EUR 200.00 For Business Accounts Only

ARCELOR MITTAL: MESSAGES FROM THE CONFERENCE CALL ON ASSET SALE IN THE US (ANÁLISIS BANCO SABADELL)

Highlights from the conference call on the assets sold in the US to Cleveland Cliffs:
 The company will focus its NAFTA business on the factories in Canada, Mexico and Calvert, which it believes are among the lowest-cost producers in the region. These factories account for ~50% of tonnage in the former NAFTA business and slightly more than 50% of its Automotive business in the US.
 The sale of these assets also means the group’s cash needs are reduced by US$ -400 M (~11% of the group’s total), of which US$~250 M would come from lower Capex and US$~150 M from pension fund contributions. Thus, assuming the average EBITDA over the past 3 years (US$~550 M), average cash generation from these assets would have reached only US$~150 M/year. Furthermore, around US$ 1.1-1.2 Bn of working capital is deconsolidated.
 With this move MTS has finalised its US$~2 Bn asset plan. Separately, the company maintains its net debt target of US$~7 Bn (vs. US$ 7.85 Bn in 1H’20).
 MTS will not take any positions on Cleveland Cliffs’ Board of Directors. Its stake includes a 6-month lockup, and no antitrust problems are expected to arise.
The comments from the conference call support our positive view of the deal. MTS holds on to the most profitable assets in the NAFTA region and gets rid of the least profitable (and with low cash generation). Moreover, the reduction to debt and pension fund obligations should lead to upgrades to its credit rating (currently non-IG). The impact on the valuation, looking at the comments regarding the amount of cash being burned by the business, could reach +10%.