Interim Management Report 1
Interim Financial Report
Half Year ended June 30, 2014
2 Interim Management Report
2
Table of contents
Interim management report
Company overview _________________________________________________________________
Message from the Chairman and CEO___________________________________________________
Business overview__________________________________________________________________
Recent developments_______________________________________________________________
Corporate governance ______________________________________________________________
Cautionary statement regarding forward-looking statements_______________________________
Chief executive officer and chief financial officer’s responsibility statement____________________
3
4
5
30
33
35
36
Financial statements
Condensed consolidated financial statements for the six months ended June 30, 2014
Condensed consolidated statements of financial position__________________________________
Condensed consolidated statements of operations________________________________________
Condensed consolidated statements of other comprehensive income ________________________
Condensed consolidated statements of changes in equity__________________________________
Condensed consolidated statements of cash flows________________________________________
Notes to the condensed consolidated financial statements _________________________________
37
38
39
40
41
42
Report of the réviseur d’entreprises agréé - interim financial statements ____________________ 59
Recast explanatory information_______________________________________________________ 60
Updated disclosure of segment and geographic information included in note 27 to the consolidated
financial statements for the year ended December 31, 2013_____________________________________ 61
Report of the réviseur d’entreprises agréé on the updated disclosure of segment and geographic
information _______________________________________________________________________ 65
Interim Management Report 3
Company overview
Company overview
ArcelorMittal including its
subsidiaries (“ArcelorMittal” or
the “Company”) is the world’s
leading integrated steel
and mining company, with
annual achievable production
capacity of approximately 119
million tonnes of crude steel.
ArcelorMittal had sales of $40.5
billion, steel shipments of 42.4
million tonnes, crude steel
production of 46.1 million tonnes,
iron ore production from own
mines of 31.4 million tonnes
and coal production from own
mines of 3.6 million tonnes in
the six months ended June 30,
2014 as compared to sales of
$39.9 billion, steel shipments of
41.4 million tonnes, crude steel
production of 44.9 million tonnes,
iron ore production from own
mines of 28.1 million tonnes
and coal production from own
mines of 4.0 million tonnes in
the six months ended June 30,
2013. The Company had sales of
$79.4 billion, steel shipments of
82.6 million tonnes, crude steel
production of 91.2 million tonnes,
iron ore production from own
mines of 58.4 million tonnes and
coal production from own mines
of 8.0 million tonnes for the year
ended December 31, 2013. As
of June 30, 2014, ArcelorMittal
had approximately 230,000
employees.
in the Commonwealth of
Independent States (“CIS”) region
and has a growing presence in
Asia, including investments in
China and India. ArcelorMittal
produces a broad range of highquality steel finished and semifinished products. Specifically,
ArcelorMittal produces flat
steel products, including sheet
and plate, long steel products,
including bars, rods and
structural shapes. ArcelorMittal
also produces pipes and tubes for
various applications. ArcelorMittal
sells its steel products primarily
in local markets and through
its centralized marketing
organization to a diverse range of
customers in over 170 countries
including the automotive,
appliance, engineering,
construction and machinery
industries.
ArcelorMittal has a global
portfolio of 16 operating units
with mines in operation and
development and is among
the largest iron ore producers
in the world. The Company
currently has iron ore mining
activities in Algeria, Brazil, Bosnia,
Canada, Kazakhstan, Liberia,
Mexico, Ukraine and the United
States and has projects under
development or prospective
development in Canada and
India. The Company currently
has coal mining activities in
Kazakhstan, Russia and the
ArcelorMittal has steel-making
United States. The Company also
operations in 20 countries
produces various types of mining
on four continents, including
products including iron ore lump,
57 integrated, mini-mill and
integrated mini-mill steel-making fines, concentrate and sinter feed,
as well as coking coal, Pulverized
facilities. ArcelorMittal is the
Coal Injection (“PCI”) and thermal
largest steel producer in North
coal.
and South America, Europe and
Africa, a significant steel producer
Corporate and other information
ArcelorMittal is a public limited
liability company (société
anonyme) that was incorporated
for an unlimited period under
the laws of the Grand Duchy of
Luxembourg on June 8, 2001.
ArcelorMittal is registered with
the Luxembourg Register of
Commerce and Companies
(Registre du Commerce et
des Sociétés) under number B
82.454.
Individual investors who have any
questions or document requests
may contact: privateinvestors@
arcelormittal.com.
Institutional investors who have
any questions or document
requests may contact: investor.
[email protected].
The mailing address and
telephone number of
ArcelorMittal’s registered office
are: ArcelorMittal, 19, avenue de
la Liberté, L-2930 Luxembourg,
Grand Duchy of Luxembourg,
telephone: +352 4792-3746.
ArcelorMittal’s agent for U.S.
federal securities law purposes is
ArcelorMittal USA LLC, 1 South
Dearborn Street, 19th Floor,
Chicago, Illinois 60603, United
States of America, telephone +1
312-899-3985.
4 Interim Management Report
Message from the Chairman and CEO
Dear Shareholders,
The first six months of 2014 have
been a period of steady progress
as the global economic recovery
takes hold in our most important
markets. Growth in demand
for steel has been particularly
encouraging in Europe and in the
United States after several years
of contraction. Demand growth
in China has eased to a level that
can be sustained in the medium to
long-term.
now own, together with NSSMC,
the most modern steel finishing
facility in the world, which will
allow us to meet rising demand
for steel in the automotive,
energy and other important
NAFTA markets.
In June, Valin ArcelorMittal
Automotive Steel Co (“VAMA”),
a joint venture between the
Company and Hunan Iron &
Steel Co., inaugurated its newest
advanced automotive steel
EBITDA for the first half of 2014
plant in Loudi, Hunan Province,
was $3.5 billion, an increase
China close to Lianyuan, one of
of 7.7 percent over the first
the most important automotive
six months of 2013, reflecting
clusters in the country. The
an improvement in trading
plant will produce high-strength
conditions and efficiency gains.
automotive steel which has
been historically imported
During the first half, the
for the Chinese market, the
Company entered into a 50/50
world’s largest and fastest
joint venture partnership with
growing market for cars. VAMA’s
Nippon Steel & Sumitomo
Metal Corporation (“NSSMC”) to customers will be global brands
acquire ThyssenKrupp Steel USA such as Volkswagen, GM, Ford
and Toyota as well as domestic
in Calvert, Alabama, for $1.55
billion. The acquisition means we manufacturers.
Looking ahead, we are confident
that we are well placed to benefit
from the continued economic
recovery in our core markets
while continuing to maintain a
tight grip on costs and further
operational improvements.
Lakshmi N. Mittal
Chairman and CEO
Interim Management Report 5
Business overview
The following discussion and
analysis should be read in
conjunction with ArcelorMittal’s
consolidated financial statements
and related notes appearing
in its Annual Report for the
year ended December 31, 2013
and the unaudited condensed
consolidated financial statements
for the six months ended June 30,
2014 included in this report.
Key factors affecting results of
operations
The steel industry, and the iron
ore and coal mining industries,
which provide its principal raw
materials, have historically
been highly cyclical. They are
significantly affected by general
economic conditions, as well as
worldwide production capacity
and fluctuations in international
steel trade and tariffs. In
particular, this is due to the
cyclical nature of the automotive,
construction, machinery and
equipment and transportation
industries that are the principal
customers of steel. After a period
of continuous growth between
2004 and 2008, the sharp fall in
demand resulting from the global
economic crisis demonstrated
the steel market’s vulnerability to
volatility and sharp corrections.
The last quarter of 2008 and
the first half of 2009 were
characterized by a deep slump
in demand, as consumers used
up existing inventories rather
than buying new stock. The iron
ore and steel market began a
gradual recovery in the second
half of 2009 that continued in
most countries through 2010
and in the first three quarters of
2011, in line with global economic
activity. The subsequent onset
of the Eurozone crisis and
significant destocking caused
demand to weaken during the
fourth quarter of 2011. Similarly,
2012 was again characterized
by early optimism and restocking
but contraction in Europe and
a slowdown in China caused
iron ore prices to fall as did then
both steel prices and margins.
Global demand excluding China
(ex-China) was subsequently
impacted by more destocking,
and, for the first time since 2009,
global ex-China steel demand
experienced a decline year-onyear during the fourth quarter
of 2012. In Europe, after a
significant decline in steel demand
during 2012, there was continued
weakness in demand, particularly
in the first half of 2013, which led
to a further, albeit mild, decrease
in demand in 2013 to levels
more than 30% below the 2007
peak. Steel demand in North
America also declined slightly in
2013, compared to the robust
level of demand experienced
during 2012, reflecting a
weaker first half of the year
and a strong second half due
to stronger underlying demand
and a turning of the inventory
cycle. In comparison, demand in
China has experienced different
dynamics, with a slowdown in
demand taking place in the first
half of 2012 in response to policy
tightening directed principally
toward the real estate market.
This was followed by a significant
increase in demand beginning
in the fourth quarter of 2012
that continued through 2013
as a result of an acceleration
in infrastructure approvals and
an increase in newly started
construction. Despite some
renewed weakness in demand
during the fourth quarter of
2013, China experienced a 6.9%
increase in steel demand in 2013
and was largely responsible for
the overall 3.7% increase in global
steel demand in 2013. During the
first half of 2014, Chinese steel
demand growth slowed to only
2.6% year-on-year, impacted
by renewed weakness in the real
estate market. In contrast, steel
demand in the developed markets
of North America and Europe,
which account for a majority
of ArcelorMittal deliveries,
rebounded during the first half of
2014. Overall global demand exChina is estimated to have grown
over 3% year-on-year through
the first half of 2014, while it
was up only 1.1% year-on-year
in 2013.
ArcelorMittal’s sales are
predominantly derived from
the sale of flat steel products,
long steel products, and tubular
products as well as of iron ore
and coal. Prices of steel products,
iron ore and coal, in general,
are sensitive to changes in
worldwide and regional demand,
which, in turn, are affected by
worldwide and country-specific
economic conditions and available
production capacity.
Unlike many commodities, steel
is not completely fungible due
to wide differences in shape,
chemical composition, quality,
specifications and application,
all of which affect sales prices.
Accordingly, there is still limited
exchange trading of steel or
uniform pricing, whereas there
is increasing trading of steel raw
materials, particularly iron ore.
Commodity spot prices may vary,
and therefore sales prices from
exports fluctuate as a function of
the worldwide balance of supply
and demand at the time sales are
made. ArcelorMittal’s sales are
made on the basis of shorterterm purchase orders as well
as some longer-term contracts
to some industrial customers,
particularly in the automotive
industry. Sales of iron ore to
external parties continued to
increase in 2013, rising to 11.6
million tonnes for the year. Sales
of iron ore to external parties
amounted to 6.7 million tonnes in
the first half of 2014. Steel price
surcharges are often implemented
on steel sold pursuant to longterm contracts in order to recover
increases in input costs. However,
spot market steel, iron ore and
coal prices and short-term
contracts are more driven by
market conditions.
the extent to which changes in
raw material prices are passed
through to steel selling prices.
Complicating factors include the
extent of the time lag between
(a) the raw material price change
and the steel selling price
change and (b) the date of the
raw material purchase and the
actual sale of the steel product
in which the raw material was
used (average cost basis). In
recent periods, steel selling prices
have tended to react quickly to
changes in raw material prices,
due in part to the tendency of
distributors to increase purchases
of steel products early in a rising
cycle of raw material prices and
to hold back from purchasing
as raw material prices decline.
With respect to (b), as average
cost basis is used to determine
the cost of the raw materials
incorporated, inventories must
first be worked through before
a decrease in raw material
prices translates into decreased
operating costs. In some of
ArcelorMittal’s segments, in
particular Europe and NAFTA,
there are several months
between raw material purchases
and sales of steel products
incorporating those materials.
Although this lag has been
reduced recently by changes to
the timing of pricing adjustments
in iron ore contracts, it cannot
be eliminated and exposes these
segments’ margins to changes in
steel selling prices in the interim
(known as a “price-cost squeeze”).
In addition, decreases in steel
prices may outstrip decreases in
raw material costs in absolute
terms, as occurred for example
in the fourth quarter of 2008, the
first half of 2009, the third quarter
of 2012 and the second quarter
of 2013.
One of the principal factors
affecting the Company’s
operating profitability is the
relationship between raw
material prices and steel selling
prices. Profitability depends
in part on the extent to which
steel selling prices exceed raw
material prices, and, in particular,
Given this overall dynamic, the
Company’s operating profitability
has been particularly sensitive
to fluctuations in raw material
prices, which have become more
volatile since the iron ore industry
moved away from annual
benchmark pricing to quarterly
pricing in 2010. In the second half
6 Interim Management Report
Business overview
continued
of 2009 and the first half of 2010,
steel selling prices followed raw
material prices higher, resulting
in higher operating income as
the Company benefitted from
higher prices while still working
through relatively lower-cost raw
materials inventories acquired
in 2009. This was followed by a
price-cost squeeze in the second
half of 2010, as steel prices
retreated but the Company
continued to work through
higher-priced raw material
stocks acquired during the first
half of the year. Iron ore prices
have experienced significant
volatility over the past few years,
for example falling over 30% in
October 2011 and similarly, after
averaging over $140 per tonne
(/t) cost inclusive of freight (CFR)
China during the first half of
2012, prices then fell below $90/t
by early September 2012. Iron
ore prices were relatively stable
in 2013, averaging $135/t but
have since fallen back to lows of
$90-95/t in June 2014, averaging
$120/t and $103/t during the
first and second quarters of
2014, respectively. If iron ore
and metallurgical coal markets
continue to be volatile with steel
prices following suit, overhangs
of previously-acquired raw
material inventories will continue
to produce more volatile margins
and operating results quarter-toquarter. With respect to iron ore
and coal supply, ArcelorMittal’s
growth strategy in the mining
business is an important natural
hedge against raw material
price volatility. Volatility on steel
margins aside, the results of the
Company’s mining segment are
also directly impacted by iron
ore prices, which were weaker in
the first half of 2014, averaging
$111/t. As the mining segment’s
production and external sales
grow, the Company’s exposure
to the impact of iron ore price
fluctuations also increases. This
means, among other things,
that any significant slowdown
of Chinese steel production
could have a significant negative
impact on iron ore selling prices
over the next few years.
