Regulatory News:
ArcelorMittal (referred to as "ArcelorMittal", or "the Company") (New York: MT; Amsterdam: MT; Madrid: MTS; Paris: MTP; Brussels: MTBL; Luxembourg: MT), the world's leading steel company, today announces results for the three and six month periods ended June 30, 2008.
H108 highlights:
-- Sales of $67.6 billion, up 31% compared with H107
-- EBITDA(1) of $13.1 billion, up 35% compared with H107
-- Net Income of $8.2 billion, up 65% as compared with H107
-- Capital expenditure of $2.3 billion in H108
Q208 highlights:
-- Sales of $37.8 billion, up 39% compared with Q207
-- EBITDA of $8.0 billion, up 51% compared with Q207
-- Net Income of $5.8 billion, up 114% as compared with Q207
-- Capital expenditure of $1.4 billion in Q208
Recent Key Announcements
-- Groundbreaking global health and safety agreement signed with labour unions to further improve Occupational Health & Safety
-- Agreements signed to acquire Mid Vol Coal Group and Concept Group (2 metallurgical coal companies located in West Virginia, USA)
-- Allocated mining lease for the Karampada iron-ore deposit in Jharkhand, India
-- Acquisition of Bayou Steel (manufacture of structural steel in Louisiana, USA)
-- Launch of new clean technology venture capital fund
Guidance for Q308
-- Q308 EBITDA guidance to exceed $8.5 billion
Commenting, Mr Lakshmi N. Mittal, Chairman and CEO, ArcelorMittal, said:
"We are pleased to report results for the first half of 2008, with EBITDA of $13.1 billion up 35% over the same period in 2007. This reflects the diversity and strength of the ArcelorMittal business model, in particular the significant diversification of our value chain including our considerable mining operations.
We continue to look for opportunities to further enhance our raw material self sufficiency, with recent investments being announced in Africa, the Americas and Australia.
Our financial strength enables us to continue to invest heavily in the development of the business, particularly relating to brownfield growth and improving product quality and mix. This year we expect capital expenditures to reach $7 billion, representing 36% of 2007 EBITDA".
Financial highlights (on the basis of IFRS(2), amounts in US$ and
Euros3):
(In millions of US dollars except earnings per share and shipments
data)
US Dollars
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Q2 Q1 Q2 H1 H1
Results 2008 2008 2007 2008 2007
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Shipments (Million MT)(4) 29.8 29.2 28.7 59.0 55.7
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Sales 37,840 29,809 27,223 67,649 51,699
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EBITDA 8,046 5,044 5,326 13,090 9,672
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Operating income 6,621 3,614 4,232 10,235 7,687
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Net income 5,839 2,371 2,723 8,210 4,973
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Basic earnings per share $4.20 $1.69 $1.97 $5.87 $3.60
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(In millions of Euros except earnings per share and shipments data)
Euros(3)
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Q2 Q1 Q2 H1 H1
Results 2008 2008 2007 2008 2007
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Shipments (Million MT)(4) 29.8 29.2 28.7 59.0 55.7
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Sales 24,222 19,895 20,194 44,201 38,898
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EBITDA 5,150 3,366 3,951 8,553 7,277
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Operating income 4,238 2,412 3,139 6,687 5,784
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Net income 3,738 1,582 2,020 5,364 3,742
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EUR EUR EUR EUR EUR
Basic earnings per share 2.69 1.13 1.46 3.84 2.71
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SECOND QUARTER 2008 NEWS CONFERENCE (FOR MEDIA) ArcelorMittal management will host a news conference: D
SECOND QUARTER 2008 EARNINGS ANALYST CONFERENCE CALL
Additionally, ArcelorMittal management will host a conference call for members of the investment community to discuss the second quarter 2008 financial performance of ArcelorMittal at 9.30 am New York time / 2.30 pm London time / 3.30 pm CET on Wednesday, July 30th 2008. The conference call will include a brief question and answer session with senior management. The conference call information is as follows:
Dial in access numbers will be the following: International: +44 208 6110 043 UK: 0208 6110 043 USA: +1 866 432 7175 A replay of the conference call will be available for one week by dialing (access code 634819): International: +44 208 196 1998 UK: 0208 196 1998 USA: +1 866 583 1035 The presentation will be available via a live video webcast on www.arcelormittal.com
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 20-F 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.
About ArcelorMittal
ArcelorMittal is the world's leading steel company, with over 320,000 employees in more than 60 countries.
ArcelorMittal is the leader in all major global steel markets, including automotive, construction, household appliances and packaging, with leading R&D and technology, as well as sizeable captive supplies of raw materials and outstanding distribution networks. With an industrial presence in over 20 countries spanning four continents, the Company covers all of the key steel markets, from emerging to mature.
Through its core values of sustainability, quality and leadership, ArcelorMittal commits to operating in a responsible way with respect to the health, safety and wellbeing of its employees, contractors and the communities in which it operates. It is also committed to the sustainable management of the environment and of finite resources. ArcelorMittal recognises that it has a significant responsibility to tackle the global climate change challenge; it takes a leading role in the industry's efforts to develop breakthrough steelmaking technologies and is actively researching and developing steel-based technologies and solutions that contribute to combat climate change.
In 2007 ArcelorMittal had revenues of $105.2 billion and crude steel production of 116 million tonnes, representing around 10 per cent of world steel output.
ArcelorMittal is listed on the stock exchanges of New York (MT), Amsterdam (MT), Paris (MTP), Brussels (MTBL), Luxembourg (MT) and on the Spanish stock exchanges of Barcelona, Bilbao, Madrid and Valencia (MTS).
