Investor Roadshow Post 4Q10 Results. February 2011

Transcription

1 Investor Roadshow Post 4Q1 Results February 211

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 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 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 2-F for the year ended December 31, 21 to be filed with the SEC. ArcelorMittal undertakes no obligation to publicly update its forward-looking statements, whether as a result of new information, future events, or otherwise. 1

3 Agenda Key themes Highlights of the 4Q1 results Steel market outlook Financial results and detail Guidance 2

4 1) Apparent demand significantly better Apparent market conditions are now much better than October. The underlying demand outlook has improved marginally but not dramatically over the past 3 months. At some stage during 1H11, it is likely that apparent demand growth will converge with underlying demand growth overall we expect 6-7% growth in global apparent steel consumption in 211. Regional PMI data (>5 is expansionary) Global apparent steel consumption (million tonnes per month) 65 6 US 5 45 Developing ex China China Developed 55 China EU 2 3 Jan-6 May-6 Sep-6 Jan-7 May-7 Sep-7 Jan-8 May-8 Sep-8 Jan-9 May-9 Sep-9 Jan-1 May-1 Sep-1 Jan Stronger indicators and rising raw materials have triggered a recovery in sentiment 3

5 2) Risk to margins if price momentum not maintained The recovery in apparent demand, triggered by rising spot raw materials, has provided a foundation to increase HRC prices, reversing the price-cost squeeze of 4Q1. Risk to margins if price momentum is not maintained as we face continued raw material purchase price pressures in 1Q11 and 2Q11. Raw material prices (Indexed to Jan 28) Regional HRC prices (US$/t) Iron Ore Coking Coal "Scrap" China domestic Shanghai N.America FOB Midwest N.Europe domestic ex-works Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 China and European HRC prices will continue to increase to reflect higher production costs (raw materials effect) 4 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 4 Jan-11

6 3) We remain committed to growth We remain committed to growth. Budgeted capex of $5bn for 211, of which $1.4bn will be on mining (double 21 spend). Our recent acquisition of Baffinland demonstrates our commitment to building a World-class mining business. Mining will be reported as a separate segment from 1Q11. Our balance sheet and liquidity position remains very strong US$3.6bn in cash from operations in 4Q1 Net debt of US$19.7bn; ND/L12MEBITDA = 2.3x Liquidity of $17.6bn We are spending to grow Capex budget for 211 of $5bn (vs. $3.3bn in 21) 211 spend on mining capex doubling to $1.4bn (from $.7bn in 21); 1Mt of iron ore by 215 remains on track Plans for brownfield and greenfield expansions in place to reach 1Mt by 215 Liberia DSO (4Mt capacity) will start-up in 2H11 (1Mt impact in 211) Baffinland is a major positive, a tier-1 cornerstone asset for growth beyond 215 India and Brazil remain focus for steel capacity growth Our new modular strategy based around 3 projects in India is lower risk; first domestic production expected in 213 We are in a natural position to supply the growing Brazilian domestic market given our slab exports Acquisition of Baffinland demonstrates commitment to growth 5

7 4) We created significant shareholder value Value creation: The Aperam demerger has been a success, creating value for ArcelorMittal shareholders. We have also successfully managed the potential dilution from our convertible debt. Aperam demerger has created value for our shareholders demerger has been a success Investment community has appreciated Aperam s Brazil growth story, its charcoal integration story, its European restructuring story and the valuation story Combined ArcelorMittal + ½ Aperam outperformed DJS Europe and DJ Basic resources indexes Dilution management program has reduced by half the potential dilution of our outstanding convertibles In December we sold 38mn shares buy call options to offset the potential dilution from our convertibles due in 214. Its is highly likely that holders of the convertibles will exercise their option to convert which will lead to 88.2mn shares being issued. We now have options to buy shares at the exercise price (effectively hedged). This dilution management has increased the number of shares outstanding by 2.6% but now avoids a 6% increase in 214. This dilution management has also removed the volatility in on our P&L (net financial income (expense) line) from the quarterly mark-tomarket of the call options. We continue to seek and pursue options to create sustainable value for shareholders 6

