Flavio Fontana [email protected] Usability Lab ENEA, University of Rome, Italy
Bernard Fontana – Chief Executive Officer€¦ · Aperam – Positioning, strategy and drivers...
Transcript of Bernard Fontana – Chief Executive Officer€¦ · Aperam – Positioning, strategy and drivers...
Aperam – Positioning, strategy and drivers
Bernard Fontana – Chief Executive Officer
16 December 2010
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Forward-looking Statements
This document may contain forward-looking information and statements about ArcelorMittal and its subsidiaries.
These statements include financial projections and estimates and their underlying assumptions, statements
regarding plans, objectives and expectations with respect to future operations, products and services, and
statements regarding future performance. Forward-looking statements may be identified by the words “believe,”“expect,” “anticipate,” “target”, “will” or similar expressions. Although ArcelorMittal’s management believes that the
expectations reflected in such forward-looking statements are reasonable, investors and holders of ArcelorMittal’s
securities are cautioned that forward-looking information and statements are subject to numerous risks and
uncertainties, many of which are difficult to predict and generally beyond the control of ArcelorMittal, that could
cause actual results and developments to differ materially and adversely from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed
or identified in the filings with the Luxembourg Stock Market Authority for the Financial Markets (Commission de
Surveillance du Secteur Financier) and the United States Securities and Exchange Commission (the “SEC”) made
or to be made by ArcelorMittal, including ArcelorMittal’s Annual Report on Form 20-F for the year ended December
31, 2009 filed with the SEC. ArcelorMittal undertakes no obligation to publicly update its forward-looking statements, whether as a result of new information, future events, or otherwise.
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Content
• Overview
• Markets and products
• Unique strengths
• Challenges and opportunities in stainless steel
• Challenges and opportunities in electrical steel, alloys and specialties
• The Leadership Journey
• Q&A
3
Overview
4
Aperam snapshot
An EBITDA average of USD 778m over 2007-2009 representing approximately 5%* of ArcelorMittal’s EBITDA
*Stainless steel segment within ArcelorMittal
– A global player in stainless steel
• 2.5mt of Flat stainless steel capacity in Europe and Brazil (27% of Aperam turnover in 2009)
– Leading position in high valued added niches, alloys and specialties
• Stainless specialities (Ferritics)
• Electrical steel (GO and NGO)
• Special-carbon
• Nickel alloys & specialties
– A highly integrated distribution, processing and services network
– A unique capability to produce stainless and specialities from low cost biomass/charcoal
– An industrial network concentrated in 6 main plants located in Brazil, Belgium and France
• Approximately 9,800 employees
5
A global player
FOREST
SALES AGENCIES
SERVICE CENTERS
PLANTS
North America
South America
Europe and CIS
Middle-East & Africa
Asia & Pacific
43 kT 743 kT
46 kT
41 kT
228 kT
Stainless steel shipments in 2009
Source: Aperam
6
Production assets in Europe &
South America
Strong presence in both Europe and South America
Isbergues
Location & facts
- Cold-rolling mill and
finishing
- France
Capacity:
- Finished: 350 kt
- LC2i: integrated line
Gueugnon
Location & facts
- Cold-rolling mill and
finishing
- France
Capacity:
- Finished: 400 kt
- Specialised in Bright Annealing (BA)
products and
stabilized ferritics
Châtelet
Location & facts
- Melt shop and hot-
rolling
- Belgium
Capacity:
- Slabs : 1,000 kt
- HSM : 3,400 kt
Location & facts
- Melt shop and cold rolling mill
- Belgium
Capacity:
- Slabs: 1,200 kt
- Finished: 740 kt
- 2,000 mm wide
capacity, 316 and
duplex grades
- Cold rolling mill: 750kt
Genk Timóteo
Location & facts
- Melt shop and
finishing facilities
- Brazil
Capacity:
- Melt shop: 900kt
- 320kt cold rolled &
60kt hot rolled annealed and pickled
- Silicon cold rolling: 60kt GO and 120kt of
NGO
Location & facts
- Melt shop and
finishing facilities
- France
Capacity:
- EAF: 60 kt
- 1 VIM, 1 VAR, Rotary
Continuous Caster for Long Products
– Hot Rolling mill of wire: ~40 kt
– 6 Cold Rolling Mills
