ArcelorMittal S.A. (NYSE:MT) Q4 2022 Earnings Call Transcript

ArcelorMittal S.A. (NYSE:MT) Q4 2022 Earnings Call Transcript February 9, 2023

Company Representatives: Lakshmi Mittal – Executive Chairman Aditya Mittal – Chief Executive Officer Genuino Christino – Chief Financial Officer Daniel Fairclough – Vice President, Investor Relations

Operator: It’s now my pleasure, and I would now like to turn the conference over to Daniel Fairclough, Vice President, Investor Relations. Please go ahead, sir.

Daniel Fairclough: Thank you, Francie. Hi and good afternoon everybody. This as Francie said is Daniel Fairclough from the ArcelorMittal Investor Relations team. I’d like to welcome everybody to the Fourth Quarter and Full Year ’22 Analyst and Investor Call. I’m joined on this call today by our Executive Chairman, Mr. Mittal; our CEO, Aditya Mittal and our CFO, Genuino Christino. Before I hand over to Mr. Mittal and Aditya, I would like to remind everybody of a few housekeeping items. Firstly, I want to refer everybody to the disclaimers that you can find on slide two of the results presentation we published on our website this morning. I’d also like to remind everybody that this call today is being recorded, and it’s scheduled to last up to 45 minutes. And finally, to repeat Francie’s instructions . And with that, I would like to hand over the call to Mr. Mittal to begin with some opening remarks.

Lakshmi Mittal: Thank you, Daniel. Good day, everyone. Thank you for joining today’s call. I hope you are all keeping safe and well. I’ll be very quick in my remarks. I would characterize 2022 as another year of progress for our ArcelorMittal. The results we have published today demonstrate the greater resilience of ArcelorMittal when facing more challenging market environments, and I believe the worst conditions of this cycle have passed. As a company we have achieved significant progress on many strategic fronts over the past 12 month. Advancing our decarbonization plans, progressing with our investments to grow EBITDA and at the same time buying back over 10% of all equity. The progress is gratifying, and it’s down to the hard work, commitment and dedication of all our people. I expect 2023 to be another good year for the company and all our stakeholders. Adit?

Photo by Stefan Lehner on Unsplash

Aditya Mittal: Thank you, and welcome everyone. In 2022 we have made clear progress in our three strategic priorities: The decarbonization of our footprint; the growth and development of our business; and capital returns to shareholders. On decarbonization we had completed the acquisition of the HBI plant in Texas, allowing us to utilize low-carbon metallics and creating significant optionality for the future. We have acquired four scrap processors in Europe with a total capacity at 1.2 million tons. We have commissioned our €200 million CCU bioethanol project in Ghent Belgium. We are progressing on our DRIEA plant in five countries and a 1 gigawatt renewable project in India is advancing. On growth, we have now received approval for the CSP acquisition, which we’ll complete this quarter, adding highest quality capacity at the bottom of the cost curve, with the added benefit of access to growing sources of competitive renewables and hydrogen.

We’re also progressing our strong pipeline of higher return strategic CapEx projects, including the newly announced Electrical Steels project in France. In total, these projects add $1.3 billion to a normalized earnings power. That assumes long term steel spreads and long term iron ore prices well below today’s levels. So at today’s levels, the impact on profitability would be even greater. We’re making progress to realize the potential of our JVs, including the announcement of a major investment to double our capacity in India, which is also supported by the recently acquired port and power assets. Our capital allocation and return policy is working very well. We’re growing the earnings power of the business. We bought back 30% of our equities in September 2020 and ended the year with record loan net debt.

In terms of outlook, we’ve seen some positive signs recently that suggests we have passed the bottom of the current destock cycle. The customer destock that we spoke of the last quarter has eased, and we’ve seen improvement in steel spreads from the unsustainable lows of the fourth quarter last year. We are forecasting apparent demand growth in all our core markets. We’re well placed to generate positive cash flow and will continue to progress our decarbonization and growth agendas and capital returns program. Genuino, can I now ask you to provide some more detail on our financial performance.

