ArcelorMittal S.A. (MT) Q1 2025 Earnings Report, Transcript and Summary

Good afternoon, everyone. This is Daniel Fairclough from the ArcelorMittal Investor Relations team. Thank you for joining this call to discuss ArcelorMittal's performance and progress during the first quarter 2025. Leading today's call will be our Group CFO, Mr. Genuino Christino. Before we begin, I would like to mention a few housekeeping items. As usual, we will not be going through the results presentation, which was published this morning on our website. However, I would like to draw your attention to the disclaimers on Slide number 19 of that presentation. As normal, Genuino will make some opening remarks before we move directly to the Q&A session. So the idea is that the call will last 40, 45 minutes. [Operator Instructions] Over to you, Genuino.

Thanks, Daniel, and welcome, everyone, and thanks for joining today's call. As usual, I will keep my remarks brief. I want to focus this quarter on three key points, beginning with safety, which remains paramount for our company. We are now in the implementation phase of the recommendations of the safety audit we completed last year, and early progress has been encouraging. We anticipate that our journey to zero could take three years. The first year will be about setting the foundations for transformational change across the whole group. Years two and three will be about embedding this change and ensure consistency, discipline and results in every region. I can say with confidence that everyone across the company is working to become a fatality-free and zero serious injuries company as quickly as possible. Moving now to the financial performance, I want to highlight our strong operational performance and cash flows. Our operations are performing well, and they are performing consistently. The standout this quarter was our Mining segment. Liberia achieved records for both production and shipments. And this is before the ramp-up of new capacity. In Europe, our mills are operating consistently across the cycle, and this is supporting good cost performance. In North America, having resolved the issues that impacted production last year in Mexico, the segment is now back to normalized operating levels. Our consistent operational performance has supported also resilient financial performance in a low cycle price environment. EBITDA per ton of $116 in the quarter is double the level compared to previous cyclical lows. As we have alluded to multiple times in the recent years, ArcelorMittal is a transformed company. We have high-graded our asset portfolio by divesting higher-cost assets and acquired new assets that are well positioned to create value in all market environments. This has been well demonstrated over the recent quarters with structurally higher margins and greater earnings resilience. Moving to cash flows. The first quarter always sees investments in working capital, and this year has been no different. But excluding the seasonal working capital investment and our discretionary growth CapEx, the underlying free cash flow for the quarter was around $700 million. This shows that even at the bottom of the cycle, we are generating good levels of cash flows. That gives us confidence to invest to support our strategic priorities as well as consistently return capital to shareholders. Lastly, I will touch on tariffs and the outlook. We are supportive of our efforts to address the excess capacity in the global steel industry and the unfair trade practices that result from it. As we said last quarter, we expect the impact of Section 232 tariffs on our North America business to be largely neutral. But on the positive side, we are seeing other regions respond also. Europe has strengthened its safeguards. India has introduced new safeguards. Ultimately, ArcelorMittal is well positioned to benefit from the continued push to create a level playing field in terms of trade. On the outlook, we said last quarter that the impact of Section 232 tariffs on our North American business should be broadly neutral. And including the benefits of higher prices to our Calvert joint venture, this remains our expectation. Encouragingly, EU spreads have recovered from unsustainably low levels, and this will be a strong support for results near term. As a result, Q2 EBITDA should be clearly better than the first quarter. What is more uncertainty is the impact that tariffs will have on demand. Customers clearly are asking themselves the same question. What I can say today is that our order book remains healthy, but this is a risk that we are monitoring very closely, and our business are prepared to adapt as necessary. So to conclude my opening remarks, ArcelorMittal is in a strong position, both operationally and financially. Despite the macro uncertainties, we will be maintaining our strategic course, delivering our strategic growth agenda while simultaneously returning capital to our shareholders. Our growth projects have good momentum. The investments we have been making for the past three years will contribute to a structurally higher EBITDA, $1.2 billion of which is expected to be captured over the next few years. The Liberia expansion project is on track and on budget, the commissioning of the new state-of-the-art EAF at Calvert is underway, and the development of our unique exposure to India is progressing to schedule, with the Phase 1 expansion at Hazira on schedule. Our clearly defined capital return policy is working well and will continue. We have initiated a new long-term share buyback program through 2030. Returning capital to shareholders at the bottom of the cycle, while continuing to invest in growth is clear evidence of the progress ArcelorMittal has made and demonstrates that our company can deliver value through all aspects of the steel cycle. With that, Daniel, I believe we can go to Q&A.