Economic environment1
Global GDP growth picked up
to 3.0% year-on-year in the final
quarter of 2013 and has remained
around that pace over in the first
half of 2014, driven by advanced
economies, despite some
setbacks and relative weakness in
many emerging markets. Global
GDP growth had eased slightly to
2.5% in 2013, from 2.6% in 2012
and 3.1% in 2011.
GDP growth in the United States
was 1.9% in 2013 and 2.8%
in 2012, but bad weather, an
inventory correction, and a
widening of the trade deficit,
contributed to a contraction in
real GDP of 2.9% (annual rate)
in the first quarter of 2014.
Nonetheless, sector-specific
fundamentals remain sound
and most indicators suggest
that economic activity has
bounced back strongly in the
second quarter, with estimates
suggesting growth of 3.5 to
4% (annual rate). The clearest
indication of the underlying
strength of the economy is that
during the first half of 2014
an average over 230,000 net
new jobs were created per
month. In the five months to
May, construction spending
increased by 8.1% year-on-year
as underlying demand, rising
incomes, improving confidence
supported residential construction
in particular. Having deleveraged
significantly households have
seen good access to credit, which
has supported light vehicle sales
averaging over 16 million units
(annual rate) in the first half of
2014, the strongest for seven
years even after the weak start
to the year. US manufacturing
output finally regained its precrisis level, increasing by 3% yearon-year in the first half of 2014.
With the rebound in GDP growth
and particularly the strengthening
in the job market, the Federal
Reserve has continued to taper
its monthly asset purchases
(part of its quantitative easing
program), reducing its monthly
asset purchases by a further $10
billion to $35 billion per month,
down from $85 billion at the end
of 2013.
Driven by a strong recovery in
the UK, European Union (EU)
GDP has picked up over the
first half of 2014, growing by
around 1.4% year-on-year, after
stagnating in 2013 (+0.2%)
and falling by 0.3% in 2012.
EU Passenger car registrations
increased to an average of 12.4
million units (annual rate) in the
first half of 2014, up from 11.9
million in 2013. The Eurozone
economy is gradually recovering
from recession as the acute risk
of a crisis has eased; indicated by
vulnerable countries’ bond yields
reaching record lows. GDP growth
in the second quarter is likely to
have edged up, to around 0.3%
quarter-on-quarter, from the
0.2% expansion achieved in the
first quarter. Remaining above 50
the manufacturing Purchasing
Managers’ Index (PMI) still
indicates expansion, but eased to
an average of 52.4 in the second
quarter, down from the firstquarter average of 53.4. Germany
and Spain built some positive
momentum in the second quarter,
whereas the pace of improvement
ebbed slightly in France and
Italy where less has been done
to improve competitiveness.
Relatively healthy consumer
confidence (still at its second
highest level since October 2007
in June) and very low consumer
price inflation will underpin
consumer spending. Nevertheless,
credit conditions are still tight,
unemployment remains elevated
but is falling gradually, and private
and public debt levels are still
high. At the Eurozone level fiscal
tightening amounted to 1.3%
of GDP in 2013, and though
the pace of consolidation is
easing, several “core” countries
(Belgium, France and Netherlands)
now need to implement more
ambitious cuts to meet European
Commission deficit targets.
The Eurozone faces the risk of
deflation, with CPI inflation falling
to 0.5% year-on-year in June. To
address this risk, the European
Central Bank (ECB) announced a
GDP and industrial production data and estimates sourced from IHS Global Insight July 15, 2014
1
series of measures in June, cutting
interest rates, boosting liquidity
and encouraging bank lending,
but banks may hesitate to expand
their lending to the private sector
until the ECB’s bank stress tests
are completed later this year.
Much like 2013, GDP growth at
the beginning of this year has
been weak in emerging markets.
First-quarter GDP growth in China
came in at 7.4% year-on-year, a
six-quarter low, but GDP growth
has since picked up to 7.5% in the
second quarter. The construction
sector in China weakened in the
first half of 2014, with residential
construction starts falling by
almost 20% year-on-year in
the first half of the year, while
property sales declined by 7.5%
year-on-year in the second
quarter. In response, some local
governments have begun to relax
restrictions on housing purchases
and the central government has
introduced stimulus measures,
including faster deployment of
public infrastructure projects
and increased public housing
construction. The central bank
also lowered bank reserve
requirements. Recent data show
relatively steady growth rates for
industrial production and fixed
investment, while retail sales
and export growth have picked
up, suggesting that Chinese
GDP growth stabilized in the
second quarter. The Russian
economy was looking weak, even
before the invasion of Crimea
and the crisis in Ukraine, which
led to significant capital flight
and has further discouraged
investment. Several factors
have converged to make the
beginning of 2014 difficult for
Brazilian industry: interest rate
hikes, the end of tax exemptions
on purchases of certain goods,
and rising production costs. In
contrast, economic prospects
have improved in India as the
incoming government has
won a parliamentary majority
in the lower house, which
breaks the long run of coalition
governments, and is expected
Interim Management Report 7
Business overview
continued
strength of the real estate and
construction sectors and by rising
steel exports, up 10.2% year-onyear. Chinese output as a share of
In line with economic growth,
OECD industrial production picked global production rose to a record
up during 2013 and has continued 49.4% in 2013, up from 47.1% in
2012.
to grow in the first half of 2014,
increasing by an estimated 3.0%
year-on-year. Growth continued to Global production increased by
shift away from emerging markets 3.1% to 1.61 billion tonnes during
2013 led by growth in Chinese
towards the developed world in
production, as output ex-China
the first half of 2014. Industrial
remained unchanged at 828 million
Production growth in non-OECD
tonnes, about 29 million tonnes
countries is estimated at 4.0%
below the pre-crisis peak of 857
year-on-year in the first half of
million tonnes recorded in 2007.
2014, having eased back from
Indeed the only regions to have
4.6% in the second half of 2013.
grown in comparison to 2007 are
Despite weaker growth in China the Middle East (60.2%) and Asia
ex-China (12.8%), whereas output
and declining iron ore and coal
is down 10.2% in NAFTA, 21.1%
prices during the first half of
in EU27, 4.6% in South America,
2014 global ex-China apparent
12.3% in CIS and 14.1% in Africa.
steel consumption (ASC) is
estimated to have grown by 3.2%
During the first half 2014,
over the same period in 2013.
annualized global steel
This is much stronger than the
production increased by 2.5% to
1.1% growth in demand in the
1.65 billion tonnes mainly driven
world ex-China during 2013
by Chinese production, which
as apparent steel consumption
increased by 2.9% year-on-year.
is estimated to have grown by
Global production outside of
over 5% year-on-year in both
China has also improved during
Europe and the United States.
the first half of 2014 mainly due
Chinese ASC has in comparison
to a rebound in Europe and
decelerated during the first half
NAFTA. EU annualized output rose
of 2014 and is up only 2.4%
year-on-year, following growth of by 3.7% to 176 million tonnes
reflecting strengthening industrial
almost 7% last year.
activity. In NAFTA, output
increased by 1.7% during the
Steel production2
first half of 2014 to an annualized
World crude steel production,
rate of 119 million tonnes despite
which had bottomed in 2009 at
reduced utilization in the USA at
1.2 billion tonnes, recovered to
just over 1.4 billion tonnes for the the start of the year due to severe
weather conditions. Production in
year 2010 (+15.8% year-on-year
Asia ex-China has also remained
) and rose in excess of 1.5 billion
strong, particularly in South
tonnes in 2011 (+7.3% year-onKorea, where annualized output
year). There was a further rise to
increased by 9.1% year-on-year to
1.56 billion tonnes in 2012 and
1.61 billion tonnes in 2013, driven 73 million tonnes in the first half of
2014. Over the same period, India
by Chinese growth.
recorded a 1.3% increase in crude
Steel output in China set another steel production to 83 million
tones annualized, whereas output
record in 2013, reaching 784
in Japan also increased by 0.9%
million tonnes (+7.3% higher
than 2012), although output was to 111 million tonnes annualized.
slightly weaker during the second Production faltered in South
America, falling by 2.6% year-onhalf of 2013 due to softening
year to annualized output of 45
demand conditions. In the first
million tonnes; and in CIS, where
half of 2013, Chinese output
growth was also supported by the annualized output decreased by
to allow for significant economic
reforms.
1.0% year-on-year 109 million
tonnes.
$730-750/t and reached a high of
$770/t in May.
Steel prices3
Steel prices in Northern Europe
remained steady during the first
quarter of 2014, relative to the
fourth quarter of 2013, with spot
hot rolled coil (“HRC”) prices
around €445-455 ($610-620) /t. In
Southern Europe, prices were also
stable quarter on quarter with
spot HRC prices around €425-440
($585-610) /t. Expectations were
for prices to increase during the
quarter and some deals at €460
($625) in Northern Europe were
achieved in late February and
early March 2014, but the price
trend reversed by the end of the
first quarter as lower raw material
costs were incorporated into
prices by foreign and domestic
competitors.
Expectations for better seasonal
demand in China, failed to
materialize during the first half of
2014 and prices remained under
heavy downward pressure due
to tight credit and falling raw
material costs. Spot HRC prices
averaged $479/t during the first
quarter and dropped to $463/t in
the second quarter.
Long products demand for
construction in Europe was
better in the first half of 2014,
than same period last year, but
downward pressure on pricing
has continued due to falling scrap
prices. Overall, rebar and medium
section prices have declined since
the beginning of 2014. From a
peak of €480-500 ($660-680)/t
in January, rebar prices fell to
€450-470 ($625-645)/t by the end
of the first quarter and €440Economic activity continued
460 ($600-620)/t by the end of
to recover in Europe during
the second quarter. Similarly,
the second quarter of 2014
prices of medium section peaked
and overall steel demand saw
in January 2014 at €550-570
a slight increase, but did not
($755-775)/t, dropped to €515result in price increases. Spot
HRC prices stabilized at €420-430 535 ($720-740)/t by end of first
($575-595)/t in Northern Europe quarter and €505-525 ($690710) /t by the end of the second
and €410-420 ($565-575)/t in
Southern Europe, despite falling quarter.
raw material costs as import
Prices of scrap imported into
prices remained relatively
Turkey, dropped substantially
unattractive.
during the first months of 2014,
In the United States, steel prices from $400/t CFR in January to
$350/t CFR by end of February,
during the first quarter of 2014
showed a decreasing trend from and then stabilized at around
$370-380/t throughout the
$740-760 per tonne in January
to $700/t in March following the second quarter. Export prices
significant downward correction for Turkish rebar followed the
in Scrap #1 Busheling from $440 trend in scrap prices: after ending
2013 at $580-590/t rebar prices
per gross tonne(/GT) in January
to $388/GT in March and despite decreased during the first quarter
to $560-570, before remaining
steady level of demand.
stable during the second quarter.
Price increases announced by
domestic producers in the United Industrial long product prices
States at beginning of April were remained stable throughout the
first half of 2014, around the same
achieved, supported by steady
level as during the fourth quarter
demand, increases in scrap cost
of 2013. However, without robust
and some supply disruptions.
demand and given abundant
HRC spot prices increased by
supply, prices came under
$40 in April relative to March, to
Global production data is for all countries for which production data is collected by the World steel. Except data for 2014, which only includes 66 countries for which monthly
production data is available, prior years include other countries for which only annual data is collected.
Source: Steel Business Briefing (SBB)
2
3
8 Interim Management Report
Business overview
continued
renewed pressure by end of the
second quarter of 2014.
whereas growth in developed
regions is expected to slow.
In China, steel production has
Current and anticipated trends in already slowed from the strong
steel production and prices
growth observed during 2013,
Global steel production grew
as domestic demand growth
year-on-year during the first half has weakened, but supported
of 2014, driven by growth in
by the strength of steel exports.
ArcelorMittal’s major markets of
The combination of continued
EU28 and NAFTA as the economic property market weakness, and
recovery persisted and also in
increasing trade protection
comparison to the year-on-year
slowing export growth, is likely
declines during the first half of
to keep steel production growth
2013. In Europe, with the gradual muted in the second half of 2014.
recovery in the steel consuming
sectors expected to continue,
Despite the weakness of steel
steel production is likely to show prices, the gradual pick-up in
year-on-year growth during the
world ex-China steel demand
second half of 2014. ArcelorMittal growth during the first half of
forecasts steel demand growth
2014 has led to a mild increase
to be between 3 and 4% in
in steel margins as steel prices
2014, helped by the strength
have not declined as much as
of deliveries in the first half,
raw material prices. Ultimately
whereas the rate of production
steel prices will depend on the
growth is expected to slow in
strength of underlying raw
the second half, as the impetus
material prices, which are a
from restocking wanes. In 2013,
function of both the demand
United States steel production
and supply of each commodity.
declined for the first time since
Any significant slowdown in steel
2009 as demand declined,
demand due to deterioration
amplified by destocking. Demand in the debt sustainability of
has since rebounded strongly
Eurozone nations, a realization
during the first half of 2014
of the many geo-political risks
as stockists began to re-stock
or a hard landing in China would
from low inventory levels at the
dampen raw material prices,
end of 2013. However, crude
eventually impacting steel prices
steel production in the first half
globally.
of 2014 was up only around
1% year-on- year as finished
Raw materials
imports and production rolled
The primary inputs for a
from semi finished imports,
steelmaker are iron ore, solid
rose more strongly. Robust
fuels, metallics (e.g., scrap), alloys,
economic growth is expected
electricity, natural gas and base
to support continued strong
metals. ArcelorMittal is exposed
growth in steel demand during
to price volatility in each of these
the second half of 2014, which
raw materials with respect to its
in turn is likely to lead to further purchases in the spot market
growth in steel production as
and under its long-term supply
import growth slows. Despite the contracts. In the longer term,
weakness seen in many emerging demand for raw materials is
markets, especially in CIS and
expected to continue to correlate
South America, World ex-China
closely with the steel market,
steel production increased,
with prices fluctuating according
supported by Europe, NAFTA and to supply and demand dynamics.
