Adjusting financial policy

Transcription

1 Adjusting financial policy Aditya Mittal Chief Financial Officer and member of GMB 16 September 29 Investor day London & New York

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 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 2-F for the year ended December 31, 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 Reaction to the financial crisis Adjusting financial policy What would profitability be post crisis? Financing the post crisis growth 2

4 Reaction to the financial crisis 3

5 ArcelorMittal financial position pre-crisis Net debt / EBITDA* 2.5 Gearing 55% 2. Upper limit targets 5% % 1. 4%.5 Lower limit targets 35%. 3% ArcelorMittal financial ratios pre-crisis * Based on latest twelve months (LTM) EBITDA 4

6 In addition to focus on cost reduction focus was put on debt reduction Net debt and gearing Main initiatives USD 1 billion target reduction 55% 5% 45% 4% Positive cash-flow from operations achieved throughout the crisis due to significant cash inflow from reduction in working capital (USD 5.5 billion over 9 months) 29 CAPEX cut to USD 3 billion from the USD 9 billion initially planned Dividend cut to USD.75 per share from USD 1.5 (annual savings of USD 1.1 billion) 35% USD 2.5 billion of cash gained from unwinding of raw material hedging transaction % USD 1.4 billion of proceeds from asset disposals over 9 months Capital increase of USD 3.2 billion Net Debt in billion of USD(LHS) Gearing (RHS) Target of USD 1 billion of net debt reduction nearly achieved in 9 months 5

7 An improved liquidity Liquidity (USD billion) Cash & Cash equivalent in % of liquidity % 2 5% % 5 3% % Cash & Equivalent Unused credit line In 9 months of financial crisis, liquidity has been improved by more than USD 1 billion 6

8 Successful refinancing Gross debt structure Main initiatives Bonds 15% Bank debt 75% Commercial paper 1% Bonds 38% Convertibles bonds 6% Commercial paper 7% At 3/9/8 At 3/6/9 New covenants for main bank facilities Bank debt 49% Amendment to the Net Debt / EBITDA covenant to 4.5x for December 29, 4.x for June 21 and reverting to 3.5x for December 21 USD 6. billion of bank refinancing secured through Forward Start facilities in February and March 29 USD 1.6 billion (EUR 1.25 billion) of convertible bonds issued on April 1, 29 USD 3.2 billion of capital increase through an accelerated book building on May 6, 29 USD.8 billion of additional convertible bond issued on May 6, 29 USD 2.25 billion of bonds issued on May 2, 29 USD 3.5 billion (EUR 2.5 billion) of bonds issued on June 3, 29 Approximately USD 11.4 billion of equity, convertible and bond financings successfully issued 7

9 A longer maturity profile Liquidity and debt profile at 3/9/8 Liquidity and debt profile at 3/6/9 5 Cumulative gross debt repayment 5 Cumulative gross debt repayment Liquidity 2 Liquidity* 1 1 Q Thereafter H Thereafter Average debt maturity profile extended to 3.8 years * Pro forma liquidity includes cancellation of USD 3.2 billion of credit facilities and prepayment of USD 3.4 billion of bank debt 8

10 Adjusting financial policy 9

11 What we learned from the crisis ArcelorMittal EBITDA* and steel price ArcelorMittal EBITDA* and turnover ArcelorMittal profitability has shown resilience to economic slowdown and inventory downturn but not to major economic crisis *Pro-forma in 24, 25 and in billion of USD HRC FOB US Midw est USD/t EBITDA in billion of USD (LHS) Steel turnover in base 1 (RHS) 1

12 Setting a leverage target based on an average profitability Net debt / EBITDA* "Old" Upper limit targets "Old" Lower limit targets Net debt / Average EBITDA Net Debt / average EBITDA** depending cost of financing and interest coverage Interest coverage of 15x Interest coverage of 1x 6% 7% 8% 9% 1% 11% 12% 13% Cost of financing Upper limit target Lower limit target Target of a Net Debt / Average EBITDA to be between.5x and 1.8x * Based on latest twelve months (LTM) EBITDA ** Based on average EBITDA since 24 and including 29 (based on Bloomberg consensus) 11

