1. No category

3Q 2014 Results
Lakshmi N Mittal, Chairman and Chief Executive Officer
Aditya Mittal, Chief Financial Officer
7 November 2014
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. Forwardlooking 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, 2013 filed with the SEC and with respect to Items 3, 4, 5, 6 and 18 of
such Annual Report on Form 20-F, such Items have been retrospectively adjusted to reflect the
retrospective application of changes in its segment information, which can be found in the current
report on Form 6-K filed with the SEC on August 5, 2014. ArcelorMittal undertakes no obligation
to publicly update its forward-looking statements, whether as a result of new information, future
events, or otherwise.
1
Agenda
• Results overview and recent developments
• Market outlook
• Results analysis
• Outlook and guidance
2
Safety focus
Health & Safety Lost time injury frequency (LTIF) rate*
Mining & steel, employees and contractors
Health and safety performance
• Safety improvement: LTIF rate of 0.78x in
3.1
3Q’14 vs 0.87x in 2Q’14 and 0.84x in 3Q’13
2.5
• The Company’s effort to improve the
1.9
Group’s Health and Safety record will
1.8
continue
1.4
1.0
0.85 0.85 0.87 0.78
• The Company is focused on further
reducing the rate of severe injuries and
fatality prevention
2007 2008 2009 2010 2011 2012 2013 1Q’14 2Q’14 3Q’14
Our goal is to be the safest Metals & Mining company
* LTIF = Lost time injury frequency defined as Lost Time Injuries per 1.000.000 worked hours; based on own personnel and contractors
3
Focus on value drivers delivering results
 Capturing volume recovery in core steel markets
3Q 14 progress vs 3Q 13:
 Margin restoration through cost optimization and
operational improvement
• Steel shipments +3.9%
 Franchise development through R&D driven
product innovation and targeted investment
• Marketable IO shipments +6.3%
 Lower mining costs through expanded volumes
 Reducing net debt remains a priority
(USDm) unless otherwise shown
• EBITDA/t +$6 to $89/t
• Mining cash costs on track for 7%
reduction FY14 v FY13
3Q'14
2Q'14*
3Q'13
9M'14*
9M'13**
Iron ore shipments at market price (Mt)
10.0
10.5
9.4
29.9
24.9
Steel Shipments (Mt)
21.5
21.5
20.7
63.9
62.1
20,067
20,704
19,643
60,559
59,592
1,905
1,763
1,713
5,422
4,978
22
52
(193)
(131)
(1,318)
Sales
EBITDA
Net income / (loss)
Steel EBITDA margins up $19/t YoY
* EBITDA in 2Q’14 was negatively impacted by $90m following the settlement of US antitrust litigation ** EBITDA in 9M’13 included the positive impact of a $47m fair valuation gain
relating to the acquisition of an additional ownership interest in DJ Galvanizing in Canada and $92m of DDH income.
4
Recap
Steel margin expansion
• Steel only EBITDA/t increased $19/t vs. 3Q’13
 NAFTA $1/t improvement YoY – improved pricing and volume offset by higher costs
 Brazil segment lower – weak domestic market offset in part by higher slab exports
 Europe $20/t improvement YoY – benefiting from lower cost and higher volume
 ACIS $30/t improvement – driven by Kazakhstan and Ukraine turnaround
Steel segment EBITDA per tonne (US$)
NAFTA
Brazil*
+1%
-16%
72
3Q’13
73
3Q’14
194
3Q’13
Europe
ACIS
+61%
+88%
162
33
3Q’14
3Q’13
53
64
34
3Q’14
3Q’13
3Q’14
Developed markets profitability improving; ACIS turnaround progressing
* Brazil includes Brazil and neighbouring countries
5
Mining volumes driving lower costs
• Growth: market priced iron ore shipments +6.3% YoY in Q3; +20.1% YoY for 9M’14
 AMMC: Benefitting from expanded capacity; Shipping at near full capacity in 3Q’14 after
minor operational issues; 23.5Mt expected in 2014
 Liberia: production and shipments on target for 5Mt in 2014; Phase 2 expansion
currently progressing at a slower pace due to contractors declaring force majeure
• Costs: overall mining costs reduction of 7% in 2014 vs. 2013
IO marketable shipments (Mt)
