Good afternoon, and good morning, everybody. Welcome to ArcelorMittal's First Quarter '22 Analyst and Investor Call. This is Daniel Fairclough from the ArcelorMittal Investor Relations team, and I'm joined on this call today by our CFO, Genuino Christino. Genuino and I are here to answer your questions on the first quarter results, which we published this morning alongside the presentation with detailed speaker notes on our website. Today's call, which is being recorded, is scheduled to last up to 45 minutes. [Operator Instructions] Before we begin the Q&A session, I'd like to hand over to Genuino for some brief opening remarks.

Thank you, Daniel, and good morning and good afternoon to everyone on the call. I will spend a minute or so with some very brief opening remarks. I will let our numbers do the talking mostly. So we are consistently posting strong operating results. This is the fourth successive quarter with EBITDA over $5 billion, demonstrating the strength of the business and our diversification. Yet again, an excellent contribution from JV and associates, contributing 14% of net income. Book value is -- per share is -- book value of the JVs reaching $12 billion. These are very material business that represent important cornerstones of our global business. Strong net income, $4.1 billion with EPS of $4.28. And here, I would also highlight that this is the highest EPS, more than a decade. Clearly, the benefits of our share buyback starts to become very visible on our reported numbers. Value creation, book value is up again to a $57 per share, with trailing ROE of 36%. Equally important is strong free cash flow generation. So the company delivered $1.5 billion of free cash flow in first quarter, and this is despite a $2 billion investment in working capital. We continue to bring down our net debt despite investments in working capital and despite returning cash to shareholders, that’s a record low. Our confidence in our outlook allows for the announcement of an additional $1 billion buyback, bringing the total up to now to $2 billion. And if we look back a little bit, if you go back to September 2020. And by the time we complete this extra $1 billion, we will have distributed $9.5 billion to shareholders. We are focused on the consistent execution of our strategy. And I think today’s results and update is a clear illustration of the progress we are like on our front. So now, Daniel, I believe we can go straight to the questions.

Yes. Thanks, Genuino. So we'll take the first question, please, from Alain at Morgan Stanley.

Two questions from my side. Firstly is on capital allocation. So the $1 billion buyback that you've announced appears to have been predicated on your expectations of a certain full year free cash flow, and not necessarily on formula linked to your Q1 cash flows. If that is the case, then should we expect the same order of magnitude buyback during Q2? Or would your buyback program be more or less linked to your Q2 free cash flows? That's the first one.

So I would say that capital allocation policy has not really changed, right? I think our commitment is very clear. So we want to distribute 50% of our free cash, after paying the base dividend that we're going to be doing now in June, as you know, $0.38. So 50% of that will go to our shareholders. Of course, when we look at our liquidity today, we look at the Q1 results and we look forward also to Q2 and even beyond, we feel that we are -- we feel very comfortable actually to top up the buyback as we are doing. We look at the share price as well, right? It seems like a very good time and opportunity to be buying back shares. So we don't want to wait and to progress on that, but that's basically it. So there is no change in the capital allocation policy here.

And the second part of my question is on the other 50% of your free cash flow that you had stated you're willing to spend on renewables or decarbonization investments. Will these investments would -- while these investments would future-proof your business in the long run, returns are likely to be very low and the market might not be willing to reward you for making the investment initially. How do you balance out the need to make these investments versus how the market rates -- rerates your stock?

Yes, I think for us, it's all about reaching a good balance, right? So I think our returns have been very, very high, as we just -- as I just highlighted in my opening remarks, $9.5 billion in -- since September 2020, that's quite a lot, right? And for us, it's about getting this to the right balance. It's returning cash to our shareholders, but it's also developing the business. And I think what we have demonstrated up to now, if you look at what we announced in India, our Greenko Group project, that's a very good example of that, right? So it's -- we would consider that to be a high-return project for ArcelorMittal. I mean we have disclosed that for this investment of about $600 million, we expect to get more than $70 million in EBITDA straight away, and then more benefits at the level of the JV as well. So you can see that the returns are good. We will basically get back our investments in a couple of years when the assets will continue to generate value for many more years, right? And also the strategic importance of being integrated to renewables. So we do believe that over time this will prove to be important. And that's exactly what we are doing. So for now, of course, an access for now has been used for the leverage, and you see that this quarter. And that's really where we are today.

