arcelormittal - transforming tomorrow, lakshmi mittal investor presentation, paris 2007
Post on 13-Sep-2014
5.020 views
DESCRIPTION
TRANSCRIPT
Transforming tomorrow
11-13 September 2007 – Investor day – Paris
Lakshmi Mittal – President and Chief Executive Officer
1
DisclaimerForward-Looking Statements
This document may contain forward-looking information and statements about ArcelorMittal S.A. including Arcelor S.A.
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 Commission de Surveillance du Secteur Financier (“CSSF”), the Luxembourg securities regulator and the
U.S. Securities and Exchange Commission (“SEC”) made or to be made by ArcelorMittal or previously made by its
predecessor, Mittal Steel Company N.V. (“Mittal Steel”). ArcelorMittal undertakes no obligation to publicly update itsforward-looking statements, whether as a result of new information, future events, or otherwise.
Additional Information
In connection with the proposed merger of ArcelorMittal with Arcelor, Mittal Steel, ArcelorMittal and Arcelor have filed
and will file important documents with the relevant securities regulatory authorities, including the filing with the U.S.
Securities and Exchange Commission of a registration statement that will include a proxy statement/prospectus. The proxy statement/prospectus will contain important information about the merger and related matters. ArcelorMittal and
Arcelor will make public such proxy statement/prospectus and mail the proxy statement/prospectus to the ArcelorMittal
U.S. shareholders. Additionally, a proxy statement/prospectus will be filed with the CSSF for European
shareholders. Investors and security holders are urged to read the applicable proxy statement/prospectus, and any
other relevant documents filed with the relevant securities regulatory authorities, when they become available and before making any investment decision. U.S. shareholders will be able to obtain a free copy of the U.S. proxy
statement/prospectus (when available) and other related documents filed with the SEC by ArcelorMittal (and Mittal
Steel as its predecessor) and Arcelor at the SEC’s web site at www.sec.gov and from ArcelorMittal and Arcelor at
www.arcelormittal.com. European shareholders will be able to obtain the European proxy statement/prospectus (when available) and the related documents at the registered office of Arcelor and ArcelorMittal and at www.arcelormittal.com.
2
Agenda
• 3 major achievements
• Industry opportunities and challenges
• Growth targets and strategy
• Conclusion
3
3 major achievements
4
A successful proactive adjustment of supply for improved market stability
Source: SBB
Sustainable ROIC
Industry cash cost
HRC – North America domestic FOB US Midwest mill $/short ton
200
300
400
500
600
700
800
Jul-9
8Ja
n-99
Jul-9
9Ja
n-00
Jul-0
0Ja
n-01
Jul-0
1Ja
n-02
Jul-0
2Ja
n-03
Jul-0
3Ja
n-04
Jul-0
4Ja
n-05
Jul-0
5Ja
n-06
Jul-0
6Ja
n-07
Jul-0
7
-33%13 monthsJuly 2002 to July 2003
-36%21 monthsApril 2000 to December 2001
-12%5 monthsApril 2007 to August 2007
-23%7 monthsJuly 2006 to January 2007
-39%12 monthsAugust 2004 to July 2005
-33%24 monthsApril 1997 to March 1999
Drop in HRC
price during
period
Length of the
downturn
Date
ArcelorMittal step-change in the consolidation process has been the main driver of a new market oriented behaviour
Analysis steel downturns in the US market since 1997
5
A successful and faster than anticipated integration
More synergies captured in purchasing and SG&A than expected
Integration milestones
- Announcement of Group Management board
- Value plan 2008 harmonised and synergies
target confirmed top down
- Integration office in place
- Internal roadshow
- Announcement of the complete organisation
- Synergies target confirmed bottom-up and
incorporated in budget
- Launch of Web-TV and intra-net
- Human Resources harmonisation
- Worldwide H&S day
- Closure of the integration office
- Brand launch
- Acceleration of captured synergies
ArcelorMittal annualised synergies
Captured at
31/12/06
Captured at
31/03/07
Captured at
30/06/07
Estimated at
30/09/07
SG&A and otherManufacturing & Process OptimisationPurchasingMarketing & Trading
269
573
973
1,280Q3 2006
Q4 2006
Q1 2007
Q2 2007
6
A successful 3 dimensional strategy for sustainability and for growth
A unique geographical and product diversification coupled with upstream and downstream integration providing reduced risk and cyclicality
Geographical breakdown of production in 2006
Geography Products Value Chain
Coated
16%
CRC
10%
HRC
21%
Bars & Rebars
9%
Semi Long
4%
Other f lat
4%
Plates
4%
Tin plate
3%
Wire Rod
8%
Sections
8%
Slabs
7%
Stainless
2%Pipes & Tubes
1%Wire products
3%
4538
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Internal iron ore
production and
strategic contracts