IO marketable shipments (Mt)
+6.3%
+15%
35
25
2010
28
29
2011
2012
2013
9.4
2014F
Mining cash cost index
10.3
9.3
-7%
10.5 10.0
3Q’13 4Q’13 1Q’14 2Q’14 3Q’14
2013
2014F
Continued mining volume growth and cost progress
6
Auto franchise developments
• Fortiform® launched
–
–
New range of cold-formable high strength steels
Complements our existing Advanced High Strength Steels
(AHSS) offering which includes Usibor® and Ductibor®
• Steel to remain the material of choice for auto
–
–
–
ArcelorMittal’s AHSS offering allows for significant weight
savings while improving safety
Helps customers meet their sustainability requirements in
order to meet future regulations on tailpipe emissions
Recent information released by major OEMs supports the
case for steel remaining the material of choice
Chevrolet recently launched AHSS-intensive
“toughnology” concept for the 2015 Silverado
New Volvo XC-90
Committed to producing innovative steel solutions for our automotive customers
7
Focussed M&A: creating value
• Gallatin JV sale
–
Sale of 50% interest in Gallatin JV to Nucor
–
Generating $385m cash in 4Q’14
–
Exit of a non-consolidated, non-core business
–
Non franchise business
–
Premium exit valuation
$4.3
billion
cash
proceeds
since
Sept
2011*













MacArthur Coal stake
BNA stake
Erdemir (½ of interest sold)
Skyline
Enovos
Paul Wurth
AMMC stake
CLN
Kiswire
ATIC
Circuit Foil
Valin
Gallatin
• NAFTA portfolio upgrade
–
–
–
Gallatin stake sale accommodated investment
in Calvert**
Calvert is a state-of-the-art facility orientated
towards high-margin end markets
Maintained group financial discipline and
deleveraging objectives
AM/NS Calvert: Pickling line
Disciplined M&A capturing value creating opportunities
* Gallatin JV sale completed in 3Q’14. Cash proceeds from sale received in 4Q’14 ** ArcelorMittal acquired Calvert through a 50:50 JV with Nippon Steel for total consideration of
$1.55bn. Transaction was largely financed through debt at the JV level, while ArcelorMittal and Nippon Steel each only contributed ~$258m of equity to the JV.
8
Leading indicators remain positive
ArcelorMittal weighted global manufacturing PMI*
Global apparent steel consumption (ASC)
growth forecast in 2014** (v 2013)
US
8.25-8.75%
EU28
3.0-3.5%
China
Brazil
CIS
(latest data point: Oct’14: 52.7)
Global
1.5-2.0%
-4.5 to -5%
-3.0 to -3.5%
2.25-2.75%
PMI above 50 continues to point to further improved demand
Source: * Markit. Purchasing managers indices for over 40 countries weighted by share of ArcelorMittal finished steel deliveries. ** ArcelorMittal estimates
9
Financial results
EBITDA bridge from 2Q’14 to 3Q’14
($million)
Steel impact
Mining impact
(2)
(108)
200
(29)
1,905
Forex***
3Q’14
EBITDA
1,853
(9)
90
1,763
2Q’14
EBITDA
US
litigation*
Underlying Volume & Price / Cost Volume & Price / Cost
2Q’14
Mix - Steel
- Steel** Mix - Mining - Mining
EBITDA
EBITDA improved 2.8% 3Q’14 vs. 2Q’14 (excluding US litigation costs)
* Relates to $90m charge following the settlement of antitrust litigation in the United States ** Includes non-steel EBITDA *** Includes translation losses on foreign exchange
11
EBITDA to net results
3Q 2014
($ million)
Includes $315m forex losses
and $161m Brazilian federal
tax amnesty*
Weighted Avg No of shares: 1,792
EPS = $ 0.01/share
(946)
54
1,905
(338)
959
(657)
18
EBITDA
D&A
Operating
Income
Income from
equity
Net interest
expense
4
Forex and Pre-tax income Taxes and
other Fin. Cost
non-controlling
interest
22
Net income
2Q 2014
Weighted Avg No of shares: 1,791
EPS = $ 0.03/share
(931)
118
1,763
832
(383)
(327)
240
(188)
52
3Q’14 net income positive
* During 3Q’14, the Company settled an amnesty programme in Brazil in relation to Siderbras case and recorded other financing charges for an amount of $161 million out of which
$82 million settled with tax losses and the remainder over 30 monthly instalments.