For more information about ArcelorMittal visit: www.arcelormittal.com
ARCELORMITTAL SECOND QUARTER 2008 AND FIRST HALF 2008 RESULTS
ArcelorMittal, the world's leading steel company, today announced results for the three and six month periods ended June 30, 2008.
Results for the three months ended June 30, 2008 versus results for the three months ended March 31, 2008 and three months ended June 30, 2007
ArcelorMittal's net income for the three months ended June 30, 2008, was $5.8 billion, or $4.20 per share, as compared with net income of $2.4 billion, or $1.69 per share, for the three months ended March 31, 2008, and $2.7 billion or $1.97 per share, for the three months ended June 30, 2007.
Sales and operating income for the three months ended June 30, 2008, were $37.8 billion and $6.6 billion, respectively, as compared with sales and operating income of $29.8 billion and $3.6 billion, respectively, for the three months ended March 31, 2008. Sales and operating income for the three months ended June 30, 2007, were $27.2 billion and $4.2 billion, respectively.
Total steel shipments for the three months ended June 30, 2008, were 29.8 million metric tonnes as compared with steel shipments of 29.2 million metric tonnes for the three months ended March 31, 2008 and steel shipments of 28.7 million metric tonnes for the three months ended June 30, 2007.
Depreciation costs for the three months ended June 30, 2008, increased to $1.3 billion as compared with depreciation of $1.1 billion for each of the three-month periods ended March 31, 2008 and June 30, 2007. The increase was primarily due to capitalisation, scope additions and foreign exchange movements.
Impairment losses for the three months ended June 30, 2008 amounted to $108 million which pertains primarily to a reduction of goodwill(5). Impairment losses for the three months ended March 31, 2008 amounted to $301 million, including $200 million related to the disposal of Sparrows Point and reduction of goodwill of $95 million(6).
Income from equity method investments and other income for the three months ended June 30, 2008, was $552 million as compared with income from equity method investments and other income of $329 million for the three months ended March 31, 2008, and $257 million for the three months ended June 30, 2007. Income from equity method investments and other income were higher in the second quarter 2008 primarily due to higher operating results from various associates as well as dividend income received from available for sale investments totalling $115 million.
Net financing costs(7) for the three months ended June 30, 2008, were $49 million as compared with $736 million for the three months ended March 31, 2008. This decrease resulted primarily from $411 million of gains related to the fair value of financial instruments for the three months ended June 30, 2008 as compared with $242 million loss for the three months ended March 31, 2008. Foreign exchange and other financing costs were lower at $16 million for the three months ended June 30, 2008 as compared to foreign exchange and other financing costs of $88 million for the three months ended March 31, 2008. Net interest expense, which includes bank fees, interest on loans and interest on pensions, increased to $444 million for the three months ended June 30, 2008 as compared to $406 million for the three months ended March 31, 2008, due to an increased level of borrowing (see "Liquidity and Capital Resources" below).
Income tax expense for the three months ended June 30, 2008, increased to $933 million as compared with $596 million for the three months ended March 31, 2008. The effective tax rate for the three months ended June 30, 2008, was 13.1% as compared with 18.6% for the three months ended March 31, 2008. The effective tax rate was lower mainly due to a change in the geographical mix of income. The income tax expense for the three months ended June 30, 2007 was $1.1 billion, with an effective tax rate of 25.2%.
Minority interest for the three months ended June 30, 2008, was $352 million as compared with $240 million for the three months ended March 31, 2008. The increase is due to higher income from ArcelorMittal South Africa, Sonasid and newly acquired companies with minority shareholders, partially offset by the acquisition of minority interests in ArcelorMittal Inox Brasil. Minority interest for the three months ended June 30, 2007, was $497 million.
Analysis of segment operations Q2 2008 v Q1 2008
The results of operations by segment discussed below reflect the changes to ArcelorMittal's segmental reporting effective January 1, 2008 in light of the new Group Management Board ("GMB") structure announced on April 21, 2008. The results of the analysis prior to January 1, 2008 have not been recast to reflect these changes.
Flat Carbon Americas
As from January 1, 2008, Mittal Canada flat and pipes and tubes businesses from Dofasco have been transferred to Long Carbon Americas and Europe.
Total steel shipments in the Flat Carbon Americas segment were lower at 7.4 million metric tonnes for the three months ended June 30, 2008, as compared with steel shipments of 7.6 million metric tonnes for the three months ended March 31, 2008. Excluding the Sparrows Point plant, which was sold effective May 7, 2008, shipments for the three months ended June 30, 2008 were 7.1 million metric tonnes as compared to 7.0 million metric tonnes for the three months ended March 31, 2008.
Sales were higher at $7.5 billion for the three months ended June 30, 2008, as compared with sales of $6.5 billion for the three months ended March 31, 2008.
Operating income was higher at $1.4 billion for the three months ended June 30, 2008, as compared with operating income of $880 million for the three months ended March 31, 2008.
Operating results for the three months ended June 30, 2008, as compared with the three months ended March 31, 2008, increased primarily due to higher shipments on a comparable basis and higher average selling prices, partially offset by increased input costs. Operating income for the three months ended June 30, 2008 was negatively impacted by $158 million due to a reduction of goodwill. Operating income for the three months ended March 31, 2008 was negatively impacted primarily by a $200 million impairment charge due to the disposal of Sparrows Point.
