ArcelorMittal : S.A., - ArcelorMittal reports second quarter 2021 and half year 2021 results

ArcelorMittal reports second quarter 2021 and half year 2021 results

Luxembourg, July 29, 2021 - 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 results1,2 for the three-month and six-month periods ended June 30, 2021.

Key highlights:

• Health and safety performance: Protecting the health and wellbeing of employees remains the Company's overarching priority; LTIF rate3 of 0.89x in 2Q 2021 and 0.83x in 1H 2021
• Significantly improved operating performance in 2Q 2021, with the continuing demand recovery supporting a further positive evolution of steel spreads and 2.4% sequential increase in steel shipments to 16.1Mt (vs. scope adjusted4 15.6Mt in 1Q 2021)
• 2Q 2021 operating income of $4.4bn compares to $2.6bn in 1Q 2021; 1H 2021 operating income of $7.1bn
• EBITDA of $5.1bn in 2Q 2021, the strongest quarter since 2008 and 55.8% higher than 1Q 2021; 1H 2021 EBITDA of $8.3bn represents the strongest half year performance since 2008
• Share of JV and associates net income in 2Q 2021 further improved to $0.6bn, reflecting continued strong performance at AMNS India8 and AMNS Calvert9; 1H 2021 share of JV and associates net income $1.0bn
• Net income of $4.0bn in 2Q 2021 vs. $2.3bn in 1Q 2021; 1H 2021 net income of $6.3bn (vs. adjusted net loss in 1H 2020 of $0.9bn)7 represents the strongest half year performance since 2008
• Free cash flow18 of $1.7bn generated in 2Q 2021 ($2.3bn net cash provided by operating activities less capex of $0.6bn) includes a further $1.9bn investment in working capital on account of higher market prices; this brings the 1H 2021 free cash flow generated to $2.0bn ($3.3bn net cash provided by operating activities less capex of $1.2bn less minority dividends $0.1bn) despite a total $3.5bn investment in working capital
• Gross debt declined to $9.2bn (vs. $11.4bn as end of 1Q 2021 and $12.3bn as end of 2020) and net debt declined to $5.0bn (vs. $5.9bn as end of 1Q 2021 and $6.4bn as end of 2020)
• Since April 1, 2021, the Company returned $1.6bn to shareholders through share buybacks and the payment of the annual base dividend. Total returns to shareholders since September 2020 now total $2.8bn

Strategic update and outlook:

• Leadership on decarbonization: New Group CO2 reduction target of 25% by 2030; new Europe CO2 reduction target of 35% (previously 30%) by 2030 includes the acceleration of DRI-EAF investments and the world's first full scale zero carbon-emissions steel plant at Sestao, Spain; the new group decarbonization plan requires an estimated gross investment (pre-government funding) of $10bn
• Capex update: FY 2021 capex is expected to increase to $3.2bn from previous guidance of $2.9bn to reflect the impacts of higher volumes and capacity utilization - the Company's operating plan (including the number of tools utilized) has changed to reflect the strength of the demand environment
• Demand outlook improving: The Company has upgraded its global apparent steel consumption (ASC) forecast in 2021 vs. 2020 from +7.5% to +8.5% (from previous growth estimate of +4.5% to +5.5%)
• New $2.2bn share buy-backprogram: The Company will return the $1.2bn proceeds from the redeemed Cleveland Cliffs preference shares and has decided to advance $1bn as part of its prospective 2022 capital return to shareholders (equivalent to 50% of 1H 2021 FCF) as a share buy back program to be completed by the end of 2021

Financial highlights (on the basis of IFRS1,2):

(USDm) unless otherwise shown	2Q 21	1Q 21	2Q 20	1H 21	1H 20
Sales	19,343	16,193	10,976	35,536	25,820
Operating income / (loss)	4,432	2,641	(253)	7,073	(606)
Net income / (loss) attributable to equity holders of the parent	4,005	2,285	(559)	6,290	(1,679)
Basic earnings / (loss) per common share (US$)	3.47	1.94	(0.50)	5.40	(1.57)
Operating income/ (loss) / tonne (US$/t)	276	160	(17)	217	(18)
EBITDA	5,052	3,242	707	8,294	1,674
EBITDA/ tonne (US$/t)	314	197	48	255	49
Crude steel production (Mt)	17.8	17.6	14.4	35.4	35.5
Steel shipments (Mt)	16.1	16.5	14.8	32.6	34.3
Total group iron ore production (Mt)	11.2	13.3	13.5	24.5	27.9
Iron ore production (Mt) (AMMC and Liberia only)	4.9	7.3	6.7	12.2	13.5
Iron ore shipment (Mt) (AMMC and Liberia only)	4.6	7.4	6.8	12.0	13.3

