Fourth quarter and annual results 2007 13th February 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 Netherlands Authority for the Financial Markets, 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
Agenda Introduction and overview Safety, performance, synergies and investment plan progress Environment and steel market Q4 and FY 2007 results Divisional highlights Outlook and guidance 2
Introduction and overview 3
Introduction and overview Health & Safety Frequency rate* in line with targets for the year 2007 but unacceptable accident at Abaiskaya mine in Kazakhstan resulting in the loss of life of 30 employees Record 2007 earnings EBITDA of USD 19.4bn in 2007 in line with guidance USD 1.4bn of synergies captured by end of 2007 Net profit of USD 10.4bn increasing by 30% for full year 2007 Solid and stable financial structure Net debt of USD 22.5bn resulting in a Net Debt / EBITDA of 1.2x ** and a gearing of 37% Record level of internal investment in line with growth plan 2012 USD 5.4bn of CAPEX in 2007 invested in capacity growth, value chain and product growth and maintenance High level of M&A activity within the 3 dimensional group strategy (geography, product, value chain) USD 12.3bn of transaction*** closed in 2007 and a total 35 deals announced in 2007 High return to shareholders in 2008 through attractive cash dividend and buy-back USD 2.1bn of cash dividend (base dividend of 1.5 USD/share), USD 1.0bn of share buy-back and 44 million of exceptional share buy-back (to be realised over 2008 and 2009) Progressive improvement in the steel market is expected to support profit increase in Q1 2008 EBITDA guidance of USD 4.7bn to USD 5.0bn in Q1 2008 * Lost time injuries per 1,000,000 worked hours ** Based on 2007 EBITDA *** Cash purchase price, assumed net debt and shares issued (27 million shares issued at 63.36 USD on 5 th June 2007 and 44 million shares issued at 72.65 USD on 13 th November 2007) 4
Safety, performance, synergies and investment plan progress 5
Health and Safety Group frequency rate* 4.1 3.9 3.8 3.7 3.5 3.0 3.2 2.7 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Key facts of Kazakhstan coal mine accident On Friday January 11, 2008, a tragic and unacceptable accident occurred in Abaiskaya mine resulting in 30 fatalities. Investigations underway Absolute commitment to continue to invest in ongoing modernisation of the mines: USD 350m investment plan underway to modernise Kazakhstan mines USD 80m was spent in 2007 including USD 23m on safety equipment such as ventilation, electrical upgrades, new methane monitors and safety related training Implementation controlled by leading consultants including Du Pont Frequency rate* in line with targets for the year 2007 but unacceptable accident in Kazakhstan on January 11, 2008 resulting in 30 fatalities IISI-standard: Fr = Lost Time Injuries per 1.000.000 worked hours 6
A performance reflecting strategy, synergy and value plan progress Shipments (Mt) EBITDA (USD billion) Net Income (USD billion) - 0.8% +27% +30% 102.9 110.5 109.7 15.0 15.3 19.4 8.3 8.0 10.4 2005* 2006* 2007 2005* 2006* 2007 2005* 2006* 2007 Merger synergy and volume adjustment to market condition have been key to group performance * ArcelorMittal pro-forma reflect results of Arcelor including Dofasco/Sonasid; 7
Synergies target expected to be reached by end of Q1 2008 ArcelorMittal annualised synergies SG&A and other Manufacturing & Process Optimisation Purchasing Marketing & Trading 1,334 1,439 1,600 Expected synergies in excess of 973 USD 1.6bn 573 269 Captured at 31/12/06 Captured at 31/03/07 Captured at 30/06/07 Captured at 30/09/07 Captured at 31/12/07 Estimated at 31/03/08 Synergies ahead of plan 8
