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Interim Financial Resultsfor the six months ended June 2009
Introduction and OverviewNonkululeko Nyembezi-Heita, CEO
3
Overview (H1’2009 vs H1’2008)
Cost pressures per ton eased up• HRC and Billet rand cash cost
increased by 28% and 18% respectively
• Cost of steel sales increased 35%
Operations• Liquid steel production down 23%
• Average capacity utilisation of 60%
Earnings loss of R844m• Earnings loss per share of 190c
(profit per share of 1 027c)
• EBITDA decrease by 96%
Total steel shipments & prices• Despatches down 24%
• Average realised prices down 9%
• Unfavourable domestic/export ratio
4
Key Result Drivers
Liquid steel production -11% -23%Total sales volume -12% -24%Export sales volume +81% +100%Domestic sales volume -30% -42%Flat carbon steel product prices -33% -9%Long carbon steel product prices -38% -8%HRC Rand cash cost per tonne -3% 28%Billet Rand cash cost per tonne -7% 18%Labour productivity 5% -5%USD/ZAR (closing rate) 18% 2%
H1’09 vs H’108H1’09 vs H2’08
Environment and steel markets
Global Environment – General Market Trends
World economic growth in 2008 decreased substantially to 3.2% from 5.2% in 2007 while negative growth of 1.3% is expected in 2009 (IMF World Economic Outlook)
Emerging markets grew by 6.1% in 2008 (2007: 8.3%), slowing down to an expected 1.6% in 2009
Chinese economy grew by 9% in 2008 compared to 13% in 2007 despite fiscal control measures to cool it down while a growth rate of close to 8% is expected for 2009
World crude steel production in the first six months of 2009 declined by 21% but China increased its output volumes by 1% compared to the same six months in 2008
Steel production in Europe and North America declined by -44% and -48% respectively in the first half of 2009 compared to the same period in 2008
WorldSteel’s latest forecasts are that steel production for 2009 will be down 14% to 1.14 billion tonnes compared with 2008 (-200mt)
6
-7000-6000-5000-4000-3000-2000-1000
010002000
7
Global Environment – Global Steel Market Trends
World production for first six months declined 21% to 548mt
China now constitute 49% of world production over the first half of 2009 compared to 38% in the comparable period
China in equilibrium between supply and demand
Lower risk of exports into emerging markets
Source: World Steel
80
105
130
25
30
35
40
45
50
Crude output (000t) China as % of world (%)
China – Imports minus exports
2006 2007 2008 20092005
2005
Crud
e stee
l outp
ut (m
t)(m
tonne
s)
2006 2007 2008 2009
%
8
Global Environment – Input Cost Trends
Average 2009 international iron ore prices have so far been cut by 33% from 2008 benchmark levels
Iron ore pellet prices have dropped by 48% from 2008 benchmark levels
International spot coking coal prices have decline by 58% in 2009 to US$128/t for the contract period Apr 2009 to Mar 2010
Scrap prices during H1’09 have fallen on average by 55% to about US$275/t from the comparable period in 2008
Alloy values during H1’09 have come down with Zinc slipping by 42%
Crude oil prices during the first six months of 2009 were on average 58% lower when compared with the same period in 2008
9
Global Environment – Benchmark Prices
0
100
200
300
400
500
600
700
2004 2005 2006 2007 2008 2009
Coking coal Iron ore
Index
ed (J
anua
ry 20
04 =
100)
Scrap (Tex)
10
Export Prices
0
200
400
600
800
1000
1200
1400
1994 1997 2000 2003 2006 2009
