MILAN INVESTOR FORUM 29 SEPTEMBER 2016 - HETAL PATEL, GENERAL MANAGER INVESTOR RELATIONS VALÉRIE MELLA, INVESTOR RELATIONS SPECIALIST - ARCELORMITTAL
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Milan Investor Forum
29 September 2016
Hetal Patel, General Manager Investor Relations
Valérie Mella, Investor Relations Specialist
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. 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 documents filed with or furnished to the Luxembourg Stock Market Authority for
the Financial Markets (Commission de Surveillance du Secteur Financier) and the U.S. Securities and Exchange
Commission (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 Measures
This document may include supplemental financial measures that are or may be non-GAAP financial measures, as defined
in the rules of the SEC. They may exclude or include amounts that are included or excluded, as applicable, in the
calculation of the most directly comparable financial measures calculated in accordance with IFRS. Accordingly, they should
be considered in conjunction with ArcelorMittal's consolidated financial statements prepared in accordance with IFRS, which
are available in the documents filed or furnished by ArcelorMittal with the SEC, including its annual report on Form 20-F and
its interim financial report furnished on Form 6-K. A reconciliation of non-GAAP measures to IFRS is available on the
ArcelorMittal website.
1
World’s Leading Steel and Mining Company
Focussed on developed markets
Cost competitive
Primary position in premium steel grades
Capacity to capitalize on continued demand recovery
Strengthened balance sheet
Roadmap to improve annual free cash flow by >$2 billion
World’s leading global steel company positioned to deliver value to shareholders
2
Safe, Sustainable Steel
Health & Safety Lost time injury frequency (LTIF) rate*
Mining & steel, employees and contractors
-75%
3.1
2.5
1.9
1.8
1.4
1.0
0.85 0.85 0.81 0.78
2007 2008 2009 2010 2011 2012 2013 2014 2015 1H’16
Our goal is to be the safest Metals & Mining company
* LTIF = Lost time injury frequency defined as Lost Time Injuries per 1.000.000 worked hours; based on own personnel and contractors 3
Global scale, regional leadership
ACIS
• ArcelorMittal is worlds leading steel and Mining
9% NAFTA
26%
mining company, with presence in 60 5%
countries and an industrial footprint in 19
countries
2015
• ArcelorMittal is the leader in all major global Revenues
steel markets, including automotive, Europe
$63.6bn
construction, household appliances and 47% Brazil
packaging 13%
• Leading R&D and technology, as well as
sizeable captive supplies of raw materials and ACIS NAFTA
distribution networks Mining 6% 17%
9%
• Balanced portfolio of cost-competitive assets
in both developed and developing markets 2015
(No1: EU; North America; Africa, LatAm, CIS) EBITDA
$5.3bn
• ~209,400 employees serving customers in Europe Brazil
over 170 countries 45% 23%
Global scale delivering synergies
4
Positioned for industry-leading returns
and value
• A global champion well positioned for new market opportunities and servicing
globalising customer industries
Leading market
position in
developed world
Diversified
Leading supplier to Higher and
Access to high
growth markets
premium markets
more stable
Leading supplier to high- returns
growth markets
through the
Ability to service Significant self-
global customers cycle
sufficiency in raw
materials
Access to own raw
materials
ArcelorMittal: the industry leader with a global presence backed by raw materials
5
Demand in core markets is growing
Steel shipment split by segment 1H’16 End market growth prospects in US (2007=100)
120
Brazil ACIS
75% of shipment to 100
12% 15% developed markets 80
60
40
25% NAFTA
2011
2012
2019
2007
2008
2009
2010
2013
2014
2015
2016
2017
2018
2020
49%
Europe
Construction* Machinery** Auto***
ArcelorMittal steel shipments (Mt) End market growth prospects in EU28 (2007=100)
110
90
100
90
85 85
83 80
82 83
70
2011
2007
2008
2009
2010
2012
2013
2014
2015
2016
2017
2018
2019
2020
2011 2012 2013 2014 2015 ACTION
2020
Demand recovery in core markets has been offset by high imports…
* Weighted by steel demand, i.e. larger weight given to non-residential; ** Industrial output of machinery and equipment (Source: Oxford Economics Sept 2016) 6
*** Light vehicle assembly (Source: LMC Automotive (March 2016))
IBDROOT\PROJECTS\IBD-LN\FRACTION2015\585460_1\6. Presentations\2016.02.08 - Roadshow Presentation\ProjectRose_investorpresentation_V7 160204 speakernotes.pptx
Positive industry signals
China steel spreads
• Supply side reforms in China ($/t differential between China HRC domestic price ex VAT and
international RM Basket*)
– Government targets to reduce capacity by 159 146 171 160
132 125 124 Note: China
100-150Mt; 2016 target is set as 45Mt 87 93 spreads based
on spot raw
capacity (~25mt achieved YTD) ~180,000 materials are
lower
people impacted and deployed 2013 2014 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Wk38
– Central SOE must cut at least 10% of
Europe steel spreads
capacity for steel & coal by 2018 (€/t differential between North Europe domestic HRC price and
international RM Basket*)
– Structural reform fund to be allocated 208 220 217 212 186 186
252 280
according to the capacity cut volume and 178
timing.
• Steel price recovery 2013 2014 1Q15 2Q15 3Q’15 4Q15 1Q16 2Q16 Wk38
– Stabilization of price environment brought US steel price
an end to destocking cycle ($/t US domestic exw Indiana HRC)
– Steel spreads recovered in all key markets 669 729
578 505 505 639 606
from unsustainable low levels of 2H’15 430 456
• Pressure from rising raw material costs
2013 2014 1Q15 2Q15 3Q’15 4Q15 1Q16 2Q16 Wk38
Steel spreads have recovered from unsustainably low levels of 2H 2015
Source: Mysteel, CU Steel, Broker Research, Factiva. . * RM basket includes coking coal prices based on quarterly contracts; week 38 start Sept 12, 2016 7
Trade case progress in core markets
Summary Europe and US Antidumping/CVD trade case timelines*
Activity 2015 2016 2017
E CRC
U Investigation Provisional Definitive
R
O HRC**
Investigation Provisional Definitive
P
E QP
Investigation Provisional Definitive
Corrosion resistant
Petition Preliminary Final
U
S CRC
A Petition Preliminary Final
HRC
Petition Preliminary Final
Sept 2016
APPROVED
…trade cases have positive momentum
* Dates provided for illustrative purposes. **Additional AD investigation against Iran, Serbia, Ukraine, Russia & Brazil started July 7, 2016
See appendix for further details.
