arcelormittal's investor presentation 2014
TRANSCRIPT
Investor Day 2014:
Strategic progressAdding value in steel
10 March 2014 Lakshmi Mittal, Chairman and CEO
DisclaimerForward-Looking Statements
This presentation may contain forward-looking information and statements about ArcelorMittal and its subsidiaries. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. Forward-looking statements may be identified by the words “believe,” “expect,” “anticipate,” “target” or similar expressions. Although ArcelorMittal’s management believes that the expectations reflected in such forward-looking statements are reasonable, investors and holders of ArcelorMittal’s securities are cautioned that forward-looking information and statements are subject to numerous risks and uncertainties, many of which are difficult to predict and generally beyond the control of ArcelorMittal, that could cause actual results and developments to differ materially and adversely from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed or identified in the filings with the Luxembourg Stock Market Authority for the Financial Markets (Commission de Surveillance du Secteur Financier) and the United States Securities and Exchange Commission (the “SEC”) made or to be made by ArcelorMittal, including ArcelorMittal’s Annual Report on Form 20-F for the year ended December 31, 2013 filed with the SEC. ArcelorMittal undertakes no obligation to publicly update its forward-looking statements, whether as a result of new information, future events, or otherwise.
Non-GAAP Financial MeasuresThis presentation may contain supplemental financial measures that are or may be non-
GAAP financial measures. Definitions of such supplemental financial measures and a discussion of the most directly comparable IFRS financial measures can be found on ArcelorMittal's website at http://www.arcelormittal.com/corp/investors/presentations/.
1
Overview
2
GMT EST
13:00 / 09:00 “Adding value in steel” Lakshmi Mittal
13:30 / 09:30 “Focussed on value drivers” Aditya Mittal
14:00 / 10:00 Q&A
14:45 / 10:45 - Break for 15 mins –
15:00 / 11:00 “ACIS turnaround underway” Davinder Chugh
15:30 / 11:30 “Mining – exploiting our potential” Bill Scotting
16:00 / 12:00 “Developing our franchises in the Americas” Lou Schorsch
16:30 / 12:30 - Close -
3
Recap
Enablers
Outlook
• Continued safety improvement
• 2013 strategic report card
• Global overview
• Key value drivers
• Critical strategic “enablers”
• Global demand outlook
Focus• Operational excellence
• Innovation
• Franchise development
Overview
Safety and sustainability
4
Safety of our employees remains the No1 priority
• Significant improvement in injury
frequency reflects Group-wide focus
on safety
• The Group’s focus is now on further
reducing severity and fatality rates
• Ultimate objective remains zero harm
*LTIF = Lost time injury frequency defined as lost time injuries per 1.000.000 worked hours; based on own personnel and contractors
Lost time injury frequency rate (LTIF)*
0.80.81.0
1.4
1.81.9
2.5
3.1
2014
Target
2007 201020092008 201320122011
RecapRecap
2013 Strategic Report Card
EBITDA
2013 Investor Day Targets 2013 Performance
Medium term target $150/t
Underlying EBITDA up 10.7%
2013 EBITDA/t = $82
Q4’13 EBITDA/t = $91
Medium Term Target Update
Medium term remains $150/t
Net
Debt
Mid year 2013 target $17bn
Medium term target $15bn
Mid year 2013 NFD = $16.2bn
Year end NFD = $16.1bnMedium term remains $15bn
Mgt
Gains2013-15 target $3bn $1.1bn achieved at end 2013 2013-15 target remains $3bn
5
Iron OreExpand capacity to 84Mtpa by end
2015Capacity expanded 10Mt in 2013
Medium term capacity target now
>84Mt given stretch potential at
Liberia and AMMC
ShipmentsIncrease to 95Mt medium term
(5yr CAGR 2.5%)
Shipments increased 0.6% due to
contraction of core markets
Increase to 95Mt medium term
(5yr CAGR 2.5%)
Progress relative to targets
RecapRecap
Global scale, regional leadership
6
Global scale delivering synergies
Brazil*
Revenues ($bn) 20.6 10.2 40.1 5.8 8.3
% Group** 26% 13% 50% 7% 10%
