Financial results for the six months ended June 2014 Agenda 2 - PowerPoint PPT Presentation

www.arcelormittalsa.com 1 Financial results for the six months ended June 2014

Agenda 2 • Overview CEO, Paul O’Flaherty • Steel market overview CEO, Paul O’Flaherty • Finance CFO, Matthias Wellhausen • Operating results COO, Hans Ludwig Rosenstock • Other key issues and outlook CEO, Paul O’Flaherty • Questions Overview www.arcelormittalsa.com

www.arcelormittalsa.com 3 Overview Paul O’Flaherty, CEO

Our Footprint 4 R27 bn ( 0.9 %) in R47 m in economic value Economic direct GDP and R11 bn R2.0 bn in procurement contribution R1.5 bn in taxes contributed growth engine (0.4 %) in indirect spend on QSE and EME in 2013 GDP contribution R42 m invested in R25 bn spent on over 2000 Over 14 800 people in Over 120,000 training seats technical training; Employer, job creator suppliers, but more direct employment due to provided with R138 m Multiple global steel and skills developer emphasis on supplier devt. AMSA invested in training innovations introduced to required South Africa 70 % of new recruits employed locally; 40 local community org. 24 % spend (R5.9 bn) on Impact on local R40 m invested in local 16 m tonnes of material engaged in 2013, with local suppliers of which R1.0 communities in 2013 communities transported on local road outcomes documented bn on QSE & EME and rail 125 PJ of energy 48 % improvement in 1.65 m tonnes 2.5 kt of dust and 17.5 bn litres of water water abstraction since 15.2 m tonnes by-products Environmental 23.5 kt of SO 2 abstracted and 13.4 m 2005. Continuously Scope 1 and 2 disposed of ; 290 emissions per footprint tonnes of raw material improving effluents CO 2 emitted ha of land under annum consumed management restoration 5 m tonnes of steel produced with Developed local steel processing Enabler of S.A. ~60% of South African steel 3.5 formal jobs created economy- industries through joint ventures. development through supplied by AMSA supporting key wide for every R1 m spent by AMSA Export rebates of R213 m paid out to supply of steel domestic industries local companies in 2013 8 819 received health 11 % female employ- Voluntary Catalyst AMSA at Open disclosure of & safety and 1 667 ment, 57 % HDSA participant in for change in B-BBEE financial, env. and received anti- employment and 75 % several debates at Level 7 social indicators South Africa corruption training unionisation national level Mostly positive Positive and negative Mostly negative Economic Social Environmental Note: All figures as of 2013 Source: AMSA, internal data, BCG analysis Overview www.arcelormittalsa.com

Our value creation model 5 Stakeholders Inputs Steelmaking process Value outputs impacted Input materials consumed Financial outputs H1 2013 H1 2014 % change H1 2013 H1 2014 % change Plate Shareholder Iron ore 3 238kt 3 387kt +5% Revenue R15 890m R17 927m +13% Investors Coal 2 121kt 2 356kt +11% EBITDA R976m R810m -17% Employees Scrap 100kt 202kt +102% Profit from operations R233m R159m -32% Fluxes (dolomite & lime) 790kt 868kt +10% EBITDA margin 6.1% 4.5% -26% Hot strip mill Energy Product outputs H1 2013 H1 2014 % change H1 2013 H1 2014 % change Customers Blast furnace Electricity purchased (TWh) 1.87 1.85 -1% Flat steel 1 361kt 1 505kt +11% Automotive Domestic market 1 095kt 969kt -12% Export market 266kt 536kt +102% Building and Water intake construction Long steel 762kt 690kt -9% H1 2013 H1 2014 % change Domestic market 611kt 565kt -8% Caster Beverage Water intake (kl) 8 535 661 9 207 418 +8% Export market 151kt 125kt -17% Infrastructure Coke & chemicals Human resources Mkt coke 210kt 208kt -1% Tar 52kt 53kt +2% H1 2013 H1 2014 % change Electric arc furnace Other 488kt 660kt +35% Employees 9 126 8 885 -3% Hired labour 1 616 2 064 +28% Service contractors 3 895 3 344 -14% Safety Training spend R69.1m R69.5m +1% Employee Billet mill H1 2013 H1 2014 % change Contractors LTIFR 0.66 0.54 -18% Investments Fatalities 0 2 n/a Raw materials H1 2013 H1 2014 % change Capex R377m R856m +127% Socio economic outputs Local Coiled rounds H1 2013 H1 2014 % change Key: communities t = Tonnes Socio economic dev R19.8m R8.2m -59% Suppliers local Flats, rails, joists, kt = Kilotonnes Flats, reinforced bar, rounds, angles, Procurement spend R12 188m R13 486m +11% rounds, angles and business TWh = Terrawatt hour billets and channels blooms kL = Kilolitres Overview www.arcelormittalsa.com

