Overview of results
2015 was a very difficult year for the steel and mining industries. Although demand in our core markets remained strong, prices deteriorated significantly during the year as a result of excess capacity in China. Throughout the year we have rigorously focused on implementing a series of measures aimed at reducing costs and ensuring the business is adapted for these tough market conditions. As a result of these measures we succeeded in ending the year with net debt slightly below the end of 2014 despite lower Ebitda.
Regrettably we saw a disappointing net loss which includes non-cash impairment charges on our mining assets as a result of the very considerable fall in the iron ore price. Our mining business is fully focused on adapting to this low-price environment and has reduced cash costs by 20% compared with an initial target of 10%. A further 10% is targeted for 2016.
||Sales for the year ended December 31.1
||Operating income for the year ended December 31.2
||2015 (in $ millions)
||2014 (in $ millions)
||2015 (in $ millions)
||2014 (in $ millions)
|Others and eliminations
1. Amounts are prior to inter-segment eliminations (except total) and sales include non-steel sales.
2. Other and eliminations to segment operating income reflects certain adjustments made to operating income of the segments to reflect corporate costs, income from non-steel operations (e.g. energy, logistics and shipping services) and the elimination of stock margins between segments.
Looking ahead, although we have started to see a recovery in Chinese steel spreads from 2015 lows, 2016 will be another difficult year for our industries. It is clear that China has a challenge to restructure its steel industry for a lower-growth economy but we are somewhat encouraged by recent comments concerning capacity closures. Until this situation is fully addressed the effective and swift implementation of trade defence instruments will be critical and we expect to see more positive rulings in this regard during the year.
Reducing net debt remains an important priority and given market conditions it is prudent to take proactive steps to accelerate progress. We announced the sale of our minority shareholding in Gestamp for $1 billion and our intention to raise $3 billion through a rights issue, now successfully completed.
Our priority is to ensure we deliver on our financial targets and strategic projects. In February 2016 we announced a new strategic plan for the period to 2020 following a detailed analysis of performance improvement potential across the group. Action 2020 targets an improvement in structural Ebitda of $3 billion and to deliver annualised free cash flow in excess of $2 billion by 2020.
Like all our operations, our NAFTA segment is facing a tough world steel market, with global overcapacity, a strong dollar and a flood of imports weakening prices to unsustainable levels. Meanwhile, a downturn in iron ore prices resulted in a lower contribution from captive iron ore mining assets. Sales were $17.3 billion, down from $21.2 billion in 2014, and Ebitda was $891 million, against $1.2 billion in 2014.
Brazil, which makes up most of this segment, is in the midst of a deep recession, arguably the most significant economic downturn the country has experienced since the 1930s. As a result, conditions in the Brazilian steel industry were very challenging in 2015, with apparent steel consumption falling by over 15%. Our sales for the year were down 15.3%, at $8.5 billion, with Ebitda down 33.3% at $1.2 billion.
2015 was a very challenging year for ACIS. Lower global steel prices and weak demand across the region resulted in lower prices, offsetting the benefits of operational efficiencies. Sales were down 25.9% at $6.1 billion, while Ebitda was down 49% at $317 million.
Despite Europe’s modest economic recovery, and an increase in demand for steel, greater volumes of low-priced, unfair imports, particularly from China, kept prices low. Our sales were down 19.4% at $31.9 billion, although lower prices were marginally offset by an increase of steel shipments of 2.6% at 40.7 million tonnes. Ebitda was up slightly at $2.4 billion, thanks to our strategy of running assets full and focusing on our franchise businesses.
2015 was a very challenging year, with the iron ore price falling nearly 40% and hitting the lowest level since spot pricing was introduced in 2008. Sales were $3.4 billion, down from $5.0 billion the previous year, while Ebitda was down 65.3% at $462 million. Iron ore shipments were down 2% at 62.4 million tonnes, although 40.3 million tonnes were shipped at market price, up 1.4% on the previous year.
Sustainable development performance
The nature of some of the issues we faced in 2015 made it even clearer to us that our 10 sustainable development outcomes, underpinned by transparent good governance, are vital to the company’s long-term success. Check our comprehensive data table outlining how we made progress against our outcomes last year.