See also 35 Most Expensive Countries in the World and 12 Countries that Produce the Best Tobacco.

Q&A Session

Genuino Christino : Thank you, Aditya. In terms of our financial performance, 2022 was very much a year of two halves. For the first half we operated in strong market conditions and delivered very strong levels of profitability. The second half of the year brought several challenges and saw a marked downturn in the market environment and naturally affected our profitability levels. Full year EBITDA was $14.1 billion, of which $10.2 billion was generated in the first half and $3.9 billion in the second. But our results demonstrate clear resilience. At $100 per ton, the EBITDA in the fourth quarter was double the levels of the previous crises environment. Considering the challenges posed by destocking and relatively high energy costs, this reevaluates the actions we have taken and the improvements we have made to our portfolio in recent periods.

Free cash flow has also been very consistent. Over the past two years we have generated $13 billion in free cash flow. It is this consistence that is allowing us to progress our strategy agenda and as Aditya mentioned, we expect to continue to generate quick levels of free cash flow in the year ahead. With that, I think they can move to your questions.

A – Daniel Fairclough : Thank you, Genuino. Thank you, Aditya. Thank you, Mr. Mittal. We have a queue of questions and we will take the first in the queue, which is Alain from Morgan Stanley. Please go ahead.

Alain Gabriel: Yes, thank you, gentlemen and I have two questions from my side. The first one is on capital returns. I understand that your framework stipulates that only $100 million of buybacks are needed to meet your 50% of the cash flow target for capital returns. But your net debt has come in far below market expectations for Q4 and you still have an authorization to buy back almost 19 million shares. Any reason why you have decided against maintaining the buyback at full steam given where your share price is today? That’s my first question.

Aditya Mittal: Yes, thank you for the question. I’m glad you asked the question, because you should clarify, there is no change in our buyback policy or the speed at which we’re implementing. We still have 19 million shares to acquire and which we will do. I think all we were highlighting in the results is that the $100 million belongs to 2022, because that’s 50% of free cash flow that we have actually bought in January, and the remainder will apply to the 2023 capital return policy.

Alain Gabriel: Okay, thank you, that’s very clear. And my second question is on your EBITDA progression going forward into Q1 and Q2 in terms of the key moving parts. Can you give us some pointers around that? And you stated that we have pasted the bottom of the current destock cycle. Is it fair to assume that we are also past the bottom when it comes to quarterly EBITDA in Q4 last year. Thanks.

Genuino Christino: Let me take this one. So yeah, I think as we’re discussing at the time of our Q3 results, and so we were expecting a very severe level of destock in quarter four. That’s exactly what we saw. Really strong destock happening. It’s hard really to say that the destock is over, but clearly not going to be as significantly as it was in Q4. We got to see certain levels of normalization, and our expectation as we move forward that the appearance to consumption will be closer to the real demand. In 2022, I think it’s important to put that into context. In Europe, if you look at Europe, the real demand was actually okay. So the real demand at the end of the year was €“ we were close to breakeven, slightly positive.

So really the destock that we started to see in Q3 and again classified in Q4 put a lot of pressure on the apparent steel consumption in the second half of 2022. So that should normalize, and we should see apparent steel consumption getting much closer now than to be real demand, that we expect to continue to be moving sideways, so that’s one. I think another very important element that we can point out is the energy costs in Europe continue to come down, continue to normalize. So as a result our order books are improving. We see that and again that’s going to the non-occurrence of the very strong destock of Q4. So trying to put all this together, I would maybe start with shipment. So our expectation is see shipments improving in Q1, in most €“ in all of our regions.

Appliances as you know, because prices continue to decline during quarter four and because of lands, our prices, we expect will continue to be affected in quarter one. But as we know, prices have since started to move up quite significantly, so that it looks good for our second quarter. So prices, we discussed volumes up. Cost, we expect costs to continue to come down, even though we are seeing more recently of course €“ I don’t know price, the coal price is moving up. We will not see so much of an impact in quarter one because of the weighted average costing. So those are the moving parts. So I think as we start the year, I think we are cautiously optimistic. We have guided for apparent steel consumption for the year to be up 2% to 3% and we are guiding for 5% improvements in our shipments for the year.