Distribution through
AM3S
Shipments by products in 2006
Upstream and downstream integration
North America
22%CIS and Central
Asia
10%
Africa
7%
South America
9%
West Europe
34%
Central & East
Europe
18%
7
3 achievements improving resilience to cycle and preparing growth
EBITDA growth dynamic from:
- Brownfield and greenfield expansion
- Value added investment
- Mining and distribution growth
- Cost reduction and management gains
- Merger synergies
- Targeted acquisition
ArcelorMittal EBITDA pro-forma
2004 2005 2006 9m 2007G
USD16bn USD14.9bn USD15.3bnUSD 14.4-14.6bn
HRC FOB US Midwest $/s.ton
Stability period Step change period
Pre-merger Post-merger
*
*Guidance
8
Industry opportunities and challenges
9* Developed world includes US, Canada, EU15, Japan and KoreaSource IISI
World steel apparent demand from 1950 to 2006 – millions of tonnes
A new demand growth dynamic due to China and emerging economies
World steel market expected to grow by 3 to 5% per year for the next 10 years driven by continuing industrialisation from China and emerging economies
Steel consumption per capita in 2006 (kg)
Breakdown of world population
0
200
400
600
800
1000
1200
1400
1950
1960
1970
1980
1990
2000
+5%/y
+1%/y
+7%/y
China
22%
Emerging World
63%
Developed
World*
15%
86
266
467
0
100
200
300
400
500
Emerging World China Developed
World*
10
Chinese growth expected to continue at strong pace in two of the “three Chinas”
Steel consumption per capita in 2006e (kg)*
West China
(80 kg)
Coastal China
(575kg)
Middle China
(100 kg)
Development and growth potential
Population Migration
*IISI and ArcelorMittal estimates
Apparent consumption of finished steel (mt)*
ArcelorMittal is well positioned to capture growth opportunities in China through its different partnerships and participations
Steel consumption per capita in 2006 (kg)
High case and low
case scenario
266
606845
1002
0
200
400
600
800
1000
1200
China Japan Taiw an Korea
0
100
200
300
400
500
600
700
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
P20
10P
2012
P
11
American population breakdown
Low steel consumption in South America represents a growth opportunity
Leader in the region and present in all products (Long, Flat & Stainless steel), ArcelorMittal is ideally positioned to capture market growth
Apparent consumption of finished steel (mt)*
Steel consumption per capita in 2006 (kg)
397
11711098770
200
400
600
Other
South
America
Brasil Argentina Venezuela United
States
Central
America
19%
South
America
43%
US & Canada
38%
*IISI and ArcelorMittal estimates
0
10
20
30
40
50
1994
1996
1998
2000
2002
2004
2006
2008
P
2010
P
2012
P
12
Africa, Middle East and CIS new growth supported by the oil and commodity boom
Population in Africa, Middle East and CIS (million)
*IISI and ArcelorMittal estimates
Apparent consumption of finished steel (mt)*
Number 1 in Africa, CIS and principal supplier of steel to Middle East, ArcelorMittal has a unique opportunity to leverage its position in those markets
Steel consumption per capita in 2006 (kg)
0
200
400
600
800
Middle East CIS Africa
149 163248
467
1046257210
200
400
600
Oth
er A
frica
Oth
er C
IS
Egypt
South
Afri
ca
Ukr
aine
Mid
dle
East
Rus
sia
Dev
elop
ed W
orld
*
0
50
100
150
200
1994
1996
1998
2000
2002
2004
2006
2008
P
2010
P
2012
P
Africa Middle East CIS
13
The very promising Indian steel market
Apparent consumption of finished steel (mt)*
Steel consumption per capita in 2006 (kg)Indian steel industry and main greenfield projects
AM Orissa
ArcelorMittal Greenfield projects
SAIL
SAIL
TataEssar
Ispat
JSW
POSCOSAIL
AM Jharkhand
266
714
72380
200
400
600
800
India South East
Asia
China Japan &
Korea
*IISI and ArcelorMittal estimates
With 2 major greenfield projects in the country, ArcelorMittal is ideally positioned to benefit from the strong and sustainable growth of the Indian market
0
10
20
30
40
50
60
70
1994
1996
1998
2000
2002
2004
2006
2008
P
2010
P
2012
P
14
Mature markets to benefit from new dynamic members in EU27 and NAFTA
Approx. 50% of the EU27 and NAFTA growth is expected to come from Central & East Europe and Mexico where ArcelorMittal is the leading steel producer
Apparent consumption of finished steel (mt)*
Steel consumption per capita in 2006 (kg)
*IISI and ArcelorMittal estimates
Steel consumption per capita in 2006 (kg)
344 402293278
177
0
200
400
600
Romania Poland Turkey Other new
EU (10)
EU 15
531
161
397
0
200
400
600
Mexico US Canada
Apparent consumption of finished steel (mt)*
0
50
100
150
200
250
300
1994
1996
1998
2000
2002
2004
2006
2008
P
2010
P
2012
P
Central & East Europe European Union (15)
0
50
100
150
200
1994
1996
1998
2000
2002
2004
2006
2008
P
2010
P
2012
P
Mexico US & Canada
15
Growth
Product
Cost
Sustainable Development
– Assuming Corporate Social Responsibility and facing global