Developed Asia. Steel production Since most of the minerals used
is expected to continue growing in the steel-making process are
in the second half of 2014 due
finite resources, they may also
to a gradual improvement in the rise in response to any perceived
output in developing markets,
scarcity of remaining accessible
supplies, combined with the
evolution of the pipeline of new
exploration projects to replace
depleted resources.
As with other commodities, the
spot market prices for most raw
materials used in the production
of steel saw their recent lows
during the global financial crisis
of 2008/2009, but have since
recovered with a greater degree
of volatility. The main driver for
the rise in input prices has been
robust demand from China, the
world’s largest steel producing
country. For example, in each of
years between 2011 and 2014,
iron ore reached high levels
well above $100 per tonne (e.g.
$193 on February 2011, $140 in
December 2012, $160 in February
2013 and $135 in January 2014).
Until the 2008-2009 market
downturn, ArcelorMittal had
largely been able to reflect raw
material price increases in its steel
selling prices. However, from
2009 onwards, ArcelorMittal has
not been able to fully pass raw
materials cost increases onto
customers as its steel markets
are structurally oversupplied and
fragmented. This has resulted in a
partial decoupling of raw material
costs (mainly driven by Asian
market demand) from steel selling
prices achieved in the European
market, and consequently
increased risk of margin squeeze.
Until the 2010 changes in
raw materials pricing systems
described below under “—Iron
Ore”, benchmark prices for iron
ore and coal in long-term supply
contracts were set annually,
and some of these contracts
contained volume commitments.
In the first half of 2010, the
traditional annual benchmark
pricing mechanism was
abandoned, with the big three iron
ore suppliers (Vale, Rio Tinto and
BHP Billiton) adopting a quarterly
index-based pricing model. The
new model operates on the basis
of the average spot price for iron
ore supplied to China, quoted
in a regularly published iron ore
index. The new system has since
generally been adopted by other
suppliers although some iron
ore suppliers continue to offer
an annual prices for their longterm contracts. The price trend
as well as pricing mechanism for
coking coal has followed a similar
trend, with the annual benchmark
pricing system being replaced by
a quarterly pricing system as from
the second quarter of 2010 and
with a monthly pricing system
introduced by BHP Billiton for coal
from Australia in 2011. Following
this transition to shorter-term
pricing mechanisms that are either
based on or influenced by spot
prices for iron ore and coking coal
imports to China, price dynamics
generally have experienced
shorter cycles and greater
volatility. Pricing cycles were
further shortened in 2012 and
2013 as high volatility of prices
continued. Since 2012, quarterly
and monthly pricing systems have
been the main type of contract
pricing mechanism, but spot
purchases also appear to have
gained a greater share of pricing
mechanisms as steelmakers have
developed strategies to benefit
from increasing spot market
liquidity and volatility. In 2013
and the first half of 2014, the
trend toward shorter-term pricing
cycles continued, with spot
purchases further increasing their
share of pricing mechanisms.
Iron ore
In the first quarter of 2013, iron
ore prices increased dramatically
as a result of restocking in China
before the New Year holiday and
a seasonally weaker supply due
to weather-related disruptions
in production in Brazil and
Australia. In the second quarter
of 2013, iron ore prices declined
significantly as a result of stock
cuts stemming from uncertainties
about the Chinese market
outlook, reaching a low of $110
per tonne in May and averaging
$126 per tonne for the quarter.
Interim Management Report 9
Business overview
continued
In the third quarter of 2013,
iron ore spot prices recovered,
averaging $132 per tonne for
the quarter, as a result of strong
crude steel production rates in
China and significant restocking
at Chinese steel mills through
the end of August. Despite a
strong seaborne supply coming
on-stream from the third quarter
of 2013 onwards, the spot price
remained above $130 per tonne.
In the fourth quarter of 2013, the
iron ore market stabilized within
a consolidated range of $130
to $140 per tonne with no clear
price direction as the increasing
supply availability was matched
with a higher demand on the
winter season restock.
Short term rallies in the seaborne
market are mainly driven by
Chinese mills’ stocking and
destocking activities which are
due to a high uncertainty on the
Chinese steel market outlook.
In the first half of 2014 iron
ore spot prices declined by
31% from $134.5 per tonne on
January 1, 2014 to $93.25 per
tonne on June 30, 2014. This
downward price trend was due to
increasing supply pressures in the
seaborne market and financial
weakness in the Chinese steel
sector. Credit market tightness
combined with stretched cash
flow at Chinese mills resulted
in a strong destocking trend at
Chinese mills from the beginning
of the year through the end of
the second quarter. Rising iron
ore import inventory at Chinese
ports was reflective of stronger
seaborne supply while real iron
ore demand in the Chinese offshore market remained relatively
stable. As a result of significant
variations of iron ore inventory
at Chinese mills the iron ore spot
price volatility remained very
significant.
Coking coal and coke
Pricing for coking coal has
been affected by changes to
the seaborne pricing system,
price of a premium hard coking
coal from Australia declined
from $132-133 per tonne FOB
Australia at the beginning of
January 2014 to $110-111 per
tonne by the end of June 2014.
The quarterly benchmark contract
settlement price followed this
downtrend and settled at $120
per tonne for the second quarter,
down $23 per tonne from the
first quarter settlement price of
Due to a continued strong supply $143 per tonne FOB Australia.
and weak demand outlook, the
spot coking coal market remained Low seaborne prices in 2013 and
the first half of 2014 put pressure
weak in 2013. Better-thanaverage supply conditions during on the profits of seaborne
suppliers and affected the cash
the Australian wet season in
flows of big miners, resulting in
early 2013 contributed to a
the closure of certain high-cost
decrease in hard coking coal
mines in Australia and the United
prices in the first half of 2013,
with premium coking coal prices States.
reaching a low of $130 per tonne
ArcelorMittal continues to
(FOB Australia) by the end of
leverage its extensive supply
the second quarter. Spurred by
Chinese demand, hard coking coal chain, diversified supply portfolio
and contracts flexibility to capture
prices began to increase at the
beginning of the third quarter of a maximum value from the
2013, peaking at $152 per tonne market price volatility and rapidly
changing pricing environment.
in mid-September. However,
despite high imports of coking
coal to China, the seaborne coking Scrap
coal market remained weak until As in 2013, scrap prices increased
by €4 per tonne in January (€285
the end of 2013, largely as a
result of relatively weak ex-China per tonne for demolition scrap)
seaborne demand, an improved and then came down by €16 per
tonne in February 2014. Another
supply base from Australia and
price decline occurred in March
strong domestic production in
China. The premium coking coal 2014 (down €15 per tonne),
spot price was $131 per tonne on which was partially recovered in
April 2013 (up €12 per tonne).
December 31, 2013.
The market then remained stable
in May (price roll-over at €266 per
In 2013, the quarterly contract
tonne) and in June (real Eurofer
price for hard coking coal
progressed from $165 per tonne Index at €265 per tonne). Prices
have therefore stayed relatively
in the first quarter to $172 per
tonne in the second quarter, $145 stable since the beginning of the
second quarter of 2014.
per tonne in the third quarter,
and $152 per tonne in the fourth
The Eurofer Index for demolition
quarter.
scrap was at an average of €267
in the first half of 2014 (i.e., down
Due to the combined effects
€12 as compared to full year
of strong Australian coking coal
2013). In NAFTA, prices followed
production performance and
weaker seaborne demand in key a different trend and, unlike in
2013, have been quite variable
importing regions, the coking
and higher than those in Europe.
coal spot market has been on
The average price for HMS 1&2
a downward trend since the
CFR Turkey was $373 per tonne
beginning of 2014. The spot
with the annual benchmark
pricing system being replaced
by a quarterly pricing system
as from the second quarter of
2010 and with a monthly pricing
system introduced by BHP
Billiton for coal from Australia
in 2011. Pricing cycles have
further shortened from 2012 and
beyond, as the spot market has
developed rapidly.
for the first half of 2014, down
$7 per tonne compared to the
full year 2013. In NAFTA, the
decrease between the peak price
in January to the lowest price in
June was $56 per tonne, while
in Europe the gap between the
peak price in January and the
lowest price in March was €31 per
tonne.
Turkey is still the number one
importer of scrap with 19.7
million tonnes of scrap imported
in 2013, even though this
represented a 12% decrease
from values in 2012. Imports
represented 65% of total demand
in Turkey in the first five months
of 2014 (i.e., 7% higher than in
the same period in 2013): 7.9
million tonnes in the period from
January 2014 to May 2014,
compared to 7.4 million tonnes
during January 2013 to May
2013.
China is the number one scrap
consumer in the world but ranks
only 7th or 8th with respect to
imports of scraps, with 4.5 million
tonnes imported in 2013. In
2014, imports into China have
continued to decline, which has
been the trend since 2011, as the
market adapts to the price gap
between scrap and iron ore, with
imports amounting to 1.0 million
tonnes in the period from January
to May 2014 (representing a
decrease of 46% compared to the
same period in 2013).
Alloys (manganese) and base
metals
The underlying price driver for
manganese alloys is the price of
manganese ore, which decreased
by 17.1% from the level of
$5.25 per dry metric tonne unit
(“dmtu”) (for 44% lump ore) on
Cost, Insurance and Freight (“CIF”)
China in January 2014 to $4.35
per dmtu in June 2014, due to
oversupply from South Africa
coupled with depreciation of the
local currency against US dollar.
10 Interim Management Report
Business overview
continued
During the first half of 2014,
prices for manganese alloys
did not follow the trend of
manganese ore due to disruption
in supply. Prices of high carbon
ferro manganese increased by
1.57% (from $1,027 to $1,043
per ton), and prices of silicon
manganese also increased by
3.53% (from $1,181 to $1,223 per
tonne). Prices for medium carbon
ferro manganese increased by
5.98% (from $1,571 to $1,665 per
tonne).
ignited a strong debate on the
future of coal power plants. In
Europe, the market continues
to be affected by poor demand
and highly erratic renewable
production, which resulted
in keeping spot prices below
€40 per MWh. The need for
investment in replacement and
additional power generating
capacity by providers and in
improved electricity grid stability
due to volatility from renewable
suppliers remains clear and
continues to fuel “capacity
Base metals used by ArcelorMittal market” debates, but is still not
apparent in light of current
are zinc and tin for coating, and
economic conditions.
aluminum for deoxidization of
liquid steel. ArcelorMittal partially
hedges its exposure to its base
Natural gas
metal inputs in accordance with Natural gas is priced regionally.
its risk management policies.
European prices were historically
linked with petroleum prices
but continuous spot market
The average price of zinc in the
development is now prevailing
first half of 2014 was $2,051 per
tonne, representing an increase of in almost all countries except
7.4% as compared to the average in poorly integrated markets
(e.g., Spain, Portugal) or not yet
price for full year 2013 ($1,909
per tonne). The January average fully open markets (e.g., Poland
). North American natural gas
price was $2,038 per tonne
while the June average price was prices trade independently of oil
prices and are set by spot and
$2,127 per tonne, with a first
future contracts, traded on the
half low at $1,942 per tonne
NYMEX exchange or over-theon March 24, 2014. Stocks
counter. Elsewhere, prices are set
registered at the London Metal
on an oil derivative or bilateral
Exchange (“LME”) warehouses
basis, depending on local market
stood at 668,475 tonnes as of
conditions. International oil prices
June 30, 2014, representing a
are dominated by global supply
decrease of 265,000 (28.4%)
and demand conditions and are
tonnes compared to December
31, 2013 (when stocks registered also influenced by geopolitical
factors, which are currently
stood at 933,475 tonnes) due
to a change in LME warehousing focused on the Middle East, in
particular Bassorah (Iraq).
rules in response to a surfeit in
stocks in 2012 and increased
demand of zinc.
So far, in 2014, the Liquefied
Natural Gas (“LNG”) market
has continued to grow in Asia,
Energy
although at a slower pace than
Electricity
in 2013. The market remains
In most of the countries where
ArcelorMittal operates, electricity depressed in Europe, and after
having reached record levels
prices have moved in line
for LNG reloading to Asia, the
with other commodities. In
arbitrage window remained
North America, prices in 2014
opened most of the first half of
were impacted by historically
2014.
cold winter conditions in the
first quarter (see “--Natural
Gas” below) and Clean Air Act
New LNG production facilities
potential extension to CO2
have started in the Pacific basin
Sources: Baltic Daily Index, Clarksons Shipping Intelligence Network, RS Platou. ACM
4
during the first half of 2014,
which helps to rebalance the
market, pressuring spot LNG
prices down to the $12-13 per
MMBtu level in early July. New
major start-ups are scheduled
for the end of 2014 or early 2015
(gas already committed), which,
together with potential nuclear
power plant restarts, should help
keeping prices reasonable.
improved vessel turnaround and
increase in efficiency in ports.
Therefore, freight rates were at
lower levels than were expected
at the beginning of the year
because of increased demand
from trade growth and a slower
delivery of new ships.
