ArcelorMittal — FY 2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone Q4 filing; the supplied text does not provide clear consolidated Q4 revenue or profit figures. Financial statements are prepared under IFRS as issued by the IASB.
Business context
ArcelorMittal is an integrated steel and mining group operating in 15 countries, with approximately 126,756 employees and sales in about 140 countries. Its five reported segments were NAFTA, Brazil, Europe, ACIS and Mining. It acquired Brazil’s Companhia Siderúrgica do Pecém (renamed ArcelorMittal Pecém) in March 2023 and sold its Kazakhstan steel and mining operations in December 2023.
Financial and operating performance
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Sales | $68.3 billion | $79.8 billion |
| Gross margin | $4.7 billion; 6.9% of sales | $12.5 billion; 15.7% of sales |
| Operating income | $2.3 billion; 3.4% of sales | $10.3 billion; 12.9% of sales |
| Net income attributable to equity holders | $919 million | $9.3 billion |
| Basic earnings per share | $1.09 | $10.21 |
| Net cash from operating activities | $7.6 billion | $10.2 billion |
| Capital expenditures | $4.6 billion | $3.5 billion |
| Total debt | $10.7 billion | $11.7 billion |
| Cash and restricted cash | $7.8 billion | $9.4 billion |
| Net debt | $2.9 billion | $2.2 billion |
Margins shown are calculated from reported figures. Operating cash flow less capital expenditures was approximately $3.0 billion, before dividends and other investing or financing items. The company also had $5.4 billion available under its revolving credit facility. Gearing was 5% of total equity, compared with 4% in 2022.
Steel shipments were 55.6 million tonnes, versus 55.9 million tonnes in 2022; average steel selling prices declined 13.5%. Crude steel production was 58.1 million tonnes. Mining-segment iron ore production fell to 26.0 million tonnes from 28.6 million tonnes. Reported 2023 shipment and production comparisons are affected by the Pecém acquisition and Kazakhstan disposal.
Material changes versus 2022
- Sales fell 14.5%, mainly reflecting lower steel prices. Operating income declined from $10.3 billion to $2.3 billion, with management citing a negative price-cost effect as steel prices fell faster than the raw-material basket and energy costs.
- Operating cash flow decreased by $2.6 billion. Working capital provided $1.6 billion in 2023, compared with a $1.3 billion investment in 2022.
- Energy costs included in cost of sales fell to $6.8 billion from $9.6 billion, but did not offset weaker steel spreads and lower shipments in several operations.
- Net income included a $2.4 billion charge associated with the Kazakhstan disposal, including $1.5 billion of cumulative foreign-exchange translation losses recycled through earnings and $0.9 billion of asset and goodwill impairment. The disposal consideration included $286 million at closing, $250 million repayment of intra-group dues and a further $450 million in four annual installments.
- The company recorded a $1.4 billion impairment of its investment in Acciaierie d’Italia (ADI), following reduced expected cash flows and uncertainty over its future. In February 2024, the Italian Government placed ADI into extraordinary administration, transferring control to government-appointed commissioners.
Outlook, commentary and risks
- Management expected 2024 apparent steel demand outside China to grow 3%–4%, with regional estimates of 1.5%–3.5% for U.S. flat products, 2%–4% for European flat products, 0.5%–2.5% in Brazil, 6.5%–8.5% in India and 0%–2% in China. These are forward-looking estimates, not results.
- 2024 capital expenditures were forecast at $4.5–$5.0 billion, including $1.4–$1.5 billion of strategic growth spending. The company expected to fund spending primarily from internal sources. Decarbonization capital expenditures were expected to rise from $0.2 billion in 2023 to $0.3–$0.4 billion in 2024.
- The company targets a 25% reduction in group Scope 1 and 2 emissions intensity by 2030, 35% in Europe, and carbon neutrality by 2050. It estimates approximately $10 billion of gross capital investment to achieve the global 2030 target and expects public support to cover about half of decarbonization costs. Funding, clean-energy availability and technology deployment remain important uncertainties.
- Key exposures include cyclical steel demand and prices, price-cost lags, raw-material and energy volatility, excess global capacity and rising Chinese steel exports, trade measures, geopolitical conflicts and sanctions, and European carbon costs. The company also cites operational, safety, environmental, labor, currency, litigation, joint-venture and cybersecurity risks.
- Safety was a major concern: 61 work-related fatalities occurred in 2023, including 46 at the Kostenko mine in Kazakhstan. A company-wide independent safety audit began in December 2023, with key recommendations expected in September 2024.
- Management concluded internal control over financial reporting was ineffective at year-end because of a material weakness at a Canadian subsidiary involving IT access and program-change controls and related controls over sales and cost of sales. The weakness did not result in a reported material misstatement; the auditor issued an adverse opinion on internal controls, while issuing an unqualified opinion on the consolidated financial statements. Management is implementing a remediation plan.
- The Board recommended increasing the base dividend to $0.50 per share for 2024, subject to shareholder approval. The policy also targets returning at least 50% of post-dividend free cash flow through buybacks, subject to the policy’s conditions.
Most important facts for investors to verify
- Review the audited financial statements and segment disclosures, especially the drivers of the sharp decline in operating income and cash flow.
- Confirm the final Kazakhstan disposal receipts, installment schedule and accounting effects, and monitor any further ADI developments or impairment exposure.
- Track progress on the Canadian subsidiary’s internal-control remediation and whether management and the auditor report effective controls in a subsequent filing.
- Assess the execution, funding and returns of planned capital spending, particularly AMNS India expansion and decarbonization projects, including dependence on government aid and energy infrastructure.
- Monitor 2024 steel demand, Chinese exports, steel-to-raw-material price spreads, European energy and carbon costs, and production utilization.
- Verify the timing and approval of the proposed $0.50 dividend and actual buybacks against cash generation and the stated capital-return policy.
- Review safety-audit findings and subsequent fatality and injury performance, as well as relevant environmental, litigation and contingent-liability disclosures.