USD 5.4 billion of CAPEX realised in 2007 Growth plan 2012 Value chain and product growth Management gains and other Main projects completed in 2007 - Brazil-Tubarão (FCA): Capacity expansion from 5mt to 7.5mt. - Poland-Krakow (FCE): New Hot Strip mill additional 300,000t of capacity, quality and yield improvements. - Spain-Zaragoza (LC): Plant relocated to outside the city with increased capacity of 400,000t and product range. - Temirtau Kazakhstan (AACIS): reconstruction of Tin plate mill of 125,000t - Gary-USA (FCA): Recomissioning of 160 Plate Mill adding 530,000t. - Brazil-Tubarão (FCA): Heat Recovery Coke batteries of 1.5mt and power co-generation of 170mw. - Mexico-Lazaro (FCA): CO2 absorption system 1 st phase. Main projects to be completed in 2008 - Belgium-Liege (FCE): Restart of blast furnace no.6 of 1.7mt 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 (AACIS): Restart of 1mt integrated route. - South Africa-Vanderbijlpark (AACIS): Two additional direct reduction kiln and de-bottlenecking adding 350,000t. - Mexico-Mining: Iron ore project of 2mt - Poland-Huta Warsawa (LC): New rolling mill of 650,000t - Italy-Piombino (FCE): New galvanising 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 (FCE): Continuous caster revamping. - Poland-ZKZ (LC): New Coke batteries of 734,000t. - Mexico-Lazaro (FCA): CO2 absorption system 2 nd phase. CAPEX plan of USD 7bn for 2008 9
USD 12.3 billion* of M&A transactions closed in 2007 Main transactions closed in 2007 and to be closed in 2008 Geography Products Value Chain Other - Acquisition of Sicartsa, a long steel producer in Mexico (2.7mt) - Acquisition of minority interests of Arcelor Brasil (33%) and AM Poland (25%) - Acquisition of 28% of China Oriental (4mt) with strategic partnership - Merger of laser-welded tailored blanks with Noble International - Acquisition VPS and VCAC tubes activity - Acquisition of Rongcheng in steelcord wire - Acquisition of MT Majdalani in stainless steel distribution - Acquisition of remainder of Wabush iron ore mine and pellet plant (3.5mt) - Acquisition of 12.6% of General Moly with off-take agreement in molybdenum - Acquisition of 51% of Rozak in Turkey (450,000t) and diverse European distributors (Italy, Poland, UK) - Legal merger with Arcelor - Acquisition of a gas distributor Saar Ferngas - Acquisition of minorities of Acindar (35%) realised at 98.6% at 1 st February 2008 - Acquisition of minorities of Acesita (43%) expected to closed in Q2 2008 - Acquisition in Costa Rica of Laminadora Costarricense (400kt) and Trefileria Colima - Acquisition of Unicon, a pipe producer in Venezuela (550,000t) - Acquisition of Galvex, a galvanising line in Estonia (190,000t) - Acquisition of Cinter, a stainless steel tubes producer in Uruguay - Acquisition of coal mines (3mt): Berezovskaya, Pervomayskaya and Anzherskoye in Russia - Acquisition of OFZ, a Slovak ferro-alloys manufacturer (150,000t) - Acquisition and merger of diverse distributors (Sweden, Austria) Currently USD 3.7bn* of M&A engagements for 2008 * Cash purchase price, assumed net debt and shares issued (27 million shares issued at 63.36 USD on 5 th June 2007 and 44 million shares issued at 72.65 USD on 13 th November 2007) 10
Environment and steel market 11
Production slowdown in China Chinese investment growth and steel production* 50 40 30 20 10 Chinese and Asian spot price for HRC** 850 750 650 550 450 350 0 250 J-01 J-02 J-03 J-04 J-05 Steel Production 3M y/y (%) J-06 J-07 Chinese total fixed Investment 3M y/y (%) 150 Jan 02 Jul 02 Jan 03 Jul 03 Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 HRC / China domestic FOB Shanghai (incl. 17% vat) $/t HRC / East Asia import CFR $/t Jul 07 Jan 08 Production growth slowing down with closures and energy constraints Chinese exports falling due to implementation of new export tax as at 1 st January 2009 Increasing costs and restocking needs expected to continue to support price rise in 2008 * Source: China National Bureau of Statistics and IISI ** Source: SBB 12