Great. Thank you, Genuino. We have a queue developing already, but just let me reiterate those instructions. [Operator Instructions] So we will take the first question from Alain at Morgan Stanley.

Hi, Alain.

Good afternoon, everyone. Hi, thank you. A couple of questions. Firstly, Genuino on the 2Q 2025, you said you expect EBITDA to be clearly higher Q-on-Q. Do you mind giving us the usual building blocks by division for the second quarter? Have you seen the full benefit of falling met coal prices? Or do lags suggest that we have to wait until Q3 before seeing the full benefit? That's my first question. Thanks.

Yes. So I believe that in Q2, as I said, what is really encouraging is what we saw during – developing during the first quarter, right? So we saw trade actions in Europe, we saw spreads recovering nicely, I would say. And as we were saying, the level of spreads in Europe were extremely weak in the second half of last year, beginning of this year, recovering nicely during the quarter. So that will provide strong support to our results in quarter two. I will ask Daniel to walk you through the moving parts that we usually do, but that's going to be a strong support. And in terms of coal, I mean, as you know, because of the weighted average cost that we have, we are still working through the high cost that we had still at the beginning of 2024, the first half of 2024, so we are still – there are still some of that, that we are working through. So we'll continue to see some support, some cost support, but I would say that is more modest. So Daniel, do you want to cover the moving parts?

Yes. Sure, Genuino. I think to focus your attention on the key themes for the second quarter that – as Genuino said, we'll support the results in the second quarter relative to the first quarter. And so I think the key themes will be higher volumes. And there, I'm specifically talking about a seasonal recovery in Brazil and also higher volumes in Ukraine. And then a positive price cost effect, and you'll really see that coming through in Europe given the dynamics that Genuino just talked about. So we've had some good momentum within Europe. We've had the new safeguards that's really helped to improve market sentiment and spreads have benefited from that sentiment. So we'll see a positive price cost effect in Europe, and you should also expect some improved results in the India and JV section.

Thank you, Daniel. My second question is on North America. Do you know if the new automotive component exemptions that have been recently announced from auto tariffs are applicable to steel? And on that question as well on the tariff absorption in the U.S., do you absorb the tariff costs at the group level? Or is it at the Calvert level? Thank you.

Yes, let me – so North America, as we said last quarter and I was covering in my opening remarks. So we still believe that the impact of Section 232 tariffs will be largely neutral, right? And the way for you to see that really will be to combine the results that you're going to see in our North America segment, plus the results of Calvert that we disclosed – that we disclose separately, right? Regarding the tariffs on auto parts, I mean our understanding is that there is no stacking. So that's our understanding. There is still some clarification that needs to happen when it comes to derivative products. I think there is still some work that needs to be done there to clarify what is really covered by that, but that's how we are seeing right now.

Thank you very much.

Great. Thanks, Alain. So we'll move to the next question from Ephrem at Citigroup. Hi, Ephrem. Can you hear us?

Yes, I can. So the question is on sort of the new greenfield steel plant in India, in the East Coast, in the Visakhapatnam. The Indian press is quoting a time line of 2029 for Phase I and 2033 for Phase II. I appreciate it's early days with land acquisition being started, et cetera, but would those timelines quoted be realistic in our view, given the challenges with greenfields in India? And related to that, anything special from the government, either in terms of facilitating against bottlenecks like land acquisition, and again, any special fiscal terms? And is the decision on the site kind of really driven by the fact that it's the end of the iron ore slurry pipeline? Or is there anything else there? Thank you.

Yes. Hi, Ephrem. So this is, of course, a very exciting development for us for the company. It opens really a new avenue for growth in India. So we're excited about that. But of course, it's still early days. So we've been working very closely with the government to have access to this piece of land. As you know, in India, this is extremely difficult. So it's a significant piece of land with access to the sea front. So it's really ideal. We are going to be also closer to the customers in that part of the country, access to iron ore. As you said, we have our pipelines there, slurry pipelines. So I think the setup is very good. Where we are now at this stage is – so we're going to be working now also to obtain the environmental licenses. And then, of course, after that follows the normal engineering work. And I'm sure we're going to have the opportunity to update you more as we progress. I think it's early days, but I think what is very good is the fact that we could obtain this plant.