8
Profitability recovering
Consensus* forecasting a 20% increase in
Comparable EBITDA ($m) comparable EBITDA in 2015
+32%
1,800 4,000 +47% 7,000 +20%
1,600 3,500 6,000
1,400 3,000
5,000
1,200
2,500
1,000 4,000
2,000
800 3,000
1,500
600
2,000
400 1,000
200 500 1,000
0 0 0
2Q 2015 2Q 2016 2H 2015 1H 2016 2H 2016 FY’15 FY’16 cons*
cons*
Profitability improving believe 2H’15 marked the low-point of EBITDA cycle
* ArcelorMittal estimate of consensus on 23/09/16 for 2016 EBITDA (based on mean of 14 estimates) 9Balance sheet strengthened
Net debt ($billion)
• Rights issue and asset disposal ~$20bn reduction
proceeds used to repay/prepay
32.5
selected near term debt maturities
• Gross debt declined from $20.2bn 12.7
as at 1Q’16 to $15.1bn at 2Q’16
• Average debt maturity increased to 3Q’08 2Q’16
7.1 years
Debt maturity at 30, June 2016* ($billion)
• Moody’s upgrade to stable outlook
7.3
from negative outlook Prepaid or repaid debt during 2Q’16
Outstanding end 2Q’16
4.9
Cash 0.7
Asset sale proceeds 1.1 2.7 2.6 7.0
2.3 2.5 2.5
Rights issue proceeds 3.1 2.2
2.0 2.1
1.0 0.8
2Q’16 2016 2017 2018 2019 2020 >2020
Action taken to materially strengthen the balance sheet
* €/$ exchange rate of 1.1102 (as end of June 30, 2016); Maturity table excludes recent $1.5bn tender offer 10Significantly reduced cash requirements
Capex cut by $2.3bn since 2012
US$mn
4.7
3.5 3.7
2.7 2.4
2012 2013 2014 2015 2016F
Improved ability to translate
EBITDA to cash flow
Net interest reduced by $0.8bn since 2012
US$mn
1.9 1.8
1.5
1.3 1.1
2012 2013 2014 2015 2016F
Actions taken to reduce cash requirements enabled net debt reduction in 2015
11Action 2020 improvement plan
Experience
Return to >$85 EBITDA per tonne
$3bn structural EBITDA improvement
Unique
Support annual FCF >$2bn
Business driven
Roadmap to sustainably improve EBITDA and FCF generation
12No1 in automotive steel: Maintaining
leadership position
S-In-Motion SUV/Mid-Size Sedans
• ArcelorMittal is the global leader in steel for
automotive 40% market share in our core markets
• Global R&D platform sustains a material
competitive advantage
• Proven record of developing new products and
affordable solutions to meet OEM targets
• Advanced high strength steels used to make
AM/NS Calvert
vehicles lighter, safer and stronger
• Automotive business backed with capital with
ongoing investments in product capability and
expanding our geographic footprint:
• AM/NS Calvert JV: Break-through for NAFTA
automotive franchise
• VAMA JV in China: Auto certifications progressing
• Dofasco: Galvanizing line expansion underway
Continue to invest and innovate to maintain competitiveness
13Strategic progress in 2016
• Balance sheet materially strengthened Automotive business development
Rights issue complete: $3.1 billion raised • Calvert ramp up progressing :
Net debt at end of 2Q’16 of $12.7bn Automotive certification ongoing and
increased utilization
• Improved conversion of EBITDA to FCF
Phase 1: Slab yard expansion complete
EBITDA “free cash flow breakeven”* point
reduced to $4.5bn • Automotive awards:
General Motors awarded ArcelorMittal its
• Focus on capex discipline
“Supplier of the Year award” for the 3rd
• Cost control and operational excellence consecutive year
Action 2020 plan underway Ford gave ArcelorMittal its highest ranking
for the 5th consecutive year
Footprint optimization Indiana Harbour (US)
Europe transformation plan progressing • ArcelorMittal and Voestalpine announce
global market launch of galvanized, press
• Portfolio optimization ongoing hardened steels for direct hot forming
Sale of US long products Vinton and LaPlace
• Launch of 2 new project in 2017: Usibor 2000
Closure / idling of non-performing assets and Ductibor 1000
Strategic priorities on track and progressing well
* Free cash flow breakeven defined as level of EBITDA required to ensure cash flow from operations is =/ > capex
14Takeaways
• ArcelorMittal is the global steel industry leader
• Core markets expanding; steel spreads have recovered from
unsustainably low levels experienced in 2H’15
• Lower cash requirements will support improved conversion of EBITDA
to free cash
• Balance sheet now amongst the strongest in the industry, reinforcing
ArcelorMittal’s leadership position
• Continuous investment in R&D and production capability to sustain
leadership position in automotive steel
• Action 2020 plan to deliver sustainable improvements and drive
outperformance
Taking the right actions to leverage leadership positions to maximise shareholder returns
15Appendix
Key trade case update: EU & US Note: Timelines provided are defined based on regulation maximum limits
Europe Flat, Long and Tubes US Flat Rolled
Prod Exporter Status Timeline Prod Exporter Status Timeline
CRC AD • Definitive measures • Measures in place for the next 5 Core AD/CVD • DOC final determination (June 24, 2016- ITC Measures in
China and retroactive years China voted unanimously on the measures ) place for the
Russia implementation were India ─ CVD: China: 39.05 – 241.07%, India: 8% - next 5 years
voted in favour on Italy 29.46%; Italy: 0.07 – 38.15%; Korea: 0.72-
July 7: Korea 1.19%; Taiwan – de minimus (no duty
Taiwan imposed)
─ China: 19.8% to
22.1% ─ AD: China 209.97%; India 3.05-4.44%; Italy
─ Russia: 18.7% to 12.63-92.12%; Korea 8.75-47.8.5%; Taiwan:
36.1% 3.77%
HRC AD • AD China Investigation • AD China Provisional measures CRC AD/CVD • DOC final determinations: Measures in
China started Feb 13, 2016 could be expected not later than Brazil ─ CVD: Brazil: 11.09%-11.31%; China: place for the
4Q’16 China 256.44%; India: 10%; Korea: 3.91%-58.36% next 5 years