Flat Carbon Europe
As from January 1, 2008, the operations of ArcelorMittal Annaba flat and Skopje previously reported in the AACIS segment have been transferred to the Flat Carbon Europe segment. In addition, the entire operations of Galati are reported within Flat Carbon Europe.
Total steel shipments in the Flat Carbon Europe segment were higher at 9.9 million metric tonnes for the three months ended June 30, 2008, as compared with steel shipments of 9.4 million metric tonnes for the three months ended March 31, 2008.
Sales were higher at $11.8 billion for the three months ended June 30, 2008, as compared with sales of $9.3 billion for the three months ended March 31, 2008.
Operating income increased to $1.7 billion for the three months ended June 30, 2008, as compared with operating income of $1.1 billion for the three months ended March 31, 2008.
Operating results for the three months ended June 30, 2008, as compared to the three months ended March 31, 2008, increased due to higher volumes and higher selling prices, partly offset by higher input costs.
Long Carbon Americas and Europe
As from January 1, 2008, the Long Carbon Americas and Europe segment includes the operations of ArcelorMittal Annaba long, Sonasid, Zenica, and the global pipes and tubes business, which previously reported in the AACIS segment, and Mittal Canada flat which previously reported in the Flat Carbon Americas segment. The wire drawing businesses have been transferred to the Steel Solutions and Services segment.
Total steel shipments in the Long Carbon Americas and Europe segment were higher at 8.1 million metric tonnes for the three months ended June 30, 2008, as compared with steel shipments of 7.8 million metric tonnes for the three months ended March 31, 2008.
Sales were higher at $9.9 billion for the three months ended June 30, 2008, as compared with sales of $7.7 billion for the three months ended March 31, 2008.
Operating income was higher at $1.6 billion for the three months ended June 30, 2008, as compared with operating income of $1.1 billion for the three months ended March 31, 2008.
Operating results for the three months ended June 30, 2008, as compared with the three months ended March 31, 2008, increased due to higher volumes and improved average steel selling prices, partly offset by input price increases.
Asia Africa and CIS ("AACIS")
As from January 1, 2008, the AACIS segment excludes the operations of ArcelorMittal Annaba, Sonasid, Zenica, Skopje and the pipes and tubes businesses that have been transferred to the respective segments as discussed above.
Total steel shipments in the AACIS segment were flat at 3.9 million metric tonnes for the three months ended June 30, 2008, as compared with the three months ended March 31, 2008.
Sales were higher at $3.9 billion for the three months ended June 30, 2008, as compared with sales of $2.9 billion for the three months ended March 31, 2008.
Operating income was higher at $1.3 billion for the three months ended June 30, 2008, as compared with operating income of $560 million for the three months ended March 31, 2008.
Operating results for three months ended June 30, 2008, were higher as compared to the three months ended March 31, 2008, due to higher selling prices partly offset by input price increases.
Stainless Steel
Total steel shipments in the Stainless Steel segment were higher at 578 thousand metric tonnes for the three months ended June 30, 2008, as compared with steel shipments of 528 thousand metric tonnes for the three months ended March 31, 2008.
Sales increased to $2.6 billion for the three months ended June 30, 2008, as compared with $2.3 billion for the three months ended March 31, 2008.
Operating income was higher at $308 million for the three months ended June 30, 2008, as compared with operating income of $166 million for the three months ended March 31, 2008.
Operating results for the three months ended June 30, 2008, were higher than the three months ended March 31, 2008, primarily due to higher volumes and improved prices.
Steel Solutions and Services(8)
As from January 1, 2008, the operations of ArcelorMittal wire drawing activities which previously reported within the Long Carbon Americas and Europe segment have been transferred to the Steel Solutions and Services segment.
Total steel shipments in the Steel Solutions and Services segment were higher at 5.7 million metric tonnes in the three months ended June 30, 2008, as compared with steel shipments of 5.5 million metric tonnes for the three months ended March 31, 2008.
Sales in the Steel Solutions and Services segment were higher at $7.1 billion for the three months ended June 30, 2008, as compared with sales of $5.7 billion for the three months ended March 31, 2008.
Operating income was higher at $285 million for the three months ended June 30, 2008, as compared with operating income of $158 million for three months ended March 31, 2008, due primarily to higher average steel selling prices and higher volumes partially offset by input price increases.
Liquidity and Capital Resources
For the three months ended June 30, 2008, net cash provided by operating activities was $4.2 billion, as compared with $2.0 billion for the three months ended March 31, 2008.
As of June 30, 2008, the Company's cash and cash equivalents (including restricted cash and short-term investments) amounted to $7.5 billion as compared to $7.2 billion at March 31, 2008. Net debt at June 30, 2008, which includes long-term debt plus short-term debt less cash and cash equivalents, restricted cash and short-term investments, was $30.7 billion ($27.4 billion as at March 31, 2008). Gearing(9) at June 30, 2008 was 46% as compared to 44% at March 31, 2008, and net debt to EBITDA ratio decreased to 1.2x(10) at June 30, 2008, as compared to 1.4x(11) at March 31, 2008. Net debt has increased primarily due to investments, increased working capital and share buy-backs. Operating working capital (defined as inventory plus receivables less payables) as at June 30, 2008 increased to $23.3 billion as compared to $19.0 billion as at March 31, 2008, mainly as a result of increases in accounts receivables due to higher sales activity and inventory and accounts payables due to higher sales activity and increased input costs. Rotation days(12) improved from 64 to 63 days.
