Interim Financial Resultsfor the six months ended June 2010
1
Introduction and overviewNonkululeko Nyembezi-Heita, CEO
2
Overview (H1’2010 vs H1’2009)
Kumba Iron Ore• Interim agreement concluded• Surcharge on domestic steel sales
Cost • Raw material cost per tonne decreased
by 15%• Cost of steel sales decreased by 15%
Steel shipments and production• Dispatches up 31% • Average realised prices on same level• Liquid steel production up 28%• Capacity utilisation increased from
66% to 76%
Headline profit of R1 804m• Earnings per share of 450c vs loss of
190c• EBITDA of R3 037m vs R256m
3
4
Key result drivers
Liquid steel production 4% 28%Total sales volume 12% 31%Export sales volume 10% 17%Domestic sales volume 13% 37%Flat carbon steel product USD prices 7% 25%Long carbon steel product USD prices 12% 15%HRC Rand cash cost per tonne 2% -11%Billet Rand cash cost per tonne 9% -14%Labour productivity 3% 30%USD/ZAR (average rate) -2% -18%
H1’2010vs.
H2’2009
H1’2010vs.
H1’2009
4
Environment and steel markets
5
Global environment – General market trends
• World economic growth in 2009 decreased to 0.6% from 3.0% in 2008 - growth of 4.6% is expected in 2010
• Emerging markets grew by 2.5% in 2009 (2008: 6.1%), increasing to an expected 6.8% in 2010 and 6.4% in 2011
• Chinese economy grew by 9.1% in 2009 compared to 9.6% in 2008 despite fiscal control measures to cool it down while a growth rate of 10.5% is expected for 2010
• World crude steel production in the first six months of 2010 increased by 29% while China increased its output volumes by 25% compared to the same six months in 2009
• Global capacity utilization improved from 66% in H1’09 to 75% in H2’09 to 81% in H1’10
• World Steel Association’s latest forecasts are that apparent steel consumption for 2010 will be up 10.7% to 1.2 billion tonnes compared with 2009 (+120mt)
6Source: IMF July 2010, World Steel 6
-7000-6000-5000-4000-3000-2000-1000
0100020003000
2006 2007 2008 2009 2010
7
Global environment – Global steel market trends
• World production for first quarter increased by 29% to 341mt
• China produced 47% of world’s total crude steel over the first half of 2010 compared to 49% in the comparable period but still up on the 38% in same period of 2008
• China has been net importer since August 2009
• During H1’10 South Korea, India, the EU, Vietnam and Brazil were the top 5 importers of China’s steel
80
105
130
2006 2007 2008 2009 2010
25
30
35
40
45
50
Source: World Steel
Crude output (000t) China as % of world (%)
China – Imports minus exports
Crud
e stee
l outp
ut (m
t)(m
tonne
s)
%
7
8
Global environment – Input cost trends
• Step change in raw material trade as suppliers move away from contracts to spot
• Increasing price trend on all major raw materials while ZAR has strengthened by 18%
• H1’2010 iron ore prices have increased by 116% from H1’2009 benchmark levels
• International hard coking coal spot prices have increased by 64% in H1’2010 to US$220/t although contract values have slipped by 16% to US$184/t over the period
• Scrap values during H1’10 increased by 64% to US$410/t
• Alloy prices during H1’10 increased with Zinc up 66% and Tin up 43%
• On average crude oil prices were up 50% in H1’2010 compared to H1’2009
8
9
Global environment – benchmark prices
Coking coal
0
100
200
300
400
500
600
700
2004 2005 2006 2007 2008 2009 2010
Iron ore
Index
ed (J
anua
ry 20
04 =
100)
Scrap (Tex)
9
10
Export prices
10
LCWR HRC
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
2004 2005 2006 2007 2008 2009 H1'2010$0
$20
$40
$60
$80
$100
$120
$140
Iron ore
Stee
l pric
es Ore prices
11
Domestic market – Quarterly shipments
0
200
400
600
800
1,000
1,200
1,400
1,600
2004 2005 2006 2007 2008 2009 201064%
66%
68%
70%
72%
74%
76%
78%
(kton
nes)
Flat carbon steel productsLong carbon steel products AMSA total market share
(market share)
11
12
Domestic market – Inventory levels
0
200
400
600
800
1,000
1,200
2004 2005 2006 2007 2008 2009 20100
2
4
6
8
10
12
14
16
(kton
nes)
Week’s dispatchesInventory (t)
Wee
ks
Source : SAISI 12
13
Domestic market – Imports
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
2004 2005 2006 2007 2008 2009 20100
2
4
6
8
10
12
14
16
18
(tonn
es)
% of consumptionImports (t)
%
Source : SAISI up to Q3’08; ArcelorMittal South Africa estimates for Q4’08, Q1’09 and Q2’09 13
Physical results for H1’2010
14
Safety remains our priority
• Zero fatalities for H1’2010• LTIFR of 1.4 within the target of 1.9
• Vanderbijlpark Works new record of 42 days and 3 000 000 man hours without a LTI on 4 May 2010
• Pretoria Works (incl contractors) achieved 386 days without any injuries
• Newcastle Works achieved a safety record of 126 LTI free days before they had an LTI
• Tubular Products had 288 lost time free days before they had an LTI.
