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COVID-19 impacts
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 wellbeing of our people and to
provide support to the extent required in the communities in which we
operate
Economic activity and steel market conditions have significantly
deteriorated since measures were introduced by governments worldwide to
contain the COVID-19 pandemic
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
Highlights of 1Q 2020
Health and safety performance: LTIF rate2 of 1.01x in 1Q 2020
Improved operating performance in 1Q 2020 reflects the positive market
developments prior to the escalation of the COVID-19 pandemic in March;
operating loss of $0.4bn (vs. loss of $1.5bn in 4Q 2019); EBITDA
increased to $1.0bn (4.5% higher than 4Q 2019)
Net loss of $1.1bn in 1Q 2020 (adjusted net loss of $0.6bn, excluding
impairment and exceptional items)3
Strong cash management during the quarter, including a working capital
investment limited to $0.1bn; gross debt of $13.8bn and a marginal
increase in net debt to $9.5bn (down $1.7bn vs 1Q 2019)
Liquidity at the end of 1Q 2020 stood at $9.8bn (consisting of cash and
cash equivalents of $4.3bn and $5.5bn of available credit lines5);
further supplemented by a recently signed new $3bn credit facility5
Outlook and guidance
The Company has moved swiftly to secure its assets and match production
to the evolving orderbook, with steel shipments for 2Q 2020 expected
within the range of 13.5Mt to 14.5Mt; the actions taken to reduce all
costs in line with reduced operating rates is expected to yield a
reduction in fixed costs10 by 25%-30% in 2Q 2020, essentially
maintaining fixed costs per-tonne at the 1Q 2020 level; EBITDA for 2Q
2020 is expected to be within the range of $0.4bn to $0.6bn
Certain cash needs of the business are now expected to be approximately
$3.5bn in 2020 (vs. $4.5bn previous guidance), due to lower planned
capex (reduced to $2.4bn from $3.2bn previous guidance) and lower taxes
Annual working capital needs will be determined by the extent market
conditions recover in 2H 2020, but the Company still expects to release
the $1bn in working capital previously targeted
The Company’s $2 billion asset portfolio optimization program continues
to progress. Given suitable and viable buyers have expressed serious
interest in certain assets, the Company remains confident in completing
the program by mid-2021
While the impacts of COVID-19 have introduced unanticipated challenges,
the Company continues to target achievement of its $7bn net debt
objective in the near term
Against the backdrop of significant cost savings measures being taken
across the business, the Board determined it both appropriate and
prudent to suspend dividend payments until such a time as the operating
environment normalizes.
Financial highlights (on the basis of IFRS [1]):
|
(USDm) unless otherwise shown |
1Q 19 |
2Q 19 |
3Q 19 |
4Q 19 |
1Q 20 |
|
Sales |
19,188 |
19,279 |
16,634 |
15,514 |
14,844 |
|
Operating income / (loss) |
769 |
(158) |
297 |
(1,535) |
(353) |
|
Depreciation |
733 |
766 |
766 |
802 |
771 |
|
Impairments net of purchase gains |
150 |
947 |
0 |
830 |
92 |
|