Imphy
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Alloys & Specialties
BioenergiaBiomass & Upstream
Strategic participation
Stainless
&
Electrical Steel
Services
&
Solutions
Industry
Tubes
Precision
Industry
Distribution
Distribution
Wire drawing
Components
Industry
Tubes
An organization by core competencies
GMO
Distribution
8
Team and organisation
Bernard FONTANA
CEO
Julien BURDEAU
Alloys &
Specialities
Jean-Paul ROUFFIAC
Clenio GUIMARAES
Timoteo DIMAULO
Services &
Solutions
Johanna VAN SEVENANT
Sustainability,
HR &
Communication
Stainless &
Electrical steel
South America
Julien ONILLON
CFO &
StrategyStainless &
Electrical steel
Europe
53 years old
48 years old
58 years old 51 years old 39 years old 40 years old 42 years old
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Markets and products
10
Demand for stainless steel driven by consumers and industrial investments
Stainless steel consumption by end user*
General
Industry
20%
Building &
Construction
17%
Automotive &
Transportation
12%
Catering &
Appliance
34%
Others
3%
Energy &
Chemicals
Industry
14%
Stainless steel represents only 2% of
total world steel market in volume
Main end-user applications
*Pre-crisisSource: Aperam
11
Demand for stainless steel comes later
in the economic development cycle
Stronger growth potential in stainless steel than carbon steel
Carbon steel consumption per capita* (kg/year) Stainless steel consumption per capita* (kg/year)
0
2
4
6
8
10
12
Emerging world China Developed world
90%
x8
0
100
200
300
400
500
Emerging world China Developed world
30%
x6
*Pre-crisisSources: CRU and Aperam
12
Grain Oriented (GO)
• GO is used in the construction of static electrical
machines / transformers
• Amorphous alloy is the only material that
competes with GO steels (restricted to small
distribution transformers for specific market
segments )
Electrical steel products are driven by
energy oriented applications
Non-grain Oriented (NGO)
• NGO is used in the construction of large and
small rotating electrical machines (hydro-
generators , electrical motors, hermetic motors /
compressors for refrigerators, air conditions and
freezers, drills, household appliance transformers,
energy meters , ballasts ….)
• Limited substitution threat
High
Low
Low HighP
ola
rizati
on
Core Losses
High grades
• Higher efficiency equipment
• Lower Energy consumption
• Lower CO2 emissions
Regular grades
• Low efficiency
equipment
• High energy
consumption
Best properties
Stricter governmental regulations, greater electricity demand/cost, focus on energy
efficiency and environmental concerns drive the growth of both GO & NGO products
13
CAPEX budget of USD 4.0 billion for 2010
Nickel Alloys applications and products
High value added materials (price over 20,000 USD/t) with unique properties
Magnetic and controlled expansion alloys
• FeNi alloys (Ni>25%) and FeNiCo exhibit unique thermal
expansion coefficient and magnetic properties
Superalloys, corrosion alloys
• High Ni-based alloys, enriched with Cr and additions of
Co, Mo, Nb, Ti exhibit outstanding corrosion
performance in various environments and mechanical
properties at high temperatures
Specialty stainless grades
• Strict control of residuals
Oil & Gas Aerospace
Heat resistance Electronics
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Unique strengths
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Strategy to leverage and maximize unique strengths
What makes Aperam unique
– Long-term growth trends in mature markets supported by emerging market demand• Emerging markets representing approximately 30% of Aperam total sales• Approximately 30% of sales in emerging markets
– Global, integrated distribution network and proximity to customer• Services & Solutions division provides exclusive global distribution channel• Focus on services, partnership and customer satisfaction offers growth opportunities
– Leading R&D capabilities• Continuous product development and innovation (Ferritics, High-end GO/NGO, Nickel Alloys, Duplex…)• R&D facilities in France and Brazil
– Culture of continuous improvement • Continuous improvement program ensuring cost effectiveness and focus on health & safety
– Ability to produce stainless and speciality steel products from low-cost charcoal• Unique upstream integration into forestry asset provides cost advantage and access to sustainable energy source