8 Recap Demand: Apparent market conditions are now much better than October. The underlying demand outlook has improved marginally but not dramatically over the past 3 months. At some stage during 1H11, it is likely that apparent demand growth will converge with underlying demand growth - we expect 6-7% growth in global apparent steel consumption in 211. Prices: The recovery in apparent demand, triggered by rising spot raw materials, has provided a foundation to increase HRC prices, reversing the price-cost squeeze of 4Q1. Risk to margins if price momentum is not maintained as we face continued raw material purchase price pressures in 1Q11 and 2Q11. Growth: We have budgeted capex of $5bn for 211, of which $1.4bn will be on mining (double 21 spend). Our recent acquisition of Baffinland demonstrates our commitment to building a World-class mining business. Mining will be reported as a separate segment from 1Q11. Value creation: The Aperam demerger has been a success, creating value for ArcelorMittal shareholders. We have also successfully managed the potential dilution from our convertible debt. 7

9 Financial and operating highlights Mr. Lakshmi Mittal, Chairman and CEO 8

10 Corporate social responsibility performance Annual Health & Safety frequency rate* for mining & steel Quarterly Health & Safety frequency rate* for mining & steel Governance, people, community and sustainability initiatives: ArcelorMittal announces the launch of its responsible sourcing program ArcelorMittal unveiled the results of its 'S-in motion' automotive research program ArcelorMittal Foundation 1.2 celebrates its 3rd International Volunteer Work Day.4. 4Q 9 1Q 1 2Q 1 3Q 1 4Q 1 ArcelorMittal s Health and Safety performance improved again in 21 * IISI-standard: Fr = Lost Time Injuries per 1.. worked hours; based on own personnel and contractors 9

11 Financial results EBITDA: Full year EBITDA of $8.5 billion (excl. $.4 billion for Aperam), 52% higher than 29 4Q 21 EBITDA of $1.9 billion, including $.1 billion from sale of CO 2 credits Shipments: Full year shipments of 85. Mt, 22% higher than 29 4Q 21 shipments of 21.1 Mt up 3% vs. 3Q 21 Strong cash flow generation: Cash flow from continuing operations of $3.3 billion in 4Q 21 ($3.8 billion for 21) Full year capex of $3.3 billion, 22% higher than 29 Net Debt reduced: $2.3 billion reduction in net debt to $19.7 billion compared to $22.1 billion at 3Q 21 Full year 21 EBITDA 52% higher than 29 Note: Successful spin off of the stainless steel business (Aperam) following shareholders approval on January 25, 211. Accordingly, results of the stainless steel operations in 4Q 21 are shown as discontinued operations. Prior periods results and operational KPIs presented have been recast to reflect the new presentation. 1

12 Operating environment Global Apparent Steel Consumption (ASC) (million tonnes per month) US and European Apparent Steel Consumption (million tonnes per month) 5 45 Developing ex China China Developed Jan-7 Apr-7 Jul-7 Oct-7 Jan-8 Apr-8 Jul-8 Oct-8 Jan-9 Apr-9 Jul-9 Oct-9 Jan-1 Apr-1 Jul-1 Oct-1 Global ASC +1% in 4Q1 vs. 3Q1 (+14.4% in 21 vs. 9) China ASC +1.6% in 4Q1 vs. 3Q1 (+5.9% in 21 vs. 9) EU ASC +3.% in 4Q1 vs. 3Q1 (+22% in 21 vs. 9) US ASC -7% in 4Q1 vs. 3Q1 (+38% in 21 vs. 9) Global ASC rose 14% in 21 but momentum slowed in the second half Jan-7 Apr-7 EU27 USA Jul-7 Oct-7 Jan-8 Apr-8 Jul-8 Oct-8 Jan-9 Apr-9 Jul-9 Oct-9 Jan-1 Apr-1 Jul-1 Oct-1 11

