Arcelormittal South Africa Limited · JSE:ACL
Arcelormittal South Africa — FY2013 Earnings Presentation
31 slides from Arcelormittal South Africa's earnings presentation, February 2014
Slide 1: Financial results for the year ended December 2013
Financial results for the year ended December 2013
Slide 2: Agenda
Agenda OVERVIEW • Results overview and recent developments • Results analysis – Steel market overview – Operating results – Finance – Other key issues and outlook • Questions www.arcelormittalsa.com 2
Slide 3: Overview
Overview CEO
Slide 4: Safety - Journey to Zero
Safety - Journey to Zero OVERVIEW • Zero fatalities since August 2011 • Total injury frequency rate has been on a 5 4,7 Lost Time Injury Frequency Rate decrease of 17%pa since 2002 (Employees and Contractors) • Safety Focus Areas 4 3,9 – Zero harm 3,4 3,3 – Visible felt leadership 3 2,8 2,6 – Fatali
Slide 5: Overview
Overview 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 ma
Slide 6: Key recent developments
Key recent developments OVERVIEW • 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 Kum
Slide 7: Key result drivers
Key result drivers OVERVIEW 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% Bi
Slide 8: Steel Market Overview
lew Steel Market Overvi CEO
Slide 9: Global macro-economic environment
Global macro-economic environment STEEL MARKET OVERVIEW 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% • 2014 Purchasing Managers' Index 65 China Eurozone USA Japan
Slide 10: Global environment – raw material prices
Global environment – raw material prices STEEL MARKET OVERVIEW • Exchange rate absorbed the benefit of Price change Price change international raw material prices Commodity in USD in ZAR • Chinese coke prices dropped 43%, due to the Iron ore +4% +22% cancellation of the 40% export tax Scrap -5% +12%
Slide 11: Domestic macro-economic environment
Domestic macro-economic environment STEEL MARKET OVERVIEW • SA’s economic growth in 2013 estimated Economic growth (%) at 2.1%, a decline from 2.5% in 2012 15 • Reduced levels of government fixed investment spend has a disproportionate 10 impact on demand for steel • Stronger order book in most cons
Slide 12: Domestic market – inventory levels
Domestic market – inventory levels (000t) STEEL MARKET AMSA domestic despatches OVERVIEW • Steel demand has grown 1% pa over Estimated total domestic despatches past 20 years, but -5% pa since 2007 5,0 4,3 4,4 4,2 4,3 3,9 Despatches (mt) • Building & construction industry remains 4,0 3,1 3,4 3,5 3,3
Slide 13: Operating Results
Operating Results CEO
Slide 14: Production and shipment volumes
Production and shipment volumes OPERATING Production (000t) Flat Long RESULTS • Overall steel production maintained despite BOF fire 5 000 4 060 3 813 4 000 3 554 – Flat output down 9% with Vdbp -11% 3 428 3 229 and Saldanha -4% 3 000 1 879 1 860 1 867 – Long volumes up 22% with Newcastle 2 000 1 39
Slide 15: Coke and Chemicals
Coke and Chemicals OPERATING SS production FeCr consumption RESULTS • Chinese producers increased their SA market share China market share market share from 11% in 2007 to 30% Global FeCr production market share 40 50% Production & consumption (mt) in 2013 40% 30 • Electricity shortage in South Afri
Slide 16: Capital expenditure (Rm)
Capital expenditure (Rm) OPERATING RESULTS 2011 2012 2013 Maintenance 708 598 1 045 Environment 89 128 350 Other 393 149 175 Total expenditure 1190 875 1 570 • Main ongoing projects during 2013 – Replacements/maintenance (67% of spend) • Newcastle: Blast furnace gas holder (R26m). Replace scrubber d
Slide 17: Environmental investment program
Environmental investment program OPERATING RESULTS 2007 2008 2009 2010 2011 2012 2013 Environmental R121m R220m R251m R293m R89m R128m R350m Large projects • Waste • Upgrade of • Sinter clean • Sinter clean • De-sulphur • VDBP coal • Coke oven Disposal Site WDS gas at VDBP gas at VDBP project at NC
Slide 18: Finance
Finance CFO
Slide 19: Headline earnings (Rm)
Headline earnings (Rm) FINANCE 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 (l
Slide 20: Impairment (Rm)
Impairment (Rm) FINANCE 2013 Thabazimbi 1 878 Other 72 Total impairment 1 950 • 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 www.arcelormittalsa
Slide 21: Main steel cost drivers (R/t liquid steel)
Main steel cost drivers (R/t liquid steel) FINANCE 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 materi
Slide 22: EBITDA from segments (Rm)
EBITDA from segments (Rm) 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% www.arcelormittalsa.com 22
Slide 23: Cash flow (Rm)
Cash flow (Rm) 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 b
Slide 24: Working capital movement (Rm)
Working capital movement (Rm) FINANCE 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 (
Slide 25: Sound balance sheet with focus on working capital management
Sound balance sheet with focus on working capital management FINANCE • Low financial leverage 10 000 140 • Intra-month borrowing (peak-demands) Working capital (Rm) 120 8 000 with sufficient/unutilised short term lines 100 6 000 80 Rotation days* – Improved payment terms provide flexibility 60 4 000
Slide 26: EBITDA history (Rm)
EBITDA history (Rm) FINANCE R 1 800 1 588 R 1 500 1 449 R 1 200 987 R 900 817 808 706 648 581 R 600 R 300 224 238 211 169 82 3 R0 2010 2011 2012 2013 -158 -R 300 -221 www.arcelormittalsa.com 26
Slide 27: $100/t EBITDA target
$100/t EBITDA target FINANCE $14 $20 $6 $43 $31 2012 EBITDA/t Improvement BOF Incident Sales prices, cost 2013 EBITDA/t actions escalation and exchange rate www.arcelormittalsa.com 27
Slide 28: Other Key Issues and Outlook
Other Key Issues and Outlook CEO
Slide 29: Well prepared for 2014
Well prepared for 2014 OTHER KEY ISSUES AND 1 Competition matters OUTLOOK 2 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
Slide 30: Outlook
Outlook OTHER KEY ISSUES AND • Outlook for Q1 2014 OUTLOOK – Improving environment for international steel prices – Increased export sales at enhanced margins – Positive headline earnings for Q1 2014 – Rand volatility remains a factor www.arcelormittalsa.com 30
Slide 31: Questions
Financial results Questions for the year ended December 2013
ArcelorMittal South Africa — FY2013 Earnings Presentation on 6ix