So we'll move now to Seth at Exane.

I have a couple of questions with regards to the demand outlook and shipment expectations. Obviously, this morning, you significantly trimmed your demand forecast for the year. Can you give us a more color on what drives confidence that shipments can still grow on a year-over-year basis? And to what extent is that predicated unexpected share gain versus imports? And the second question, if I may. On a short-term view, obviously, in the course of Q1, we saw steel prices surge. We heard about widespread panic buying over that appears to be reversing course at present in certain regions. What are you currently hearing from customers? And what's the state of order intake and price negotiations?

Okay, Seth. So what gives us confidence that our shipments will be higher. So I think it's important just to -- I would just call attention to a couple of points, right? I think it's important to take note that in Q1 of last year, we still had [indiscernible] consolidated at least until April, right? So we need to adjust for that. And also, of course, we are saying that this will be the case once we adjust for Kryviy Rih. And then if you do that, if you were to normalize our shipments in quarter 1 for this 2-scope change, so -- 1 scope change and 1 as a result of the conflict in Russia, Ukraine, you see that our shipments are actually rising. And our expectation is that, that should also be the case for full year. And you're right, I think what we saw last year was in key parts of our business in regions a surge of imports, and that was true in most of the regions, right, because of the extended lead times, high pricing environment. So we saw an increase in imports that we expect will come down this year. So our expectation -- and we start to see that actually. If we look at our business in Brazil, we see that the market share of imports, our expectation is that it has come down already in Q1. We see the same in Europe. So our expectation is that imports will come down. We will take some domestic players in general, will take some market share of imports this year. And then on the order intake, I think it's good. It remains quite, quite good. Of course, we have very good visibility now. If we talk about Europe, that goes to mid-summer, I would say, and the order intake has been -- continues to be good, and the order book is healthy at this point.

Outside of Europe, can you provide me additional color perhaps in the North American region as well.

Sorry. Seth, can you repeat your question?

Sorry. Can you provide a bit more color on this other regions beyond Europe, specifically on North America, and where you see buyer behavior, please?

Yes. So in North America, as you saw, I mean, we have not really changed our forecast, right? We believe that -- we had a bit of a slow start in Q1, but then it actually improved. So we did quite well, I think, in terms of shipments, as you can see in quarter 1. So our forecast for U.S. are not really changing. So it's -- I would say, we actually saw PMIs in April actually continue to rise, right? So it continues to be quite high. So we see demand at very good levels in NAFTA.

So we'll move now to Patrick at Bank of America.

I had 2 questions. The one was just on the shipments in Europe. So I understand year-on-year, you've deconsolidated Ilva, but pretty much flat on the fourth quarter, and the first quarter is usually quite a good shipment quarter. How should we think about it going forward? Do you -- it's usually strongest in the first half, weaker in the second half. Is there any recovery into 2Q versus the first quarter? Or why is it not up by more, let's say, quarter-on-quarter? And then the second question is just on decarbonization in Europe and these plans, they kind of depend on natural gas and the intermediate phase, and then also electricity in terms of electric arc furnaces. I mean is it -- are you starting to be concerned around decarbonization strategy in Europe given Russia and given natural gas and electricity prices?

Okay. Thank you, Patrick. First one, your question in Europe. This is something that we discussed before, Patrick. What happened really was that Q4 was particularly strong. Because in Q3, we had several issues with logistics. And we had -- and therefore, we had shipments that moved from Q3 to Q4, right? And -- so Q4 was, I would say, higher than it would have been if we had managed to ship our Q3 production. That's why you don't really see an improvement now so much. You're right. So typically, seasonally, we would see Q1 being better than Q4, but that's the reason. . Then on decarb question, I think it's a very good question, and it's something that, of course, we have been debating quite a lot internally as well. But I would say that at this point, we don't believe that what we are seeing is we can still conclude that it's something structural, right? I think governments in Europe, they understand the importance of bringing courses of gas, power to more normal levels. And actually, when you look at the forward curves, if you go out and look at the prices in 2, 3 years from now, you actually see that prices are kind of coming back to normal levels. So I think that is -- so the market still believes that this is some -- it should be something temporary. Of course, it's very difficult to predict how long, but we don't see that as being structural. For us, of course, it's going to be very important to make sure that we have competitive gas and power prices to execute these plans.