13 Steel production and shipments ArcelorMittal quarterly crude steel production and steel shipments ( t) 35, 3, Steel production (' t) Steel shipment (' t) 25, 2, 15, 1, 5, 1Q 8 2Q 8 3Q 8 4Q 8 1Q 9 2Q 9 3Q 9 4Q 9 1Q 1 2Q 1 3Q 1 4Q 1 While our steel production declined 3% in 4Q1 v 3Q1, our steel shipments increased by 3% 12

14 Mining production Annual iron ore production* (Mt) 5 Annual coal production* (Mt) Quarterly iron ore production* (Mt) Quarterly coal production* (Mt) Q 29 1Q 21 2Q 21 3Q 21 4Q 21. 4Q 29 1Q 21 2Q 21 3Q 21 4Q 21 Own iron ore production of 48.9 Mt in 21, up 29.9% as compared to 29 * Excluding strategic agreement and long-term supply contracts 13

15 Share Price Rebased on ArcelorMittal ( ) Market Capitalization ( bn) Corporate actions: Aperam created Intraday price of AM + Aperam vs. AM Pre spin-off Value creation based on Market and consensus ArcelorMittal (Pre Spin-Off) ArcelorMittal + 1/2 Aperam DJS Europe DJS Bas. Res. +4.% bn 42.6bn bn +4.% 44.4bn 44.5bn bn +4.5% January 27 January 28 January % +.1% Value creation relative to market of +3.9%, corresponding to 1.7 per share, of which.15 from Aperam, and.92 from ArcelorMittal AM Pre Spin- Off AM + Spin-Off Ref. Price AM + APAM (Market) AM + APAM (Consensus) Successful spin-off of Aperam creating >$2bn of value for ArcelorMittal shareholders Source Bloomberg 14

16 Corporate actions: Baffinland acquisition In partnership with Nunavut, ArcelorMittal has acquired a controlling interest in Baffinland. The second-step going-private transaction will result in ArcelorMittal and Nunavut holding respectively interests of 7% and 3% in Baffinland Baffinland owns the Mary River project, a tier-1 iron ore resource in northern Canada. In-situ Fe grades of 64.7%, high-quality product, significant and scalable resource. While the project has development and operational challenges, ArcelorMittal is well placed to overcome them. Exploration is ongoing and feasibility studies will be updated ahead of a project scope decision. The acquisition of Baffinland is in line with ArcelorMittal s strategy of building a world-class mining business. Baffinland is not part of our 1Mt target. ArcelorMittal already has a significant iron ore presence in Canada through ArcelorMittal Mines Canada operating 2 iron ore mining operations, concentrator and pellet plant. Nunavut is located in Northern Canada and covers ~2Mkm2 of land. The territory includes part of the mainland, most of the Arctic Archipelago, and all of the islands in Hudson Bay, James Bay, and Ungava Bay which belonged to the NW Territories. Acquisition of Baffinland demonstrates commitment to building a world-class mining business 15

17 Market outlook 16

18 Contraction Expansion Global economic outlook positive Regional Purchasing Managers Indexes point towards demand growth China EU USA 3 Jan-6 Jul-6 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Real demand continues to grow in all markets. Outlook for the US has improved 17

19 China outlook China Inventories in 25 Major Cities MT (end of Month) China Floor space (Million square metres) Long Flat % of ASC (rhs) 45% 4% 35% Floor Space under construction (12mma) Newly Started Construction (SA) Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 ASC refers to Apparent steel consumption; MMA refers to twelve months moving average 3% 25% 2% 15% 1% 5% % Current fundamentals remain solid We expect ~7% growth in ASC in China in Jan-4 Jul-4 Jan-5 Jul-5 Jan-6 Jul-6 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 18