Price rise confirmed in the US despite weak economy Crude steel production in the US (y/y change %) 30 25 20 15 10 5 0-5 -10-15 -20 J-02 J-03 J-04 J-05 J-06 J-07 HRC North America domestic FOB US Midwest mill $/short ton Underlying and apparent demand remain weak but supply constrained by stable production, low level of inventory and declining imports Increasing US prices approaching Asian and European levels 800 700 600 500 400 300 200 Jul-98 Jan-99 Jul-99 Sustainable ROIC Industry cash cost Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 * Source: IISI ** Source: SBB 13
Rapid inventory reduction and cost increase to support price rise in Europe Crude steel production in EU-27 (y/y change %) 20 15 10 HRC South Europe domestic Ex-Works Euro/t** 550 500 450 5 0-5 -10-15 J-02 J-03 J-04 J-05 J-06 J-07 Underlying steel demand still growing in Europe Inventory level back to normal and expected to reduce further as imports continue to decline Price expected to increase in line with cost increase and global trend 400 350 300 250 200 Jul-98 Jan-99 Jul-99 Sustainable ROIC Industry cash cost Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 * Source: IISI ** Source: SBB 14
Stainless steel market recovery continuing CR304 European base price and alloy surcharge* CR304 Asian and European total price* 6,900 7,000 5,900 6,000 4,900 3,900 5,000 4,000 2,900 1,900 900 Jan 99 Jul 99 Jan 00 Jul 00 Alloy surcharge Jan 01 Jul 01 Jan 02 Jul 02 Jan 03 Jul 03 Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 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 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Confirming order book, stainless steel demand is progressively improving Low and stable production level as well as a sharp drop imports support supply/demand equilibrium Transaction price stable but base price continues to improve 3,000 2,000 CR 304 - East Asia import CFR (USD/t) CR 304 - North Europe domestic total price delivered (USD/t) * Source: SBB 15
Q4 and FY 2007 results 16
Results highlights Record earnings in 2007 EBITDA of USD 19.4bn versus USD 15.3bn in 2006*, increase of 27% Net earning of USD 10.4bn, increased by 30% Strong cash-flow from operation in 2007 Cash flow from operation of USD 16.5bn, an increase of 61% CAPEX of USD 5.4bn Return to shareholders of USD 4.4bn Solid balance sheet Net debt of USD 22.5bn, representing 1.2x EBITDA 2007 and a 37% gearing Record Q4 2007 in line with guidance EBITDA of USD 4.8bn in line with guidance Guidance for Q1 2008 EBITDA expected of between USD 4.7bn USD 5.0bn in Q1 08 * Pro forma 17
P&L highlights USD mn unaudited FY 2006* FY 2007 Q3 2007 Q4 2007 Revenue 88,576 105,216 25,524 27,993 Gross op. result (EBITDA) 15,272 19,400 4,881 4,847 as % of revenue 17.2% 18.4% 19.1% 17.3% Depreciation & Amortisation -3,448-4,570-1,028-1,557 Operating result (EBIT) 11,824 14,830 3,853 3,290 as % of revenue 13.3% 14.1% 15.1% 11.8% Equity method gains & other inc 619 985 280 273 Net financing cost -1,328-927 -189-546 Q4 07 versus Q3 07 Revenue increased by 10% due to shipments and slight price increase EBITDA stable at USD 4.8bn Net financing cost increased due to absence of nonrecurring mark to market gains Effective tax rate decreased from 17% to 11.4% Minority interest charge reduced due in particular to the completion of the legal merger Profit before tax 11,115 14,888 3,944 3,017 Tax -1,654-3,038-672 -345 Minority interests -1,488-1,482-312 -237 Net result, Group share 7,973 10,368 2,960 2,435 as % of revenue 9.0% 9.9% 11.6% 8.7% EPS $ 5.76 $ 7.41 $ 2.10 $ 1.72 Shipment ('000 mt) 110,502 109,725 26,037 27,978 Proforma Q4 shipments include a (57kt) adjustment in stainless steel for elimination of Q3 inter-company shipments EPS increased by 29% in 2007 2007 versus 2006 Revenue increased by 19% mainly due to price rise EBITDA increased by 27% at USD 19.4bn Net financing cost reduced due to non-recurring forex and mark to market gains Effective tax rate increased from 15% to 20% Net earning up 30% 18