I will stop here. Aditya see if you can have any follow-ups. Thank you.

Aditya Mittal : Thank you, Genuino. Maybe just a few quick points to add. So I think Genuino went into a lot of details, so I appreciate that. Overall, I know you asked, do you see the worst behind us and I think we do. So when we look forward, we think fourth quarter was the lowest point in the current cycle. So we expect Q1 and going forward, the business to perform better. The apparent steel consumption numbers match, almost the real demand numbers of the forecast in the core markets. So there’s also a good development on the real demand side. Thank you.

Alain Gabriel: Thank you very much.

Daniel Fairclough: Thanks, Alain. So we’ll move now to our next question from Tristan, at BNP Paribas Exane. Go ahead Tristan.

Tristan Gresser: Yes hi! Thank you for taking my question. Maybe if you could shed some light under the full year volume guidance. You mentioned that the guidance implied no change in Ukraine. So could you give us a sense of the current output levels at the moment? And is it fair to assume that this is the base case scenario in which your free cash flow guidance is based on.

Aditya Mittal: Thank you for the question. We have not really provided free cash flow guidance. We have provided shipment guidance, and we expect our shipments to build 5% year-on-year, and this obviously includes Ukraine. In terms of Ukraine, I think first of all, I must say that our people have been absolutely heroic. They had been maintaining the operation. They had been defending themselves and are on our facility, and we are all extremely proud of them, and we really applaud everything that they are doing on a daily basis. The focus of our people has been to maintain, maintain our assets, maintain its integrity. We are in fact in critical €“ the critical implication of that is that we are maintaining our opportunity to produce steel in the future.

Today, the operating levels are roughly 15% to 20% for steel and 20% to 25% for iron ore mines. And as you know that the facility in Ukraine has vertically integrated. It has its iron ore mines connected to our steel making and makes long products. So clearly can participate in the reconstruction, redevelopment of Ukraine when there is peace.

Tristan Gresser: Okay, that’s very helpful. And maybe just a quick follow up on the volume guidance. In Europe, you have a couple of blast furnaces that have been idle at the moment, and I think only one has been restarted so far. Does your volume guidance include some additional restructure in the region. And is there some possibility, when you look at certain blast furnace being idle that some are now called idol or some close to the end of life. And this is context of the decarburization, maybe some of those blast furnaces will not restart. Is that a fair possibility? Thank you.

Genuino Christino: Yeah, let me report on that Tri. Yeah, so I think we are bringing production back as we see improvement to our order book, right? So and that’s where we have been also very consistent on that. So we will always match supply to the demand that we see. So we are not bringing capacity back. Anticipation of an improvement is really responding to the dynamics, the order books that we have in front of us. So at this point in time we have some of the finance debt we brought down during Q4. As you know they were for maintenance, we are up and running. We have made all the announcement, so some older furnaces are up today. So we only have one furnace in that is a small furnace that is down, that is close to end of life, that we may or may not bring back, but that remains available to the group. So all of our capacity remains available for the group.

Tristan Gresser: Okay. Thank you very much.

Daniel Fairclough : Thanks Tristan. So we’ll move now to the question from Patrick at Bank of America. Go ahead, Patrick.

Patrick Mann : Good day, and thank you for the opportunity. I wanted to ask just how you’re thinking about the other 50% of free cash flow, which for the strategic acquisitions. So I mean, when you look at your current footprint, you know with the big acquisitions that are being replaced with HBI, CSP and the recycling businesses. Is that how we should think about going forward that you’ll look for bolt-on, and I suppose low carbon feedstock or basically how are you thinking about it, going forward?

Aditya Mittal: Yes, thank you, that’s a great question. Yeah, I think you’re right from an industry. I’ll just add a little bit more color to your question. So we continue to be focused on how we can effectively deploy our strategic capital. We are looking at opportunities which help us decarbonize, that they will be further or create advantages for us as we decarbonize. We’re looking for low cost, higher margin assets and clearly, the real fundamental decision making is how much value do we create, right. What are the trends in these projects and then include it, and how do we continue to grow and develop the business keeping all of these factors in mind. So I think in 2022 we did a great job, right. We deployed our strategic capital appropriately, Texas, Brazil, scrap processors, renewable investment in India, XCarb fund deployment in different and new technologies, and we managed to return a lot of cash to shareholders, buying back 11% of the company, and as you saw this morning we also increased our base dividend.