Note: As previously announced, effective 2Q 2021, ArcelorMittal has amended its presentation of reportable segment to report only the operations of AMMC and Liberia within the Mining segment. The results of every other mine is accounted for within the steel segments that it primarily supplies. As from 2Q 2021 onwards, ArcelorMittal Italia is deconsolidated and accounted as a joint venture.

Commenting, Mr. Aditya Mittal, ArcelorMittal Chief Executive Officer, said:

"In addition to our half year results, we have today also published our second group Climate Action Report, which sets out our intent to be at the forefront of the transition to net zero in our sector. This intent is reflected in the new targets announced in the report - a new group-wide target of a 25% reduction in carbon emissions by 2030, and an increase in the target for our European business, to 35% by 2030. These targets are the most ambitious in our sector and build on the progress we have already made this year. In recent weeks we announced plans for ArcelorMittal to have the world's first full-scale zero carbon- emissions steel plant. Earlier this year we launched XCarb™, our new brand for all low-carbon initiatives including green steel certificates13, low carbon products, and the XCarb™ innovation fund which is investing in new technologies associated with the decarbonization of the steel industry. To achieve net zero by 2050, accelerating progress in the next decade is vital and ArcelorMittal is committed to seeing how we can move faster, working collaboratively with stakeholders in the regions we operate."

"On the financial side, the second quarter has seen a continued strong recovery backdrop alongside a sustained lean inventory environment. This resulted in even healthier spreads in our core markets than in the first three months of the year, supporting the best quarterly and half year result we have reported since 2008. This has enabled us to further improve our balance sheet and deliver on our commitment to return cash to shareholders. Our performance is clearly very welcome after the unprecedented disruption the business and our people faced in 2020. I would like to thank all our employees again for the way in which they managed this volatility and have been able to quickly bring production back online to maximize the opportunity from the current extraordinary market conditions."

"Looking forward, we see the demand outlook further improving into the second half and have therefore upgraded our steel consumption forecasts for the year."

Sustainable development and safety performance

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

Protecting the health and wellbeing of employees remains the Company's overarching priority with ongoing strict adherence to World Health Organization guidelines (in respect of COVID-19), and specific government guidelines have been followed and implemented. We continue to ensure extensive monitoring, with stringent sanitary practices and social distancing measures at all operations and have implemented remote working wherever possible and provided essential personal protective equipment to our people.

Health and safety performance based on own personnel and contractors lost time injury frequency (LTIF) rate was 0.89x in the second quarter of 2021 ("2Q 2021") as compared to 0.78x for the first quarter of 2021 ("1Q 2021"). Prior period figures have not been recast for the ArcelorMittal USA disposal which took place in December 2020 and exclude ArcelorMittal Italia (which is now accounted for under the equity method) for all periods.

Health and safety performance in the first six months of 2021 ("1H 2021") was 0.83x as compared to 0.63x in the first six months of 2020 ("1H 2020").

The Company's efforts to improve its health and safety record aim to strengthen the safety of its workforce with an absolute focus on eradicating fatalities.

A change to the Company's executive remuneration policy has been made to reflect the renewed safety focus. This includes a substantial increase in the proportion of the short-term incentive plan that is linked to safety, as well as a tangible link to broader ESG topics in the long-term incentive plan.