The Company had total liquidity of $15.8 billion as at June 30, 2008 (as compared to $13.9 billion as at March 31, 2008), consisting of cash and cash equivalents (including restricted cash and short-term investments) of $7.5 billion and available bank lines of $8.3(13) billion as at June 30, 2008.
On May 27, 2008, the Company issued US dollar denominated bonds in two tranches totalling $3 billion. For the entire duration of the bonds the fixed rate has been swapped into floating rate.
In June 2008, the Company entered into a hedging transaction(14) in order to hedge USD dollar denominated raw material purchases till 2012. The program represents approximately 60-75% of the dollar outflow based on current raw materials prices for Flat Carbon Western Europe.
Capital expenditures during the three months ended June 30, 2008, increased to $1.4 billion, as compared with $1.0 billion for the three months ended March 31, 2008. The Company continues to expect capital expenditures to total approximately $7.0 billion during 2008.
Dividend and share buy-backs
During the three months ended June 30, 2008, the Company returned $1.1 billion(15) to shareholders, consisting of $510 million in cash dividends and $541 million in share buy-backs.
With respect to the 44 million shares buy-back program, during the first half of 2008, the Company repurchased an aggregate of 22.6 million shares at an average price of $75.97 (EUR 50.70) for a total amount of $1,713 million(16). Furthermore, in July 2008, the Company repurchased an aggregate of 10 million shares at an average price of $87.68 (EUR 55.58) for a total amount of $877 million.
To date, the Company has purchased under the 44 million shares buy back program 32.7 million shares at an average price of $79.54 (EUR 52.19). (See appendix 3 "Share buy-back" below).
Also in the first half of 2008, ArcelorMittal completed its $1.0 billion share buy-back program with the purchase of 14.6 million shares at an average price of $68.70 (EUR 46.60).
Recent Developments:
Upstream Activities:
-- On July 21, 2008 ArcelorMittal, announced that it had signed an agreement to acquire the Concept Group ("Concept"). Concept, located in southern West Virginia and adjacent to the recently acquired Mid Vol Coal Group in the Central Appalachian Coal Basin, produced 0.8 million tons of metallurgical coking coal in 2007 and has control over recoverable saleable reserves and resources estimated to be in excess of 57 million tons.
-- On July 16, 2008, ArcelorMittal announced it had acquired the remaining 60% of the shares in Rolanfer Recyclage S.A. ("Rolanfer") that it did not previously own. Rolanfer is based in Yutz (France) near Thionville on the Luxembourg border and operates a shredder at the port of Illange.
-- On June 29, 2008, ArcelorMittal announced that it had increased its stake in Macarthur Coal Limited from 14.9% to 19.9%, following the acquisition of a further 5% stake (10,607,830 shares) from Talbot Group Holdings. The shares were purchased at 20 Australian dollars per share, bringing ArcelorMittal's total investment in Macarthur Coal to $843 million Australian dollars (USD $810 million).
-- On June 23, 2008, ArcelorMittal announced that it had signed an agreement to acquire the Mid Vol Coal Group. Mid Vol, located in southern West Virginia and southwestern Virginia in the Central Appalachian Coal Basin, produced 1.5 million tons of metallurgical coking coal in 2007 and has estimated recoverable saleable reserves and resources in excess of 85 million tons.
-- On June 11, 2008, ArcelorMittal announced the allocation of a mining lease in respect of the Karampada iron ore deposit to the Company by the Governments of India and Jharkhand for its integrated steel plant to be based in Jharkhand. The Karampada iron ore deposit is located in West Singhbhum district of Jharkhand with estimated reserves of 65 million tonnes of iron ore.
-- On June 9, 2008, ArcelorMittal, announced that it had signed an agreement to acquire Bakermet, a market leader in the scrap metal recycling industry in Eastern Ontario, Canada. Bakermet, which specializes in all types of ferrous and non-ferrous metal, processed approximately 130,000 short tons of ferrous and 40 million pounds of non-ferrous metals in 2007. The plant, located near Ottawa, will secure upstream self sufficiency in shredded metal for ArcelorMittal's Contrecoeur mill (ArcelorMittal Montreal).
-- On April 23, 2008, ArcelorMittal announced that it had reached an agreement with Coal of Africa Limited ("CoAL"), a coal development company operating in South Africa. ArcelorMittal will enter into an off-take agreement with CoAL relating to two coal mines. The first, Baobab, is 100% owned by CoAL and has an estimated yield of 2.45 million tonnes per annum. The second, Thuli, is 74 % owned by CoAL and has an estimated yield of 4.2 million tonnes per annum. Full production at both mines is expected to be achieved by 2011.
-- On April 10, 2008, ArcelorMittal announced the acquisition of three coal mines and associated assets in Russia for a total consideration of $718 million.
Steel Production Initiatives:
-- On July 22, 2008, ArcelorMittal announced a EUR 76 million ($118 million) investment to expand electrical steel production capacity at its Saint Chely d'Apcher plant in Southern France, a move in line with the Group's strategy to strengthen its position in high added value steel products and solutions that contribute to lower carbon dioxide emissions. The addition of a new 180,000 tonnes continuous annealing line will take Saint Chely d'Apcher's capacity to 210,000 tonnes per year of mostly high end non-grain oriented electrical steels, which are used, among other things, in electric engines and wind turbines. The new line is scheduled to become operational during the second quarter of 2010.
