ArcelorMittal Plans Asset Sale, Production Cuts To Tide Over Crisis

EBITDA for first half drops 42.6%

Production cut of approximately 4.2 million tons in response to market demand in the second half of 2019 and unlocking up to $2 billion from asset sale over the next two years are some of the steps being taken by ArcelorMittal to tide over the current crisis in the global steel sector.

Strategic actions

The following steps are being contemplated as highlighted post the earnings release by the Luxembourg-based entity on August 1:

1. Given weak demand and high import levels in Europe, the company has taken steps to align its European production levels to the current market demand. As a result of previously announced European production curtailments, approximately 4.2 million tons of annualised production curtailment is scheduled for second half of 2019

2. Further temporary cost initiatives undertaken to navigate the current weak market backdrop

3. Deleveraging remains a priority. Net debt at the end of June was the lowest level achieved since the ArcelorMittal merger

4. Cash needs of the business for 2019 have been reduced by $1 billion to $5.4 billion, due to lower expected capex and tax

5. To complement the expected deleveraging through FCF generation, the company has identified opportunities to unlock up to $2 billion of value from its asset portfolio over the next two years

“After a strong 2018, market conditions in the first half of 2019 have been very tough, with the profitability of our steel segments suffering due to lower steel prices combined with higher raw material costs. This has been only partially offset by improved profitability from our mining segment,” Lakshmi N. Mittal, ArcelorMittal Chairman and CEO, said.

Global overcapacity remains a clear challenge for the industry forcing ArcelorMittal to cut capacity in Europe in response to the current weak demand environment, which has also impacted the turnaround of the ex-Ilva facilities in Italy.