Cash-flow highlights USD mn unaudited FY 2006* FY 2007 Q3 2007 Q4 2007 Net Income (Group) 7,973 10,368 2,960 2,435 Minority interests 1,487 1,482 312 237 Depreciation 3,448 4,570 1,028 1,557 Other operating activities -2,623 112-183 1,804 Cash flow from operating activities 10,285 16,532 4,117 6,033 Acquisitions of tangible and intangible assets -4,638-5,448-1,152-1,978 Other acquisitions and disposals -137-6,256-209 -1,474 Cash flow from investing activities -4,775-11,704-1,361-3,452 Dividends paid -2,480-2,269-519 -592 Net servicing of borrowings -718 1,435-1,693 420 Share buy back 0-2,604-682 -1,351 Other financing activities (net) -88-30 442-509 Cash flow from financing activities -3,286-3,468-2,452-2,032 Q407 versus Q307 Strong cash-flow from operations of USD 6.0bn in Q407 versus USD 4.1bn in Q3 07 CAPEX of USD 2.0bn for Q4 07 Share buy-back of USD 1.4bn 2007 versus 2006 Cash-flow from operations increased by 61% to USD 16.5bn CAPEX rising by 17% to USD 5.4bn Cash dividend of USD 1.8bn Share buy-back of USD 2.6bn effect of exchange rate changes on cash 295 685 138 390 Change in cash & cash equivalents 2,519 2,045 442 939 * Proforma USD 16.5bn of cash-flow from operations 19
Balance Sheet highlights USD mn unaudited 31.12.2006 30.09.2007 31.12.2007 Non current assets 72,804 83,506 88,138 - Intangible assets 10,782 14,979 15,031 - Property, plant and equipment 54,696 59,341 61,994 - Investments and other 7,326 9,186 11,113 Current assets 39,362 44,119 45,510 - Inventories 19,238 20,792 21,750 - Trade receivables and other 13,978 16,127 15,655 - Cash and cash equivalents 6,146 7,200 8,105 Shareholders equity 50,191 58,760 61,376 - Group share 42,127 52,079 56,526 - Minority interests 8,064 6,681 4,850 Non current liabilities 37,415 36,320 39,881 - Interest bearing liabilities 21,645 19,775 22,085 - Provisions and Other 15,770 16,545 17,796 Q407 versus Q307 Working capital has decreased by USD1.6bn to USD 17.3bn at the end of Q407 Cash conversion* days improved by 16 days Net debt increased by USD 0.4bn during Q4 07 to USD 22.5bn Gearing decreased from 38% to 37% 2007 versus 2006 Working capital unchanged Net debt increased by USD 2.1bn to USD 22.5bn Gearing decreased from 41% to 37% Net Debt / EBITDA reduced from 1.3x to 1.2x Current liabilities 24,560 32,545 32,391 - Trade payables 10,717 12,248 14,173 - Interest bearing liabilities 4,922 9,594 8,542 - Other 8,921 10,703 9,676 A Net Debt representing 1.2x the EBITDA 2007 *Cash conversion cycle (CCC) = days of account receivables + days of inventory days of account payables 20
Divisional highlights 21
Flat Carbon Americas USD mn (unaudited) FY 2006* FY 2007 Q3 2007 Q4 2007 Q407 v Q307 Change Revenue 21,877 22,895 5,662 6,210 9.7% Gross op. result (EBITDA) 3,594 4,051 1,104 1,023 as % of revenue 16.4% 17.7% 19.5% 16.5% Depreciation & Amortisation 984 1,064 240 330 Operating result (EBIT) 2,610 2,987 864 693 as % of revenue 11.9% 13.0% 15.3% 11.2% Production (000 t) 31,521 31,096 8,156 7,935 ** Shipments (000 t) 29,960 27,931 6,886 7,327 *pro forma Q407 production includes a (117kt) adjustments for double counting of production in Q207 and Q307 Volume effect +6% Price/Mix effect +4% EBITDA decreased by 7% in Q4 2007 22
Flat Carbon Europe USD mn (unaudited) FY 2006* FY 2007 Q3 2007 Q4 2007 Q407 v Q307 Change Revenue 27,567 34,562 8,241 9,249 12.2% Gross op. result (EBITDA) 3,863 5,549 1,368 1,279 as % of revenue 14.0% 16.1% 16.6% 13.8% Depreciation & Amortisation 1,046 1,400 336 410 Operating result (EBIT) 2,817 4,149 1,032 869 as % of revenue 10.2% 12.0% 12.5% 9.4% Production (000 t) 38,492 37,494 9,720 7,976 ** Shipments (000 t) 33,111 34,372 7,798 8,756 *pro forma Q407 production includes a year to date (509kt) adjustments for double counting of production from Q107 to Q307 Volume effect +10% Price/Mix effect +2% EBITDA decreased by 7% in Q4 2007 23