warming
– Facing constant cost pressure in particular from raw materials
and energy
– Responding to customer demands for improved services, quality
and innovations
– Expanding capacity to answer demand growth without creating
over-capacity
Facing the new challenges of the steel industry
ArcelorMittal strategy to answer the industry’s new challenges
� Systematically challenging investments projects
� Investing in value added products and downstream
� Realising operational excellence and global sourcing
� Implementing ambitious CSR strategies
16
Growth targets and strategy
17
An internal growth plan of more than 20%* increase in shipments by 2012
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2006 2012P
1,500 - 1,600
1,244
World crude steel production (million tonnes) ArcelorMittal shipments (million tonnes)
ArcelorMittal target for internal growth matching world market low case scenario growth to ensure healthy supply/demand equilibrium
World steel production expected to grow between 20% and 30% by year 2012 (or a
yearly growth rate of 3% to 5%, depending on high or low case scenario
Internal growth plan target to increase ArceloMittal shipments by 22mt* to
130mt by year 2012
*Internal growth related to internal investment projects done, approved and under study. Volumes in 2012 are excluding Sparrows point disposal and European remedies and includes Sicartsa acquisition
0
20
40
60
80
100
120
140
2006 2012 including
projects done or
approved
2012 including
projects under
study
131
111
126
18
A very achievable target considering leadership in high growth markets
• Marketing
• Purchasing
• Human Resources
• Industrial assets• Mining assets
• Technology
• R&D
• Financials
ArclorMittal production breakdown and market position in 2006
Africa
7%
CIS and
Central Asia
10%
Central & East
Europe
18%West Europe,
US & Canada
52%
Latin America
13%Rank No 1
Rank No 1
Rank No 2
Rank No 1
Uncontested global leadership and capability in:
Approximately half of ArcelorMittal industrial network is located in high potential growth markets
… to provide leverage for high return growth in emerging economies
19
Value chain and product growth adding to volume growth plan
Value added products and enhancement target (mt)
Iron ore production internal growth plan (mt)*
AM3S volume increase target (mt)**
Mining growth
Product growth
Distribution growth
3 dimension growth strategy not only focused on internal capacity growth but also mining, distribution and value added mix growth
*excluding strategic contracts Cleveland Cliffs (11.2mt), South Africa (8.5mt) and Brazil (1.4mt)
**excluding trading
0
2
4
6
8
10
12
14
16
18
20
Coated CRC Sections Plates Tin plate Upgraded
products
by 2012
14mt
0
5
10
15
20
2006 2012
+6mt
+60%
45
5153
58
66
0
10
20
30
40
50
60
70
2006 2007 2008 2009 2010
20
Achieving cost leadership and operational excellence
Steel industry HRC production cash cost in H2 2006e* ArcelorMittal HRC production cash cost in H2 2006
0
100
200
300
400
500
Africa
& C
IS
South
Am
eric
aR
est o
f Asi
a
Chi
na
Japa
n
Europ
e
Nor
th A
mer
ica
Average 420 USD/t
0
100
200
300
400
500
CIS
Africa
Sou
th A
mer
ica
Europe
Nor
th A
mer
ica
Average 390 USD/t
• Knowledge management and best practice
• Practical good capital management
• Development of a competitive supply base
• Transfer of best practice from Europe and Brazil to US
• Specific energy cost reduction in FCA
• Increasing sourcing from China and alternative suppliers
ArcelorMittal strategy is not only about growth but also continuous cost reduction beyond merger synergies
Group strategy Example of initiatives
* WSD, JPM, BCG and ArcelorMittal estimates
21
Implementing a Corporate Social Responsibility strategy
12 commitments to transform tomorrow
Human Resources
Environment Communities Shareholders
• Health & Safety
• Social dialogue
• Human rights and best
in class labour
standards
Social Commitments
Environmental Commitments
Communities Commitments
Corporate Governance
Commitments
• Greenhouse gas
emissions
• Waste, water resources and pollution
• Research &
Development of product sustainability
• Board independence
• Equal rights among
shareholders
• Best in class
shareholder dialogue
• Local economic
development
• Foundation for social
investment practice
• Community engagement around
new acquisition and
resettlements
22
Conclusion
23
ArcelorMittal new dynamic
Transforming tomorrow
�A strong resilience to economic cycle
�An ambitious internal growth plan
� Long term Greenfield projects and M&A to accelerate growth
�Question 1
� ArcelorMittal deserves a premium to Steel industry multiples
due to:
� 1 - Uncontested leadership
� 2 - More stable profile
� 3 - Superior growth profile
� 4 - Combination of above points
� 5 - Does not deserve a premium
24
Q&A