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Annual Financial Results

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Crane replacement and gantry upgrade at Steelmaking (2008) Coke & Chemicals 59 ... Crane and gantry upgrade (2008) Major Investments up to 2011. Environmental ... – PowerPoint PPT presentation

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Title: Annual Financial Results


1
Annual Financial Results
ArcelorMittal South Africa Limited
  • for the 12 months ended 31 December 2007

2
Introducing New CEO and member of the Board
Me. Nku Nyembezi-Heita
3
Introducing new President and member of the Board
Luc Bonte
4
Market and Operations
  • Rick Reato

5
Introduction and Overview
  • Earnings increase to R5.7bn
  • Earnings per share of 1 288c up 21
  • Net cash flow of R2.9bn
  • Domestic market retained momentum
  • Demand essentially unchanged on 2006
  • Domestic sales constitute 76 of total sales
  • Cost pressures continue
  • Raw material cost increased by 14
  • Cost of steel sales increased 17
  • Operations
  • BFD rebuild completed
  • Liquid steel production down 10
  • Sales down 6

Earnings increase by 21
6
Key Result Drivers
2007 vs 2006
HRC US export price 22 LCWR US export
price 26 Total sales volume -6 Export sales
volume -22 Domestic sales volume 1 HRC Rand
cash cost per tonne 18 Billet Rand cash cost
per tonne 16 Labour productivity -3 ZAR
movement -4
Production volumes impacted on sales volumes
7
Global Environment General Market Trends
  • World economic growth in 2007 decreased
    marginally from 3.9 to 3.6
  • Chinese economy grew by 11 despite measures to
    cool it down
  • World consumption and production of steel
    increased by 7.5 in 2007
  • Global steel industry consolidation still
    priority
  • Input costs remain high will continue to
    support prices
  • Lower price volatility expected to continue

Global steel consolidation supports a less
volatile market environment
8
Global Environment - Chinese Market Trends
  • China remained a net exporter of total steel
    products in 2007
  • China accounted for 37 of world steel production
    and 35 of consumption
  • Export taxes increased

ktonnes
Source TEX Report
China expected to retain its status as a net
exporter
9
Global Environment Input Cost Trends
  • Iron ore price expected to increase substantially
  • China iron ore spot _at_ premium of US40/t
  • Coking Coal cost pressure expected in 2008 due to
    scarcity worldwide
  • Coking coal spot prices have increase by 65
  • Sharp increase in scrap prices in early 2008
  • Scrap prices increased by 30 during 2007
  • Reduction in supply from traditional markets due
    to local consumption
  • Port delays changing trade patterns lead to
    rising freight rates
  • Freight rates almost doubled during 2007
  • Prices of base metals and alloys increased
    substantially
  • Tin (66) Nickel (55) Ferro Alloys (60)
    Zinc stable after 146 in 2006

Raw material prices exert pressure on steel prices
10
Global Environment Benchmark Prices
Based to 100
Global input costs continue to increase
11
Global Environment - Export Prices Achieved
Export prices (cf) US/t
2002
2003
2004
2005
2006
2007
Steel prices established new trading range
12
Domestic Environment Shipments
Source SAISI
Long steel local despatches again achieved a
record level
13
Domestic Environment Inventory Levels
Source SAISI
Industry inventory levels below recent averages
14
Domestic Environment Imports
Source SAISI
Imports slightly down from 2006
15
Key Performance Indicators
2006 2007
Employees per million tonnes produced 1 385 1
429 Revenue per head (R000) 2 594 3 220 HRC cash
cost - R/t 2 150 2 538 - US/t 318 360 Billet
cash cost - R/t 1 993 2 310 -
US/t 295 327 Percentage value-add exports -
flat 96 97 - long 94 100
Productivity influenced by lower volume
16
Liquid Steel Production
ktonnes
Blast furnace rebuild and Corex reduced output
volumes
17
Liquid Steel Production
ktonne
2006 liquid steel output 7 055 Recoupment of 2006
losses 323 Vanderbijlpark - BFD
Rebuild -813 Vanderbijlpark - BFD Cold hearth
conditions -177 Saldanha - Corex
condition -49 Newcastle - Furnace
condition -57 Efficiency improvements 93 2007
liquid steel output 6 375
BFD biggest impact on output volumes
18
Operational developments
  • Blast Furnace D
  • Market Coke production at battery N2 at Newcastle
    Works
  • Galvanizing line 5 achieved full capacity
  • Colour coating line achieved record output
  • EAF at Vereeniging produced record volume
  • Various records at all rolling mills at Newcastle