– Strong financials through the cycle and effective working capital and risk management• Superior earnings profile and lower volatility• Best in class working capital ratio• Active use of risk management tools to manage in particular Nickel exposure
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Leading global stainless and specialty steel producer
Nickel Alloys producers ranking in Europe (by production)
TK VDM
30-35 kt 20-
25 kt
Aperam
5 kt
DNick
7 kt4 kt
Generalist pure players
Specialists / Multi materials
3 kt2 kt 2 kt
KanthalBGH
A&D
VAC G&G
1 kt
Isabellen Hütte
Wire drawers
Flat product stainless steel producers ranking (by slab capacity)
0
1
2
3
4
TKS
Ace
rino
xTIS
CO
YUS
CO
POSC
OA
peram
Out
okum
pu
Fujian D
enshe
ngB
aost
eel
Nip
pon S
teel
AK
Ste
el
CAPEX budget of USD 4.0 billion for 2010Leading player in stainless and specialty steel in Europe and South America
Sources: CRU and Aperam estimates
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A small but fast growing market
Market leader in stainless and electrical steel in Brazil
Brazilian stainless steel demand estimates (000t) Brazilian electrical steel demand estimates (000t)
0
50
100
150
200
250
300
350
400
450
2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E
GO (Grain oriented) NGO (Non-Grain Oriented)
+90%
0
100
200
300
400
500
2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E
+75%
Sources: CRU and Aperam
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Close to customer through a highly
integrated distribution network
Sales subsidiaries and representative offices Steel Service CentersSales agencies
A key competitive advantage to maintaining market share and capturing growth opportunities
Sales, distribution and steel services centers networkStrong relationships with global and long term customers, including Whirlpool,
Bosch Siemens, Indesit and others…
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Strong R&D capabilities catering to
high-end application and specialities
High-end application and specialties products
Commodity and specialty price (USD/t) Sales 2009 breakdown by products
Stainless steel
80%
Electrical Steel
11%
Nickel Alloys
& Specialities
9%
High
grade GO
Base
price
Stainless 430
Regular
GO
Nickel
alloys
Base
price
Stainless 304 CR
500
0
High
grade
NGO
Regular
NGO
1,000
1,500
2,000
2,500
3,000
17,000
Base price
Surcharge
Sources: Aperam
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Strong culture of continuous improvement
Steelshop
Chatelet
1.0Mt
Genk
1.1Mt Clients
Isbergues
0.35Mt
Genk
0.74Mt
Gueugnon
0.40Mt
Cold rolling
Steel Service Centers
Transformation
Direct sales
Service
Chatelet
3.4Mt
Hot rolling
Timoteo
0.90Mt
Timoteo
0.88Mt
Timoteo Electrical 0.17Mt
Timoteo Stainless 0.38 Mt*
Electrical flat
Stainless flat
Steel Service Centers
Transformation
Direct sales
Imphy
0.06 Mt Imphy (wire)
ImphySSCs, Direct sales
Transformation
Ni alloys &
specialties
Chatelet (strip)
Stainless flat
* Includes 0.06Mt of finished HRAP products
Upstream has been significantly upgraded in Europe demonstrating rationalisation efforts
21
Equivalent Coke and Charcoal cost in 2009 (USD/t)*
280
194Brazil
(charcoal)
Imported
(coke)
31%
A unique capability to produce stainless
and specialties from Biomass
Biomass is a strong competitive cost advantage
– Strategic participation of 36% in Bioenergia which produces biomass (charcoal) from eucalyptus - planting, maintenance and cutting at 7 years old
– Consumed 194,000t of biomass (charcoal) in 2009 and target to
double consumption of biomass (charcoal) by shifting Blast
Furnace #2 from coke to biomass by 2012
– Positive impact on environment
*One tonne of charcoal is equivalent to approximately 0.90 tonne of cokeSource: Aperam
22
Strong financials through the cycle and
effective working capital management
Earnings profile is less volatile than competitors due to relative high proportion of long term contracts, ferritics, specialties and geographic diversity
EBIT per tonne (in USD)
*Average of Acerinox, ThyssnKrupp Stainless and Outokumpu** Average of Acerinox and OutkumpuSource: Aperam
Operating working capital as % of sales
-1500
-1000
-500
0
500
1000
1500
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
European competitors* ArcelorMittal Stainless
0%
10%
20%
30%
40%
50%
60%
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
