Arcelormittal South Africa Limited · JSE:ACL
Arcelormittal South Africa — FY2008 Earnings Presentation
43 slides from Arcelormittal South Africa's earnings presentation, February 2009
Slide 1: Annual Financial Results
Annual Financial Results for the twelve months ended December 2008
Slide 2: Introduction and Overview
Introduction and Overview Nonkululeko Nyembezi-Heita, CEO 2
Slide 3: Vision
Vision To be the preferred supplier of steel solutions for the development of Sub-Saharan Africa 3
Slide 4: Overview (2008 vs 2007)
Overview (2008 vs 2007) Earnings increased to R9.5bn Total steel shipments y Earnings per share of 2 128c up 65% y Despatches down 13% y EBITDA margin of 34% y Domestic sales constitute 86% of total sales Cost pressures continue Operations y Raw material cost increased by +57% y Liquid steel product
Slide 5: Key Result Drivers
Key Result Drivers Q4’08 vs Q3’08 2008 vs 2007 Flat carbon steel product prices -8% +61% Long carbon steel product prices +2% +63% Liquid steel production -54% -9% Total sales volume -37% -13% Export sales volume +14% -49% Domestic sales volume -44% -1% HRC Rand cash cost per tonne +24% +59% Billet
Slide 6: Environment and steel markets
Environment and steel markets
Slide 7: Global Environment – Global Steel Market Trends
Global Environment – Global Steel Market Trends World monthly crude output 120,000 y World production declined 1.2% 15% (-16mt) to 1 330mt 100,000 5% 80,000 60,000 -5% y Biggest YoY drop came in 40,000 December with output slipping 24% -15% (35% excl China) 20,000 0 -25% y Excluding China world outp
Slide 8: Global Environment – General Market Trends
Global Environment – General Market Trends y World economic growth in 2008 decreased substantially to 3.4% from 5.2% in 2007 (IMF World Economic Outlook – Jan 09) y Emerging markets grew by 6.3% (2007: 8.3%) y Chinese economy grew by 9% in 2008 compared to 13% in 2007 despite measures to cool it dow
Slide 9: Global Environment – Input Cost Trends
Global Environment – Input Cost Trends y Average 2008 international iron ore spot prices increased 85% to US$278/t y International spot coking coal prices increased 218% in 2008 to US$305/t y Sharp increase in scrap prices in 2008 which peaked at US$735/t and 2008 average was US$492/t (+37%) y Price
Slide 10: Global Environment – Benchmark Prices
Global Environment – Benchmark Prices 650 550 Indexed (January 2004 = 100) 450 350 250 150 50 2004 2005 2006 2007 2008 Coking coal Iron ore Scrap (Tex) 10
Slide 11: Global Environment – Export Prices
Global Environment – Export Prices 1400 Quarterly average export prices (C&F) US$/t 1200 1000 800 600 400 200 0 1994 1997 2000 2003 2006 LCWR HRC 11
Slide 12: Domestic Market – Quarterly Shipments
Domestic Market – Quarterly Shipments Q4’08 contracted 24% vs Q4’07 and 40% vs Q3’08 1600 1200 (000t) 800 400 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Long carbon steel products Flat carbon steel products Source : SAISI up to Q3’08; ArcelorMittal South Africa estimates for
Slide 13: Domestic Environment – Shipments to Industries
Domestic Environment – Shipments to Industries 50% Sector contribution to RSA economic growth vs 40% steel sector shipments 30% 20% 10% 0% Manufacturing Construction Wholesale Transport Utilities / Mining Government Agriculture Fin Services GDP Sectors Steel sectors Source : SAISI and SARB Bulletin
Slide 14: Domestic Market – Inventory Levels
Domestic Market – Inventory Levels 1,600,000 25 20 1,200,000 15 800,000 10 400,000 5 0 0 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 Stocks (t) Week’s dispatches Source : SAISI up to Q3’08; ArcelorMittal South Africa estimates for Q4’08 14
