Aperam Positioning, strategy and drivers

Transcription

1 Aperam Positioning, strategy and drivers Bernard Fontana Chief Executive Officer 16 December 2010

2 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, will 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

3 Content Overview Markets and products Unique strengths Challenges and opportunities in stainless steel Challenges and opportunities in electrical steel, alloys and specialties The Leadership Journey Q&A 2

4 Overview 3

5 Aperam snapshot A global player in stainless steel 2.5mt of Flat stainless steel capacity in Europe and Brazil (27% of Aperam turnover in 2009) Leading position in high valued added niches, alloys and specialties Stainless specialities (Ferritics) Electrical steel (GO and NGO) Special-carbon Nickel alloys & specialties A highly integrated distribution, processing and services network A unique capability to produce stainless and specialities from low cost biomass/charcoal An industrial network concentrated in 6 main plants located in Brazil, Belgium and France Approximately 9,800 employees An EBITDA average of USD 778m over representing approximately 5%* of ArcelorMittal s EBITDA *Stainless steel segment within ArcelorMittal 4

6 A global player Stainless steel shipments in 2009 North America Europe and CIS 43 kt 743 kt Asia & Pacific 46 kt South America 41 kt 228 kt Middle-East & Africa PLANTS SERVICE CENTERS Source: Aperam FOREST SALES AGENCIES 5

7 Production assets in Europe & South America Châtelet Genk Gueugnon Isbergues Timóteo Imphy Location & facts - Melt shop and hotrolling - Belgium Location & facts - Melt shop and cold rolling mill - Belgium Location & facts - Cold-rolling mill and finishing - France Location & facts - Cold-rolling mill and finishing - France Location & facts - Melt shop and finishing facilities - Brazil Location & facts - Melt shop and finishing facilities - France Capacity: - Slabs : 1,000 kt - HSM : 3,400 kt Capacity: - Slabs: 1,200 kt - Finished: 740 kt - 2,000 mm wide capacity, 316 and duplex grades - Cold rolling mill: 750kt Capacity: - Finished: 400 kt - Specialised in Bright Annealing (BA) products and stabilized ferritics Capacity: - Finished: 350 kt - LC2i: integrated line Capacity: - Melt shop: 900kt - 320kt cold rolled & 60kt hot rolled annealed and pickled - Silicon cold rolling: 60kt GO and 120kt of NGO Capacity: - EAF: 60 kt - 1 VIM, 1 VAR, Rotary Continuous Caster for Long Products Hot Rolling mill of wire: ~40 kt 6 Cold Rolling Mills Strong presence in both Europe and South America 6

8 An organization by core competencies Alloys & Specialties Biomass & Upstream Strategic participation Bioenergia GMO Stainless & Electrical Steel Industry Industry Industry Services Distribution Distribution Distribution & Solutions Tubes Tubes Precision Wire drawing Components 7

9 Team and organisation Bernard FONTANA CEO 48 years old Clenio GUIMARAES Stainless & Electrical steel South America 53 years old Jean-Paul ROUFFIAC Timoteo DI MAULO Julien BURDEAU Julien ONILLON Johanna VAN SEVENANT Stainless & Electrical steel Europe Services & Solutions Alloys & Specialities CFO & Strategy Sustainability, HR & Communication 58 years old 51 years old 39 years old 40 years old 42 years old 8

10 Markets and products 9

11 Stainless steel represents only 2% of total world steel market in volume Stainless steel consumption by end user* Main end-user applications Others 3% Energy & Chemicals Industry 14% Catering & Appliance 34% General Industry 20% Automotive & Transportation 12% Building & Construction 17% Demand for stainless steel driven by consumers and industrial investments *Pre-crisis Source: Aperam 10

12 Demand for stainless steel comes later in the economic development cycle Carbon steel consumption per capita* (kg/year) Stainless steel consumption per capita* (kg/year) % % 200 x6 6 4 x Emerging world China Developed world 0 Emerging world China Developed world Stronger growth potential in stainless steel than carbon steel *Pre-crisis Sources: CRU and Aperam 11

