ArcelorMittal Reports Second Quarter and First Half 2008 Results

Tag : Zinc Coated

LUXEMBOURG (Business Wire) -- 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 leadingsteel company, today announces results for the three and six monthperiods 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 withlabour unions to further improve Occupational Health & Safety
-- Agreements signed to acquire Mid Vol Coal Group and ConceptGroup (2 metallurgical coal companies located in West Virginia,USA)
-- Allocated mining lease for the Karampada iron-ore deposit inJharkhand, India
-- Acquisition of Bayou Steel (manufacture of structural steel inLouisiana, 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 ArcelorMittalbusiness model, in particular the significant diversification ofour value chain including our considerable mining operations.
We continue to look for opportunities to further enhance our rawmaterial self sufficiency, with recent investments being announcedin Africa, the Americas and Australia.
Our financial strength enables us to continue to invest heavily inthe development of the business, particularly relating tobrownfield growth and improving product quality and mix. This yearwe expect capital expenditures to reach $7 billion, representing36% of 2007 EBITDA".
(In millions of Euros except earnings per share and shipments data)
SECOND QUARTER 2008 EARNINGS ANALYST CONFERENCE CALL
Additionally, ArcelorMittal management will host a conference callfor members of the investment community to discuss the secondquarter 2008 financial performance of ArcelorMittal at 9.30 am NewYork time / 2.30 pm London time / 3.30 pm CET on Wednesday, July30th 2008. The conference call will include a brief question andanswer session with senior management. The conference callinformation is as follows:
Forward-Looking Statements
This document may contain forward-looking information andstatements about ArcelorMittal and its subsidiaries. Thesestatements include financial projections and estimates and theirunderlying assumptions, statements regarding plans, objectives andexpectations with respect to future operations, products andservices, and statements regarding future performance.Forward-looking statements may be identified by the words"believe," "expect," "anticipate,""target" or similar expressions. Although ArcelorMittal'smanagement believes that the expectations reflected in suchforward-looking statements are reasonable, investors and holders ofArcelorMittal's securities are cautioned that forward-lookinginformation and statements are subject to numerous risks anduncertainties, many of which are difficult to predict and generallybeyond the control of ArcelorMittal, that could cause actualresults and developments to differ materially and adversely fromthose expressed in, or implied or projected by, the forward-lookinginformation and statements. These risks and uncertainties includethose discussed or identified in the filings with the LuxembourgStock Market Authority for the Financial Markets (Commission deSurveillance du Secteur Financier) and the United States Securitiesand Exchange Commission (the "SEC") made or to be made byArcelorMittal, including ArcelorMittal's Annual Report on Form 20-Ffiled with the SEC. ArcelorMittal undertakes no obligation topublicly update its forward-looking statements, whether as a resultof new information, future events, or otherwise.
About ArcelorMittal
ArcelorMittal is the world's leading steel company, with over320,000 employees in more than 60 countries.
ArcelorMittal is the leader in all major global steel markets,including automotive, construction, household appliances andpackaging, with leading R&D and technology, as well as sizeablecaptive supplies of raw materials and outstanding distributionnetworks. With an industrial presence in over 20 countries spanningfour 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 withrespect to the health, safety and wellbeing of its employees,contractors and the communities in which it operates. It is alsocommitted to the sustainable management of the environment and offinite resources. ArcelorMittal recognises that it has asignificant responsibility to tackle the global climate changechallenge; it takes a leading role in the industry's efforts todevelop breakthrough steelmaking technologies and is activelyresearching and developing steel-based technologies and solutionsthat contribute to combat climate change.
In 2007 ArcelorMittal had revenues of $105.2 billion and crudesteel production of 116 million tonnes, representing around 10 percent of world steel output.
ArcelorMittal is listed on the stock exchanges of New York (MT),Amsterdam (MT), Paris (MTP), Brussels (MTBL), Luxembourg (MT) andon the Spanish stock exchanges of Barcelona, Bilbao, Madrid andValencia (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 announcedresults for the three and six month periods ended June 30, 2008.