12
EBITDA to free cash flow
3Q 2014 free cash flow waterfall ($ million)
(576)
1,905
Change in
working
capital
Net financial
cost, tax
expense, and
others*
(828)
Capex
501
(949)
(448)
EBITDA
Cashflow from
operations
Free cashflow
Negative free cash flow during 3Q’14
* Includes pension expense, non cash items etc.
13
Net debt analysis
3Q 2014 net debt analysis ($ million)
381
428
61
17,770
448
17,430
Net debt
at 2Q’14
Free cashflow
M&A*
Dividends**
Forex & others
Net debt
at 3Q’14
Net debt increased due to working capital investment & dividends offset by forex
Net debt refers to long-term debt, plus short term debt, less cash and cash equivalents, restricted cash and short-term investments *M&A primarily relates to net proceeds from
Circuit Foil ** Dividends include $328 million paid to ArcelorMittal shareholders and $53 million paid to minority shareholders.
14
Outlook and guidance
 Operating conditions remain generally favorable. The impact of declining
iron ore prices on Mining segment profitability is being offset by
improvement in the steel business
 The Company reiterates its guidance for EBITDA in excess of $7.0 billion
in 2014
 Net interest expense is expected to be approximately $1.5 billion for
2014 down from previous $1.6 billion guidance
 2014 capital expenditure is expected to be approximately $3.8 billion
 The Company maintains its medium term net debt target of $15 billion
The Company still expects FY 2014 EBITDA to be greater than $7.0 billion
15
Appendix
Selective steel projects:
AM/NS Calvert JV
AM/NS Calvert announced two important investment projects that will further enhance the
capabilities of the world’s most advanced steel finishing facility in Calvert, Alabama
•
Slab yard expansion to increase Calvert’s slab
staging capacity and efficiency ($40m):
–
–
–
The current HSM consists of 3 bays with 335kt
capacity for incoming slabs (less than the
staging capacity required to achieve the 5.3Mt
target)
Includes additional overhead cranes, foundation
work and structural steel erection, to increase
the staging and storage capacity in support of
achieving full capacity
Project completion expected in 2Q 2016
•
Investment in the existing No.4 continuous
coating line:
–
–
–
Increases ArcelorMittal’s North American
capacity to produce press hardenable
steels,  one of the strongest steels used in
automotive applications, Usibor®, a type
one aluminum-silicon coated (Al Si) high
strength steel
AM/NS Calvert will also be capable of
producing Ductibor®, an energy-absorbing
high strength steel grade designed
specifically to complement Usibor® and
offer ductility benefits to customers
The modifications are expected to be
complete by the end of 2014 and the first
coil is targeted for production in early 2015
Investment in Calvert to further enhance automotive capabilities
17
17
Selective steel projects:
Monlevade (Brazil segment)
Billet charging table
Monlevade expansion project in Brazil restarted:
•
•
•
Phase 1 (approved) focuses on downstream facilities and
consists of:
– a new wire rod mill in Monlevade with additional capacity of
1,050ktpy of coils with capital expenditure of $280m;
– Juiz de Fora rebar capacity increase from 50 to 400ktpy
(replacing some wire rod production capacity) and meltshop
capacity increase by 200ktpy
Expected completion in 2015
A decision whether to invest in Phase 2 of the project, focusing on
the upstream facilities in Monlevade (sinter plant, blast furnace
and meltshop), will be taken at a later date
Hangar of the rolling mill # 3
Intermediate mill
Vertical stands
Wire rod mill
Expansion supported by improved market for long products in Brazil
18
18
Selective steel projects:
Acindar (Brazil segment)
New rolling mill at Acindar (Argentina):
•
•
New rolling mill (Huatian) in Santa Fe province to
increase rebar capacity by 0.4mt/year for civil
construction market:
– New rolling mill will also enable Acindar to optimize
production at its special bar quality (SBQ) rolling mill
in Villa Constitución, which in future will only
manufacture products for the automotive and mining
industries
Estimated capital expenditure of ~$100m and completion
in 2016
Progress update
• Equipment import: Rolling mill Huatian received at
Acindar
• Disassembly of the existing rolling mill (from March to
July): electrical disassembly at 65%, mechanical
disassembly at 35%
Expansion supported by improved construction market in Argentina
19
19
Selective steel projects:
Dofasco (NAFTA)
Cost optimization, mix improvement and increase of shipments of
galvanized products:
•
Phase 1: New heavy gauge galvanize line (#6 Galvanize Line):
– Restart construction of heavy gauge galvanizing line #6 (cap.
