Business context and reporting period
ArcelorMittal’s Form 20-F is an audited annual report for the fiscal year ended December 31, 2020, prepared under IFRS. It covers a global steelmaking and mining group operating across five reporting segments: NAFTA, Brazil, Europe, ACIS and Mining. The filing provides full-year results, not a clear standalone set of fourth-quarter financial statements; Q4 commentary should not be read as a separate quarterly earnings report.
The year’s results and year-over-year comparisons were affected by COVID-19 demand and production disruptions, the December sale of most U.S. operations, and the planned transition of ArcelorMittal Italia to joint control with Italy’s Invitalia.
Key financial metrics
| Metric | 2020 | 2019 |
|---|---|---|
| Sales | $53.270 billion | $70.615 billion |
| Gross margin | $4.132 billion | $1.728 billion |
| Operating income (loss) | $2.110 billion | $(627) million |
| Net income (loss) attributable to parent shareholders | $(733) million | $(2.454) billion |
| Net cash from operating activities | $4.082 billion | $6.017 billion |
| Capital expenditures | $2.439 billion | $3.572 billion |
| Total debt | $12.322 billion | $14.340 billion |
| Net debt | $6.359 billion | $9.345 billion |
| Cash, restricted cash and other restricted funds | $5.963 billion | $4.995 billion |
| Undrawn revolving credit facility | $5.5 billion | $5.5 billion |
Sales fell 24.6%. Steel shipments declined 18.2% to 69.1 million tonnes, and the average steel selling price fell 8.7%. Gross margin was about 7.8% of sales versus 2.4% in 2019; operating margin was about 4.0% versus negative 0.9% (calculated from reported figures). Operating cash flow less capital expenditures was approximately $1.6 billion, compared with approximately $2.4 billion in 2019; this simple comparison is not necessarily equivalent to the company’s reported non-GAAP free cash flow measure.
Iron ore production was 58.0 million tonnes, up 1.6%, while coal production fell 8.8% to 5.0 million tonnes. Mining operating income increased to $1.411 billion from $1.215 billion, supported by higher iron ore prices. Long-term debt was $9.815 billion and short-term debt was $2.507 billion at year-end. Net debt was below the company’s $7 billion target; gearing was 15.9% versus 23.1% in 2019.
Material changes versus the prior comparable period
- COVID-19 sharply reduced steel demand, shipments and prices, particularly in the first half. Shipments were down 23.0% in the first half year over year; activity and prices recovered during the second half, but full-year shipments remained lower.
- Operating income returned to positive territory from a 2019 loss, but 2020 included significant disposal and impairment-related items. These included a $1.460 billion net gain on the U.S. divestment, a $660 million reversal of prior U.S. asset impairments, a $331 million impairment on European plate assets classified as held for sale, and closure-related and inventory charges.
- Net loss narrowed to $733 million from $2.454 billion. The 2020 result included $1.666 billion of income tax expense, including substantial deferred tax asset derecognition following the U.S. sale.
- Operating cash flow decreased despite a $1.5 billion working-capital release, compared with a $2.2 billion release in 2019. Capital spending was reduced as non-essential projects were suspended.
- Debt declined and liquidity remained substantial. The company raised $750 million through an ordinary-share offering and $1.25 billion through mandatorily convertible notes in 2020.
Transactions, outlook, risks and unusual items
- U.S. divestment: On December 9, 2020, the company sold substantially all U.S. steel and mining operations to Cleveland-Cliffs for stated total consideration of $2.2 billion, including $509 million cash, Cleveland-Cliffs common and preferred shares, and assumption of certain pension and other post-employment liabilities. ArcelorMittal retained its Calvert joint venture interest and entered into a slab-supply agreement. The transaction materially changes the group’s scale and comparability.
- ArcelorMittal Italia: A December 2020 agreement provides for Invitalia to invest up to €1.105 billion in two tranches. The first €400 million tranche, subject to approvals and expected in 2021, would give Invitalia 50% voting rights and joint control. The later tranche and purchase obligation depend on conditions due by May 2022, including environmental, legal and labor conditions. Failure to meet conditions could result in return of the business units and liquidation of the proposed joint venture.
- Management outlook: The company forecast 2021 global apparent steel consumption growth of 4.5%–5.5%, while emphasizing pandemic-related uncertainty. It expected capital expenditures of about $2.8 billion and net interest expense of about $0.3 billion in 2021. A $1.0 billion structural cost-improvement program was expected to be fully realized in 2022 relative to 2019 operations, adjusted for divestments and deconsolidations.
- Capital returns: The 2020 dividend was suspended. In 2021, the Board recommended a $0.30-per-share base dividend, subject to shareholder approval. After year-end, the company completed a $650 million buyback and began a further $570 million buyback; it also announced the sale of 40 million Cleveland-Cliffs shares for gross proceeds of $652 million.
- Principal risks: Steel and mining cyclicality, excess capacity, volatile steel and raw-material prices, pandemic effects, trade measures, and the timing mismatch between input costs and steel prices may pressure results. Other material risks include environmental and carbon-transition costs, mine safety and tailings, labor relations, litigation and regulatory proceedings, foreign-exchange exposure, pension funding, and execution risks for ArcelorMittal Italia and joint ventures. The company reported $4.5 billion of guarantees on behalf of associates and joint ventures, including $3.1 billion for AMNS India.
- Contingencies and unusual items: Contractual obligations totaled $30.305 billion, including $13.047 billion of purchase obligations and $1.058 billion of environmental commitments and asset-retirement obligations. The filing says there were no material off-balance-sheet arrangements. The audit report was unqualified, and management and the auditor concluded internal control over financial reporting was effective.
Important facts for investors to verify
- Reconcile reported operating income and net loss to the U.S. disposal gain, impairment reversals and charges, inventory costs, restructuring and tax effects; assess recurring earnings separately.
- Confirm the final cash, share and liability consideration from the Cleveland-Cliffs transaction, including the value and terms of preferred shares and the retained Calvert slab-supply commitments.
- Track Invitalia’s investment tranches, the conditions for completing the ArcelorMittal Italia purchase, and whether the expected deconsolidation and production plan proceed as disclosed.
- Assess the sustainability of the 2021 demand recovery, steel spreads and mining profitability, and whether working-capital movements support cash generation.
- Monitor delivery of the $1.0 billion structural cost program, planned capital expenditures, the dividend and buyback policy, and progress toward carbon-reduction targets alongside related investment and regulatory costs.
- Review debt maturities, credit ratings, covenant compliance, the $4.5 billion of joint-venture guarantees, and the recoverability of $7.9 billion in deferred tax assets.