• Coke and Chemicals achieved 234 LTI free days
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2004 2005 2006 2007 2008 2009 Q1 Q2
ArcelorMittal South Africa
1515
Lost Time Injury Frequency Rate(Employees and Contractors)
per 1
m m
an ho
urs
2010
15
Liquid steel production & capacity
16
0
1,000
2,000
3,000
4,000
H1'05 H1'06 H1'07 H1'08 H1'09 H1'10 H2'05 H2'06 H2'07 H2'08 H2'09 H1'05 H1'06 H1'07 H1'08 H1'09 H1'10
ktonn
es
Flat carbon steel products
Long carbon steel products
Total
Liquid Steel Available capacity
16
17
Shipment volumes
0
1,000
2,000
3,000
4,000
H1'05 H1'06 H1'07 H1'08 H1'09 H1'10 H2'05 H2'06 H2'07 H2'08 H2'09 H1'05 H1'06 H1'07 H1'08 H1'09 H1'10
ktonn
es
Export carbon steel productsDomestic carbon steel products
Flat carbon steel products
Long carbon steel products
Total
17
Geographic shipments
0%
8%
1%
91%
20%
71%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Europe
Asia
Americas
Total Africa
Rest of Africa
South Africa
2009 2007 20062008 2005H1’10
18
Investment programme
1919
Safety 29 49 21
Growth 45 25 40
Environment 78 173 109
Sustainable maintenance 214 302 186
Total expenditure 366 549 356
Rm H1’2009 H2’2009 H1’2010
FinanceKobus Verster, CFO
20
Headline earnings
21
Revenue 11 960 13 638 16 165Profit/(loss) from operations -322 551 2 349Gains & (Losses) on forex & financial instruments -695 -118 113Interest income 183 16 24Finance costs -141 -135 -176Income from investments 1 2 1Tax 85 -120 -669Equity earnings* 41 165 135Net deficit on disposal or scrapping of assets* 4 17 27Impairment* 26Headline earnings/(loss) -844 404 1 804
- in USDm -92 53 239
H1’2009 H2’2009 H1’2010Rm
21
22
Quarterly headline earnings trend
2005 2006
1582 1653
988 869703
12471488
12921530 1624
1055
1532
2003
2573
3772
1136
469748
1056
-607-237 -65
-1200
-700
-200
300
800
1300
1800
2300
2800
3300
3800
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Q1 Q2 3Q 4Q Q1 Q2
Rm
20102007 2008 2009
22
EBITDA from segments
23
Flat carbon steel products -99 480 1 705
Long carbon steel products 111 480 846
Coke & chemicals 123 435 503
Corporate & Other 121 -102 -17
Total EBITDA 256 1 291 3 037
EBITDA margin % 2% 9% 19%
H1’2009 H2’2009 H1’2010Rm
23
Main cost drivers
24
Iron ore & pellets 513 598 734
Scrap / DRI / HBI 209 186 233
Coking coal & other fuels 1 661 1 196 1 169
Energy 229 300 256
Manpower 588 489 519
Maintenance 211 299 290
Other 1 072 1 042 1 126
Total 4 483 4 110 4 328
H1’2009 H2’2009 H1’2010R/ton (Production)
24
Cash flow
25
Cash generated from operations 322 968 2 584Working capital 1 701 1 128 -1 001 Capex -339 -575 -356Net interest and investment income 126 44 -18Investments -405 -119 -98Tax -640 -294 -387Dividends -1 627Repayment of borrowings and finance lease 3 -95 -27Repurchase of shares -3 918Effect of Foreign Exchange rate changes on cash -645 284 134Net cash flow - 5 422 1 341 831Net cash 3 007 4 348 5 179
H1’2009 H2’2009 H1’2010Rm
25
Working capital movement
26
Inventories 2 777 134 -1 151Finished products 147 -179 103Work-in-progress 872 211 -473Raw materials 1 820 31 -817Plant spares & stores -62 71 36
Receivables -701 683 -1 284Payables -140 195 1 358Utilisation of provisions -235 116 76
1 701 1 128 -1 001
H1’2009 H2’2009 H1’2010Rm
26
Financial ratios
27
Operating margin 3% 4% 15%EBITDA margin 2% 10% 19%Revenue / invested capital (times) 1.0 1.2 1.4Return on equity (annualised) - 7% 4% 16%Net cash / equity 14% 18% 21%