Blast Furnace D overshadowed production
19
Shipment Volumes
6 223
6 230
6 194
5 829
4 329
4 283
4 268
3 928
ktonnes
1 947
1 926
1 901
1 894
Flat Products
Long Products
Total
Substantial shift to meet local demand on long
products
20
Geographic Shipments
Maintain Africa focus
21
Investment Programme
Rm 2007
Major projects completed (and ongoing) in
2007 Vanderbijlpark Works 1 183 - Blast furnace
D rebuild completed - New direct reduction
kilns 5 6 on track (2008) Saldanha
Works 260 - Corex/Midrex reline preparation -
Ore screen stockhouse upgrade Newcastle
Works 199 - Evaporator crystalliser RO plant
upgrade - Blast Furnace N5 Mini-reline
(2008) Vereeniging Works 50 - EAF Dust
extraction (2008) - Crane replacement and
gantry upgrade at Steelmaking (2008) Coke
Chemicals 59 - Battery rebuild
(Newcastle) Other (mainly Mozambique) 97 Total
Expenditure in 2007 1 848
Furnace refurbishment absorbed 30 of total cash
flow expenditure
22
Safety Remains our Priority
  • ArcelorMittal South Africa achieved 26 LTI free
    days (3.7m LTI free man hours)
  • 1m LTI free hours achieved
  • 7x at Vanderbijlpark Works
  • 6x at Newcastle Works
  • 1x at Vereeniging Works
  • 1x at Saldanha Works
  • Best ever safety performance by Newcastle Works

Includes contractors
Best ever safety performance
23
Finance
  • Kobus Verster

24
Headline Earnings
Rm 2006 2007
Revenue 25 350 29 333 Operating profit 6 082 7
703 Gains losses on foreign exchange rates and
financial instruments 301 -131 Financing cost -
net interest income 294 369 - imputed interest
on non-current provisions -101 -44 Income from
investments 7 4 Tax -2 022 -2 455 Equity
earnings 135 270 Net deficit on disposal or
scrapping of assets 34 25 Headline earnings 4
730 5 741 - in USm 693 816
After tax
Record earnings
25
Headline Earnings Trend
Rm
2003
2004
2005
2006
2007
Earnings remains within new range
26
Operating Profit
Rm 2006 2007
Flat products 3 644 4 338 Long products 2 111 2
661 Coke Chemicals 184 727 Corporate
other 143 -23 Operating profit 6 082 7 703
Long products and Coke Chemicals continue to
increase their contribution
27
Cash Flow
Rm 2006 2007
Cash profits from operations 7 132 9 021 Working
capital -1 033 -606 Capex -1 446 -1 848 Net
interest/Investment income 468 476 Investments -
16 Tax -1 660 -2 209 Dividends -1 261 -1 948 Net
cash flow 2 200 2 870 Capital reduction -6
352 Net cash flow after capital reduction 2
200 -3 482 Net cash 7 679 3 973
Cash flow remains robust
28
Financial Ratios
2006 2007
Operating margin 24 26 EBITDA
margin 28 30 Revenue / invested capital
(times) 1.4 1.5 Return on equity 22 26 Net
cash/equity 33 19
Improvement in financial ratios
29
Share Performance
Period 2003 to 2007 Average Dividend Yield at
5.7 (excl cap red) - double the market Average
Price Earnings ratio of 7.2X - half the market
Excellent medium to long term share performance
30
Dividend
  • Dividend policy
  • Distributing one third of headline earnings
  • Dividend and cash declared
  • Interim dividend of 233 cents per share - 3
    September 2007
  • Final dividend of 196 cents per share - 17 March
    2008
  • Total dividend of 429 cents covered 3 times by
    EPS of 1 288 cents
  • Capital reduction of 1 425 cents - September
    October 2007
  • Total cash distribution of 1 854 cents over past
    twelve months

Cash yield at 13.6
31
Other Developments
  • Rick Reato

32
Meeting local demand
  • Channels for capturing strong local demand and
    strong international prices
  • Production stability
  • Divert exports
  • N5 and Corex/Midrex relines
  • Investing in additional capacity
  • Electricity supply

Focus on production stability
33
Investment Programme
Rm 2008 - 2011
Relines 450 Maintain capability 2 000 Steel
capacity increase 2 900 Downstream value adding
projects 2 700 Environmental investments 1
000 Expenditure in 2005 1 608 Expenditure in
2006 1 446 Expenditure in 2007 1 848
Investment programme support expansion strategy
34
Major Investments up to 2011
  • Flat products
  • DRI kilns (2008)
  • Corex and Midrex reline (2008)
  • New Colour Line (2009)
  • New Galvanising line (2011)
  • Power plant
  • Ore screen and stockhouse upgrade (2009)
  • Long products
  • N5 reline (2008)
  • Maputo mill (2008)
  • New Bar/Section Mill (2011)
  • New Blast Furnace N6 (2011)
  • New Billet Caster (2011)
  • Crane and gantry upgrade (2008)

35
Major Investments up to 2011
  • Environmental
  • Sinter clean gas
  • EAF dust extraction at Vanderbijlpark Works
  • EAF dust extraction at Vereeniging Works
  • Calcium Carbide Desulphurisation at Newcastle
    Works
  • Evaporator crystallizer

36
Ongoing developments
  • Competition Tribunal
  • SARS BAA dispute
  • Iron ore supply
  • Electricity supply
  • BEE

37
Cost containment
  • Production stability
  • Increased throughput
  • Purchasing power
  • Efficiency improvements
  • Cost Control

38
Outlook
  • Rick Reato

39
Outlook for Q108
  • Business environment
  • Domestic demand expected to remain healthy
  • Higher international prices expected
  • Higher input prices will influence production
    costs
  • Earnings
  • Earnings to remain strong compared to Q407
  • Power supply and the exchange rate may have an
    influence

Earnings expected to remain strong in Q108
40
Annual Financial Results
ArcelorMittal South Africa Limited
  • Thank you
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