Arcelormittal South Africa Limited · JSE:ACL
Arcelormittal South Africa — FY2011 Earnings Presentation
71 slides from Arcelormittal South Africa's earnings presentation, December 2011
Slide 1: Annual financial results for the year ended December 2011
Annual financial results for the year ended December 2011
Slide 2: Overview
www.arcelormittalsa.com Overview CEO 2
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Slide 4: Safety - Journey to Zero
Safety - Journey to Zero Five tragic fatalities during the year 5 Improvements in all other key safety 4 metrics – LTIFR improved to record 1.24 3 (2010 = 1.64) – All sites improved on 2010 LTIFR 2 – Annual LTIFR records set at 4 of our sites 1 – Annual total injury frequency rate below 20 The
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Slide 6: Overview
Overview EBITDA reduced by 51% culminating in a headline loss of R52m (2010 = profit of R1 377m) - EBITDA margin 6% (12%) Liquid steel output fell 4% - capacity utilisation = 68% (71%) Steel shipments decreased 7% with domestic sales up 3% and exports declining by 26% Cash cost of steel sales per to
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Slide 8: Key result drivers
Key result drivers Q4’11 vs Q4’10 2011 vs 2010 Flat steel product prices in US$ 9% 10% Long steel product prices in US$ 23% 19% Liquid steel production 0% -4% Total sales volume -17% -7% Export sales volume -50% -26% Domestic sales volume 10% 3% HRC Rand cash cost per tonne 17% 19% Billet Rand cash
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Slide 10: Steel Market Overview
www.arcelormittalsa.com Steel Market Overview 6
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Slide 12: Global Economy
Global Economy World economic growth grew at an estimated 4% in 2011, down from the 5.1% recorded in 2010 Emerging market economies grew by 6.4% in 2011, while growth is expected to slow to 6.1% in 2012 In the same year, world steel output increased by 6.7% to 1.49 bn mt, from 1.4 bn mt in 2010 Chin
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Slide 14: Input Cost Trends
Input Cost Trends International iron ore fines prices increased a further 36% (62% Fe) from 2010 to reach a new annual average record of $172/t - pellet prices increased by 21% International spot coking coal prices increased by 25% at an average $262/t and the domestic coal price index (API4) rose b
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Slide 16: Global environment – raw material prices
Global environment – raw material prices $1,400 80% $1,300 74% $1,200 70% 60% 57% 57% 58% 60% $1,000 $,881 54% $,838 45% 52% 50% $,800 $,757 $,729 $,687 $,643 36% 36% 43% 40% 33% $,583 $,677 $,600 31% 30% 34% $,500 26% 25% $,448 $,529 30% $,472 $,498 $,400 $,413 $,389 $,372 20% $,200 $,226 $,226 $,2
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Slide 18: Input Cost Positioning
Input Cost Positioning 2011 000t Backward integrated Domestic supply Imported Iron ore 7 400 88% 12% 0% Pellets 450 0% 0% 100% Scrap 1 100 58%* 42% 0% Coking coal 4 300 12% 53% 35% Other coal 1 600 0% 100% 0% Total 14 850 52% 35% 13% *Internally generated Overview Steel Market Overview Operating Res
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Slide 20: Total Domestic Market – Shipments
Total Domestic Market – Shipments 3000 2500 2000 1500 1000 500 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Long (000t) Flat (000t) Source : SAISI actuals up to Q3’11, Q4’11 AMSA estimates Overview Steel Market Overview Operating Res
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Slide 22: Domestic Market – Consumption by major sector
Domestic Market – Consumption by major sector 7000 3.9mt 4.6mt 4.5mt 6.1mt 5.7mt 6.0mt 4.6mt 4.9mt 5.0mt 6000 7% 7% 6% 13% 11% 5000 12% 10% 8% 8% 15% 15% 9% 18% 15% 10% 4000 13% 12% 11% 10% 13% 15% 12% 14% 14% 15% 8% % 3000 14% % 2000 64% 65% 65% 65% 67% 67% 66% 65% 61% 1000 0 2003 2004 2005 2006 20
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Slide 24: Domestic Market – Inventory Levels