13 Electrical steel products are driven by energy oriented applications Grain Oriented (GO) GO is used in the construction of static electrical machines / transformers Amorphous alloy is the only material that competes with GO steels (restricted to small distribution transformers for specific market segments ) High High grades Higher efficiency equipment Lower Energy consumption Lower CO2 emissions Regular grades Low efficiency Non-grain Oriented (NGO) NGO is used in the construction of large and small rotating electrical machines (hydrogenerators, electrical motors, hermetic motors / compressors for refrigerators, air conditions and freezers, drills, household appliance transformers, energy meters, ballasts.) Limited substitution threat Polarization Low Low Best properties Core Losses equipment High energy consumption High Stricter governmental regulations, greater electricity demand/cost, focus on energy efficiency and environmental concerns drive the growth of both GO & NGO products 12

14 Nickel Alloys applications and products Magnetic and controlled expansion alloys FeNi alloys (Ni>25%) and FeNiCo exhibit unique thermal expansion coefficient and magnetic properties Oil & Gas Aerospace Superalloys, corrosion alloys High Ni-based alloys, enriched with Cr and additions of Co, Mo, Nb, Ti exhibit outstanding corrosion performance in various environments and mechanical properties at high temperatures Specialty stainless grades Strict control of residuals Heat resistance Electronics High value added materials CAPEX budget (price of over USD 20, billion USD/t) for with 2010 unique properties 13

15 Unique strengths 14

16 What makes Aperam unique Long-term growth trends in mature markets supported by emerging market demand Emerging markets representing approximately 30% of Aperam total sales Approximately 30% of sales in emerging markets Global, integrated distribution network and proximity to customer Services & Solutions division provides exclusive global distribution channel Focus on services, partnership and customer satisfaction offers growth opportunities Leading R&D capabilities Continuous product development and innovation (Ferritics, High-end GO/NGO, Nickel Alloys, Duplex ) R&D facilities in France and Brazil Culture of continuous improvement Continuous improvement program ensuring cost effectiveness and focus on health & safety Ability to produce stainless and speciality steel products from low-cost charcoal Unique upstream integration into forestry asset provides cost advantage and access to sustainable energy source Strong financials through the cycle and effective working capital and risk management Superior earnings profile and lower volatility Best in class working capital ratio Active use of risk management tools to manage in particular Nickel exposure Strategy to leverage and maximize unique strengths 15

17 Leading global stainless and specialty steel producer Flat product stainless steel producers ranking (by slab capacity) 4 Nickel Alloys producers ranking in Europe (by production) TK VDM Aperam kt kt DNick Kanthal BGH kt 7 kt 4 kt A&D 3 kt VAC 2 kt 2 kt G&G Isabellen Hütte 1 kt TKS Acerinox TISCO YUSCO POSCO Aperam Outokumpu Fujian Densheng Baosteel Nippon Steel AK Steel Generalist pure players Specialists / Multi materials Wire drawers CAPEX budget of USD 4.0 billion for 2010 Leading player in stainless and specialty steel in Europe and South America Sources: CRU and Aperam estimates 16

18 Market leader in stainless and electrical steel in Brazil Brazilian stainless steel demand estimates (000t) Brazilian electrical steel demand estimates (000t) % % E 2011E 2012E 2013E 2014E 2015E E 2011E 2012E 2013E 2014E 2015E GO (Grain oriented) NGO (Non-Grain Oriented) A small but fast growing market Sources: CRU and Aperam 17

19 Close to customer through a highly integrated distribution network Sales, distribution and steel services centers network Strong relationships with global and long term customers, including Whirlpool, Bosch Siemens, Indesit and others Sales subsidiaries and representative offices Sales agencies Steel Service Centers A key competitive advantage to maintaining market share and capturing growth opportunities 18

20 Strong R&D capabilities catering to high-end application and specialities Commodity and specialty price (USD/t) Sales 2009 breakdown by products 17,000 3,000 2,500 2,000 1,500 1, Surcharge Base price Electrical Steel 11% Nickel Alloys & Specialities 9% 0 Regular NGO High grade NGO Base price Stainless 430 Base price Stainless 304 CR Regular GO High grade GO Nickel alloys Stainless steel 80% High-end application and specialties products Sources: Aperam 19

21 Strong culture of continuous improvement Steelshop Hot rolling Cold rolling Service Isbergues Chatelet 0.35Mt 1.0Mt Chatelet 3.4Mt Genk 0.74Mt Stainless flat Steel Service Centers Transformation Direct sales Genk 1.1Mt Gueugnon 0.40Mt Clients Timoteo 0.90Mt Timoteo 0.88Mt Timoteo Electrical 0.17Mt Timoteo Stainless 0.38 Mt* Electrical flat Stainless flat Steel Service Centers Transformation Direct sales Chatelet (strip) Imphy 0.06 Mt Imphy (wire) Imphy Ni alloys & specialties SSCs, Direct sales Transformation Upstream has been significantly upgraded in Europe demonstrating rationalisation efforts * Includes 0.06Mt of finished HRAP products 20

