ArcelorMittal Q3 2008 results

Third quarter results 2008

5th November 2008

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

Agenda

• Introduction and overview
• Health and safety
• Environment and steel market
• Industrial plan
• Q3 results and financial plan
• Divisional highlights
• Guidance

2

Introduction and overview

3

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

Health and Safety

5

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

Environment and steel market

7

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

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

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

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

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

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

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

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

Q3 results and financial plan

17

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

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

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

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

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

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

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

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

Divisional highlights

26

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)

Steel Services and Solutions


+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

• 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
• 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

Long Carbon Steel


+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

• 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.
• Impact of scope changes in Q3 2007 compared to Q3 2008: shipments (+1,048kt) and EBITDA (+USD 161 million)

Stainless Steel


-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


30

Asia, Africa and CIS


+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

• 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.
• Impact of scope changes in Q3 2007 compared to Q3 2008: shipments (-1,145kt) and EBITDA (-USD 86 million)

Flat Carbon Americas


+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

** 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.
• Impact of scope changes in Q3 2007 compared to Q3 2008: shipments (-311kt) and EBITDA (-USD 37 million)

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

ArcelorMittal Q3 2008 results

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (17)

Andere mochten auch

Andere mochten auch (7)

Ähnlich wie ArcelorMittal Q3 2008 results

Ähnlich wie ArcelorMittal Q3 2008 results (20)

Mehr von earningsreport

Mehr von earningsreport (20)

Kürzlich hochgeladen

Kürzlich hochgeladen (20)

ArcelorMittal Q3 2008 results