Arcelormittal South Africa Limited · JSE:ACL
Arcelormittal South Africa — FY2009 Earnings Presentation
41 slides from Arcelormittal South Africa's earnings presentation, 2009
Slide 1: Annual Financial Results
Annual Financial Results for the twelve months ended 31 December 2009 1
Slide 2: Introduction and overview
Introduction and overview Nonkululeko Nyembezi-Heita, CEO 2
Slide 3: Overview (2009 vs 2008)
Overview (2009 vs 2008) Headline loss of R440m Total steel shipments • Headline loss per share of 104c • Dispatches down 12% • EBITDA margin of 6% down from 34% • Average realised prices down by 26% in 2008 • Domestic sales constituted 69% of total • Adverse impact of strong rand sales Cost pressure
Slide 4: Key result drivers
Key result drivers Q4’09 vs Q3’09 2009 vs 2008 Flat carbon steel product prices +2% -23% Long carbon steel product prices +2% -31% Liquid steel production +15% -8% Total sales volume -7% -12% Export sales volume -20% 96% Domestic sales volume -1% -30% HRC Rand cash cost per tonne -6% +1% Billet Rand
Slide 5: Environment and steel markets
Environment and steel markets 5
Slide 6: Global environment – economic trends
Global environment – economic trends • World economic growth in 2009 decreased substantially by -1.1% from 3% in 2008, but positive growth of 3.2% is expected in 2010 • Emerging markets grew by 1.7% in 2009 (2008: 6%), increasing to an expected 5.1% in 2010 • Chinese economy surged by 8.7% in 2009 c
Slide 7: Global environment – steel market trends
Global environment – steel market trends • 2009 world crude steel output declined 8% World Monthly Crude Steel Output to 1.2 billion tonnes, reflecting an 8.5% fall 140000 40.0% in global demand last year 120000 30.0% 100000 20.0% • Production in the EU fell by 30%, North 80000 60000 10.0% 0.0% Amer
Slide 8: Global environment – input cost trends
Global environment – input cost trends • Average 2009 international iron ore spot prices decreased by 46% from 2008 benchmark levels • International coking coal spot prices declined by 66% in 2009 • Our coking coal contract price was 57% lower – implemented in Q3 2009 • Scrap prices fell on average
Slide 9: Global environment – benchmark prices
Global environment – benchmark prices 700 600 Indexed (January 2004 = 100) 500 400 300 200 100 0 2004 2005 2006 2007 2008 2009 Coking coal Iron ore Scrap (Tex) (Contract) (Contract) Source: Tex; AMG; Industry sources 9
Slide 10: 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 2009 Long Carbon Wire Rod Hot Rolled Coil Source: ArcelorMittal 10
Slide 11: Domestic market – shipments
Domestic market – shipments 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 Long (t) Flat (t) Source : SAISI 11
Slide 12: Domestic environment – shipments to industries
Domestic environment – shipments to industries 50% Exposure to consumer market is 26% • Auto 7% Sector contribution to RSA economic growth vs steel sector • Packaging 7% 40% • Housing 6% • Hardware, Equipment and Machinery 5% 30% • Furniture & Appliances 1% shipments 20% 10% 0% Manufacturing Constru
Slide 13: Steel usage in South Africa’s infrastructure programme
Steel usage in South Africa’s infrastructure programme Tonnes 2007-2015 Eskom power stations (Medupi, Kusile) 1 902 000 2010 Soccer World Cup Stadiums 100 000 Gautrain 15 000 SA National Roads Agency (national roads) 39 000 Transnet (rail transport) 254 000 Dept of Water Affairs (dams) 231 000 13
Slide 14: Domestic market – inventory levels
Domestic market – inventory levels 1,500,000 20 16 1,000,000 12 500,000 8 4 0 0 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 Stocks (t) Week’s dispatches Source : SAISI 14
Slide 15: Domestic market – imports
Domestic market – imports 1,200,000 24% 20% 800,000 16% 12% 400,000 8% 4% 0 0% 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 Imports (t) % of consumption Source : SAISI 15
Slide 16: Physical results for 2009
_ ArcelorMittal Physical results for 2009 16
Slide 17: Safety remains our priority
Safety remains our priority Safety performance has deteriorated Lost Time Injury Frequency Rate (Employees and Contractors) • 5 fatalities • 8% deterioration in lost time injury 5.0 frequency rate when compared to 2008 Highlights 4.0 • World class safety performance at LTIFR 3.0 Saldanha Works (LTIF
Slide 18: Liquid steel production & capacity
Liquid steel production & capacity Total 9000 8000 7765 7460 7460 7640 8000 Flat carbon steel products 7000 6000 5380 5485 5700 5200 5200 ktonnes 5000 Long carbon steel products 4000 7261 7055 6375 3000 5774 5067 4863 2260 2260 2260 2280 2300 5307 2000 4231 4084 3428 1000 2194 2192 2144 1879 1690 0
Slide 19: Shipment volumes
Shipment volumes Total 7000 6230 6210 6000 5819 Flat carbon steel products 5089 5000 4473 4283 4280 ktonnes 3920 4000 3412 Long carbon steel products 3000 2858 1947 1930 1899 4400 4422 4375 2000 1677 1615 3485 2969 2887 3072 2835 2402 1000 2078 1431 1535 1540 1083 994 0 2005 2006 2007 2008 2009 2005
Slide 20: Geographic shipments