So we'll move now to Carsten at Credit Suisse.

Two questions also from my side, and one has to probably start with the impact from the Ukraine conflict. And my question here is not only can you give us some kind of indications on the operations in Kryviy Rih, but also the Kazakhstan operations. Because as far as I understood is you previously sourced some raw materials from Russia for Kazakhstan and also had some sales from Kazakhstan over to Russia, did those stop? And are you able to redirect those volumes? That's the first one. And the second one is on Liberia. We have recently seen the news that the Liberian government will review the concession agreements for your mining operations again. Could you give us an update what that will mean for your 10 million tonnes expansion program there?

Yes. Thank you, Carsten. So just a quick overview of where we are in Ukraine today. I mean I'm sure you have been following us. And so we have restarted one of the 3 blast furnaces that we have. So that's a smallest blast furnace. So we are today running at about 20% of our metal capacity. So it's not much, but it's a start. I think we see a lot of motivation from our employees to be back, and to be helping bringing back some economic activity. So we are supporting that. The mines that were running at levels close to 35%, we have actually increased production. We are running at about 60% now, right? But -- and the idea is to produce at the -- steel mill to be producing basically pig iron. So this blast furnace is basically producing pig iron. So the activities are going to be quite limited, I would say, for some time. That's our expectation. And then in Temirtau, you're right. So we were selling a significant part of our production into Russia that has stopped since the beginning of the conflict. So the team has a challenge in front of them, which is, of course, to find alternative markets for these products. And so far, they are doing a great job, I would say. So looking in both directions, east and west. So there will be some implications for profitability. In all likelihood, we're going to be spending a bit more on logistics. So you can expect that going forward, there will be some impact but not much. So I think -- and I think the team has demonstrated in the past, probably you remember, we had similar issues with Ilva. And the team did a good job in final tentative places for selling the materials. In Temirtau, we are self-sufficient, as you know, in coal. We have also our own iron ore mines. So there is not a lot of dependence on Russia raw materials. So we don't see that as a problem. This is actually more of a problem for Ukraine because Ukraine was also buying more coal from Russia. So that's one of the constraints to -- that the industry in Ukraine will need to find a solution. And we don't believe that it should be a problem provided that you have the logistics to get the materials in and out.

On the -- just a quick follow-up before you go on Liberia. The pig iron volumes I would guess they go out of the country and sold somewhere. Could you say where it goes? And I assume it goes out via train and not ship?

Yes, that's correct, it goes by train. It goes by train. Basically, it goes to Poland. And then Liberia. So we -- I think it's very important to understand that we have an MDA that it's valid, right? So -- and that doesn't expire until 2030. So it's a valid MDA. We have -- it's an MDA that gives us also the ability to extend the concession also for another 25 years. So the amendments that we are discussing with the government right now, we believe that it's an interest of everybody. It basically provides some more information on utilization of the infrastructure assets, the rail and port. So we are in dialogue with the government. So as you know, these amendments, they were approved by the government. They were sent to the parliament for validation. It was approved by the Senate, but the lower house has asked for some change. So I think we are in the process of waiting for the outcome of this discussion, but we don't believe that it will have an impact on our projects. So we continue to move forward there.

So we'll take the next question, please, from Alan at Jefferies.

Two from my side. The first one is on the announced HBI acquisition, and I appreciate the deal hasn't done yet. But can you speak and give us most of what you can say about how you see the potential returns from that investments even in the context of your general hurdle rates you think about the projects.

