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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