 15.30pm CET.

To listen to the webcast recording, please visit the results section on our website once the event has finished.

This document may contain forward-looking information and statements about ArcelorMittal and its subsidiaries. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. Forward-looking statements may be identified by the words “believe”, “expect”, “anticipate”, “target” or similar expressions. Although ArcelorMittal’s management believes that the expectations reflected in such forward-looking statements are reasonable, investors and holders of ArcelorMittal’s securities are cautioned that forward-looking information and statements are subject to numerous risks and uncertainties, many of which are difficult to predict and generally beyond the control of ArcelorMittal, that could cause actual results and developments to differ materially and adversely from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed or identified in the filings with the Luxembourg Stock Market Authority for the Financial Markets (Commission de Surveillance du Secteur Financier) and the United States Securities and Exchange Commission (the “SEC”) made or to be made by ArcelorMittal, including ArcelorMittal’s latest Annual Report on Form 20-F on file with the SEC. ArcelorMittal undertakes no obligation to publicly update its forward-looking statements, whether as a result of new information, future events, or otherwise.

ArcelorMittal is the world's leading steel and mining company, with a presence in 60 countries and an industrial footprint in 18 countries. Guided by a philosophy to produce safe, sustainable steel, we are the leading supplier of quality steel in the major global steel markets including automotive, construction, household appliances and packaging, with world-class research and development and outstanding distribution networks.

Through our core values of sustainability, quality and leadership, we operate responsibly with respect to the health, safety and wellbeing of our employees, contractors and the communities in which we operate. For us, steel is the fabric of life, as it is at the heart of the modern world from railways to cars and washing machines. We are actively researching and producing steel-based technologies and solutions that make many of the products and components people use in their everyday lives more energy efficient.

We are one of the world’s five largest producers of iron ore and metallurgical coal. With a geographically diversified portfolio of iron ore and coal assets, we are strategically positioned to serve our network of steel plants and the external global market. While our steel operations are important customers, our supply to the external market is increasing as we grow. In 2019, ArcelorMittal had revenues of $70.6 billion and crude steel production of 89.8 million metric tonnes, while own iron ore production reached 57.1 million metric tonnes.

ArcelorMittal is listed on the stock exchanges of New York (MT), Amsterdam (MT), Paris (MT), Luxembourg (MT) and on the Spanish stock exchanges of Barcelona, Bilbao, Madrid and Valencia (MTS). For more information about ArcelorMittal please visit: http://corporate.arcelormittal.com/

ArcelorMittal investor relations: Europe: +44 207 543 1128; Americas: +1 312 899 3985; Retail: +44 207 543 1156; SRI: +44 207 543 1156 and Bonds/credit: +33 1 71 92 10 26.

ArcelorMittal corporate communications (E-mail: press@arcelormittal.com) +44 0207 629 7988. Contact: Paul Weigh +44 203 214 2419