Results for the three months ended June 30, 2008 versus results forthe three months ended March 31, 2008 and three months ended June30, 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 netincome of $2.4 billion, or $1.69 per share, for the three monthsended March 31, 2008, and $2.7 billion or $1.97 per share, for thethree 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, ascompared with sales and operating income of $29.8 billion and $3.6billion, 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 of29.2 million metric tonnes for the three months ended March 31,2008 and steel shipments of 28.7 million metric tonnes for thethree 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 $1.1billion for each of the three-month periods ended March 31, 2008and June 30, 2007. The increase was primarily due tocapitalisation, scope additions and foreign exchange movements.
Impairment losses for the three months ended June 30, 2008 amountedto $108 million which pertains primarily to a reduction ofgoodwill(5). Impairment losses for the three months ended March 31,2008 amounted to $301 million, including $200 million related tothe disposal of Sparrows Point and reduction of goodwill of $95million(6).
Income from equity method investments and other income for thethree months ended June 30, 2008, was $552 million as compared withincome from equity method investments and other income of $329million for the three months ended March 31, 2008, and $257 millionfor the three months ended June 30, 2007. Income from equity methodinvestments and other income were higher in the second quarter 2008primarily due to higher operating results from various associatesas well as dividend income received from available for saleinvestments 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 monthsended March 31, 2008. This decrease resulted primarily from $411million of gains related to the fair value of financial instrumentsfor the three months ended June 30, 2008 as compared with $242million loss for the three months ended March 31, 2008. Foreignexchange and other financing costs were lower at $16 million forthe three months ended June 30, 2008 as compared to foreignexchange and other financing costs of $88 million for the threemonths ended March 31, 2008. Net interest expense, which includesbank fees, interest on loans and interest on pensions, increased to$444 million for the three months ended June 30, 2008 as comparedto $406 million for the three months ended March 31, 2008, due toan increased level of borrowing (see "Liquidity and CapitalResources" below).
Income tax expense for the three months ended June 30, 2008,increased to $933 million as compared with $596 million for thethree months ended March 31, 2008. The effective tax rate for thethree months ended June 30, 2008, was 13.1% as compared with 18.6%for the three months ended March 31, 2008. The effective tax ratewas 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 monthsended March 31, 2008. The increase is due to higher income fromArcelorMittal South Africa, Sonasid and newly acquired companieswith minority shareholders, partially offset by the acquisition ofminority interests in ArcelorMittal Inox Brasil. Minority interestfor 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 thechanges 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 analysisprior to January 1, 2008 have not been recast to reflect thesechanges.
Flat Carbon Americas
As from January 1, 2008, Mittal Canada flat and pipes and tubesbusinesses from Dofasco have been transferred to Long CarbonAmericas and Europe.
Total steel shipments in the Flat Carbon Americas segment werelower at 7.4 million metric tonnes for the three months ended June30, 2008, as compared with steel shipments of 7.6 million metrictonnes for the three months ended March 31, 2008. Excluding theSparrows Point plant, which was sold effective May 7, 2008,shipments for the three months ended June 30, 2008 were 7.1 millionmetric tonnes as compared to 7.0 million metric tonnes for thethree months ended March 31, 2008.
Sales were higher at $7.5 billion for the three months ended June30, 2008, as compared with sales of $6.5 billion for the threemonths ended March 31, 2008.
Operating income was higher at $1.4 billion for the three monthsended June 30, 2008, as compared with operating income of $880million for the three months ended March 31, 2008.
Operating results for the three months ended June 30, 2008, ascompared with the three months ended March 31, 2008, increasedprimarily due to higher shipments on a comparable basis and higheraverage selling prices, partially offset by increased input costs.Operating income for the three months ended June 30, 2008 wasnegatively impacted by $158 million due to a reduction of goodwill.Operating income for the three months ended March 31, 2008 wasnegatively impacted primarily by a $200 million impairment chargedue to the disposal of Sparrows Point.