Slide 15: Domestic Market – Imports
Domestic Market – Imports 1,600,000 25% 20% 1,200,000 15% 800,000 10% 400,000 5% 0 0% 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 Imports (t) % of consumption Source : SAISI up to Q3’08; ArcelorMittal South Africa estimates for Q4’08 15
Slide 16: Physical results for 2008
Physical results for 2008
Slide 17: Safety Remains our Priority
Safety Remains our Priority y Two fatalities in Sep 2008 at 7 Lost Time Injury Freqency Rate Saldanha Works (Employees and Contractors) y From 2007 – mid-2008 achieved 6 14 months without fatality y Vanderbijlpark Works - 3m LTI free man per 1m man hours 5 hours y Newcastle Works - 2m LTI free man h
Slide 18: Liquid Steel Production
Liquid Steel Production 8000 7000 6000 Flat carbon steel products 5000 ktonnes 4000 7261 Long carbon steel products 7033 7055 6375 3000 5774 4855 5067 4863 2000 4231 4084 1000 2178 2194 2192 2144 1690 0 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Total 18
Slide 19: Liquid Steel Production
Liquid Steel Production ktonne 2007 liquid steel output 6 375 Vanderbijlpark – BFD reline in 2007 +660 Saldanha – Corex/Midrex reline -135 Newcastle- N5 Mini-reline -255 Electricity -150 Market conditions -721 2008 liquid steel output 5 774 19
Slide 20: Shipment Volumes
Shipment Volumes 7000 6000 Flat carbon steel products 1810 2344 1397 5000 2745 714 ktonnes 4000 1601 1311 1881 1033 577 3000 Long carbon steel products 4400 4422 4375 2000 3879 499 364 3485 2969 743 864 137 2728 2887 2835 2402 1000 1431 1535 1540 1151 1083 0 2004 2005 2006 2007 2008 2004 2005 2006 2
Slide 21: Geographic Shipments
Geographic Shipments South Africa 86% Rest of Africa 8% Total Africa 94% Americas 0% Asia 5% Europe 1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2004 2005 2006 2007 2008 21
Slide 22: Investment Programme
Investment Programme Rm 2008 Major projects completed (and ongoing) in 2008 Vanderbijlpark Works 806 - New direct reduction kilns 5 & 6 - Sinter plant off-gas treatment Saldanha Works 224 - Corex / Midrex reline completed Newcastle Works 415 - Evaporator crystalliser & RO plant upgrade (2009) - Blas
Slide 23: Finance
Finance Kobus Verster, Executive Director Finance 23
Slide 24: Headline Earnings 2007 - 2008
Headline Earnings 2007 - 2008 Rm 2007 2008 % change Revenue 29 301 39 914 +36% Profit from operations 7 703 12 159 +58% Gains & Losses on forex & financial instruments -131 637 +586% Interest income 442 318 -28% Finance costs -117 -238 +103% Income from investments 4 3 -25% Tax -2 455 -3 865 +57% Eq
Slide 25: Headline Earnings Q3 ‘08 – Q4 ‘08
Headline Earnings Q3 ‘08 – Q4 ‘08 Rm Q3’08 Q4’08 % change Revenue 13 349 8 162 -39% Profit from operations 5 190 1 614 -69% Gains & Losses on forex & financial instruments 111 149 +34% Interest income 44 132 +200% Finance costs -160 -51 -68% Income from investments 1 1 Tax -1 620 -576 -64% Equity ea
Slide 26: Profit from operations 2007 - 2008
Profit from operations 2007 - 2008 Rm 2007 2008 % change Flat carbon steel products 4 827 7 007 +45% Long carbon steel products 2 652 3 672 +38% Coke & Chemicals 727 1 743 +140% Corporate & Other -503 -263 +48% Profit from operations 7 703 12 159 +58% 26
Slide 27: Operating costs
Operating costs Rm 2007 2008 % change Raw materials & consumables 12 162 16 712 +37% Employee costs 2 210 2 598 +18% Energy 1 364 1 474 +8% Other operating expenses 4 763 5 528 +16% Depreciation & amortisation 1 099 1 322 +20% Impairment charges 121 Total operating costs 21 598 27 755 + 29% 27
Slide 28: Cash Flow
Cash Flow Rm 2007 2008 Cash flow from operations 9 024 14 072 Working capital -605 -3 333 Capex -1 852 -1 832 Net interest and Investment income 477 276 Investments -16 Tax -2 209 -3 087 Dividends -1 948 -2 398 Net cash flow 2 871 3 698 Capital reduction -6 352 Net cash flow after capital reduction