13 Setting a new gearing target based on stock market trough Historical price to book value of the steel sector Gearing target for market capitalisation in trough to remain close to 2 times net debt 8% 7% 6% 5% Improve investment selectivity due to capital constrain Gearing 4% 3% Gearing range 2% 1% Historical price to book of.75x during trough % Market capitalisation over net debt Gearing target of 25% to 4% in order to reduce equity volatility during crisis Source Credit Suisse 12

14 Adjusted financial policy and new targets Net debt over average EBITDA* 2. Gearing 55% 5% % 1. Target range 4% 35%.5 3% Target range 25% % Net Debt / average EBITDA between.5x and 1.8x Gearing to be between 25% and 4% Committed to solid investment grade * Based on average EBITDA since 24 and including 29 (based on Bloomberg consensus) 13

15 What would profitability be post crisis? 14

16 Should we expect profitability to recover to previous levels? ArcelorMittal shipments and EBITDA margin Global steel demand expectation (Mt) Shipments in base 1 (LHS) Source WSA and ArcelorMittal estimates % 25% 2% 15% 1% 5% EBITDA Margin in % (RHS) Despite the exceptional crisis steel industry fundamentals (growth, consolidation ) remain 8 6 The financial crisis E 21E 211E 212E 213E 15

17 Historical profitability level ArcelorMittal annual EBITDA per tonne ArcelorMittal peak and trough EBITDA per tonne E* 29E* 29 EBITDA in USD billion (LHS) EBITDA in USD/t (RHS) Annual Quarterly Historical average and peak/trough of EBITDA per tonne of around 15 USD/t *Analyst consensus Source Bloomberg 16

18 Profitability level based on cost leadership, cost curve and capacity utilisation Industry HRC cost curve with overhead Margin in USD/t based on cost curve Cash cost USD/tonne Marginal cost producer 29e Industry theoritical margin at 9% capacity utilisation** ArcelorMittal unique added value* 4 2 ArcelorMittal weighted average target Industry weighted average cost Cumulative capacity, m tonnes ArcelorMittal integration & cost leadership 1 Cost curve analysis *Includes margin from AM3S and certain high margin product per tonne such as stainless steel **Assuming rational behaviour and that steel price equal marginal cost producer Source ArcelorMittal estimates 17

19 Financing the post crisis growth 18

20 Financing growth through cash-flow from operations CAPEX since merger M&A* since merger Cash-flow from operations (in billion USD) 7 USD 15.1bn USD 22.2bn Net Debt increase since merger** USD.1bn Over the last 3 years, ArcelorMittal has generated more than USD 38 billion of cash-flow from operation * Cash purchase price, assumed net debt and shares issued bought back ** Since 3/6/6 to 31/12/8 19

21 Growth CAPEX to be reinitiated cautiously CAPEX plan pre-crisis (USD billion) New CAPEX plan (USD billion) 1 Grow th CAPEX planned pre-crisis 1 Grow th CAPEX planned 8 Grow th CAPEX realised Maintenance CAPEX 8 Grow th CAPEX realised Maintenance CAPEX E 29E 21E Growth CAPEX focus on key emerging markets such as South America and India, and Mining expansion 2

22 Targeted M&A opportunities to be re-examined Financing of major historic Merger & Acquisition Aceralia / Arbed / Usinor Mittal Steel / ISG Mittal Steel / Arcelor ArcelorMittal / Arcelor Brasil Cash 31% Cash 31% Cash 5% Equity 5% Equity 1% Equity 69% Equity 69% ArcelorMittal to continue to create value through M&A leveraging leadership and integration know-how to deliver synergies 21

23 Q&A 22