Geographic shipments South Africa 69% Rest of Africa 21% Total Africa 90% Americas <1% Asia 10% Europe <1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2005 2006 2007 2008 2009 20
Slide 21: Investment programme
Investment programme Rm 2009 Major projects completed (and ongoing) in 2009 Vanderbijlpark Works 574 New direct reduction kilns 5 & 6 – completed Sinter Off-gas treatment plant Coke oven gas and water cleaning project Refurbished Tin line structure Saldanha Works 56 Newcastle Works 108 Zero effluent
Slide 22: Finance
Finance Kobus Verster, CFO 22
Slide 23: Headline earnings
Headline earnings Rm 2008 2009 Revenue 39 914 25 598 Profit from operations 12 159 229 Gains/(losses) on forex & financial instruments 637 -813 Interest income 318 199 Finance costs -238 -276 Income from investments 3 3 Tax -3 865 -35 Equity earnings* 331 206 Net deficit on disposal or scrapping of
Slide 24: Quarterly headline earnings trend
Quarterly headline earnings trend 4,000 3772 3,500 3,000 2573 2,500 2003 2,000 1582 1653 1488 1530 1624 1532 Rm 1,500 1247 1292 1055 1136 988 869 1,000 703 469 500 0 -65 -500 -237 -607 -1,000 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Q1 Q2 Q3 Q4 2005 2006 2007 2008 2009 24
Slide 25: EBITDA from segments
EBITDA from segments Rm 2008 2009 Q4 Q1 Q2 Q3 Q4 Flat carbon steel products 1 139 -46 -52 -59 538 Long carbon steel products 771 54 57 200 280 Coke & Chemicals 300 28 95 179 254 Corporate & Other -133 83 37 42 -143 Total EBITDA 2 077 119 137 362 929 EBITDA Margin % 28 2 2 5 14 25
Slide 26: Operating costs
Operating costs Rm 2008 2009 Raw materials & consumables 16 712 15 299 Employee costs 2 598 2 640 Energy 1 474 2 062 Other operating expenses 5 528 4 050 Depreciation & amortisation 1 322 1 292 Impairment charges 121 26 Total operating costs 27 755 25 369 26
Slide 27: Cash flow
Cash flow Rm 2008 2009 Cash generated from operations 14 130 1 290 Working capital -3 391 2 886 Capex -1 832 -914 Net interest and Investment income 276 170 Investments -524 Tax -3 087 -934 Dividends -2 398 -1 627 Repayment of borrowings and finance lease -121 -149 Net cash flow before share repurch
Slide 28: Working capital movement
Working capital movement Rm 2008 2009 Inventories -4 067 +2 911 Finished products -194 -32 Work-in-progress -1 688 +1 083 Raw materials -2 016 +1 851 Plant spares & stores -169 +9 Receivables 253 -18 Payables 607 112 Utilisation of provisions -184 -119 -3 391 2 886 28
Slide 29: Financial ratios
Financial ratios 2008 2009 Operating margin 30% 1% EBITDA margin 34% 6% Revenue / invested capital (times) 1.8 1.1 Return on equity (annualised) 39% -2% Net cash/equity 29% 18% 29
Slide 30: Share performance
Share performance 450 Period Jan 2005 to Dec 2009 400 Average dividend yield at 6.2% – 2.2x the market Indexed (Jan2005 =100) 350 300 250 200 150 100 50 2005 2006 2007 2008 2009 ArcelorMittal ALSI Resources 20 30
Slide 31: Dividend
Dividend • Dividend policy: • Distributing one third of headline earnings • Headline loss for the year – no dividend declared 31
Slide 32: Investment programme and other developments
Investment programme and other developments Nonkululeko Nyembezi-Heita, CEO 32
Slide 33: Investment programme
Investment programme • The economic downturn and new opportunities resulted in a re-evaluation of our growth strategy • Delay in roll-out of some projects • Reinstatement of power generation projects • Maintenance spending will be increased • A successful outcome of our bid for Zisco will impact on
Slide 34: Investment programme
Investment programme • Environmental projects will continue to be a high priority • Various atmosphere emission abatement projects at Vanderbijlpark • Secondary fume extraction at the Electric Arc Furnace • Construction of a new sinter bag house Vereeniging’s new dust extraction unit facility at the
Slide 35: Additional focus areas
Additional focus areas • Iron ore supply Power costs for ArcelorMittal South Africa Impact of proposed 35% tariff hike • Electricity 3,500 3267 • Tariffs 3,000 • Supply R million 2419 2,500 • Competition tribunal 2,000 1792 1,500 1250 880 979 1,000 500 0 2007 2008 2009 2010 2011 2012 Actual At 35% i
Slide 36: Corporate responsibility
Corporate responsibility • Corporate responsibility • School development programme • Science centres 36
Slide 37: Outlook
Outlook = ArcelorMittal 37
Slide 38: 2010 growth forecast for key sectors
2010 growth forecast for key sectors GDP Growth Manufacturing 4.8% Building & Construction 11.7% Transport 3.3% Automotive 1.3% Packaging 13.6% South Africa’s GDP 2.5% 38
Slide 39: Outlook for Q1’2010
Outlook for Q1’2010 • Business environment • Improved domestic and international demand and also prices for steel • Higher capacity utilisation • Prices for coal, scrap, alloys and iron ore expected to increase • Earnings • Earnings to improve compared to Q4’09 • Impacted by exchange rate movements
Slide 40: Thank you
Thank you ArcelorMittal South Africa Room N3-5 Main Building Delfos Boulevard Vanderbijlpark 1911 South Africa 40
Slide 41: 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
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