European competitors** ArcelorMittal Stainless
23
Challenges and opportunities in
stainless steel
24
Global stainless steel demand has
more than recovered from 2009
Stainless steel market structure (mt)
Long-term growth expected to be around 6%
Global flat stainless steel demand* (mt)
-
5
10
15
20
25
30
1998 2008 2009 2014E
China
Emerging World
Developed World
25%
42%62%
40%
13% 32%
26%
34%
37%
29%
37%
31%
32%
Sources: CRU
0
5
10
15
20
25
30
2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E
Cold rolled Hot rolled
+6% per
year
+20%
25
European demand expected to come
back to pre-crisis levels in 2013/2014
Western Europe remains a major stainless steel consumer and technology leader, while Eastern Europe is expected to continue to expand
Eastern European HR & CR demand (mt)Demand for stainless steel flat products in Western Europe* (mt)
Source: CRU
0
1,000
2,000
3,000
4,000
5,000
6,000
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
E20
11E
2012
E20
13E20
14E201
5E0
100
200
300
400
500
600
700
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
E20
11E
2012
E20
13E
2014
E20
15E
26
South American demand is growing again at a solid rate
South America presents important
growth potential
Stainless steel consumption per capita pre-crisis (kg/year)
0
1
2
3
4
5
6
Other South
America
India Brazil China US
Sources: CRU & Aperam estimates
Stainless steel flat products demand in South America (kt)
0
100
200
300
400
500
600
700
2003
2004
2005
2006
2007
2008
2009
2010E
2011E
2012
E20
13E20
14E
2015
E
Rest of South America
Brazil
27
Despite increased demand, structural
overcapacity remains a challenge
Worldwide excess capacity* (mt)
Stainless steel prices expected to remain under pressure
Global utilization rates* (mt)
Source: CRU
50%
55%
60%
65%
70%
75%
80%
85%
90%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2007 2008 2009 2010 2011 2012 2013 2014 2015
China Rest of World
28
Raw material impact on pricing
Nickel pricing has a high influence on short term demand and pricing for
stainless steel
*Sources: Steel Business Briefing
Stainless steel CR 304 base price versus LME Nickel pricing* (US$/t)
Stainless steel CR 304 base price versus Ferro-chrome North Europe Import CFT*
0
50
100
150
200
250
Jan
04
Jul
04
Jan
05
Jul
05
Jan
06
Jul
06
Jan
07
Jul
07
Jan
08
Jul
08
Jan
09
Jul
09
Jan
10
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
FeCr Europe (USc/lb) - RHS Europe Base price CR 304 (USD/t) - RHS
0
10,000
20,000
30,000
40,000
50,000
60,000
Jan-
04
Jul-
04
Jan-
05
Jul-
05
Jan-
06
Jul-
06
Jan-
07
Jul-
07
Jan-
08
Jul-
08
Jan-
09
Jul-
09
Jan-
10
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Nickel - LME (USD/t) - LHS Europe Base price CR 304 (USD/t) - RHS
29
Challenges and opportunities in
electrical steel, alloys and specialties
30
Electrical steel market growth expected
to come mainly from China
By 2015, 90% of new electrical steel demand is expected to come from China,
while demand in the developed world will return to 2008 levels
Global GO demand (mt) Global NGO demand (mt)
-
0.5
1.0
1.5
2.0
2.5
3.0
2004
2005
2006
2007
2008
2009
2010
E
2011
E
2012
E
2013
E
2014
E
Europe, Middle East & Africa Americas Asia
+10%
per year
-
2
4
6
8
10
12
14
2004
2005
2006
2007
2008
2009
2010
E
2011
E
2012
E
2013
E
2014
E
Europe, Middle East & Africa Americas Asia
+12% per year
Source Aperam
31
Current overcapacity due to crisis
expected to reduce progressively
Despite rapid capacity expansion, supply demand equilibrium in China is
expected to remain tight
Global capacity and demand for GO (mt)
Source Aperam
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2008 2009 2015E
Demand
Capacity
+56%
+18%
0
2
4
6
8
10
12
14
16
2008 2009 2015E
Demand
Capacity
+40%
Utilization
Rates100% 64% 84%
Utilization
Rates93% 71% 101%
Global capacity and demand for NGO (mt)
32
CAPEX budget of USD 4.0 billion for 2010
Nickel alloys markets expected to recover
in line with core end-use sectors
Innovation will be key in capturing alloys market growth
Ni use in nickel alloys
Sources: Steel Market Research Gmbh, 2009
End-use sectors: CAGR 3-4%
50
75
100
125
150
175
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
CAGR +8.5%
+50% by 2015
60
70
80
90
100
110
120
130
140
150
2008 2009 2010 2011 2012 2013 2014 2015
Ba
se
: 2
00
8 =
10
0%
Power
generation
Oil & Gas
Process
industries
Elec.
