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Financial resultsfor the year ended December 2013
OVERVIEW
www.arcelormittalsa.com
Agenda
• Results overview and recent developments
• Results analysis
– Steel market overview
– Operating results
– Finance
– Other key issues and outlook
• Questions
2
OverviewCEO
OVERVIEW
www.arcelormittalsa.com
Safety - Journey to Zero
• Zero fatalities since August 2011
• Total injury frequency rate has been on a
decrease of 17%pa since 2002
• Safety Focus Areas
– Zero harm
– Visible felt leadership
– Fatality prevention standards
entrenched at all sites
– Contractor management
– Leading indicators
4
4,7
3,3
3,9
3,4
2,8
2,22,4
2,6
1,6
1,2
0,61 0,56
0
1
2
3
4
5
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Lost Time Injury Frequency Rate
(Employees and Contractors)
OVERVIEW
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Overview
EBITDA increased by 58% to R1.8bn
Headline loss reduced by 57% to R224m from R518m
Production optimisation increased capacity utilisation to 76%
Steel shipments decreased 8% with domestic sales down 6%
and exports contracting 14%
Marginal increase in cash cost despite higher raw material prices
Coke & Chemicals sustain EBITDA contribution due to increased despatches
EBITDA target of $100/t by end 2015 at $43/t to date
5
OVERVIEW
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Key recent developments
• Resolution to Kumba dispute with new Sishen supply agreement (SSA)
– Became operative January 2014 for maximum of 6.25mtpa of iron ore
– Price at Sishen cost plus 20% and pre-negotiated price for Thabazimbi for
2014 & 2015
– Settle all outstanding disputes with Kumba
– Constitutional Court appeal confirmed standing of Kumba as only competent party
that can apply for the 21.4% mining right
• Impairment
– Total impairment of R1 950m
– 96% stemming from AMSA exiting its operational involvement at Thabazimbi
6
OVERVIEW
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Key result drivers
H2’13 vs H1’13 2013 vs 2012
Flat steel product prices in Rand +3% +10%
Long steel product prices in Rand +2% +5%
Liquid steel production +5% nc
Total sales volume -1% -9%
Export sales volume +64% -14%
Domestic sales volume -17% -6%
HRC Rand cash cost per tonne +10% +4%
Billet Rand cash cost per tonne +7% +1%
Labour productivity +1% +2%
ZAR movement (average rate) +9% +18%
7
Steel Market OverviewCEO
www.arcelormittalsa.com
STEEL MARKET
OVERVIEW
Global macro-economic environment
• 2014
– IMF forecasting global economic growth at 3.6%
– China to continue with reform programme and
expected economic growth rate of 7.5%
• Major PMI’s above 50 since mid-2013
– Construction dominates global steel end usage
with 48% followed by machinery (24%) and
transport (11%)
– Only Europe and Japan has a low construction
weighting of 27% and 10% respectively
9
25
30
35
40
45
50
55
60
65China Eurozone USA Japan
Country / Region 2013 economic growth 2013 apparent steel consumption
China 7.7% 6.0%
Europe -0.4% -3.7%
USA 1.6% 0.7%
Africa 4.8% 4.3%
Sub-Saharan Africa 5.0% 5.5%
Global 2.9% 3.1%
*ArcelorMittal estimates ** Worldsteel.org. IMF, AfDB
Purchasing Managers' Index
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STEEL MARKET
OVERVIEWCommodity
Price change
in USD
Price change
in ZAR
Iron ore +4% +22%
Scrap -5% +12%
Pellets n/c +17%
Hard coking coal -22% -9%
Coke -43% -33%
Local coal -14% +2%
58%
5…
31%
39%
25%
42%
34%
0%
10%
20%
30%
40%
50%
60%
$450
$550
$650
$750
2009 2010 2011 2012 2013
HRC price margin over raw material basket
% available for other costs &
margin
Global environment – raw material prices
• Exchange rate absorbed the benefit of
international raw material prices
• Chinese coke prices dropped 43%, due to the
cancellation of the 40% export tax
• Excess Chinese steel capacity and slowing
economic growth expected to pressurise raw
material prices
• Potential cost savings
– SSA effective January and benefit should start to
show during 2014
– Tshikondeni mine closure at end 2014
– Coal prices and pellets expected to remain
constant in 2014
• Raw material basket at 66% of HRC price
10
HR
C C
hina
exp
ort (
fob
Sha
ngha
i $/t
)
Sources: Platts, AME, AMS and TEX Report
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STEEL MARKET
OVERVIEW
Domestic macro-economic environment
• SA’s economic growth in 2013 estimated
at 2.1%, a decline from 2.5% in 2012
• Reduced levels of government fixed
investment spend has a disproportionate
impact on demand for steel
• Stronger order book in most construction
companies
• PMI averaged around 50 in 2013
• Improved exports anticipated if the Rand
remains at current levels
-10
-5
0
5
10
15
GDP growth rate GFCF growth rate
