ArcelorMittal S.A. (MT) Q1 2018 Earnings Report, Transcript and Summary

Hi. Good afternoon, everybody. Welcome to ArcelorMittal’s Q1 2018 Analyst and Investor Call. This is Daniel Fairclough from ArcelorMittal Investor Relations team. And I’m joined on this call today by Genuíno Christino, who’s our Head of Finance. We’re here to answer your questions on the results published this morning. [Operator Instructions] And as usual, this call is being recorded. Hopefully, you’ve all had a chance to read our earnings statement and the Q&A document, and the presentation with speaker notes, which were all published on our website this morning. It’s clear that results for the first quarter of 2018 were very encouraging. Indeed, this is the best start that we’ve had to a year since 2011, and there’s more to come. The supply and demand fundamentals in the global steel market do remain very supportive. And our confidence in the outlook for the rest of 2018 has improved since the start of the year. So with that brief opening, Genuíno and I are now happy to take your questions and we’re going to answer them in the order that we receive them.

So we’ll move to the first question, please, from Mike Shillaker at Credit Suisse.

Yeah, Dan. Thanks very much for taking my questions. Two questions, if I may. Firstly, on the sort of concept that there is more to come, and looking into Q2, and then maybe into H2 as far as you can. On Q2, obviously, we still see some very strong pricing tailwinds, especially from the lag in the U.S. and, I guess, some volume tailwinds all over. So we can get some sense as to how strong the margin improvement could be in Q2 relative to Q1. And then if we look into H2, and I know it’s difficult, but I think last year you did give some sort of – some form of guidance on H2 versus H1. We have a mix of, obviously, normal negative seasonality, potentially some positive demand drivers on one hand, and then, I guess, some positive pricing lag still feeding through on the other. So I wonder if you could give us some kind of feeling for how you would see H2 versus H1 against what we would look at as a normal backdrop of weaker H2 just driven by pure seasonality. Second question, regarding Ilva, last year when you won the contest, I think you set out very clearly some plans for volume for the plant and similar. We now have all the remedies. I just wonder if you could help try and confirm, A, the total tonnage of up and downstream assets being disposed of in the revenue. I think the upstream is close to 4 million tonnes, but the downstream is not completely clear. And then some help as to the profitability of those assets, so we can actually work out what the net Ilva transaction effect is. It would be perfect. And then very quick housekeeping question, which, I guess, everyone’s going to want too. So, around $2 billion of working capital build in Q1. I just wonder if you could give us some guidance as to what you expect for the full year, whether a lot of that will be released in the last part of the year. Thank you. Genuíno José Magalhães Christino: Okay. Thank you, Michael. This is Genuíno. So let me address your first question on how we see business evolving to second quarter. I think you’re absolutely right. So we see the – all the key drivers moving in the right direction. So, clearly, we will see next quarter a pickup in shipments across all of our divisions. Prices, as you said, we will see a meaningful pickup in prices also in NAFTA, just given how prices, spot prices moved in the second part of quarter one from late January. So I would just point that also that in Brazil, we’ll see meaningful shipments’ pickup. But you should keep in mind that that is primarily exports. There will be also some contribution from Voto. You should take that – you should take that into account as well. So all in all, I mean, we would expect our margins, our EBITDA per tonne at group level to move in the right direction next quarter.

Thanks, Genuíno. So I’ll take the question on Ilva and the remedy package. So, Mike, I think I can help you get a feel for this. Obviously, it is a confidential sales process. So I’m not in a position to go into too specific a detail. But I think – and you’ve probably already done this. If you look at our fact book, you can get a good idea what the remedy package in terms of the contribution to our production in 2017. It was approximately about 9% of our Europe production. But, obviously, it’s a package of assets, which is predominantly located in Eastern Europe. Those assets are not operating at full capacity. So they are carrying a degree of fixed cost, and so the fixed cost per tonne is slightly handicapped by that. And then there’s the mix effect as well. So predominantly, the mix of this business or the package of assets that we’re looking to sell is lower than the average levels of our Europe-wide business. So, yes, it’s about 9% of segment Europe production in 2018. But the EBITDA per tonne, that package of assets is lower than the sort of comparable number for our Europe-wide business. So hopefully, that gives you an idea. And then, Genuíno, on working…

Can I – could I – just before you go to working capital, can I get any comment on H2 versus H1, the seasonality versus – the normal seasonality versus what you’re seeing in terms of pricing lag and maybe better volumes in some areas? Genuíno José Magalhães Christino: Look, so Michael, on this point, I mean, as we did last year, if you recall, I mean, we will be updating you on the second half in the second quarter. So we’ll not go beyond quarter two right now. I can only say that, I mean, the order book and business is strong, remains strong. But we will provide you more color on H2 in quarter two.

