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 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 20-F for the year ended December 31, 2007 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
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 target t from USD 4bn to USD 5bn through h additional SG&A savings 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 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 and short-term investments *** Based on last twelve months EBITDA 4
Health and Safety 5
Health and Safety Steel frequency rate* 4.1 3.9 3.8 3.7 3.5 3.0 3.2 2.7 2.4 2.3 2.1 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 %)* 35 30 25 20 15 10 Chinese and Asian spot price for HRC** 1150 950 750 550 5 0 350-5 -10-15 J-02 J-03 J-04 J-05 J-06 J-07 J-08 150 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 HRC / China domestic FOB Shanghai (incl. 17% vat) $/t HRC / East Asia import CFR $/t Strong destocking to prompt price improvement before end of 2008 * Source: IISI ** Source: SBB 8
Rapid inventory reduction following production cuts in the US Crude steel production in the US (y/y change %)* HRC North America domestic FOB US Midwest mill $/short ton** 30 25 20 15 10 5 0-5 -10-15 -20 J-02 J-03 J-04 J-05 J-06 J-07 J-08 1200 1100 1000 900 800 700 600 500 400 300 200 J-02 J-03 J-04 J-05 J-06 J-07 J-08 Destocking phase expected to be completed and prices to stabilise by end of 2008 * Source: IISI ** Source: SBB 9
Market expected to progressively stabilise in Europe Crude steel production in EU-27 (y/y change %)* HRC South Europe domestic Ex-Works Euro/t** 20 800 15 700 10 600 5 0 500-5 400-10 300-15 J-02 J-03 J-04 J-05 J-06 J-07 J-08 200 J-02 J-03 J-04 J-05 J-06 J-07 J-08 Production cuts and destocking expected to continue into 2009 * Source: IISI ** Source: SBB 10
Stainless steel market deterioration to continue CR304 European base price and alloy surcharge* 6,900 5,900 CR304 Asian and European total price* 7000 7,000 6,000 4,900 5,000 3,900 4,000 2,900 Alloy surcharge 3,000 1,900 2,000 900 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 CR 304 - North Europe domestic base price delivered (USD/t) CR 304 - North Europe domestic total price delivered (USD/t) 1,000 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 CR 304 - East Asia import CFR (USD/t) CR 304 - North Europe domestic total price delivered (USD/t) No market improvement expected before 2009 * Source: SBB 11
Industrial plan 12
Increasing production cuts to accelerate inventory reduction AM Planned production cuts in Q4 2008 Flat Carbon America >35% AM Quarterly crude steel production (million tonnes) 32 Long Carbon Flat Carbon Europe >30% 28 30 Flat Carbon Europe Long Carbon ~30% 26 24-9mt est. Asia, Africa, CIS & CIS >35% 22 20 ~30% Stainless 18 steel ~30% 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 ArcelorMittal capacity utilisation to be voluntarily reduced below 65% 13
Accelerating and increasing management gains Management gains breakdown (USD billion) 60 6.0 5.0 1.0 4.0 05 0.5 3.0 1.2 5.0 2.0 0.9 3.5 4.0 1.0 0.0 0.8 2.3 1.5 0.6 0.6 Manpow er Energy Yield and quality Input cost effect Other Initial Additionnal productivity i consumption improvement management SG&A savings gains plan New management gains plan Increasing management gains target from USD 4bn to USD 5bn through additional SG&A savings over the next 5 years 14
Adjusting growth plan to market conditions Products and value chain growth Steel shipments 110mt AM3S 50% Distribution AM3S Growth plan 39% 2012* Value-added +3% per Value-added and speciality 57% year in and speciality products products line with market Mining Iron ore 46% 2007 Growth Iron ore 65% Medium/long term Growth plan adjusted 15
Investment completed in 2008 Growth plan Value chain and product growth MGT gains and other Main projects to be completed in 2008 - Belgium-Liege (FCE): Restart of blast furnace no.6 of 1.2mt leading to a 2.7mt capacity. - Argentina-Acindar (LC): Steel capacity increase by 300,000t. - Luxembourg-Rodange (LC): Revamping of mill adding 150,000t of sheet piles. - Luxembourg-Differdange (LC): Revamping of electrical arc furnace adding 160,000t. - Bosnia-Zenica (LC): Restart of 1mt integrated route. - South Africa-Vanderbijlpark (AACIS): Two additional direct reduction kilns and de-bottlenecking adding 350,000t. - Mexico-Mining: Iron ore project of 2mt - Poland-Huta Warszawa (LC): New rolling mill of 650,000t - Italy-Piombino (FCE): New galvanising g line of 310,000t - Kazakhstan-Temirtau (AACIS): New bar mill of 400,000t - Poland-Krakow(AM3S): New steel service centre of 450,000t - France-Dunkerque (FCE): Continuous caster revamping. - France-Fos Fos (FCE): Continuous caster revamping. - Poland-ZKZ (LC): New Coke battery of 734,000t. - Mexico-Lazaro (FCA): CO2 absorption system 2 nd phase. Status Completed in Q1 Completed in Q3 Completed in Q2 Completed in Q3 Completed in Q2 Completion expected in Q4 Completion expected in Q4 Completed in Q2 Completion expected in Q4 Completed in Q2 Completed in Q1 Completed in Q1 Completed in Q1 Completed in Q1 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%*** 1,414 Depreciation & impairment 8.0 8.6 1,699 FOREX & other** 4.9 4.8 5.0 386 394 8,580 Non recurring item* Income from equity 529 Net interest Tax 695 414 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 Earnings per share (USD) 5,467 4,930 Minority 3,821 4.20-34%*** 2.10 1.72 1.69 2.79 EBITDA Ope rating income Pre-tax Net income 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 EBITDA increased 7% in Q3 2008 versus Q2 2008 * USD 1,699m due to one-time impact of USA Labour agreement ** Includes revaluation of derivative instruments *** Compared to Q2 2008 18