660ktpy) and closure of line #2 (cap. 400ktpy)  increased
shipments of galvanized sheet by 260ktpy, along with improved mix
and optimized cost
– Line #6 will incorporate AHSS capability part of program to
improve Dofasco’s ability to serve customers in the automotive,
construction, and industrial markets
– Expected completion in 2015
•
Phase 2: Approved Galvanized line conversion:
– Restart conversion of #4 galvanize line to dual pot line (capacity
160ktpy of galvalume and 128ktpy of galvanize products) and
closure of line #1 galvanize line (cap.170ktpy of galvalume) 
increased shipments of galvanized sheet by 128ktpy, along with
improved mix and optimized cost.
– Expected completion in 2016
Expansion supported by strong market for galvanized products
20
20
Selective steel projects:
VAMA-JV with Hunan Valin
• VAMA: JV between ArcelorMittal and Hunan Valin which will
produce steel for high-end applications in the automobile
industry, supplying international automakers and first-tier
Chinese car manufacturers as well as their supplier networks
for rapidly growing Chinese market
• Construction of automotive facility, the main components are:
– State of the art pickling tandem CRM (1.5mt)
– Continuous annealing line (0.9mt), and
– Hot dip galvanizing line (0.5mt)
• Capital expenditure of ~$832 million (100% basis)
• First automotive coils targeted for 1Q 2015
Robust Chinese automotive market: > 50% growth to 25 million vehicles by 2018
21
21
Continued growth in developed markets
Global apparent steel consumption (ASC)*
(million tonnes per month)
65
US and European apparent steel consumption (ASC)**
(million tonnes per month)
19
Developing ex China
China
Developed
EU28
17
55
USA
15
45
13
11
35
9
7
25
5
(latest data point: Sept ‘14)
•
•
•
•
Global ASC -2.2% in 3Q’14 vs. 2Q’14
Global ASC +1.6% in 3Q’14 vs. 3Q’13
China ASC -2.6% in 3Q’14 vs. 2Q’14
China ASC -0.5% in 3Q’14 vs. 3Q’13
(latest data point: Sept’14)
3
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
15
•
•
•
•
US ASC +0.9% in 3Q’14 vs. 2Q’14
US ASC +10.2% in 3Q’14 vs. 3Q’13
EU ASC -8.7% in 3Q’14 vs. 2Q’14
EU ASC +1.7% in 3Q’14 vs. 3Q’13
Year-on-Year growth in core markets continued in 3Q’14
* ArcelorMittal estimates; ** AISI, Eurofer and ArcelorMittal estimates
22
Global indicators remain positive
•
Global manufacturing output has continued to
expand in our key markets, but manufacturing
PMIs suggest the pace of expansion has
moderated.
•
US manufacturing output picked up to 3.9% yo-y in 3Q’14 from 3.5% in 2Q’14 and
composite manufacturing PMI** increased to
57.1 in September.
•
EU28 manufacturing growth eased to 0.4% yo-y in August. “Flash” manufacturing PMI
ticked up to 50.7 in October.
•
In China, industrial output rebounded to 8.0%
y-o-y in September from 6.9% in August and
the composite manufacturing PMI** averaged
51.0 in Q3.
•
Both Brazil and Russia face significant
headwinds. Brazil’s manufacturing PMI
remains below 50 indicating further
contraction.
(latest data point: Oct’14: 52.7)
Global indicators signal continued growth in developed markets in 4Q’14
Source: *Markit. ArcelorMittal estimates
** Composite manufacturing PMIs is an average of the Markit and ISM for the US and Markit and China Federation of Logistics and Purchasing for China
23
US construction growth continues;
Europe easing back
US residential and non-residential construction indicators
(SAAR) $bn*
750
700
650
600
550
500
450
400
350
300
250
200
•
– Total construction spending fell slightly in
August, bringing the y-o-y growth rate
down to 5%.
(latest data point: Aug’14)
– Non-residential is growing more strongly
than residential, up 6.4% ytd
Residential
Non-residential
– Strength is likely to persist as the
Architecture Billings Index picked up to
55.2 in September.