Sorry. If I can have a quick follow-up question. I mean you've taken the impairment on Monlevade expansion, and you announced that not just – you have not stopped the plant, but you've kind of canceled the project, the expansion project. Can you give us some background as to why you've kind of canceled the project after being probably about 20% through the project?

Yes. Well, I think what we are trying to do there Ephrem, is really we believe that – so that project was on hold for a number of years. And as we embarked again on the engineering work, we saw that the costs would be too high Ephrem, would be prohibitive. And the teams are doing a good job exploring different optionalities – options to continue to develop the business in Brazil, so which should be more cost effective. So that's why I think it was a combination of the high cost and the possibility that we have – with the footprint that we have to come up with options that might be more cost efficient. Yes, go ahead.

Genuino, sorry. And just to remind everybody that, that was a decision taken last quarter. So that wasn't a new event for this first quarter. It was a decision taken in Q4 and the impairment was taken in Q4.

Yes. Thank you.

Great. So we'll move to the next question from Tom at Barclays. Hi, Tom. Please go ahead.

Hi. Thanks for taking our questions. Two for me as well, please. The first one just on North America. I noticed you didn't talk too much about it around volumes or price cost. I know there's a lot of moving parts around tariffs. But when you say the impact of Section 232 is going to be largely neutral to you. Is that a guide – or is that a comment towards earnings being quite stable in North America into Q2? Or are there other moving parts like Mexico domestic pricing, Canada domestic pricing, volumes? Any sort of main comments around those would be interesting.

Yes. So maybe I can touch on that, Daniel can complement. But I think what we are seeing is that in terms of volumes, when we look at our order book, it remains quite healthy, right? And that is across all our customers in North America. So order books are healthy. So our expectation is to see our average prices, what you see reported also to move slightly up, not as much as you would expect for a pure U.S. company because, of course, we also have operations in Canada and Mexico where prices have not really gone to the same levels as what we can see today in the U.S., right? So we have – we are guiding for volumes in North America to be stable, prices to be slightly up. But then you're going to see, of course, the impact of tariffs, right? So it's not so much in quarter 1, but then we will have the full impact of the tariffs in our results in quarter two, but then again, you will see an offset at the level of Calvert. That's why we are guiding for you to really look at the business on a combined basis, look at NAFTA, but look also at Calvert.

Okay. So I think that was very comprehensive, Genuino. So the only thing I would just reiterate is that the overall message here has not changed. So same message that we gave last quarter.

Understood. Thank you. And then the other question, just on Europe. Obviously, there was a potential 600 job cuts in France and 1,400 total in Europe. Can I just ask how this could potentially change your footprint? Is that all going to be finishing downstream? And does that mean anything for your upstream footprint in Europe? Because I know you've had a furnace basically idle for quite a while now in France, you've been juggling a little bit with maintenance, but it's clearly not been running at full utilization. Do we expect a permanent idling? And are these cuts kind of linked at all to European policy, right, around energy provision and effective CBAM trade defenses that I think you mentioned in the press release. Yes, are these job cuts at all linked to that? Thanks.

Yes. Well, I would say that what we have seen this quarter is quite encouraging in terms of the new steel action plan. So all the points that have been addressed at least conceptually by the commission, it's all very, very positive, I would say. The message on CBAM trade access to energy. And then of course, when you combine that with the actions that are already impacting us today, which is the strengthening of the safeguards, the antidumping on some exporters, it's all good news, right? So now I think we are in the stage where we have to see the concrete actions linked to an execution of the steel action plan. So we have no plans here to change. We are not looking at changing our footprint in Europe. So it all remains. And I think the momentum in Europe, I would say, it's more positive than it was a couple of months ago.

Okay. Thank you.

Great. Thanks, Tom. So we'll move now to a question from Matt at Goldman Sachs. Please go ahead, Matt.

Hi. Good afternoon, guys. So just another one on Canada and Mexico and the auto tons heading into the U.S. You mentioned your order book is fine. But can you just confirm you've actually been able to move higher priced volumes into the U.S.? And then just that fully captured the duty. And just on the Trump tariff relief for auto – the auto industry, what are you hearing from your customers? And I'll follow up with another question. Thanks.

