Covid-19 impact: AMNS India's March operations take a hit due to lockdown

ArcelorMittal expects the remainder of the year to be challenging
ArcelorMittal’s India operations, under the joint venture (JV) with Nippon Steel, have recorded an Ebitda (earnings before interest, taxation, depreciation, and amortisation) of $140 million, despite some impact due to the lockdown.

While announcing its March quarter results, ArcelorMittal said CY20 began on a strong footing, with ArcelorMittal Nippon Steel India (AMNS India) achieving robust production and shipment performance in January and February. However, operations were hit in March by the lockdown.

 “Despite the impact, AMNS India reported crude steel production of 1.7 million tonnes (7 million tonnes annualised run rate) and Ebitda of $140 million ($560 million annualised) for Q1CY20,” the company said.

 This is the first full quarter for AMNS India following the acquisition by ArcelorMittal and Nippon Steel, under the insolvency law. In December, Essar Steel was acquired jointly by ArcelorMittal and Nippon Steel in a Rs 42,000-crore deal and renamed AMNS India. ArcelorMittal holds 60 per cent in the JV.

 ArcelorMittal’s income from associates, JVs, and other investments for the quarter stood at $142 million, compared to $20 million in the December quarter (sequential) and $208 million in the first quarter of last year (YoY). ArcelorMittal said the Q1CY20 income was helped by income from AMNS India.

 The steel maker said on Thursday that economic activity and the steel market conditions had significantly deteriorated since measures were introduced by governments worldwide to contain the pandemic, and the improved operating performance in the first quarter had been considerably overshadowed by it.

ArcelorMittal’s Ebitda increased to $967 million, 4.5 per cent higher than Q4CY19, with that for the ongoing June quarter expected to be within the range of $0.4-0.6 billion. Net loss was at $1.1 billion in the March quarter, compared to $1.9 billion in the previous quarter.
Lakshmi Mittal, chairman and CEO of ArcelorMittal, said: “It seems likely that over the course of this month, countries will start announcing details of their ‘exit’ strategies. While these will likely be easing and not immediate ending of the lockdown, construction and manufacturing are expected to be among the first sectors to be allowed to restart operations.”

The firm said it had moved to match output with the evolving order book; steel shipments for Q2 are expected in the range of 13.5-14.5 million tonnes.
In line with cost-saving measures taken across businesses, the ArcelorMittal board has decided to suspend dividend payments till the operating environment normalised.

AMNS India was also running at low utilisation levels. Cash requirement (i.e. maintenance capex, interest and tax) is below $250 million per annum, said ArcelorMittal. Given the cash needs, the JV was in a good position to translate Ebitda into cashflow, it added.

ArcelorMittal also said the JV had made good strategic progress, beginning with a new 10-year term loan agreement with Japanese banks. The proceeds were used to refinance the amounts borrowed by AMNS in connection with the acquisition of AMNS India.

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