India ─ AD: Brazil:14.35%-35.43%; China: 265.79%;
• CVD China • AD China definitive measures
CVD Korea India: 7.6%; Japan: 71.35%; Korea: 6.32%-
investigation started could be expected no later than
China May 13, 2016 2Q’17 34.33%; UK: 5.4%-25.56%
AD only • ITC voted affirmative on China and Japan (June
AD 22), and on Brazil, India, Korea, UK (Sept 2)
Iran, Serbia, • AD (5 Cs) Investigation Japan
started July 7, 2016 UK • ITC voted negative on Russia AD and CVD (Sept
Ukraine, Russia
2) - no orders will be issued
& Brazil
QP AD • Investigation initiated • Provisional measures could be HRC AD/CVD • DOC final determination: Measures in
China Feb 13, 2016 expected not later than 4Q’16 Korea ─ CVD: Brazil: 11.09%-11.30%; Korea: 3.89%- place for the
• Definitive measures could be Brazil 57.04% next 5 years
expected not later than 2Q’17 ─ AD: Australia: 29.37%, Brazil: 33.14%-
AD only
Australia, 34.28%, Japan: 4.99%-7.51%, Korea: 3.89%-
Japan, 9.49%, Netherlands: 3.73%, Turkey: 3.66%-
AD • Definitive measures • Publication of the EU Commission Netherland, 7.15%, UK: 33.06%
Rebar (HF) China implementation were expected by Aug 2016 Turkey , UK • ITC voted affirmative on all AD and Korea and
voted in favour on the • Measures in place for the next 5 Brazil CVD; the ITC voted negative on Turkey
July 7, 2016 – From years CVD (Sept 12)
18.4% to 22.5%
QP AD/ CVD • Petition filed March 7, 2016 DOC AD
AD • Investigation initiated • AD provisional measures expected China, Korea • ITC preliminary vote: affirmative, present material preliminary
Belarus March 31, 2016 no later than beginning of 1Q’17 injury, on May 20, 2016 for all countries; imports determination
Rebar (LF) • Definitive measures expected no AD subsidized by the Brazilian government were s for Brazil,
later than 2Q’17 Austria, found to be negligible so the CVD investigation Turkey and S.
Belgium, was terminated Africa Sept
France, • DOC preliminary determination (7 Sept.’16): 2016; all
AD • Investigation confirmed • Provisional measures could be Germany, CVD China 210.5%, Korea 0.62% (de minimus) other
Seamless China on 13 February expected not later than mid Q4 Italy, Japan, countries Nov
Tubes • Prelim. AD for Brazil, Turkey and S. Africa 2016
2016 South Africa, expected 16 September ‘16. Prelim decisions in
(Large Turkey, and
diameter) • Definitive measures expected not remaining AD cases extended until early
later than 2Q 2017 Taiwan November.
17Balance sheet structurally improved
Net debt* ($ billions) Average debt maturity (Years)
32.5 7.1
12.7 2.6
3Q 2008 2Q 2016 3Q 2008 2Q 2016
Liquidity** ($ billions) Bank debt as component of total debt (%)
12.0 75%
8.4
4%
3Q 2008 2Q 2016 3Q 2008 2Q 2016
Balance sheet fundamentals improved
* 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); 18
** liquidity is defined cash and cash equivalents plus available credit lines including back-up lines for commercial paper programNet debt
Net Debt ($ billion) & Net Debt/LTM reported EBITDA* Ratio (x)
35 4.0
Net Debt ($ billion) - LHS
Net Debt / LTM EBITDA
30
3.0
25
2.5
20
2.0
15
10
1.0
5
0 0.0
1Q 11
2Q 11
3Q 11
4Q 11
1Q 07
2Q 07
3Q 07
4Q 07
1Q 08
2Q 08
3Q 08
4Q 08
1Q 09
2Q 09
3Q 09
4Q 09
1Q 10
2Q 10
3Q 10
4Q 10
1Q 12
2Q 12
3Q 12
1Q 13
2Q 13
3Q 13
4Q 13
2Q 14
3Q 14
4Q 14
1Q 15
2Q 15
3Q 15
4Q 15
1Q16
2Q16
4Q 12
1Q 14
Net debt decreased to lowest level since the merger
* Based on last twelve months (LTM) reported EBITA. Figures prior to 2012 have not been recast on quarterly basis for adoption of accounting standards implemented from 1.1.13 19Strategy
20ArcelorMittal’s strategy
Our strategy is to leverage our distinctive attributes that enable us to achieve a leading
position in the most attractive components of the steel value chain
In steel, capture a leading position In operations, achieve best- In mining, grow a world-class
in attractive businesses by in-class competitiveness by business utilizing our financial
leveraging our technical leveraging our technical strength and diverse portfolio of
capabilities and global scale and capabilities and diverse portfolio assets and businesses
scope of assets and businesses • Invest to expand output at Tier I and
• Be the supplier of choice for • Be the safest Tier II assets
customers who value distinctive • Concentrate production • Optimize the value proposition
products and services at the best assets and run them associated with our products’ value
• Grow in markets with attractive well in use
structures • Be cost competitive by • Be the supplier of choice for a
• Minimize costs in commodity benchmarking, sharing best balanced mix of internal and external
businesses to lower risks and practices, and investing to customers
capture boom-market potential optimize our multi-site footprint • Provide a natural hedge against
• Innovate (product/process) market volatility and potential
oligopolies
Enablers
A clear A strong An effective Active The
licence to balance organisational portfolio best
operate sheet structure management talent
21Physical capacity reduction in Western
Europe Footprint now Optimised
Asset optimisation plan New “Footprint” in Western Europe:
• In 2011 as European steel demand weakened ArcelorMittal 2011 2013
undertook a footprint exercise to save $1bn on sustainable basis # Blast furnaces 15 11
• Focus on “core” assets to ensure lowest cost footprint with no # Hot strip mills 8 7
impact on output # Cold rolling 18 16
mills
• Supply existing customers with lower cost base without
compromising quality and service
• Significant savings $1bn annualised savings achieved by end-
Transformation costs
