ArcelorMittal reports third quarter 2013 and nine-months 2013 results

Luxembourg, November 7, 2013 – ArcelorMittal (referred to as “ArcelorMittal” or the “Company”) (MT (New York, Amsterdam, Paris, Luxembourg), MTS (Madrid)), the world’s leading steel company, today announced results[1] for the three and nine month periods ended September 30, 2013.

Highlights[2]:

• Health and safety performance improved in 3Q 2013 with a LTIF rate[3] of 0.8x as compared to 0.9x in 2Q 2013
• EBITDA[4] of $1.7 billion in 3Q 2013, 24% higher than underlying EBITDA in 3Q 2012[5]
• Steel shipments of 21.1 Mt in 3Q 2013, an increase of 6% as compared to 3Q 2012
• 3Q 2013 own iron ore production of 14.9 Mt, up 4.5% YoY; 9.4 Mt shipped and reported at market price[6] , up 32% YoY
• As anticipated, net debt[7] increased from $16.2 billion as of June 30, 2013 to $17.8 billion as of September 30, 2013, largely driven by investment in operating working capital ($0.8 billion) and dividends paid ($0.4 billion)
• Net interest expense reduced by $62 million (13%) in 3Q 2013 as compared to 2Q 2013 primarily due to lower gross debt
• $0.8 billion annualized management gains achieved during 9M 2013, in line with plan to achieve $3 billion of cost improvement by the end of 2015
• The ramp-up of expanded capacity at AMMC remains on track to achieve a run-rate of 24 Mt by year-end 2013

Key strategic developments:

• Resolution of long-term Kumba dispute: Sishen iron ore supply agreement secured on cost-plus terms
• Investment plan to double capacity at ArcelorMittal Annaba following stake dilution to 49% (from 70%)[7]
• Selective steel capital expenditure projects restarted to support development of franchise businesses

Outlook and guidance:

• In line with our guidance framework, underlying profitability is still expected to improve in 2013, driven by three factors: a) a 1-2% increase in steel shipments; b) an approximate 20% increase in marketable iron ore shipments; and c) the benefits realized from Asset Optimization and Management Gains initiatives
• The Company still expects 2013 EBITDA to be greater than $6.5 billion
• Due to improved operating cash flows and proceeds from already announced disposals[8] , net debt is expected to decrease in 4Q 2013 to approximately $17 billion; the $15 billion medium term net debt target is unchanged
• 2013 capital expenditure is still expected to be approximately $3.7 billion

Financial highlights (on the basis of IFRS[1], amounts in USD):

Commenting, Mr. Lakshmi N. Mittal, ArcelorMittal Chairman and CEO, said:

“After a weak first half, we have seen third quarter performance improve year-on-year, positively impacted by our cost optimisation efforts and the increased shipments from our mining expansion.  We believe that the bottom of the cycle is behind us and expect second half EBITDA, usually comparably weaker, to be at least equal to the first.  Although operating conditions remain challenging, as economic indicators are improving we are cautiously optimistic about the prospects for 2014.”

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[1]The financial information in this press release has 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”. The numbers in this press release have not been audited. The financial information and certain other information presented in a number of tables in this press release have been rounded to the nearest whole number or the nearest decimal. Therefore, the sum of the numbers in a column may not conform exactly to the total figure given for that column. In addition, certain percentages presented in the tables in this press release reflect calculations based upon the underlying information prior to rounding and, accordingly, may not conform exactly to the percentages that would be derived if the relevant calculations were based upon the rounded numbers.
[2]On January 1, 2013, in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”), ArcelorMittal mandatorily adopted IFRS 10 (“Consolidated Financial Statements”), IFRS 11 (“Joint Arrangements”), IFRS 12 (“Disclosure of Interests in Other Entities”), IFRS 13 (“Fair Value Measurement”), the revision of IAS 19 (“Employee Benefits”) and IFRIC 20 (“Stripping Costs in the Production Phase of a Surface Mine”). Prior period 2012 information has been adjusted retrospectively for the mandatory adoption of these new standards and interpretations except for IFRS 13 which is applied only prospectively. The main effects for ArcelorMittal are related to the revision of IAS 19R which was applied retrospectively. Following the changes, the previously unrecognized actuarial gains and losses on pension liabilities are recorded in the statements of financial position in full against equity. It means that the previously unrecognized actuarial gains and losses are no longer recorded over time against profit and loss following the then allowed “corridor approach”. All future actuarial gains and losses will also be immediately recognized in other comprehensive income (OCI). In addition, for purposes of measuring the net financial cost on pension liabilities/assets, the expected rate of return on assets must be equal to the discount rate applicable to liabilities.
[3]Lost time injury frequency rate equals lost time injuries per 1,000,000 worked hours, based on own personnel and contractors.
[4]EBITDA is defined as operating income plus depreciation, impairment expenses and exceptional items.
[5]Reported EBITDA in 3Q 2012 of $1,445 million included a positive impact of $131 million of DDH income partially offset by a $72 million charge related to a one-time signing bonus and post retirement benefit costs following entry into a new labor contract in the U.S. As a result underlying EBITDA for 3Q 2012 is $1,386 million.
[6]Market priced tonnes represent amounts of iron ore and coal from ArcelorMittal mines that could be sold to third parties on the open market.  Market priced tonnes that are not sold to third parties are transferred from the Mining segment to the Company’s steel producing segments and reported at the prevailing market price.  Shipments of raw materials that do not constitute market priced tonnes are transferred internally and reported on a cost-plus basis.
[7]Net debt refers to long-term debt, plus short term debt, less cash and cash equivalents, restricted cash and short-term investments (including those held as part of asset/liabilities held for sale). As at September 30, 2013 cash included $42 million and debt included $202 million held at Annaba. In accordance with IFRS5, asset and liabilities from the Annaba and Tebessa stake dilution have been classified as asset/liabilities held for sale.
[8]On October 8, 2013, ArcelorMittal announced the sale of 233,169,183 shares (the “Shares”) of Ereğli Demir ve Çelik Fabrikaları T.A.Ş. (“Erdemir”) by way of a single accelerated bookbuilt offering to institutional investors. The sale generated proceeds of approximately $267 million. Prior to the sale, ArcelorMittal owned 655,969,154 Shares, representing approximately 18.74% of Erdemir’s share capital. Following completion of the sale, ArcelorMittal holds approximately 12.08% of Erdemir’s share capital. ArcelorMittal has agreed to a 180-day lock-up period on its remaining stake in Erdemir. The transaction is cash positive; however there is an accounting loss of approximately $57 million to be booked in the fourth quarter of 2013.
[9]EBITDA/t includes total group EBITDA divided by total steel shipments.