Strategic imperatives and strategies 6 • Protecting the health and safety of our employees • Driving profitability – Customer focus – Eliminate excessive raw material costs – Improve operational efficiencies – Improve supplier efficiencies – Optimise our industrial footprint – Improve energy efficiencies • Government relations • Managing our people • Environmental responsibility • Engaging with local communities Overview www.arcelormittalsa.com

Safety – Our Key Strategic Imperative 7 Lost Time Injury Frequency Rate • Two contractor fatalities in Q2 2014 (the first (Employees and Contractors) in 33 months) 5 4.7 • Another fatality in July 2014 (non-reportable) 4 3.9 • Since 2002 our lost time injury frequency rate has been reduced by 30% a year from 3.4 3.3 4.7 in H1 2002 to 0.54 in H1 2014 3 2.8 2.6 • Safety Focus Areas 2.4 2.2 – Hazard Identification and Risk Management 2 entrenchment being introduced at all sites 1.6 1.2 – Leadership and awareness 1 – Zero harm / Zero fatalities 0.66 0.56 0.54 – Minimum Level 3 Compliance with Fatality Prevention Standards 0 2002 2004 2006 2008 2010 2012 H1'14 Overview www.arcelormittalsa.com

Environmental investment program 8 • R1 452m spent on environmental capital since 2007 – Air emission compliance (44%) – Water management (47%) – Others such as waste management (9%) • Rehabilitation of legacy sites remains important • Energy efficiency – Investigate alternative suppliers for electricity and gas – Mitigating options to replace natural gas and/or generate own electricity Overview www.arcelormittalsa.com

Socio Economic activities 9 • R8.2m (R19.8m) spent – 100 houses re-roofed in Boipatong bringing the total to 3 000 since 2010 – 10 new homes in Blaaubosch near Newcastle were built by employees bringing the total of new homes built near our plants to 54 since our volunteering program in 2009 – Grants for NGO’ s mostly involved in health and education related activities and up-skilling at the North West University around the Vaal area – Science centers • 1 500 pupils attend science centers in the Vaal Triangle, Saldanha and Newcastle • Vanderbijlpark Works recruits graduates from the program with 34 learners already on the workforce pipeline for various engineering fields • 500 local communities benefited from computer lessons offered by the centers • Early childhood development programs offered by the centers • Signed an MOU for the Newcastle Science Center to assist the Department of Education with teacher development training Overview www.arcelormittalsa.com

Operational and Financial overview (for the six months to end June 2014) 10 EBITDA decreased 17% to R810m 1 Headline loss lower by 95% to R6m from R123m N5 reline on budget, but behind schedule 2 Plans in place to limit impact of delay 3 Despite the N5 furnace reline, capacity utilisation increased to 74% Steel shipments increased 3% 4 Domestic sales down 10% and exports higher by 59% Cash cost increased 12% 5 Exchange rate eroded impact of lower raw material prices EBITDA target of $100/t by end 2015 at $34/t to date 6 Target remains achievable Overview www.arcelormittalsa.com

Key result drivers 11 H1 2013 H1 2014 Flat steel product prices in rand R6 676/t R7 170/t +7% Long steel product prices in rand R6 818/t R7 382/t +8% Liquid steel production 2 481kt 2 386kt -4% Total sales volume 2 123kt 2 195kt +3% Export sales volume 417kt 661kt +59% Domestic sales volume 1 706kt 1 534kt -10% Cash cost per ton liquid steel (Total) R5 983 R6 710 +12% Fixed R1 377 R1 559 +13% Variable R4 607 R5 151 +12% ZAR movement (average rate) R9.22 R10.71 -16% Overview www.arcelormittalsa.com

www.arcelormittalsa.com 12 Steel market overview Paul O’Flaherty, CEO

Sales environment 13 Global Apparent consumption and AMSA sales vs stocks Stocks Apparent consumption AMSA sales • Activity picked up in Q2 with USA leading the 1 400 000 1 000 000 Eurozone and China, while emerging Apparent consumption (t) Despatches (t) & stock (t) economies under pressure 1 300 000 900 000 Domestic 1 200 000 800 000 • Prolonged mining strike impacted steel 1 100 000 700 000 demand and investment climate 1 000 000 600 000 • Apparent steel consumption down 16% 2009 2010 2011 2012 2013 2014 • Major steel consuming sectors performed Imports poorly: steel stocks reduced (8 weeks) Primary long Primary flat Finished steel products 500000 10 • Marked reduction in steel imports by 28% Weeks’ despatches 400000 Imports (t) 9 • ArcelorMittal South Africa increased market 300000 share from 58% to 62% 8 200000 • Imports of finished products containing steel 7 losing momentum 100000 • Sub-Saharan African market is still an 0 6 2009 2010 2011 2012 2013 2014 important growth market for steel Source : SAISI actuals up to 2008, thereafter AMSA estimates Steel market overview www.arcelormittalsa.com