Yes. So first of all, I think we are very happy with this move. As you said, it's early days. So we have not yet completed the acquisition. So we have done extensive due diligence. So very happy with the quality of the asset. I think investments were made to address environmental byproducts. So some more investments were made. So we feel that we have potential. We can, with our know-how, with our experience in running similar plants, so we're going to be able to add value to this plant and improve the results. We feel that it's, of course, a great opportunity to integrate with our existing facilities, however, that's the most obvious one. But we have here, which is quite interesting also for the future. So there is -- you have enough space land that can potentially also creates optionality for the future for the group in terms of increasing capacity of the DRI plant. And I would also highlight that if we do that in the future and then ArcelorMittal would own 100%. So those will keep 20% only of this existing asset. I would also say that we believe that we have done this acquisition for a price that is below replacement costs, right? So I have seen in the press very high multiples. I don't believe that that's probably the right way to look at it. We believe that profitability of this site will be better. And of course, the security integration to high-quality metallics, it's going to be quite important, especially NAFTA, and it paves the way for its very strong footprint in NAFTA.

Can you remind us what your some of the hurdle rates are? What do you think about investments for IRR. I understand you can't tell us specifically about this project, but what is kind of the minimum level you would think about?

So our projects, we will announce, we will have hurdle rate of about 15%, right? That's what we try to achieve in most of our investments. Here, as I said, I think that probably the right way to look at this is what is the replacement cost, right? And what is the potential of this site? What it does, right? So basically -- so once you integrate that into Calvert, so you have a very low carbon footprint. Calvert will be -- we will have secured its supply of metallics -- high-quality metallics, competitive costs. Of course, this is a facility that is in Texas. So you have the lowest cost of gas in the world. It's a state that is also -- has also a lot of potential for renewable power. So you have also to think about the order benefits of this acquisition. So that's why we feel -- we're very excited about this opportunity.

Okay. And last one for me. You highlighted in your opening remarks the -- I think it was the $12 billion in the book value of the JVs. But I think realistically, it's hard to say that would be reflected in the share price today. What are the options or what are you considering to crystallize some of that value, perhaps?

Alan, that's a good question because I think it's not only the JVs. I think we have discussed that in the past, right? So look at the valuation of ArcelorMittal, right? It's so low, look at the multiples, we're talking about multiples. Look at the multiples of ArcelorMittal, right? I think our focus there is really to continue to develop the JVs. And I think we are doing a fantastic job in India. So making good progress there, tremendous asset, look at Calvert, also tremendous potential and doing quite, quite well. But it's not only the 2 JVs. I mean all of the JVs have been performing quite well, our Chinese JVs, European JVs. . So I think the only thing we can do right now is to keep showing the benefits of these JVs, their performance. And we have to hope that at some point, the market will realize that they have in front of them a very high-quality company, asset base that is extremely good, delivering very strong results. So that's all we can hope at this point.

And just to add to that as well, Genuino, I think there's probably more that we can do on the investor education side, particularly to help the market appreciate the quality of the assets in India, the quality of the management team there, the specifics around the plans for growth. And so I think it's certainly our plan later this year to invite analysts and investors down to India to see firsthand, the work that's underway, the success that's already been achieved, and why we're so passionate about the growth potential of that business. And hopefully, that can also be one of the catalysts for a greater appreciation by the market for the value of not just that asset, but the broader portfolio of JV and associates. But we will move now to the next question from Andrew at UBS.

A few of my questions have been answered, but just a couple more. First of all, just on the 2Q outlook by division. Can you just give us an idea for how you're thinking about volumes and spreads in each of the divisions? And how we should sort of think about that? And then just secondly, big picture. I mean there's been a follow-up to some of these questions around the M&A and use of cash. Aside from the 50% residual free cash flow going to buybacks, what are the main priorities on a big-picture basis for the remainder of that? I mean is it renewables? Is it mining integration? Is it excess balance -- excess cash from the parent company going into places like India? What are the main priorities that you think about in broad strokes?

Yes. Andrew. So let me start with the second quarter. So clearly, as we all know, we would expect prices based on what happened since -- especially since beginning of March. We would expect our prices overall to rise, right? The realized prices should be stronger in the second quarter. . Volumes, our expectation is for volumes should be stable, slightly up expectation. We hope that we can do better than Q1. But I would say stable to marginally higher. And then we should not forget that costs will continue to rise as well, right? So we have not yet seen the full extent of the cost increases. As we -- in Q1, of course, we benefited from the weighted average cost of inventories. So you should also expect that costs will rise. There will be some higher energy costs as well in Europe. But clearly, when you look at -- just current trends, prices are offsetting that.