Flat Carbon Europe
As from January 1, 2008, the operations of ArcelorMittal Annabaflat and Skopje previously reported in the AACIS segment have beentransferred to the Flat Carbon Europe segment. In addition, theentire operations of Galati are reported within Flat Carbon Europe.
Total steel shipments in the Flat Carbon Europe segment were higherat 9.9 million metric tonnes for the three months ended June 30,2008, as compared with steel shipments of 9.4 million metric tonnesfor the three months ended March 31, 2008.
Sales were higher at $11.8 billion for the three months ended June30, 2008, as compared with sales of $9.3 billion for the threemonths ended March 31, 2008.
Operating income increased to $1.7 billion for the three monthsended June 30, 2008, as compared with operating income of $1.1billion for the three months ended March 31, 2008.
Operating results for the three months ended June 30, 2008, ascompared to the three months ended March 31, 2008, increased due tohigher volumes and higher selling prices, partly offset by higherinput costs.
Long Carbon Americas and Europe
As from January 1, 2008, the Long Carbon Americas and Europesegment includes the operations of ArcelorMittal Annaba long,Sonasid, Zenica, and the global pipes and tubes business, whichpreviously reported in the AACIS segment, and Mittal Canada flatwhich previously reported in the Flat Carbon Americas segment. Thewire drawing businesses have been transferred to the SteelSolutions and Services segment.
Total steel shipments in the Long Carbon Americas and Europesegment were higher at 8.1 million metric tonnes for the threemonths ended June 30, 2008, as compared with steel shipments of 7.8million metric tonnes for the three months ended March 31, 2008.
Sales were higher at $9.9 billion for the three months ended June30, 2008, as compared with sales of $7.7 billion for the threemonths ended March 31, 2008.
Operating income was higher at $1.6 billion for the three monthsended June 30, 2008, as compared with operating income of $1.1billion for the three months ended March 31, 2008.
Operating results for the three months ended June 30, 2008, ascompared with the three months ended March 31, 2008, increased dueto higher volumes and improved average steel selling prices, partlyoffset by input price increases.
Asia Africa and CIS ("AACIS")
As from January 1, 2008, the AACIS segment excludes the operationsof ArcelorMittal Annaba, Sonasid, Zenica, Skopje and the pipes andtubes businesses that have been transferred to the respectivesegments as discussed above.
Total steel shipments in the AACIS segment were flat at 3.9 millionmetric tonnes for the three months ended June 30, 2008, as comparedwith the three months ended March 31, 2008.
Sales were higher at $3.9 billion for the three months ended June30, 2008, as compared with sales of $2.9 billion for the threemonths ended March 31, 2008.
Operating income was higher at $1.3 billion for the three monthsended June 30, 2008, as compared with operating income of $560million for the three months ended March 31, 2008.
Operating results for three months ended June 30, 2008, were higheras compared to the three months ended March 31, 2008, due to higherselling prices partly offset by input price increases.
Stainless Steel
Total steel shipments in the Stainless Steel segment were higher at578 thousand metric tonnes for the three months ended June 30,2008, as compared with steel shipments of 528 thousand metrictonnes 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 endedMarch 31, 2008.
Operating income was higher at $308 million for the three monthsended June 30, 2008, as compared with operating income of $166million for the three months ended March 31, 2008.
Operating results for the three months ended June 30, 2008, werehigher than the three months ended March 31, 2008, primarily due tohigher volumes and improved prices.
Steel Solutions and Services(8)
As from January 1, 2008, the operations of ArcelorMittal wiredrawing activities which previously reported within the Long CarbonAmericas and Europe segment have been transferred to the SteelSolutions and Services segment.
Total steel shipments in the Steel Solutions and Services segmentwere higher at 5.7 million metric tonnes in the three months endedJune 30, 2008, as compared with steel shipments of 5.5 millionmetric 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 comparedwith sales of $5.7 billion for the three months ended March 31,2008.
