Delivering growth in the new steel horizon

Transcription

1 Delivering growth in the new steel horizon Michel Wurth Member of Group Management Board 24 September 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 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 or the entities to which it is successor (including Mittal Steel Company N.V. ( Mittal Steel ), including Mittal Steel s Annual Report on Form 20-F 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 A global leader with a unique strategy The new steel horizon Delivering growth plan Conclusion 2

4 A global leader with a unique strategy 3

5 A unique global and regional leadership 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 No 1 in South America No 1 in Africa ArcelorMittal Others Industrial and commercial network focus on market sustainability and growth opportunity Source: IISI and ArcelorMittal estimates 4

6 A unique 3 dimensional strategy Geographical production breakdown in 2007 Shipments breakdown by products in 2007 Upstream and downstream integration in 2007* Geography Product Value Chain Achieving sustainability and capturing growth through geography, product and value chain *Downstream integration or shipments distributed through AM3S divided by total shipments to distribution 5

7 A new cost leader out-performing Metals & Mining peers EBITDA per tonne of crude steel (USD/t)* Historic EPS 2008 consensus revisions (base 100)** Since merger ArcelorMittal has achieved cost leadership due to vertical integration, merger synergies and management gains plan Source: Annual reports, Bloomberg consensus and ArcelorMittal analysis *Average and analyst consensus for Baosteel, China Oriental, Hunan Valin, POSCO, Severstal, ThyssenKrupp, Nucor, Gerdau and ArcelorMittal **Average of BHP Billiton, Rio Tinto, Xstrata, AngloAmerican, POSCO, Nippon Steel, ThyssenKrupp, Baosteel, US Steel and Nucor 6

8 A new management gains program to reinforce cost leadership Management gains breakdown (USD billion)* Main sources of gains Continued improvement in operating practices Productivity gains and headcount reduction through voluntary retirement plans and natural attrition Reduction in energy consumption through internal and external benchmarking and key investments Significant yield improvement resulting from specific investment and best practice Cost reduction due to subcontracting and purchasing improvements Raw material cost reduction through investment in process optimisation USD 4bn of management gains targeted over the next 5 years *Excludes price cost squeeze 7 36

9 The new steel horizon 8

10 China and emerging economies are driving steel market growth World steel apparent demand and production from 1950 to 2007 millions of tonnes World steel real demand increase between 2000 and 2007 million of tonnes Breakdown of world steel market in 2007 Developed economies represent only one third of the world steel market today versus half in 2000 *Developed world includes US, Canada, EU15, Japan and Korea Source: IISI and ArcelorMittal 9

11 Despite slowdown, world steel demand growth is expected to remain strong Steel consumption per capita in 2007 (kg) Steel consumption per capita in 2007e (kg) Steel consumption scenario from 2007 to 2012 Western China (155 kg) Central China (210 kg) Coastal China (520kg) Development and growth potential Population migration Despite global economic slowdown, world steel market is expected to continue to grow by 3% to 5% over the next several years *Developed world includes US, Canada, EU15, Japan and Korea Source IISI, SBB and ArcelorMittal estimates 10

12 World capacity growth to slow down due to increasingly challenging expansions World steel capacity utilisation ( ) Chinese crude steel production yearly growth rate (%) Steel capacity expansion limitations: Natural resource scarcity (coking coal, iron ore, scrap, energy ) Steel equipment and engineering suppliers are increasing lead times Strict government measures for capacity control, credit control, closures and export taxes in China Environmental restrictions (CO 2,,dust ) particularly in Europe and Japan Land availability, challenges related to population resettlement and time-consuming administrative process in India Infrastructure and logistic bottleneck in CIS Financial resources and credit availability Apart from China, no major Greenfield has been built over the last 10 years and no new Greenfields are expected to start-up before 2010 As industry is operating at near full capacity and global supply remains constrained, steel market is expected to remain tight Source IISI and ArcelorMittal 11

13 Price to remain structurally strong due to high raw material and equipment costs 1200 Hot Rolled Coil production cash cost with overhead (USD/t) Investment cost of a 6mt greenfield integrated plant in a low cost emerging country (USD/t) Cumulative capacity, m tonnes Steel price to remain above 1,000 USD/t for coming years Source: World Steel Dynamics, CRU monitor and ArcelorMittal analysis 12

14 Prices to remain stable as producers cut production Hot Rolled Coil spot price in Europe and the US (USD/t) H Profitability of top 40 Chinese producers representing 50% of China production 30% of top Chinese producers have reported less than 30 USD/t of net profit in the favourable market of H Facing temporary market weakness, rising raw material costs and losses, medium and small Chinese producers are accelerating production cuts beyond Olympic shutdown 13