LCWR
Quar
terly
aver
age e
xpor
t pric
es (C
&F) U
S$/t
HRC
11
Domestic Market – Quarterly Shipments
0
200
400
600
800
1000
1200
1400
1600
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
(kton
nes)
Flat carbon steel productsLong carbon steel products
12
Domestic Market – Inventory Levels
0
200
400
600
800
1000
1200
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 20090
2
4
6
8
10
12
14
16
(kton
nes)
Week’s dispatchesStocks (t)
Wee
ks
Source : SAISI up to Q3’08; ArcelorMittal South Africa estimates for Q4’08, Q1’09 and Q2’09
13
Domestic Market – Imports
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
2000 2001 2002 2003 2004 2005 2006 2007 2008 20090
2
4
6
8
10
12
14
16
(tonn
es)
% of consumptionImports (t)
%
Source : SAISI up to Q3’08; ArcelorMittal South Africa estimates for Q4’08, Q1’09 and Q2’09
Physical results for H1’2009
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2004 2005 2006 2007 2008 2009
ArcelorMittal South Africa
1515
Safety Remains our Priority
Zero fatalities
Safety achievementsVereeniging Works - 1m LTI free man hours
Vanderbijlpark Works – 4 x 1m LTI free man hours
Coke & Chemicals - 208 LTI free days
Lost Time Injury Frequency Rate(Employees and Contractors)
per 1
m m
an ho
urs
16
Liquid Steel Production
2392 2463 2602 2465 2433 24301993
2238 22501834
1526
1085 10931105
1089 1100 1092
10741070 841
849
851
0
1000
2000
3000
4000
H1 2004 H2 2004 H1 2005 H2 2005 H1 2006 H2 2006 H1 2007 H2 2007 H1 2008 H2 2008 H1 2009
3 477 3 5663 707
3 554 3 533 3 522
3 0673 308
3 091
2 683
2 377
ktonn
es
Long carbon steel productsFlat carbon steel products
Shipment Volumes
1297 14311210 1192
1437 1556 1518 13691577
1258931
820781
857 1024781 530 436 597 255
322
416
594 557540
543 692744
778 757814
726
458
390 353426
438 323177 196 168
84
53
263
0
1000
2000
3000
H1 2004 H2 2004 H1 2005 H2 2005 H1 2006 H2 2006 H1 2007 H2 2007 H1 2008 H2 2008 H1 2009
Export flat carbon steel products Export long carbon steel products
3 101 3 122 3 0333 197 3 233
3 007 2 928 2 8912 730
2 359
2 068
ktonn
es
Domestic long carbon steel productsDomestic flat carbon steel products
0%
12%
0%
20%
67%
87%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Europe
Asia
Americas
Total Africa
Rest of Africa
South Africa
Geographic Shipments
H1’09H2’08H1’07H2’06H1’06 H1’08H2’07
H1’2009
19
Investment Programme
Rm
Major projects completed (and ongoing) in H1’2009Vanderbijlpark Works 69- New direct reduction kilns 5 & 6- Replace Tin Line Structure- Replace HSM delay table motors & drivesVereeniging Works 55- EAF dust extraction (2010)Other 215
Total Expenditure in H1’2009 339
FinanceKobus Verster, Executive Director Finance
21
Headline Earnings
Rm
*After tax
Revenue 18 403 21 511 11 960Profit/loss from operations 5 355 6 804 -322Gains & Losses on forex & financial instruments 377 260 -695Interest income 142 176 183Finance costs -27 -211 -141Income from investments 1 2 1Tax -1 669 -2 196 85Equity earnings* 392 -61 41Net deficit on disposal or scrapping of assets* 5 23 4Impairment* 111Headline earnings/loss 4 576 4 908 -844
- in US$m 597 554 -92
H1’2009H2’2008H1’2008
22
Profit from operations
Flat carbon steel products 2 899 4 108 -577
Long carbon steel products 1 480 2 192 -12
Coke & Chemicals 927 816 95
Corporate & Other 49 -312 172
Profit/loss from operations 5 355 6 804 -322
H1’2009H2’2008H1’2008Rm
23
Raw material costsH1’2009
vs.H1 2008
H1’2009vs.