20 Contraction Expansion US/Europe outlook US Architecture Billing index and Eurozone construction US & EU Stocks at service centres (27=1) 65 6 USA Architecture Billings Index Eurozone Construction PMI Europe (EASSC) USA (MSCI) ` Jan-6 Jul-6 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 45 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Current fundamentals remain solid Strong ABI index figures indicating US construction recovery 19

21 Global apparent steel consumption 14 ASC growth 211: RoW: 6.5-7% +7% NAFTA: +9-1% 6.5-7% - EU27: % China: +7% 6.5-7% China EU27 NAFTA ROW We expect global Apparent Steel Consumption growth of % in 211 2

22 Raw material price pressures acute Spot iron ore, coking coal and scrap price (index IH 28=1) Regional Steel price HRC ($/t) Iron Ore Coking Coal "Scrap" China domestic Shanghai N.America FOB Midwest N.Europe domestic ex-works Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Raw materials are returning to 28 peaks Steel prices have begun to respond 21

23 Financial results Mr. Aditya Mittal, CFO 22

24 P&L highlights 4Q1 EBITDA to Net Loss (USD million) Net income/ (loss) (USD billion) Depreciation & impairment ,853 1, Income from equity +74 Net Interest, FOREX & other -1,2 Income Tax Benefit Discontinued Operations and Noncontrolling interest Earnings/ (loss) per share (USD) -.8 4Q 29 1Q 21 2Q 21 3Q 21 4Q EBITDA Operating income Pre-tax Income/(Loss) from continuing operations Net loss Q 29 1Q 21 2Q 21 3Q 21 4Q 21 Lower EBITDA and impairment charges resulted in a net loss of $.8 billion for 4Q 1 In accordance with IFRS the Company has adjusted the 29 financial information retrospectively for the finalization in 21 of the allocation of purchase price for certain business combinations carried out in 29. The adjustments have been reflected in the Company s consolidated financial statements for the year ended December 31, 29 23

25 Cash flow highlights 4Q 1 Free cash flow (USD million) Capex (USD million) ,139 Net financials, tax expenses and others -1,379 1, Q 29 1Q 21 2Q 21 3Q 21 4Q 21 Change in w orking capital 3,568 Capex Net acquisition spending (USD million) 1, , EBITDA Cash flow from operations Free cash flow Q4 29 Q1 21 Q2 21 Q3 21 Q4 21 $3.6 billion cash provided from operations in 4Q 1 24

26 Balance Sheet highlights OWC and rotation days* (USD billion) Net Debt (USD billion) & Net Debt/Average EBITDA** Ratio (x) x Q 7 2Q 7 3Q 7 Working capital (USDbn) - LHS 4Q 7 1Q 8 2Q 8 3Q 8 4Q 8 1Q 9 2Q 9 3Q 9 4Q 9 1Q 1 2Q 1 3Q 1 4Q 1 Rotation day - RHS 57 days Rotation days decreased to 57 days during 4Q 1 from 75 days in 3Q Q 7 2Q 7 3Q 7 4Q 7 1Q 8 2Q 8 3Q 8 4Q 8 1Q 9 2Q 9 Net Debt (USDbn) - LHS ` 3Q 9 4Q 9 1Q 1 2Q 1 3Q 1 4Q 1 1.4x Net Debt / Average EBITDA - RHS 1.5x 1.x.5x.x * Rotation days are defined as days of accounts receivable plus days of inventory minus days of accounts payable. Days of accounts payable and inventory are a function of cost of goods sold. Days of accounts receivable are a function of sales. ** Based on yearly average EBITDA since January 1,

27 Guidance Production and shipments: Group shipment volumes are expected to increase from 4Q 21, capacity utilization expected to rise to ~76% (vs. 69% in 4Q 21) Selling prices: Average steel selling prices are expected to increase from 4Q 21 as they adjust to rapid raw material increases Margin: EBITDA/tonne expected to increase from 4Q 21 1Q 211 EBITDA expected to be between $ billion Working capital: to increase in 1Q 211 due to increased activity levels Other: cash out to include acquisition of Baffinland Capex: full year capex to be $5.bn, including $1.4bn in mining Net debt to increase in 1Q 211 Note: starting effective 1Q 211 we will begin reporting Mining as a separate segment 1Q11 EBITDA expected to improve with better market conditions despite higher costs 26