15 Delivering growth plan 14

16 Delivering brownfield projects Key growth projects completed, approved and new Growth plan shipment target (mt) USA volume recovery of 1mt on track Montreal 0.4mt* new H-beam investment 0.6mt Bayou Steel acquisition Liege 1.2mt blast furnace restarted Poland 2 nd phase adding 1.7mt on schedule Delay in Kriviy Rih expansion Temirtau 1.2mt expansion ongoing Mexico 0.6mt long product expansion approved Monlevade 1.2mt expansion approved Juiz de Fora 1mt expansion approved Tubarao 2.5mt expansion completed Cariacica 0.5mt expansion approved Flat products growth projects Long products growth projects Despite delays and challenging equipment lead times, target remains to increase volume by more than 20mt 80% of Brownfield projects focus on growth market *partial as volume ramp-up expected in

17 Delivering greenfield projects Shipments target in million tonnes* Greenfield projects Turkey (Egypt) Nigeria Russia Saudi Arabia India Mozambique Rising investment cost for greenfield projects has resulted in increased project selectivity (Egypt) Rolling mill Integrated plant 7 greenfield projects ideally positioned to capture expected market growth in India, Middle-East, CIS and Africa *Volume related only to integrated Greenfield plants 16

18 Growth plan expected to generate high returns in the new steel horizon Steel industry Hot Rolled Coil production cash cost with overhead in 2008 (USD/t) ArcelorMittal Price level for 15% ROIC Industry Price level for 15% ROIC ArcelorMittal Brownfield projects* ArcelorMittal Greenfield projects* Industry Brownfield projects** Industry Greenfield projects** Cumulative capacity, m tonnes Growth plan based on Brownfield expansions expected to improve group returns Source: World Steel Dynamics, CRU monitor and ArcelorMittal analysis *Based on steel projects only ** Assuming project in an average cost region 17

19 Value chain growth confirmed Products and value chain growth Distribution AM3S 39%* +50% AM3S >50%* Growth plan 2012* Steel shipments 110mt Value added and speciality products 57% +16mt Value added and speciality products Mining Iron ore** 46% % Growth Iron ore** >65% 2012 target Mining and distribution growth to exceed steel internal growth *Downstream integration or shipments distributed through AM3S divided by total shipments to distribution ** Iron ore self-sufficiency including strategic contracts 18

20 Capturing new opportunities in iron ore Iron ore production target to 2012 (mt) Recent iron ore initiatives and growth projects Volcan and Las Truchas expansion projects Senegal Greenfield project Buvac project in Bosnia Mauritania exploratory project Ukraine oxidised and magnetite expansion projects Liberia Greenfield project Atansore and Atasu project in Kazakhstan Acquisition of London Mining and 49% of MPP in Brazil Production target 2012 confirmed at 110mt Further expansion under study to raise self-sufficiency level to 75%-85% by 2014/15 A unique diversified portfolio of reserves efficiently connected to global steel industrial network *Strategic contracts included 19

21 Enhancing self-sufficiency in other strategic raw materials Self-sufficiency < Coking coal self-sufficiency level to increase from 10% to 20%* Recent mining initiatives ex-iron ore Acquisition of coking coal mines of Mid Vol and Concept Group Acquisition of Monessen Coke plant Acquisition of 12.6% of General Moly and off-take agreement for molybdenum under development Acquisition of 16% of CoAL and off-take agreement for coking coal under development Acquisition of OFZ, a ferro-alloys producer in Slovakia 50/50 strategic equity partnership with Kalagadi to develop manganese mines and a ferro-manganese alloy plant MoU with Mozambique government for mining cooperation and acquisition of 35% of Black Gold Mining a coal exploration company Acquisition of 3 coking coal mines located in the Kemerovo region in Russia Allocation of steam coal blocks in Jharkhand and Orissa Acquisition of 19.9% of Macarthur, a PCI coal producer Selective and targeted growth by acquisitions delivering high returns due to steel/mining synergies and careful attention paid to purchase price * Excluding strategic participation in MacArthur and Coal of Africa **Coal denoted only for steelmaking process and excludes steam coal for power generation 20

22 Conclusion 21

23 A unique profile of growth and sustainability ArcelorMittal EBITDA* and change in steel price Pre-merger Post-merger Demonstrating profit growth and stability beyond steel price volatility *Pro-forma in 2004, 2005 and

24 Q&A 23