ArcelorMittal Q3 2008 results
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  • 1. Third quarter results 2008 5th November 2008
  • 2. Disclaimer •Forward-Looking Statements This document may contain forward-looking information and statements about ArcelorMittal and its subsidiaries. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. Forward-looking statements may be identified by the words “believe,” “expect,” “anticipate,” “target” or similar expressions. Although ArcelorMittal’s management believes that the expectations reflected in such forward-looking statements are reasonable, investors and holders forward looking of ArcelorMittal’s securities are cautioned that forward-looking information and statements are subject to numerous risks and uncertainties, many of which are difficult to predict and generally beyond the control of ArcelorMittal, that could cause actual results and developments to differ materially and adversely from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed or identified in statements the filings with the Luxembourg Stock Market Authority for the Financial Markets (Commission de Surveillance du Secteur Financier) and the United States Securities and Exchange Commission (the “SEC”) made or to be made by ArcelorMittal, including ArcelorMittal’s Annual Report on Form 20-F for the year ended December 31, 2007 filed with the SEC. ArcelorMittal undertakes no y obligation to publicly update its forward-looking statements, whether as a result of new information, future events, or otherwise. 1
  • 3. Agenda • Introduction and overview • Health and safety • Environment and steel market • Industrial plan • Q3 results and financial plan • Divisional highlights • Guidance 2
  • 4. Introduction and overview 3
  • 5. Introduction and overview • Health & Safety – Frequency rate* down to 2.1 • Strong third quarter earnings supported by unique 3-dimensional strategy – EBITDA increased 6.6% to USD 8.6bn in Q3 2008 as compared to Q2 2008 • Solid financial structure – Net Debt** of USD 32.5bn resulting in a Net Debt/EBITDA ratio of 1.2x *** – Liquidity of USD 12bn • Response to current economic environment – Adaptation of existing growth plan to reflect market conditions – Increasing management gains t I i t i target from USD 4bn to USD 5bn through additional SG&A savings tf 4b t 5b th h dditi l i – Increasing voluntary production cuts to accelerate inventory reduction – Targeting USD 10bn Net Debt reduction by end of 2009 to increase financial flexibility • Guidance EBITDA in Q4 08 reflecting increased voluntary production cuts – EBITDA is expected to be in the range of USD 2 5bn – USD 3bn 2.5bn • Base dividend maintained in 2009 – Base dividend maintained at 1.50 USD/share * Lost time injuries per 1,000,000 worked hours ** Net Debt is equal to long-term debt, net of current portion plus our payable to banks and current portion of long-term debt, less cash and cash equivalents, restricted cash 4 and short-term investments *** Based on last twelve months EBITDA
  • 6. Health and Safety 5
  • 7. Health and Safety Steel frequency rate* 4.1 3.9 3.8 3.7 3.5 3.2 3.0 2.7 2.4 2.1 2.3 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q108 Q208 Q308 Heath and safety performance progressively improving IISI-standard: Fr = Lost Time Injuries per 1.000.000 worked hours 6
  • 8. Environment and steel market 7