28 Questions 27

29 Appendix 28 ArcelorMittal Dofasco, Hamilton Port and Steel works ArcelorMittal Dofasco, Hamilton Port and Steel works

30 Shipmnts (kt) ASP (US$/t) EBITDA (US$mn) EBITDA/t (US$) Shipmnts (kt) ASP (US$/t) EBITDA (US$mn) EBITDA/t (US$) Segmental highlights Shipments ASP EBITDA EBITDA/t 25 2 FCA Q 29 1Q 21 2Q 21 3Q 21 4Q Q 29 1Q 21 2Q 21 3Q 21 4Q 21 Shipments higher 9.1% Average Selling Price (ASP) down 6.9% Costs higher in Latam Ebitda down 29.8% 78 Shipments ASP 95 8 EBITDA EBITDA/t 12 FCE Q 29 1Q 21 2Q 21 3Q 21 4Q Q 29 1Q 21 2Q 21 3Q 21 4Q 21 Shipments marginally higher 1.1% ASP higher 6.1% Note: Percentage comparison provided for 4Q 21 versus 3Q 21 Costs higher EBITDA up 18.3%; 4Q1 incl. $14M CO2 gain 29

31 Shipmnts (kt) ASP (US$/t) EBITDA (US$mn) EBITDA/t (US$) Shipmnts (kt) ASP (US$/t) EBITDA (US$mn) EBITDA/t (US$) Segmental highlights LONG Shipments ASP 4Q 29 1Q 21 2Q 21 3Q 21 4Q EBITDA EBITDA/t 4Q 29 1Q 21 2Q 21 3Q 21 4Q Shipments marginally lower 1.3% ASP stable Costs higher in Latam Ebitda down 45.8% AACIS Shipments ASP 4Q 29 1Q 21 2Q 21 3Q 21 4Q EBITDA EBITDA/t 4Q 29 1Q 21 2Q 21 3Q 21 4Q Shipments higher 4%; improving CIS market ASP down 1.4%; weak S.African domestic market Domestic market in South Africa weak EBITDA down 21.9% vs. 3Q 1 Note: Percentage comparison provided for 4Q 21 versus 3Q 21 3

32 Liquidity and debt maturity profile Debt structure December 31, 21 Debt maturities (US$ billion) Unused credit lines Cash & equivalent Commercial paper Other debt due in Term loan Liquidity Debt due in > 215 Bonds Term Loans Convertibles Other Commercial Paper Approximately $13.1 billion of successful capital markets refinancing in 29 Successful extension of the maturity profile from 2.6 years at end Q3 28 to 5.1 years at the end of 21 Continued emphasis on strong liquidity position and lengthening of debt maturities 31

33 Mining disclosure - Effective from 1Q11 Basic objective of the mining as a separate segmentation: Create world class mining operations for AM Price externally marketable Iron Ore and Coal to steel units at market price Ensure appropriate capital allocation for mining business for long term sustainability and growth Focus on mine safety, mine planning, MRMR, quality, expansion, capex and logistics Ensuring world class project control and management systems Basic Principles that will be applied for mining as a separate segmentation: Iron Ore: Iron ore not considered currently marketable due to quality and/or logistic constraints will continue to be transferred at cost (Andrade, Kazakhstan, Bosnia, Algeria, Ukraine Opencast & Underground, Hibbing and Minorca). Simultaneously work on addressing the issues of logistic, quality and market for these mines. Marketable ores from other mines to be priced with reference to market prices. Coal: Kuzbass and Princeton coal to be priced with reference to the relevant market price. Kazakhstan coal Shippable volume to be priced with reference to market price. Starting effective 1Q 211 we will begin reporting Mining as a separate segment 32