22 A unique capability to produce stainless and specialties from Biomass Equivalent Coke and Charcoal cost in 2009 (USD/t)* Strategic participation of 36% in Bioenergia which produces biomass (charcoal) from eucalyptus - planting, maintenance and cutting at 7 years old Consumed 194,000t of biomass (charcoal) in 2009 and target to double consumption of biomass (charcoal) by shifting Blast Furnace #2 from coke to biomass by 2012 Positive impact on environment Imported (coke) Brazil (charcoal) % 280 Biomass is a strong competitive cost advantage *One tonne of charcoal is equivalent to approximately 0.90 tonne of coke Source: Aperam 21

23 Strong financials through the cycle and effective working capital management EBIT per tonne (in USD) Operating working capital as % of sales % 50% 40% 30% 20% 10% % 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 European competitors* ArcelorMittal Stainless European competitors** ArcelorMittal Stainless Earnings profile is less volatile than competitors due to relative high proportion of long term contracts, ferritics, specialties and geographic diversity *Average of Acerinox, ThyssnKrupp Stainless and Outokumpu ** Average of Acerinox and Outkumpu Source: Aperam 22

24 Challenges and opportunities in stainless steel 23

25 Global stainless steel demand has more than recovered from 2009 Stainless steel market structure (mt) Global flat stainless steel demand* (mt) % China % +6% per year % 13% 32% 25% 37% 29% 31% Emerging World % 62% 42% 34% 32% E Developed World E 2011E 2012E 2013E 2014E 2015E Cold rolled Hot rolled Long-term growth expected to be around 6% Sources: CRU 24

26 European demand expected to come back to pre-crisis levels in 2013/2014 Demand for stainless steel flat products in Western Europe* (mt) 6,000 Eastern European HR & CR demand (mt) 700 5, , ,000 2,000 1,000 0 Western Europe remains a major stainless steel consumer and technology leader, while Eastern Europe is expected to continue to expand Source: CRU E 2011E 2012E 2013E 2014E 2015E E 2011E 2012E 2013E 2014E 2015E 25

27 South America presents important growth potential Stainless steel consumption per capita pre-crisis (kg/year) Stainless steel flat products demand in South America (kt) Rest of South America Brazil Other South America India Brazil China US E 2011E 2012E 2013E 2014E 2015E South American demand is growing again at a solid rate Sources: CRU & Aperam estimates 26

28 Despite increased demand, structural overcapacity remains a challenge Worldwide excess capacity* (mt) Global utilization rates* (mt) 90% 85% 80% 75% 70% 65% 60% 55% % China Rest of World Stainless steel prices expected to remain under pressure Source: CRU 27

29 Raw material impact on pricing Stainless steel CR 304 base price versus LME Nickel pricing* (US$/t) Stainless steel CR 304 base price versus Ferrochrome North Europe Import CFT* 60,000 5, ,000 50,000 40,000 30,000 20,000 10,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, ,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Jan- 04 Jul- 04 Jan- 05 Jul- 05 Jan- 06 Jul- 06 Jan- 07 Jul- 07 Jan- 08 Jul- 08 Jan- 09 Jul- 09 Jan Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 0 Nickel - LME (USD/t) - LHS Europe Base price CR 304 (USD/t) - RHS FeCr Europe (USc/lb) - RHS Europe Base price CR 304 (USD/t) - RHS Nickel pricing has a high influence on short term demand and pricing for stainless steel *Sources: Steel Business Briefing 28

30 Challenges and opportunities in electrical steel, alloys and specialties 29

31 Electrical steel market growth expected to come mainly from China Global GO demand (mt) Global NGO demand (mt) % per year % per year E 2011E 2012E Europe, Middle East & Africa Americas Asia 2013E 2014E E 2011E 2012E 2013E Europe, Middle East & Africa Americas Asia 2014E By 2015, 90% of new electrical steel demand is expected to come from China, while demand in the developed world will return to 2008 levels Source Aperam 30