Operating income was higher at $285 million for the three monthsended June 30, 2008, as compared with operating income of $158million for three months ended March 31, 2008, due primarily tohigher average steel selling prices and higher volumes partiallyoffset by input price increases.
Liquidity and Capital Resources
For the three months ended June 30, 2008, net cash provided byoperating activities was $4.2 billion, as compared with $2.0billion 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. Netdebt at June 30, 2008, which includes long-term debt plusshort-term debt less cash and cash equivalents, restricted cash andshort-term investments, was $30.7 billion ($27.4 billion as atMarch 31, 2008). Gearing(9) at June 30, 2008 was 46% as compared to44% at March 31, 2008, and net debt to EBITDA ratio decreased to1.2x(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 workingcapital (defined as inventory plus receivables less payables) as atJune 30, 2008 increased to $23.3 billion as compared to $19.0billion as at March 31, 2008, mainly as a result of increases inaccounts receivables due to higher sales activity and inventory andaccounts payables due to higher sales activity and increased inputcosts. 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 cashand short-term investments) of $7.5 billion and available banklines of $8.3(13) billion as at June 30, 2008.
On May 27, 2008, the Company issued US dollar denominated bonds intwo tranches totalling $3 billion. For the entire duration of thebonds the fixed rate has been swapped into floating rate.
In June 2008, the Company entered into a hedging transaction(14) inorder to hedge USD dollar denominated raw material purchases till2012. The program represents approximately 60-75% of the dollaroutflow based on current raw materials prices for Flat CarbonWestern Europe.
Capital expenditures during the three months ended June 30, 2008,increased to $1.4 billion, as compared with $1.0 billion for thethree months ended March 31, 2008. The Company continues to expectcapital expenditures to total approximately $7.0 billion during2008.
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 incash dividends and $541 million in share buy-backs.
With respect to the 44 million shares buy-back program, during thefirst half of 2008, the Company repurchased an aggregate of 22.6million shares at an average price of $75.97 (EUR 50.70) for atotal amount of $1,713 million(16). Furthermore, in July 2008, theCompany repurchased an aggregate of 10 million shares at an averageprice of $87.68 (EUR 55.58) for a total amount of $877 million.
To date, the Company has purchased under the 44 million shares buyback program 32.7 million shares at an average price of $79.54 (EUR52.19). (See appendix 3 "Share buy-back" below).
Also in the first half of 2008, ArcelorMittal completed its $1.0billion share buy-back program with the purchase of 14.6 millionshares at an average price of $68.70 (EUR 46.60).
Recent Developments:
Upstream Activities:
-- On July 21, 2008 ArcelorMittal, announced that it had signed anagreement to acquire the Concept Group ("Concept").Concept, located in southern West Virginia and adjacent to therecently acquired Mid Vol Coal Group in the Central AppalachianCoal Basin, produced 0.8 million tons of metallurgical coking coalin 2007 and has control over recoverable saleable reserves andresources estimated to be in excess of 57 million tons.
-- On July 16, 2008, ArcelorMittal announced it had acquired theremaining 60% of the shares in Rolanfer Recyclage S.A.("Rolanfer") that it did not previously own. Rolanfer isbased in Yutz (France) near Thionville on the Luxembourg border andoperates a shredder at the port of Illange.
-- On June 29, 2008, ArcelorMittal announced that it had increasedits stake in Macarthur Coal Limited from 14.9% to 19.9%, followingthe acquisition of a further 5% stake (10,607,830 shares) fromTalbot Group Holdings. The shares were purchased at 20 Australiandollars per share, bringing ArcelorMittal's total investment inMacarthur Coal to $843 million Australian dollars (USD $810million).
-- On June 23, 2008, ArcelorMittal announced that it had signed anagreement to acquire the Mid Vol Coal Group. Mid Vol, located insouthern West Virginia and southwestern Virginia in the CentralAppalachian Coal Basin, produced 1.5 million tons of metallurgicalcoking coal in 2007 and has estimated recoverable saleable reservesand resources in excess of 85 million tons.