EBITDA ($bn) 1.4 1.9 1.6 2.0 0.3
% Group** 20% 28% 24% 29% 4%
Shipments (M mt) 23.3 9.8 38.4 59.7*** 12.3
% Group 28% 12% 45% 15%
232,000 employees serving customers in over 170 countries
Europe Mining ACIS
The presentation in this slide reflects the reporting segments that the Company intends to adopt as from its first quarter 2014 results. The change in segments results from the
Company’s organizational and management restructuring announced in December 2013. Allocation of businesses to reporting segment has not been finalized; accordingly, the numbers
presented in this slide are indicative and not final * Brazil includes neighboring countries ** Figures for others and eliminations are not shown; *** Iron ore shipments only
RecapRecap
NAFTA
Largely exposed to the developed
markets of NAFTA and EU
7
Africa 7%
BELGIUM 2%
FRANCE 6%
GERMANY 9%
ITALY 3%
SPAIN 5%
Others 6%
EU 15 30%
CZECH REPUBLIC 2%
POLAND 4%
ROMANIA 1%
Others 2%
Rest EU 9%
EU 39%
BRAZIL 8%
ARGENTINA 2%
Others 3%
LATAM 13%
EU39%
LATAM13%
Africa, 7%
Approximately 2/3 of sales to developed markets
CANADA 4%
MEXICO 3%
USA 20%
NAFTA 26%
Sales as % of total Group
RecapRecap
8
Recap
Enablers
Outlook
• Key value drivers
• Critical strategic “enablers”
• Global demand outlook
Focus• Operational excellence
• Innovation
• Franchise development
• Continued safety improvement
• 2013 strategic report card
• Global overview
Key value drivers of an industry
leader
9
3
Distinctive attributes
Global scale and reach
Diversified portfolio
Financial capability
Leading positions in the most attractive areas of the steel value chain
Unmatched technical capability
Raw Materials
Low cash cost
Capacity expansion
Reserve development
Steel Making
Finished Steel
Distribution
Scale
Operational excellence
Right-sizing capacity
Quality
R&D / innovation
Solution-orientated
Customer proximity
Service excellence
Logistics
Enablers
Critical strategic “enablers”
10
Strategic enablers are critical to achievement of industry leadership
Strong balance sheet
• A sustainable “Through-the-cycle” approach required
• Ensures balance sheet flexibility for funding organic growth and
executing options at all points of the cycle
Decentralized
organizational structure
• Global scale and scope is a competitive advantage that also
introduces complexity and the risks of inefficiency
• Decentralized structure with BU autonomy drives optimal behaviour
The best talent
• Success depends on the quality of and our ability to engage, motivate
and reward our people
• Continuous processes to attract, develop and retain the best talent
Active portfolio
management
• Acquisitions typically more attractive than greenfield investment
• But the Company is also willing to dispose of businesses that cannot
meet its performance standards or that have more value to others
Enablers
Strong balance sheet
11
Net debt* progression ($bn) Pension/OPEB net liability ($bn) reduced >20% in 2013
Lower net debt (lower interest) and lower pension liabilities (lower financing costs)
• Lowest level of net debt since the
merger in 2006
• Medium term net debt target of
$15bn remains
• Pension/OPEB liability is sensitive to
long term interest rates
• A 1% increase in the discount rate
reduces the liability by $1.8bn
8.7
0.6
6.0
4.7
-2.6
Pension
ER
OPEB
Net deficit
2013
Assets’
return
(0.7)
DBO***
reduction
(1.7)
Cash
contribution
net of P&L
charges**
(0.2)
Net deficit
2012
11.3
* Net debt refers to long-term debt, plus short term debt, less cash and cash equivalents, restricted cash and short-term investments (including those held as part of asset/liabilities held for
sale); ** Including pension, other post employment benefits (OPEB) and early retirement (ER); *** DBO refers to Defined Benefit Obligation (weighted average interest rate increase from
4.5% in 2012 to 5.1% in 2013)
16.1
24.9
-8.8
Medium
term target
15.0
4Q’133Q’11
Enablers
Active portfolio management
12
$3.6bncash raised
from asset
sales since
3Q 2011
Including:
MacArthur Coal stake
BNA stake
Erdemir (½ of interest sold)
Skyline
Enovos