Own personnel and contractors - Frequency rate

Lost time injury frequency rate	2Q 21	1Q 21	2Q 20	1H 21	1H 20
NAFTA	0.17	0.71	0.51	0.43	0.60
Brazil	0.26	0.17	0.14	0.22	0.31
Europe	1.41	0.94	0.93	1.16	0.94
ACIS	1.03	1.02	0.48	1.02	0.70
Mining	0.71	0.62	-	0.68	0.19
Total	0.89	0.78	0.50	0.83	0.63

Key sustainable development highlights for 2Q 2021:

During 2Q 2021, the Company highlighted:

• New Climate action report published July 2021: New Group CO2 reduction target of 25% by 2030 which includes an acceleration of the Europe CO2 reduction target to 35% by 2030 (from 30% by 2030 previously); the new targets will require an estimated gross investment (pre-government support) of $10 billion through 203022
• The world's first full scale zero carbon-emissions steel plant announced: In line with its new accelerated targets, the Company has announced the first full scale zero carbon-emissions(scopes 1+2) steel plant at Sestao (Spain)
• ArcelorMittal has agreed to partner with the Science-Based Targets initiative (SBTI) to support their development of a 1.5OC methodology for the steel industry: A key input to this process will be the work of the Net Zero Steel Pathway Methodology Project, established and led by four steel companies including ArcelorMittal over the past 15 months, alongside Worldsteel and ResponsibleSteel™. The SBTI project is expected to be completed in 2022
• Investments in the Company's recently launched XcarbTM Innovation fund: On June 8, 2021, ArcelorMittal announced the completion of its first investment since the launch of the fund with an initial $10 million investment in Heliogen, a renewable energy technology company which focuses on 'unlocking the power of sunlight to replace fossil fuels'. Heliogen's technology will harness solar energy by using a field of mirrors which will act as a multi-acremagnifying glass to concentrate and capture sunlight. The sunlight will then be subsequently converted into heat (HelioHeat™), electricity (HelioPower™) or clean fuels (HelioFuel™). All three Heliogen products have the potential to be applicable to the steelmaking process and support the steel industry's transition to carbon-neutrality.

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On July 21, 2021, ArcelorMittal announced it has completed its second investment in the Company's recently launched XCarb™ innovation fund, serving as lead investor in Form Energy's $200 million Series D financing round, with a $25 million equity injection. Form Energy, which was founded in 2017, is working to accelerate the development of its breakthrough low- cost energy storage technology to enable a reliable, secure, and fully-renewable electric grid year-round. Alongside the $25 million investment, ArcelorMittal and Form Energy have signed a joint development agreement to explore the potential for ArcelorMittal to provide iron, tailored to specific requirements, to Form Energy as the iron input into their battery technology.

• ResponsibleSteel™ site certification in Belgium, Germany and Luxembourg: On July 20, 2021 ArcelorMittal announced that it has achieved ResponsibleSteel™ site certification in Belgium (Geel, Genk, Gent and Liège), Luxembourg (Belval, Differdange and Rodange) and Germany (Bremen and Eisenhüttenstadt). These are the first steel plants globally to be independently audited and found to meet the standards required for ResponsibleSteel, the industry's first global multi- stakeholder standard and certification initiative, having met rigorously defined standards across a broad range of social, environmental and governance criteria including: Climate change and greenhouse gas emissions; Water stewardship and biodiversity; Human rights and labour rights; Community relations and business integrity. ArcelorMittal Europe Flat Products plans to achieve full certification of all sites by the end of 2022.
• Further investments to progress its digital transformation in Dunkirk: On July 6, 2021, ArcelorMittal inaugurated its first Digital Lab, located in Dunkirk (Nord), near its largest steel production site in Europe, with the support of local, regional and national public authorities. The Digital Lab will bring together other manufacturers, start-ups,universities and local digital players, with the aim of bringing the best of digital innovation to the steel industry and accelerating ArcelorMittal's digital transformation.
• New highly sustainable product launched for use in extreme climates: On May 2021, ArcelorMittal launched a new product designed for use in extreme climates. Granite® HDXtreme is the latest pre-paintedsteel in ArcelorMittal's organic coated Granite® range. It has a coating system that provides high levels of protection against UV and corrosion, designed for roofs and façades on buildings near the sea, and its performance is guaranteed for up to 40 years. Chromates and heavy metals-free,and 100% recyclable, Granite® HDXtreme is highly sustainable: it has a lower CO2 footprint compared with alternative solutions such as aluminum.

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Analysis of results for the six months ended June 30, 2021 versus results for the six months ended June 30, 2020

Total steel shipments for 1H 2021 were 32.6 million metric tonnes (Mt) representing a decrease of 5.2% as compared to 34.3Mt in 1H 2020. Steel shipments on a scope adjusted basis (i.e. excluding the shipments of ArcelorMittal USA, sold to Cleveland Cliffs on December 9, 2020, and ArcelorMittal Italia14, deconsolidated as from April 14, 2021), increased by 13.4% as economic activity continued to recover. All segments experienced year on year shipment growth: Europe +11.5% (scope adjusted basis), Brazil +32.3%, ACIS +7.7% and NAFTA +18.4% (scope adjusted basis).