The Baltic Dry Index (“BDI”)
averaged 1,179 points in the first
half of 2014, representing a 40%
In the United States, despite
increase compared to the first
the coldest winter in decades,
half of 2013, driven most notably
unconventional gas production
by the Capesize sector which
proved more than robust, and
averaged at $14,135/day in the
storage level deficit end of
first half of 2014 (compared to
October should be limited to 400 $6,136/day in the first half of
bcf (billion standard cubic feet).
2013). The smaller vessels saw a
Therefore, steam coal continues
less significant increase as a result
to be challenged as a fuel to
of the Indonesian ban on bauxite
produce power, and projects
and nickel ore exports, delayed
to build liquefaction facilities
South American grain exports
for export to Asia continue to
and a weaker coal trade. Panamax
be developed, with production
rates averaged at $8,399/day in
expected to start in early 2016.
the first half of 2014 (compared
In this context, natural gas prices to$7,415/day for the first half of
in North American markets have 2013).
continued to increase from 2012
lows, averaging in 2014 at $4.3
Impact of exchange rate
per MMBtu and up from $3.7 per movements
MMBtu in 2013.
The first half of 2014 delivered a
very favorable mix of improving
In Europe, gas demand remains
developed world growth, ample
depressed and the gap between central bank liquidity and
long-term oil-indexed contracts
evidence of adjustment in some
and spot gas prices increased
large emerging markets. In this
in the second quarter of 2014
context of low volatility, the €/$
despite continuing contract
exchange rate has remained in
renegotiation, as spot prices
the range of 1.35-1.40 since the
strongly decreased down to $8.5 beginning of the year. Regarding
per MMBtu in the first half of
the emerging market economies,
2014, and have continued to
the first half of the year has been
decrease.
mixed. The first quarter saw an
emerging markets currencies
crisis with the South African
Ocean freight4
rand reaching a 5-year low (local
Ocean freight market rates
increased in the first half of 2014 strike and negative growth
outlook), the Kazak tenge (i.e., the
compared to the first half of
National Bank 19% devaluation
2013. Total iron ore imports by
of the tenge ), Argentinean peso
China increased 19% compared
(20% devaluation) and Turkish
to the first half of 2014. Both
Lira reaching historical lows. In
Australian and Brazilian iron ore
addition, geopolitical tensions
exports were up compared to
the prior year. However, coal and weighed heavily on the Ukraine
and Russia, generating significant
other sectors such as grain did
downside risks to both the
not experience as much growth
Russian and Ukrainian economy
and combined with easing of
with their currencies depreciating
congestion, the result was an
Interim Management Report 11
Business overview
continued
against the U.S dollar as a result.
However, a slight recovery has
been seen in the second quarter
as emerging markets currencies
have enjoyed a robust rally,
gaining 3.2% on average against
the U.S dollar. In central Europe,
the U.S dollar was relatively
steady against both the Polish
zloty and the Czech koruna.
Because a substantial portion
of ArcelorMittal’s assets,
liabilities, sales and earnings are
denominated in currencies other
than the U.S. dollar (its reporting
currency), ArcelorMittal has
exposure to fluctuations in
the values of these currencies
relative to the U.S. dollar. These
currency fluctuations, especially
the fluctuations of the U.S. dollar
relative to the euro, as well as
fluctuations in the currencies
of the other countries in which
ArcelorMittal has significant
operations and sales, can have
a material impact on its results
of operations. In order to
minimize its currency exposure,
ArcelorMittal enters into hedging
transactions to lock-in a set
exchange rate, as per its risk
management policies.
In June 2008, ArcelorMittal
entered into a transaction in
order to hedge U.S. dollardenominated raw material
purchases until 2012. The hedge
involved a combination of
forward contracts and options
that initially covered between
60% and 75% of the U.S. dollar
outflow from the Company’s
European subsidiaries
based on then-current raw
materials prices, amounting
to approximately $20 billion.
The transaction was unwound
during the fourth quarter of
2008, resulting in a deferred
gain of approximately $2.6
billion recorded in shareholders’
equity and of $349 million
recorded in operating income.
The gain recorded in equity
along with the recording of
hedged expenses was recycled
in the consolidated statements
of operations during the period
from 2009 through the first
quarter of 2013; of this amount,
the last installment of $92
million was recorded as income
within cost of sales during the
six months ended June 30, 2013.
Trade and import competition
Europe5
Import competition in the EU28
steel market reached a high of
38.0 million tonnes of finished
goods during 2007, equal to
18.6% of steel demand. As
demand decreased, imports
also declined, reaching a low
of 15.3 million tonnes in 2009,
equal to an import penetration
ratio (ratio of imports to market
supply) of 13.3%. Since 2009,
import ratios have fluctuated.
In 2010, imports recovered
to 18.6 million tonnes, but an
increase in domestic deliveries
resulted in an import penetration
ratio of 12.6%. In 2011, finished
steel imports rose strongly to
23.3 million tonnes, as a result
of which the import penetration
ratio increased to 14.8%. In
2012, steel demand in Europe
declined, but imports fell more
sharply to 16.6 million tonnes,
down 28.7% year-on-year,
resulting in a penetration ratio of
only 12.0% for 2012.
In 2013, despite a slight decline
in steel demand, imports
rose, particularly from China,
Russia and Turkey, to total
approximately 18.4 million
tonnes in 2013, or 10.5% higher
than in 2012. As a result, the
penetration ratio increased to
13.1% for the year.
During the first half of 2014,
finished steel imports are
estimated to have increased
by 10.3% year-on-year, around
21.9 million tonnes annualized,
with shipments originating
mainly from Commonwealth of
Independent States (CIS) and
China. The penetration rate for
the first half of 2014 is estimated
at approximately 14.4%.
United States6
After reaching a record level of
32.6 million tonnes in 2006, or
an import penetration ratio of
26.9%, total finished imports
bottomed at 12.9 million tonnes
in 2009, representing an import
penetration ratio of 21.8%. Over
the next two years, imports
rose to 19.8 million tonnes in
2011 but import penetration
remained relatively stable at
21.8%, due to stronger finished
steel consumption.
Steel demand rose strongly in
2012 as did steel imports, rising
to an import penetration of
23.2%. As demand weakened
during 2013, finished steel
imports and in particular pipe
and tube, fell 3.9% year-onyear to an import penetration of
23.2%.
During the first half of 2014,
finished steel imports were up
26.8% year-on-year, compared
to a 9.1% year-on-year decline
over the same period last year.
Penetration increased to 27.4%,
the highest level over the same
period since 2006, compared to
an 8.1% year-on-year increase
in apparent steel demand during
the first half of 2014. Overall
steel imports were up 34.8%
during the first half of 2014, as
imports of semis increased by
over 64% year-on-year.
Consolidation in the steel and
mining industries
The global steel and mining
industries have experienced a
consolidation trend over the
past ten years. After pausing
during the credit crisis and global
economic downturn of 20082009, merger and acquisition
activity of various steel and
mining players, including
Chinese and Indian companies,
Source: Eurostat trade data to April 2014, estimates for May and June 2014.
Source: U.S. Department of Commerce, customs census data up to May 2014 and license data for June 2014.
5
6
has increased at a rapid pace.
However, given the current
economic uncertainties in the
developed economies, combined
with a slowdown in emerging
regions such as China and India,
consolidation transactions
decreased significantly in terms
of number and value in the
past two years and this trend is
expected to continue in 2014,
unless and until prices stabilize
and supply and demand balance
out in the context of worldwide
structural overcapacity.
Apart from Mittal Steel’s
acquisition of Arcelor in 2006
and their merger in 2007,
notable mergers and acquisitions
in the steel business in recent
years include the merger of
Tata Steel and Corus (itself the
result of a merger between
British Steel and Hoogovens);
U.S. Steel’s acquisitions in
Slovakia and Serbia; Evraz and
Severstal’s acquisitions in North
America, Europe and South
America; and expansion in North
and South America by Brazilian
steel company Gerdau. Most
recently, on October 1, 2012,
Japanese steelmakers Nippon
Steel Corp. and Sumitomo
Metals Industries Ltd. completed
their merger and created the
world’s second-largest steel
company. On December 28,
2012, Outokumpu and Inoxum,
ThyssenKrupp’s stainless steel
division, completed their merger
in order to create the worldwide
leader in stainless steel.
As developed markets
continued to present fewer
opportunities for consolidation,
steel industry consolidation
also began to slow down
substantially in China in 2012.
Despite being a key initiative
of the five-year plan issued in
March 2011, the concentration
process of the steel industry
that is expected to reduce
overcapacity, rationalize
steel production based on
12 Interim Management Report
Business overview
continued
obsolete technology, improve
energy efficiency, achieve
environmental targets and
strengthen the bargaining
position of Chinese steel
companies in price negotiations
for iron ore declined as a result
of the slowing economy. This
situation could affect the
Chinese government’s objective
for the top ten Chinese steel
producers to account for
60% of national production
by 2015 and for at least two
producers to reach 100 million
ton capacity in the next few
years. However, the Chinese
government is considering
scrapping a ban on overseas
control which was imposed in
2005, enabling non-Chinese
companies to make acquisitions
in China, which could drive
merger and acquisition activity
if implemented.
Merger and acquisition
activity is expected to remain
active in the Indian steel and
mining industry though at a
lower pace considering the
current economic slowdown.
The country has become the
world’s third largest steel
consumer after China and the
United States and is expected
to become soon the world’s
second largest steel producer
worldwide. The integration of
Ispat Industries into JSW Steel
was a major consolidation step
in 2010.
Recent and expected future
industry consolidation should
foster the ability of the steel
industry to maintain more
consistent performance through
industry cycles by achieving
greater efficiencies and
economies of scale, and should
lead to improved bargaining
power relative to customers
and, crucially, suppliers, which
tend to have a higher level of
consolidation. The wave of steel
industry consolidation in the
previous years has followed
the lead of raw materials
suppliers, which occurred in an
environment of rising prices
for iron ore and most other
minerals used in the steelmaking process. The merger
of Cliffs Natural Resources and
Consolidated Thompson in 2011
was a significant consolidation
move in North America which,
at the same time, strengthened
vertical relationships into the
Chinese steel market. In the
context of volatile prices and
an overall decline since 2011,
which is expected to continue in
2014 given the large additional
supply expected to come on
line, iron ore producers continue
to seek consolidation that
would strengthen their options
whatever the direction of future
price trends. There are still only
four primary iron ore suppliers in
the world market. Consolidation
among other mining companies
has continued, as evidenced by
the completion of the merger
between Xstrata and Glencore
on May 2, 2013.
Operating results
ArcelorMittal reports its
operations in five segments:
NAFTA, Brazil, Europe, ACIS and
Mining. On January 1, 2014,
ArcelorMittal implemented
changes to its organizational
structure which provide a
greater geographical focus. The
principal benefits of the changes
are to reduce organizational
complexity and layers;
simplification of processes;
regional synergies and taking
advantage of the scale effect
within the regions.
As a result of the organizational
changes, ArcelorMittal’s
reportable segments changed
to NAFTA, Brazil, Europe, ACIS
and Mining. NAFTA includes the
Flat, Long and Tubular operations
of the United States, Canada
and Mexico. Brazil includes the
Flat operations of Brazil, and
the Long and Tubular operations
of Brazil and its neighboring
countries including Argentina,
Costa Rica, Trinidad and Tobago
and Venezuela. Europe comprises
the Flat, Long and Tubular
operations of the European
business, as well as Distribution
Solutions (AMDS). The ACIS
segment is largely unchanged
except the addition of some
Tubular operations. The Mining
segment remains unchanged.
Prior period information has
been recast to reflect this new
segmentation. The reportable
segments have been revised to
reflect ArcelorMittal’s change
in organizational structure
and managing its business and
retrospectively adjusted in
conformity with IFRS.
Key Indicators
The key performance
indicators that ArcelorMittal’s
management uses to analyze
operations are sales, average
steel selling prices, steel
shipments, iron ore and coal
production and operating
income. Management’s analysis
of liquidity and capital resources
is driven by operating cash
flows.
Six months ended June 30, 2014
as compared to six months
ended June 30, 2013
Sales, steel shipments and
average steel selling prices and
mining production
ArcelorMittal’s sales were
higher at $40.5 billion for the six
months ended June 30, 2014,
up from $39.9 billion for the six
months ended June 30, 2013,
primarily due to an increase
in steel shipments offset by a
decrease in average steel selling
prices.
ArcelorMittal’s steel shipments
increased by 2.5% to 42.4 million
tonnes for the six months ended
June 30, 2014, from 41.4 million
tonnes for the six months ended
June 30, 2013. Average steel
selling prices decreased by 2%
for the six months ended June
30, 2014 as compared to the six
months ended June 30, 2013.
ArcelorMittal had iron ore
and coal production (own
production of iron ore and coal,
excluding supplies sourced
under strategic contracts) of
31.4 million tonnes and 3.6
million tonnes, respectively, for
the six months ended June 30,
2014, an increase of 11.7% and
decrease of 10%, as compared
to 28.1 million tonnes and 4.0
million tonnes, respectively, for
the six months ended June 30,
2013. The increase in iron ore
production resulted primarily
from expanded operations in
Canada while the decrease in
coal production was mainly
related to very difficult
geological conditions that
limited underground extraction
in the Company’s Russian
coal operations and lower
production at the Company’s
USA coal operations (Princeton).
Interim Management Report 13
Business overview
continued
The following tables provide a summary of sales at ArcelorMittal by reportable segment and mining production for the six months ended June 30,
2014 as compared to the six months ended June 30, 2013.
