Annual Financial Results for the twelve months ended 31 December 2009 1
Introduction and overview Nonkululeko Nyembezi-Heita, CEO 2
Overview (2009 vs 2008) Headline loss of R440m Headline loss per share of 104c EBITDA margin of 6% down from 34% in 2008 Adverse impact of strong rand Total steel shipments Dispatches down 12% Average realised prices down by 26% Domestic sales constituted 69% of total sales Cost pressures continue Raw material cost per tonne decreased by 31% Cost of steel sales increased by 8% Impacted by lower production volumes Operations Liquid steel production down 8% Capacity utilisation decreased from 76% to 66% 3
Key result drivers Q4 09 vs Q3 09 2009 vs 2008 Flat carbon steel product prices +2% -23% Long carbon steel product prices +2% -31% Liquid steel production +15% -8% Total sales volume -7% -12% Export sales volume -20% 96% Domestic sales volume -1% -30% HRC Rand cash cost per tonne -6% +1% Billet Rand cash cost per tonne +1% -9% Labour productivity +14% -1% ZAR movement (average rate) -4% +2% 4
Environment and steel markets 5
Global environment economic trends World economic growth in 2009 decreased substantially by -1.1% from 3% in 2008, but positive growth of 3.2% is expected in 2010 Emerging markets grew by 1.7% in 2009 (2008: 6%), increasing to an expected 5.1% in 2010 Chinese economy surged by 8.7% in 2009 compared to 9% in 2008, while a growth rate of over 9% is forecasted for 2010 World Bank forecast sub-saharan African growth rate of 3.8% for 2010 from 0.9% in 2009. For South Africa the respective figures are 2% and -2.2% in 2009 Source: IMF; World Bank 6
Global environment steel market trends 2009 world crude steel output declined 8% to 1.2 billion tonnes, reflecting an 8.5% fall in global demand last year Production in the EU fell by 30%, North America 34% and Japan 26% 140000 120000 100000 80000 60000 40000 World Monthly Crude Steel Output 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% Africa s total steel production declined by 11% to 15.2 million tonnes China s production was up 13.5% to 568 million tonnes accounting for 47% of global output 20000 0 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Crude Output (000t) YOY change (%) China Monthly Crude Steel Output -20.0% -30.0% Quarterly rate of change in crude output Q4 09 vs Q3 09 = +2% Q4 09 vs Q4 08 = +22% Q4 global capacity utilisation level: 74% 60000 50000 40000 30000 20000 10000 0 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Crude Output (000t) YOY change (%) Source: WorldSteel; WorldSteel Dynamics 7
Global environment input cost trends Average 2009 international iron ore spot prices decreased by 46% from 2008 benchmark levels International coking coal spot prices declined by 66% in 2009 Our coking coal contract price was 57% lower implemented in Q3 2009 Scrap prices fell on average by 39% from 2008 levels Alloy prices decreased during 2009 with Tin slipping by 27% Crude oil prices were on average 37% lower when compared with 2008 Source: AMG; Metal Bulletin; SBB 8
Global environment benchmark prices 700 Indexed (January 2004 = 100) 600 500 400 300 200 100 0 2004 2005 2006 2007 2008 2009 Source: Tex; AMG; Industry sources Coking coal (Contract) Iron ore (Contract) Scrap (Tex) 9
Global environment export prices 1400 Quarterly average export prices (C&F) US$/t 1200 1000 800 600 400 200 0 1994 1997 2000 2003 2006 2009 Long Carbon Wire Rod Hot Rolled Coil Source: ArcelorMittal 10
Domestic market shipments 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 Long (t) Flat (t) Source : SAISI 11
Domestic environment shipments to industries Sector contribution to RSA economic growth vs steel sector shipments 50% 40% 30% 20% 10% Exposure to consumer market is 26% Auto 7% Packaging 7% Housing 6% Hardware, Equipment and Machinery 5% Furniture & Appliances 1% 0% Manufacturing Construction Wholesale Transport Utilities / Mining Government Agriculture Fin Services GDP Sectors Steel sectors Source : SAISI and SARB Bulletin 12