Yes. I would just say, Matt, that outflows, they have not changed. They continue to be exactly the same. And each contract, it's – they have their own clauses and conditions. So what I would say to you is that we are, of course, honoring all these contracts. So in some cases, we are the importer of record. So we will pay the tariffs. In some other cases, it's our customers. So it really varies. But I think what is important is that given the quality of the assets we have in Canada, Mexico, U.S., so we are able to keep supplying the OEMs. So we are not seeing any change there, right? And as I said, the order book remains good, healthy. And it's probably early days, right? But we – so what we are seeing right now, it's, I would say, stable.

That's great. Thanks, Genuino. And then just on met coal. Obviously, you've touched on that this is helping on spreads, but we're seeing some miners get into a bit of distress. Would ArcelorMittal be open to acquiring high-quality steelmaking coal production for future supply security?

Matt, it's not something that – as you know, we don't really comment on M&A, and it's not something that is high on our agenda at this point.

Loud and clear. That's all for me. Thank you.

Great. Thanks, Matt. So we'll take the next question from Patrick at Bank of America. Please go ahead, Patrick.

Thanks very much, and good day, Genuino and Daniel. Maybe the first question, I just – can you just talk us through the sort of the change in the technical aspects of the share buyback. So I appreciate there's no change to the capital allocation policy, but the previous one was 85 million shares over two years, and now it's authorization for 85 million shares, but this 10 million shares tranche. Can you just talk us through kind of the thinking how and why it's changed effectively? Thanks. That's the first question.

Do you want to talk about it, Daniel?

Yes, sure, Genuino. So I think, look, the fact is we've done nine separate share buybacks since we started the buyback programs in September of 2020. So it's clear that – our policy is clear, and the application of our policy is also very clear. So we're extremely happy with what we've been able to achieve. We've been able to buy back 38% of the company at obviously attractive points of the cycle and at a good average price level. So like you said in your question, the policy is unchanged. We will continue to return a minimum 50% of post-dividend cash flow to shareholders through the buybacks. But the idea is that – we've now made this announcement. It's through 2030. We will execute the first tranche of 10 million shares, and then we'll start the next tranche of 10 million shares straight after that. So you can kind of forget about that side of things, and just look at the policy, look at your expectations for the business, the cash flow that we're going to generate, and that should then form your expectations for how many shares we're going to be buying back. Hopefully, that's clear.

Yes. That is. Thanks very much. And then the second question, I wanted to ask a little bit on the Liberia iron ore expansion. I mean I think last year, you shipped 3.5 million tons from – and obviously, it's picking up to 10 million and then going to capacity of 20 million. I mean, does that really only add $450 million additional EBITDA. I mean, if I look at the long-term margins of the Mining division, it's sort of closer to 50% on EBITDA. And so sort of additional 16.5 million tons, it kind of implying at current prices only about a 25%, 26% margin. So yes, I mean, are you being conservative around pricing? Is it higher cost because of the concentrating or because of additional – is there anything – any reason why it should be lower margin than the balance of your Mining division effectively? Thanks.

Yes. So first of all, I think the project is going extremely well as we alluded to at the beginning, in our opening remarks. So we are actually about to really start the first line, which is also quite exciting. And we are talking about here very high-quality material, Patrick. So the $450 million that we have been quoting, that's really based on long-term prices, right? And that's, as we know, lower than what we have been enjoying in recent quarters, so in this $100 range. So the $450 million is based on the long-term prices, which is much lower. So to the extent that, of course, prices remain where they are, then we should be able to print higher results from Liberia. But there is no reason to assume that the quality of the material will be inferior. On the contrary, we believe that it's going to be a very high-quality product. So very excited about that.

Yes. It's quite transformational, Genuino. So you get the economies of scale, have a much bigger operation and that largely neutralizes the cost of concentration. And then we get a richer product, and we'll be able to capture a richer price for that material in the market. So just to confirm what Genuino was saying, the guidance that we've given for this project of $450 million at capacity, that's very conservative. It's based on conservative long-run pricing. But even based on that, you can see the very attractive economics of the project, and the good returns on the investment that we're making. But should prices hold anything like where they are today, then there would be quite significant upside to that $450 million number.