  • 9. Historic production cuts in China as industry faces heavy losses Crude steel production in China (y/y change %)* Chinese and Asian spot price for HRC** 35 1150 30 25 950 20 750 15 10 550 5 350 0 150 -5 07 08 02 03 04 05 06 -10 n n n n n n n Ja Ja Ja Ja Ja Ja Ja -15 HRC / China domestic FOB Shanghai (incl. 17% vat) $/t 02 03 04 05 06 07 08 HRC / East Asia import CFR $/t J- J- J- J- J- J- J- Strong destocking to prompt price improvement before end of 2008 * Source: IISI 8 ** Source: SBB
  • 10. Rapid inventory reduction following production cuts in the US HRC – N th America domestic FOB US Midwest mill North A id ti Mid t ill Crude t l C d steel production in the US (y/y change %)* d ti i th (/ h $/short ton** 30 1200 25 1100 20 1000 000 15 900 10 800 5 700 0 600 -5 5 500 -10 400 -15 300 -20 200 02 03 04 05 06 07 08 02 03 04 05 06 07 08 J- J- J- J- J- J- J- J- J- J- J- J- J- J- Destocking phase expected to be completed and prices to stabilise by end of 2008 * Source: IISI 9 ** Source: SBB
  • 11. Market expected to progressively stabilise in Europe Crude steel production in EU 27 (y/y change %) EU-27 %)* HRC –South Europe domestic Ex-Works Euro/t** S th E d ti E W k E /t** 20 800 15 700 10 600 5 500 0 400 -5 300 -10 -15 200 02 03 04 05 06 07 08 02 06 03 04 05 07 08 J- J- J- J- J- J- J- J- J- J- J- J- J- J- Production cuts and destocking expected to continue into 2009 * Source: IISI 10 ** Source: SBB
  • 12. Stainless steel market deterioration to continue CR304 – European base price and alloy surcharge* CR304 – Asian and European total price* 7,000 7 000 6,900 6,000 5,900 5,000 4,900 3,900 4,000 2,900 Alloy surcharge 3,000 1,900 2,000 900 1,000 02 03 04 05 06 07 08 04 05 06 07 08 n n n n n n n Ja Ja Ja Ja Ja Ja Ja n n n n n Ja Ja Ja Ja Ja CR 304 - North Europe domestic base price delivered (USD/t) CR 304 - East Asia import CFR (USD/t) CR 304 - North Europe domestic total price delivered (USD/t) CR 304 - North Europe domestic total price delivered (USD/t) No market improvement expected before 2009 11 * Source: SBB
  • 13. Industrial plan 12
  • 14. Increasing production cuts to accelerate inventory reduction AM Planned production cuts in Q4 2008 AM Quarterly crude steel production (million tonnes) 32 >35% Flat Carbon America 30 Long Carbon >30% Flat Carbon Europe 28 26 Flat Carbon Europe -9mt ~30% Long Carbon 24 est. 22 >35% Asia, Africa & CIS Asia, Africa, CIS 20 ~30% 18 Stainless steel Stainless steel 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 ArcelorMittal capacity utilisation to be voluntarily reduced below 65% 13
  • 15. Accelerating and increasing management gains Management gains breakdown (USD billion) 6.0 60 5.0 1.0 4.0 0.5 05 3.0 1.2 5.0 4.0 2.0 0.9 3.5 2.3 0.8 1.0 1.5 0.6 0.6 0.0 Manpow er Energy Yield and quality Input cost effect Other Initial Additionnal New productivity d ii consumption i improvement i management SG&A savings i management gains plan gains plan Increasing management gains target from USD 4bn to USD 5bn through additional g g g g g SG&A savings over the next 5 years 14
  • 16. Adjusting growth plan to market conditions Products and value chain growth AM3S 50% Growth plan Distribution AM3S 39% 2012* +3% per Steel Value-added Value-added 57% year in and speciality and speciality shipments products products 110mt line with market Iron ore Mining 46% Iron ore 65% 2007 Growth Medium/long term Growth plan adjusted 15
