Arcelormittal South Africa Limited · JSE:ACL
Arcelormittal South Africa — FY2017 Earnings Presentation
32 slides from Arcelormittal South Africa's earnings presentation, Jan 30, 2018
Slide 1: Financial results for the year ended 31 December 2017
Financial results For the year ended 31 December 2017
Slide 2: Disclaimer
Disclaimer Forward looking statements This presentation includes forward-looking information and statements about ArcelorMittal South Africa (“AMSA”) and its subsidiaries that express or imply expectations of future events or results. Forward-looking statements are statements that are not historical
Slide 3: Contents page
Contents page Overview Steel Operational Financial Outlook Questions market review review Wim Wim Dean Dean Kobus The team de Klerk de Klerk Subramanian Subramanian Verster Financial results for the year ended 31 December 2017 3
Slide 4: Overview
Overview Wim de Klerk transformingtomorrow ArcelorMittal
Slide 5: Safety
Safety Lagging indicators • 6% increase in LTIFR • Improvement in plant and shop TIFR floor audits 7.66 (9.50) DIFR TIFR 0.87 (0.89) • 53 serious potential incidents 7.66 (9.50) LTIFR Leading indicators Zero fatalities in H2 0.66 (0.62) • 19% improvement in TIFR Three fatalities in H1 • Increase haz
Slide 6: Salient features
Salient features Revenue Production Cost of sales H1 H2 Change Item 19% 3% 21% 2017 2017 H1 to H2 EBITDA (R534m) +R219m +R753m EBITDA Flat Raw materials (315) 237kt (+7%) +27% HEPS (148cps) (82cps) +66cps HEPS Long Energy +6% (230cps) 98kt (-6%) Employee 0% % Avg R8 138 R8 540 +R402 NRP/t Level 3 B-
Slide 7: Commercial Procurement Initiatives
Initiatives What we set out to do What we achieved • Productivity improvements • Steel produced per employee up almost 2% Short term • Asset disposal • No substantial disposals • Excess material • Fixed product stock declined by 36kt Procurement • Cost control over contracts • Liquid steel cost of p
Slide 8: Steel Market
Wim de*Klérk =~ transformingtomorrow ™ ArcelorMittal
Slide 9: The industry - global
The industry - global Global steel output (mt) 900 806 807 830 818 814 805 837 853 • Global crude steel production 782 798 800 increased by 87mt (+5.4%) 700 • Asia retained its market share at 600 69% and grew by 60mt of which 544 546 563 559 555 548 557 577 588 40mt came from China, despite 500 538
Slide 10: The industry – raw materials
The industry – raw materials International raw material basket ($/t) AMSA raw material basket (R/t) 100% 600 100% 10 000 20.0% 18.5% 19.6% 13.8% 15.3% 17.7% 9% 8% 12% 14% 14% 14% 80% 500 RMB 2016 2017 2016 2017 weight 80% 8 000 400 42% 43% 41% 30.5% 30.5% 32.1% 47.0% 41.3% International AMSA 44% 49%
Slide 11: Macro backdrop
Macro backdrop South African GDP growth South African Q3 2017 GDP growth -10% 10% 30% 50% 4% 44.2% Agriculture 2.8% 3% 6.6% Mining 2.0% 4.3% Manufacturing 2% 1.2% Finance 1% 0.9% Personal Services 0.6% Transport 0% -0.4% Trade -1% -0.6% -0.7% Government -1.1% Construction -2% -5.5% Electricity 2014
Slide 12: The industry - domestic
The industry - domestic South African apparent steel consumption (ASC kt) and market share (%) 3 500 30% • Domestic ASC has been 3 000 declining steadily since 2013 25% 15% 2 500 11% • Imports (including Chinese steel 11% 11% 7% 15% 9% 10% 14% 8% 20% imports) peaked in 2015 at 8% 17% 12% 11% 2 000 2
Slide 13: The industry - domestic
The industry - domestic SA flat steel ASC market share SA long steel ASC market share 100% 100% 8% 6% 4% 4% 6% 4% 9% 6% 11% 4% 13% 16% 15% 13% 15% 16% 11% 4% 3% 6% 4% 3% 21% 21% 16% 4% 10% 6% 8% 4% 11% 80% 11% 14% 15% 80% 9% 11% 20% 20% 17% 11% 31% 19% 33% 39% 28% 9% 7% 36% 39% 39% 29% 32% 9% 7% 1%
Slide 14: Operational review
Operational review Dean Subramanian
Slide 15: Flat steel division
Flat steel division Liquid steel output (kt) Product sales distribution (%) 2000 100% 1867 7% 8% 6% 6% 6% 7% 7% 6% 6% 5% 1809 1732 6% 8% 6% 8% 5% 4% 5% 6% 4% 5% 1800 1694 1719 1707 1649 7% 10% 10% 10% 8% 7% 8% 7% 1600 1535 80% 6% 10% 1489 8% 8% 1438 9% 10% 9% 10% 8% 9% 8% 10% 1400 11% 9% 14% 15% 14%
Slide 16: Long steel division
Long steel division Liquid steel output (kt) Product sales distribution (%) 1000 946 100% 921 8% 10% 9% 12% 8% 7% 6% 7% 7% 7% 856 838 4% 4% 3% 3% 3% 3% 3% 3% 3% 3% 11% 12% 788 10% 12% 13% 800 762 80% 11% 13% 16% 18% 14% 725 727 667 18% 16% 23% 18% 17% 22% 19% 16% 60% 21% 21% 600 18% 19% 15% 19% 17%
Slide 17: Coke & Chemicals division