So I think you should expect more of the same, i.e., a balanced approach in terms of growing and developing the business, but also returning cash and value to shareholders.

Patrick Mann : Thank you.

Daniel Fairclough: Thanks Patrick. As we’ll move now to question from Dominic at JP Morgan.

Dominic O’Kane: Hi! Thanks for taking my question. I have two questions. The first one on working capital. Given the initiatives that you have for 2023, could you maybe just talk to us about how you are thinking about the normalized working capital levels for maybe 2023 and maybe even long term. And then second question, again really interested in your comments on you know the destocking cycle. Could you maybe just maybe drill into a little bit on the U.S. How you see the U.S. playing out in current markets. Thank you very much.

A – Aditya Mittal: Yeah, maybe I’ll start with the working capital question Dominic. So as you know we have invested significantly in 2021, 2022. We had of course, a good release already in quarter four, and we can see now we released that our expectation is to continue to release working capital in 2023. We are not quantifying that, but what gives us confidence that we should be able to see that, in fact that the cost of our inventory, the cost of our metal stock is still impacted by the high raw materials that we bought in the first half of 2023, that’s one. Second, the energy costs also that were very high, especially in Europe up to Q3, also is due to some extent sits in our inventory. So as cost is normalized, then naturally we would see our requirements for working capital to come down, so that’s one aspect.

And typically as we, we stopped ourselves in Q4, you see also an impact in payables, and as we start also procurement of raw materials, then you recover that support from suppliers as well. So that was €“ that really gave us confidence of course, and then the dynamics, the working capital dynamics we know will be really much €“ pretty much impacted by what happens in the last three, four, five months of the year. So that’s our expectation, that’s what we can see today. In terms of the destocking, I think the dynamics that we see, they are relatively similar in U.S. We also saw in the second half a significant biz stock, especially in flats, much more than in some of the other segments, loans and tubular. So our expectation is that we should start to see that normalizing as well.

So the dynamics are the same, although the levels, the intensity of the destocking in Europe, they were greater.

Dominic O’Kane: Okay, thank you.

Daniel Fairclough: Thanks Dominic. So now we’ll move to our next question from Rochus at Kepler Cheuvreux.

Rochus Brauneiser : Yes, thanks for taking the question. Yeah, let me go back to your volume guidance. I think the 5% you’re expecting to grow this year is I guess quite a constructive number, particularly as we’re still you know dealing with kind of a recessionary environment. What I’d like to understand is what your kind of real demand assumption is behind. Are we talking about kind of a flex demand you’re seeing for the whole of €˜23, and in times of the dynamics of whether we end up in a software and hardware scenario for the rest of the world, in your guidance have you baked in kind of a similar real demand that was in the second half compared to H1 or is there any nature valuation to that for the second half.

A – Aditya Mittal: So maybe I will just start with the macro and if we need to provide you further details, I’m sure Genuino can supplement. I think we started with the call by saying we have a constructive outlook, so it’s predicated on few elements. The first is that we feel that the destock has peaked and there’s lot of evidence of that just based on how our customers are ordering and what we’ve seen in terms of real demand and the pan demand. The second I would add is that energy costs, even though they are still very elevated had eased relative to the second half, particularly relative to the fourth quarter and clearly that’s positive momentum as we enter 2023 and is also positive in terms of real demand, right, because the energy complex is not just impacting us from impacts.