2012; competitive gap with competition recovered
Working Cap needs
Industrial plan
• Closed 4 BF in Belgium and France and idled least competitive
rolling & coating lines
• Concentrated slab production in 5 coastal sites: Dunkirk; Ghent;
Bremen; FOS and Asturias
• Savings through fixed cost removal; well loaded assets with
stable working points; lower variable cost; better service and
quality; and reduce capex requirements
Positive savings: Europe FCF positive even in challenging environments
22ACIS turnaround underway
• Volume improvement: 2mt through operational
Shipments split by geographical location
reliability (investing in our assets) Domestic
• Maintenance practices: Maintenance Exports CIS
Transformation program and WCM regaining
customer confidence in domestic and core
Kryviy Rih
markets
Exports
• Long term agreements: Renegotiated long term Domestic
Temirtau
supply agreement with Kumba in South Africa
expected to improve profitability
CIS
• Government support: Trade case support and
encouragement to sell locally in South Africa
South
Exports
Africa
• Renewed access to Middle-East market to
improve overall shipments
Domestic
• Currency devaluation improves
competitiveness: long overdue currency
adjustment to offset the last couple of years
inflation ACIS recovery underway
23China addressing its excess capacity
11th 5-year plan 2009 12th 5-year plan 2013 September 2016 February
• Eliminate capacity • Eliminate capacity • Eliminate capacity • Reduce 80mt • Reduce 100-150mt
below following below following below following capacity capacity over 5 years
standard: standard by 2011: standard : • Increase financial • No projects of new
- BF < 300m3 - BF < 400m3 - BF < 400m3 incentives in capacity
- BOF < 20t - BOF < 30t - BOF < 30t capacity reduction • There will be a
- EAF < 20t - EAF < 30t - EAF < 30t or volume swap “mandatory” part and
• By 2005, overall • By 2011, overall • By 2015, overall proposals a “voluntary” part
energy consumption energy consumption energy • Implement • The “mandatory” part
< 0.76 tons of coal < 0.62 TCE; water consumption < 0.58 penalties through uses same criteria as
equivalent; water consumption < 5t TCE; water high electricity & earlier policy but adds
consumption < 12t per ton; dust consumption < 4 water prices for criteria for product
per ton emission per ton < 1 m3; SO2 emission those companies quality and for
• By 2010, overall kilogram; CO2 per ton < 1 kilogram that fail to meet safety
energy consumption emission per ton < environmental • The “voluntary” part
< 0.73 TCE; water 1.8 kilogram standard will rely upon financial
consumption < 8t incentives to cut
• By 2012, overall capacity. Special
energy consumption funds* will be used
< 0.7 TCE; water for redeployment
consumption < 6t incentives and debt
restructuring
Previous capacity closures more than offset by rapid capacity additions
China steel capacity rationalisation will take time… trade action to protect during this transition
24MACRO (highlights)
Global apparent steel consumption
China* EU28*
220
0% to -1.0%
800 200
700 0% to +1.0%
180
600 160
500 140
400 120
300 100
200 80
100 60
0 40
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F
NAFTA* Rest of World**
+1% to +2%
160 +0% to +1% 600
140 500
120 400
100 300
80 200
60 100
40 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F
Estimated 2016 ASC growth of 0% to 0.5%
*ArcelorMittal estimates of finished ASC in Mt; ** World ex. China, NAFTA and EU28 26Global PMI point to improving manufacturing
• Global manufacturing output growing at an improved Global apparent steel consumption
rate in Jun (ArcelorMittal PMI 51.3*) 2016 v 2015**
• US: Real demand growth continues led by consumer US*** +2 to +3%
spending and homebuilding, but investment is held back
by the strong dollar and depressed oil drilling activity.
PMI picking up to 52.2 in Jun’16 EU28 +0% to +1%
• Europe: Underlying demand continues to rise led by
strong automotive. Mild impact from Brexit to slow
European recovery into 2017 China 0% to -1.0%
• Brazil: The economy remains in recession. The pace of
decline is moderating, as confidence has improved and
the currency strengthened, both from low levels. Brazil -10% to -12%
• China: PMI remains below 50, but industrial output
growth stable, supported by strong automotive. Robust
infrastructure investment continues to support demand, CIS -5% to -6%
while growth in real estate moderates as expected.
• CIS: Russian economy continues to contract, but at a
Global 0% to +0.5%
slower pace. Russia PMI above 50 in Jun’16, first time
since Nov’15 as manufacturing output stabilises
ArcelorMittal PMI continues to indicate positive (albeit slow) growth in real demand
Source: *ArcelorMittal PMIs (weighted by ArcelorMittal steel deliveries) ** ArcelorMittal estimates *** Excludes tubular demand 27Real GDP growth in major economies
Real GDP
Percent change 2014 2015 2016 2017 2018
World 2.7 2.7 2.4 2.8 3.1
United States 2.4 2.6 1.5 2.4 2.4
Canada 2.5 1.1 1.2 2.3 2.3
Eurozone 1.1 1.9 1.6 1.3 1.6
United Kingdom 3.1 2.2 1.9 0.7 1.3
China 7.3 6.9 6.6 6.3 6.4
Japan -0.1 0.6 0.6 0.7 1.0
India 7.2 7.5 7.5 7.4 7.7
Brazil 0.1 -3.9 -3.2 0.6 2.1
Russia 0.7 -3.7 -0.9 0.6 1.6
Source: IHS © 2016 IHS
World GDP growth expected in 2017
Source: HIS
© 2016 IHS 28Construction markets in developed market
United States US residential and non-residential construction
indicators (SAAR) $bn*
• Residential construction remains strong supported
by low mortgage rates but permits have begun to (latest data point: May’16)
stabilise after growing strongly in 2015 and Q1’16.