Appliances
Aerospace
33
The Leadership Journey
34
An adverse trend
EBITDA expected to decline significantly in Q4 compared to Q3 due to price pressure and seasonality as anticipated
Aperam quarterly EBITDA (USDm)**Southern Europe - CR 304 2B 2mm coil base price (€/t)*
*Source SBB
144
178
66
1Q 2010 2Q 2010 3Q 2010
** Non audited
800
850
900
950
1000
1050
1100
1150
1200
1250
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11
35
The Leadership Journey to confront
challenges and seize opportunities
• Leadership Journey accelerating sustainable management gains
– Targeting USD 250m over the next two years
Approximately USD 40m of provisions to initiate Leadership Journey in 2010
Based upon :
– USD 100m of fixed costs improvement (including Isbergues traditional cold roll mill suspension, Gueugnon Hot AP line project, tubes assets optimization in South America, fixed cost base improvement plan in Brazil, SG&A reduction plan through organization simplification)
– USD 100m variable costs improvements (including charcoal program and connection to natural gas in Brazil, yields and quality plans)
– USD 50m of EBITDA upside on additional business from existing assets, growth in biomass (charcoal), etc…
36
Biomass (charcoal) production to be doubled and to represent 35% of Aperam energy needs by 2012
Forest expansion and biomass development
*Share of Bioenergia
Source: Aperam
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2009 2010 2011 2012 2013 2014
Biomass Stainless & Electrical Stainless, Electrical & Alloys
Biomass integration (% of Aperam production)Biomass (charcoal) production (000t)*
0
100
200
300
400
500
2009 2010E 2011E 2012E 2013E 2014E
37
Current downstream industrial network Future downstream industrial network
29 downstream tools
Total capacity of 1.49mt Total capacity of 1.39mt
Reconfiguring European downstream to achieve cost leadership
20 downstream tools
Rationalization initiated by temporarily suspending the Isbergues’ traditional cold rolling mill capacity of 100,000t
38
Investment in productivity
Benefits:
- Productivity increase
- Energy saving
- Elimination of one line
- Quality and yield
improvement
- Gain of approximately
40 USD/t
Existing picklingshot blastingx4FurnaceManual welding Existing edge trimming
We Keep the existing bay with exiting over-cranes
New shot
blastingx4New Scale
breakerNew furnaceNew
welder
New 2 Pickling
tanks + brushes
CurrentRD7
Future RD79
New Pay-off
SCHEME
This part of RD7 line is kept (minor modifications)This part of RD79 line is new
USD 62m for a new Hot Annealing and Pickling line in Gueugnon
39
Each additional tonne expected to contribute approximately USD 450 of EBITDA
Capturing post-crisis growth and recovery
Stainless steel demand in Western Europe (000’t)*
* Source: CRU
2,500
3,000
3,500
4,000
4,500
2008 2009 2010E 2011E 2012E
+22%+3%
+4%
Stainless steel demand in Brazil (000’t)*
200
250
300
350
400
2008 2009 2010E 2011E 2012E
+43%
+7%
+6%
40
Project to capture South American growth in electrical steel
Capacity expansion for 180,000t in high grade electrical steel under review
Hot
Rolling
Cold R
olling
Electrical
Cold
Rolling
Stain
less
Melt Shop
BF1BF2
CR5
HAP5
DC2BOX5
CL2
HAP
CR New ZMill
New HAP5 – 400 kty
DC2 BOX5 CL2 New GO final lines (Decarb, Box, Carlite)
LF New Ladle Furnace
LF
GO and NGO expansion project
41
Other opportunities and potential
Asian footprint and upstream integration would require M&A
…and upstream opportunities
• Develop further Biomass (charcoal) opportunities
• Strategy to actively look at upstream and mining opportunities (Cr, Ni) directly or in partnership
• Upstream integration aiming to secure strategic raw materials and create upstream/production synergies by leveraging ArcelorMittal technology in
ferro-chrome and nickel pig iron.
Developed world
South American
Brownfield Expansion
Asian opportunities
Asia…
• Targeted opportunities in Nickel Alloys & Specialties and Services & Solutions to be explored
42
Q&A