Paul Wurth
AMMC stake
Additionally:
• Reduced ownership of Baffinland to 50% with Nunavut Iron ore increasing its share of funding
• Annaba: diluted stake to 49% to facilitate expansion of capacity
Optimized the portfolio of subsidiaries, JVs and investments
Enablers
M&A: AM/NS Calvert Establishes our leadership in NAFTA for next 10yrs
AM/NS Calvert Hot strip mill:
State of the art walking beam reheating furnace
13
• Strategically important transaction
• Capitalizing on an exceptional
opportunity
• State-of-the art facility capable of
producing Advance High Strength
Steels (AHSS)
• Strengthens our NAFTA
Automotive “franchise” business
• Minimal impact on ArcelorMittal
balance sheet
AM/NS Calvert significantly strengthens the ArcelorMittal franchise in NAFTA
Enablers
Decentralized and autonomous
• Steel businesses have been grouped by region with ONE single
point of responsibility:
– Reduced organizational complexity
– Regional autonomy with devolved authority
– Simplification of internal processes
• Principal expectations:
– A lean, action-orientated organization
– Improved accountability and empowerment
– Quicker decision making
– Flat, long and distribution solutions working together to improve results
within the regions
14
Simplification of the senior organization to facilitate decision making
Europe
Enablers
MiningNAFTA Brazil ACIS
The best talent
15
Motivating, developing and rewarding talent is key to sustainable business
The best
talent
Workforce
Planning &
Resourcing
Performance
Management
Talent
Identification
& Development
Compensation
& Benefits
Employee
Relations
& Social
Dialogue
ArcelorMittal
University
Achieving
Business
Strategy
through its
People
Enablers
16
Recap
Enablers
Outlook • Global demand outlook
Focus• Operational excellence
• Innovation
• Franchise development
• Continued safety improvement
• 2013 strategic report card
• Global overview
• Key value drivers
• Critical strategic “enablers”
Operational excellence
17
2013-15 management gains program ($ billion)
Annualized savings
Bottom up plan across the group
Leveraging extensive benchmarking
opportunities within the group
Improvements in reliability, fuel rate,
yield, productivity, etc.
Business units plans rolled out and
key personnel accountable for
delivery
Gap analysis completed in 2012 defined the priorities for 2013-2015 program
2.0
3.0
1.1
2014F2013 2015F
12M’13 achieved
Savings targets
Focus
Commitment to innovation
18
Through constant innovation, steel remains the material of choice
Generation 1, phase 1: HSLA, HSS
Generation 1, phase 2 AHSS: Dual Phase, TRIP Steels, Martensitic etc.
Generation 1, phase 3: Usibor® for hot stamping
Generation 3: 3rd Gen AHSS
Generation 2: TWIP, X-IP
Usibor® 1500P:
first serial use of hot stamping of
coated boron
steels, patented by ArcelorMittal
I II III
S-in motion
demonstrates the potential of
AHSS
1990 2008 2010 20172012
S-in motion
electric vehicles
Contribution to
ULSAB/ULSAC industry-wide lightweight
effort
ArcelorMittal’s
ABC lightweight project
Lightweight
steel door
Continuous investment in R&D drives innovation
Savings of up to 73 kg or 19% of a typical C-segment vehicle’s Body In
White and chassis weight
A 13.5% reduction in CO2 equivalent (eq) emissions during the vehicle’s
use-phase
Increased collaboration with OEMs on co-engineering activities
Contribution to significant growth of Advanced High Strength Steels and
increase of our patented solutions (e.g. Usibor® and Laser Welded Blanks)
S-in Motion: a catalogue of 60 steel solutions
• ArcelorMittal R&D program is global
• 1,300 full time researchers
• Broad, comprehensive portfolio and
programmes addressing business needs
• Worldwide network of laboratories (11
labs in Europe and North America)
• Committed funding throughout the crisis
• R&D budget increase in 2014
Focus
Franchise development:Exploiting potential of world-class Mining business
19
• New CEO Bill Scotting
• In place since mid 2013Reinforced Management
• 10Mt capacity added in 2013
• Marketable shipments +22%Delivering on Volumes