Okay. So net-net, you're talking about some small expansion in spread in addition to stable/slightly...

Yes. Andrew, I'm not really suggesting that. I'm saying that we are clearly expecting a strong second quarter, right? I think that's quite clear from our guidance. I'm not suggesting that it's high or low. I'm just giving you the components here. Higher prices, stable to higher shipments and higher costs. And of course, I don't really -- I think you should also expect that when I talk about higher shipments, you have to take into account the situation in Ukraine, right? The fact that in Q1, we still had at least almost 2 months of kind of normal operations there. So you have to take that into account. Yes. So those are the high-level moving parts, Andrew. And then in terms of your M&A question, I think this is something that we have discussed quite extensively also last quarter. I think we don't want, of course, to compromise on our balance sheet. So I think we have a very balanced capital allocation policy. And I think the focus is on the carbonization, right? So you have seen the announcement regarding Texas. So you have Greenko in India. Even though technically, it's not an M&A, it will show in our CapEx, but that's the kind of things that we have been focused on. You probably saw also a small acquisition of a scrap company in U.K. It's small, but it shows how we see the importance of trying to improve our vertical integration to renewables and into mechanics.

So we'll move now to Bastian at Deutsche Bank.

I have one question on your other noncore holdings there. I think you still have your stake in Dillinger, and the business obviously struggled over the last couple of years. And obviously, we've got this massive rally in plate, and there's probably also much improved prospects in the market such as energy and defense, both of which Dillinger is quite exposed to. So it's probably fair to say that the value which is start up there has increased. What are you looking to do here because this may be an evolving opportunity window for you to realize value in an asset, which is probably noncore if you managed to sort of the very complex governance structure. I would be very interested in your perspective here.

Yes. Bastian, I think that's a good point. You're right. So as you know in the past, we actually took some impairment there. The performance was for some time not great. But it has changed a lot as you rightly pointed out, and I think the potential, it's good, given the transition to more renewables, the demand for plates. So I think that it's good. So at this point in time, I don't think we are looking at anything else. So we're happy with the holding the asset, and we are in constant dialogue with the management team there. So yes, so there is no change in the strategic direction right now.

Okay. Understood. Just one question actually. Is this company an entity also under your scope of decarbonization targets?

No. It's a company that we don't have -- we don't have control over this company, right? So we have a significant stake, but it's not controlled by ArcelorMittal.

So we'll take the next question from Grant at Bloomberg Intelligence.

Two specific questions on decarbonization. And the first one is on the -- your latest announcement in France where you've increased or accelerated the investment in decarbonization there. I'm just curious to know, I think initially you said at Dunkirk, you were going to save about 2.8 million tonnes of CO2, and that's a jump to 7.8 million. And it seems to be for a fairly marginal additional investment. So I'm just keen to understand the dynamics there? And how that's increased quite so significantly. So that would be my first question. And then just a point of clarity on the decarbonization, your initial $10 billion estimate. I take it -- can you just remind me. That was exclusive of any government funding that you would have got towards that. So it's $10 billion, and any government funding would reduce that total amount just as a point of clarity, please.

Yes. So Grant, let me take the second part of your question. So maybe, Daniel, maybe you can try to find the reconciliation of the CO2 targets for France, but I can also talk about it. So the $10 billion, Grant. So that's what we have announced for this decade, right? So this is what we believe we're going to be spending from now to 2030. And we believe that we're going to be spending about 35% of this money in the next 5 years. And this is a gross number. So our expectation is to get from governments here funding in the range of 50%, right? And so -- and up to now, we have announced, including all these projects. So we have announced projects in France, in Spain and in Belgium and also in Canada where I think we are ahead now because we have confirmation from the investments from the Canadian government. So we have secured investments in the range of CAD 900 million, so that is about 50% of the announced investment there. So we are -- I think we have a very good dialogue with the member states, and the process now is in the hands of the commission, and we expect to hear back from them relatively soon. So that's on the second part of your question. Do you have, Daniel, the third part of the question?