-- On June 11, 2008, ArcelorMittal announced the allocation of amining lease in respect of the Karampada iron ore deposit to theCompany by the Governments of India and Jharkhand for itsintegrated steel plant to be based in Jharkhand. The Karampada ironore deposit is located in West Singhbhum district of Jharkhand withestimated reserves of 65 million tonnes of iron ore.
-- On June 9, 2008, ArcelorMittal, announced that it had signed anagreement to acquire Bakermet, a market leader in the scrap metalrecycling industry in Eastern Ontario, Canada. Bakermet, whichspecializes in all types of ferrous and non-ferrous metal,processed approximately 130,000 short tons of ferrous and 40million pounds of non-ferrous metals in 2007. The plant, locatednear Ottawa, will secure upstream self sufficiency in shreddedmetal for ArcelorMittal's Contrecoeur mill (ArcelorMittalMontreal).
-- On April 23, 2008, ArcelorMittal announced that it had reachedan agreement with Coal of Africa Limited ("CoAL"), a coaldevelopment company operating in South Africa. ArcelorMittal willenter into an off-take agreement with CoAL relating to two coalmines. The first, Baobab, is 100% owned by CoAL and has anestimated yield of 2.45 million tonnes per annum. The second,Thuli, is 74 % owned by CoAL and has an estimated yield of 4.2million tonnes per annum. Full production at both mines is expectedto be achieved by 2011.
-- On April 10, 2008, ArcelorMittal announced the acquisition ofthree coal mines and associated assets in Russia for a totalconsideration of $718 million.
Steel Production Initiatives:
-- On July 22, 2008, ArcelorMittal announced a EUR 76 million ($118million) investment to expand electrical steel production capacityat its Saint Chely d'Apcher plant in Southern France, a move inline with the Group's strategy to strengthen its position in highadded value steel products and solutions that contribute to lowercarbon dioxide emissions. The addition of a new 180,000 tonnescontinuous annealing line will take Saint Chely d'Apcher's capacityto 210,000 tonnes per year of mostly high end non-grain orientedelectrical steels, which are used, among other things, in electricengines and wind turbines. The new line is scheduled to becomeoperational during the second quarter of 2010.
-- On July 3, 2008, ArcelorMittal and AREVA signed an agreement fora EUR 70 million ($110 million) investment aimed at increasingproduction of certain products for the nuclear industry, at thesteel plant of Industeel, a subsidiary of ArcelorMittal. Theinvestment, which will be staggered between 2008 and 2010, istargeted to increase ingot production capacity significantly (from35,000 tonnes to 50,000 tonnes per year). In addition, the twocompanies announced that they plan to implement a joint 3-yearmetallurgy research and development program that will be conductedat the Creusot Materials Research Center.
-- On June 27, 2008, ArcelorMittal, Hunan Valin Group and HunanValin Steel Co. Ltd. announced a new development in theirrelationship with the launch of Valin ArcelorMittal AutomotiveSteel, an industrial and commercial automotive joint venture thatwill have an annual production capacity of 1.2 million tonnes offlat carbon steel, mainly for automotive applications. Productswill include cold rolled steel, galvannealed steel and pure zincgalvanized steel. The establishment of this new joint ventureremains subject to regulatory approval.
Hunan Valin Steel Co., Ltd will own 34% of the new joint ventureand ArcelorMittal and Hunan Valin Group will each have a 33% equityshare. The new activity will be located in Hunan Province next toHunan Valin Steel Co.'s subsidiary, Lianyuan Steel, which willsupply hot rolled coil to the new joint venture.
-- On June 16, 2008, ArcelorMittal announced that it had signed anagreement to acquire Bayou Steel, a producer of structural steelproducts with facilities in LaPlace, Louisiana, and Harriman,Tennessee, for $475 million. The transaction is subject toregulatory approval. Bayou Steel is an independent producer ofmedium and light structural steel and bar size products. Throughits Mississippi River Recycling division, Bayou Steel operates anautomobile shredder at the LaPlace facility, as well as bargewrecking and full-service scrap yards at LaPlace and its facilityin Harvey, Louisiana. The company also has a deepwater dock anddistribution network, including four stocking locations in theUnited States.