H1’2009 H2’2009 H1’2010Rm
27
ArcelorMittal ALSI Resources 20
28
Share performanceInd
exed
(Jun
e 200
5 = 10
0)
0
50
100
150
200
250
300
350
400
450
2005 2006 2007 2008 2009 2010
Period January 2005 to July 2010
Average Dividend Yield at 5.7% – 2.1x the market
28
29
Dividend
• Dividend policy• Distributing one third of headline earnings
• Headline earnings R1 804m (450cps)
• Dividend of 150cps
29
Investment programme and other developmentsNonkululeko Nyembezi-Heita, CEO
30
Investment programme
• Shifts of focus away from volume to areas such as electricity generation and raw material procurement
• Value adding downstream projects under investigation: for example, AMSA is in the final stages of an evaluation process for a new tin-line
• Environmental projects will continue to be a high priority
3131
32
Other focus areas
• Kumba
• Competition developments
• BBBEE
32
33
Corporate social responsibility
• School in Mamelodi - completed and handover before year-end
• Re-roofing Project in Bophelong and Boipatong (Vaal Triangle)• ArcelorMittal South Africa is re-roofing 3 332 houses in Bophelong and Boipatong
by 2012
• 920 houses have been completed benefiting almost 5 000 individuals
• At least 80 unemployed community members are employed and continue to receive on-the-job training as part of our broader commitment to skills development
• Project is supervised by 20 Candidate Engineers sourced from the Vanderbijlpark Works to ensure that the required quality, health and safety standards are achieved.
• The project is a result of community engagement in both townships
33
34
Environment
• Implementation of the Environmental Program to improve emissions to air, waste management and water management
• Important projects pursued• New emission abatement system for the Sinter Plant at Vanderbijlpark Works to be
completed by Q2’2011
• The achievement of “Zero Effluent Discharge” status at Newcastle Works by end 2011
• New disposal site at Vanderbijlpark Works to be completed by end 2010
• Preparations has started to comply with the new Air Emission Standards which became effective April 2010• Significant investment required at coke making facilities to ensure compliance
34
35
Training
International involvement• Saudi Arabia Training• Liberian Loco Training & apprenticeships• Canadian Apprenticeship ForumNational involvement• Career exhibitions• Foundry learnership• Pipe making learnership• Involvement with Department of Higher
Education for FET sectorArcelorMittal South Africa Related• Candidate artisan program• Fatality prevention standards• Establishment of E-Learning Classroom for
Asynchronous Generic Training • Bricklayer Training Centre Accreditation• Artisan to Technician Conversion Programme
using Virtual Technology
Pipeline Jun 2009
Dec 2009
Jun 2010
Total 1 464 3054 3 239
Engineers
Technicians
Apprentices
81
80
655
108
68
1 142
102
50
1 027
Engineering Pipeline
35
Outlook
36
37
Outlook for Q3’10
• Business environment• Domestic customer inventory levels high
• International demand and prices started to soften
• Raw material prices remain high
• Earnings• Earnings expected to decline
• Could be impacted by exchange rate movements
37
Interim Financial Resultsfor the six months ended June 2010
Questions
38