Great. Thank you very much.

Great. Thank you. So we will move to the next question, which should be from Cole at Jefferies. Hi, Cole. Please go ahead.

Good afternoon. Thanks for taking the question. I just like some color on how you're seeing the European market developing here? I mean margins are looking a lot better into the second quarter. We've got a lot of safeguards. How are you looking at your mill system to either increase volumes if your order books remain healthy? And secondly, how do you think some of the players that have idle capacity or have some challenges at the moment might react to the more favorable spreads into the second quarter? Thank you.

Yes. So what I would say is that I think in terms of demand in Europe, as we have been discussing, and you have our forecast for this year, which remains unchanged is – and we have a forecast of about neutral to about 2% increase. I think what is really helping and supporting the demand right now is the change that we talked about in terms of trade. So we started to see some reduction of imports, which is extremely positive. We will not see the full impact of the new trade actions until quarter three because that's how there is a bit of a transition there. So our expectation is that imports will continue to trend down, of course, to be seen, but that's our expectation, allowing then domestic players to regain some market share that was lost with surge of exports from China and other countries. So that's very good. So we retain, of course, as part of our operations, the ability to regain market share. So we are not constrained there. And regarding capacity that is idle, I would just say that given DTS system in Europe, it's not so easy for people to bring back capacity because then they will incur very high CO2 costs as well. So that's just something to keep in the back of your mind. But of course, we cannot comment on what others will do, but I would say that what we can see right now it's quite positive.

Thank you. And then maybe just following on that last point around the costs for CO2 to restart idled capacity. Have you heard anecdotally how competitors might be facing in kind of high-yield debt markets just considering they're a little bit more challenging relating to potentially starting up some of that capacity? Will it be more challenging for them to get the financing and start up some of the capacity in your view?

Well, I'm not going to comment. We just say that there is a lot of volatility in the markets, right? So the markets were kind of closed for high yield. But I think that's just temporary, of course. So I think that it's a question that I'm afraid you're going to need to ask the other companies.

I understand. And then just following up on the comment around India and JV sequentially improving into the second quarter. The U.S. market is clear, considering the price dynamics with Calvert. But would you mind just giving some color on the dynamics impacting the India JV with the safeguard actions for India? Thank you.

Well, India is – I think the story there is really intact, right? We continue to see good growth. So apparent steel consumption, our forecast remains the same. So we still expect a growth of about 7% this year. So that's extremely good. And as we discussed, so we have the safeguards now in place from beginning of April, which is supporting prices. We have already seen prices recovering from low levels that we had in quarter one. So that should support the results of our JV in India going into the second quarter. And as we have also pointed to you in our release, so Q1, we had some maintenance work, which is now completed. So we're going to be back to full operations that should support costs as well. So we are looking for an improvement in terms of profitability in India in quarter two. And more importantly, as we have been discussing, is the progress on the projects going well, on track, which is also quite encouraging. So that's the dynamics in India that we are seeing right now.

Thank you.

Great. Thanks, Cole. So we will move to the next question now, which we'll take from Boris at Kepler Cheuvreux. Hi, Boris, please go ahead.

Hello. Can you hear me?

Yes, we can. Hi, Boris.

Yes. Perfect. Thank you for taking my question. The first one is on the free cash flow. So the press release reads that you remain positive for free cash flow with a stable CapEx envelope, the incremental contribution from the strategic projects and some working capital optimization. Can you bring some details on working cap, just to help us in the modeling part? And second question is on China. China has been under pressure for some time now. What do you expect – do you see do you have any good reasons to expect some stimulus? What's your view on that market where we have heard about potential production cuts?

Yes. So Boris, in terms of the working capital, we are keeping our message of the previous quarter as well. No change there. I mean, of course, the investment that you see in quarter one is seasonal. I mean, it happens every year. And our expectation is that for full-year, we should still see there are moving parts, but we should still see some release. But it's always difficult to be precise because there are, of course, many moving parts, and a lot will depend on what happens really in the last couple of months of the year. But because of our actions like we will have a reline of a furnace in France in the second quarter. We're building slabs for that. So we'll be working through that. And as we also discussed at the very beginning of the call, we see some high cost coming from the first half of 2024 because of the weighted average cost. So we still believe that all in all, we will be in a position to release working capital this year, which is, of course, supportive for free cash flows. Should not forget that Liberia, the expansion is the second half, primarily, right, even though the performance in quarter one was really outstanding. But it's second half event, will support results in the second half. So that's why we feel comfortable and confident that the group will be generating free cash this year.