Okay, yeah, working capital then. Genuíno José Magalhães Christino: And in terms of your last question on WC [ph], so I think this is – I mean, we have deployed cash in quarter one, $1.9 billion. This is really a function of higher selling prices and volumes. So it’s all good news. So looking to the second quarter, just based on how we see the business evolving and we just talked about high shipments prices, I would expect – we would expect further working capital deployment in second quarter. We will not be providing this year, Michael, as we did last year, a forecast for full year. We will see, finally, where we land at the end of the year. But everything should be pointing, also as I said in the right direction. So we will be updating you in terms of what we see in the business on a quarterly basis.

Okay. Thanks very much, guys.

Thanks a lot, Mike. So we’ll move to the next question from Alain at Morgan Stanley, please.

Yes. Good afternoon, gents. Two questions from my side. If I may go back to NAFTA, given the nature of your order books, I presume you have some visibility until Q3. Is it fair to assume that the spreads were still wide in Q3 versus Q1? That’s the first question and that’s specifically on NAFTA. The second question is on Ilva. What are the remaining obstacles that you need to resolve from now until the end of June to make sure that you close the deal by the end of June? Thank you. Genuíno José Magalhães Christino: So in terms of NAFTA, clearly, I mean, in quarter two we will see a meaningful expansion of our margins. And we will not get into quarter three right now. Clearly, as I said, it’s also true for NAFTA, the order book remains strong. Everything, demand is good. And let’s go quarter by quarter, so quarter two will be good, and let’s wait for quarter three.

Thank you.

And thanks, Alain. On your question regarding Ilva, there’s only so much I can say really on this topic. Obviously, it has been a long process. I think we announced the – our successful bid almost 12 months ago. And so, it’s great news that we’ve made headway with the acquisition on Monday. You saw that we’ve been granted a clearance from the commission to go ahead. So that’s great news. But that is conditional on our commitment to dispose of that package of remedy assets, which we just discussed. That’s something that we expect to complete by the end of the year. But that’s not – we don’t have to sell those assets before we complete the transaction. So that’s the major milestone out of the way now. So we’re confident that we can push forward this quarter and complete the acquisition by the end of Q2.

Thank you.

Great. So we’ll move to the next question please from Seth at Jefferies.

Good afternoon. I have a couple of questions on the Brazilian business, please. In the first quarter, you seemed to report nearly 12% year-over-year shipment growth. That’s well above your target for around 7% growth for the full year. Can you just explain it? Are you expecting to be more challenged in comps throughout the year or risk of a deceleration after a uniquely strong first quarter? And to follow-up, when you think about that Brazilian business, can you comment on the current mix of domestic versus export sales and how you think that might change in the coming quarters as domestic demand recovers? Thank you. Genuíno José Magalhães Christino: Seth, so, yeah, clearly, we had a good performance in the domestic markets in Brazil. So we saw a growth not only quarter-on-quarter, but also year-on-year in both of our businesses, long and flats. So the demand has been – was strong in quarter one in most of the segments in which we operate, be it construction industry and auto, that has been strong. In the second quarter, as you know, we will have a higher mix of exports as we are back to the slab exports business in full capacity following the maintenance of the hot strip mill in quarter four. And as demand grows, we would expect to be shifting more volumes from exports to domestic to protect our market share.

Can you give us a sense in terms of the current mix of domestic versus exports and how that could be in, say, 12 months’ time, assuming a normal recovery in demand aligned with your full-year target? Genuíno José Magalhães Christino: Well, in quarter one, we were roughly 50-50. In 12 months’ time, I mean, I think it’s fair to take the apparent steel consumption that we have, so we are forecasting growth of about 6% to 7%. We are not updating that forecast right now. So we would – you should expect that we will keep our market share as the market grows.

