ArcelorMittal 2026 Q3 Earnings Call

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 in the 3rd quarter of 2026. Leading today's call will be our 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 do want to draw your attention to the disclaimers on slide 24 of that presentation. Following some opening remarks from Genuino, we will move directly to the Q&A session. So if you'd like to ask a question, then please do press star 1, 1, on your keypad to join the queue. And with that, I will hand the call over to Genuino. Thanks, Daniel. Welcome, everyone, and thanks for joining today's call. As usual, I will keep my remarks brief. Let me begin with safety, which remains our highest priority. We are now approaching the end of the second year of our safety transformation. Through disciplined execution of our safety roadmaps, we are seeing more consistent performance across the group. This is encouraging, and we remain firmly focused on our ambition of achieving zero fatalities and zero serious injuries as quickly as possible.

Turning now to the business, I would like to focus on 3 key points. First, Our results continue to demonstrate the structural improvements in margins. Third quarter EBITDA was $2 billion, up 34% year on year. EBITDA per ton increased to $155. which is $44 higher than a year ago and well above historical averages. This demonstrates that our portfolio optimization and strategic execution are delivering results, and I believe there is significantly more to come. Importantly, these results do not yet reflect the full benefit of the new European trade framework, which is restoring sustainability to the European steel industry. And given the length of our order book, the increases in steel prices flow through to earnings with a lag. In addition, around 25% of our European flag product volumes remain under annual contracts that have yet to reset. This brings me to my second point. As imports normalize, customers are increasingly looking to domestic supply, and we are responding. The TRQ framework provides the opportunity for recently idle capacity to restart. Restoring employment and providing direct benefits to the local and regional economy.

During the quarter, Imports of flat steel products were approximately 50% lower than a year ago.

And as expected, our European flat product shipments were higher in the 3rd quarter against the 2nd quarter, which is counter to the normal seasonal pattern.

As inventories normalize, we expect more of this reduction in imports to translate into higher domestic shipments. Our order book continues to strengthen, and we expect shipments growth to accelerate in the 4th quarter and show a double-digit year-on-year improvement. This momentum is expected to continue to build into 2027. As customers shift back towards domestic steel supply, we will see higher, more sustainable capacity utilization with the, the growth of Asturias and Foz back in operation. All of our European blast furnaces are now running and we are well placed to serve our customers reliably and efficiently. High utilization should support a return to healthy and sustainable levels of profitability and returns on capital across the industry. My third and final point is that ArcelorMittal is exceptionally well positioned to deliver higher earnings, stronger returns on capital, and continued value creation for shareholders. An increasingly regionalized steel market provides a stronger foundation for sustainable profitability throughout the cycle. I have already talked about the significantly improved outlook for our business in Europe. Our business in India continues to perform well. We are ramping up our higher added value capacity, and the year to September, we presented a new shipment record.

In North America, we are seeing positive momentum across our franchise. Better import protections are a common theme, and lean inventories alongside growing demand from data centers, energy infrastructure investment, creates a positive outlook for 2027. Against this improved backdrop, ArcelorMittal is well positioned to succeed. Our scale, our leadership positions in key markets, and our strong track record of product and process innovation will continue to set us apart from the competition. We are proud of the entrepreneurial culture, which promotes accountability and a relentless focus on continuous improvement. more supportive industry structure give us an even greater opportunity to convert these advantages into higher earnings and stronger returns. Over the past 4 years, we have invested consistently in high-return strategic growth projects. that are increasing our earnings capacity. Importantly, many of these projects have not yet reached their full potential, providing a further source of earnings growth as we move into 2027 and beyond. The value created through these investments is further enhanced by our buyback program. This has been a powerful driver of shareholder value. And given the positive outlook for free cash flow this year and beyond, I expect this to continue. With that, Daniel, I believe we can start the Q&A.

Great. Thank you, Jim. We know we have quite a long list of questions to get through, but we'll start with a question from Alain at Morgan Stanley.

Hi, Alain. Hi. Thank you for taking my question.

Hi. Hi. 2 questions from my side. I'll start with the first one, which is the usual one. If you don't mind discussing the profit bridge into Q4 and specifically around Europe, where we are seeing many moving parts, including shipment growth, spot prices moving higher, but also elevated or sticky energy costs? And perhaps the same question applies to the other divisions as well. So if you don't mind starting with the bridge. Thank you. So, Daniel? Yeah, sure.

Thank you, Genuino. So, thanks, Alain. Looking at the major components, you know, the building blocks, the major themes into the 4th quarter. I think it's clear from Genuino's comments and the release that we expect higher volumes. in the 4th quarter. You know, that's a common theme, but in particular, we would expect that from Europe, where we've guided to flat volumes being accelerating in the 4th quarter and increasing year-on-year at a double-digit rate. Second component would be generally higher steel prices across the segments. The Brazil, perhaps a slight exception to that. Just given mix effects. So that's probably going to be a little bit more stable quarter to quarter. The 3rd bucket or theme would be higher costs. You know, you talk about that in your question, the way you posed it. But I think everybody can appreciate the evolving cost dynamics, particularly in Europe, as energy prices have continued to rise. evolve through the quarter. So we'll have to see how energy prices continue over the next 6 weeks or so. So it's difficult to be specific there on the guidance, but that will clearly be a theme. The last component would be mining.

You know, we've guided to a stronger quarter to end the year from our mining segment, given the continued progress at Liberia and our expectation that that should be operating at capacity in the 4th quarter. So it should be a good quarter from a shipment standpoint. And then, you know, it's difficult to be specific on the iron ore and freight factors, but I'm sure you can accommodate that in your expectations as they become apparent. And then I think just my final comment would be on free cash flow. If you look at our release, if you look at the presentation, we are expecting a good free cash flow performance in the 4th quarter, and that will be in substantial part driven by an expected seasonal release of working capital.

Thank you, Daniel. Thank you. And my second question is, if we stay with Europe into 2027, you talked about the annual contract resets. Do you mind reminding us how many tonnes will be up for repricing on the 1st of Jan and how quickly this will feed through your ASP? And then in Europe as well, in your presentation, you talk quite extensively about the benefits of the TRQ framework, which hasn't fully yet fed through your profits and margins. What do you expect to see as we head into early 2027 that will drive the margin upside for your European division? Thank you. Okay, so thank you, Alain.

Let me take your second question. So first of all, I think it's important to say that TRQ Q3, of course, was the first quarter in which we could see the benefits of the new framework. We are of course, very, very happy with what we have seen. As we were guiding at the time of Q2, we see higher shipments in flat despite the seasonality. And despite the fact that we were going through a destock during the quarter, So it's really working as initially designed, which would then allow us to bring back the capacity that we are— that I also talked about at the beginning of my own my opening remarks. And we will really see the full benefits of the new framework, of course, in 2027, Alain. And also what it does and we believe it should really be extremely helpful. It allows the industry now to pass on higher costs, right? So we are seeing now we were in a positive trend in terms of recovering our margins. Of course, we were hit by higher energy costs. But we are in the process of recovering that. So when I look at the pricing guidelines that we have already for January, I'm sure you have seen it.

It's already significantly higher than what you see at the moment coming from the index. So that's all very positive. And we're going to be working through the destocking. Our expectation is that destocking should largely end in Q4. So when I look at the business and the moving parts, I think we can be very optimistic for 2027.