Sales for the six months
ended June 30*,
Segment
NAFTA
Brazil
Europe
ACIS
Mining
Total
2013
(in $ millions)
9,681
5,080
20,750
4,303
2,550
39,949
2014
(in $ millions)
10,351
4,787
20,840
4,307
2,639
40,492
Changes in
Sales
(%)
7
(6)
3
1
Steel
Shipments
(%)
4
(5)
3
5
2
Average
Steel Selling
Price (%)
1
(3)
(1)
(7)
(2)
* Amounts are prior to inter-company eliminations (except for total) and include non-steel sales
Mining shipments (million tonnes)1
Six months ended
June 30, 2013
Six months ended
June 30, 2014
Total iron ore shipments2
Iron ore shipped externally and internally and reported at market price3
26.8
15.5
30.2
19.8
Iron ore shipped externally
Iron ore shipped internally and reported at market price3
4.3
11.2
6.7
13.1
11.3
3.8
2.4
10.4
3.7
2.1
1.7
0.7
1.0
1.1
1.4
1.6
Iron ore shipped internally and reported at cost-plus3
Total coal shipments4
Coal shipped externally and internally and reported at market price3
Coal shipped externally
Coal shipped internally and reported at market price3
Coal shipped internally and reported at cost-plus3
There are three categories of sales: (1) “External sales”: mined product sold to third parties at market price; (2) “Market-priced tonnes”: internal sales of mined product to
ArcelorMittal facilities reported at prevailing market prices; (3) “Cost-plus tonnes”: internal sales of mined product to ArcelorMittal facilities on a cost-plus basis. The determinant of
whether internal sales are reported at market price or reported at cost-plus is whether or not the raw material could practically be sold to third parties (i.e., there is a potential market
for the product and logistics exist to access that market).
2
Total of all finished products of fines, concentrate, pellets and lumps and includes tonnes shipped externally and internally and reported at market price as well as tonnes shipped
internally on a cost-plus basis.
3
Market-priced tonnes represent amounts of iron ore and coal from ArcelorMittal mines that could practically be sold to third parties. Market-priced tonnes that are transferred from
the Mining segment to the Company’s steel producing segments are reported at the prevailing market price. Shipments of raw materials that do not constitute market-priced tonnes
are transferred internally on a cost-plus basis.
4
Total of all finished products of coal and includes tonnes shipped externally and internally and reported at market price as well as tonnes shipped internally on a cost-plus basis.
1
14 Interim Management Report
Business overview
continued
Iron ore production (million metric tonnes)
Own mines
North America2
South America
Europe
Africa
Asia, CIS & Other
Total own iron ore production
Strategic long-term contracts - iron ore
North America3
Africa4
Total strategic long-term contracts - iron ore
Total
3
4
1
2
Six months ended
June 30,
2013
Six months ended
June 30,
2014
Type
Product
Open pit
Open pit
Open pit
Open pit / Underground
Open pit / Underground
Concentrate, lump, fines and pellets
Lump and fines
Concentrate and lump
Fines
Concentrate, lump, fines and sinter feed
15.1
1.9
1.0
2.6
7.5
28.1
17.7
2.2
1.1
3.0
7.4
31.4
Open pit
Open pit
Pellets
Lump and fines
3.1
2.4
5.5
33.6
2.8
2.8
5.6
37.0
1
Total of all finished production of fines, concentrate, pellets and lumps.
Includes own mines and share of production from Hibbing (United States, 62.30%) and Peña (Mexico, 50%).
Consists of a long-term supply contract with Cleveland Cliffs for purchases made at a previously set price, adjusted for changes in certain steel prices and inflation factors.
Includes purchases under a strategic agreement with Sishen/Thabazambi (South Africa). Prices for purchases under the July 2010 interim agreement with Kumba (as extended and
amended several times) have been on a fixed-cost basis since March 1, 2010. On November 5, 2013, ArcelorMittal announced that its 51% subsidiary, ArcelorMittal South Africa, had
reached an agreement with Sishen Iron Ore Company Ltd (SIOC), a subsidiary of Kumba, relating to the long-term supply of iron ore. The agreement, which became effective as of
January 1, 2014, allows ArcelorMittal South Africa to purchase up to 6.25 million tonnes per year of iron ore from SIOC, complying with agreed specifications and lump-fine ratios.
This volume of 6.25 million tonnes per year of iron ore includes any volumes delivered by SIOC to ArcelorMittal from the Thabazimbi mine, the operational and financial risks of which
will pass from ArcelorMittal to Kumba under the terms of this agreement.
Six months ended
June 30,
2013
Six months ended
June 30,
2014
1.39
2.63
4.02
0.17
0.17
0.34
4.36
1.03
2.53
3.56
0.18
0.20
0.38
3.94
Europe
Sales in the Europe segment
remained relatively flat at $20.8
billion for the six months ended June
30, 2014 as compared to the six
months ended June 30, 2013,
primarily due to a 3% increase in
steel shipments offset by a 1%
decrease in average steel selling
prices.
the six months ended June 30,
2014 were positively impacted by
improved shipments in Kazakhstan
with stable operations. Steel
shipments for the six months ended
June 30, 2013 were negatively
affected by lower volumes in South
Africa, caused by fire disruption at
the Vanderbijlpark site, and
Kazakhstan.
Total steel shipments in the Europe
segment increased 3% to 20.2
million tonnes for the six months
ended June 30, 2014, from 19.5
million tonnes for the six months
ended June 30, 2013. The increase
was primarily driven by improved
demand compared to the first half of
2013.
Average steel selling price in the ACIS
segment decreased 7% to $580 per
tonne for the six months ended June
30, 2014 from $626 per tonne for
the six months ended June 30, 2013,
primarily due to lower international
prices driven by lower raw material
prices, and partially due to currency
devaluation.
Average steel selling price in the
Europe segment decreased 1% to
Total steel shipments in the NAFTA
$804 per tonne for the six months
segment increased 4% to 11.4
ended June 30, 2014 from $813
million tonnes for the six months
per tonne for the six months ended
ended June 30, 2014, from 11.0
Total steel shipments in the Brazil
June 30, 2013, which reflected
million tonnes for the six months
segment were 4.6 million tonnes for strong competition and decreasing
ended June 30, 2013. Steel
the six months ended June 30,
trend in raw material prices.
shipments for the six months ended 2014 as compared to 4.9 million
June 30, 2014 were impacted by
tonnes for the six months ended
ACIS
severe weather conditions during
June 30, 2013. The decrease was
the first half of 2014 in the United
primarily due to operational issues Sales in the ACIS segment remained
relatively flat at $4.3 billion for the
States. Steel shipments for the six
in the hot strip mill in Tubarão and
six months ended June 30, 2014 as
months ended June 30, 2013 was
lower exports from the Point Lisas
compared to the six months ended
negatively affected by labor issues operating facility in Trinidad.
June 30, 2013, primarily due to a
at Burns Harbor and operational
5% increase in steel shipments
incidents at Indiana Harbor East and Average steel selling price in the
offset by a 7% decrease in average
West, for which reductions in
Brazil segment decreased 3% to
steel selling prices.
inventory and supplies from other
$914 per tonne for the six months
NAFTA units partially mitigated the ended June 30, 2014 from $942 per
Total steel shipments in the ACIS
market impact.
tonne for the six months ended
June 30, 2013, promarily driven by segment increased 5% to 6.5 million
tonnes for the six months ended
Average steel selling price in the
currency devaluation in Brazil,
June 30, 2014, from 6.2 million
NAFTA segment increased 1% to
Argentina and Venezuela.
tonnes for the six months ended
$848 per tonne for the six months
June 30, 2013. Steel shipments for
Mining
Own iron ore production (not
including supplies under strategic
long-term contracts) in the six
months ended June 30, 2014 was
31.4 million metric tonnes, 11.7%
higher than in the six months ended
June 30, 2013, primarily due to
higher production at the Company’s
Canadian operations.
Coal production (million metric tonnes)
Own mines
North America
Asia, CIS & Other
Total own coal production
North America1
Africa2
Total strategic long-term contracts - coal
Total
Includes strategic agreement - prices on a fixed price basis.
Includes long term lease - prices on a cost-plus basis.
1
2
NAFTA
Sales in the NAFTA segment
increased 7% to $10.4 billion for the
six months ended June 30, 2014,
from $9.7 billion for the six months
ended June 30, 2013, mainly due to
a 4% increase in steel shipments and
1% increase in average steel selling
prices.
ended June 30, 2014 from $838
per tonne for the six months ended
June 30, 2013, which reflected
increased demand.
Brazil
Sales in the Brazil segment were
$4.8 billion for the six months ended
June 30, 2014 as compared to $5.1
billion for the six months ended June
30, 2013, primarily due to lower
volumes and average selling prices.
Own coal production (not including
supplies under strategic long-term
contracts) in the six months ended
June 30, 2014 was 3.6 million
metric tonnes, representing a
decrease of 10% compared to the
six months ended June 30, 2013,
due to very difficult geological
conditions that limited
underground extraction in the
Company’s Russian coal operations
and lower production at the
Company’s USA coal operations
(Princeton).
Interim Management Report 15
Business overview
continued
Sales in the Mining segment
increased 3.5% to $2.64 billion for
the six months ended June 30,
2014 from $2.55 billion for the six
months ended June 30, 2013. Sales
of marketable iron ore and coal
(internal market-priced and sales to
external customers) increased
10.5% to $2.1 billion for the six
months ended June 30, 2014 from
$1.9 billion for the six months ended
June 30, 2013. Sales to external
customers were $0.71 billion for the
six months ended June 30, 2014
representing a 10.9% increase
compared to $0.64 billion for the six
months ended June 30, 2013. The
increase in sales to external
customers was primarily due to
higher shipments from own mines
for iron ore, partially offset by lower
average selling prices of iron ore and
coal in line with decreases in
international reference prices and
lower shipments from own mines for
coal. Higher shipments to external
customers for iron ore accounted for
approximately $0.24 billion of the
increase in sales partially offset by
lower selling prices for iron ore and
coal of $0.09 billion and lower
shipments from own mines for coal
of $0.09 billion. Iron ore shipments
to external customers increased by
55.8% from 4.3 million tonnes for
the six months ended June 30, 2013
to 6.7 million tonnes for the six
months ended June 30, 2014. Sales
of marketable iron ore (internal
market-priced and sales to external
customers) increased by 28% from
15.5 million tonnes for the six
months ended June 30, 2013 to
19.8 million tonnes for the six
months ended June 30, 2014. The
increase in external shipments was
due to additional quantity from our
Canadian operations post
completion of the project to expand
to annual production of 24 million
tonnes. Coal shipments to external
customers decreased 42.9% from
1.75 million tonnes to 1.0 million
tonnes. With respect to lower
average selling prices, for example,
the average iron ore spot price of
$111 per tonne CFR China and the
average spot price for hard coking
coal FOB Australia at $117 per
tonne were 19% and 24% lower for
the six months ended June 30,
2014 than for the six months ended
June 30, 2013, respectively. It
should be noted, however, that there
may be no direct correlation
between benchmark prices and
actual selling prices in various regions
at a given time.
Operating income for the six months
ended June 30, 2014 was positively
affected by a decrease in
depreciation as a result of a change
in useful lives of plant and
equipment. The Company
performed a review of the useful
lives of its assets and determined its
maintenanceandoperatingpractices
enabled a change in the useful lives
of plant and equipment. As a result,
the useful lives of certain of the
Company’s existing assets have been
and will be used longer than
previously anticipated and therefore,
the estimated useful lives of certain
plant and equipment have been
lengthened prospectively. In
addition, there were no impairment
charges or restructuring charges for
the six months ended June 30, 2014.
Operating income for the six months
ended June 30, 2014 was
negatively affected by a $90 million
charge following the settlement of
antitrust litigation in the United
States.
Operating income for the six months
ended June 30, 2013 was
negatively affected by impairment
charges of $39 million primarily
relating to the closure of the organic
coating and tin plate lines in Florange
(Europe segment) and restructuring
charges of $173 million, primarily
related to $137 million of costs
During the six months ended June
incurred for the long term idling of
30, 2014, ArcelorMittal’s operating
the Florange liquid phase (including
income was improved by higher steel
voluntary separation scheme costs,
shipments offset by lower average
site rehabilitation/safeguarding
steel selling prices.
Operating income
ArcelorMittal’s operating income for
the six months ended June 30,
2014 amounted to $1,506 million,
compared to operating income of
$756 million for the six months
ended June 30, 2013.
costs, and take or pay obligations) as
well as by a $67 million loss caused
by fire disruption at the
Vanderbijlpark site in South Africa.
Operating income for the six months
ended June 30, 2013 was positively
affected by a $47 million fair
valuation gain relating to the
acquisition of an additional
ownership interest in DJ Galvanizing
in Canada in the NAFTA segment and
$92 million related to the Dynamic
Delta Hedge income.
Cost of sales consists primarily of
purchases of raw materials
necessary for steel-making (iron ore,
coke and coking coal, scrap and
alloys) and electricity cost. Cost of
sales for the six months ended June
30, 2014 was $37.5 billion,
remaining relatively flat as
compared to $37.7 billion for the six
months ended June 30, 2013, which
was driven by a decline in raw
material prices, offset by higher
production. Selling, general and
administrative expenses (“SG&A”)
for the six months ended June 30,
2014 were $1.5 billion remaining flat
as compared to $1.5 billion for the
six months ended June 30, 2013.
SG&A represented 3.6% of sales for
the six months ended June 30,
2014, as compared to 3.7% for the
six months ended June 30, 2013.
The following table summarizes by reportable segment the operating income and operating margin of ArcelorMittal for the six months ended June 30,
2014 as compared with the six months ended June 30, 2013:
Operating income for the six months ended
June 30,1
2013
2014
(in $ millions)
(in $ millions)
NAFTA
Brazil
Europe
ACIS
Mining
Total adjustments to segment operating income and other 2
Total consolidated operating income
193
542
(256)
(140)
572
(155)
756
77
592
414
5
507
(89)
1,506
Operating margin for the six months
ended June 30,1
2013
2014
(%)
(%)
2
11
(1)
(3)
22
1
12
2
19
Segment amounts are prior to inter-segment eliminations.