I don't have the -- on the reconciliation to the 7.8 million. I can confirm the 7.8 million, but I don't have a bridge from the original number to that. So if it's okay, Grant, to have a follow-up with you after the call having spoken to the team.

That's brilliant. And then just -- again, just not to be too pedantic. In terms of your -- the acquisitions, for instance, in your -- in the HBI plant, that's not included in the $10 billion you guided to, that $10 billion is exclusively for your own investments as it were?

That's correct. That's correct, Grant.

So we'll move to Luke now at JPMorgan.

Two for me. Firstly, just to follow up on the calls -- the questions on sort of excess capital and specifically on M&A. And your comment earlier just around Mittal being cheap. I think we can see it in the forward multiples, free cash flow yields are all very cheap. But I mean, investors are nervous about M&A. It comes up in pretty much all conversations I have about the investment thesis. So if I was being critical, you've done Corpus Christi, which thought it's worth I think, is a good acquisition. But we're seeing renewables M&A pop-up for India, the scrap company you mentioned in the U.K. It doesn't necessarily appear that there's sort of a clear strategy on where or what is being spent on M&A. Can you maybe just clear up what the priorities are here from an M&A front? And I suppose, whilst they have that question on the floor? Huawei is potentially selling an asset or a flat mill in Brazil. Is that something that could potentially be an asset of interest or not?

Yes. Luke, so maybe I would just say that -- and I think we have been giving this message very consistently that we don't want to compromise what we have achieved, right? So we will continue to be very diligent, focusing on making sure that the balance sheet continues to be strong. As you know, we have net debt limits as well that we have imposed on ourselves. And I think you can see the level of returns that we are returning to shareholders. I think that is -- we believe that is unprecedented really in the industry, right? So not $9.5 billion. And for us, it's all about, again, reaching the right balance where we develop a business, where we return cash to shareholders. And we have been very clear as well that improving -- or accelerating our decarbonization is strategic. We have said also that achieving this level of vertical integration with renewable, metallics, it's something that we believe in the future will pay off nicely. And we actually have seen that when we did this move to a bit more integrated to iron ore, right? So I think the strategy from our standpoint, it's clear. I hope it helps.

Yes. No. That's helpful. Sorry, just the last part of my question was the potential asset in slab mill in Brazil. Some press articles have suggested Mittal might be interested in that. Can you comment within the realms of what you can say about that?

No comments on that, Luke.

Okay. No problem. And then second question is just on the buyback, sort of 3 small sections or parts of the question. Firstly, can you confirm the Mittal family are not participating in the buyback? And secondly, given the quantum of free cash flow and your capital allocation process around returns, is there some form -- or do we reach some form of technical effect that will cut out the share buyback level in future periods in terms of potential ownership from the family or in terms of index weighting. And then thirdly, your approval yesterday for the buyback, I think it's 10% amortization of the share balance, which is likely significantly lower than what the shareholder returns could be this year. So I'm just trying to think about how we should be framing additional returns if you don't have approval for the buyback.

Yes. So the first part of the question, I think, that's in our press release. So the Mittal family has decided not to tender -- not to participate in the back, similarly to what they decided to do with the previous one, right? I'm not aware, Luke, that we may hit any limitations here. So I don't believe that, that's an issue. And the 10%, I think it's just important that it's very standard in Europe, right? That's what normally you get the proxy [revises] also to support. In 2021, we did more because, of course, we had the divestments as well to return. The first billion that we did and that we completed in April, that was still part of the over authorization, right? So the 10% that we have now, it's all available. So I think that's important. But you should not read much into that. I mean that's -- as I said, it's just a very standard percentage. And if we get to the conclusion that, okay, it's not enough, and we can always go back and ask for more authorization. And you probably saw as well that we have asked for authorization to cancel shares and -- which is -- has been, of course, the whole point here that we are buying and canceling.

Okay. And just quickly on that last point. If -- with the mandatory, how would that be treated? Is that sort of form part of the amortization of shares?