Great. Thank you very much.

Thanks, Seth. So we’ll move to Novid at Cowen, please.

Thanks for taking my questions. Just starting with the European segment. Would you mind providing some more color on the strong growth in shipments there and maybe your expectations for the trajectory for the remainder of 2018? I’m just wondering if we should expect the kind of year-over-year shipment growth that we saw to be able to maintain throughout the year? Genuíno José Magalhães Christino: Well, yeah, so the shipment performance in Europe was good. So what we saw also was a good performance of our long business, so primarily HAV products. If you recall, I mean, last year, we saw some weakness in some of those products and we see some pickup in demand in long products in Europe. So we will continue to see – we hope to see progressive improvements in shipments also going to second quarter.

Thanks. And then for 2017, you mentioned that the apparent steel consumption in China came in above your expectations of 3.5%, pretty much flat demand essentially is what you guys are forecasting for this year. Just want to see if you see the potential for trying to surprise the upside again in 2018. And if so, what you see is the potential likely driver of that. Thank you.

Hi, Novid, I’ll take that question. I think, yes, it’s a good observation. Looking back 12 months ago, we were a little bit of an outlier in terms of our demand forecasts for China. We were pretty positive. The market was more neutral to negative. And as you point out, we started this year with a forecasted, fairly flat steel consumption in China. So zero growth, maybe minor contraction, maybe minor positive. But I think so far this year, the indicators are pretty positive, so – and they’re quite broad-based as well. So construction activity has been good; manufacturing activity has been good; and even autos is holding up nicely. So I think as we go through the remainder of the first half of the year, we’ll be looking to make any appropriate changes to all of our demand forecasts, and I would flag at this stage that China would be one of the areas, where there is upside risk.

Thanks.

Great. Thanks very much. And we’ll move to Cedar, Bank of America, please.

Thanks very much. Two questions for me, guys. The one question is you are on a process of acquisitions, it seems, at the moment. So we’ve had Voto in Brazil. We’ve got Ilva. And we know that you’re looking at Essar. Is there a level of net debt that you think about internally that you would not be willing to breach in order to do deals? I’m just trying to understand basically your capacity for further M&A. That’s the first question. And then the second question is, do we have any further update on the dividend policy going forward? I know that you’ve said, it’s going to be a payout of free cash flow once you get to a net debt target. Has there been any elaboration on that? Can we start thinking about what that payout level could be? Thank you.

Okay. Thanks, Cedar. I think, hopefully, we’ve been pretty clear in our capital allocation policy that we announced alongside our Q4 full-year results at the end of January. So our bias is firmly towards deleveraging the business. So we’ve been working very, very hard really over the past 10 years to reduce the level of debt on our balance sheet. If you go back to 2008, we entered the global financial crisis with in excess of $30 billion of net debt. We ended last year with just over $10 billion of net debt. So it’s dramatic progress. Following our results, we were upgraded back to investment grade by S&P, so that was a major positive achievement for ArcelorMittal. And we don’t want to compromise that strength. So balance sheet strength, our investment grade credit rating that’s very, very important to ArcelorMittal. But given the progress that we’ve made, we are in a position to look at the opportunities to create value for the future. So we’ve been fortunate in our ability to capitalize on the two major opportunities that have existed in our business over the past 18 months or so, which were Ilva in Europe and Votorantim in Brazil. And we’re now getting close to the end game with Ilva, and we’ve obviously just this past quarter completed the acquisition of Votorantim. So that’s a significant positive, and those two acquisitions will significantly strengthen our business in both of those geographies. As far as a new opportunity for us, a new opportunity that’s presented itself over the past six months, because of the process that’s ongoing in India. It’s something that we’ve taken a strong look at. We’ve obviously got high expectations for the demand outlook for steel in India. At the moment, we don’t have an opportunity to really be a part of that demand growth. So India is an opportunity for us to grow into that geography, and Essar is a very attractive opportunity to gain a foothold in that market. But I think, beyond that, we don’t really have any comment on what the potential appetite for M&A would be. I would just go back to my initial comments about deleveraging is our bias for capital allocation, balance sheet strength and our investment grade rating are a fundamental priority.