Total adjustments to segment operating income and other reflects certain adjustments made to operating income of the segments to reflect corporate costs, income from non-steel
operations (e.g. energy, logistics and shipping services) and the elimination of stock margins between the segments. See table below.
1
2
Corporate and shared services1
Real estate and financial activities
Shipping and logistics
Intragroup stock margin eliminations
Depreciation and impairment
Total adjustments to segment operating income and other
Includes primarily staff and other holding costs and results from shared service activities.
1
Six months ended
June 30, 2013
(in $ millions)
Six months ended
June 30, 2014
(in $ millions)
(62)
2
(23)
(53)
(19)
(155)
(75)
(6)
(4)
17
(21)
(89)
16 Interim Management Report
Business overview
continued
NAFTA
Operating income for the NAFTA
segment for the six months
ended June 30, 2014 was $77
million, as compared with
operating income of $193 million
for the six months ended June
30, 2013.
Operating income for the six
months ended June 30, 2014 was
negatively affected by a $90 million
charge following the settlement
of antitrust litigation in the United
States and the severe weather
conditions during the first half of
2014. Operating income for the six
months ended June 30, 2013 was
positively affected by a $47 million
fair valuation gain relating to DJ
Galvanizing in Canada, a joint
operation in which the Company
acquired the remaining 50% interest
held by the other joint operator.
Operating income for the six
months ended June 30, 2014
was positively affected by higher
volumes and higher average
selling prices compared to the six
months ended June 30, 2013.
Brazil
Operating income for the Brazil
segment for the six months
ended June 30, 2014 was $592
million, as compared with
operating income of $542 million
for the six months ended June
30, 2013.
Operating income for the six
months ended June 30, 2014
was negatively affected by lower
shipments and lower average
steel selling prices. Operating
income was positively impacted
by a decrease in depreciation
which was $247 million and $358
million for the six months ended
June 30, 2014 and June 30, 2013,
respectively, mainly due to the
change in asset lives of certain
plant and equipment.
Europe
Operating income for the Europe
segment for the six months
ended June 30, 2014 was $414
million, as compared with
operating loss of $256 million for
the six months ended June 30,
2013.
Mining
Operating income attributable
to the mining segment for the six
months ended June 30, 2014 was
$507 million, as compared with
operating income of $572 million
for the six months ended June 30,
2013 primarily driven by higher
volumes offset by lower selling
prices. In terms of selling prices,
as noted above, the market price
Operating income for the six
of iron ore and coal decreased
months ended June 30, 2014
on average year-on-year. Iron ore
was positively impacted by
marketable volume for the six
improved market conditions
months ended June 30, 2014 was
and the realized benefits of
19.8 million tonnes, compared
cost optimization efforts as
to 15.5 million tonnes for the six
well as increased shipments,
months ended June 30, 2013,
offset slightly by lower average
representing an increase of 28%.
steel selling prices. In addition,
operating income was positively Coal marketable volume for the
six months ended June 30, 2014
impacted by a decrease in
was 2.1 million tonnes, compared
depreciation which was $810
to 2.4 million tonnes for the six
million and $978 million for the
six months ended June 30, 2014 months ended June 30, 2013,
representing a decrease of 13%.
and June 30, 2013, respectively,
Cost of sales was stable at $2.0
mainly due to the change in
billion for the six months ended
asset lives of certain plant and
June 30, 2014 and $1.9 billion for
equipment.
the six months ended June 30,
Operating loss for the six months 2013.
ended June 30, 2013 included
restructuring costs amounting
Investments in associates, joint
to $164 million including $137
ventures and other investments
million associated with the long Income from investments in
term idling of the liquid phase
associates, joint ventures and
at the Florange site in France.
other investments was $154
The operating loss for the first
million for the six months ended
half of 2013 also included a $92
June 30, 2014, compared to
million non-cash gain relating
a loss of $42 million for the
the unwinding of hedges on raw six months ended June 30,
material purchases.
2013. The income was primarily
related to the annual dividend
ACIS
received from Erdemir, improved
Operating income for the ACIS
performance of Spanish entities
segment for the six months
and the share of profits of the
ended June 30, 2014 was $5
Calvert operations. The loss
million, as compared with
for the six months ended June
operating loss of $140 million for 30, 2013 was primarily due
the six months ended June 30,
to the payment of contingent
2013. Operating income for the
consideration of $56 million with
six months ended June 30, 2014 respect to the Gonvarri Brasil
reflected improved performance acquisition made in 2008 and
in the CIS countries resulting
weaker performance of European
in higher shipments, offset by
associates.
weaker South African profitability
due to weak economic growth
Financing costs
and associated domestic
Net financing costs include net
challenges.
interest expense, revaluation of
financial instruments, net foreign
Operating loss for the six
exchange income/expense (i.e.,
months ended June 30, 2013
the net effects of transactions
was negatively affected by a
in a foreign currency other than
$67 million loss caused by fire
the functional currency of a
disruption at the Vanderbijlpark
subsidiary) and other financing
site in South Africa.
costs. Net financing costs for the
Operating income for the six
months ended June 30, 2014
was positively impacted by
improved market conditions
and the realized benefits of
cost optimization efforts as well
as increased shipments, offset
slightly by lower average steel
selling prices.
six months ended June 30, 2014
were $1.5 billion as compared
with $1.6 billion recorded for the
six months ended June 30, 2013.
Net interest expense (interest
expense less interest income)
decreased to $809 million for the
six months ended June 30, 2014
as compared to $949 million for
the six months ended June 30,
2013, primarily due to savings
incurred following the repayment
of the EUR and USD convertible
bonds in April and May of 2014.
Foreign exchange and other net
financing costs (which includes
foreign currency swaps, bank
fees, interest on pensions,
impairments of financial
instruments and revaluation of
derivative instruments, and other
charges that cannot be directly
linked to operating results) for
the six months ended June 30,
2014 amounted to $707 million,
as compared to costs of $685
million for the six months ended
June 30, 2013. The first half of
2014 amount includes a payment
following the termination of the
Senegal greenfield project, noncash charges for the premiums
related to call options on treasury
shares expired following the
maturity of EUR convertible
bonds and hedging instruments.
Foreign exchange and other
net financing costs for the six
months ended June 30, 2013
was negatively affected by a 8%
devaluation of the Brazilian Real
versus U.S. dollar, which impacted
loans and payables denominated
in foreign currency.
Income tax
ArcelorMittal’s consolidated
income tax expense (benefit) is
affected by the income tax laws
and regulations in effect in the
various countries in which it
operates and the pre-tax results
of its subsidiaries in each of
these countries, which can vary
from year to year. ArcelorMittal
operates in jurisdictions, mainly
in Eastern Europe and Asia,
which have a structurally lower
corporate income tax rate than
the statutory tax rate as in effect
in Luxembourg (29.22%), as
well as in jurisdictions, mainly in
Interim Management Report 17
Business overview
continued
Western Europe and the Americas and Venezuela. Some of these
which have a structurally higher operating subsidiaries have debt
outstanding or are subject to
corporate income tax rate.
acquisition agreements that
impose restrictions on such
ArcelorMittal recorded a
consolidated income tax expense operating subsidiaries’ ability
to pay dividends, but such
of $217 million for the six
restrictions are not significant
months ended June 30, 2014,
in the context of ArcelorMittal’s
as compared to a consolidated
overall liquidity. Repatriation of
income tax expense of $196
million for the six months ended funds from operating subsidiaries
may also be affected by tax and
June 30, 2013.
foreign exchange policies in place
from time to time in the various
Non-controlling interests
Net income attributable to non- countries where the Company
operates, though none of these
controlling interests for the six
policies is currently significant
months ended June 30, 2014
was $80 million as compared with in the context of ArcelorMittal’s
overall liquidity.
net income attributable to noncontrolling interests of $9 million
for the six months ended June 30, In management’s opinion,
ArcelorMittal’s credit facilities
2013. Net income attributable
are adequate for its present
to non-controlling interests
requirements.
primarily relate to the minority
shareholders’ share of net income
As of June 30, 2014,
recorded in ArcelorMittal Mines
ArcelorMittal’s cash and cash
Canada.
equivalents, including restricted
Net income attributable to equity cash amounted to $4.4 billion as
compared to $6.2 billion as of
holders of the parent
December 31, 2013. In addition,
ArcelorMittal’s net loss
attributable to equity holders of ArcelorMittal had available
borrowing capacity of $6.0 billion
the parent for the six months
under its credit facilities as of
ended June 30, 2014 was $153
June 30, 2014, unchanged from
million as compared to net loss
attributable to equity holders of December 31, 2013.
the parent of $1.1 billion for the
six months ended June 30, 2013, As of June 30, 2014,
for the reasons discussed above. ArcelorMittal’s total debt, which
includes long-term debt and
short-term debt, was $21.8
Liquidity and capital resources
billion, compared to $22.3 billion
ArcelorMittal’s principal sources
as of December 31, 2013. The
of liquidity are cash generated
from its operations and its credit repayments of the €1.25 billion
Convertible Bonds upon maturity
facilities at the corporate level.
in April, 2014 and the $800
Because ArcelorMittal is a holding million of Convertible Notes upon
maturity in May 2014 were partly
company, it is dependent upon
offset by the issuance of €750
the earnings and cash flows of,
million 3.00% Notes in March,
and dividends and distributions
from, its operating subsidiaries to 2014, a $1 billion loan agreement
with a credit institution in June
pay expenses and meet its debt
2014 and proceeds from the
service obligations. Significant
cash or cash equivalent balances draw-down of the $300 million
term loan facility in February
may be held from time to time
2014. Net debt (defined as longat the Company’s international
operating subsidiaries, including term debt plus short-term debt,
less cash and cash equivalents
in particular those in France,
and restricted cash) was $17.4
where the Company maintains
billion as of June 30, 2014, up
a cash management system
from $16.1 billion at December
under which most of its cash
31, 2013. Net debt increased
and cash equivalents are
period-on-period primarily
centralized, and in Argentina,
due to the repayment of the
Brazil, China, Kazakhstan,
perpetual capital securities and
Morocco, South Africa, Ukraine
capital expenditures which were
partially offset by cash flows from
operating activites . Most of the
external debt is borrowed by the
parent company on an unsecured
basis and bears interest at varying
levels based on a combination of
fixed and variable interest rates.
Gearing (defined as net debt
divided by total equity) at June
30, 2014 was 33% as compared to
30% at December 31, 2013.
The Company must ensure
that the ratio of “Consolidated
Total Net Borrowings”
(consolidated total borrowings
less consolidated cash and cash
equivalents) to “Consolidated
EBITDA” (the consolidated
net pre-taxation profits of
the ArcelorMittal group for a
Measurement Period, subject
to certain adjustments as set
out in the facilities) does not, at
the end of each “Measurement
Period” (each period of 12
The margin applicable to
months ending on the last day of
ArcelorMittal’s principal credit
a financial half-year or a financial
facilities and the coupons on its
year of the Company), exceed a
outstanding bonds are subject
certain ratio, referred to by the
to adjustment in the event of a
Company as the “Leverage ratio”.
change in its long-term credit
ratings. Due, among other things, ArcelorMittal’s principal credit
to the weak steel industry outlook facilities set this ratio to 4.25 to
and ArcelorMittal’s credit metrics one, whereas certain facilities
have a ratio of 3.5 to one. As of
and level of debt, Standard
June 30, 2014, the Company was
& Poor’s, Moody’s and Fitch
downgraded the Company’s rating in compliance with both ratios.
to below “investment grade” in
August, November and December Non-compliance with the
2012, respectively, and Standard covenants in the facilities
& Poor’s and Moody’s currently
described above would entitle
have ArcelorMittal’s credit rating the lenders under such facilities
on negative outlook. These
to accelerate the Company’s
downgrades triggered the interest repayment obligations. The
rate “step-up” clauses in most of
Company was in compliance with
the Company’s outstanding bonds, the financial covenants in the
resulting in an incremental interest agreements related to all of its
expense of $50 million for the
borrowings as of June 30, 2014.
six months ended June 30, 2014
and $40 million for the six months As of June 30, 2014, ArcelorMittal
ended June 30, 2013 compared
had guaranteed approximately
to interest expense expected prior $1.2 billion of debt of its
to the downgrades.
operating subsidiaries and
$0.6 billion of total debt
ArcelorMittal’s principal credit
of ArcelorMittal Finance.
facilities, which are (i) the
ArcelorMittal’s debt facilities
syndicated revolving credit
have provisions whereby the
facility maturing on March
acceleration of the debt of
18, 2016 (the “$3.6 Billion
another borrower within the
Facility”) and (ii) the syndicated
ArcelorMittal group could, under
revolving credit facility maturing certain circumstances, lead to
on November 6, 2018 (the
acceleration under such facilities.
“$2.4 Billion Facility”), contain
restrictive covenants. Among
other things, these covenants
limit encumbrances on the
assets of ArcelorMittal and
its subsidiaries, the ability of
ArcelorMittal’s subsidiaries to
incur debt and the ability of
ArcelorMittal and its subsidiaries
to dispose of assets in certain
circumstances. These agreements
also require compliance
with a financial covenant, as
summarized below.
18 Interim Management Report
Business overview
continued
The following table summarizes the repayment schedule of ArcelorMittal’s outstanding indebtedness, which includes short-term and long-term debt,
as of June 30, 2014.