Sources: SARB
Economic growth (%)
11
www.arcelormittalsa.com
STEEL MARKET
OVERVIEW
12%
5%
10%
16%20%
13%
24%
21%
18%
14,0
9,0
7,6
10,4
7,5
10,4
11,5
0%
5%
10%
15%
20%
25%
30%
0
4
8
12
16
2009 2010 2011 2012 2013
Domestic market – inventory levels (000t)
• Steel demand has grown 1% pa over
past 20 years, but -5% pa since 2007
• Building & construction industry remains
dominant consumer
• Stocks increased during 2013, ending
the year at 7.8 weeks of consumption
• Imports at record level of around 1.3mt
– Market share reached above 20% in
early 2013
– BOF fire resulted in 300kt being imported
– Quick recovery from incident resulted in
high stock levels at customers
• Final product imports added to the
already weak demand for primary
steel products
12
Des
patc
hes
(mt)
Source : SAISI actuals up to 2008, thereafter AMSA estimates
Imports
Wee
ks’ d
espa
tche
s
Imports as %
of apparent consumption
3,13,4 3,5
3,3 3,1
3,94,3 4,4 4,2 4,3
0,0
1,0
2,0
3,0
4,0
5,0
2009 2010 2011 2012 2013
AMSA domestic despatches
Estimated total domestic despatches
Operating ResultsCEO
www.arcelormittalsa.com
OPERATING
RESULTS
Production and shipment volumes
• Overall steel production maintained
despite BOF fire
– Flat output down 9% with Vdbp -11%
and Saldanha -4%
– Long volumes up 22% with Newcastle
adding 24% and Vereeniging +8%
• Shipments decreased to 4.2mt
– Domestic shipments shrunk by 6% as
result of the continued weak building,
construction and mining sectors
– 2013 saw record import effort with a 20%
import penetration due to the fire
– Exports slowed by 14% to minimise the
effect of the fire on local customers
14
3 4283 813
4 060
3 5543 229
1 879 1 860
1 393 1 5361 867
0
1 000
2 000
3 000
4 000
5 000
2009 2010 2011 2012 2013
Flat Long
2 078 2 336 2 468 2 223 2 003
7801 012 956
915768
994
1 078 1 0391 113
1 123
621615
245 371336
0
1 000
2 000
3 000
4 000
5 000
6 000
2009 2010 2011 2012 2013
Flat local Flat export Long local Long export
Production (000t)
Shipments (000t)
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OPERATING
RESULTS
Coke price ($/t)
Coke and Chemicals
• Chinese producers increased their
market share from 11% in 2007 to 30%
in 2013
• Electricity shortage in South Africa
remains key limitation and resulted in
market share loss to almost 30% from
49% in 2007
• 90% domestic share of commercial coke
market and 40% speciality chemicals
• Most of AMSA’s speciality chemicals
products are consumed by electrode
manufacturers (50%) and timber (20%)
and carbon black (15%) industries
15
0%
10%
20%
30%
40%
50%
0
10
20
30
40
2009 2010 2011 2012 2013
SS production FeCr consumption
SA market share China market share
0
100
200
300
400
500
600
0
100
200
300
400
500
600
700
2009 2010 2011 2012 2013
Commercial coke Speciality chemicalsCoke price
Sal
es v
olum
es (
000t
)P
rodu
ctio
n &
con
sum
ptio
n (m
t)
Global F
eCr
production market share
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OPERATING
RESULTS
Capital expenditure (Rm)
2011 2012 2013
Maintenance 708 598 1 045
Environment 89 128 350
Other 393 149 175
Total expenditure 1190 875 1 570
16
• Main ongoing projects during 2013
– Replacements/maintenance (67% of spend)
• Newcastle: Blast furnace gas holder (R26m). Replace scrubber demister (R59m) and blast furnace reline
procurement (R157m)
• Vanderbijlpark: Basic oxygen furnaces essential repair (R158m)
– Environment (22% of spend)
• Newcastle: Zero effluent discharge project (R263m)
• Vanderbijlpark: Coal water treatment plant (R27m) and blast furnace D stockhouse bag house (R60m)
– For 2014 the focus will be on:
• Newcastle: Blast furnace reline (R1.6bn), raw material handling and sinter plant, reline window of
opportunity projects
• Vanderbijlpark: Blast furnace D stockhouse bag house, coke oven battery tightness project, start up of
waste gas channel repair, abatement of Volatile Organic Compound emissions at the speciality
chemicals plant
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OPERATING
RESULTS
Environmental investment program
17
2007 2008 2009 2010 2011 2012 2013
Environmental R121m R220m R251m R293m R89m R128m R350m
Large projects • Waste
Disposal Site
(WDS) prep
VDBP
• Dam 10
clean up
VDBP
• Upgrade of
WDS
• Ground
water study
VDBP
• Fugitive dust
suppression
• Sinter clean
gas at VDBP
• VRN EAF
gas cleaning
• Waste water
treatment at
NC
• Sinter clean
gas at VDBP
• New disposal
site VDBP
• De-sulphur
project at NC
• ZED phase 1
at NC
• EAF gas
cleaning at
VRN
• De-sulphur
project at NC
• Sinter clean
gas at VDBP
• VDBP coal
water
treatment
plant
• VDBP BFD
stock house
bag house
• Newcastle
ZED
• Saldanha by-
product
storage area
• Coke oven
battery
tightness
program
