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ArcelorMittal Q3 2008 results
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Third quarter results 2008Third 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 holdersexpectations 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 ininformation 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 yobligation 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 safetyHealth and safety• Environment and steel market• Industrial plan• Q3 results and financial plan• Divisional highlights• Guidance• 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
I i t i t t f USD 4b t USD 5b th h dditi l SG&A i– Increasing management gains target from USD 4bn to USD 5bn through 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 cutsEBITDA is expected to be in the range of USD 2 5bn USD 3bn– 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
4* 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
Health and Safety
5
Health and Safety
Steel frequency rate*
3.83.94.1
3.7
3.53.0 3.2
2.7
2.12.3
2.72.4
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
6
Heath and safety performance progressively improving
IISI-standard: Fr = Lost Time Injuries per 1.000.000 worked hours
Environment and steel market
7
Historic production cuts in China as industry faces heavy lossesindustry faces heavy losses
Chinese and Asian spot price for HRC**Crude steel production in China (y/y change %)*
25
30
35
950
1150
5
10
15
20
350
550
750
-15
-10
-5
0
02 03 04 05 06 07 08
150Ja
n 02
Jan 0
3
Jan 0
4
Jan 0
5
Jan 0
6
Jan 0
7
Jan 0
8
HRC / China domestic FOB Shanghai (incl. 17% vat) $/t
J-02
J-03
J-04
J-05
J-06
J-07
J-08
HRC / East Asia import CFR $/t
8* Source: IISI** Source: SBB
Strong destocking to prompt price improvement before end of 2008
Rapid inventory reduction following production cuts in the US
C d t l d ti i th US ( / h %)* HRC N th A i d ti FOB US Mid t ill
production cuts in the US
Crude steel production in the US (y/y change %)* HRC – North America domestic FOB US Midwest mill $/short ton**
20
25
30
1000
1100
1200
5
0
5
10
15
600
700
800
900
000
-20
-15
-10
-5
J-02
J-03
J-04
J-05
J-06
J-07
J-08
200
300
400
500-02 -03 -04 -05 -06 -07 -08J-0 J-0 J-0 J-0 J-0 J-0 J-0 J-0 J-0 J-0 J-0 J-0 J-0 J-0
9* Source: IISI** Source: SBB
Destocking phase expected to be completed and prices to stabilise by end of 2008
Market expected to progressively stabilise in Europe
Crude steel production in EU 27 (y/y change %)* HRC S th E d ti E W k E /t**
stabilise in Europe
Crude steel production in EU-27 (y/y change %) HRC –South Europe domestic Ex-Works Euro/t**
10
15
20
700
800
-5
0
5
400
500
600
-15
-10
J-02
J-03
J-04
J-05
J-06
J-07
J-08
200
300J-0
2
J-03
J-04
J-05
J-06
J-07
J-08
10* Source: IISI** Source: SBB
Production cuts and destocking expected to continue into 2009
Stainless steel market deterioration to continue
CR304 – European base price and alloy surcharge* CR304 – Asian and European total price*
7 000
4,900
5,900
6,900
5,000
6,000
7,000
1,900
2,900
3,900
Alloy surcharge
2,000
3,000
4,000
900
Jan 0
2
Jan 0
3
Jan 0
4
Jan 0
5
Jan 0
6
Jan 0
7
Jan 0
8
CR 304 - North Europe domestic base price delivered (USD/t)CR 304 - North Europe domestic total price delivered (USD/t)
1,000Ja
n 04
Jan 0
5
Jan 0
6
Jan 0
7
Jan 0
8
CR 304 - East Asia import CFR (USD/t)CR 304 North Europe domestic total price delivered (USD/t)
CR 304 - North Europe domestic total price delivered (USD/t)
11* Source: SBB
No market improvement expected before 2009
Industrial plan
12
Increasing production cuts to accelerate inventory reductioninventory reduction
AM Quarterly crude steel production (million tonnes) AM Planned production cuts in Q4 2008
32
Long Carbon
Flat Carbon America >35%
Flat Carbon Europe >30% 28
30
32
Flat Carbon EuropeLong Carbon ~30%
24
26
-9mtest.