• Average iron ore concentrate
cash costs maintained in 2013
• But projected to decline 7% in
2014
Delivering on Cost
Identifying Growth
• “Stretch” production beyond
84Mt at minimal additional capex
• Opportunities identified at
Liberia and AMMC
Marketable iron ore shipments growth (Mt)
3529
~ +15%+22%
2014F20132012
8470
60
Iron ore production capacity (Mt)
20132012 2015F
Leveraging infrastructure to bring resources to market and reduce costs
Focus
ACIS turnaround underway
20
• New CEO Davinder Chugh
• NEW COO Mark Vereecke
• 22/50 top management changes
Reinforced Management
• Focus is ops, ops, ops
• WCM program with focus on
Maintenance Transformation
• Visible impact at Termitau
Operational Reliability
• Capex budget raised
• Investing in skills developmentInvest
Exchange Rates
• FX weakness boosts export
competitiveness
• Reduces competitiveness of
importers
Focus on improving operations
Temirtau: Bar mill productivity, tn/h
2012 2013
+27%
2014F
Focus
Kryviy Rih: Overall equipment
efficiency (OEE) of LFCC*
2013 2014F
+34%
2012
21
Recap
Enablers
Outlook
Focus
• Global demand outlook
• Operational excellence
• Innovation
• Franchise development
• Continued safety improvement
• 2013 strategic report card
• Global overview
• Key value drivers
• Critical strategic “enablers”
Our markets are growing
• Balance of growth favors
ArcelorMittal exposure
– Turnaround in EU28 and NAFTA 2014
demand, which accounts for ~2/3 of
AM deliveries with positive momentum
into 2015
– EU28 auto production expected to
grow by 2.5m units over the next 5
years, or 3% CAGR*
– NAFTA light vehicle production
expected to grow by 2.5m units by
2018, to 7% above 2000 peak*
– Emerging market growth rate has
slowed but overall, still positive yoy
growth
22
ArcelorMittal weighted global manufacturing PMI**
* Source: LMC Automotove**Purchasing managers Indices for over 40 countries weighted by share of ArcelorMittal finished steel deliveries. Source: Markit
The average of 40 country-specific PMI
readings weighted by share of ArcelorMittal
deliveries bottomed in mid-2009
ArcelorMittal to benefit specifically from developed market growth
Outlook
Core markets moving from
contraction to growth in 2014
23
Global apparent steel consumption growth forecast* in
2014 (v 2013)
ArcelorMittal’s key markets moving from contraction to growth in 2014
* Source: ArcelorMittal estimates
Global apparent steel consumption growth in 2013
3.5-4%
1.5-2.5%CIS
Global
Brazil 2-3%
China 3.5-4.5%
EU28 1.5-2.5%
US 3.5-4.5%
CIS
4.6%
3.4%
Brazil
2.8%
China
Global
EU28
US
6.9%
-0.5%
-0.8%
Outlook
Positive fundamentals in
developed markets
24
Improving market fundamentals in core markets
USA EU28
* Weighted by steel demand, i.e. larger weight given to non-residential; ** Industrial output of machinery and equipment (Source:: IHS Global Insight forecasts at Jan 2014);*** Light vehicle assembly (Source: LMC Auto Feb’14)
50
55
60
65
70
75
80
85
90
95
100
105
110
115
120
125
20
07
20
17
20
15
20
18
20
16
20
13
20
08
20
14
20
10
20
09
20
12
20
11
65
70
75
80
85
90
95
100
105
110
115
20
07
20
10
20
11
20
08
20
09
20
15
20
12
20
14
20
13
20
16
20
17
20
18
Machinery** Auto***Construction*
Outlook
End market growth prospects in US and EU28 (2007=100)
EU and NAFTA recoveryPotential for 40Mt demand recovery 2013-18
25
NAFTA
+20Mt*
EU28
+20Mt**
ArcelorMittal has the industrial
capacity to capture this
demand recovery
Margins will improve as fixed
costs spread across increasing
tonnes
We anticipate increased capacity utilization rates in the coming years
* ArcelorMittal estimates, represents a CAGR (2013-2018) of 3.1% for NAFTA
** ArcelorMittal estimates, represents a CAGR (2013-2018) of 2.6% for EU28
Outlook
26
Conclusion
ArcelorMittal is in a position of strength to
capitalize on opportunities & deliver value
27
Industry leading returns
Cost competitive
assets
World-class mining
business
Leading supplier to automotive
industry
Exposed to fastest
growing markets
Components are in place to deliver industry leading returns and value
28
Q&A