All European industry and impacts, the European consumer as we’re all well aware. In terms of the things that remain outstanding. I mean, first and foremost is Ukraine, where we don’t have a resolution of peace, but the immediate direct economic impact of energy has eased, and we also have a tightening monetary condition environment, right, and that’s offsetting the inflationary pressures that we have seen in 2022. So those headwinds remain. China, we still have to see how China comes out of the holiday season and what type of demand environment, but we’re also constructive in China, and that is why ensuring all of these factors, that the overall, the destock has peaked, we see that the energy complex has €“ the pricing has eased and that’s a positive headwind, but yes there are typing monetary conditions, but perhaps not to the same degree that you would have forecasted a few months ago.

Relatively good news throughout of China allows us to have a constructive apparent state assumption outlook. And interestingly enough, in almost all markets, you know whatever numbers we have posted in our presentation, matches the real demand environment, real steel consumption environment. So it’s not that we are forecasting an inventory build into 2023. What we’re forecasting is real demand improvement relative to 2022.

Rochus Brauneiser : Okay, understood. Maybe on CSP, can you give us an update of when in Q1 you’re expected to close the transaction and giving us any update nonetheless in terms of what CSP is actually shipping and maybe also any hint on what the EBITDA performance is at the moment?

A – Genuino Christino: The transaction should close now, end of the month, right, and I think we will update you in Q1 in terms of performance. Of course, at this point in time the level of information that we have is limited. We believe we have evidence that the company continues to do quite well. So we are encouraged by that, and I think the whole thing in this year is they are excited to €“ waiting for the transaction to close and I’m sure we will have the opportunity to update you on performance expectations for that plant as we made in quarter one, but the transaction closes end of this month.

Rochus Brauneiser : Okay, that’s clear. Thank you very much.

Operator: Thanks, Rochus. And so we’ll move now to a question from Max at Oddo, go ahead Max.

Max Kogge: Hey! Good afternoon. So I have this first question on the SIS, because in your press release you used some good questions on the evolution of the region this year. But given the extent of company specific issues you faced last year, could we expect a better performance for your own operations. And perhaps can you give a sense of all things we developed doing in South Africa because you’re adding a number of officials to next year, and should we expect a rebound to there, to reference the question.

Genuino Christino: Max, I missed the last part of your question. A rebound where, sorry?

Max Kogge: In South Africa given that you had also another officials there that year?

Genuino Christino: Yeah, yeah, sure. Well, as you know we have guided for plant two consumption to be up by about 2% to 3% and we are guiding for 5%, so that implies that we expect to do €“ to be doing a little bit better than the appearance to consumption overall. And some of the reasons, you mentioned.one of them, South Africa. South Africa had a number of operational issues in 2022, not all of them under control of our unit. As you know, the country is facing significant challenges in terms of energy availability and rate availability. So we hope that the country and us will be the providers and we’re going to be making some progress, and our expectation is to see an improvement over there. So and then in the other regions we do expect to be following the apparent steel consumption guidance that we are providing.

We do expect to do better in some of the regions. In Brazil, a little bit better. We also expect to do a little bit better in Africa. So that’s why we are taking a target to 5% instead of the 2% to 3%.

Max Kogge: Okay, thank you. And the second question is on your Carb initiatives, . So you got a green light in Canada recently, but the projects in Europe are still somewhat standing. So could you give us a sense of the timeline of timing there, when you can get a final go ahead in Europe and potentially launch those projects.

Aditya Mittal: Yeah, sure, thank you. So you’re right. In Canada we have received the government support for our decarbon initiatives at the Dofasco facility. In Europe, we’re still waiting. We have four applications or four major projects that are sitting with the European Union, that’s been a while. But for them to grant us the approval, but from what we understand, the approval should be granted shortly. When I mean shortly, in the next few months.

Max Kogge: Okay, that’s good news. And we will take a decision for the four initiatives combined or will it be an individual decision for each of them.

Aditya Mittal: It’s a very good question. For what we understand, it’s an individual decision making process. Maybe two out of the four will be done first, and then the other two later on.

Max Kogge: Okay, that’s helpful. Thank you.

Daniel Fairclough: Thanks, Max. We will now move to the next question from Phil at KeyBanc. Go ahead Phil.

Philip Gibbs: Hey! Thanks very much. Question on the NAFTA segment. How is the ramp of the Mexican hot strip mill. Maybe you can give us capacity utilization of what’s the progression there and an update on your plans of support, Calvert with a look at EAF.

