Download Strategy: winning in the post crisis world

Strategy: winning in the
post crisis world
Aditya Mittal
Investor Day 2010 - 16 September - London and New York
Disclaimer
•Forward-Looking Statements
This document 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. Forwardlooking 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, 2009 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.
1
Today’s Agenda
•
•
•
•
The future of our business
Strategy: winning in the post crisis world
Costs: protecting and developing our competitive advantage
Mining: building a world-class business
2
Strategic priorities
•
•
•
•
Balance sheet strength
Maintain and improve cost-competitive position
Exploit our mining resource base
Execute organic growth opportunities in emerging markets
3
Strategic priority 1:
Maintain balance sheet strength
4
Balance sheet strength
Balance sheet strengths
Net Debt (US$ billion)
2.0x
35
•
We remain committed to a strong balance sheet
with good liquidity
•
A solid investment grade rating is important to
ArcelorMittal and remains a priority
•
While our balance sheet offers flexibility, we are
comfortable with the current net debt level of
~US$ 20 billion
•
Credit metrics are improving with increased
profitability
•
We have significant support from a high quality
bank group and proven access to debt capital
markets
30
1.4x 1.5x
25
20
1.0x
15
10
0.5x
5
0.0x
4Q
2
1Q 00
6
2
2Q 007
2
3Q 00
7
2
4Q 007
2
1Q 00
7
2
2Q 008
2
3Q 00
8
2
4Q 00
8
2
1Q 008
2
2Q 00
9
2
3Q 00
9
2
4Q 00
9
2
1Q 009
2
2Q 01
0
20
10
0
Net Debt (USDbn) - LHS
Net Debt / Average EBITDA* - RHS
Credit ratings
•
Moody’s: Baa3
•
Standard & Poor’s: BBB
•
Fitch: BBB
Our credit metrics are strong; We are comfortable with the current net debt level
* Based on yearly average EBITDA since January 1, 2004.
5
Liquidity and debt maturity profile
Debt structure September 2008
Pro-forma debt maturities* (US$ billion)
Commercial
paper, 10%
5
Bond, 15%
3.8
4
3.8
3.1
3.2
3
1.9
2
1.2
1.6
1
Bank loans
and others,
75%
1.6
1.3
1.5
1.0
0.1
0
2010
Bonds
2011
2012
2013
Term Loans
2014
2015
2016
2017
Convertibles
2018
Other
2019
2020
2039
Commercial Paper
Debt structure June 2010**
Commercial
paper, 7%
Bank loans
and others,
29%
Convertible,
8%
9 Approximately US$ 13.1 billion of successful capital markets refinancing in
2009
9 Successful extension of the maturity profile from 2.6 years at end Q3 2008
to 5.4 years after recent US bond issue
Bond, 56%
New highly successful three-tranche dollar bond issued in the amount of US$ 2.5 billion
in August further extended debt maturity profile to 5.4 years
* As of June 30, 2010, pro forma for US$ 2.5 billion US bond issue in august 2010 and repayment of EUR 600 million 5.25% Eurobond in September 2010
** After US$ 2.5 billion Yankee bond issued in August 2010
Commercial paper (CP) expected to be rolled over
6
Uses of surplus cash
Maintain
assets
Organic
growth
Selective
M&A
Further
reduce
debt
9 Maintain our facilities and upgrade where necessary
9 Organic growth: mining development; emerging market footprint
9 M&A: selective strategic acquisitions; larger deals should be equity funded
9 Net Debt: surplus cash to reduce debt further
Surplus cash will be used to further reduce gross debt
7
Strategic priority 2:
Maintain competitive position
8
Competitive position
•
We occupy a better-than-average cost
position in the regions we are serving
400
China
Asia ex China
500
USA
600
Europe
More important is being competitive in target
markets
Æ Competitive on costs
Æ Competitive on quality
Æ Competitive on service
Middle East/Africa
•
Regional average HRC cash cost 2009 ($/tonne)
South America
Competitive does not just mean low-cost
CIS
•
ArcelorMittal global weighted average
300
ArcelorMittal regional weighted average costs
200
•
We have one of the largest R&D budgets in
the steel industry; this supports our product
quality and innovation
100
0
•
We have a strong relationship with customers
which reflects in our service quality
0
Cumulative capacity
575Mt
We have a strong competitive position today, but we can always improve
Source: World Steel Dynamics (WSD) structural cost curve
9
Competitive position
Management gains realised and 2012 target (US$bn)
• We are investing to improve our assets.