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
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Eurozone and US construction indicators**
65
Expansion
Eurozone construction PMI
•
European construction easing back
USA Architectural Billings Index
– Eurozone construction PMI remains below
50, rising only slightly to 43.1 in
September.
60
55
50
– In contrast, EU28 construction growth
actually picked up in August to 2.2% y-o-y.
45
40
35
30
(latest data point: Aug’14)
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Contraction
US growth continues in 3Q’14
– Output in 2014 expected to be higher than
2013, led by growth in Germany, Poland
and the UK. Construction in Southern
Europe remains weak despite a pick up
from low levels in Spain.
Construction gradually improving
* Source: US Census Bureau; ** Source: Markit and The American Institute of Architects
24
Chinese industrial growth stable
China infrastructure investment 3mma* (Y-o-Y)
75%
•
Industrial output growth slowed from 8.9% (2Q’14) to
8% in 3Q’14 but Manufacturing PMI has rebounded
slightly indicating stabilised growth in 4Q’14
•
Infrastructure investment continues to grow robustly at
15% y-o-y in 3Q’14 but has slowed from rapid growth
rates seen in the second quarter (+24% y-o-y)
•
Despite a loosening of purchase restrictions in many
cities, and a relaxation of lending rules for
homebuyers:
(latest data point: Jul’14)
60%
45%
30%
15%
0%
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
-15%
Crude steel finished production and inventory (mmt)
120
100
Steel inventory at warehouses (RHS)
Finished steel production (LHS)
Steel inventory at mills (RHS)
80 (latest data point: Jul’14)
21
15
–
The real estate market remains oversupplied, with
vacant floor space at record levels.
–
Newly started construction was down 9.3% y-o-y
in Jan-Sep’14, while property sales declined by
8.6% y-o-y over the same period.
•
Flat products demand continues to be supported by
strong demand from auto, and stabilising shipbuilding
after two years of decline.
•
Steel production data indicates that output continued
to grow in 3Q’14 but mainly due to rising exports.
•
Warehouse inventories to historical lows in days of
supply, but partially offset by still high inventory at
mills.
9
40
6
20
3
0
0
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Prices declined m-o-m in 68 out of 69 cities.
18
12
60
–
Chinese economy growth slows with steel demand impacted by weak real estate
*Mma refer to months moving average. Source: NBS, CISA, WSA, Mysteel, ArcelorMittal Strategy estimates
25
Growth in developed market inventory slows
US service centre total steel Inventories (000 MT)
German inventories (000 MT)
2,500
(latest data point: Aug’14)
Germany Flat Stocks
Months Supply (RHS)
2,000
5
14,000 (latest data point: Sep’14)
12,000
4
3.6
3.4
3.2
3.0
2.8
2.6
2.4
2.2
2.0
USA (MSCI)
Months Supply
10,000
1,500
3
1,000
2
8,000
6,000
4,000
0
0
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
0
2,000
China service centre inventories* (Mt/mth) with ASC%
Brazil service centre inventories (000 MT)
Flat stocks at service centres
Months of supply (RHS)
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
1,400 (latest data point: Sept’14)
1,300
1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
0
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
22
20
18
16
14
12
10
8
6
4
2
(latest data point: Sept’14)
Flat and Long
% of ASC (RHS)
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
1
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
500
Slow rebound in inventory is supporting demand growth in developed market
Source: WSA, Mysteel, ArcelorMittal Strategy estimates
26
Global apparent steel consumption
China
EU28
+1.52%
+70%
+9%
800
700
600
500
400
300
200
100
0
2007 2008 2009 2010 2011 2012
2013
2014F
NAFTA
160
220
200
180
160
140
120
100
80
60
40
-30%
2007 2008 2009 2010 2011 2012
Rest of World*
+8.258.75%
-9%
-2%
140
120
100
80
60
40
2007 2008 2009 2010 2011 2012
2013
2014F
+33.5%
+1%
2013
+11%
+2%
+3%
550
500
450
400
350
300
250