Steel usage in South Africa s infrastructure programme Tonnes 2007-2015 Eskom power stations (Medupi, Kusile) 1 902 000 2010 Soccer World Cup Stadiums 100 000 Gautrain 15 000 SA National Roads Agency (national roads) 39 000 Transnet (rail transport) 254 000 Dept of Water Affairs (dams) 231 000 13
Domestic market inventory levels 1,500,000 20 1,000,000 16 12 500,000 8 4 0 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 Stocks (t) Week s dispatches 0 Source : SAISI 14
Domestic market imports 1,200,000 24% 20% 800,000 16% 12% 400,000 8% 4% 0 0% 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 Imports (t) % of consumption Source : SAISI 15
Physical results for 2009 16
Safety remains our priority Safety performance has deteriorated 5 fatalities Lost Time Injury Frequency Rate (Employees and Contractors) 8% deterioration in lost time injury frequency rate when compared to 2008 Highlights World class safety performance at Saldanha Works (LTIFR = 0.8) Signing of Joint Health & Safety Agreement with trade unions Progress made in implementing our Journey to Zero initiative LTIFR 5.0 4.0 3.0 2.0 1.0 2002 2003 2004 2005 2006 2007 2008 2009 17
Liquid steel production & capacity Total 9000 8000 Flat carbon steel products 7460 7460 7640 7765 8000 7000 ktonnes 6000 5000 4000 3000 2000 5200 5380 5485 5200 5067 4863 4231 4084 5700 3428 Long carbon steel products 2260 2260 2260 2280 2300 7261 7055 6375 5774 5307 1000 2194 2192 2144 1690 1879 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Total Capacity Liquid Steel Production Spare Capacity 18
Shipment volumes Total 7000 6000 Flat carbon steel products 6230 6210 5819 ktonnes 5000 4000 3000 4283 4280 3920 3412 2858 Long carbon steel products 5089 4473 2000 1000 2402 2969 2887 2835 2078 1947 1930 1899 1677 1615 1431 1535 1540 1083 994 3485 4400 4422 4375 3072 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Domestic Exports 19
Geographic shipments South Africa 69% Rest of Africa 21% Total Africa 90% Americas <1% Asia 10% Europe <1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2005 2006 2007 2008 2009 20
Investment programme Rm 2009 Major projects completed (and ongoing) in 2009 Vanderbijlpark Works 574 New direct reduction kilns 5 & 6 completed Sinter Off-gas treatment plant Coke oven gas and water cleaning project Refurbished Tin line structure Saldanha Works 56 Newcastle Works 108 Zero effluent discharge project Construction waste site cells Vereeniging Works 163 EAF Dust extraction completed Crane replacement and gantry upgrade at Steel making completed Other 13 Total Expenditure in 2009 914 21
Finance Kobus Verster, CFO 22
Headline earnings Rm 2008 2009 Revenue 39 914 25 598 Profit from operations 12 159 229 Gains/(losses) on forex & financial instruments 637-813 Interest income 318 199 Finance costs -238-276 Income from investments 3 3 Tax -3 865-35 Equity earnings* 331 206 Net deficit on disposal or scrapping of assets* 28 21 Impairment* 111 26 Headline earnings/(loss) 9 484-440 - in US$m 1 148-52 *After tax 23
Quarterly headline earnings trend Rm 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0-500 -1,000 3772 2573 2003 1582 1653 1488 1530 1624 1532 1247 1292 988 1055 1136 869 703 469-65 -237-607 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Q1 Q2 Q3 Q4 2005 2006 2007 2008 2009 24
EBITDA from segments Rm 2008 2009 Q4 Q1 Q2 Q3 Q4 Flat carbon steel products 1 139-46 -52-59 538 Long carbon steel products 771 54 57 200 280 Coke & Chemicals 300 28 95 179 254 Corporate & Other -133 83 37 42-143 Total EBITDA 2 077 119 137 362 929 EBITDA Margin % 28 2 2 5 14 25