-- On April 16, 2008, ArcelorMittal announced that it would beexpanding its joint venture partnership with Nippon SteelCorporation by building a new continuous galvanising line at theI/N Kote facility in New Carlisle, Indiana. The new line will havean 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 thatpromote improved safety and fuel efficiency in automobiles.
Downstream Activities
-- On July 25, 2008, ArcelorMittal acquired a 70% share ofManchester Tubos e Perfilados S.A, a Brazilian steel processor anddistributor located in Contagem, Minas Gerais. This new acquisitionwill reinforce ArcelorMittal's downstream position in Brazil,following the acquisition on April 3, 2008 of a 50% stake inGonvarri Brasil. With the acquisition of Manchester, and with itspartnership with Gonvarri, ArcelorMittal will widen its productoffering in the distribution segment in Brazil. The Group will nowoffer an extended range of flat products (coils and blanks),profiles, tubes and pipes.
-- On July 14, 2008, ArcelorMittal and Primex (Germany) reached anagreement whereby ArcelorMittal Stainless International acquiredthe 35% stake in Uginox Sanayi ve Ticaret Limited Sirketi which wasowned by Primex.
-- On July 1, 2008, ArcelorMittal acquired Astralloy Steel ProductsInc. ("Astralloy") a subsidiary of IMS InternationalMetal Service. Astralloy operates three warehouses and employs 60people in North America. Its 2007 revenues were $34 million.
-- On June 30, 2008, ArcelorMittal announced its intention toacquire 60% of the entire issued share capital of Dubai SteelTrading Company LLC ("DSTC LLC"). DSTC LLC's distributesapproximately 120,000 tonnes of products per year.
-- On April 3, 2008, ArcelorMittal announced the acquisition of a50% share of Gonvarri Brasil to form a Steel Service Centre jointventure. Gonvarri Brasil is one of the major players for servicingautomotive, industry and distribution customers. The company is oneof the leaders of flat steel processing in Brazil and itsactivities include pickling, slitting, blanking, and cutting tolength, with a total processing capacity of around 1.3 million tonsof steel.
Disposals:
-- On May 7, 2008, ArcelorMittal announced that the Court appointedtrustee had completed the previously announced sale ofArcelorMittal's Sparrows Point steel mill to OAO Severstal for $810million, net of debt.
Other key events
-- On July 11, 2008, ArcelorMittal announced the launch of a newclean technology venture capital fund (with an initial cleantechnology investment of $20 million in Miasole).
-- On June 16, 2008, ArcelorMittal announced that followingpurchases 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 itsemployees across the globe signed a new agreement to furtherimprove health and safety standards throughout the Company. Theagreement, the first of its kind in the steel industry, recognisesthe vital role played by trade unions in improving health andsafety. It sets out minimum standards in every site the Companyoperates in order to achieve world class performance. Thesestandards include the commitment to form joint management/unionhealth and safety committees as well as training and educationprogrammes in order to make a meaningful impact on overall healthand safety across the Company. Also included in the agreement isthe creation of a joint management/union global health and safetycommittee that will target ArcelorMittal plants in order to helpthem to further improve their health and safety performance. Theagreement was signed on June 3, 2008 by ArcelorMittal, the EuropeanMetalworkers' Federation, the United Steelworkers and theInternational Metalworkers' Federation.
-- On May 2, 2008, ArcelorMittal announced a series of measureswhich will restore a 25% free float in China Oriental Group Company("China Oriental") in compliance with the listing rulesof the Hong Kong Stock Exchange ("HKSE"). At the time ofthe close of its tender offer on February 4, 2008 ArcelorMittal hadreached a 47% shareholding in China Oriental. Given the 45.4%shareholding by the founding shareholders, this left a free floatof 7.6% against a minimum HKSE listing requirement of 25%. Themeasures to restore the minimum free float have been achieved bymeans 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 beenreduced to 29.6%.