200
150
100
50
2007 2008 2009 2010 2011 2012
2014F
2013
2014F
Estimated 2014 ASC growth of 2.25-2.75%
ArcelorMittal estimates; * World ex. China, NAFTA and EU28
27
Raw material prices stabilizing
Spot iron ore, coking coal and scrap price
(index IH 2008=100)*
Regional steel price HRC ($/t)
(latest data point: Oct’14)
130
Spot Iron Ore
Coking Coal
Scrap
120
110
100
(latest data point: Oct’14)
1300
China domestic Shanghai (Inc 17% VAT)
1200
N.America FOB Midwest
1100
N.Europe domestic ex-works
90
1000
80
900
70
800
60
700
50
500
20
400
Jan 08
Apr 08
Jul 08
Oct 08
Jan 09
Apr 09
Jul 09
Oct 09
Jan 10
Apr 10
Jul 10
Oct 10
Jan 11
Apr 11
Jul 11
Oct 11
Jan 12
Apr 12
Jul 12
Oct 12
Jan 13
Apr 13
Jul 13
Oct 13
Jan 14
Apr 14
Jul 14
Oct 14
30
Jan 08
Apr 08
Jul 08
Oct 08
Jan 09
Apr 09
Jul 09
Oct 09
Jan 10
Apr 10
Jul 10
Oct 10
Jan 11
Apr 11
Jul 11
Oct 11
Jan 12
Apr 12
Jul 12
Oct 12
Jan 13
Apr 13
Jul 13
Oct 13
Jan 14
Apr 14
Jul 14
Oct 14
600
40
Coking coal stable during the quarter; iron ore and scrap declined
* Source data: ArcelorMittal estimates; Platts
28
Balance sheet  structurally improved
Average maturity (years)
Net debt ($ billion)
32.5
6.1
-45%
17.8
2.6
3Q 2008
3Q 2014*
Liquidity ($ billion)
3Q 2008
3Q 2014
Bank debt as component of total debt (%)
12.0
84%
10.2
10%
3Q 2008
3Q 2014
3Q 2008
3Q 2014
Balance sheet fundamentals improved
Net debt refers to long-term debt, plus short term debt, less cash and cash equivalents, restricted cash and short-term investments (including those held as part of asset/liabilities
held for sale). *As at September 30, 2014, net debt includes $0.1 billion from distribution centers in Europe held for sale
29
Working capital
OWCR and rotation days* ($ billion and days)
28
120
24
90
20
16
54
60
12
8
30
4
Working capital ($ billion) - LHS
3Q 14
2Q 14
1Q 14
4Q 13
3Q 13
2Q 13
1Q 13
4Q 12
3Q 12
2Q 12
1Q 12
4Q 11
3Q 11
2Q 11
1Q 11
4Q 10
3Q 10
2Q 10
1Q 10
4Q 09
3Q 09
2Q 09
1Q 09
4Q 08
3Q 08
2Q 08
1Q 08
4Q 07
3Q 07
2Q 07
0
1Q 07
0
Rotation days - RHS
Business will invest in working capital as conditions necessitate
* Rotation days are defined as days of accounts receivable plus days of inventory minus days of accounts payable. Days of accounts payable and inventory are a function
of cost of goods sold of the quarter on an annualized basis. Days of accounts receivable are a function of sales of the quarter on an annualized basis.
30
Net debt
Net Debt ($ billion) & Net Debt/LTM reported EBITDA* Ratio (x)
35
4.0
30
3.0
25
2.4
20
2.0
15
10
1.0
5
Net Debt ($ billion) - LHS
3Q 14
2Q 14
1Q 14
4Q 13
3Q 13
2Q 13
1Q 13
4Q 12
3Q 12
2Q 12
1Q 12
4Q 11
3Q 11
2Q 11
1Q 11
4Q 10
3Q 10
2Q 10
1Q 10
4Q 09
3Q 09
2Q 09
1Q 09
4Q 08
3Q 08
2Q 08
1Q 08
4Q 07
3Q 07
2Q 07
0.0
1Q 07
0
Net Debt / LTM EBITDA
Net debt increased by $0.4bn due to WC investment & dividends partly offset by forex
* Based on last twelve months (LTM) reported EBITDA. Figures prior to 1Q’12 have not been recast on quarterly basis for adoption of new accounting standards
implemented from 1.1.13
31
Liquidity and debt maturity profile
Liquidity at September 30, 2014 ($ billion)
10.2
Debt maturities ($ billion)*
9.7
10
Commerical
9
Other
8
Unused credit lines
6.0
Bonds
7
6
5
4
Cash
4.2
2.1
0.1
1.7
0.3
Liquidity
at 30/9/14
Liquidity lines:
Debt due
in 2014
Commercial paper
Bonds
Other loans
3
2.1
2.3
2014
2015
2.6
2.9
2.3
2
1
0
2016
Debt maturity:
• $3.6bn syndicated credit facility matures 18/03/16 • Continued strong liquidity
• $2.4bn syndicated credit facility matures 06/11/18 • Average debt maturity  6.1 years
2017
2018
>2018
Ratings
• S&P – BB+, negative watch
• Moody’s – Ba1, negative outlook
• Fitch – BB+, stable outlook
Continued strong liquidity position and average debt maturity of 6.1 years
* On October 30, 2014, the Company redeemed its 9.0% Notes due February 15, 2015 and its 3.750% Notes due February 25, 2015 prior to their scheduled maturity. For
purposes of the Company’s debt maturity profile table, these two issuances have been excluded from 2015 debt repayments and included in 2014 debt repayments.