• Non-residential construction continues to grow
with the Architecture Billings Index (52.6) in June
indicated growing demand (>50) for the 5th month
running.
Europe
• The economic recovery in Europe had been
Eurozone and US construction indicators**
strengthening and broadening, but the UK’s vote
to Brexit will slow growth.
• The expected pickup in European construction
has still not materialised and has become less
likely in the current environment.
• Increased uncertainty has knocked confidence,
(latest data point: Jul’16)
so further policy action (such as a big increase in
government infrastructure) spending is needed to
support growth, but faces political constraints.
Construction gradually improving
* Source: US Census Bureau; ** Source: Markit and The American Institute of Architects 29Regional inventories
German inventories (000 Mt) US service centre total steel inventories (000 Mt)
(latest data point: May’16) (latest data point: Aug’16)
Brazil service centre inventories (000 Mt) China service centre inventories* (Mt/mth) with ASC%
(latest data point: Aug’16) (latest data point: Aug’16)
Inventory trends
* Source: WSA, Mysteel, ArcelorMittal Strategy estimates 30Surge of flat imports in 2014 and 2015 triggered antidumping
investigations targeting especially China, developed Asia and
some European countries
Evolution of North America finished flat products* imports, mt
11.7
• The surge of imports initiated trade
10.9
actions with new AD and CVD
2.3
1.5 introduced in 2016 targeting
especially:
1.0 0.9
8.2 - China (HRC, CRC, coated)
0.5
0.6
0.5
0.4 - S. Korea (HRC, CRC, coated)
0.7 2.2 Others
6.4 6.4 0.7 - Netherlands (HRC), UK (HRC,
0.7
5.4 1.3 1.1
0.7 CRC), Italy (coated)
1.0 1.0 Rest of EU
4.6 0.8 0.1 India - Brazil (HRC, CRC)
1.6 0.8 1.4 0.3
1.3 Turkey
0.3 0.3
0.0 0.5 Taiwan - Turkey (HRC)
1.3 0.0 0.4 0.4
0.6 0.5 Japan
0.2 0.5 0.7 0.7 Brazil - Russia (CRC)
0.7 0.3 1.9 1.5
0.2 0.4 0.7 IT, NL, UK
0.7 0.8
0.3 0.6 0.4 China
0.7 0.7
0.6 0.6
0.3 2.0 2.3 1.9
1.4 1.3 Korea
0.8 1.1
2010 2011 2012 2013 2014 2015 2016**
…trade case have already had some impact in the US
• HRC, CRC, HDG, EG, TP; ** 2016 H1 annualized
Source: ArcelorMittal Corporate Strategy team analysis
31Lower US imports
US Total Carbon Flat roll imports US Total Carbon Flat roll imports from
(excl. slab) – YoY ‘000 tons* China (excl. slab) – YoY ‘000 tons*
-25%
-94%
8,957 1,208
6,695
70
7M’15 7M’16 7M’15 7M’16
US HRC imports – YoY ‘000 tons* US CRC imports – YoY ‘000 tons*
-24%
-27%
2,238 1,160
1,703 846
7M’15 7M’16 7M’15 7M’16
• YTD-July carbon flat roll import market share fell to ~17% from ~22% in the same
period last year
• Domestic producers have been benefiting from the falling imports into the US, with
YTD-July domestic shipments up ~2% YoY
…allowing domestic producers to recover market share
“Source: US Census Bureau, Dept. of Commerce, short tons 32China overview
Despite declining real estate, other sectors
support steel demand growth
Forecast crude steel demand in China (million tonnes)
Base case, Q3 2016 outlook
Others
Container
Ship Building
Auto
Light industry
Machinery
Infrastructure
Real estate
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
China demand stabilized
Sources: ArcelorMittal Corporate Strategy team analysis Highly Restricted
34
34China overview
China China construction % change YoY, (3mth moving av.)*
• GDP growth steady at +6.7% y-o-y in Q2’16, as
robust infrastructure investment, offset weakening
corporate investment and slower real estate growth
(latest data point: May’16)
• GDP growth likely to slow during H2’16 without
further stimulus, but strong credit and state-led
growth increases downside risks in the medium-term
• Industrial output growth has picked-up to 6.1% in
Q2, up from only 5.9% in Q1. Passenger car sales,
particularly SUV’s continued to improve, up over
12% y-o-y in Q2’16
• Chinese domestic HRC spread over raw materials, Crude steel finished production and inventory (mmt)
which surged to a peak of $210/t in April, has eased (latest data point: Jun’16)
to $150-$160 spread in May/June
• 2016 real demand still expected to decline but ASC
will be supported by an end to destocking
• Crude steel production is expected to decline again
in 2016, but less than previously expected as export
volumes will be higher than forecast at the start of
the year
Economic growth stable supported by state led investment
* Source: China National Bureau of Statistics, China Real Estate Index System (via Haver) and ArcelorMittal estimates; Source: NBS, CISA, WSA, Mysteel, ArcelorMittal Strategy estimates 35China exports expected to decline
China exports Mt*
• Chinese steel exports for August came in at 9.0M metric tons (vs July at 10.34M metric tons), down 12.5%
sequentially and -7% YOY
• Chinese steel exports are tracking +6.5% YTD. On an annualized YTD basis, exports are tracking toward 115M
metric tons (+2% above 2015’s record of 112.4M metric tons)
China exports remain at elevated levels
* Source: Haver 36Steel investments
Europe: ArcelorMittal Krakow Poland
On July 7, 2015, ArcelorMittal Poland announced it will restart preparations for the relining of BF#5 in Krakow,
which is coming to the end of its lifecycle in mid-2016.
• Further investments in the primary operations include:
– The modernization of the BOF #3 Total expected cost PLN 200m (more than €40m).