Long Carbon Steel USD mn (unaudited) FY 2006* FY 2007 Q3 2007 Q4 2007 Q407 v Q307 Change Revenue 18,544 23,830 5,511 6,674 21.1% Gross op. result (EBITDA) 3,559 4,694 1,080 1,213 as % of revenue 19.2% 19.7% 19.6% 18.2% Depreciation & Amortisation 571 798 183 290 Operating result (EBIT) 2,988 3,896 897 923 as % of revenue 16.1% 16.3% 16.3% 13.8% Production (000 t) 24,620 24,714 6,091 6,171 Shipments (000 t) 24,896 24,599 5,657 6,283 Volume effect +9% Price/Mix effect +12% *pro forma EBITDA increased by 12% in Q4 2007 24
AM3S USD mn (unaudited) FY 2006* FY 2007 Q3 2007 Q4 2007 Revenue 11,882 16,241 3,719 5,325 Gross op. result (EBITDA) 563 717 153 197 as % of revenue 4.7% 4.4% 4.1% 3.7% Depreciation & Amortisation 97 138 34 42 Operating result (EBIT) 466 579 119 155 as % of revenue 3.9% 3.6% ** 3.2% 2.9% Shipments (000 t) ** 14,306 15,934 3,523 5,304 *pro forma ** AM3S shipments are not consolidated and exclude all hirework and commission shipments from April 1, 2007 onwards EBITDA increased by 29% in Q4 2007 25
Asia, Africa and CIS USD mn (unaudited) FY 2006 * FY 2007 Q3 2007 Q4 2007 Q407 v Q307 Change Revenue 14,745 18,229 4,757 4,688-1.5% Gross op. result (EBITDA) 3,103 3,774 935 807 as % of revenue 21.0% 20.7% 19.7% 17.2% Depreciation & Amortisation 463 590 145 176 Operating result (EBIT) 2,640 3,184 790 631 as % of revenue 17.9% 17.5% 16.6% 13.5% Production (000 t) 20,754 20,886 5,225 5,086 Shipments (000 t) 20,309 20,887 5,263 5,151 Volume effect -2% Price/Mix effect 0% *pro forma EBITDA decreased by 14% in Q4 2007 26
Stainless Steel USD mn (unaudited) FY 2006 * FY 2007 Q3 2007 Q4 2007 ** Q407 v Q307 Change Revenue 7,251 9,349 2,028 2,335 15.1% Gross op. result (EBITDA) 938 1,151 225 190 as % of revenue 12.9% 12.3% 11.1% 8.1% Depreciation & Amortisation 207 275 74 75 Operating result (EBIT) 731 876 151 115 as % of revenue 10.1% 9.4% 7.4% 4.9% Production (000 t) 2,591 2,225 475 559 Shipments (000 t) 2,226 1,935 432 461 *pro forma **Q4 stainless shipments include a -57kt adjustment for elimination of Q3 inter company shipments. EBITDA decreased by 16% in Q4 2007 27
Outlook and guidance 28
Guidance for Q1 2008 Expectation for 1st quarter 2008 versus 4th quarter 2007 Total shipments expected to increase Flat Carbon Americas EBITDA to benefit from improved steel selling price levels Flat Carbon Europe and Long Carbon EBITDA to improve due to volume Asia, Africa & CIS EBITDA to decrease due to operating disruptions AM3S is expected decrease Stainless Steel profitability to improve Quarterly depreciation of USD 1.1bn EBITDA expected between USD 4.7bn and USD 5.0bn 29
2008 underlying growth prospects Synergies and management gains Approximately USD 500m of EBITDA related to full benefit from merger synergies Full impact of management gains related to productivity, yield, and energy efficiency improvement identified in value plan 2008 Growth plan 2012, value chain and product growth Full year positive impact from Brazil and Poland capacity expansion First effect of the restart of blast furnace in Liege (Belgium), of the long carbon asset revamping in Luxembourg, of the restart of the integrated route in Zenica (Bosnia) and of the expansion of Acindar (Argentina) Value added growth to benefit from projects completed in 2007 and new investments AM3S Greenfield projects in Central and East Europe expected to add to growth M&A growth Full year impact on earnings of diverse minorities acquisitions realised or announced in 2007 (Arcelor Brasil, Arcelor, Acindar, Acesita ) Positive impact on EBITDA of acquisitions completed in 2007 or expected to be completed in 2008 in particular in mining, pipes & tubes and distribution Stable and diversify business model with growth prospects in 2008 30
Q&A 31