32
Segment highlights
Segmental EBITDA* (US$mn)
Own iron ore prod
Iron ore (mt)
Shipped at market price
Shipped at cost plus
+73%
700
600
+3%
20
20
15
15
-48%
-8%
500
400
300
9.4
10
+90%
6.8
100
10.0
6.2
7.1
10
6.3
4.2
5
0
0
NAFTA
Brazil
Europe
ACIS
4Q’13
1Q’14
2Q’14
3Q’14
Segmental EBITDA/tonne (US$/t)
250
+6%
12,000
0
3Q’13
Mining
Segmental shipments (kt)
200
10,000
8,000
10.5
9.3
5
200
10.3
+2%
6,000
150
+11%
+1%
4,000
100
50
2,000
0
0
NAFTA
3Q’13
Brazil
4Q’13
Europe
1Q’14
2Q’14
ACIS
3Q’14
3Q’13
4Q’13
1Q’14
NAFTA
Brazil
Q2’14*
Europe
Q3’14
ACIS
Improving YoY segment performance except Brazil and Mining
* Segmental figures shown above include one time adjustments; NAFTA EBITDA in 2Q 2014 of $177m included the negative impact from settlement of US litigation $90m
33
NAFTA
EBITDA ($ Millions) and EBITDA/t
$72/t
$31/t
$73/t
Analysis 3Q’14 v 2Q’14
$59/t
$50/t
-13%
+2.8%
417
429
993
865
3Q’14
9M’13
9M’14*
177
3Q’13
2Q’14*
•
Crude steel production up 5.4% primarily
due to completion of BF reline in Indiana
Harbor No.7 in 3Q’14
•
Steel shipments up 1.3% driven by:
•
+2.9% increase in flat products
reflecting improved demand
•
-1.8% decrease in long products
•
Average steel selling prices (ASP) down
0.4% driven by:
•
-3.1% decrease in long products and
remained stable for flat products
•
EBITDA up 142.2%:
•
2Q’14 was negatively impacted by
$90 million litigation costs as well as
residual costs associated with severe
winter incurred in 1Q’14 (circa $150
million)
Due to severe
weather
impact
Average steel selling price $/t
+4.3%
818
3Q’13
856
2Q’14
+2.3%
853
3Q’14
831
849
9M’13
9M’14
Steel shipments (000’t)
+3.0%
+1.6%
5,774
5,790
5,866
16,772
17,269
3Q’13
2Q’14
3Q’14
9M’13
9M’14
NAFTA profitability improved 3Q’14 v 2Q’14
* EBITDA in 2Q’14 of $177 million was negatively impacted by $90 million following the settlement of US antitrust litigation; as well as residual costs associated with severe
winter in 1Q’14 (~$150 million) ;total 1H’14 weather impact (~$350 million)
34
Brazil
EBITDA ($ Millions) and EBITDA/t
$194/t
$179/t
$162/t
Analysis 3Q’14 v 2Q’14
$188/t
$174/t
•
-7.1%
-7.5%
restart of ArcelorMittal Tubarao blast
498
414
460
1,398
1,299
3Q’13
2Q’14
3Q’14
9M’13
9M’14
furnace No.3 on July 6, 2014
•
Average steel selling price $/t
-3.1%
934
Steel shipments up 23% primarily on
account of higher slab shipments from Brazil
-3.0%
893
Crude steel production up 24.7% following
925
866
post restart of blast furnace No.3 at Tubarao
896
•
ASP down 7.3% driven by:
•
3Q’13
2Q’14
3Q’14
9M’13
9M’14
excluding mix impact
Steel shipments (000’t)
+11.1%
•
Due to BF3 Tubarao
restart
-1.9% decrease for flat products
-1.2% decrease for long products
+0.4%
•
2,559
2,312
2,844
7,453
7,481
3Q’13
2Q’14
3Q’14
9M’13
9M’14
EBITDA up 11.1%
Brazil profitability improved 3Q’14 v 2Q’14
35
Europe
EBITDA ($ Millions) and EBITDA/t