  • 17. Investment completed in 2008 Main projects to be completed in 2008 Status - Belgium-Liege (FCE): Restart of blast furnace no.6 of 1.2mt Completed in Q1 √ leading to a 2.7mt capacity. - Argentina-Acindar (LC): Steel capacity increase by 300,000t. √ Completed in Q3 - Luxembourg-Rodange Luxembourg Rodange (LC): Revamping of mill adding √ Completed in Q2 C l t di Growth 150,000t of sheet piles. plan - Luxembourg-Differdange (LC): Revamping of electrical arc √ Completed in Q3 furnace adding 160,000t. - Bosnia-Zenica (LC): Restart of 1mt integrated route. √ Completed in Q2 - South Africa Vanderbijlpark (AACIS): Two additional direct Africa-Vanderbijlpark Completion expected in Q4 reduction kilns and de-bottlenecking adding 350,000t. - Mexico-Mining: Iron ore project of 2mt Completion expected in Q4 Value - Poland-Huta Warszawa (LC): New rolling mill of 650,000t √ Completed in Q2 chain - Italy-Piombino (FCE): New galvanising line of 310,000t y ( ) g g , Completion expected in Q4 and - Kazakhstan-Temirtau (AACIS): New bar mill of 400,000t √ Completed in Q2 product - Poland-Krakow(AM3S): New steel service centre of 450,000t √ Completed in Q1 growth √ - France-Dunkerque (FCE): Continuous caster revamping. Completed in Q1 MGT √ - France-Fos France Fos (FCE): Continuous caster revamping revamping. Completed in Q1 gains and i d √ - Poland-ZKZ (LC): New Coke battery of 734,000t. Completed in Q1 other - Mexico-Lazaro (FCA): CO2 absorption system 2nd phase. Completion delay to 2009 USD 1.8bn of CAPEX realised in Q3 and USD 5.5bn of CAPEX expected for 2008 16
  • 18. Q3 results and financial plan 17
  • 19. P&L highlights EBITDA to Net Income (USD million) EBITDA (USD billion) +7%*** Depreciation 1,414 & impairment 8.6 8.0 FOREX & 5.0 4.9 4.8 1,699 other** 386 394 Non Tax 529 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 Income recurring 695 from Net interest item* 8,580 equity Earnings per share (USD) 414 Minority 5,467 - 4,930 34%*** 3,821 4.20 2.79 2.10 1.72 1.69 EBITDA Operating Pre-tax Net 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 incom e incom e EBITDA increased 7% in Q3 2008 versus Q2 2008 * USD 1,699m due to one-time impact of USA Labour agreement 18 ** Includes revaluation of derivative instruments *** Compared to Q2 2008
  • 20. Cash-flow highlights Free Cash-Flow (USD million) Return to shareholders (USD billion) Buy-backs 631 Dividends Net 2.1 1.8 financials, 1.3 tax 0.7 0.5 expenses 0.5 0.5 0.5 0.5 0.5 and others 5,388 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 8,580 Net acquisition spending (USD billion) Change in CAPEX 1,758 w orking 2,561 4.2 capital* 2.5 803 1.7 CAPEX 1.4 14 0.2 EBITDA Cash-Flow Free Cash- 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 from Flow operations Free cash-flow negatively affected by USD 5.4bn increase in working capital primarily due to price and cost increase * Changes in working capital is defined as trade accounts receivable plus inventories less trade accounts payable plus prepaid expenses and less accrued expenses. 19
  • 21. Balance sheet highlights Net Debt & Equity (USD billion) Net Debt (USD billion) and Net debt/EBITDA ratio (x) 4.4 Minority +1.8 35 2.0 30 25 1.5 Shareholders' 1.2x 20 61.8 Equity 15 1.0 32.5 10 5 0 0.5 Equity Net Debt 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2006 2006 2007 2007 2007 2007 2008 2008 2008 Gearing of 49% G i f Net Debt (USDbn) - LHS Net Debt / EBITDA* (x) - RHS Net Debt / EBITDA ratio reduced to 1 2x* 1.2x* * Based on latest twelve months (LTM) EBITDA 20
  • 22. Liquidity highlights Credit line utilization at 30/09/08 Liquidity & short term debt (USD billion)* 16 12.0 14 12 10 Unsused 8 6.0 14.0 credit line 6 8.0 4 2 4.2 0 Credit facilities Used Cash & ST & Others* 6.0 2.5 Equivalent LT repayment Less than USD 600m of credit line expiring in 1.7 next 12 months out of a total of USD 14bn Liquidity at 30/09/08 Debt due in Q4 Liquidity in excess of debt coming due in next 12 months … *Excluding USD3.7bn of commercial paper 21