Well, I mean, if you look at our presentation, there is 1 bridge showing the evolution of our share count. And that includes the MCB as well, right? As you know, we have bought partially already -- put in 2 occasions a part of the MCB. So we see the MCB -- any buyback of the MCB very similar to a share buyback, although the focus right now is -- has been on the outstanding shares group. But that remains -- I mean as we have done already 2 times, that remains another option to do. The amounts now are much smaller, right?

So we'll move now to Rochus at Kepler.

I have 2 parts. The one is on scrap. I guess you flagged the small acquisition before. Can you give us a bit of sense what are the kind of longer-term ambitions there? It's the first small step, and I think it's pretty small compared to your backwards integration into iron ore, for example. And I would be also interested to see what the relative appeal is of buying external scrap companies versus, for example, pushing the circular economy model by brokering...

Yes. So we do that as well, right? So we have a number of contracts to get back scrap, and this is something that we have been doing for quite some time. Of course, normally, it's high-quality scrap that we can use in our flat business. So that is not changing. I think it's -- this is really -- it's small. I mean this acquisition is small, the market in Europe, as you know, it's very polarized. I mean very few exceptions. So for us, we're also learning here, Rochus, with this acquisition. We want to -- I think it will also improve our know-how here, what we can do, what we cannot do, learning from the management teams. So I think at this stage, it's probably very early to set targets for this initiative.

Okay. Okay. Okay. Understood. And then the second part is on HBI again on the deal in Texas. I guess, Genuino, you mentioned that one direction of the output will be towards Calvert. So I guess this will be kind of a hot charging of HBI into the EAF and Calvert, which is probably not the same model you are doing at your other DRI plants, but maybe correct me if I'm wrong. So what would be the kind of thinking why it makes a sense to co-charge HBI? And how shall we think about the further development of the Calvert side, would you rather think about purely growing that metallics exposure? Or could it also mean that you could invest at the Corpus Christi side in different direction?

Rochus, we look at all this, right, and the hot charging or charging the code, call it, code HBI. Of course, the hot DRI, so you do have some savings, right? If you have that proximity, if you can do that, that hot charging, that's normally good. But it doesn't change the economic -- so much the economics for us here, right? So this is a great opportunity to do the integration. And yes, so I think that's how we're seeing it. So it does change a bit, but it doesn't fundamentally change. So we will not change the decisions here. And then I think we have the optionality, as I discussed at the beginning. So we have acquired these assets. So we have a great strategic advantage, I would say. We talked about the gas. We have the boat, which is nearby. So you can very easily transport materials either to Calvert, to Europe at very competitive freight rates, so we have the land. So yes, we can -- it creates a lot of optionality for the view.

Okay. Very good. And then maybe finally on your working capital. I guess you're saying in your statement today that you expect a further working capital build. How should we think about the magnitude in the second quarter versus Q1? And probably any color on what might happen in the rest of the year?

Yes. Well, as we discussed, so as we expect prices -- steel prices to be generally higher, raw material prices should be higher. So expectation is for not investment in working capital. I would expect, Rochus, the number should be a little bit lower than what we spent in Q1. So not more, but less, right? And for full year, as you know, I mean, it's -- at this point, we are not providing that guidance. I would just say that all this money that we have been investing in working capital, and almost all of it on account of prices, sits on our balance sheet, right? And you can see that. So it really depends how you see the evolution of the EBITDA of the company in the second half, right? So if you're more bearish, then we should also expect that there will be a release of working capital. If you are more optimistic, then assuming that there can be some investments, it's also realistic. So that's how I would encourage you to think about it. You should expect that there will be always a correlation between our EBITDA and the working capital, either investments or release. But at this point in time, there is a very significant amount of value that has been kind of -- that we have on the balance sheet on this.

So we'll take the next question from Phil at KeyBanc.

I just wanted to confirm that the outlook for stable volumes excludes Ukraine.

Phil, that's correct. I think that's what we are writing as well. You have to assume that -- because even the pig iron that we are producing right now, we don't really count that as shipments. It's a semi-finished product, not a steel product technically. So we don't count that as part of our shipments. Okay. So -- and then, of course, as we discussed, we are running at about 20%. So you have to take that into account. That's correct.