Okay. And then the payout of free cash flow, has there been any sort of thought on elaborating on that? Or do we have to wait until we get to $6 billion?

Yeah, I think we really have to wait. So this is obviously a question that we’re asked last quarter following the announcement of the capital allocation policy and the resumption of our base dividend. The intention is that when we do hit $6 billion of net debt, that there will be a more material increase in our returns to shareholders. It will be a function of free cash flow, and it will be up to the board at that time to determine how much of free cash flow is allocated to returns to shareholders.

Okay. Thank you.

Thank you. So we’ll move to the next question from Brett at Seelaus.

Yeah, I think, you guys have answered a lot of the geography question and that sort of thing. Can you talk a little bit about kind of where you see yourself going longer-term vis-à-vis EAFs versus blast furnaces? This is a harder one, obviously, unions versus nonunion. It seems like, over the course of time as the steel industry gets more mature, there’s going to be more scrap out there and there may be some opportunities for you guys to kind of somewhat shift your mix.

Thanks, Brett. So I think it’s an interesting fundamental question. But if you look at our global operations, we clearly have a bias towards the blast furnace route. For us, when it comes to producing high quality steels for the most demanding applications, the best route for that is through the integrated route. So I think at this stage, we don’t have any plans to change that strategy.

And then, I mean, the other sort of threat again from a big picture perspective is alternative materials, whether it’s composites or plastics or aluminum or anything else like that. Obviously, and I’m asking the question from the United States where CAFE standards has been relaxed recently and it seems like less of an issue. But is there sort of a competitive assessment at this point as to whether or not you guys can sort of hold ground against some of these competitive products?

Yeah, I think it’s a good question. I’m glad you asked it because I think the results of that for all to see that the work that we put into R&D, into product and solution developments in recent years has allowed ArcelorMittal, and to some degree the industry, to have a very, very competitive offering against these alternative materials. So as a result, the rates have uptake, by the materials that you mentioned by automotive makers has been towards the lower end of market expectation. So we have a strong product offering. It continues to evolve. We continue to fund R&D very significantly. And as a result, the solutions that we’re offering will continue to be very competitive. And as a result, we do expect steel to be the material of choice for the automotive industry.

Thanks very much, guys. Good answers.

Great. Thanks, Brett. So we’ll move to Luc at Exane.

Hi, gents. A lot of the questions had been answered obviously, but I had one left on Votorantim. Would it be possible maybe to provide a bit more disclosure or help us a bit to understand how EBITDA can debt compensated for the addition of each business and how it will be accounted for from Q2? Thank you. Genuíno José Magalhães Christino: Okay, Luc, let me walk you through the transaction. So the transaction closed from – on April 1. So it’s effective, so we will be consolidating fully Votorantim steel from second quarter onwards. Basically, the transaction combines the number two and the number three long player in Brazil. So that means that we are basically increasing our business, our long business in Brazil, by about 30%. We do expect to capture synergies of about $110 million. So we believe that we will be able to capture those synergies relatively fast. So by the end of the year, we should be at relatively high run rate, I would say, mostly 80%, 85% of the synergies captured by the end of the year. It’s important to observe that Voto is coming from a negative rate – run rate in terms of EBITDA from 2017, with improvement in 2018 that has improved. But we hope that, by the end of the year, we will be able to bring the performance of this asset pretty much in line with our own assets. So in terms of consideration, so we are taking debt right now. So we are buying this business, and it comes with debt of about $230 million. And Voto will have earn-out based on 15% of part of our long business that can be exercised from mid of 2019 down to 2022. So there is also debt associated with this transaction, so that is about $2 billion – $1.8 billion linked to this transaction, which means that the earn-out to be – to have value, we will need to cross this hurdle. So today, just to put it simply, so today the value of this option is very low, to the extent that we capture the synergies and to the extent that the business in Brazil improves, then we believe that this option can be worth up to $300 million to $350 million. So in total, if you combine that with the debt, so then we are looking at $550 million to $600 million.

Thank you. Will it be possible on the Essar potential acquisition to have a bit more clarity on the timetable please?