34 Exploit our mining resources Geographical split of estimated iron ore resources* 29 Ukraine 1% Brazil 7% USA 3% Other 5% Canada 42% ArcelorMittal has a world-class iron ore reserve and resource base Our strategy is to commercially develop this to maximise the value for our shareholders Liberia 13% We have spent time and money proving out our resource base Kazakhstan 2% We are now standardising the classification of the mining asset base Estimated iron ore resources of 19 billion tonnes in 29* * Final resource estimates expected 211. The above preliminary estimates are based on surveys conducted to date and include inferred resources which, as of the date hereof, are still considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. The potential quantity and grade is conceptual in nature; there has been insufficient exploration to date to define a mineral resource; and it is uncertain if further exploration will result in the above targets being delineated as a mineral resource. There is no certainty that the above preliminary assessments will be realized. ** Excluding strategic agreement and long term contracts 33 33

35 Expanding iron ore production to 1MT 215 iron ore growth* target (mt) Iron ore development target to 215* (mt) Target 1mt by Own production Strategic contracts 15 21F Efficiency Brow nfield Improvements** expansion Greenfield Cleveland Cliff expansion contract 215 plan Strategic Contracts Base Production Planned Brow nfield Expansion Planned Greenfield Expansion Potential Brow nfield Projects Potential Greenfield Projects We have plans for growth beyond the 1Mt target in 215 * 215 strategic contracts include Kumba supply agreement (currently under arbitration) and the Cliffs-ISG contract which expires 31 Dec 216; it does not include the Cliffs- Ispat Inland contract which expires 31 Jan 215. ** Includes extended life of mine projects and returning to full capacity 34 34

36 Execute organic growth options Market position and market share estimates by region No 1 in North America No 1 in Western Europe No 1 in Eastern Europe and CIS Emerging markets continue to offer the best organic growth potential for ArcelorMittal Superior demand growth potential We have the platform and experience: No 1 in South America No 1 in Africa Already the steel market leader in Latin America, CIS and Africa ArcelorMittal focus areas for growth are Brazil and India ArcelorMittal Others We also have JV projects in the Middle East and China Industrial and commercial network focus on market sustainability and growth opportunity Source: WSA and ArcelorMittal estimates 35 35

37 Brazil growth plans in place ArcelorMittal Brazil industrial network Brazilian long products capacity expansions: 21: Monlevade project from 12 ktpy to 24 ktpy (US$1.2 billion capex) 211*: AM Cariacica from 6 to 8 ktpy (under evaluation) 213*: AM Juiz de Fora from 1 ktpy to 22 ktpy (under evaluation) Brazilian flat products business has excess primary capacity so the rolling mill at Tubarao will be expanded, or a new rolling mill built We expect to develop at least one vertically integrated greenfield project by 22, utilising our iron ore resources Ecuador Venezuela Colombia Peru Chile Bolivia 23 km Argentina Paraguay Brazil Uruguay Monlevade Juiz de Fora Cariacica Tubarao Vega Du sol We are growing our Brazilian long product capacity and plan to increase in flats * Planned project implementation dates 36 36

38 India our new strategy We now plan smaller steps: Mtpa modules In areas with easier access to land (Karnataka) and proximity to strong consumption centers reduced implementation risk Pakistan China Expertise of local partner is invaluable. Uttam Galva stake gives us: Access to its large downstream network (we are already largest importer of steel into India) Partner in developing service centres for auto/appliances using AM feedstock JV partner for potential greenfield in Western India Jharkhand 1 Karnataka greenfield project: Land acquisition expected to be completed by end of this year We are also expecting to get some mining leases in Karnataka as well Jharkhand greenfield project: land acquisition is progressing well Western India JV potential Orissa Karnataka Major steel markets Smaller modular sites planned between million tonnes per annum 37 37