Asia, Africa & CIS
Stainless steel
Asia, Africa, CIS
Stainless steel
>35%
~30% 18
20
22
Stainless steel
ArcelorMittal capacity utilisation to be voluntarily reduced below 65%
Stainless steel ~30%1Q
20062Q
20063Q
20064Q
20061Q
20072Q
20073Q
20074Q
20071Q
20082Q
20083Q
20084Q
2008
13
ArcelorMittal capacity utilisation to be voluntarily reduced below 65%
Accelerating and increasing management gainsmanagement gains
Management gains breakdown (USD billion)
6 0
0 5
1.0
4.0
5.0
6.0
3.54.0
5.0
0.9
1.2
0.5
2.0
3.0
0.6
1.5
2.3
0.6
0.8
0.0
1.0
Manpow erd i i
Energyi
Yield and qualityi
Input cost effect Other Initial AdditionnalSG&A i
New
Increasing management gains target from USD 4bn to USD 5bn through additional
productivity consumption improvement managementgains plan
SG&A savings managementgains plan
14
g g g g gSG&A savings over the next 5 years
Adjusting growth plan to market conditionsconditions
Products and value chain growth
39%Distribution AM3S Growth plan
2012*
50%AM3S
57%Steel
shipments 110mt
Value-added and speciality
products
+3% per year in
line with market
Value-added and speciality
products
46%
2007
Mining Iron ore
65%Iron ore
Growth plan adjusted
2007Medium/long term
Growth
15
Growth plan adjusted
Investment completed in 2008Main 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
Completed in Q1
Completed in Q3 C l t d i Q2
Status
√
√√
Growth plan
- 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
Completed in Q2
Completed in Q3
Completed in Q2√
√
√
Value chain and
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 line of 310,000t
Completion expected in Q4
Completion expected in Q4Completed in Q2Completion expected in Q4
√and product growth
MGT i d
y ( ) g g ,- 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
Completion expected in Q4Completed in Q2Completed in Q1
Completed in Q1Completed in Q1
√√
√√
gains and other
- France-Fos (FCE): Continuous caster revamping.- Poland-ZKZ (LC): New Coke battery of 734,000t.- Mexico-Lazaro (FCA): CO2 absorption system 2nd phase.
Completed in Q1Completed in Q1Completion delay to 2009
√√
16
USD 1.8bn of CAPEX realised in Q3 and USD 5.5bn of CAPEX expected for 2008
Q3 results and financial plan
17
P&L highlights
EBITDA (USD billion)EBITDA to Net Income (USD million)+7%***
4.9 4.8 5.08.0 8.6
1,414
1,699FOREX & other**
Depreciation & impairment
Earnings per share (USD)
3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008
8,580
394
695
529386
414
Income from equity
Net interest
TaxNon recurring
item*
-34%***
2.10 1.72 1.69
4.202.79
5,4674,930
3,821
Minority
EBITDA increased 7% in Q3 2008 versus Q2 2008
3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008EBITDA Operatingincome
Pre-tax Netincome
18
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
Cash-flow highlights
Free Cash-Flow (USD million) Return to shareholders (USD billion)
1.32.1
0.5
1.8
0.7
Buy-backsDividends631
Net f inancials,
tax expenses
Net acquisition spending (USD billion)
0.5 0.5 0.5 0.5 0.5
3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008
8,580
5,388
expenses and others
4.22.5
1 41.7
2,561
803
1,758Change in w orking capital*
CAPEX
CAPEX
Free cash-flow negatively affected by USD 5.4bn increase in working capital
0.21.41.7
3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008EBITDA Cash-Flow
fromoperations
Free Cash-Flow
CAPEX
19
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.