-- On July 3, 2008, ArcelorMittal and AREVA signed an agreement for a EUR 70 million ($110 million) investment aimed at increasing production of certain products for the nuclear industry, at the steel plant of Industeel, a subsidiary of ArcelorMittal. The investment, which will be staggered between 2008 and 2010, is targeted to increase ingot production capacity significantly (from 35,000 tonnes to 50,000 tonnes per year). In addition, the two companies announced that they plan to implement a joint 3-year metallurgy research and development program that will be conducted at the Creusot Materials Research Center.
-- On June 27, 2008, ArcelorMittal, Hunan Valin Group and Hunan Valin Steel Co. Ltd. announced a new development in their relationship with the launch of Valin ArcelorMittal Automotive Steel, an industrial and commercial automotive joint venture that will have an annual production capacity of 1.2 million tonnes of flat carbon steel, mainly for automotive applications. Products will include cold rolled steel, galvannealed steel and pure zinc galvanized steel. The establishment of this new joint venture remains subject to regulatory approval.
Hunan Valin Steel Co., Ltd will own 34% of the new joint venture and ArcelorMittal and Hunan Valin Group will each have a 33% equity share. The new activity will be located in Hunan Province next to Hunan Valin Steel Co.'s subsidiary, Lianyuan Steel, which will supply hot rolled coil to the new joint venture.
-- On June 16, 2008, ArcelorMittal announced that it had signed an agreement to acquire Bayou Steel, a producer of structural steel products with facilities in LaPlace, Louisiana, and Harriman, Tennessee, for $475 million. The transaction is subject to regulatory approval. Bayou Steel is an independent producer of medium and light structural steel and bar size products. Through its Mississippi River Recycling division, Bayou Steel operates an automobile shredder at the LaPlace facility, as well as barge wrecking and full-service scrap yards at LaPlace and its facility in Harvey, Louisiana. The company also has a deepwater dock and distribution network, including four stocking locations in the United States.
-- On April 16, 2008, ArcelorMittal announced that it would be expanding its joint venture partnership with Nippon Steel Corporation by building a new continuous galvanising line at the I/N Kote facility in New Carlisle, Indiana. The new line will have an annual capacity of 480,000 metric tonnes and, upon completion, will double I/N Kote's hot-dipped galvanised production capacity. The new line will offer high-grade, high-quality coated sheets that promote improved safety and fuel efficiency in automobiles.
Downstream Activities
-- On July 25, 2008, ArcelorMittal acquired a 70% share of Manchester Tubos e Perfilados S.A, a Brazilian steel processor and distributor located in Contagem, Minas Gerais. This new acquisition will reinforce ArcelorMittal's downstream position in Brazil, following the acquisition on April 3, 2008 of a 50% stake in Gonvarri Brasil. With the acquisition of Manchester, and with its partnership with Gonvarri, ArcelorMittal will widen its product offering in the distribution segment in Brazil. The Group will now offer an extended range of flat products (coils and blanks), profiles, tubes and pipes.
-- On July 14, 2008, ArcelorMittal and Primex (Germany) reached an agreement whereby ArcelorMittal Stainless International acquired the 35% stake in Uginox Sanayi ve Ticaret Limited Sirketi which was owned by Primex.
-- On July 1, 2008, ArcelorMittal acquired Astralloy Steel Products Inc. ("Astralloy") a subsidiary of IMS International Metal Service. Astralloy operates three warehouses and employs 60 people in North America. Its 2007 revenues were $34 million.
-- On June 30, 2008, ArcelorMittal announced its intention to acquire 60% of the entire issued share capital of Dubai Steel Trading Company LLC ("DSTC LLC"). DSTC LLC's distributes approximately 120,000 tonnes of products per year.
-- On April 3, 2008, ArcelorMittal announced the acquisition of a 50% share of Gonvarri Brasil to form a Steel Service Centre joint venture. Gonvarri Brasil is one of the major players for servicing automotive, industry and distribution customers. The company is one of the leaders of flat steel processing in Brazil and its activities include pickling, slitting, blanking, and cutting to length, with a total processing capacity of around 1.3 million tons of steel.
Disposals:
-- On May 7, 2008, ArcelorMittal announced that the Court appointed trustee had completed the previously announced sale of ArcelorMittal's Sparrows Point steel mill to OAO Severstal for $810 million, net of debt.
Other key events
-- On July 11, 2008, ArcelorMittal announced the launch of a new clean technology venture capital fund (with an initial clean technology investment of $20 million in Miasole).
-- On June 16, 2008, ArcelorMittal announced that following purchases of 11.31% on June 13, 2008, the Company now owns 24.99% of the Turkish steel company Erdemir.
-- On June 3, 2008, ArcelorMittal and trade unions representing its employees across the globe signed a new agreement to further improve health and safety standards throughout the Company. The agreement, the first of its kind in the steel industry, recognises the vital role played by trade unions in improving health and safety. It sets out minimum standards in every site the Company operates in order to achieve world class performance. These standards include the commitment to form joint management/union health and safety committees as well as training and education programmes in order to make a meaningful impact on overall health and safety across the Company. Also included in the agreement is the creation of a joint management/union global health and safety committee that will target ArcelorMittal plants in order to help them to further improve their health and safety performance. The agreement was signed on June 3, 2008 by ArcelorMittal, the European Metalworkers' Federation, the United Steelworkers and the International Metalworkers' Federation.