32 Current overcapacity due to crisis expected to reduce progressively Global capacity and demand for GO (mt) Global capacity and demand for NGO (mt) Demand Capacity +18% Demand Capacity % % E E Utilization Rates 100% 64% 84% Utilization 93% 71% 101% Rates Despite rapid capacity expansion, supply demand equilibrium in China is expected to remain tight Source Aperam 31

33 Nickel alloys markets expected to recover in line with core end-use sectors Ni use in nickel alloys End-use sectors: CAGR 3-4% CAGR +8.5% +50% by Power generation Base: 2008 = 100% Oil & Gas Process industries Elec. Appliances Aerospace Innovation CAPEX will be budget key in of capturing USD 4.0 billion alloys market for 2010growth Sources: Steel Market Research Gmbh,

34 The Leadership Journey 33

35 An adverse trend Southern Europe - CR 304 2B 2mm coil base price ( /t)* Aperam quarterly EBITDA (USDm)** Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan Q Q Q 2010 *Source SBB ** Non audited EBITDA expected to decline significantly in Q4 compared to Q3 due to price pressure and seasonality as anticipated 34

36 The Leadership Journey to confront challenges and seize opportunities Leadership Journey accelerating sustainable management gains Targeting USD 250m over the next two years Based upon : USD 100m of fixed costs improvement (including Isbergues traditional cold roll mill suspension, Gueugnon Hot AP line project, tubes assets optimization in South America, fixed cost base improvement plan in Brazil, SG&A reduction plan through organization simplification) USD 100m variable costs improvements (including charcoal program and connection to natural gas in Brazil, yields and quality plans) USD 50m of EBITDA upside on additional business from existing assets, growth in biomass (charcoal), etc Approximately USD 40m of provisions to initiate Leadership Journey in

37 Forest expansion and biomass development Biomass (charcoal) production (000t)* Biomass integration (% of Aperam production) 100% % 80% 70% 60% 50% 40% 30% 20% 10% E 2011E 2012E 2013E 2014E 0% Biomass Stainless & Electrical Stainless, Electrical & Alloys Biomass (charcoal) production to be doubled and to represent 35% of Aperam energy needs by 2012 *Share of Bioenergia Source: Aperam 36

38 Reconfiguring European downstream to achieve cost leadership Current downstream industrial network Future downstream industrial network 29 downstream tools 20 downstream tools Total capacity of 1.49mt Total capacity of 1.39mt Rationalization initiated by temporarily suspending the Isbergues traditional cold rolling mill capacity of 100,000t 37

39 Investment in productivity We Keep the existing bay with exiting over-cranes Benefits: SCHEME Manual welding Furnace shot blastingx4 Existing pickling Existing edge trimming - Productivity increase Current RD7 - Energy saving - Elimination of one line This part of RD79 line is new This part of RD7 line is kept (minor modifications) - Quality and yield improvement New Pay-off New welder New furnace New New Scale shot breaker blastingx4 New 2 Pickling tanks + brushes - Gain of approximately 40 USD/t Future RD79 USD 62m for a new Hot Annealing and Pickling line in Gueugnon 38

40 Capturing post-crisis growth and recovery Stainless steel demand in Western Europe (000 t)* Stainless steel demand in Brazil (000 t)* 4, % 4, % +3% +4% % +7% 3, , , E 2011E 2012E E 2011E 2012E Each additional tonne expected to contribute approximately USD 450 of EBITDA * Source: CRU 39

41 Project to capture South American growth in electrical steel GO and NGO expansion project LF CR BF2 BF1 New Ladle Furnace New ZMill Melt Shop LF DC2 BOX5 CL2 Cold Rolling Electrical HAP5 Hot Rolling CR5 Cold Rolling Stainless HAP New HAP5 400 kty DC2 BOX5 CL2 New GO final lines (Decarb, Box, Carlite) Capacity expansion for 180,000t in high grade electrical steel under review 40

42 Other opportunities and potential Asia and upstream opportunities Develop further Biomass (charcoal) opportunities Developed world Strategy to actively look at upstream and mining opportunities (Cr, Ni) directly or in partnership South American Brownfield Expansion Asian opportunities Upstream integration aiming to secure strategic raw materials and create upstream/production synergies by leveraging ArcelorMittal technology in ferro-chrome and nickel pig iron. Targeted opportunities in Nickel Alloys & Specialties and Services & Solutions to be explored Asian footprint and upstream integration would require M&A 41

43 Q&A 42