• Investment in the downstream operations include:
– The extension of the hot rolling mill capacity by 0.9Mtpa
– Increasing the hot dip galvanizing capacity by 0.4Mtpa
– Expected completion in 2016 Total capex value of both projects expected to exceed PLN 300m (€90m)
HRM Krakow HRM
Investments in excess of €130m in upstream and downstream installations in Krakow
38Dofasco (NAFTA)
Cost optimization, mix improvement and increase of shipments of galvanized products:
• Phase 1: New heavy gauge galvanize line (#6 Galvanize Line):
– Completed construction of heavy gauge galvanizing line #6 (cap. 660ktpy) and closure of line #2 (cap. 400ktpy)
increased shipments of galvanized sheet by 260ktpy, along with improved mix and optimized cost
– Line #6 will incorporate AHSS capability part of program to improve Dofasco’s ability to serve customers in
the automotive, construction, and industrial markets
– The first commercial coil was produced in April 2015 with ramp up ongoing
• Phase 2: Approved galvanize line conversion to Galvalume and Galvanize:
– Restart conversion of #4 galvanize line to dual pot line (capacity 160ktpy of galvalume and 128ktpy of
galvanize products) and closure of line #1 galvanize line (cap.170ktpy of galvalume) increased shipments of
galvanized sheet by 128ktpy, along with improved mix and optimized cost.
– Expected completion in 2016
Expansion supported by strong market for galvanized products
39VAMA-JV with Hunan Valin
• VAMA: JV between ArcelorMittal and Hunan Valin which will produce steel for high-end applications in the automobile industry,
supplying international automakers and first-tier Chinese car manufacturers as well as their supplier networks for rapidly growing
Chinese market
• Construction of automotive facility : State of the art pickling tandem CRM (1.5Mt); Continuous annealing line (1.0Mt), and Hot dip
galvanizing line (0.5Mt)
• Capex ~$832 million (100% basis) First automotive coils produced during 1Q 2015
• VAMA recent developments
– VAMA has completed development of DP780, DP980 and Ductibor and received approval on advanced high strength steel and
USIBOR by key auto OEMs.
– During 1Q’16, VAMA completed homologation of IF, USIBOR and DP600 with tier 1 auto OEMs; also officially homologated by
some of the biggest domestic OEM’s
– Obtained ISO/TS16949 certification
CGL furnace Entry section of Continuous Annealing Line Automotive packaging line
Robust Chinese automotive market: growth to ~32 million vehicles by 2022*
* Source: IHC
40AM/NS Calvert JV
Investment in the existing No.4 continuous coating line: Project completed 1Q 2015:
• Increases ArcelorMittal’s North American capacity to produce press hardenable steels one of the strongest steels used in
automotive applications, Usibor®, a type one aluminum-silicon coated (Al Si) high strength steel
• AM/NS Calvert will also be capable of producing Ductibor®, an energy-absorbing high strength steel grade designed specifically to
complement Usibor® and offer ductility benefits to customers
• Modifications completed at the end of 2014 and the first commercial coil was produced in January 2015
Slab yard expansion to increase Calvert’s slab staging capacity and efficiency (capex $40m):
• To expand the HSM slab yard bays 4 & 5 with overhead cranes and roller table to feed the HSM production up to 5.3mt/year of
coils.
• The current HSM consists of 3 bays with 335kt capacity for incoming slabs (less than the staging capacity required to achieve
5.3mt target).
• Phase 1 completed 1Q 2016: Slab yard expansion of Bay 4 and minor installations for Bay 5 increase coil production up to
4.6mt/pa
• Phase 2: Slab yard expansion Bay 5 Increase coil production from 4.6mt/pa to 5.3mt/pa. Completion expected in 2017
HSM Slab yard Bay 4
Investment in Calvert to further enhance automotive capabilities
41Acindar (Brazil segment)
New rolling mill at Acindar (Argentina):
• New rolling mill (Huatian) in Santa Fe province to increase rebar
capacity by 0.4mt/year for civil construction market:
– New rolling mill will also enable Acindar to optimize production at its
special bar quality (SBQ) rolling mill in Villa Constitución, which in
future will only manufacture products for the automotive and mining
industries
• Estimated capital expenditure of ~$100m
• Project completed in 1Q 2016
Finishing block Hot commissioning
Plant overview
Reheating Furnace New Building
Expansion supported by construction market in Argentina
42Mining
A global mining portfolio addressing Group
steel needs and external market
Canada
Key assets and projects Baffinland 50%(1) Ukraine
Iron Ore
Bosnia 95.13%
Iron Ore
51%
Canada Kazakhstan Iron
AMMC 85% (2) Ore
4 mines 100%
Kazakhstan
USA Coal Coal
USA Iron Ore
100% 8 mines 100%
Minorca 100%
Hibbing 62.31%*
Mexico Iron Ore
Las Truchas &
Volcan 100%;
Pena 50%*
Liberia
Iron ore mine Iron Ore 85%
Coal mine
Brazil
Iron Ore
Existing mines 100%
South Africa
Iron Ore**
Geographically diversified mining assets
* Includes share of production
** Includes purchases made under July 2010 interim agreement with Kumba (South Africa)
1) Following an agreement signed off in December 2012, on February 20th, 2013, Nunavut Iron Ore subscribed for new shares in Baffinland Iron Mines Corporation which diluted AM’s stake to 50%
2) January 2nd, 2013 AM entered into an agreement to sell 15% of its stake in AM Mines Canada to a consortium lead POSCO and Chi na Steel Corporation (CSC).
3)
4)
New exploration projects, Indian Iron Ore & Coal exploration , Coal of Africa (9.71%) and South Africa Manganese (50% ) are excluded in the above .
On January 19, 2015, ArcelorMittal announced the sale of its interest in the Kuzbass Coal mines in the Kemerovo region of Siberia, Russia, to Russia’s National Fuel Company (NTK). This transaction closed on December 31, 2014.