-- On May 2, 2008, ArcelorMittal announced a series of measures which will restore a 25% free float in China Oriental Group Company ("China Oriental") in compliance with the listing rules of the Hong Kong Stock Exchange ("HKSE"). At the time of the close of its tender offer on February 4, 2008 ArcelorMittal had reached a 47% shareholding in China Oriental. Given the 45.4% shareholding by the founding shareholders, this left a free float of 7.6% against a minimum HKSE listing requirement of 25%. The measures to restore the minimum free float have been achieved by means of sale of 17.4% stake to ING Bank and Deutsche Bank, together with put option agreements entered into with both banks. As a result of the measures ArcelorMittal's shareholding has been reduced to 29.6%.
-- On April 29, 2008, ArcelorMittal announced that it had signed new long-term contracts with Companhia Vale do Rio Doce ("Vale") to supply iron ore and pellets to its plants in Europe, Africa and the Americas. Under these long-term contracts, which are the largest ever signed between a steel company and an iron ore supplier, Vale will supply approximately 480 million tonnes of iron ore and pellets to ArcelorMittal plants over the next ten years (2007-2016).
For further disclosure about each of these recent developments, please refer to our website www.arcelormittal.com
Q308 Outlook
The Company expects third quarter 2008 EBITDA to exceed $8.5 billion. Flat Carbon Americas' EBITDA is expected to significantly increase due to operational improvements and a better operating environment. Asia, Africa & CIS EBITDA is expected to increase due to improved volumes and price increases. Long Carbon's EBITDA is expected to improve. ArcelorMittal Steel Solutions and Services EBITDA is expected to remain flat. Flat Carbon Europe's EBITDA is expected to decrease following seasonal shutdowns and increased cost pressure, while Stainless Steel profitability is set to decline. The full year effective tax rate is expected to be between 15-20%.
ARCELORMITTAL UNAUDITED CONSOLIDATED BALANCE SHEETS
In millions of US dollars June 30, March December
31, 31,
2008 2008 2007(17)
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ASSETS
Current Assets
Cash and cash equivalents, restricted
cash and short-term investments $ 7,531 $ 7,244 $ 8,105
Trade accounts receivable - net 14,795 11,694 9,533
Inventories 27,591 23,213 21,750
Prepaid expenses and other current
assets 6,762 6,252 5,940
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Total Current Assets 56,679 48,403 45,328
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Goodwill and intangible assets 17,854 15,984 15,031
Property, plant and equipment 66,350 63,948 61,994
Investments in affiliates and joint
ventures and other assets 15,381 13,066 11,272
---------------------------
Total Assets $156,264 $141,401 $ 133,625
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Payable to banks and current portion of
long-term debt $ 10,329 $ 9,537 $ 8,542
Trade accounts payable and others 19,134 15,879 13,991
Accrued expenses and other current
liabilities 12,740 10,352 9,676
---------------------------
Total Current Liabilities 42,203 35,768 32,209
---------------------------
Long-term debt, net of current portion 27,920 25,119 22,085
Deferred tax liabilities 8,309 8,387 7,927
Other long-term liabilities 10,683 9,684 9,869
---------------------------
Total Liabilities 89,115 78,958 72,090
---------------------------
Total Shareholders' Equity 63,067 57,889 56,685
Minority Interest 4,082 4,554 4,850
---------------------------
Total Equity 67,149 62,443 61,535
---------------------------
Total Liabilities and Shareholders' Equity $156,264 $141,401 $ 133,625
----------------------------------------------------------------------
ARCELORMITTAL UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
In millions of US Three Months Ended Six Months Ended
dollars, except shares,
per share, employee,
iron production and
shipment data
-------------------------- -----------------
June 30, March June 30, June 30, June 30,
2008 31, 2007 2008 2007
2008
---------------------------------------------------------------------
STATEMENTS OF INCOME
DATA
Sales $37,840 $29,809 $27,223 $67,649 $51,699
Depreciation 1,317 1,129 1,094 2,446 1,985
Impairment 108 301 - 409 -
Operating Income 6,621 3,614 4,232 10,235 7,687
Operating Margin % 17.5% 12.1% 15.5% 15.1% 14.9%
Income from equity
method investments and
Other income 552 329 257 881 432
Net foreign exchange and
other financing costs (16) (88) 182 (104) 292
Net interest expense (444) (406) (381) (850) (708)
Revaluation of financial
instruments 411 (242) 17 169 224
--------------------------------------------
Income before taxes and
minority interest 7,124 3,207 4,307 10,331 7,927
Income tax expense 933 596 1,087 1,529 2,021
--------------------------------------------
Income before minority
interest 6,191 2,611 3,220 8,802 5,906
Minority interest (352) (240) (497) (592) (933)
--------------------------------------------
Net Income $ 5,839 $ 2,371 $ 2,723 $ 8,210 $ 4,973
============================================
Basic earnings per
common share $ 4.20 $ 1.69 $ 1.97 $ 5.87 $ 3.60
Diluted earnings per
common share 4.19 1.68 1.97 5.86 3.59
Weighted average common
shares outstanding (in
millions) 1,390 1,407 1,380 1,398 1,383
Diluted weighted average
common shares
outstanding (in
millions) 1,394 1,410 1,382 1,402 1,385
EBITDA(18) $ 8,046 $ 5,044 $ 5,326 $13,090 $ 9,672
EBITDA Margin % 21.3% 16.9% 19.6% 19.3% 18.7%
OTHER INFORMATION
Total shipments of steel