Yeah, thanks, Luc. It’s another difficult topic for us to comment on. The reason being that, this is still a competitive process, still a competitive bidding stage. And under the terms of that process the details of our offer and everything around the process are confidential. So we can’t really comment further on today’s call. All I can reiterate there is that Essar is a very strategic opportunity for ArcelorMittal to establish a meaningful operation and an operating presence in what we expect to be a high growth Indian steel market. And together with our partner, Nippon Steel, we do believe that we’re the most credible bidder to restore Essar and its fortunes and realize its full potential against that positive backdrop.

But what are the next, let’s say, is that in the process, which is a bit messy from what I see?

Yes, there are a lot of moving parts, newcomers on this process. So I think if you – I can direct you to the press. And you can see some commentary on the process, but that commentary doesn’t come from us. And as a result, I can’t add anything more at this stage. Once there is something more certain, more concrete, then we’ll update you at that stage.

Okay. Thank you. Cheers.

Thanks very much. So we’ll move to Rochus at Kepler, please.

Yes. Thanks, guys, for taking the question. Maybe as a follow-up on Ilva, can you guys give us a bit of an update on what we shall expect in terms of the second half EBITDA from Ilva? Usually, the summer is always delicate time in Italy. So is it still reasonable to think it could be kind of a neutral or a zero contribution? And in terms of the remedy assets, as far as I understand you don’t have to sell those before you consolidate the asset. Can you give us a sense what the timeframe is for selling onwards these agreed disposals? That’s the first question, maybe then a few more to come.

Okay, sure. So I’ll address that question. In terms of the remedy package, as I mentioned just earlier, we would expect to complete the sale of that package by the end of the year. So you should expect some ongoing contribution to EBITDA whilst those assets are held for sale. And in terms of the Ilva contribution in second half of the year, obviously, I’ll take you back to the comments that we made 12 months ago, which were that we expect Ilva to have a positive contribution to our EBITDA in the first 12 months of ownership and to be free cash flow positive in year three. I don’t think there’s anything since then to suggest that, that shouldn’t still be the case. Obviously, we will know more though, once we take ownership of the assets.

Okay, fair enough. The other question is, you were referencing in the release today on this $146 million provision on a certain litigation case. Can you give us a bit more color, what exactly is that referring to? Genuíno José Magalhães Christino: Okay, let me address this question. So this is related to an old case. So we are in the process of negotiating this settlement. We have not yet signed the settlement. So we view that it will not be appropriate to disclose the nature until this is done. As soon as we have the agreement signed, then we will be in a position to talk more about the nature of this charge.

Okay, understood. Maybe on Brazil, maybe a few things, I maybe missed that. So Brazil shipments on the flat side were down nearly 30% quarter-on-quarter in the first quarter, maybe a comment why that has been down so much. And secondly, when I look at the changes in market prices there, in my view, it doesn’t really reflect the steep increase you have been showing in terms of the realized average revenue per tonne. Maybe any comment on that? Genuíno José Magalhães Christino: Yes. So let me address the shipments issue first. So as we have every year in Brazil, this is something that happens in our flat business. So in quarter four, traditionally, we stop our hot strip mill for maintenance. So when we do that, we distort – I mean, we sell more slabs, we export more slabs. In quarter one, we bring back the hot strip mill and then we have to replenish the slab inventory, so that’s why you have the reduction there. In terms of prices, so perhaps, as you know, we have also lags in our business. It’s primarily the export business. So the slabs, I just see that there is export out of Brazil. We need to take into account at least two months lag. So that’s why we’re also guiding for higher prices in the second quarter. So we have not yet – our exports have not yet fully captured also the price increases that we have seen in the marketplace.

Okay. I think this is it. So maybe I’ll add a final one on working capital. I think, you gave a guidance indication last year. So what is still materially different in terms of the visibility in your market that you’re not in the position to give us a full-year indication at this point in time? Genuíno José Magalhães Christino: I don’t think there is an issue with regard to – there is nothing really different. It’s just that we have moved away from providing quantitative guidance. We had an exception last year for working capital, and this year, we have decided to go back to our policy, which is not to provide quantitative guidance. But other than that, there is nothing really different in terms of being able to provide.

All right. Okay. Thanks for that.

Thanks, Rochus. So we’ll take the next question, please, from Yanis [ph] at Macquarie.