Operating costs Rm 2008 2009 Raw materials & consumables 16 712 15 299 Employee costs 2 598 2 640 Energy 1 474 2 062 Other operating expenses 5 528 4 050 Depreciation & amortisation 1 322 1 292 Impairment charges 121 26 Total operating costs 27 755 25 369 26
Cash flow Rm 2008 2009 Cash generated from operations 14 130 1 290 Working capital -3 391 2 886 Capex -1 832-914 Net interest and Investment income 276 170 Investments -524 Tax -3 087-934 Dividends -2 398-1 627 Repayment of borrowings and finance lease -121-149 Net cash flow before share repurchase and forex 3 577 198 Repurchase of share -3 918 Effect of foreign exchange rate changes on cash 818-361 Net cash flow 4 395-4 081 Cash 8 429 4 348 27
Working capital movement Rm 2008 2009 Inventories -4 067 +2 911 Finished products -194-32 Work-in-progress -1 688 +1 083 Raw materials -2 016 +1 851 Plant spares & stores -169 +9 Receivables 253-18 Payables 607 112 Utilisation of provisions -184-119 -3 391 2 886 28
Financial ratios 2008 2009 Operating margin 30% 1% EBITDA margin 34% 6% Revenue / invested capital (times) 1.8 1.1 Return on equity (annualised) 39% -2% Net cash/equity 29% 18% 29
Share performance Indexed (Jan2005 =100) 450 400 350 300 250 200 150 100 50 Period Jan 2005 to Dec 2009 Average dividend yield at 6.2% 2.2x the market 2005 2006 2007 2008 2009 ArcelorMittal ALSI Resources 20 30
Dividend Dividend policy: Distributing one third of headline earnings Headline loss for the year no dividend declared 31
Investment programme and other developments Nonkululeko Nyembezi-Heita, CEO 32
Investment programme The economic downturn and new opportunities resulted in a re-evaluation of our growth strategy Delay in roll-out of some projects Reinstatement of power generation projects Maintenance spending will be increased A successful outcome of our bid for Zisco will impact on the growth strategy for long products 33
Investment programme Environmental projects will continue to be a high priority Various atmosphere emission abatement projects at Vanderbijlpark Secondary fume extraction at the Electric Arc Furnace Construction of a new sinter bag house facility at the sinter plant Vereeniging s new dust extraction unit Environmental projects at Newcastle Basic Oxygen Furnace slag disposal facility Slag Bay containment Zero-effluent discharge project 34
Additional focus areas Iron ore supply Electricity Tariffs Supply Competition tribunal R million 3,500 3,000 2,500 2,000 Power costs for ArcelorMittal South Africa Impact of proposed 35% tariff hike 1792 2419 3267 1,500 1,000 880 979 1250 500 0 2007 2008 2009 2010 2011 2012 Actual At 35% increase 35
Corporate responsibility Corporate responsibility School development programme Science centres 36
Outlook 37
2010 growth forecast for key sectors GDP Growth Manufacturing 4.8% Building & Construction 11.7% Transport 3.3% Automotive 1.3% Packaging 13.6% South Africa s GDP 2.5% 38
Outlook for Q1 2010 Business environment Improved domestic and international demand and also prices for steel Higher capacity utilisation Prices for coal, scrap, alloys and iron ore expected to increase Earnings Earnings to improve compared to Q4 09 Impacted by exchange rate movements 39
Thank you ArcelorMittal South Africa Room N3-5 Main Building Delfos Boulevard Vanderbijlpark 1911 South Africa 40
Disclaimer This document may contain forward-looking information and statements about ArcelorMittal South Africa 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 South Africa s management believes that the expectations reflected in such forward-looking statements are reasonable, investors and holders of ArcelorMittal South Africa 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 South Africa, 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. ArcelorMittal South Africa undertakes no obligation to publicly update its forward-looking statements, whether as a result of new information, future events, or otherwise. 41