products(19) (Million
metric tonnes) 29.8 29.2 28.7 59.0 55.7
Total iron ore
production(20) (Million
metric tonnes) 15.6 15.2 14.8 30.8 29.7
Employees (in
thousands)(21) 322 312 314 322 314
---------------------------------------------------------------------
ARCELORMITTAL UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
In millions of US Three Months Ended Six Months Ended
dollars
-------------------------- -----------------
June 30, March June 30, June 30, June 30,
2008 31, 2007 2008 2007
2008
---------------------------------------------------------------------
Operating activities:
Net Income $ 5,839 $ 2,371 $ 2,723 $ 8,210 $ 4,973
Adjustments to reconcile
net income to
net cash provided by
operations:
Minority interests 352 240 497 592 933
Depreciation and
impairment 1,425 1,430 1,094 2,855 1,985
Other operating activity (3,384) (2,059) (582) (5,443) (1,509)
---------------------------------------------------------------------
Net cash provided by
operating activities 4,232 1,982 3,732 6,214 6,382
---------------------------------------------------------------------
Investing activities:
Purchase of property,
plant and equipment (1,353) (975) (1,330) (2,328) (2,318)
Other investing
activities (net) (4,247) (1,408) (5,435) (5,655) (4,573)
---------------------------------------------------------------------
Net cash used in
investing activities (5,600) (2,383) (6,765) (7,983) (6,891)
---------------------------------------------------------------------
Financing activities:
Proceeds (payments)
from payable to banks
and long-term debt 3,122 2,312 2,693 5,434 2,708
Dividends paid (629) (661) (644) (1,290) (1,158)
Share buy-back (541) (2,107) - (2,648) -
Other financing
activities (net) - 17 (580) 17 (534)
---------------------------------------------------------------------
Net cash provided by
(used in) financing
activities 1,952 (439) 1,469 1,513 1,016
---------------------------------------------------------------------
Net (decrease) increase
in cash and cash
equivalents 584 (840) (1,564) (256) 507
---------------------------------------------------------------------
Effect of exchange rate
changes on cash (305) 168 90 (137) 157
---------------------------------------------------------------------
Change in cash and cash
equivalents $ 279 $ (672) $(1,474) $ (393) $ 664
---------------------------------------------------------------------
Appendix 1 - Q2 2008
-----------------------
Unaudited Key financial and operational information
---------------------------------------------------------------------
---------------------------------------------------------------------
All figures Flat Flat Long AACIS Stainless Steel
in million Carbon Carbon Carbon Steel Solutions
of US Americas Europe Americas and
dollars, and Services
except Europe
employee,
production
and shipment
data.
---------------------------------------------------------------------
Financial
Information
(1)
-------------
Sales 7,480 11,837 9,878 3,938 2,639 7,070
Depreciation
and
impairment 245 468 491 130 82 57
Operating
income 1,437 1,678 1,646 1,255 308 285
Operating
margin (as a
percentage
of sales) 19.2% 14.2% 16.7% 31.9% 11.7% 4.0%
EBITDA(2) 1,682 2,146 2,137 1,385 390 342
EBITDA margin
(as a
percentage
of sales) 22.5% 18.1% 21.6% 35.2% 14.8% 4.9%
Capital
expenditure
(3) 244 402 254 218 62 57
Operational
Information
-------------
Crude Steel
Production
(Thousand
MT) 7,685 10,062 7,488 4,390 656 -
Steel
Shipments
(Thousand
MT) 7,398 9,882 8,097 3,876 578 5,690
Average Steel
Selling
price
($/MT)(4) 881 1,081 1,083 855 4,299 1,190
Employees
('000) 31 75 75 101 12 18
---------------------------------------------------------------------
1. As from January 1, 2008, the segment reporting has undergone scope
changes to reflect the new management structure of the Group as
announced on April 21, 2008.
2. EBITDA is defined as operating income plus depreciation and
impairment.
3. Segmental capex figures include intangible assets.
4. Average steel selling prices are calculated as steel sales divided
by steel shipments. Steel sales exclude sales of coke, coal, DRI, pig
iron, hot metal, slag, by-products, energy etc.
Appendix 2 - Q2 2008
Shipments by geographical location Amounts in thousand tonnes Q108 Q208 H108 --------------------------------------------------------------------- Flat Carbon America: 7,603 7,398 15,001 --------------------------------------------------------------------- North America(1) 5,937 5,793 11,730 South America 1,666 1,605 3,271 --------------------------------------------------------------------- Flat Carbon Europe: 9,399 9,882 19,281 --------------------------------------------------------------------- Long Carbon: 7,780 8,097 15,877 --------------------------------------------------------------------- North America(2) 1,563 1,447 3,010 South America 1,496 1,595 3,091 Europe 4,321 4,565 8,886 Other(3) 400 490 890 --------------------------------------------------------------------- AACIS: 3,895 3,876 7,771 --------------------------------------------------------------------- Africa 1,377 1,306 2,683 Asia, CIS & Other 2,518 2,570 5,088 --------------------------------------------------------------------- Stainless Steel: 528 578 1,106 --------------------------------------------------------------------- Steel Solutions and Services 5,497 5,690 11,187 --------------------------------------------------------------------- 1. Includes shipments from Lazaro Cardenas (Mexico) and Dofasco (Canada). 2. Includes shipments from Sicartsa (Mexico). 3. Includes pipes and tubes business.