Okay. And then just a follow-up, and I apologize if I missed it, but where are you all on the progress on the hot strip mill ramp in Mexico?

Yes. Thank you for the question, Phil. I think we are all very excited with the progress there in Mexico. So we're going to -- we are -- in Q2, we should be reaching about 40% in terms of run rate. And in Q3, we should -- our expectation is that we should be moving to about 60%, and then we start -- we have already started, and we should be improving on that. The trials with industrial accounts, trying to get the certifications or elevations. But we are very pleased with the progress so far. We have actually indicated in our release that we expect already a good contribution this year coming from the hot strip mill. So we have indicated that it can be in the range of $100 million this year.

Just on that, there is more detail on Page 24 of the results deck. So it has a couple of charts on the ramp-up. And also just the numbers that Genuino just confirmed. So we will now move to the next question from [Devest] at Goldman Sachs.

So the first question is could you provide some more details on mill utilization across each division during the first quarter? And how much impact did the higher energy costs in Europe and the Russia-Ukraine crisis have on utilization? And how do you expect utilization to evolve over the next quarter?

Yes. Well, we don't disclose the capacity utilization. But what we have been saying and has not really changed. If you look at our flat business across the board, we have been running full, and that was also the case this quarter. Our loan business in Europe, we did announce that we were, because of the high energy costs, deciding to not operate the furnaces at certain point in time during the day when prices are very high. But that has not really had a material impact on our production overall. I think what we have seen in the loan business in Europe is that prices have so -- steel prices have also moved up to reflect the higher prices. So I think we have not really seen a squeeze in terms of profitability in Q1 against Q4. I think we have also done a good job when managing the energy prices overall in Q1 against Q4. As we discussed in the previous call, because of our hedges, we did not really see a significant increase in costs in terms of gas in Europe. And when I think about the quarter 2, I think we will see some increases in costs coming from energy, and including gas and power. But that should not really be so significant. So that's how we are seeing it.

And the second one is we noted that your CapEx forecast have been maintained. Do you see any inflationary pressure affecting CapEx? Or have you already factored in marginal safety and projections?

Well, typically, we do have some contingencies embedded in our projects, right? I think it's a very good point, and this is something that we have been monitoring very closely. So far, so good, but it's something to watch out. All the teams are aware of that. There are risks, of course. But so far, I think the teams are doing a good job. We have also been active in projects where we are more exposed to currencies as an example. So we have been also hedging that when we see opportunities to try to make sure that we deliver on the budget rates. So we are taking actions wherever we can, but there is always a risk that in this environment, you can have some overruns even though today, that's not the case.

So we're running up against time here, Genuino. But I think we've got time for one last question from Alain from ODDO. And then any other follow-ups we'll take offline after the call.

I guess coming back to the valuation again. It seems like despite all your efforts, the market is really not willing to recognize the value inside ArcelorMittal. I think the stock is trading at 2x easy to normalize EBITDA. We've just -- that just doesn't make any sense. So my question may sound a bit provocative, but why not just take the company private?

So I think we share your views that the valuation is really very, very low. But we -- this is not something that is being considered.

Yes. And perhaps I can just complement, Genuino. Obviously, it's a recurring theme. It is something that we're very conscious of, that management and the board are very conscious of as well. It's difficult to rationalize. It's clearly very frustrating. But I think what we can do to somewhat take advantage of that is to just continue with our capital returns, continue with our share buybacks. And that is one way of sort of capitalizing on this very discounted valuation. And I know when we looked at this last year, the amount of shares that we were able to repurchase and the impact that, that burden had on the book value per share but also the intrinsic value on a per share basis was very, very significant and really demonstrated the sort of value creation that we can achieve through our share repurchases. So if we can continue doing that, then at least we can take advantage of this discounted valuation whilst it's there. Whilst, of course, making every effort to rectify and trade at more -- at multiples, which would be better reflecting of the size, scale, diversity leadership and qualities that ArcelorMittal has. That is the last of the questions that we have. There were a couple of follow-ups, but I think we will take those offline, Genuino. So I'll hand back to you for any closing comments.

Thank you, Daniel, and thanks, everyone, for your interest, for your questions and speak to you guys soon. Thank you very much.