44Mining performance improved in 2Q’16
• EBITDA: 2Q’16 EBITDA 67% higher than 1Q’16 Iron ore 62% Fe Platts (CFR) ($/t)
+23.2% higher volumes (mainly AMMC) and +15.2%
higher iron ore prices* +15.2%
• Production lower in 2016:
Liberia:
‒ Drilling underway to assess transition mining from 58 55 56
ageing Tokadeh iron ore deposit to the nearby DSO 47 48
Gangra deposit by 3Q’17
‒ Increase from current 2-3Mtpa to 5Mtpa, higher grade 2Q’15 3Q’15 4Q’15 1Q’16 2Q’16
DSO, low strip ratio product by 3Q’17 (minimal
investment) Market price iron ore shipments (Mt)
Mexico: Volcan mine closure (2mtpa impact)
• Shipments: FY’16 marketable shipments expected to +23.2%
decline by ~10% YoY
• Ongoing cost reduction: FY’16 iron ore cash costs
expected to be reduced by >10% 10.8 10.3 9.9 9.6
7.8
• Cashflow: FCF** breakeven point $40/t*
2Q’15 3Q’15 4Q’15 1Q’16 2Q’16
Profitability improved due to seasonally higher volumes, prices and ongoing cost reduction
YoY refers to FY’16 v FY15; 45
*CFR China 62% Fe; **FCF refers to cash flow from operations less maintenance capexR&D
46Global R&D key facts and figures
• Over 1,300 full time researchers
• Working on all process and development needs
• Expanding worldwide network of laboratories (currently 12 labs in Europe, North America,
and South America)
• Key challenges fully aligned with the group strategy: geography, value chain, product
differentiation
R&D budget spending by need Construction
Exploratory 10%
6% Plates and specialities
13%
Process 37%
57% Product 10% General industry
60%
Automotive
7%
Others
Significant R&D spend of ~$250m (1/3 for automotive sector)
47Six R&D labs dedicated to automotive
industry
Canada France
Hamilton Maizières-lès-Metz
Montataire
Gandrange*
USA
East Chicago
Brazil
Tubarão**
Main missions:
• Develop new steels
• Improve the in-use properties of steels
• Find anti-corrosion solutions
• Invent breakthrough products
• Ensure technical service to customers
• Predict the behaviour of steel
565 people are adapting steel to the evolution of automotive industry needs
* Focus on R&D for Long Products 48
** Focus on steel innovations for the automotive, energy, construction, machinery and white goods industries.Product and applications R&D is strongly
focused on addressing customer needs
• Automotive: compromise between weight reduction, comfort, safety & durability
• Packaging: cost effectiveness, easy processing, weight reduction, innovative look,
food compatibility, green products
• Appliances: cost reduction, antibacterial, aesthetics, environmental friendly,…
• Construction: energy-efficiency, environmental issues, safe buildings, durability, fast
erection, health & comfort, aesthetics,…
• Metal processing: weight and cost saving, corrosion resistance, safety, reduced total
cost of ownership, high temperature resistance
• Electrical engineering: higher efficiency and power density machines through low
loss, high permeability, high strength electrical steels
• Energy pipes: heavy gauge, high strength, corrosion resistance, improved welding
49Automotive
50Through innovation, steel remains the
material of choice
3rd Generation AHSS
Fortiform® for cold stamping
2nd Generation: TWIP, X-IP
1st Generation, phase 3: Usibor® for hot stamping
1st Generation, phase 2 : Dual Phase (DP1180 since 2008), TRIP Steels, Martensitic(MS>1200MPa since 80’s)
1st Generation, phase 1: HSLA, HSS
1990 1993 2003 2008 2014
• ArcelorMittal has developed a unique full range of coated Advanced High Strength Steels in the last
25 years
• This has had significant impact on automotive construction:
– Safety: Most vehicles get 5 stars NCAP rating today
– Weight saving: Body structures are 25% lighter than in the 1980s
– Environment: 6% less greenhouse gas emissions than in the 1980s
– Corrosion protection: 12 years is the mainstream guarantee for corrosion thanks to the huge
share of coated products
ArcelorMittal has developed the broadest product offer in the world
51Global automotive a franchise business
• Steel set to remain material of choice for automotive producers
Auto shipments by geography
• ArcelorMittal is the leading supplier with a global footprint
Global distribution network
• Majority of OEMs in Europe and NAFTA rank ArcelorMittal #1 Nafta
Europe
in Technology 54%
38%
• Unrivalled reputation for quality and innovation
South America 6%
• Unique product offerings to meet OEMs demand for safety, South Africa 2%
fuel economy and reduced CO2 emission (S-in Motion 20%
weight reduction)
• Relative stability of margin: 20-30% of average selling price is
attributable to the value added nature of the product
• R&D efforts producing award winning Automotive solutions
• Focused investment to capture growth opportunities
• Calvert acquisition a break-through for NAFTA automotive
franchise
• Strong market share in our core markets
• Strong and consistent investment in R&D
Committed to producing innovative steel solutions for our automotive customers
52S-in motion®: weight reduction solutions
• A catalogue of 60 steel solutions using:
– Advanced High Strength Steels
– Hot stamping
– Laser Welded Blanks
– Tubular products
– Long products Press hardened parts (Usibor®/Ductibor®)
• Enabling:
– to save up to 73 kg or 20% of a typical
C-segment vehicle’s body-in-white and
chassis weight
– to deliver a 13.5% reduction in
CO2 equivalent (eq) emissions during
the vehicle’s use-phase
– to achieve these savings at neutral cost 54% AHSS
Processes
without compromising the vehicle’s safety • Hot stamping
• Stamping of LWB
29 parts
16 parts
performance • Roll forming 2 parts
Choose the best weight saving / cost compromises
53Further weight reduction potential
• Due to a very aggressive and weight reduction driven product development,
ArcelorMittal keeps enhancing:
• Our portfolio of products for cold stamping with developments like Fortiform®,
our family of 3rd Generation AHSS
• Our portfolio of products for hot stamping with Usibor® 2000 and Ductibor® 1000
Further potential weight savings with new products (%)
Potential Potential weight savings of
additional 3% over the next
23 24
Current 20 2 years across our solutions
C Segment Pick up truck North America
(2009 base) (2013 base) D segment
(2015 base)
New product developments to offer an additional 3% weight reduction in next 2 years
54Automotive growth in developed world
USA / Canada and EU28 + Turkey vehicles production units
• USA and Canadian automotive production
forecast to stabilize at ~14m units level
21,000
20,000 18,056
19,000
18,000 • EU28 and Turkey recovery ongoing.