Projects approved/completed over past 6
months:
–
–
–
–
–
LCA: Steelton new reheat furnace
LCE: new wire rod mill at Duisburg
AACIS: continuous caster for long products
at Kryviy Rih
FCE: upgrade of PCI facilities at Gent
LCE/FCE: build PCI facility at Blast Furnace
#2 of Dąbrowa Górnicza, Poland
5.0
0.2
0.5
0.1
4.0
0.4
0.5
0.3
3.0
5.0
2.0
4.3
SG&A
Fixed cost
3.8
3.0
• We achieved US$3 billion of management
gains ahead of target; we aim to achieve
a further US$2 billion by end-2012
4.2
3.0
3.3
1.0
0.0
2Q 10 Mgt Input Cost
gain
Yield &
Quality
Energy
Others
We are investing to improve our assets; we target further management gains savings
10
2012
Target
Strategic priority 3:
Exploit mining resource base
11
Exploit our mining resources
Geographical split of estimated iron ore resources* 2009
• ArcelorMittal has a worldclass iron ore reserve and
resource base
• Our strategy is to
commercially develop this to
maximise the value for our
shareholders
• We have spent time and
money proving out our
resource base
• We are now standardising the
classification of the mining
asset base
Brazil
7%
USA
3%
Other
5%
Ukraine
10%
Canada
42%
Liberia
13%
Kazakhstan
20%
Estimated iron ore
resources of 19 billion
tonnes in 2009*
Our vast iron ore resource base provides significant growth options
* Final resource estimates expected 2011.
2011 The above preliminary estimates are based on surveys conducted to date and include inferred resources which, as of the date hereof,
are still considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. The
potential quantity and grade is conceptual in nature; there has been insufficient exploration to date to define a mineral resource; and it is uncertain if further exploration will result
in the above targets being delineated as a mineral resource. There is no certainty that the above preliminary assessments will be realized.
12
Strategic priority 4:
Execute organic growth options
13
Execute organic growth options
Market position and market share estimates by region
No 1 in
North America
No 1 in
Western Europe
No 1 in Eastern
Europe and CIS
Emerging markets continue to offer the best
organic growth potential for ArcelorMittal
• Superior demand growth potential
• We have the platform and experience:
No 1 in
South America
Æalready the steel market leader in Latin
America, CIS and Africa
No 1 in Africa
ArcelorMittal
Others
• ArcelorMittal focus areas for growth are
Brazil and India
• We also have JV projects in the Middle
East and China
Industrial and commercial network focus on market sustainability and growth opportunity
Source: WSA and ArcelorMittal estimates
14
Brazil – remains highly attractive market
•
Structurally low cost
– Abundant natural resources
– Short distances from plants to markets and ports
•
Strong macro fundamentals - Significant growth through 2020
– May become the seventh largest economy in 2011*
– Steel demand driven by strong domestic market and
infrastructure development
•
•
•
•
•
Import pressures rising
–
–
•
Government infrastructure investments of $150bn over next 3yrs
Large projects for offshore oil exploitation (Pre Salt), iron ore mine
expansion and energy
US$14 billion in subsidies + US$ 30 billion investment for
affordable housing
World Cup 2014, Olympics 2016
Exchange rate appreciation; State tax incentives; Higher selling prices
Historical participation of imports ~ 6%-7% of consumption should rise
to 20% in 2010, according to estimates of IABr
Brownfield and greenfield expansions required to satisfy
consumption growth of 8.9% CAGR 2010-15 (long prods)
Brazil may become the seventh largest economy in 2011
* Source: Economist Intelligence Unit
15
Brazil – we have platform for growth
Share of Brazil Crude Steel Output*
•
We are already the No. 1 steel producer in Brazil.