H2 2008
Coal +21% +140%
Iron Ore +15% +39%
Imported iron ore pellets +10% +70%Scrap -46% -44%
Alloys -42% -31%
Zinc -11% -28%
Note: Movement in own cost in rand on a delivered bases
Rm
24
Cash Flow
Operating cash flow 5 992 8 080 -320Working capital -2 122 -1 211 1 701Cash flow from operations 3 870 6 769 1 381Capex -857 -975 -339Net interest and Investment income 111 165 126Investments -16 -405Tax -1 757 -1 330 -640Dividends -874 -1 524 -1 627Net cash flow 493 3 205 -1 504Share buy back -3 918Net cash flow after share buy back 493 3 205 -5 422Net cash 4 793 8 378 2 966
H1’2009H2’2008H1’2008Rm
25
Working capital movement
Inventories -1 417 -2 593 2 777Finished products 200 -368 147Work-in-progress -937 -746 872Raw materials -638 -1 378 1 820Plant spares & stores -42 -101 -62
Receivables -2 384 2 638 -701Payables 1 367 -760 -140Utlisation of provisions 312 -496 -235
-2 122 -1 211 1 701
H1’2009H2’2008H1’2008Rm
26
Financial Ratios
Operating margin 29% 32% -3%EBITDA margin 33% 35% 2%Revenue / invested capital (times) 1.8 1.9 1.0Return on equity (annualised) 41% 38% -7%Net cash / equity 20% 30% 14%
H1’2009H2’2008H1’2008
27
Quarterly Headline Earnings Trend
2003 2004 2005 2006 2007 2008 2009
661 599353
656 672
13981586 1499 1582 1653
988 869703
12471488
12921530 1624
1055
1532
2003
2573
3772
1136
-607-237
-1000
-500
0
500
1000
1500
2000
2500
3000
3500
4000
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Q1 Q2
Rm
ArcelorMittal ALSI Resources 20
28
Share Performance
0
50
100
150
200
250
300
350
400
450
500
550
600
650
2005 2006 2007 2008 2009
Index
ed (J
une 2
004 =
100)
Period June 2004 to June 2009
Average Dividend Yield at 6.3% – 2.2x the market
Average Price Earnings ratio of 8.3x – 58% of the market
29
Dividend
Dividend policyDistributing one third of headline earnings
Headline loss – no dividend declared
Industrial Plan and Other DevelopmentsNonkululeko Nyembezi-Heita
31
Industrial Plan
Production still aligned to demand
Production and shipments for Q3’09 forecast to be somewhat higher than the previous two quarters
Continued adjustment of strategic growth plan to market conditions with a review of key projects essential for the post-crisis steel market
200920082007
ktonn
eskto
nnes
Production
Shipments
Q3’09 outlook
0
500
1000
1500
2000
Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09
0200400600800
1000120014001600
Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09
32
Industrial Plan
Cost evolution (H1’09 vs H2’08)Total fixed cost reduction of R1,1bn
Fixed cost reduction excl labour of 51%
Labour cost reduction of 6%
Working capital reduced by 32%
33
Investment Programme
Medium to long term market expectations for Sub-Saharan Africa remain optimistic
Focus on smaller projects with efficiency, quality enhancement and cost improvement objectives
Environmental projects are underwayElectric Arc Furnace dust extraction at Vereeniging Works
New waste disposal sites
Effluent treatment projects at Newcastle Works
34
Other focus areas
1. Competition Tribunal; 2. Kumba iron ore arbitration; 3. Corporate Responsibility
Outlook
36
Outlook for Q3’09
Business environmentDomestic and international demand expected to improve
Increase production to meet higher demand
Positive sentiment on international prices
Negative impact of tariff increases on electricity, rail and harbour charges
EarningsEarnings expected to improve
Could be impacted by exchange rate movements
37
DisclaimerThis document may contain forward-looking information and statements about ArcelorMittal South Africa and its subsidiaries. These statements include financial projections and estimates and their underlyingassumptions, 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.
Thank youArcelorMittal South AfricaRoom N3-5Main BuildingDelfos BoulevardVanderbijlpark 1911South Africa
www.arcelormittal.com/southafrica