Domestic Market – Inventory Levels 1100 16 1000 14 900 800 12 700 10 600 8 500 400 6 300 4 200 2 100 0 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Stocks (000t) Week’s dispatches Source : SAISI actuals up to Q3’11, Q4’11 AMSA estima
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Slide 26: Domestic Market – Imports
Domestic Market – Imports 1000 18 900 16 800 14 700 12 600 10 500 8 400 6 300 200 4 100 2 0 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Imports (000t) AMSA own imports (000t) % of consumption Source : SAISI actuals up to Q3’11, Q4’1
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Slide 28: Operating Results
www.arcelormittalsa.com Operating Results 15
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Slide 30: Liquid Steel Production (000t) & Capacity Utilisation (%)
Liquid Steel Production (000t) & Capacity Utilisation (%) Total 7000 95% Flat 83% 6000 75% 71% 66% 68% 5000 94% 4000 79% 75% 71% Long 67% 7055 60% 6375 3000 5774 5674 5307 5453 4863 2000 4231 4084 4060 3814 97% 95% 3428 82% 81% 74% 1000 2192 2144 61% 1690 1879 1860 1393 0 2006 2007 2008 2009 2010 20
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Slide 32: Shipment Volumes (000t)
Shipment Volumes (000t) Total 6210 6300 5819 Flat 5300 1810 5089 5041 1397 4708 714 4473 4280 4300 3920 1627 1200 3426 1401 1311 3412 3346 3300 1033 Long 577 2858 1012 956 780 2300 1930 1899 4400 4422 4375 1677 1615 1693 499 364 3414 3508 2969 2887 1283 3072 2835 137 615 1300 2336 2469 621 244 2078
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Slide 34: Commercial coke
Commercial coke Shipment and import volumes compared to South African FeCr production (000t) 1000 995 4000 900 813 3500 800 3000 700 630 631 597 2500 600 500 443 2000 433 400 400 1500 389 372 300 327 1000 264 263 200 174 500 100 0 0 2005 2006 2007 2008 2009 2010 2011 Shipments Imports SA Fe Cr produ
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Slide 36: Investment Program (Rm)
Investment Program (Rm) 2010 2011 Safety 137 97 Growth 154 22 Environment 331 79 Sustainable maintenance 1 092 992 Total expenditure 1 714 1 190 Overview Steel Market Overview Operating Results Finance Other Issues Outlook 19 19
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Slide 38: Environmental Investment Program
Environmental Investment Program 2006 2007 2008 2009 2010 2011 7RWDO Environmental R102m R123m R221m R293m R331m R79m 5P Large projects Emergency Waste Disposal Upgrade of Maturation Remed of Dam Newcastle de- dams VDBP Site (WDS) prep WDS ponds VDBP 10 VDBP sulphur project New ambient
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Slide 40: Finance
www.arcelormittalsa.com Finance Rudolph Torlage CFO 21
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Slide 42: Headline Earnings (Rm)
Headline Earnings (Rm) 2010 2011 Revenue 30 224 31 453 Profits from operations 2 151 297 Finance and investment income 71 31 (Losses)/profit on forex and financial instruments -150 124 Finance costs -357 -292 Tax -492 -118 Equity earnings* 122 -34 Loss/(profit) on disposal/scrapping of assets 32 -60
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Slide 44: EBITDA from Segments (Rm)
EBITDA from Segments (Rm) 2010 2011 Flat steel products 1 442 597 Long steel products 1 090 500 Coke and Chemicals 1 029 870 Corporate and other -39 -247 Total EBITDA 3 522 1 720 EBITDA margin 12% 6% Overview Steel Market Overview Operating Results Finance Other Issues Outlook 23 23
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Slide 46: Main Cost Drivers (R/t)
Main Cost Drivers (R/t) 2010 2011 % change Iron ore and pellets 886 1 062 20% Scrap / DRI / HBI 212 367 73% Coking coal and other fuels 1 456 1 824 25% Energy 386 507 31% Manpower 606 695 15% Maintenance 336 405 21% Alloys, fluxes and coating materials 552 603 9% Refractories, electrodes and consuma
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Slide 48: Cash Flow (Rm)