Restructuring / Exceptional (income) |
0 |
0 |
0 |
828 |
457 |
|
EBITDA |
1,652 |
1,555 |
1,063 |
925 |
967 |
|
Crude steel production (Mt) |
24,096 |
23,751 |
22,209 |
19,753 |
21,092 |
|
Steel shipments (Mt) |
21,826 |
22,773 |
20,185 |
19,727 |
19,481 |
|
Average steel selling price (US$/t) |
744 |
715 |
692 |
644 |
641 |
|
EBITDA/tonne (US$/t) |
76 |
68 |
53 |
47 |
50 |
|
Steel only EBITDA |
1,232 |
985 |
691 |
624 |
669 |
|
Steel only EBITDA/ton (US$/t) |
56 |
43 |
34 |
32 |
34 |
NAFTA
|
(USDm) unless otherwise shown |
1Q 19 |
2Q 19 |
3Q 19 |
4Q 19 |
1Q 20 |
|
Sales |
5,085 |
5,055 |
4,395 |
4,020 |
4,304 |
|
Operating income / (loss) |
216 |
(539) |
(24) |
(912) |
(120) |
|
Depreciation |
134 |
137 |
147 |
152 |
126 |
|
Impairments net of purchase gains |
0 |
600 |
0 |
700 |
0 |
|
Restructuring / Exceptional charges |
0 |
0 |
0 |
200 |
241 |
|
EBITDA |
350 |
198 |
123 |
140 |
247 |
|
Crude steel production (Mt) |
5,388 |
5,590 |
5,658 |
5,261 |
5,503 |
|
Steel shipments (Mt) |
5,319 |
5,438 |
5,135 |
5,029 |
5,536 |
|
Average steel selling price (US$/t) |
874 |
836 |
792 |
731 |
715 |
|
EBITDA/tonne (US$/t) |
66 |
36 |
24 |
28 |
45 |
BRAZIL
|
(USDm) unless otherwise shown |
1Q 19 |
2Q 19 |
3Q 19 |
4Q 19 |
1Q 20 |
|
Sales |
2,156 |
2,126 |
1,929 |
1,902 |
1,592 |
|
Operating income / (loss) |
239 |
234 |
196 |
177 |
150 |
|
Depreciation |
70 |
79 |
62 |
63 |
69 |
|
Impairments net of purchase gains |
0 |
0 |
0 |
0 |
0 |
|
Restructuring / Exceptional (income) |
0 |
0 |
0 |
0 |
0 |
|
EBITDA |
309 |
313 |
258 |
240 |
219 |
|
Crude steel production (Mt) |
3,013 |
2,830 |
2,669 |
2,489 |
2,679 |
|
Steel shipments (Mt) |
2,880 |
2,785 |
2,810 |
2,717 |
2,351 |
|
Average steel selling price (US$/t) |
704 |
705 |
676 |
628 |
642 |
|
EBITDA/tonne (US$/t) |
107 |
112 |
92 |
88 |
93 |
EUROPE
|
(USDm) unless otherwise shown |
1Q 19 |
2Q 19 |
3Q 19 |
4Q 19 |
1Q 20 |
|
Sales |
10,494 |
10,396 |
8,796 |
8,035 |
7,654 |
|
Operating income / (loss) |
11 |
(301) |
(168) |
(649) |
(426) |
|
Depreciation |
309 |
313 |
311 |
323 |
347 |
|
Impairments net of purchase gains |
150 |
347 |
0 |
28 |
92 |
|
Restructuring / Exceptional charges |
0 |
0 |
0 |
456 |
191 |
|
EBITDA |
470 |
359 |
143 |
158 |
204 |
|
Crude steel production (Mt) |
12,372 |
12,079 |
10,432 |
9,030 |
9,912 |
|
Steel shipments (Mt) |
11,553 |
11,811 |
9,698 |
9,290 |
9,300 |
|
Average steel selling price (US$/t) |
729 |
704 |
686 |
654 |
638 |
|
EBITDA/tonne (US$/t) |
41 |
30 |
15 |
17 |
22 |
ACIS
|
(USDm) unless otherwise shown |
1Q 19 |
2Q 19 |
3Q 19 |
4Q 19 |
1Q 20 |
|
Sales |
1,645 |
1,906 |
1,654 |
1,632 |
1,446 |
|
Operating income / (loss) |
64 |
114 |
35 |
238 |
(60) |
|
Depreciation |
81 |
85 |
93 |
105 |
86 |
|
Impairments net of purchase gains |
0 |
0 |
0 |
102 |
0 |
|
Restructuring / Exceptional charges |
0 |
0 |
0 |
76 |
21 |
|
EBITDA |
145 |
199 |
128 |
45 |
47 |
|
Crude steel production (Mt) |
3,323 |
3,252 |
3,450 |
2,973 |
2,998 |
|
Steel shipments (Mt) |
2,662 |
3,182 |
2,718 |
2,985 |
2,614 |
|
Average steel selling price (US$/t) |
541 |
536 |
532 |
460 |
471 |
|
EBITDA/tonne (US$/t) |
54 |
63 |
47 |
15 |
18 |
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