17,000
16,000 Expected to return to 2007 level in 2017
13,818
15,000 with further growth potential beyond
14,000
13,000
12,000
11,000
10,000 EU28 & Turkey
9,000 USA & Canada
8,000
0
2006 2008 2010 2012 2014 2016 2018 2020 2022
Developed market vehicle production rates increasing; recovery ongoing
55Penetration of press hardened steels
Quote from Volvo’s statement on 22 July 2014:
Volvo XC90 “To help keep the occupant space inside intact in a
crash, the all-new XC90 has literally been made stronger
in every sense. This is achieved by more extensive use
275 pounds lighter than its of hot-formed boron steel, which is the strongest type of
steel presently used in the car body industry.
predecessor and 440 pounds The complete safety cage around the occupants is
lighter than most of its competitors . made from hot-formed boron steel and is designed for
maximum occupant protection in all types of crash
scenarios. The hot-formed steel amounts to about 40 per
cent of the total body weight.”
XC90's body & components
structure
Press hardened steels
40%
60%
Other
40% of the Volvo XC90 uses press hardened steel – the most in any vehicle
56S-in motion® : Mid-Size Sedan & SUV
• Offers one platform for both the mid-size sedan and SUV
• Official launch 1Q 2016
• Achieves more than 20% weight reduction from a 2015 baseline
• Includes body structures, doors, rear suspension and bumper systems
• Approximately 25% of the underbody mass of the SUV solution is carried over from the sedan
solution
- 86 of 241 vehicle parts were applied to the SUV solution from the sedan
• Representative 2015 baseline vehicles include:
- Mid-size sedan: Ford Fusion, Honda Accord, Chevrolet Malibu, Toyota Camry and Nissan Altima
- Mid-size SUV: Ford Explorer, Jeep Grand Cherokee, Chevrolet Traverse, Toyota Highlander,
Honda Pilot and Nissan Pathfinder
S-in motion® Mid-Size Sedan S-in motion® Mid-Size SUV
The S-in motion® Mid-Size SUV was built as an extension of the S-in motion® Mid-Size Sedan
57Award winning solutions
Delegation from ArcelorMittal and Magna Cosma Int’l
American Metal Market’s 2014 Best Innovation Automotive News' 2014 PACE Award in the
Process Award for the Honda door ring Manufacturing Process and Capital Equipment
category for the laser ablation process
Door ring project awarded
58AM/NS Calvert
• World’s most advanced steel finishing facility. The largest newly constructed facility in the
U.S. in 40 years
• Well positioned to supply growing demand in the SE US and Mexico with steels grades that
meet 2025 safety and fuel economy targets
• Powerful, state-of-the-art hot-strip mill, well suited to supply fast-growing demand for
advanced high-strength steels (AHSS)
• 5.3 million metric ton capacity with 1,650 team members
Strengthens existing auto steel franchise and ability to supply energy market
59VAMA greenfield JV facility in China
• 1.5 MT state-of-the-art production facilities VAMA: Valin ArcelorMittal Automotive target
areas and markets
• Well-positioned to serve growing automotive market
• Central office in Changsha with satellite offices in
FAW-VW &
proximity to decision making centers of VAMA’s customers BMW
• VAMA will represent 10% of Chinese automotive steel Daimler &
Nissan
market
Beijing
Auto steel consumption accessible to VAMA target products (market size
in MT)
Geely, VW, GM, KIA,
BYD, Changan,
SAIC & Chery
+29% Suzuki, CFMA &
FAW-VW Shanghai
20 22
Changfeng, Fiat,
17 DPCA, Dongfeng,
VAMA Honda, JMC & Suzuki
Loudi
SAIC, Toyota, GM,
Honda, Nissan & BYD Guangzhou
2014 2016F 2018F
VAMA well positioned to supply growing Chinese auto market (+35% 2014-2020)
BYD: Build Your Dreams; CFMA: Changan Ford Mazda Automobile; SAIC: Shanghai Automotive Industry Corporation; JMC: Jiangling Motors Corporation 60India - potential JV with SAIL
• MoU signed with SAIL on 22nd May to India auto production 2007-2022 (kveh)
study feasibility of creating JV for 8,000 +93%
constructing CR and HDG automotive 6,000
steel production facility in one of the major 4,000
auto clusters in India 2,000
0
• India forecast to become the 4th largest
2011
2016
2007
2008
2009
2010
2012
2013
2014
2015
2017
2018
2019
2020
2021
2022
automobile manufacturing nation by 2020,
growing from ~3.5m units to over 7m units
India auto steel consumption ktpa 2014-2021
• India is expected to grow as a hub for
automobile export manufacturing facilities +2,200
to cater to the international market Organic growth 4,900
Domestic
• Establishing an automotive focussed Imports
2,700 2,200
production presence in India is a natural 1,900 1,900
progression in executing our global 800 800
automotive strategy 2014 2021
2014: 3.7m passenger cars; 2.6Mtpa
2021F: 6.6m passenger cars; 4.8Mtpa
ArcelorMittal technology to be delivered through local JV partner
61Steel demand by end market
China steel demand split US steel demand split
Machinery and equipment
10% Other
Shipbuilding 3%
Railway Energy
1%
1% Construction 10%
Machinery
19% 40%
Automobiles
8% Automobile
Defense & Homeland Security
Household appliances 26%
3%
2% Container
Appliances
Construction 4%
Metal goods 4%
68% Europe & NAFTA
14%
Other
Construction 2%
35%
Tubes
13%
Europe steel demand split
Other transport
2%
Domestic appliances
3%
Mechanical enginering Automobiles
14% 18%
Regional steel demand by end markets
Sources: China-Bloomberg, Europe: Eurofer, US: AISI
62New ArcelorMittal IR app and contacts
Daniel Fairclough – Global Head Investor Relations
daniel.fairclough@arcelormittal.com
+44 207 543 1105
Hetal Patel – UK/European Investor Relations
hetal.patel@arcelormittal.com
+44 207 543 1128
Valérie Mella – European/Retail Investor Relations
valerie.mella@arcelormittal.com
+44 207 543 1156
Maureen Baker – Fixed Income/Debt Investor Relations
maureen.baker@arcelormittal.com
+33 1 71 92 10 26
Lisa Fortuna – US Investor Relations
lisa.fortuna@arcelormittal.com
+312 899 3985
We have released a new ArcelorMittal investor relations app available for download on IOS or android devicesYou can also read