-- On April 29, 2008, ArcelorMittal announced that it had signednew long-term contracts with Companhia Vale do Rio Doce("Vale") to supply iron ore and pellets to its plants inEurope, Africa and the Americas. Under these long-term contracts,which are the largest ever signed between a steel company and aniron ore supplier, Vale will supply approximately 480 milliontonnes of iron ore and pellets to ArcelorMittal plants over thenext 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 $8.5billion. Flat Carbon Americas' EBITDA is expected to significantlyincrease due to operational improvements and a better operatingenvironment. Asia, Africa & CIS EBITDA is expected to increasedue to improved volumes and price increases. Long Carbon's EBITDAis expected to improve. ArcelorMittal Steel Solutions and ServicesEBITDA is expected to remain flat. Flat Carbon Europe's EBITDA isexpected to decrease following seasonal shutdowns and increasedcost pressure, while Stainless Steel profitability is set todecline. The full year effective tax rate is expected to be between15-20%.
ARCELORMITTAL UNAUDITED CONSOLIDATED BALANCE SHEETS
ARCELORMITTAL UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
ARCELORMITTAL UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Appendix 2 - Q2 2008
Appendix 2a - Q2 2008
(1) EBITDA is defined as operating income plus depreciation andimpairment.
(2) The financial information in this press release and Appendix 1have been prepared in accordance with International FinancialReporting Standards ("IFRS") as issued by theInternational Accounting Standards Board ("IASB"). Whilethe interim financial information included in this announcement hasbeen prepared in accordance with IFRS applicable to interimperiods, this announcement does not contain sufficient informationto constitute an interim financial report as defined inInternational Accounting Standards 34, "Interim FinancialReporting". Unless otherwise noted the numbers in the pressrelease have not been audited.
(3) US dollars have been translated into Euros using an averageexchange rate ($/Euro) of 1.5622, 1.4983, 1.3481, 1.5305 and 1.3291for Q2 2008, Q1 2008, Q2 2007, H1 2008 and H1 2007, respectively.
(4) Shipments defined as the sum of segment shipments excludingAM3S. Some intercompany shipments included.
(5) As required by IFRS, this reduction of goodwill resulted fromthe recognition of net operating losses previously not recognizedin purchase accounting, amongst others due to a reorganisation inSouth America (amounting to $158 million) in the second quarter.
(6) As required by IFRS, this reduction of goodwill resulted fromthe recognition of net operating losses previously not recognizedin purchase accounting, amongst others due to a reorganisation inWestern Europe in the first quarter.
(7) Net financing costs include net foreign exchange and otherfinancing costs, net interest expense and revaluation of financialinstruments.
(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 plusdays of inventory minus days of accounts payable. Days of accountspayable and inventory are a function of cost of goods sold. Days ofaccounts receivable are a function of sales.
(13) Includes back-up lines for commercial paper program of $4.7billion (EUR 3.0 billion)
(14) Hedging has been implemented using a combination of forwardcontracts and options in order to cap adverse effects due to marketmovements over the period.
(15) Excluding dividends totalling $119 million paid to minorityshareholders of subsidiaries, primarily in Morroco and Brazil.
(16) Includes $66 million relating to payments made in July 2008.ArcelorMittal holds, indirectly and directly, approximately 63.8million shares in treasury as of June 30, 2008 and approximately73.8 million shares as of July 29, 2008.
(17) Amounts are derived from the Company's audited consolidatedfinancial statements for the year ended December 31, 2007.
(18) EBITDA is defined as operating income plus depreciation andimpairment.
(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 longterm contracts).
(21) Employee figures for Q208 include scope additions primarilyfor Noble, Russian mines and Unicon offset by disposal of SparrowsPoint.
ArcelorMittal Investor Relations
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 94 489 416
Oscar Fleites, +34 98 512 60 29
Keith Grant, +34 639 760 397
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