$33/t
$68/t
$53/t
Analysis 3Q’14 v 2Q’14
$42/t
$58/t
+44.1%
+72.6%
303
3Q’13
689
523
2Q’14
3Q’14
1,747
1,213
•
Crude steel production decreased by 0.9%
•
Steel shipments down 3.6% driven by:
•
9M’13
9M’14
long products respectively, following
Average steel selling price $/t
seasonally lower demand
-3.3%
786
3Q’13
799
2Q’14
2.2% and 5.9% decrease in flat and
-1.8%
804
760
3Q’14
789
9M’13
•
9M’14
ASP lower primarily due to euro weakness :
•
-5.4% decrease in flat products
•
-4.0% decrease in long products
Steel shipments (000’t)
•
+6.2%
+4.3%
EBITDA down 24.2% mainly driven by lower
shipments and the translation impact
following a weaker euro
9,257
10,191
9,829
28,795
30,029
3Q’13
2Q’14
3Q’14
9M’13
9M’14
Europe profitability declined 3Q’14 v 2Q’14
36
ACIS
EBITDA ($ Millions) and EBITDA/t
$34/t
$47/t
$64/t
Analysis 3Q’14 v 2Q’14
$28/t
$49/t
•
+81.8%
+89.5%
110
156
208
3Q’13
2Q’14
3Q’14
260
9M’13
Crude steel production was stable.
Production was higher in Kazakhstan and
Ukrainian, offset in part by lower South
473
African production following the on-going
reline at Newcastle blast furnace
9M’14
Average steel selling price $/t
•
-5.6%
-2.1%
Steel shipments down 2.3% primarily driven
by lower exports
607
592
594
619
584
•
3Q’13
2Q’14
3Q’14
9M’13
9M’14
lower sales of non-steel products and lower
Steel shipments (000’t)
steel shipment volumes
+0.7%
+3.3%
•
3,208
3,306
Sales decreased 13.3% primarily due to
3,229
9,413
9,722
EBITDA +33.7% mainly driven by improved
performance (prices and costs) in the CIS
countries
3Q’13
2Q’14
3Q’14
9M’13
9M’14
ACIS profitability improved 3Q’14 v 2Q’14
37
Mining
EBITDA ($ Millions)
Analysis 3Q’14 v 2Q’14
-21.4%
-47.9%
533
3Q’13
•
1,398
388
278
2Q’14
3Q’14
9M’13
to the rainy season in Liberia and minor
1,099
9M’14
operational issues in Canada
•
Iron ore (Mt)
20
5
shipments and lower Ukrainian shipments
9.4
10.5
10.0
6.8
6.2
7.1
24.9
29.9
18.2
17.5
0
3Q’13
Coal (000’t)
2Q’14
3Q’14
3
9M’13
9M’14
3.7
3.2
2.1
2.4
9M’13
9M’14
•
EBITDA 28.4% lower primarily due to lower
seaborne iron ore market prices, offset in
part by lower costs
8
6
2
0
40
20
0
1
Market price iron ore shipments decreased
4.8% due to seasonally lower Liberian
60
15
10
Own iron ore production declined 4.5% due
1.3
1.1
1.1
0.7
0.8
0.8
3Q’13
2Q’14
3Q’14
4
2
0
Own production
Shipped at market price
Shipped at cost plus
Mining profitability declined Q3’14 v Q2’14
38
Contacts
Daniel Fairclough – Global Head Investor Relations
[email protected]
+44 207 543 1105
Hetal Patel – UK/European Investor Relations
[email protected]
+44 207 543 1128
Valérie Mella – European and Retail Investor Relations
[email protected]
+44 207 543 1156
Maureen Baker – Fixed Income/Debt Investor Relations
[email protected]
+33 1 71 92 10 26
Lisa Fortuna – US Investor Relations
[email protected]
+312 899 3985