Cash Flow (Rm) 2010 2011 Cash generated from operations 3 766 1 985 Working capital -1 100 -2 821 Capex -1 714 -1 190 Interest and investment income 197 81 Finance cost -143 -97 Investments -120 -180 Tax -653 -243 Dividends -602 -221 Repayment of borrowings and finance lease -374 -529 Net cash flow
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Slide 50: Working Capital Movement (Rm)
Working Capital Movement (Rm) 2010 2011 Inventories -1 544 -2 633 Finished products -524 -112 Work-in-progress -106 -1 721 Raw materials -875 -755 Plant spares and stores -39 -45 Receivables 303 -555 Payables 524 655 Utilisation of provisions -383 -288 Working capital movement -1 100 -2 821 Overview
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Slide 52: Financial Ratios
Financial Ratios 2010 2011 Operating margin 7.1% 0.9% EBITDA margin 11.7% 5.5% Revenue / invested capital (times) 1.3 1.2 Return on equity 6.2% -0.2% Net cash / equity 14.2% 0.4% Overview Steel Market Overview Operating Results Finance Other Issues Outlook 27 27
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Slide 54: Quarterly Headline Earnings Trend (Rm)
Quarterly Headline Earnings Trend (Rm) 3700 3200 2700 2200 1700 1200 700 200 -300 -800 2005 2006 2007 2008 2009 2010 2011 Overview Steel Market Overview Operating Results Finance Other Issues Outlook 28 28
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Slide 56: Share Performance in US$ Jan 2007 to Dec 2011
Share Performance in US$ 500 Period Jan 2007 to Dec 2011 Average Dividend Yield at 2.9% (excl cap red) – 1.0X the market Nippon Posco 450 Average Price Earnings ratio of 28.1X – 195% of the market Evraz SAIL Tata Nucor 400 SteelDynamics Thyssen 350 Gerdau AM Group Index (January 2007 = 100) AMSA 300
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Slide 58: Dividend
Dividend Dividend policy – Distributing one third of headline earnings every six months – Dividends Interim dividend declared and paid of 55cps No final dividend Overview Steel Market Overview Operating Results Finance Other Issues Outlook 30 30
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Slide 60: Investment Program and other developments
www.arcelormittalsa.com Investment Program and other developments Nonkululeko Nyembezi-Heita 31 31
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Slide 62: Other key issues
Other key issues Backward integration programme Investment programme Sishen iron ore pricing arbitration Anti-trust and competition matters Overview Steel Market Overview Operating Results Finance Other Issues Outlook 32 32
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Slide 64: Corporate Social Responsibility
Corporate Social Responsibility 500 pupils attend science centers in the Vaal Triangle,Saldanha and Newcastle Currently constructing Nelson Mandela Primary school in Mthata as part of our school building program Social Grants for NGO’ s mostly involved in health related activities 13 houses in Orang
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Slide 66: Corporate Social Responsibility (continued)
Corporate Social Responsibility (continued) AMSA scholarship programme Apprentices 396 Candidate Artisans (completed their apprenticeship and are undergoing 1 year internship) 161 Engineering bursars studying Engineering at University 49 Candidate Engineers (completed their university studies and ar
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Slide 68: Outlook
www.arcelormittalsa.com Outlook 35 35
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Slide 70: Outlook for Q1'12
Outlook for Q1’12 Business environment – Domestic sales expected to improve – Increased production stability – Lower international steel prices Earnings – Significant improvement compared to Q4 2011 – Impacted by Rand/US Dollar exchange rate movements Overview Steel Market Overview Operating Res
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ArcelorMittal South Africa — FY2011 Earnings Presentation on 6ix