Thanks very much. Just two questions from my side. The first on the divestment package for Ilva. As you already mentioned, the Galati and Ostrava are running up low-utilization rates. So if the new owner of these assets ramps up volumes, do you think domestic demand in Europe will be able to absorb the increase to supply? Or is there a risk that we’re fixing one problem in the Southern Europe and potentially creating another one in Eastern Europe? And then the second question, on China. We’ve seen recent data suggesting the significant ramp up in output through to April. And looking at the numbers, it looks like we’re close to record profit levels again, despite the capacity reduction we’ve seen since early 2016. Do you think China is close to full effective output now? Or is there potential for further volume growth? And related to this, have you seen net capacity addition in 2018, either due to new EAF capacity or any potential restarts of induction furnaces?

Great. Thanks, Yanis [ph]. So I think in terms of the divestment package that’s going to be a function of how the market evolves in the coming periods and how the new owner of those assets chooses to operate them, so not something for us to comment at this stage. Obviously, we would prefer not to have to sell those assets, but for us, it’s more important for us to acquire Ilva, and that’s very strategic to us and something that we are very much wanted to do. So at the end of the day, in order to advance that opportunity positively, we were prepared to reach agreement to sell this package of assets. In terms of China, I think, the – you need to just be a little bit careful on the production statistics so far this year. Obviously, in the first three months of the year, there has been an increase in production. But don’t forget that Q1 of 2017, you still had the effect of unreported production from the shadow industry, the induction hot furnaces. So on a like-for-like comparison, I don’t think that the increase in production is significant as the statistics – headline statistics suggest. We don’t think that there is net capacity being added in 2018. There is certainly no restart of the induction hot capacity. Some of the operators of that capacity have been able to use their EAF licenses to switch from EAF back into – induction capacity back into EAF. But for us that that change is still less than the 20 million to 25 million tonnes that is due to be taken out in terms of capacity closures in order to hit the government objectives in 2018. So as a result, we do see overall capacity continuing to come down, obviously more moderately than we saw in the past couple of years. But it’s still progressing in the right direction. So as a result, capacity utilization continues to go up. It is now at high levels. You can argue, though, that there is still too much capacity in China, because they’re still exporting a fairly substantial amount of steel. So that’s something that we need to continue to keep an eye on that China needs to continue to address, and we will continue to monitor that and the impact that it has on our core markets. Is that helpful?

Yes, it is. Thank you very much.

Great. So we’ll take the next question, please, from Christian at SocGen.

Yes, thanks. A couple of questions. First on Essar, I heard what you just said earlier. I was just wondering, I think, I read that Aditya elected a potential bid in the order of $6 billion for Essar on the hold. I’m not sure if it’s something you can confirm. But more correctly, I was wondering if you could confirm that the operation with the JV with Nippon will be strictly as an associate and that there would be no impact on your net debt is the first question. And the second one on ACIS. In term of headwinds in Q2, we’re looking at higher exchange rate in South Africa. I don’t know to what extent Iran is an issue for Kazakhstan. I mean, can you highlight if you see any headwind, which are building up for ACIS at all? Thank you. Genuíno José Magalhães Christino: Yeah. So let me address first the JV. So the intention is that once we are successful here, that the JV would be jointly controlled by ArcelorMittal and Nippon. And then, as such, you would be treated as an associate, it would not be consolidated on a line-by-line basis. That’s still early days, but that’s the principle of the JV. Regarding the question on South Africa, you’re absolutely right. So we have seen strengthening of the rand, which initially is a negative for our business in South Africa. We have seen now in quarter two some reversal of that trend, which would help. Our volumes are increasing. You can also see their own release, you will see that given the strength of the international markets, they have been able to – they were able to export more out of South Africa. So that is to some extent, offsetting some of the weakness that we see domestically. And on the – on Essar, we’re not going to be commenting on, as Daniel already said, we’re not going to be commenting on the bid terms. It’s confidential.

Okay. Thanks.

Thanks, Christian. So we’ll take the next question, please, from Bastian at Deutsche Bank.