Genuino Christino: Yeah Phil. So I’ll take this one. So we have €“ we are quite pleased with the evolution of the hot strip mill in New Mexico. So we have end of the year with run rate of about 50% of the capacity. So we had a record in December. So the team is quite excited about the progress over there. So it’s about 50% and that’s our run rate today. We will continue to ramp up the hot strip mill. The focus here has also moved a little bit now, to more towards also product development and motivation with customers so that we can enlarge the customer base. So I think it’s progressing well, and we have actually in our release provided the contribution of the hot strip mill. So we are already at a run rate of about a $100 million of additional EBITDA, which is in line with what we had anticipated before.

After the full ramp up should be generating about $250 million of contribution. So I think we are moving in the right direction there. In Calvert, we had to well also with the EAF. So expecting to €“ our expected completion date is end of the year, and then we will take it from there. And I think it works well. I mean, once we start the Arc Furn in Calvert then we should also be making progress with the ramp up of the hot strip mill in Mexico. So I think it’s a good balance. This last data today being transferred to Mexico, and be rolled and sold domestically in Mexico.

Philip Gibbs: Thank you, and just to follow up if I could. Any update on what’s your automotive customers are telling you? In Africa and Europe and in terms of how they expect the year to play out or anything there in terms of what you’re seeing along the order book, I appreciate it.

Aditya Mittal: Yeah. I think we saw the second half of last year ended relatively well, right. Especially in Europe, we had a very bad first half and things slow improved in the second half. So I think we ended the year with a little bit of an improvement in terms of production, and we had also similar production increases in after. And we believe that the demand for automotive, the backlog, the low level of investment should continue to support our production. So our expectations that we will continue to see progress and increase in production, automotive production 2023. So that should be and I think at this point in time, I think we are looking at something in the range of 5% increase for 2023.

Daniel Fairclough : Thanks Phil. We will move now to Andrew Jones at UBS. Go ahead Andrew.

Andrew Jones: Hi! Thanks for taking the questions. Just a follow-up on the detail plans. Can you just remind us of what you were expecting from those potential subsidiary. I think you took back as you €“ if you turn to the CapEx coming from, potentially coming from government sources, what exactly are you asking for? Can you remind us what the expected sort of CapEx would likely to be on those four DRI pumps and how much do you think should could come from government source?

Aditya Mittal: Sure, thank you. So we have not specifically broken down the CapEx for that project, but I would refer to our climate action report. In the climate action report, we talked about reducing our overall carbon footprint by 25% by 2030 and 35% in our European footprint. We outline the CapEx $10 billion to achieve that, and we suggested that governing grants would be approximately 50%, so we can do the net CapEx to us is about $5 billion. That remains the plan, and as these projects get approved and finalized in terms of engineering design and scope, and they are mature, we will be updating you on all the questions that you have asked.

Andrew Jones: Okay. Thank you.

Daniel Fairclough : Thanks Andy. So we will now move to our final question from Bastian, Deutsche Bank. Go ahead Bastian.

Bastian Synagowitz: Yeah, thanks Daniel and good afternoon all. My question is on the regulatory side and see them specifically, and I think we just had the results from the European parliament today, and could you please give us your view on the outcome on the trial, of the trial of meeting in December. Is this really good enough. What else needs to be addressed to shape the regulatory environment in a way that it makes it suitable for you to get the get the decarbonization done. Thank you.

Aditya Mittal: Sorry, could you just repeat the last bit of your question. What do we need done, it wasn’t clear Andrew €“ Bastian,

Bastian Synagowitz: Basically, it’s where will you have to see them. Maybe have some color on the funding support. We were obviously discussing CapEx earlier, but I guess outside maybe the CBAMand what is decided here so far. What else €“ if you need it to be done to basically give you enough confidence that he can go ahead with the decarbonization and make these projects actually a call for and not just a biggest one.

