Arcelormittal South Africa Limited · JSE:ACL
Arcelormittal South Africa — FY2007 Earnings Presentation
40 slides from Arcelormittal South Africa's earnings presentation, February 2008
Slide 1: Annual Financial Results
ArcelorMittal South Africa Limited Annual Financial Results for the 12 months ended 31 December 2007
Slide 2: Introducing New CEO and member of the Board
Introducing New CEO and member of the Board Me. Nku Nyembezi-Heita 2
Slide 3: Introducing new President and member of the Board
Introducing new President and member of the Board Luc Bonte 3
Slide 4: Market and Operations
Market and Operations Rick Reato
Slide 5: Introduction and Overview
Introduction and Overview Earnings increase to R5.7bn Earnings per share of 1 288c up 21% Net cash flow of R2.9bn Domestic market retained momentum Demand essentially unchanged on 2006 Domestic sales constitute 76% of total sales Cost pressures continue Raw material cost increased by
Slide 6: Key Result Drivers
Key Result Drivers 2007 vs 2006 HRC US$ export price +22% LCWR US$ export price +26% Total sales volume -6% Export sales volume -22% Domestic sales volume +1% HRC Rand cash cost per tonne +18% Billet Rand cash cost per tonne +16% Labour productivity -3% ZAR movement -4% Production volumes impacted o
Slide 7: Global Environment – General Market Trends
Global Environment – General Market Trends World economic growth in 2007 decreased marginally from 3.9% to 3.6% Chinese economy grew by 11% despite measures to cool it down World consumption and production of steel increased by 7.5% in 2007 Global steel industry consolidation still priority
Slide 8: Global Environment - Chinese Market Trends
Global Environment - Chinese Market Trends China remained a net exporter of total steel products in 2007 China accounted for 37% of world steel production and 35% of consumption Export taxes increased 45,000 ktonnes 20,000 -5,000 -30,000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2
Slide 9: Global Environment – Input Cost Trends
Global Environment – Input Cost Trends Iron ore price expected to increase substantially China iron ore spot @ premium of US$40/t Coking Coal cost pressure expected in 2008 due to scarcity worldwide Coking coal spot prices have increase by 65% Sharp increase in scrap prices in early 2008
Slide 10: Global Environment – Benchmark Prices
Global Environment – Benchmark Prices 400 Spot coal 300 prices Based to 100 200 100 0 2003 2004 2005 2006 2007 2008 Coking Coal Iron Ore Scrap (Tex) Global input costs continue to increase 10
Slide 11: Global Environment - Export Prices Achieved
Global Environment - Export Prices Achieved 800 700 Export prices (c&f) US$/t 600 500 400 300 200 100 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 HRC Low carbon wire rod Steel prices established new trading range 11
Slide 12: Domestic Environment – Shipments
Domestic Environment – Shipments 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 69 73 77 81 85 89 93 97 01 05 Long (t) Flat (t) Source : SAISI Long steel local despatches again achieved a record level 12
Slide 13: Domestic Environment – Inventory Levels
Domestic Environment – Inventory Levels 1,500,000 20 1,000,000 16 12 500,000 8 4 0 0 69 73 77 81 85 89 93 97 01 05 Stocks (t) Week’s despatches Source : SAISI Industry inventory levels below recent averages 13
Slide 14: Domestic Environment – Imports
Domestic Environment – Imports 1,200,000 24% 20% 800,000 16% 12% 400,000 8% 4% 0 0% 69 73 77 81 85 89 93 97 01 05 Imports (t) % of consumption Source : SAISI Imports slightly down from 2006 14
Slide 15: Key Performance Indicators
Key Performance Indicators 2006 2007 Employees per million tonnes produced 1 385 1 429 Revenue per head (R000) 2 594 3 220 HRC cash cost - R/t 2 150 2 538 - US$/t 318 360 Billet cash cost - R/t 1 993 2 310 - US$/t 295 327 Percentage value-add exports - flat 96% 97% - long 94% 100% Productivity influ
Slide 16: Liquid Steel Production
Liquid Steel Production 8,000 7261 7055 7033 7,000 6375 6,000 4855 5067 4863 5,000 4231 ktonnes 4,000 3,000 2178 2194 2192 2144 2,000 1,000 0 Flat Products Long Products Total 2004 2005 2006 2007 Blast furnace rebuild and Corex reduced output volumes 16
Slide 17: Liquid Steel Production
Liquid Steel Production ktonne 2006 liquid steel output 7 055 Recoupment of 2006 losses +323 Vanderbijlpark - BFD Rebuild -813 Vanderbijlpark - BFD Cold hearth conditions -177 Saldanha - Corex condition -49 Newcastle - Furnace condition -57 Efficiency improvements +93 2007 liquid steel output 6 375
Slide 18: Operational developments
Operational developments Blast Furnace D Market Coke production at battery N2 at Newcastle Works Galvanizing line 5 achieved full capacity Colour coating line achieved record output EAF at Vereeniging produced record volume Various records at all rolling mills at Newcastle Blast Furnace
Slide 19: Shipment Volumes
Shipment Volumes 6 223 6 230 6 194 6,000 5 829 1794 2344 1408 5,000 2745 4 329 4 283 4 268 3 928 4,000 ktonnes 1601 1299 1881 1042 3,000 1 894 1 947 1 926 1 901 4400 4421 2,000 3879 3485 495 366 2969 2886 743 864 2728 2402 1,000 1535 1151 1431 1083 0 2004 2005 2006 2007 2004 2005 2006 2007 2004 2005
