Implementing a leaner and more efficient organisation to capture management gains

Transcription

1 Implementing a leaner and more efficient organisation to capture management gains Davinder Chugh Member of the Group Management Board 16 September 2009 Investor day London & New York 0

2 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 forwardlooking 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, 2008 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

3 Agenda Key pillars of sustainable management gains Fixed cost reductions and SG&A savings Continuous improvement and supply chain gains 2

4 Key pillars of sustainable management gains 3

5 Sustainable management gains Transversal activities Sustainable management gains target (USD million) 5 Supply Chain Gains Sustainable Management Gains Fixed Cost Reduction Continuous SG&A Improvement Savings 0 Gains At end of June E 2010E 2012E Transversal activities leveraged to capture fixed cost reduction over USD 10 billion* including sustainable SG&A and fixed cost reduction of USD 1.7 billion * Including foreign exchange positive impact of USD1.8 billion 4

6 Fixed cost reductions and SG&A savings 5

7 Fixed cost reduction Fixed cost by category in first half 2009 COGS Spares & structure cost 15% SG&A 22% COGS Contractor cost 10% COGS Manpower cost 53% Main initiatives Manufacturing footprint aligned with market demand Restructuring of segment management Corporate office rationalisation Voluntary separation Incentives and rewards Variabilisation of fixed costs Quarterly fixed cost spend (base 100 average 2008) Q1-09 Q2-09 Efforts to increase sustainable part with volume recovery COGS is defined as Cost of Goods sold 6

8 SG&A cost reduction SG&A cost by category in first half 2009 Travel & commercial expenses 17% Other costs IT 6% 10% Main initiatives Technology enabled culture to reduce SG&A Internal expertise, benchmarking and knowledge sharing replacing external consultancy Optimisation of real estate sustainable cost reduction and cash generation IT supply: out-sourcing and off-shoring Consolidation of shared service centres Increase sustainable SG&A reduction Quarterly SG&A spend (base 100 average 2008) Manpower & contracted services 67% Q 09 2Q 09 Every component of SG&A costs challenged 7

9 Leaner and more effective organisation Project OMEGA overview Actions and Initiatives Shared Service Centres Corporates/ Bus* Streamline activities across all segments by consolidating at a regional or global level (OMEGA project) Redesign the SG&A activities and organisations Sites Align with best in class through benchmarking Consolidation into centres of excellence and shared service centres Focused on rationalising and streamlining decision making * BU: Business units A leaner and more effective organisation is required to capture USD 5 billion management gains by

10 Continuous improvement and supply chain gains 9

11 Continuous improvement to accelerate operational excellence and cost reduction Variable cost reduction efforts Actions and initiatives Leveraging scale of group for effective internal benchmark Variable Cost Benchmarking & Cost Variance Analysis Variable cost reduction Local Site Action Plans & Dashboard Main KPIs regularly challenged for improvement Capture best in class processes Sustainable variable cost improvements More than 250 global actions to enrich sites action plans Continuous improvement gains through knowledge sharing culture 10

12 Total Cost of Ownership driven global supply chain Breakdown of Total Cost of Ownership (TCO) spend forecast Industrial Products, Services & Logistics 35% Energy 24% Iron Ore & Solid Fuels 20% Alloys & Metals 8% Metallics 13% Methodology and initiatives Total Cost of Ownership (TCO) methodology Captive resource utilisation (ore, coal, coke, workshops, self generation) and low cost country sourcing Portfolio based approach to sourcing and flexible contracting strategy Energy management participate in cost based projects on equity/off-take principle Optimisation of inventory at sea as a common pool Leveraging scale and reach in global purchasing for constant competitive advantage Scale and global reach enable supply chain gains 11

13 Q&A 12