Perhaps I can take the question on China. So the – clearly, the demand situation in China continues to be challenging, and we continue to see very weak spreads and elevated from China. So – and there is a lot of talk of incremental stimulus in reaction to everything that's going on at the moment. And hopefully, that will come. Hopefully, that will be oriented towards more steel-intensive parts of the economy so that it can have the maximum impact on steel consumption. But that's all uncertain, and that's why we continue to – our strong efforts and lobbying efforts within all of the countries that we are operating to make sure that our businesses and our industries are appropriately protected from those risks of excess capacity in China.

Just a follow-up on that. Do you expect – what kind of further measures can we expect in Europe?

Well, I think – as we discussed, I think there is a lot of good news in Europe. We've the steel plan just announced. I think there is a lot that will be announced as we move forward. I think what's going to be very important for us is the new trade actions because as we know, the safeguard comes to an end next year. So this is an important piece of the whole puzzle. So this is coming in summer. CBAM, I think there is a lot that will be worked out in Europe in the second part of the year. I think what is really encouraging is that now it's clear that there is a good understanding of the challenges that we face in Europe, that the industry is facing in Europe, right? And that's always very critical. So once we are all speaking in the same language, we all understand the issues, then we can work together to resolve them. And so I think that's what is encouraging about everything that has been published. And as I said, I think now we want to see the detailed plans and implementation.

Great. Thanks, Boris. So we'll move to the next question, which we will take from Bastian at Deutsche Bank. Hi, Bastian, please go ahead.

Yes. Thanks for taking my questions. I've got two questions left actually. The first one is just on the JVs business and actually Calvert specifically, actually on the start-up of the new EAF. From what I understand, I think you will start actual production shortly. Is there a broad volume target or production target you could maybe share with us for this year? And then secondly, you spent a lot of time talking about the tariff impact on NAFTA, but I think there's another 1.5 million to 2 million tons of slab supply from Brazil into Calvert as well. I think you did around 0.5 million tons of shipments in the first quarter. So will the cost for these – for the tariffs on these will be – will that be taken in Calvert or in the Brazilian segment? And also, have you been able to build any slab inventory ahead of the tariffs. So maybe you can help us on the current inventory runway there in Calvert. Those are my questions.

Yes. So we are not giving – you're right, so that we are now in the process of commissioning the EAF, which is also extremely important for our business in North America, particularly, now with everything that we just talked about trade. So that's very timely. We're not giving a target for this year in terms of production. What I would say is that we – our expectation is that it should take us about 12 months to be at a full run rate. So I would expect that by the end of the year, we should be at a very high level of run rate already. And then, of course, in parallel, we start the certification, the homologation process with customers. So this is a process that we will be running in parallel. And regarding the slabs, you're right. So of course, we are importing slabs into the United States for Calvert. But I would point to two points. So one is we have seen a decline in slab prices. So Calvert will be of course, paying the cost of the tariffs for the imported slabs. So you're going to see that as part of the Calvert performance, not in Brazil, Calvert. But despite that, given how quickly prices moved in the United States, it will more than offset that. It will help also to offset some of the costs that we talked about we will incur in Canada.

Understood. So basically, bottom line, no real impact on the Brazilian business itself from that, from what you say?

No. That's right.

Understood. Okay. And then maybe just coming back to the EAF startup, just checking in – I mean is the start-up of the EAF itself, is it going – is that going according to plan and timeline. So I think you started to ramp it up late last year. So – but I guess the 12 months you're referring to, I guess, is probably starting basically with the first melting process. Is that correct, i.e., like whenever you start the melting, it's basically 12 months from then?

Yes, I think that's a good reference, Bastian. So right now, we are going through testing all the equipments, right? And then you put it all together, you have the first slab, which we are anticipating by the end of second quarter. And then from there, you start counting the ramp-up. That's how it works.

Got it. Okay. Thank you.