Cash-flow highlights Free Cash-Flow (USD million) Return to shareholders (USD billion) 631 Net financials, tax expenses and others 5,388 Buy-backs Dividends 2.1 1.8 1.3 0.7 0.5 0.5 0.5 0.5 0.5 0.5 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 8,580 Net acquisition spending (USD billion) EBITDA Change in w orking capital* 2,561 Cas h-flow from operations CAPEX 1,758 CAPEX 803 Free Cash- Flow 4.2 1.7 14 1.4 2.5 0.2 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 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) Minority 4.4 35 +1.8 2.0 30 Shareholders' Equity 61.8 32.5 25 20 15 10 1.2x 1.5 1.0 5 Equity Gearing of 49% Net Debt 0 3Q 2006 4Q 2006 1Q 2007 2Q 2007 Net Debt (USDbn) - LHS 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 Net Debt / EBITDA* (x) - RHS 0.5 Net Debt / EBITDA ratio reduced to 1.2x* * Based on latest twelve months (LTM) EBITDA 20
Liquidity highlights Liquidity & short term debt (USD billion)* Credit line utilization at 30/09/08 12.0 16 14 12 Unsused credit line 6.0 10 8 6 14.0 4 8.0 Cash & Equivalent 6.0 4.2 2.5 ST & Others* 2 0 Credit facilities Used Liquidity at 30/09/08 1.7 Debt due in Q4 LT repayment Less than USD 600m of credit line expiring in next 12 months out of a total of USD 14bn 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 8 7.8 7.9 6 4 4.7 4.1 4.4 2 1.8 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 Standard & Poor s BBB+ (stable outlook) Moody s Baa2 (stable outlook) Fitch BBB+ (stable outlook) Covenants for all bank facilities Net Debt/EBITDA* not greater than 3.5x No material adverse change clauses Upgraded by S&P, Moody s and. Fitch in the last 12 months *Based on last 12 months 22
A cost leader generating free cash-flow HRC production cost with overhead EBITDA and free cash-flow (USD billion) 1200 1000 800 Cash cost USD/tonne 2008 EBITDA Free cash-flow * 600 400 200 0 ArcelorMittal weighted position 580 USD/t** Cumulative capacity, m tonnes 0 50 100 150 200 250 300 350 400 450 500 1Q 2006 0.4 1.9 2Q 2006 0.7 3Q 2006 2.6 4Q 2006 1.7 1Q 2007 2.4 2Q 2007 30 3.0 3Q 2007 4.1 4Q 2007 1.0 1Q 2008 2.9 2Q 2008 0.8 3Q 2008 A unique free cash-flow track record Source: World Steel Dynamics, CRU monitor, ArcelorMittal analysis *Cash-flow from operation minus CAPEX ** 9 months 23
Strong potential of working capital release Net Debt and working capital (USD billion) 35 Net Debt increase (USD billion) 35 30 25 20 15 10 5 0 30 25 20 15 0.8 22.8 21.4 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) 10 5 8.5 24.0 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 working capital requirement 24
Focusing on net debt reduction CAPEX plan (USD billion) M&A Less than USD 0.6bn outstanding commitments Grow th CAPEX adjustm ent Grow th CAPEX realised Maintenance CAPEX Base Dividend 2009 Base dividend maintained at 1.50 USD/share 2.5 2.9 2.4 2.0 1.5 2.1 2.2 2.5 3.0 3.0 2005 2006 2007 2008E 2009E Buy-back program Exceptional buy-back program basically completed Annual buy-back program to be implemented once debt reduction target achieved 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%* -16.9% 9%* -15.1%* 7.80 9.88 8.21 861 1,081 1,125 1368 1,368 2,146 1,821 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 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) 27
Steel Services and Solutions Steel shipments (Mt) Average steel selling price (USD/t) EBITDA (USD million) -24.9%* +14.4%* +14.0%* 3.52 5.69 4.27 999 1,190 1,361 342 390 153 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. 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 28
Long Carbon Steel Steel shipments (Mt) Average steel selling price (USD/t) EBITDA (USD million) -17.4%* +16.2%* +5.7%* 5.66 8.10 6.69 801 1,083 1,258 1,080 2,137 2,258 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 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) 29
Stainless Steel Steel shipments (Mt) Average steel selling price (USD/t) EBITDA (USD million) -15.7%* -7.9%* -36.2%* 0.43 0.58 0.49 4,182 4,299 3,960 225 390 249 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
Asia, Africa and CIS Steel shipments (Mt) Average steel selling price (USD/t) EBITDA (USD million) +25.1%* +18.1%* -14.0%* 5.26 3.88 3.34 641 855 1,070 935 1,385 1,635 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 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) 31
Flat Carbon Americas Steel shipments (Mt) Average steel selling price (USD/t) EBITDA (USD million) -7.0%** +25.2%* +44.8%* 6.89 7.40 6.88 707 881 1,103 1,682 2,435 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%) 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) 32
Guidance 33
Guidance for Q4 and FY 2008 ArcelorMittal EBITDA* USD19.4bn USD24.2-24.7bn 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 *Proforma 2004, 2005 and 2006 34
Q&A 35