Balance sheet highlights
Net Debt & Equity (USD billion) Net Debt (USD billion) and Net debt/EBITDA ratio (x)
25
30
35 2.0+1.84.4Minority
10
15
20
25
1.0
1.51.2x61.8
32.5
Shareholders' Equity
0
5
3Q2006
4Q2006
1Q2007
2Q2007
3Q2007
4Q2007
1Q2008
2Q2008
3Q2008
0.5Equity Net Debt
G i f 49%Net Debt (USDbn) - LHS Net Debt / EBITDA* (x) - RHS
Net Debt / EBITDA ratio reduced to 1 2x*
Gearing of 49%
20
Net Debt / EBITDA ratio reduced to 1.2x*
* Based on latest twelve months (LTM) EBITDA
Liquidity highlights
Credit line utilization at 30/09/08Liquidity & short term debt (USD billion)* Credit line utilization at 30/09/08Liquidity & short term debt (USD billion)*
10
12
14
1612.0
14.0
8.0
0
2
4
6
8
10
6.0Unsused credit line
4.2
Less than USD 600m of credit line expiring in next 12 months out of a total of USD 14bn
0Credit facilities Used
1.7
2.56.0Cash & Equivalent
ST & Others*
LT repayment
4.2
Liquidity in excess of debt coming due in next 12 months
next 12 months out of a total of USD 14bnLiquidity at 30/09/08 Debt due in Q4
21
…Liquidity in excess of debt coming due in next 12 months
*Excluding USD3.7bn of commercial paper
Gross debt maturity
Repayment schedule at 30/09/08 (USD billion)
4
6
8
10
4.7
7.8
4.1
7.9
4.4
0
2
2009 2010 2011 2012 2013 Therafter
Bond maturity profile LT Debt maturity (Loans) LT Debt maturity (Credit facilities) LT Debt maturity (other)
1.8
• Standard & Poor’s – BBB+ (stable outlook)• Moody’s – Baa2 (stable outlook)
Commitment to strong investment grade ratingsCovenants for all bank facilities
Net Debt/EBITDA* not greater than 3.5xNo material adverse change clauses
• Fitch – BBB+ (stable outlook)No material adverse change clauses
Upgraded by S&P Moody’s and Fitch in the last 12 months
22
…….Upgraded by S&P, Moody s and Fitch in the last 12 months
*Based on last 12 months
A cost leader generating free cash-flow
HRC production cost with overhead EBITDA and free cash-flow (USD billion)p
Cash cost USD/tonne
1000
1200
EBITDAFree cash-flow*
( )
2008
600
800
3 0
4.1
Cumulative capacity m tonnes
ArcelorMittal weighted position 580 USD/t**
200
400
0.4
1.9
0.7
2.6
1.7
2.43.0
1.0
2.9
0.8
Cumulative capacity, m tonnes0
0 50 100 150 200 250 300 350 400 450 500 1Q2006
2Q2006
3Q2006
4Q2006
1Q2007
2Q2007
3Q2007
4Q2007
1Q2008
2Q2008
3Q2008
A unique free cash-flow track record
23Source: World Steel Dynamics, CRU monitor, ArcelorMittal analysis*Cash-flow from operation minus CAPEX** 9 months
A unique free cash flow track record
Strong potential of working capital releaserelease
Net Debt and working capital (USD billion) Net Debt increase (USD billion)
3535
0.8
8.5
15
20
25
30
35
15
20
25
30
35
22.8 21.4 24.0
0
5
10
15
30/09/2006 30/09/2007 30/09/2008
0
5
10
15
3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 30/09/2006 30/09/2007 30/09/2008
Net Debt increase related to w orking capital increaseNet Debt excluding w orking capital increase
3Q2006
4Q2006
1Q2007
2Q2007
3Q2007
4Q2007
1Q2008
2Q2008
3Q2008
Net Debt (USDbn) Working capital (USDbn)
Current steel market deterioration expected to significantly reduce
The USD5.4bn increase of working capital during Q3… …expected to reverse in Q4 2008 and Q1 2009
24
p g yworking capital requirement
Focusing on net debt reduction