Great. Thanks, Bastian. So I think we're going to have time for just a few more questions, Genuino. So the first of those we will take from Max at ODDO. Actually, I'm mistaken, sorry, looking at my screen. So it's actually – sorry, Tristan at BNP Paribas Exane. Hi, Tristan, please go ahead.

Hey. Hi, thank you. Thanks for taking my questions. First, on the CapEx. You mentioned that any decarb investment would fit within your $4.5 billion, $5 billion CapEx envelope. But if you move forward with all your projects, DRIF projects in Europe, in France, Spain, Germany, Belgium, it really feels difficult to see how it would fit and you would not go above $5 billion. So I was just wondering how we should look at this $5 billion. Is that a hard target? Is it a bit like your 50% plus dividend free cash flow target? Is that the way to think about it?

Tristan, as you can imagine, I mean, these are very large projects, right? So – and we're not going to do it all at the same time. So this will happen gradually. We should not forget that the transformation, right, to this new green steel, it's going to take decades, right? And so you should expect that this will – once we can see that we have the right conditions, the right policies that we have been talking about, and we have been very vocal about it. Once we have that in place, so then we're going to be in a position then to start investments, but that should happen gradually. And that's why we feel confident that we should be able to accommodate that within the existing envelopes that we have been using now for a couple of years.

All right. And could there be upside as well to subsidies? I think the steel action plans also refers to additional help. Is that something you can expect?

Well, I think that's going to be part of the dialogue with the government. I think as I said, the fact that there is a good understanding of some of the issues that we are facing in Europe. So we are encouraged by that, and this will be part of the dialogue. But at this point in time, I really don't have any more news on that front to share with you.

Okay. That's clear. And a quick question, just also on Calvert. There is a new review process ongoing regarding the acquisition of U.S. Steel by Nippon Steel. If the new U.S. administration clears the deal on national security rounds, but does not see an antitrust issue, could Nippon Steel walk back from the agreement of selling the 50% stake to you? I'm just trying to understand if this is kind of a black or white scenario or if there is some gray as well.

Tristan, I will not speculate on that. I think let's wait and see what finally happens with that deal. So let us see. I don't think we have much to add to that. You know the terms that have been agreed. So let's just wait and see what is the final conclusion of the review by CFIUS. There is a new review ongoing. That's, at least my understanding, reading the news. So we will wait to see what happens there.

All right. Thank you.

Great. Thank you, Tristan. So we will have – the next question will be from Max at ODDO. Hi, Max, please go ahead.

Yes. Good afternoon, both of you. Yes. So my first question is on defense, because this is a thing that has grown in importance for the investors in recent weeks, in recent months. And could you talk us through your own defense exposure. My understanding is that you sell some heavy plates to Industeel. Is it the only segment where you're active? Or is there anything else we should be aware of?

Do you want to talk about it, Daniel?

Yes, sure. So I think we have touched on this a little bit in a lot of recent meetings. So yes, Industeel is the sort of focus point of our defense exposure, they do have leading market positions. I think when we think about defense, it isn't a big steel consumer. So when we – when you compare the focus on defense versus the German infrastructure bill, then clearly, the German infrastructure bill will be much more impactful for steel demand over the medium to long-term. However, I think the focus on defense is indicative of this sort of renewed focus at Europe and at the commission level that we need to be able to defend ourselves. And in order to be able to defend ourselves, we need to have strong healthy steel industries to be able to supply that material. So I think for us, that would be the biggest takeaway that it's just indicative of this broader move at Europe and at the commission level to think more strategically about domestic industries.

Okay. Clear. And second question is on the decarbonization agenda. So you've highlighted a number of positive changes in Europe over recent months. And yet you haven't reactivated your plans to decarbonize in Europe. So what would be really the major triggers for you to envisage to really reactivate these plans? Would it be a much higher energy cost? Would it be confirmation that the safeguard system will be replaced by a new one that is at least as effective? Is it the introduction of the melt and pour rule? What steps do you see as critical for you to resume these investments?

Maxime, maybe I'll take this one. I think it's kind of all of the above, right? So you touched on a number of very important points on the safeguards. Our hope is that the commission will go even a step further. As you know, domestic mills lost a lot of market share to imports, and we would really welcome measures that would take us – or take the market share of imports back to prior levels. So it's still a long way to go there. Then CBAM, of course, is quite important, right, and then access to energy, competitive energy as well. So I would, for now just list these three. And melt and pour as we know, is also quite effective. It's also something that we would welcome because then you can really make sure that you are avoiding circumventions, and that's quite good. So I'll leave at that. Back to you, Daniel.