Type of Indebtedness as of June 30, 2014
Q314
Q414
2015
2016
Repayment Amounts per Year (in billions of $)
2017
2018
2019
>2019
Total
Bonds
Long-term revolving credit lines
- $3.6 billion syndicated credit facility
- $2.4 billion syndicated credit facility
Commercial paper 1
Other loans
0.1
0.5
2.2
1.9
2.8
2.2
2.5
6.0
18.2
0.1
0.5
0.1
1.3
0.9
0.1
0.1
0.1
0.4
0.1
3.5
Total Debt
0.7
0.6
3.5
2.8
2.9
2.3
2.6
6.4
21.8
Commercial paper is expected to continue to be rolled over in the normal course of business.
1
The average debt maturity of the Company was 6.2 years as of June 30, 2014, as compared to 6.2 years as of December 31, 2013.
The following table summarizes the amount of credit available as of June 30, 2014 under ArcelorMittal’s principal credit facilities.
Facility
amount
$ 3.6
$ 2.4
$ 6.0
Credit lines available
$3.6 Billion Facility
$2.4 Billion Facility
Total committed lines
Financings
On September 30, 2010,
ArcelorMittal entered into the
$500 million revolving multicurrency letter of credit facility
(the “Letter of Credit Facility”). The
Letter of Credit Facility is used by
the Company and its subsidiaries
for the issuance of letters of
credit and other instruments and
matures on September 30, 2016.
The terms of the letters of credit
and other instruments contain
certain restrictions as to duration.
The Letter of Credit Facility was
amended on October 26, 2012
to reduce its amount to $450
million.
Drawn
-
On January 17, 2014,
Principal credit facilities
ArcelorMittal extended the
On March 18, 2011, ArcelorMittal
conversion date for the $1 billion
entered into a $6 billion facility
privately placed mandatory
(now defined herein as the $3.6
convertible bond (“MCB”) issued
Billion Facility), a syndicated
on December 28, 2009 by one of
revolving credit facility which
its wholly-owned Luxembourg
may be utilized for general
subsidiaries. The mandatory
corporate purposes and which
conversion date of the bond has
matures in 2016. On November
been extended to January 29,
26, 2013, the facility was
2016. The other main features
amended and reduced to $3.6
of the MCB remain unchanged.
billion. As of June 30, 2014, the
The bond was placed privately
$3.6 Billion Facility remains fully
with a Luxembourg affiliate of
available.
Crédit Agricole Corporate and
On May 6, 2010, ArcelorMittal
Investment Bank and is not
entered into a $4 billion facility
listed. In connection with the
(now defined herein as the $2.4
extension of the conversion date
On December 20, 2013,
Billion Facility), a syndicated
of the MCB, ArcelorMittal also
ArcelorMittal entered into a
revolving credit facility which
term loan facility in an aggregate extended the maturities of the
may be utilized for general
amount of $300 million, maturing equity-linked notes in which the
corporate purposes. On
proceeds of the MCB issuance are
on December 20, 2016, under
November 26, 2013, the facility
invested.
which amounts repaid may not
was amended and reduced to
be re-borrowed. As of June 30,
$2.4 billion and the maturity date
2014, the term loan facility was
On February 20, 2014,
extended from May 6, 2015 to
fully drawn.
ArcelorMittal redeemed all of
November 6, 2018. As of June
its outstanding $650 million
30, 2014, the $2.4 Billion Facility
2014 Capital Markets Transactions subordinated perpetual
remains fully available.
and Other Outstanding Loans and capital securities following the
occurrence of a “Ratings Agency
Debt Securities
Available
$ 3.6
$ 2.4
$ 6.0
Event”, as defined in the terms
of the securities. The notes were
redeemed for $657 million at a
redemption price of 101% of the
principal amount thereof, plus
interest accrued.
On March 25, 2014,
ArcelorMittal completed the
offering of €750 million 3.00
per cent Notes due March 25,
2019 issued under the €3 billion
wholesale Euro Medium Term
Notes Programme. The proceeds
of the issuance were used for
general corporate purposes.
On June 10, 2014, ArcelorMittal
entered into a loan agreement
for $1 billion. The loan was
funded upon closing. The credit
institution has the right to
demand repayment of the loan
once per year beginning February
2015 until the final maturity of
the agreement on April 20, 2017.
On July 4, 2014, ArcelorMittal
completed the offering of €600
million 2.875 per cent Notes
due July 6, 2020 issued under
Interim Management Report 19
Business overview
continued
the €3 billion wholesale Euro
Medium Term Notes Programme.
The proceeds of the issuance
were used for general corporate
purposes.
During the first half of 2014,
ArcelorMittal entered into shortterm committed bilateral credit
facilities totaling approximately
$0.9 billion. As of June 30,
2014, the facilities remain fully
available.
Additional information regarding
the Company’s outstanding
loans and debt securities is set
forth in Note 17 of ArcelorMittal’s
consolidated financial statements
for the year ended December 31,
2013 and Note 8 of ArcelorMittal’s
condensed consolidated financial of December 31, 2013 and as
statements for the period ended of June 30, 2014, respectively.
Through the TSR programs,
June 30, 2014.
certain operating subsidiaries
of ArcelorMittal surrender
True sale of receivables (“TSR”)
the control, risks and benefits
programs
associated with the accounts
The Company has established
receivable sold; therefore, the
a number of programs for
amount of receivables sold is
sales without recourse of trade
recorded as a sale of financial
accounts receivable to various
assets and the balances are
financial institutions (referred
removed from the consolidated
to as True Sale of Receivables
(“TSR”)) for an aggregate amount statements of financial position
at the moment of sale. The total
of $5,607 million as of June 30,
amount of receivables sold under
2014. This amount represents
TSR programs and derecognized
the maximum amounts of
in accordance with IAS 39 for
unpaid receivables that may
the six months ended June 30,
be sold and outstanding at any
2013 and 2014 was $17.1 billion
given time. Of this amount, the
and $19.4 billion, respectively
Company has utilized $5,368
(with amounts of receivables sold
million and $5,370 million as
converted to U.S. dollars at the
monthly average exchange rate).
Expenses incurred under the TSR
programs (reflecting the discount
granted to the acquirers of the
accounts receivable) recognized
in the consolidated statements
of operations for the six months
ended June 30, 2013 and 2014
were $91 million and $80 million,
respectively.
Sources and uses of cash
The following table summarizes cash flows of ArcelorMittal for the six months ended June 30, 2014 and 2013:
Summary of Cash Flow
Six months ended
June 30, 2013
(in $ millions)
Net cash provided by operating activities
Net cash used in investing activities
Net cash (used in) provided by financing activities
Net cash provided by operating
activities
For the six months ended June 30,
2014, net cash provided by
operating activities was $1.1 billion
as compared with net cash
provided by operating activities of
$2.1 billion for the six months
ended June 30, 2013. Net cash
provided by operating activities for
the six months ended June 30,
2013 was positively impacted by a
release of working capital.
Net cash provided by operating
activities for the six months ended
June 30, 2014, included a $50
million increase in working capital
(consisting of inventories plus
accounts receivable less accounts
payable), primarily related to a
decrease in payables of $56 million
and a decrease in inventories of
$380 million, partly offset by an
increase in accounts receivables of
$374 million, as compared to a $0.7
billion decrease in working capital
a year earlier. The reduction in
inventories is mainly related to
lower raw material prices for the six
months ended June 30, 2014 as the
average benchmark iron ore price
per tonne of $111 CFR China and
the average benchmark price for
hard coking coal FOB Australia
were 19% and 24% lower than in
2013, respectively, leading to a
lower carrying value of raw
materials and finished steel
products in inventory.
Net cash provided by operating
activities for the six months ended
June 30, 2014 was negatively
affected by payments made
relating to the settlement of
antitrust litigation in the United
States and termination of the
Senegal greenfield project.
2,057
(1,520)
1,897
Six months ended
June 30, 2014
(in $ millions)
1,077
(1,697)
(1,118)
ArcelorMittal’s major growth
capital expenditures in the six
activities
months ended June 30, 2014
Net cash used in investing
included the following major
activities for the six months ended
projects: Capacity expansion in
June 30, 2014 was $1.7 billion as
Liberia; Monlevade expansion plan
compared with net cash used in
downstream part.
investing activities of $1.5 billion
for the six months ended June 30,
2013.
Net cash used in investing
Capital expenditures were $1.6
billion for the six months ended
June 30, 2014, remaining flat as
compared with $1.6 billion for the
six months ended June 30, 2013.
The Company currently expects
that capital expenditures for the
year ended 2014 will amount to
approximately $3.8-$4.0 billion,
involving mainly sustaining capital
expenditures with a slight increase
compared to the prior year as well
as the continuation of the phase II
Liberia project.
20 Interim Management Report
Business overview
continued
The following tables summarize the Company’s principal growth and optimization projects involving significant capital expenditures completed in
the last half of 2013 and in the current year, as well as those that are ongoing.
Segment
Completed Projects
Site
Project
Capacity / particulars
Actual completion
ArcelorMittal Mines Canada
Expansion project
Increase concentrator capacity by 8mt/ year
(16 to 24mt/ year)
Q2 20131
Site
Project
Capacity / particulars
ForecastCompletion
Mining
Liberia
Increase production capacity to 15mt/ year
(high grade sinter feed)
20153
NAFTA
ArcelorMittal Dofasco (Canada)
Phase 2 expansion project
Construction of a heavy
gauge Galvanizing line #6
to optimize Galvanizing
operations
Mining
Segment
Ongoing Projects2
Brazil
ArcelorMittal Vega Do Sul (Brazil)
Brazil
Monlevade (Brazil)
Brazil
Juiz de Fora (Brazil)
Brazil
Monlevade (Brazil)
Expansion project
Wire rod production
expansion
Rebar and meltshop
expansion
Sinter plant, blast furnace
and melt shop
Brazil
Acindar (Argentina)
New rolling mill
Optimize cost and increase shipment of
galvanized products by 0.3mt / year
Increase hot dipped galvanizing (HDG)
capacity by 0.6mt / year and cold rolling (CR)
capacity by 0.7mt / year
Increase in capacity of finished products by
1.1mt / year
Increase in rebar capacity by 0.4mt / year;
Increase in meltshop capacity by 0.2mt / year
Increase in liquid steel capacity by 1.2mt /
year; Sinter feed capacity of 2.3mt / year
Increase in rolling capacity by 0.4mt / year for
bars for civil construction
Site
Project
Capacity / particulars
Actual completion
VAMA auto steel JV
Early revenue phase
Capacity of 1.5mt pickling line, 0.9mt
continuous annealing line and 0.5mt of hot
dipped galvanizing auto steel
Production capacity 3.5mt/ year (iron ore)
H2 20147
20158
Country
Joint venture
projects
China
Canada
Hunan Province
Baffinland
20154
On hold
20155
20155
On hold5
20166
Final capex for the AMMC expansion project was $1.6 billion. The ramp-up of expanded capacity at AMMC hit a run-rate of 24mt by year end 2013. Stretch opportunity to 30mtpa concentrate
through debottlenecking of existing operations has been identified but remains subject to board approval.
2
Ongoing projects refer to projects for which construction has begun (excluding various projects that are under development), or have been placed on hold pending improved operating conditions.
3
The Phase 2 expansion of the Liberia project to a production capacity of 15 million tonnes per annum sinter feed is underway. The first sinter feed production is expected at the end of 2015.
Stretch opportunity to 20mtpa including 5mtpa DSO has been identified but remains subject to board approval. Phase 2 is expected to require capex of $1.7 billion.
4
During Q3 2013, the Company restarted the construction of a heavy gauge galvanizing line #6 (capacity 660ktpy) at Dofasco. On completion of this project in 2015, the older and smaller
galvanizing line #2 (capacity 400ktpy) will be closed. The project is expected to benefit EBITDA through increased shipments of galvanized product (260ktpy), improved mix and optimized costs.
The line #6 will also incorporate Advanced High Strength Steel (AHSS) capability and is the key element in a broader program to improve Dofasco’s ability to serve customers in the automotive,
construction, and industrial markets.
5
During Q2 2013, the Company restarted its Monlevade expansion project in Brazil. The project is expected to be completed in two phases with the first phase (investment in which has now
been approved) focused mainly on downstream facilities and consisting of a new wire rod mill in Monlevade with additional capacity of 1,050 ktpy of coils with capex estimated at a total of $280
million; and Juiz de Fora rebar capacity increase from 50 to 400ktpy (replacing some wire rod production capacity) and meltshop capacity increase by 200ktpy. This part of the overall investment
is expected to be finished in 2015. A decision whether to invest in Phase 2 of the project, focusing on the upstream facilities in Monlevade (sinter plant, blast furnace and meltshop), will be taken
at a later date.
6
During Q3 2013, Acindar Industria Argentina de Aceros S.A. (Acindar) announced its intention to invest $100 million in a new rolling mill (with production capacity of 400ktpy of rebars from 6 to
32mm) in Santa Fe province, Argentina devoted to the manufacturing of civil construction products. The new rolling mill will also enable ArcelorMittal Acindar to optimize production at its special
bar quality (SBQ) rolling mill in Villa Constitución, which in the future will only manufacture products for the automotive and mining industries. The project is expected to take up to 24 months to
build, with operations expected to start in 2016.
7
Valin ArcelorMittal Automotive Steel (“VAMA”), a downstream automotive steel joint venture between ArcelorMittal and Valin Group, of which the Company owns 49%, will produce steel for
high-end applications in the automobile industry and supply international automakers and first-tier Chinese car manufacturers as well as their supplier networks for the rapidly growing Chinese
market. The project involves the construction of state of the art pickling line tandem CRM (1.5mt), continuous annealing line (0.9mt) and hot dipped galvanised line (0.5mt). Total capital investment is $832 million (100% basis) with the first automotive coil to be produced in H2 2014.