–
–
–
–
–
•
Advanced management methods with highly skilled labour
force
Modern and updated facilities
High performance plants are recognized as a benchmark
within the group
Largely self-sufficient in coke
We own iron ore mines with high potential
CSN
15%
Usiminas
22%
Downstream and market orientation
–
–
–
Commercial team and planning and logistic structure promote
strong downstream integration through distribution centres
Enhanced value added mix and services within the portfolio
Very strong brand
ArcelorMittal
Brazil
34%
Gerdau
24%
Others
5%
Strong leadership position in Brazil
Source: IABr
* Twelve months to March 2010
16
Brazil – growth plans in place
ArcelorMittal Brazil industrial network
• Brazilian long products capacity expansions:
–
–
–
2010: Monlevade project from 1200 ktpy to 2400
ktpy (US$1.2 billion capex)
2011*: AM Cariacica from 600 to 800 ktpy (under
evaluation)
2013*: AM Juiz de Fora from 1000 ktpy to 2200
ktpy (under evaluation)
Venezuela
Colombia
Monlevade
Ecuador
Brazil
Juiz de Fora
Peru
Bolivia
Paraguay
• Brazilian flat products business has excess
primary capacity so the rolling mill at Tubarao
will be expanded, or a new rolling mill built
Chile
2300 km
Uruguay
Argentina
Cariacica
Tubarao
Vega Du sol
• We expect to develop at least one vertically
integrated greenfield project by 2020, utilising
our iron ore resources
We are growing our Brazilian long product capacity and plan to increase in flats
* Planned project implementation dates
17
India – our old strategy
•
India is an attractive market:
–
–
•
•
We expect India’s steel demand to triple to
>150mt by 2020
Balance ArcelorMittal's portfolio by establishing
presence in one of the most growth-oriented
markets in the world
NEW DELHI
Pre-crisis we planned 2 mega-greenfield
projects at Jharkhand (JH) and Orissa (OR)
We have made progress upstream
–
–
Jharkhand
1
Kolkata
2
Orissa
Mumbai
Karampada iron ore mineral and land licences
awarded in Jharkhand
Thermal coal mines in JH and OR
Bangalore
•
Our plans have been slowed due to:
–
–
High tribal influence
We are gaining ground on land acquisition in JH,
but remains very slow in OR
Chennai
India’s steel demand could triple by 2020 – we will be a part of that growth
Source: ArcelorMittal estimates
18
India – our new strategy
•
We now plan smaller steps: 1.5-3 Mtpa modules
•
In areas with easier access to land (Karnataka) and
proximity to strong consumption centers
Æ reduced implementation risk
•
Expertise of local partner is invaluable. Uttam Galva
stake gives us:
– Access to its large downstream network (we are
already largest importer of steel into India)
– Partner in developing service centres for
auto/appliances using AM feedstock
– JV partner for potential greenfield in Western
India
•
•
Karnataka greenfield project:
– Land acquisition expected to be completed by
end of this year
– We are also expecting to get some mining
leases in Karnataka as well
Pakistan
China
Jharkhand
1
2 Orissa
3
Western
India JV
potential
Karnataka
4
Major steel markets
Jharkhand greenfield project: land acquisition is
progressing well
Smaller modular sites planned between 1.5 – 3.0 million tonnes per annum
19
India – a summary of our new strategy
More
Comprehensive
Approach
Considering important factors beyond iron
-ore:
ore:
• Logistics,
Logistics, proximity
proximity to
to the
the markets,
markets, infrastructure,
infrastructure, execution
executionime
time
t
• Social
Social factors,
factors, business
business friendliness
friendliness
• Establishing
Establishing downstream
downstream to
to support
support our
our global
global network
network of
of mills
mills
Higher Certainty
Opportunities
Doable
plan ofby
9 2020:
MTPA by 2020
• Western
Western India
India –
- Construction
Construction could
can start
startininDec
2011
2010. Production start ~2013
• Karnataka
Karnataka -– Land
Land acquisition
acquisition could
can complete
be completed
by 2010.
this Production
year
start ~2015
• Jharkhand
Jharkhand -– Process
Process of
of land
land acquisition
acquisition commenced
commenced. Production start ~2016
Better Risk Spread
Brand Presence
•Project
Projectlocations
locationswell
wellspread
spreadacross
acrossEast,
East,West
Westand
andSouth
SouthIndia
India
Reduced exposure to Maoists
•Mix
Mixof
ofcaptive
captiveand
andpartially
partiallybought
bought-out
iron ore
projects
-out iron-ore
projects
•AMI
AMI–- Established
Established presence
presence in
in Indian
Indian Subcontinent
Subcontinent
•AMDS
AMDS–- AM
AM Dhamm,
Dhamm, Chennai;
Chennai; Stockholding
Stockholding operations
operations in
in Mumbai,
Mumbai, Chennai
Chennai
•Auto
AutoSSC
SSC––ininJV
JVwith
withUG
Utam Galva
We now have greater visibility on our growth plans in India
20
Recap
21
Re-cap
• Our balance sheet is strong – our debt level is comfortable and
we do not expect it to change significantly
• We are cost-competitive and we have plans in place to improve
our position further
• Investing in our mining assets to exploit our resource base is a
priority
• Our strategy in India has changed; we are now on the ground
selling branded steel; our first domestic production is expected
by 2013
• Brazil remains a huge growth market and we have opportunities
to expand upstream and downstream
22