Okay. Thanks. So we have time, I think, for one last question, which we're going to take from Andrew at UBS. Hi, Andrew, please go ahead.

Hi. Can you hear me, okay?

Yes.

Good. It's actually a follow-up to the last question, to some extent. I mean, one thing that – I mean I was encouraged by the steel action plan. But one thing I'm less clear on is what can actually be done to address the biggest problem, which to me seems like it's the high energy cost issue in many of the countries around Europe. I mean, from your perspective, what can actually be achieved through the steel action plan from changes in regulation, could actually make a difference to that? Because, ultimately, if you're going to make these investments in green steel, that's a key building block. So I mean, do you see any material change that could come from this, which is going to impact upon your ability to make those investments?

Andrew, I think – I'm not so sure that I follow 100% of your question and the link you were trying to establish. But I think, as we just discussed, I think the – with the steel action plan, we can address some of these fundamental issues such as the very high level of imports. And as we know, it's just not the level of imports, it's just that it's extremely unfair, right, with the domestic mills because domestic mills are paying for the higher CO2 costs, than nobody else is paying. Of course, we have also the situation in China with extremely low prices that it's very hard to rationalize, to defend, right? So it's really – the competition is today for the European mills, clearly, it's extremely unfair. So to the extent that we can address that, that will really be extremely supportive, right? Even if demand remains where it is, if we can just allow the domestic mills to recover some market share loss, that will be extremely positive. We should see that as an increase in apparent steel consumption for the domestic mills. So that should be quite important. And then, of course, we have the energy discussion, which continues to be an issue. So our power prices across Europe continue to be elevated. And if you want to go through this transition and we want to have more EAFs, we will need to have better transmission lines, we will need to have access to more competitive prices. And all of that is actually to some – it's covered by the steel action plan that was announced. But again, as we discussed, the key point will really be now the details and the implementation.

I guess just a follow-up to that. I mean, my question was more on what can the action plan actually deliver in terms of tangible reductions in energy costs because maybe some help on transmission might make a small change, but ultimately, does it make enough of a change? And given your global footprint, does a model of maybe doing the iron making outside Europe where power costs are just naturally lower, and importing in potentially make more sense? And how do you think about that?

Yes. I think you're right. So what governments can do – this is also part of the plan is allowing as an example, contracts for difference, which should then address some of the structural issues, right? So contracts for difference, facilitating access to PPAs. So there are measures that governments in Europe can take today to provide the local mills competitive price, right? Your question is, do we do it in Europe? Do we do it outside of Europe? I think that is something to be seen, right? I think we have really to first see – really what comes out concretely from the plan. And then we're going to be in a position to decide. I think ArcelorMittal is well positioned because we have, of course, our footprint in different locations. Texas is a good example, right? So we have our DRI plant there. We have the possibility to expand. We have access there to gas. So we'll have the option. So – but at this point, I think it's early, so we just need to really understand concretely the change, and then we're going to be in a position to take a call on it.

That's great. Thank you very much.

You are mute, Daniel.

Thank you, Genuino. So that's our last question. So with that, I will hand back to you for closing remarks. Thank you.

Thank you, Daniel, and thank you, everyone. Before we close, I want to reiterate my messages from the beginning of the call. Firstly, I say with confidence that everyone across the company is working to become a fatality-free and zero serious injuries company as quickly as possible. Secondly, our operations are performing well consistently. Together with our high-graded portfolio, this is enabling our company to deliver resilient results and high margins. Underlying cash flow generation remains strong at all points of the cycle, demonstrating the material transformation of ArcelorMittal. Lastly, our business is well positioned both operationally and financially to navigate market uncertainties without changing strategic course. Our growth projects have good momentum and will provide unique upside to ArcelorMittal's EBITDA and cash flow. And our capital return policy that has enabled us to buy back 38% of the company over the last 4.5 years and increased dividends per share by 85% over the same period is unchanged. With that said, I will close today's call. If you need anything further, please do reach out to Daniel and his team. I look forward to speaking with you soon. Stay safe and keep those around you safe as well. Thank you.