CAPEX plan (USD billion) M&Ap ( ) M&A • Less than USD 0.6bn outstanding
commitments
Base Dividend 2009
Growth CAPEX adjustment
Growth CAPEX realisedMaintenance CAPEX
Buy-back program
• Exceptional buy-back program basically l t d
• Base dividend maintained at 1.50 USD/share
2.42.9 2.5
1.52.0
completed• Annual buy-back program to be
implemented once debt reduction target achieved
2.1 2.2 2.5 3.0 3.0
2005 2006 2007 2008E 2009E
Targeting USD 10bn of Net Debt reduction by end of 2009 to increase financial flexibility
25
Targeting USD 10bn of Net Debt reduction by end of 2009 to increase financial flexibility
Divisional highlights
26
Flat Carbon Europe
Steel shipments (Mt) EBITDA (USD million)Average steel selling price (USD/t)
-16 9%*
+4.1%*
-15.1%*
7.809.88
8.21 1,8212,146
1 368
16.9%
8611,081 1,125
Q3 2007 Q2 2008 Q3 2008
1,368
Q3 2007 Q2 2008 Q3 2008Q3 2007 Q2 2008 Q3 2008
222 USD/t of EBITDA in Q3 2008
27• 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)
* Compared to Q2 2008
Steel Services and Solutions
Steel shipments (Mt) EBITDA (USD million)Average steel selling price (USD/t)
-24.9%*+14.0%*+14.4%*
3.52
5.69
4.27390
342999
1,1901,361
Q3 2007 Q2 2008 Q3 2008
153
Q3 2007 Q2 2008 Q3 2008Q3 2007 Q2 2008 Q3 2008
91 USD/t of EBITDA in Q3 2008
28• 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
* Compared to Q2 2008
Long Carbon Steel
Steel shipments (Mt) EBITDA (USD million)Average steel selling price (USD/t)
-17.4%*+16.2%* +5.7%*
2,2582,137
5.66
8.106.69
801
1,0831,258
1,080
Q3 2007 Q2 2008 Q3 2008Q3 2007 Q2 2008 Q3 2008
801
Q3 2007 Q2 2008 Q3 2008
338 USD/t of EBITDA in Q3 2008
29• 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 beentransferred 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)
* Compared to Q2 2008
Stainless Steel
Steel shipments (Mt) EBITDA (USD million)Average steel selling price (USD/t)
-15.7%*-7.9%*
0.43
0.580.49
249
390
225
-36.2%*
4,182 4,299 3,960
Q3 2007 Q2 2008 Q3 2008
225
Q3 2007 Q2 2008 Q3 2008Q3 2007 Q2 2008 Q3 2008
511 USD/t of EBITDA in Q3 2008
30
* Compared to Q2 2008
Asia, Africa and CIS
Steel shipments (Mt) EBITDA (USD million)Average steel selling price (USD/t)
+25.1%* +18.1%*
5.26
3.883.34
1,6351,385
935
-14.0%*
641855
1,070
Q3 2007 Q2 2008 Q3 2008
935
Q3 2007 Q2 2008 Q3 2008Q3 2007 Q2 2008 Q3 2008
490 USD/t of EBITDA in Q3 2008
31• 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 Europesegment.
• 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)
* Compared to Q2 2008
Flat Carbon Americas
Steel shipments (Mt) EBITDA (USD million)Average steel selling price (USD/t)
-7.0%** +44.8%*+25.2%*
707881
1,1032,435
1 682
6.89 7.40 6.88
707
Q3 2007 Q2 2008 Q3 2008
1,682
1,104
Q3 2007 Q2 2008 Q3 2008Q3 2007 Q2 2008 Q3 2008
354 USD/t of EBITDA in Q3 2008
32• 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)
* 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%)
Guidance
33
Guidance for Q4 and FY 2008
ArcelorMittal EBITDA*ArcelorMittal EBITDA*
USD19.4bn
USD24.2-24.7bn
USD16bn USD14.9bn USD15.3bn
USD19.4bn
Due to increased voluntary production cuts, EBITDA expected to be between USD 2 5bn and USD 3bn in Q4 2008
2004 2005 2006 2007 2008 Guidance
34
between USD 2.5bn and USD 3bn in Q4 2008*Proforma 2004, 2005 and 2006
Q&A
35