  • 23. Gross debt maturity Repayment schedule at 30/09/08 (USD billion) 10 7.8 7.9 8 6 4.7 4.1 4.4 4 1.8 2 0 2009 2010 2011 2012 2013 Therafter Bond maturity profile LT Debt maturity (Loans) LT Debt maturity (Credit facilities) LT Debt maturity (other) Commitment to strong investment grade ratings Covenants for all bank facilities • Standard & Poor’s – BBB+ (stable outlook) Net Debt/EBITDA* not greater than 3.5x • Moody’s – Baa2 (stable outlook) No material adverse change clauses • Fitch – BBB+ (stable outlook) Upgraded by S&P, Moody’s and Fitch in the last 12 months S&P Moody s ….… *Based on last 12 months 22
  • 24. A cost leader generating free cash-flow HRC production cost with overhead p EBITDA and free cash-flow (USD billion) ( ) 1200 Cash cost USD/tonne EBITDA 1000 Free cash-flow * 2008 800 600 4.1 3.0 30 ArcelorMittal weighted 2.9 400 2.6 2.4 position 580 USD/t** 1.9 1.7 200 1.0 0.8 0.7 0.4 Cumulative capacity, m tonnes capacity 0 0 50 100 150 200 250 300 350 400 450 500 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 A unique free cash-flow track record cash flow Source: World Steel Dynamics, CRU monitor, ArcelorMittal analysis 23 *Cash-flow from operation minus CAPEX ** 9 months
  • 25. Strong potential of working capital release Net Debt increase (USD billion) Net Debt and working capital (USD billion) 35 35 30 30 8.5 25 25 0.8 20 20 15 15 24.0 22.8 10 21.4 10 5 5 0 0 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 30/09/2006 30/09/2007 30/09/2008 2006 2006 2007 2007 2007 2007 2008 2008 2008 Net Debt increase related to w orking capital increase Net Debt excluding w orking capital increase Net Debt (USDbn) Working capital (USDbn) The USD5.4bn increase of working capital during Q3… …expected to reverse in Q4 2008 and Q1 2009 Current steel market deterioration expected to significantly reduce p g y working capital requirement 24
  • 26. Focusing on net debt reduction CAPEX plan (USD billion) p ( ) M&A • Less than USD 0.6bn outstanding commitments Grow th CAPEX adjustm ent Grow th CAPEX realised Base Dividend 2009 Maintenance CAPEX • Base dividend maintained at 1.50 USD/share Buy-back program 2.5 2.9 1.5 • Exceptional buy-back program basically 2.4 2.0 completed ltd • Annual buy-back program to be 3.0 3.0 2.5 2.2 2.1 implemented once debt reduction target achieved 2005 2006 2007 2008E 2009E Targeting USD 10bn of Net Debt reduction by end of 2009 to increase financial flexibility 25
  • 27. Divisional highlights 26
  • 28. Flat Carbon Europe Steel shipments (Mt) Average steel selling price (USD/t) EBITDA (USD million) +4.1%* -15.1%* -16 9%* 16.9% 1,125 1,081 2,146 9.88 1,821 861 8.21 7.80 1,368 1 368 Q3 2007 Q2 2008 Q3 2008 Q3 2007 Q2 2008 Q3 2008 Q3 2007 Q2 2008 Q3 2008 222 USD/t of EBITDA in Q3 2008 * Compared to Q2 2008 • As from January 1, 2008, the operations of Annaba flat and Skopje previously reported in the AACIS segment have been transferred to the Flat Carbon Europe division. In addition, the entire operations of Galati are reported within the Flat Carbon Europe division 27 • Historical Q3 2007 figures have not been recast to reflect the new scope changes • Impact of scope changes in Q3 2007 compared to Q3 2008: shipments (+295kt) and EBITDA (-USD 13 million)