Slide 29: Working capital movement
Working capital movement Rm 2007 2008 Inventories -41 -4 010 Finished products -47 -168 Work-in-progress 362 -1 683 Raw materials -283 -2 016 Plant spares & stores -73 -143 Receivables -118 254 Payables -288 607 Utlisation of provisions -158 -184 -605 -3 333 29
Slide 30: Financial Ratios
Financial Ratios 2007 2008 Operating margin 26% 30% EBITDA margin 30% 34% Revenue / invested capital (times) 1.5 1.8 Return on equity (annualised) 26% 39% Net cash / equity 19% 30% 30
Slide 31: Quarterly Headline Earnings Trend
Quarterly Headline Earnings Trend 4000 3772 3500 3000 2573 2500 Rm 2003 2000 1586 1653 1624 1582 1530 1532 1499 1488 1500 1398 1247 1292 1136 988 1055 1000 869 661 599 656 672 703 500 353 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2003 2004 2005 2006 2007 2008 31
Slide 32: Share Performance
Share Performance 850 Period Jan 2004 to Dec 2008 Average Dividend Yield at 4.6% (excl capital red) – 1.7x the market Indexed (January 2004 = 100) 650 Average Price Earnings ratio of 8.8x – 60% of the market 450 250 50 2004 2005 2006 2007 2008 ArcelorMittal South Africa ALSI Resources 20 32
Slide 33: Dividend
Dividend y Dividend policy y Distributing one third of headline earnings y Dividend declared Interim Final Total Period 6 months to 6 months to 12 months to June 2008 December 2008 December 2008 Earnings per share 1 027 cps 1 101 cps 2 128 cps Dividends per share 342 cps 365 cps 707 cps Dividend cov
Slide 34: Industrial Plan and Other Developments
Industrial Plan and Other Developments Nonkululeko Nyembezi-Heita
Slide 35: Industrial Plan
Industrial Plan y Alignment of production to demand Production 2000 y Production and shipment Q1‘09 1500 ktonnes forecasts slightly higher than Q4’08 1000 levels 500 y Cost evolution 0 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 y Fixed cost reduction of 40% (excl labour) 2007 2008 Q1’2009
Slide 36: Investment Programme
Investment Programme y Change in economic landscape resulted in a re-evaluation of our growth strategy and hence a delay in the roll-out of some projects: y BF N6, Galvanising line, Colour line y Employee safety is crucial and related projects will continue y Environmental projects are underway y El
Slide 37: Additional focus areas
Additional focus areas y Iron ore arbitration y BBBE y Electricity supply y Corporate Responsibility y Schools y Science centres 37
Slide 38: Additional focus areas
Additional focus areas y Iron ore arbitration y BBBEE y Electricity supply y Corporate Responsibility y Schools y Science centres 38
Slide 39: Additional focus areas
Additional focus areas y Iron ore arbitration y BBBEE y Electricity supply y Corporate Responsibility y Schools y Science centres 39
Slide 40: Outlook
a ArcelorMittal
Slide 41: Outlook for Q1’09
Outlook for Q1’09 y Business environment y Steel demand is expected to remain under pressure y Though output levels have improved market dictates a lower production utilisation – retain flexibility to match market changes y International prices remain uncertain y Positive impact of lower coal prices
Slide 42: Disclaimer
Disclaimer This document may contain forward-looking information and statements about ArcelorMittal South Africa and its subsidiaries. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect t
Slide 43: Thank you
Thank you ArcelorMittal South Africa Room N3-5 Main Building Delfos Boulevard Vanderbijlpark 1911 South Africa www.arcelormittal.com/southafrica
ArcelorMittal South Africa — FY2008 Earnings Presentation on 6ix