Aditya Mittal: Yeah, okay, great. That’s very clear, thank you. So look, you highlighted a lot of it already, and I will just, I’ll do a little bit more detail. So the first thing is the previous questioner asked the same. We’re expecting planning and support from the European Union, the United European Union, and the various countries are actually providing that funding support. So if you have a project in Germany, it’s actually the German government, etc. etc. So that’s the first, that’s CapEx support. The second, the CBAM is important to create a level playing field. Because in Europe as you know there is a ETS system, the Emissions Trading System, which imposes costs on people who admit CO2 and steel coming into the country, should have equivalent cost.

The same in terms of exports, we need some export relief. So there is a CBAM legislation, and there’s going to do trial. And I think that’s a great development, because it’s good to see the trial. We will all learn and develop from it, and there’ll be more clarity on the CBAM, and I think it’s clear that the intent is to make it effective. Clearly, the trial and the details will go long way in determining how effective it actually is. The third things is, really the IRA in the United States. So you can see there is a active dialogue in the European Union to ensure that the EU remains globally cost competitive. Whether it is the cost of energy or the cost of hydrogen or the cost of CCS and I say that’s another very important element, because the change since we have announced all of these projects has been the build in the United States, which creates a very favorable climate in North America.

So trying to bring some of those advantages into Europe is also very important. Having said that, I would just add that one of the strengths of ArcelorMittal is the fact that it is global. We have assets in the US, we have assets in Europe, we have assets in uh in Brazil. And these are all centers which have access to and not necessary Europe, but we are assessing the locations which have access to our low cost energy or can benefit from those like the IRA. So the Texas HBI acquisition that we’ve made in Corpus Christi is a great example. Because there are a lot of CCS projects, a lot of hydrogen projects, it is really the basin of energy, and so we have a very good strategic asset there which we can grow and develop to supply low carbon metallics on a global basis.

Your question was on returns, and clearly that is the most important. As we decarbonize our business, we have to generate an adequate return. We have to make sure the business is stronger and not weaker post this investment. And as we implement these investments and getting back to the previous question, providing details on the CapEx where it’s been executed, first. What is the level of government support? We will provide a, we will provide you a clarity on what is the return profile. Just like what we’ve done with our strategic CapEx, where we talked about $4.2 billion of CapEx, $1.3 billion of EBITDA, in my opening remarks. You must have heard the highlight that this is based on long term steel spreads, long term iron ore prices, which are much lower than what we’re seeing in the market today.

So we provide you with that framework, as we embark on these large scale decarb projects in our facility.

Bastian Synagowitz: Thanks. Thanks for detail for that color. Maybe just a very quick follow up on the IRA of your €“ I guess your strategic analog is basically at least on that side unchanged here ahead of the project in France, at least versus the IRA, it is unchanged while offering. Potentially at least the IRA does give you some potential for other projects maybe to also tap those funds. Is there anything which you’re working on and which you have in mind or do you actually see the IRA more as a case where it’s actually going to drive your demand and support it nicely. But you’re not really going to go out there and try to develop the larger scale project to take advantage of that.

Aditya Mittal: Yeah. So, Bastian that’s a good question. So we all see the demand impact. I think that that’s something that has been widely discussed. I mean, there’s always a by American provision and the impact that can that can have and have that in the U.S. steel industry. I would say there is an investment opportunity that is absolutely clear. I think the €“ it depends on it, on those investment opportunities are two-fold. There will be some investment ideas, and that’s where the strategic capital comes into play, which are great on the standalone North American perspective and others, which are global. And I think for that, we have to have clarity on the IRA rules. So the IRA has been, passed as a law, but the actual detail and the rules will be decided the summer of this year.

And I think they, and soon after there would be a similar exercise in Europe. I think post that clarity, you could make the appropriate investment decisions. At this point in time there’s nothing imminent, but clearly something that we are looking at very actively,

Bastian Synagowitz: Okay, perfect. Thank you.

Aditya Mittal: Okay, great. So let’s conclude. Thank you very much, everyone. I think we have covered a lot of ground on the call today. If you need anything more, any more clarifications, please do reach out to Daniel and his team. They are always available. With that, we will conclude the call. Stay safe and keep those around you safe as well. Thank you and all the best.