Appendix 2a - Q2 2008
-------------------------------------------- --------------------------------------------
EBITDA(1) by geographical location Amounts in million US dollars Q108 Q208 H108 --------------------------------------------------------------------- Flat Carbon America: 1,284 1,682 2,966 --------------------------------------------------------------------- North America(2) 800 1,098 1,898 South America 484 584 1,068 --------------------------------------------------------------------- Flat Carbon Europe: 1,525 2,146 3,671 --------------------------------------------------------------------- Long Carbon: 1,414 2,137 3,551 --------------------------------------------------------------------- North America(3) 139 315 454 South America 454 650 1,104 Europe 766 1,130 1,896 Others(4) 55 42 97 --------------------------------------------------------------------- AACIS: 685 1,385 2,070 --------------------------------------------------------------------- Africa 304 474 778 Asia, CIS & Other 381 911 1,292 --------------------------------------------------------------------- Stainless Steel: 259 390 649 --------------------------------------------------------------------- Steel Solutions and Services 205 342 547 --------------------------------------------------------------------- 1. EBITDA is defined as operating income plus depreciation and impairment. 2. Includes EBITDA from Lazaro Cardenas (Mexico) and Dofasco (Canada). 3. Includes EBITDA from Sicartsa (Mexico). 4. Includes pipes and tubes business.
Appendix 3 - Share buy-back ---------------------------------------------------
Number of Amount Average
shares (billion price
Program (million) $) ($)
---------------------------------------------------------------------
$1 billion buy-back program 14.6 1.0 68.70
---------------------------------------------------------------------
44 million buy-back program in 2007 0.1 0 70.38
44 million buy-back program in 1H 2008 22.6 1.7 75.97
44 million buy-back program in July 2008 10.0 0.9 87.68
---------------------------------------------------------------------
44 million buy-back program total to date 32.7 2.6 79.54
---------------------------------------------------------------------
(1) EBITDA is defined as operating income plus depreciation and impairment.
(2) The financial information in this press release and Appendix 1 have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). While the interim financial information included in this announcement has been prepared in accordance with IFRS applicable to interim periods, this announcement does not contain sufficient information to constitute an interim financial report as defined in International Accounting Standards 34, "Interim Financial Reporting". Unless otherwise noted the numbers in the press release have not been audited.
(3) US dollars have been translated into Euros using an average exchange rate ($/Euro) of 1.5622, 1.4983, 1.3481, 1.5305 and 1.3291 for Q2 2008, Q1 2008, Q2 2007, H1 2008 and H1 2007, respectively.
(4) Shipments defined as the sum of segment shipments excluding AM3S. Some intercompany shipments included.
(5) As required by IFRS, this reduction of goodwill resulted from the recognition of net operating losses previously not recognized in purchase accounting, amongst others due to a reorganisation in South America (amounting to $158 million) in the second quarter.
(6) As required by IFRS, this reduction of goodwill resulted from the recognition of net operating losses previously not recognized in purchase accounting, amongst others due to a reorganisation in Western Europe in the first quarter.
(7) Net financing costs include net foreign exchange and other financing costs, net interest expense and revaluation of financial instruments.
(8) Steel Solutions and Services shipments are not consolidated.
(9) Gearing is defined as net debt divided by total equity.
(10) Based on H108 annualised EBITDA.
(11) Based on Q108 annualised EBITDA.
(12) Rotation days are defined as days of accounts receivable plus days of inventory minus days of accounts payable. Days of accounts payable and inventory are a function of cost of goods sold. Days of accounts receivable are a function of sales.
(13) Includes back-up lines for commercial paper program of $4.7 billion (EUR 3.0 billion)
(14) Hedging has been implemented using a combination of forward contracts and options in order to cap adverse effects due to market movements over the period.
(15) Excluding dividends totalling $119 million paid to minority shareholders of subsidiaries, primarily in Morroco and Brazil.
(16) Includes $66 million relating to payments made in July 2008. ArcelorMittal holds, indirectly and directly, approximately 63.8 million shares in treasury as of June 30, 2008 and approximately 73.8 million shares as of July 29, 2008.
(17) Amounts are derived from the Company's audited consolidated financial statements for the year ended December 31, 2007.
(18) EBITDA is defined as operating income plus depreciation and impairment.
(19) Steel Solutions and Services shipments are not consolidated.
(20) Total of all finished production of fines, concentrate, pellets and lumps (includes share of production and strategic long term contracts).
(21) Employee figures for Q208 include scope additions primarily for Noble, Russian mines and Unicon offset by disposal of Sparrows Point.
Contacts:
Europe, +352 4792 2414
Americas,
+1 312 899 3569
Retail, +352 4792 2434
SRI, +44 203 214 2854
Bonds/Credit,
+33 1 71 92 10 26
or
ArcelorMittal Communications
E-mail: press@arcelormittal.com
Phone:
+352 4792 5000
or
ArcelorMittal Corporate Communications
Haroon
Hassan, +44 20 3214 2867
Jean Lasar, +352 4792 2359
or
Maitland
Consultancy:
Martin Leeburn/David Sturken, +44 20 7379 5151
or
Belgium
Charles-Hubert
Gernaert, Comfi, +32 2 290 90 90
or
North America
Bill
Steers, +1 312 899 3817
Adam Warrington, +1 312 899 3596
or
Netherlands
Smink,
Van der Ploeg & Jongsma
Leon Melens, +31 20 647 81 81
or
Germany
Phoebe
Kebbel, Markus Talanow, Hering Schuppener
+49 69 92 18 74 77 / +49
69 99 18 74 70
or
France
Image 7
Anne France
Malrieu, +33 1 5370 7470
Tiphaine Hecketsweiler, +33 1 5370 7470
or
Spain
Ignacio
Agreda, +34 94 489 4162
Oscar Fleites, +34 98 512 60 29
Keith
Grant, +34 639 760 397
