COVID-19 weighs on ArcelorMittal Q1 results

Luxembourg-based steelmaker ArcelorMittal has announced a $1.1 billion net loss for its 2020 first quarter ending March 31. The company, which has steelmaking facilities in the United States, Mexico and several other nations, says “economic activity and steel market conditions have significantly deteriorated since measures were introduced by governments worldwide to contain the COVID-19 pandemic.”

ArcelorMittal says its adjusted net loss of $600 million excludes “impairment and exceptional items.” The company adds, “Strong cash management during the quarter, including a working capital investment limited to $100 million; gross debt of $13.8 billion and a marginal increase in net debt to $9.5 billion (down $1.7 billion compared with the first quarter of 2019).” This has left it with liquidity of $9.8 billion at the end of 2020’s first quarter.

The company’s liquid position consists of cash and cash equivalents of $4.3 billion and $5.5 billion of available credit lines, “further supplemented by a recently signed new $3 billion credit facility,” says the steelmaker.

“Faced with a significant humanitarian challenge from the COVID-19 pandemic, the company’s first priority has been to take all the necessary actions to safeguard the well-being of our people and to provide support to the extent required in the communities in which we operate,” states ArcelorMittal.

On the financial front, “The company has responded swiftly: aligning production to a lower order book, and taking measures to reduce all costs in line with exceptionally low capacity utilization levels,” states the firm.

Looking forward, ArcelorMittal says it expects steel shipments in the second quarter of 2020 in the range of 13.5 million to 14.5 million metric tons. “The actions taken to reduce all costs in line with reduced operating rates is expected to yield a reduction in fixed costs by 25 to 30 percent in 2Q 2020, essentially maintaining fixed costs per metric ton at the 1Q 2020 level,” says the firm. It projects earnings before interest, taxes, depreciation and amortization (EBITDA) in the range of $400 million to $600 million in the second quarter.

“There are still too many uncertainties to accurately predict what the rest of the year holds,” states Lakshmi N. Mittal, ArcelorMittal’s chair and CEO. “However, it seems likely that over the course of this month, countries will start to announce details of their ‘exit’ strategies. Whilst these are likely to be an easing, not an immediate ending of lockdown, construction and manufacturing are expected to be among the first sectors to be permitted to restart operations, and indeed we are seeing signs of customers restarting production. Rigorous planning to ensure we can meet customer demand whilst protecting the health and safety of our people has been undertaken, leaning on the experience of our plants, which have already been on this journey.”