Yes. Good afternoon, gentlemen. I have two questions left. So firstly, could you please quantify the shipment impact from the maintenance in Ukraine, and also any additional cost component baked into your EBITDA besides the lost volumes? And then my second question is again a follow-up on the financial implications from Votorantim. You mentioned the $200 million net debt you will be absorbing. Is this already net of the proceeds, which you received from the divestments of the remedy assets, which I think you’ve finalized already. Or is there any additional offset to the debt from the sale? Thank you. Genuíno José Magalhães Christino: Thank you, Bastian. These are good questions. So first, Ukraine. So in quarter one, we, because of maintenance in our BF#9, there is an impact of about 200kt, not so much in EBITDA. Most of the expenses were capitalized. These are capital expenses. In the second quarter, because of unplanned maintenance, we will also have a similar impact about 200kt as well. And then in Voto, you’re right, so the $230 million, this is gross, and then we will – we have proceeds for about $85 million to be received from the disposal.

Okay. It’s very clear. Thank you.

Right. Thanks, Bastian. So we’ll move to the next question from Kevin at Goldman Sachs.

Good afternoon. Most of my questions have been answered, but could you quickly run through your different regions and tell us a little bit about how lead times are looking in the different markets and if there’ve been any big changes versus where you were a month ago?

I can’t, I just need to pull out that information, if you give me a second. So if I look at lead times in general, they are extending, so I think it’s pretty clear. In most of the regions that we’re now seeing a longer and lengthier order book than we were seeing just a quarter-ago. And indeed, if I compare it to the same period of last year in the region such as Europe, it’s – the order book is longer than where we were 12 months ago. So all indicative of a positive operating backdrop, which you will note from these results and the outlook comments from Mr. Mittal and his quote: Business conditions are positive. Demand is growing. And that’s reflected in the strength of our order book.

Perfect. Thank you. And maybe also have you seen any change in import trends in any of the other regions after the U.S. and post the Section 232?

Yeah, it’s a very good question, because it’s something that we’re obviously paying very, very close attention to. It’s important that governments globally take the appropriate steps to protect domestic industry from unfair trade. The U.S. is doing that through Section 232, which we clearly feel is a positive for our business in that region. There were some concerns on the potential implications for the other areas of our portfolio, but I think the advancing negotiations with some of our key countries, particularly Brazil and Europe, are pointing towards the necessary sort of steps to make sure that for ArcelorMittal as a whole this Section 232 is a positive. But that probably does require Europe to take action against the ongoing increases in imports that we’re seeing and a particular surge in imports last month. It’s very appropriate that Europe has launched its own investigations to safeguard the European industry, and we look forward to seeing some progress there and some news flow towards the end of the second quarter.

Okay. Thank you very much.

Great. So I think we’ll move to our last question, actually, which is from Phil at KeyBanc.

Okay. Thanks very much. Good morning. I have a question on NAFTA. And crude steel production there was down about 6% year over year in the first quarter. Can you just help us understand a bit why that was the case? Hello? Genuíno José Magalhães Christino: Sorry, my mic was on mute here, Phil. I was just saying that in first quarter 2017, we had very strong production figures. So we were running at very high levels of capacity. So in quarter four and quarter one, we had some moderation of inventories. But there is nothing unusual here. We will be ramping up as we can in quarter two.

Is – on the Calvert side, Daniel, has 232 changed anything in terms of the long term slab sourcing strategy for that facility?

Not as yet, no. So I think we’ve seen, as I was trying to allude to in my previous response, some encouraging developments on the negotiations there. Nothing has been confirmed as yet. But I think the slab supply arrangements that we currently have should be protected. But that being said, at the end of the day we do have some degree of flexibility should that situation change.

And then, lastly, here if I could. In terms of NAFTA as well, I think this is union labor contract renegotiation year for the USW. When should we think that those conversations are going to be taking place? And you think that there’s any opportunity for those to be settled early this year? Thank you.

Well, I think it validates your comment. Yeah, you’re right. We’ll have the negotiations this year, but I think it’s too premature to comment on any outcome right now. Thank you.

Thank you.

Thanks very much, Phil. So I think that concludes our Q&A session. So thank you very much for everybody’s interest and attention today. I think we will be seeing a meeting with a lot of you guys in the coming days and weeks. It’s a very busy period for conferences, et cetera. So we look forward to seeing you then. And, of course, we will be updating you guys on the strategic progress and the results for the first half at the end of July. So thank you very much.