Sales for 1H 2021 increased by 37.6% to $35.5 billion as compared with $25.8 billion for 1H 2020, primarily due to higher average steel selling prices (41.5%) partly offset by lower steel shipments (5.2%) following the disposal of ArcelorMittal USA and the deconsolidation of ArcelorMittal Italia.

Depreciation of $1.2 billion for 1H 2021 as compared with $1.5 billion in 1H 2020 was broadly stable on a scope adjusted basis. The FY 2021 depreciation expense is expected to be approximately $2.6 billion (based on current exchange rates).

There were no impairment charges for 1H 2021. Impairment charges for 1H 2020 were $92 million and related to the permanent closure of the coke plant in Florange (France), at the end of April 2020.

There were no exceptional items for 1H 2021. Exceptional items for 1H 2020 were $678 million due to inventory related charges in NAFTA and Europe.

Operating income for 1H 2021 of $7.1 billion was primarily driven by positive steel price-cost effects (due to improved demand, which coupled with lean inventories supported significant increases in steel spreads and which, due to order book lags, are not yet fully reflected in results) and improved iron ore reference prices (+100.6%). The operating loss for 1H 2020 of $0.6 billion was primarily driven by the impairment and exceptional items discussed above, and lower steel spreads and iron ore market prices.

Income from associates, joint ventures and other investments for 1H 2021 was $1.0 billion as compared to $127 million for 1H 2020. 1H 2021 income is significantly higher on account of improved contribution from AMNS India8 , AMNS Calvert (Calvert)9 and other investees as well as the annual dividend received from Erdemir of $89 million. 1H 2020 income from associates, joint ventures and other investments was negatively impacted by COVID-19.

Net interest expense in 1H 2021 was lower at $167 million as compared to $227 million in 1H 2020 following debt repayments and liability management. The Company continues to expect full year 2021 net interest expense to be approximately $0.3 billion.

Foreign exchange and other net financing losses were $427 million for 1H 2021 as compared to losses of $415 million for 1H 2020.

• Foreign exchange loss for 1H 2021 was $147 million as compared to a gain of $12 million in 1H 2020.
• 1H 2021 includes non-cashmark-to-market gains of $37 million related to the mandatory convertible bonds call option following the market price increase of the underlying share while 1H 2020 included a loss of $117 million.
• 1H 2021 and 1H 2020 also include early bond redemption premium expenses of $130 million and $66 million, respectively.
• 1H 2021 pension expenses are lower by $0.1 billion following the disposal of ArcelorMittal USA.

ArcelorMittal recorded an income tax expense of $946 million for 1H 2021 (including $391 million deferred tax benefit) as compared to $524 million for 1H 2020 (which included $262 million deferred tax expense).

ArcelorMittal's net income for 1H 2021 was $6,290 million, or $5.40 basic earnings per common share, as compared to a net loss in 1H 2020 of $1,679 million, or $1.57 basic loss per common share.

Analysis of results for 2Q 2021 versus 1Q 2021 and 2Q 2020

Adjusted for the change in scope (i.e., excluding the shipments of ArcelorMittal Italia14), steel shipments in 2Q 2021 increased 2.4% as compared with 15.6Mt in 1Q 20214, as economic activity continued to recover. All segments experienced quarter-on- quarter shipment growth: Europe +1.0% (scope adjusted basis), Brazil +3.3%, ACIS +8.0% and NAFTA +3.2%. Total steel shipments in 2Q 2021 of 16.1Mt were +30.6% higher than 2Q 2020 on a scope adjusted basis (excluding ArcelorMittal Italia and ArcelorMittal USA): Europe +32.4% (scope adjusted); NAFTA +45.7% (scope adjusted); ACIS +17.0%; Brazil +43.9%.

Sales in 2Q 2021 were $19.3 billion as compared to $16.2 billion for 1Q 2021 and $11.0 billion for 2Q 2020. As compared to 1Q 2021, the 19.5% increase in sales was primarily due to higher realized average steel selling prices (+20.3%), offset in part by

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