  • 29. Steel Services and Solutions Steel shipments (Mt) Average steel selling price (USD/t) EBITDA (USD million) +14.0%* +14.4%* -24.9%* 5.69 390 1,361 342 1,190 4.27 999 3.52 153 Q3 2007 Q2 2008 Q3 2008 Q3 2007 Q2 2008 Q3 2008 Q3 2007 Q2 2008 Q3 2008 91 USD/t of EBITDA in Q3 2008 * Compared to Q2 2008 • As from January 1, 2008, the operations of ArcelorMittal wire drawing activities previously reported within the Long Carbon Americas and Europe segment have been transferred to the AM3S division. 28 • Historical Q3 2007 figures have not been recast to reflect the new scope changes • Impact of scope changes in Q3 2007 compared to Q3 2008: shipments (+113kt) and EBITDA (-USD 25 million) • Total shipments for the group are calculated as the sum of the shipments of steel producing segments. AM3S shipments are not consolidated
  • 30. Long Carbon Steel Steel shipments (Mt) Average steel selling price (USD/t) EBITDA (USD million) +5.7%* +16.2%* -17.4%* 2,258 8.10 1,258 2,137 1,083 6.69 5.66 801 1,080 Q3 2007 Q2 2008 Q3 2008 Q3 2007 Q2 2008 Q3 2008 Q3 2007 Q2 2008 Q3 2008 338 USD/t of EBITDA in Q3 2008 * Compared to Q2 2008 • As from January 1, 2008, the Long Carbon Americas and Europe segment include the operations of Annaba long, Sonasid, Zenica, global pipes and tubes business previously reported in the AACIS segment, and Mittal Canada flat previously reported in the Flat Carbon Americas segment. The wire drawing businesses has been 29 transferred to the AM3S segment. • Historical Q3 2007 figures have not been recast to reflect the new scope changes • Impact of scope changes in Q3 2007 compared to Q3 2008: shipments (+1,048kt) and EBITDA (+USD 161 million)
  • 31. Stainless Steel Steel shipments (Mt) Average steel selling price (USD/t) EBITDA (USD million) -7.9%* -15.7%* -36.2%* 390 4,299 0.58 4,182 3,960 0.49 0.43 249 225 Q3 2007 Q2 2008 Q3 2008 Q3 2007 Q2 2008 Q3 2008 Q3 2007 Q2 2008 Q3 2008 511 USD/t of EBITDA in Q3 2008 * Compared to Q2 2008 30
  • 32. Asia, Africa and CIS Steel shipments (Mt) Average steel selling price (USD/t) EBITDA (USD million) +18.1%* +25.1%* -14.0%* 5.26 1,635 1,070 1,385 855 3.88 3.34 641 935 Q3 2007 Q2 2008 Q3 2008 Q3 2007 Q2 2008 Q3 2008 Q3 2007 Q2 2008 Q3 2008 490 USD/t of EBITDA in Q3 2008 * Compared to Q2 2008 • As from January 1, 2008, the pipes and tubes business has been transferred to the Long Carbon Americas and Europe division. In addition, the operations of Annaba long, Sonasid and Zenica have been transferred to Long Carbon Americas and Europe segment and the operations of Annaba flat and Skopje to the Flat Carbon Europe 31 segment. • Historical Q3 2007 figures have not been recast to reflect the new scope changes • Impact of scope changes in Q3 2007 compared to Q3 2008: shipments (-1,145kt) and EBITDA (-USD 86 million)
  • 33. Flat Carbon Americas Steel shipments (Mt) Average steel selling price (USD/t) EBITDA (USD million) +25.2%* -7.0%** +44.8%* 7.40 1,103 6.89 6.88 2,435 881 707 1,682 1 682 1,104 Q3 2007 Q2 2008 Q3 2008 Q3 2007 Q2 2008 Q3 2008 Q3 2007 Q2 2008 Q3 2008 354 USD/t of EBITDA in Q3 2008 * Compared to Q2 2008 ** Compared to Q2 2008. Excludies Sparrows Point, which was sold Q2 2008, shipments decreased from 7.138mt in Q2 2008 to 6.878mt in Q3 2008 (down 3.6%) 32 • As from January 1, 2008, Mittal Canada and pipes and tubes businesses from Dofasco have been transferred to the Long Carbon Americas and Europe division. • Historical Q3 2007 figures have not been recast to reflect the new scope changes • Impact of scope changes in Q3 2007 compared to Q3 2008: shipments (-311kt) and EBITDA (-USD 37 million)
  • 34. Guidance 33
  • 35. Guidance for Q4 and FY 2008 ArcelorMittal EBITDA* USD24.2-24.7bn USD19.4bn USD16bn USD14.9bn USD15.3bn 2004 2005 2006 2007 2008 Guidance Due to increased voluntary production cuts, EBITDA expected to be between USD 2 5bn and USD 3bn in Q4 2008 2.5bn *Proforma 2004, 2005 and 2006 34
  • 36. Q&A 35