• Coal water
treatment plant
• Blast furnace D
stock house
bag house
• Newcastle ZED
FinanceCFO
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FINANCE
Headline earnings (Rm)
2012 2013
Revenue 32 291 32 421
EBITDA 1 121 1 768
(Loss) / profit from operations (477) 47
Finance and investment income 60 108
Finance costs (334) (368)
Tax credit 184 51
Equity earnings / (loss) 59 (35)
Profit on disposal / scrapping of assets* (10) (27)
Headline (loss) (518) (224)
- In US$m (63) (23)
*After tax
19
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FINANCE
2013
Thabazimbi 1 878
Other 72
Total impairment 1 950
Impairment (Rm)
• Exiting operational involvement at Thabazimbi
– Asset retirement obligations R432m
– Buildings and infrastructure R56m
– Machinery, plant and equipment R336m
– Site preparation R1 054m
– Total R1 878m
20
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FINANCE
Main steel cost drivers (R/t liquid steel)
2012 2013 % change % weight
Iron ore and pellets 1 110 1 370 24% 23%
Scrap / DRI / HBI 193 242 25% 4%
Coking coal and other fuels 1 565 1 307 -17% 22%
Electricity 413 434 5% 7%
Other energy & utilities 199 206 3% 4%
Alloys, fluxes and coating materials 513 577 13% 10%
Refractories, electrodes and consumables 332 342 3% 6%
Manpower 541 559 3% 9%
Maintenance 390 347 -11% 6%
General expenses, outside services,professional fees, IS/IT and insurance premiums
573 544 -5% 9%
TotalLiquid steel (000t)Average exchange rate (ZAR)
5 8295 0908.21
5 9295 0979.65
2%n/c
18%
21
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FINANCE
2012 2013
Flat steel products (266) 135
Long steel products 770 1 198
Coke and Chemicals 503 514
Corporate and other 114 (79)
Total EBITDA 1 121 1 768
EBITDA margin 3.5% 5.5%
EBITDA from segments (Rm)
22
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FINANCE
2012 2013
Cash generated from operations 1 309 1 831
Working capital 713 (168)
Capex (875) (1 570)
Net finance cost (157) (157)
Investments (369) (53)
Tax (52) (220)
Dividend received 87
Proceeds on scrapping of assets 29 2
Realised forex (34) (128)
Increase / (repayment) of borrowings and finance lease (231) 674
Cash flow 420 211
Effect of forex rate changes on cash 25 96
Net cash flow 445 307
Cash in bankShort term loans
884(10)
1 191(906)
Net cash 874 285
Cash flow (Rm)
23
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FINANCE
Working capital movement (Rm)
2012 2013
Inventories 1 110 (1 775)
Finished products (78) (365)
Work-in-progress 540 (1 046)
Raw materials 678 (353)
Plant spares and stores (30) (11)
Receivables 714 (541)
Payables (881) 2 239
Utilisation of provisions (230) (91)
Working capital movement 713 (168)
24
www.arcelormittalsa.com
FINANCE
Sound balance sheet with focus on working capital management
• Low financial leverage
• Intra-month borrowing (peak-demands)
with sufficient/unutilised short term lines
– Improved payment terms provide flexibility
– Turnover of working capital improved to
84 days
• Metal stocks at Newcastle should reach
a high of 507 000t in Q1 2014 in
anticipation of reline
25
-
20
40
60
80
100
120
140
0
2 000
4 000
6 000
8 000
10 000
2009 2010 2011 2012 2013
0
100
200
300
400
500
2009 2010 2011 2012 2013 2014e
New
cast
le m
etal
sto
cks
(000
t)
*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 annualised basis. Days of accounts receivable are a function of sales of the quarter on an annualised basis.
Rotation days*
Wor
king
cap
ital (
Rm
)
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FINANCE
EBITDA history (Rm)
1 449
1 588
706
-221
648
987
3
82
817
224 238
-158
169
808
581
211
-R 300
R 0
R 300
R 600
R 900
R 1 200
R 1 500
R 1 800
2010 2011 2012 2013
26
www.arcelormittalsa.com
FINANCE
$100/t EBITDA target
$31
$20
$14
$6
$43
2012 EBITDA/t Improvementactions
BOF Incident Sales prices, costescalation andexchange rate
2013 EBITDA/t
27
Other Key Issues and OutlookCEO
www.arcelormittalsa.com
OTHER KEY
ISSUES AND
OUTLOOK
Well prepared for 2014
Competition matters
2014 summarised
• Impairment
• Tshikondeni provided for
• Operational stability has been demonstrated
• Operational optimisation at Vanderbijlpark in full swing
• Productivity increased
• Capacity utilisation moving up
• N5 reline fully prepared and on target
• AMSA internally strong
29
1
2
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OTHER KEY
ISSUES AND
OUTLOOK
Outlook
• Outlook for Q1 2014
– Improving environment for international steel prices
– Increased export sales at enhanced margins
– Positive headline earnings for Q1 2014
– Rand volatility remains a factor
30
Financial resultsfor the year ended December 2013Questions
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