Slide 20: Geographic Shipments
Geographic Shipments South Africa 76% Rest of Africa 12% Total Africa 88% Americas 0% Asia 11% Europe 1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2004 2005 2006 2007 Maintain Africa focus 20
Slide 21: Investment Programme
Investment Programme Rm 2007 Major projects completed (and ongoing) in 2007 Vanderbijlpark Works 1 183 - Blast furnace “D” rebuild completed - New direct reduction kilns 5 & 6 on track (2008) Saldanha Works 260 - Corex/Midrex reline preparation - Ore screen & stockhouse upgrade Newcastle Works 199 -
Slide 22: Safety Remains our Priority
Safety Remains our Priority ArcelorMittal South Africa achieved 26 LTI free days (3.7m LTI free man hours) 7.0 Lost Time Injury Frequency Rate (LTIFR)* 1m LTI free hours achieved 6.0 7x at Vanderbijlpark Works 5.0 6x at Newcastle Works 4.0 1x at Vereeniging Works 3.0 1x at Saldanha Works
Slide 23: Finance
Finance Kobus Verster
Slide 24: Headline Earnings
Headline Earnings Rm 2006 2007 Revenue 25 350 29 333 Operating profit 6 082 7 703 Gains & losses on foreign exchange rates and financial instruments 301 -131 Financing cost - net interest income 294 369 - imputed interest on non-current provisions -101 -44 Income from investments 7 4 Tax -2 022 -2 4
Slide 25: Headline Earnings Trend
Headline Earnings Trend 1,800 1653 1623 1586 1582 1,600 1488 1532 1528 1398 1439 1,400 1292 1247 1,200 1056 988 1,000 869 Rm 800 661 656 672 703 599 600 400 353 200 0 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 Earnings remains within ‘new’ range 25
Slide 26: Operating Profit
Operating Profit Rm 2006 2007 Flat products 3 644 4 338 Long products 2 111 2 661 Coke & Chemicals 184 727 Corporate & other 143 -23 Operating profit 6 082 7 703 Long products and Coke & Chemicals continue to increase their contribution 26
Slide 27: Cash Flow
Cash Flow Rm 2006 2007 Cash profits from operations 7 132 9 021 Working capital -1 033 -606 Capex -1 446 -1 848 Net interest/Investment income 468 476 Investments -16 Tax -1 660 -2 209 Dividends -1 261 -1 948 Net cash flow 2 200 2 870 Capital reduction Cash flow remains robust 27
Slide 28: Financial Ratios
Financial Ratios 2006 2007 Operating margin 24% 26% EBITDA margin 28% 30% Revenue / invested capital (times) 1.4 1.5 Return on equity 22% 26% Net cash/equity 33% 19% Improvement in financial ratios 28
Slide 29: Share Performance
Share Performance 650 Period 2003 to 2007 Average Dividend Yield at 5.7% (excl cap red) - double the market 550 Average Price Earnings ratio of 7.2X - half the market 450 350 250 150 50 Arcelor Mittal South Africa ALSI Top 40 Excellent medium to long term share performance 29
Slide 30: Dividend
Dividend Dividend policy Distributing one third of headline earnings Dividend and cash declared Interim dividend of 233 cents per share - 3 September 2007 Final dividend of 196 cents per share - 17 March 2008 Total dividend of 429 cents covered 3 times by EPS of 1 288 cents Capital red
Slide 31: Other Developments
Other Developments Rick Reato
Slide 32: Meeting local demand
Meeting local demand Channels for capturing strong local demand and strong international prices Production stability Divert exports N5 and Corex/Midrex relines Investing in additional capacity Electricity supply Focus on production stability 32
Slide 33: Investment Programme
Investment Programme Rm 2008 - 2011 Relines 450 Maintain capability 2 000 Steel capacity increase 2 900 Downstream value adding projects 2 700 Environmental investments 1 000 Expenditure in 2005 1 608 Expenditure in 2006 1 446 Expenditure in 2007 1 848 Investment programme support expansion strategy
Slide 34: Major Investments up to 2011
Major Investments up to 2011 Flat products DRI kilns (2008) Corex and Midrex reline (2008) New Colour Line (2009) New Galvanising line (2011) Power plant Ore screen and stockhouse upgrade (2009) Long products N5 reline (2008) Maputo mill (2008) New Bar/Section Mill (2011) New
Slide 35: Major Investments up to 2011
Major Investments up to 2011 Environmental Sinter clean gas EAF dust extraction at Vanderbijlpark Works EAF dust extraction at Vereeniging Works Calcium Carbide Desulphurisation at Newcastle Works Evaporator crystallizer 35
Slide 36: Ongoing developments
Ongoing developments Competition Tribunal SARS BAA dispute Iron ore supply Electricity supply BEE 36
Slide 37: Cost containment
Cost containment Production stability Increased throughput Purchasing power Efficiency improvements Cost Control 37
Slide 38: Outlook
Outlook Rick Reato
Slide 39: Outlook for Q1'08
Outlook for Q1’08 Business environment Domestic demand expected to remain healthy Higher international prices expected Higher input prices will influence production costs Earnings Earnings to remain strong compared to Q4’07 Power supply and the exchange rate may have an influence Earni
Slide 40: Annual Financial Results
ArcelorMittal South Africa Limited Annual Financial Results Thank you
ArcelorMittal South Africa — FY2007 Earnings Presentation on 6ix