Coke & Chemicals division Commercial coke (kt) Commercial coke source of revenue % 350 336 2% 3% 1% 294 3% 300 256 9% 210 242 238 250 211 217 228 200 196 9% 200 181 178 157 150 9% 63% 94 100 90 100 92 86 89 50 0 FeCr Alloy Aluminium 2013 2014 2015 2016 2017 Other Timber Cement Production Sales Plast
Slide 18: Capital expenditure
Capital expenditure FY2017 FY2016 Maintenance 1 098 1 518 Expansion 151 335 Environmental 41 38 Other 92 127 Total expenditure 1 382 2 018 Vdbp R720m Long Saldanha AMSA products R97m R1 382m R283m C&C R281m Financial results for the year ended 31 December 2017 19
Slide 19: Financial review
Financial review Dean Subramanian
Slide 20: Headline earnings
Headline earnings FY 2017 FY 2016 Revenue 39 022 32 737 EBITDA (315) 190 Depreciation and amortisation (976) (1055) Once-off items 71 (227) Loss from operations (1 220) (1 092) B-BBEE cost (870) Impairment (2 604) (2 154) Net finance costs (1 441) (700) Equity earnings 139 129 Income tax expense (2)
Slide 21: Once-off items and impairments
Once-off items and impairments Once-off items FY 2017 FY 2016 Competition Commission 30 30 Thabazimbi Mine closure costs 41 (275) Unclaimed dividends 37 Derecognised payment in advance (19) Total 71 (227) Impairments FY 2017 FY 2016 Long steel products 1 007 Equity steel investments 10 11 Flat steel
Slide 22: Divisional EBITDA
Divisional EBITDA FY2017 FY2016 H2 2017 H1 2017 Flat steel products (Rm) 264 (392) 333 (69) EBITDA margin 0.9% (1.8%) 2.3% (0.5%) Net realised price R/t 8 581 7 344 8 746 8 413 Long steel products (Rm) (945) 286 (239) (706) EBITDA margin (8.0%) 2.7% (3.8%) (13.0%) Net realised price R/t 7 760 7 154
Slide 23: EBITDA bridge (Rm)
24 2016 190 Exchange rate impact 2 026 Sales volume 158 Sales price & mix 7 606 Raw material prices 5 318 EBITDA bridge (Rm) Efficiencies & 667 other variable cost Financial results for the year ended 31 December 2017 NRV provision 168 Other 90 2017 315
Slide 24: Cost dynamics and breakdown
Cost dynamics and breakdown FY 2017 FY 2016 Weight (R/t) (R/t) 49.1% Raw materials 3 818 2 779 F 29.5% Auxiliaries & consumables 2 289 2 221 l 21.4% Fixed costs 1 663 1 628 a 100.0% Total 7 770 6 628 t Liquid steel (kt) 3 459 3 221 Average ZAR rate 13.32 14.72 Average NRP 8 581 7 344 51.5% Raw mater
Slide 25: Cash flow and analysis (Rm)
Cash flow and analysis (Rm) FY 2017 FY 2016 Cash (utilised)/generated before WC (613) 215 Working capital (99) 658 Capital expenditure (1 324) (2 008) Net finance costs (667) (451) Investments (11) (11) Tax 80 (2) B-BBEE Cost (55) Transaction cost on BBF (61) Proceeds on scrapping of assets 13 67 Re
Slide 26: Working capital movement and analysis (Rm)
Working capital movement and analysis (Rm) FY 2017 FY 2016 Inventories (353) (1 830) Finished products 198 (300) Work-in-progress (397) (533) Raw materials (134) (904) Plant spares and stores (20) (93) Receivables (1 207) (164) Payables 1 538 2 958 Utilisation of provisions (77) (306) Working capita
Slide 27: Consolidated statement of financial position (Rm)
Consolidated statement of financial position (Rm) FY 2017 FY 2016 Current assets 18 131 14 812 Cash balance 3 138 1 660 Inventories 11 519 11 274 Trade & other receivables 2 988 1 774 Other current assets 486 104 Non-current assets 13 065 15 834 Property, plant & equipment 8 474 10 670 Equity accoun
Slide 28: Net debt and liquidity (Rm)
Net debt and liquidity (Rm) Cash flow and net debt/(cash) per half year Liquidity (undrawn facilities plus cash) per half year 5000 5000 -10% -6% 4000 2% 0% 2000 3000 12% 10% 1010 -290 21% 2015 2016 2017 2000 23% 20% -1000 -2522 1000 33% 30% -2577 -2865 -3262 4065 2164 4660 3660 4873 3938 -4000 0 40
Slide 29: Outlook
Outlook Kobus Verster, Chief Executive Officer designate
Slide 30: 2018 initiatives
2018 initiatives 2018 What is to be done • Operational stability • Improve reliability and liquid steel output Short term • Productivity improvements • Target Group benchmark on key KPI’s • Cost reduction • Reduce fuel rates, optimise coal blends and minimize non-prime output • Balance sheet optimis
Slide 31: Outlook H1 2018
Outlook H1 2018 Steel markets • International steel demand expected to remain strong • Domestic steel demand is likely to remain subdued due to low economic growth and a lack of infrastructure spend • However, local sales volume are expected to increase replacing gap created by lower imports • Expor
Slide 32: Questions
transformingtomorrow ArcelorMittal ata We \hy \ hh \\
ArcelorMittal South Africa — FY2017 Earnings Presentation on 6ix