8
The Company’s Board of Directors has approved the Early Revenue Phase (“ERP”) at Baffinland, which requires less capital investment than the full project as originally proposed. Implementation
of the ERP is now underway and environmental approvals are in place. The goal is to reach a 3.5mt per annum production rate during the open water shipping season by the end of 2015. The
budget for the ERP is approximately $730 million and requires upgrading of the road that connects the port in Milne Inlet to the mine site.
1
Other investing activities for the six months ended June 30, 2014 included an inflow of $183 million from the sale of ATIC Services S.A.
(“ATIC”) and the steel cord business ($144 million and $39 million, respectively) as well as proceeds from the exercise of the second put
option in Hunan Valin. Other investing activities for the six months ended June 30, 2014 included an outflow of $258 million associated
with the acquisition of ThyssenKrupp Steel USA through the joint venture with Nippon Steel & Sumitomo Metal Corporation (“NSSMC”).
Interim Management Report 21
Business overview
continued
Net cash (used in) provided by
the divestitures of ATIC, Bekaert
and the steel cord business and
financing activities
Net cash used in financing activities partially offset by net results from
the period.
was $1.1 billion for the six months
ended June 30, 2014, as compared
to cash provided by financing
Earnings distributions
activities of $1.9 billion for the six
On May 8, 2014 at the Annual
months ended June 30, 2013.
General Shareholders’ meeting, the
shareholders approved the
During the six months ended June Company’s dividend of $0.20 per
30, 2014, the Company repaid debt share. The dividend amounted to
in the amount of $2.7 billion
$333 million and was paid on July
(primarily €1.25 billon for the 7.25% 15, 2014.
convertible bonds due April 1, 2014
and $800 million for the 5.00%
Treasury shares
convertible bonds due May 15,
ArcelorMittal held 11,785,524
2014) and redeemed subordinated shares in treasury at June 30,
perpetual capital securities for
2014, down from 11,792,674
$657 million. These payments were shares at December 31, 2013 as a
offset by the receipts of $1.0 billion result of allocations to employees
from a loan agreement with a
under incentive plans. At June 30,
financial institution, proceeds of
2014, the number of treasury
$1.3 billion from the issuance of a
shares represented approximately
€750 million 3.00% Notes due
0.71% of the total issued number
March 25, 2019 under its €3 billion of ArcelorMittal shares.
wholesale Euro Medium Term Notes
Programme, and proceeds from
Research and development,
new 3-year $300 million financing
patents and licenses
provided by EDC (Export
Research and development
Development Canada).
expense (included in selling, general
expected iron ore price, this
underlying assumption has been
adjusted to $105/t (from $120/t
previously) implying a second-half
average of $100/t. All other
components of the framework
remain unchanged. As a result the
Company now expects 2014
operating income plus
depreciation and impairment to be
in excess of $7.0 billion. The key
assumptions behind this
framework are discussed below.
year-on-year increases in market
priced iron ore shipments are
expected. This should underpin a
15% expansion of marketable iron
ore volumes for the Company in
2014 as compared to 2013.
Based on the current economic
outlook, ArcelorMittal continues to
expect global apparent steel
consumption (“ASC”) to increase by
approximately 3-3.5% in 2014.
Steel demand growth has been
strong in Europe and we have
upgraded our ASC growth in 2014
to 3-4%. Despite the impact of
severe weather in the US on
demand in Q1 2014, data for Q2
2014 has been strong and US ASC
growth in 2014 has also been
upgraded to a forecast range of
5-6%. In China, we see signs of
stabilization due to the
government’s targeted stimulus,
and administrative expenses) was and expect steel demand in the
Dividends paid to non-controlling $150 million for the six months
range of 3-3.5%. While risks remain
shareholders in subsidiaries and
ended June 30, 2014 as compared to steel demand in the CIS and
payments to holders of
to $119 million for the six months
other emerging markets including
subordinated perpetual capital
ended June 30, 2013.
Brazil, the stronger fundamentals
securities during the six months
in our key developed world
ended June 30, 2014 amounted to
markets continue to support our
Trend information
$40 million and $22 million,
All of the statements in this “Trend expectation that steel shipments
respectively as compared to $9
million and $28 million, respectively information” section are subject to should increase by approximately
and qualified by the information set 3% in 2014 as compared to 2013.
for the six months ended June 30,
Following the successful ramp up
forth under the “Cautionary
2013.
of expanded capacity at
statement regarding forwardArcelorMittal Mines Canada,
looking statements”. See also
Equity
“—Key factors affecting results of year-on-year increases in market
Equity attributable to the equity
priced iron ore shipments are
operations” above.
holders of the parent decreased to
expected. This should underpin a
$48.9 billion at June 30, 2014,
15% expansion of marketable iron
compared with $49.8 billion at
ore volumes for the Company in
December 31, 2013, primarily due
2014 as compared to 2013.
to the redemption of subordinated Outlook
The 2014 operating income
perpetual capital securities, the
Following the successful ramp up
guidance framework remains valid. of expanded capacity at
declaration of the dividend to
Reflecting the weaker than
ArcelorMittal shareholders, and
ArcelorMittal Mines Canada,
Due to improved industry
utilization rates, and the further
contribution of the Company’s
Asset Optimization and
Management Gains cost
optimization programs, steel
margins are expected to improve
in 2014. This improvement is
forecasted despite the negative
weather related impact on NAFTA
performance at the beginning of
the year, which resulted in
increased costs of approximately
$350 million in the H1 2014.
The working assumption behind
the revised 2014 operating income
plus depreciation and impairment
guidance is an average iron ore
price of approximately $105/t (for
62% Fe CFR China).
Furthermore, the Company
expects net interest expense to be
approximately $1.6 billion in 2014
as compared to $1.8 billion in 2013
due primarily to lower average
debt.
Capital expenditure is expected to
be approximately $3.8-4.0 billion, a
slight increase over 2013, with
some of the expected spending
from last year rolling into 2014 as
well as the continuation of the
phase II Liberia project.
As previously communicated, the
Company does not intend to
ramp-up any major steel growth
capex or increase dividends until
the medium term $15 billion net
debt target has been achieved and
market conditions improve.
22 Interim Management Report
Business overview
continued
As a result of the Company’s change in reporting segment, the operational review for the years ended December 31, 2012 and 2013 are as
follows:
Year ended December 31, 2013 compared to year ended December 31, 2012
Sales, steel shipments, average steel selling prices and mining production
The following tables provide a summary of ArcelorMittal’s sales, steel shipments, changes in average steel selling prices by reportable segment
and mining (iron ore and coal) production and shipments for the year ended December 31, 2013 as compared to the year ended December 31,
2012:
Sales for the Year ended
December 311
Steel Shipments for the Year ended
December 312
2012
(in $ millions)
2013
(in $ millions)
2012
(thousands of MT)
2013
(thousands of MT)
NAFTA
20,760
19,645
22,394
22,500
Brazil
10,156
10,148
9,654
Europe
42,499
40,507
37,531
ACIS
10,197
8,419
12,921
5,493
5,766
84,213
79,440
Segment
Mining
Total
Changes in
Sales Steel Shipments
(%)
(%)
Average Steel
Selling Price (%)
(5)
-
(6)
9,797
-
1
(1)
38,269
(5)
2
(4)
12,422
(17)
(4)
(9)
N/A
N/A
5
N/A
N/A
82,182
82,610
(6)
1
(5)
1 Amounts are prior to inter-segment eliminations (except for total) and sales include non-steel sales.
2 Amounts are prior to inter-segment eliminations (except for total).
Mining shipments (million tonnes) 1
Total iron ore shipments 2
Iron ore shipped externally and internally and reported at market price 3
Iron ore shipped externally
Iron ore shipped internally and reported at market price 3
Iron ore shipped internally and reported at cost-plus 3
Total coal shipments 4
Coal shipped externally and internally and reported at market price 3
Coal shipped externally
Coal shipped internally and reported at market price 3
Coal shipped internally and reported at cost-plus 3
Year ended December 31, 2012
54.4
28.8
10.4
18.4
25.6
8.24
5.12
3.33
1.78
3.13
Year ended December 31, 2013
59.6
35.1
11.6
23.5
24.4
7.72
4.84
3.26
1.58
2.88
1 There are three categories of sales: (1) “External sales”: mined product sold to third parties at market price; (2) “Market-priced tonnes”: internal sales of
mined product to ArcelorMittal facilities reported at prevailing market prices; (3) “Cost-plus tonnes”: internal sales of mined product to ArcelorMittal
facilities on a cost-plus basis. The determinant of whether internal sales are reported at market price or reported at cost-plus is whether or not the raw
material could practically be sold to third parties (i.e., there is a potential market for the product and logistics exist to access that market).
2 Total of all finished products of fines, concentrate, pellets and lumps and includes tonnes shipped externally and internally and reported at market price
as well as tonnes shipped internally on a cost-plus basis.
3 Market-priced tonnes represent amounts of iron ore and coal from ArcelorMittal mines that could practically be sold to third parties. Market-priced
tonnes that are transferred from the Mining segment to the Company’s steel producing segments are reported at the prevailing market price.
Shipments of raw materials that do not constitute market-priced tonnes are transferred internally on a cost-plus basis.
4 Total of all finished products of coal and includes tonnes shipped externally and internally and reported at market price as well as tonnes shipped
internally on a cost-plus basis.
Interim Management Report 23
Business overview
continued
Iron ore production (million metric tonnes) 1
Own mines
North America 2
South America
Europe
Africa
Asia, CIS & Other
Total own iron ore production
Strategic long-term contracts - iron ore
North America 3
Africa 4
Total strategic long-term contracts - iron ore
Total
Type
Product
Open pit
Concentrate, lump, fines and pellets
Open pit
Lump and fines
Open pit
Concentrate and lump
Open pit / Underground
Fines
Open pit / Underground Concentrate, lump, fines and sinter feed
Open pit
Open pit
Pellets
Lump and fines
Year ended
December 31, 2012
Year ended
December 31, 2013
30.3
4.1
2.1
4.7
14.7
55.9
32.5
3.9
2.1
4.8
15.0
58.4
7.6
4.7
12.3
68.1
7.0
4.7
11.7
70.1
1 Total of all finished production of fines, concentrate, pellets and lumps.
2 Includes own mines and share of production from Hibbing (United States, 62.30%) and Peña (Mexico, 50%).
3 Consists of a long-term supply contract with Cleveland Cliffs for purchases made at a previously set price, adjusted for changes in certain steel prices
and inflation factors.
4 Includes purchases under an interim strategic agreement with Sishen Iron Ore Company (Proprietary) Limited (“SIOC”) which was entered into on
December 13, 2012 and became effective on January 1, 2013, pursuant to which SIOC supplied a maximum annual volume of 4.8 million tonnes of
iron ore at a weighted average price of $65 per tonne. Since 2010, SIOC and ArcelorMittal have entered into a series of strategic agreements that
established interim pricing arrangements for the supply of iron ore to ArcelorMittal on a fixed-cost basis. On November 5, 2013, ArcelorMittal and
SIOC entered into an agreement establishing long-term pricing arrangements for the supply of iron ore by SIOC to ArcelorMittal. Pursuant to the
terms of the agreement, which became effective on January 1, 2014, ArcelorMittal may purchase from SIOC up to 6.25 million tonnes iron ore per
year, complying with agreed specifications and lump-fine ratios. The price of iron ore sold to ArcelorMittal by SIOC is determined by reference to the
cost (including capital costs) associated with the production of iron ore from the DMS Plant at the Sishen mine plus a margin of 20%, subject to a
ceiling price equal to the Sishen Export Parity Price at the mine gate. While all prices are referenced to Sishen mine costs (plus 20%) from 2016, the
parties agreed to a different price for certain pre-determined quantities of iron ore for the first two years of the 2014 Agreement.
Coal production (million metric tonnes)
Own mines
North America
Asia, CIS & Other
Total own coal production
North America 1
Africa 2
Total strategic long-term contracts - coal
Total
Year ended
December 31, 2012
2.44
5.77
8.21
0.36
0.35
0.72
8.93
1 Includes strategic agreement - prices on a fixed price basis.
2 Includes long term lease - prices on a cost-plus basis.
Year ended
December 31, 2013
2.62
5.43
8.05
0.37
0.42
0.79
8.84
24 Interim Management Report
Business overview
continued
ArcelorMittal had sales of $79.4
billion for the year ended
December 31, 2013, representing
a decrease of 6% from sales of
$84.2 billion for the year ended
December 31, 2012, primarily due
to lower average steel selling prices
(which were down 5%) reflecting
lower raw material prices, partially
offset by improved marketable
mining shipments (which were up
22%). Sales in 2012 also included
$0.9 billion related to the divested
operations Paul Wurth and Skyline
Steel. In the first half of 2013, sales
of $39.9 billion represented a 12%
decrease from sales of $45.2 billion
in the first half of 2012, primarily
due to a drop in average steel
prices and lower shipments,
resulting from weaker market
conditions compared to 2012.
Sales for the first half of 2013 did
not include any contribution from
Paul Wurth and Skyline Steel, which
amounted to $0.7 billion in the first
half of 2012. In the second half of
2013, sales of $39.5 billion
represented an increase of 1%
from sales of $39.0 billion in
second half of 2012 primarily
driven by an increase in steel
shipments of 5% offset by a drop
in average steel prices of 3%. The
latter includes lower average steel
prices during the third quarter of
2013 as a result of weaker market
conditions in Europe for flat and
long products and higher average
prices in the fourth quarter of
2013 due in particular to stronger
market conditions in the Americas.
same period in 2012, while average
steel selling price in the second half
of the year was down 3% from the
same period in 2012.
ArcelorMittal had steel shipments
of 82.6 million tonnes for the year
ended December 31, 2013,
representing an increase of 1%
from steel shipments of 82.2
million tonnes for the year ended
December 31, 2012. Average steel
selling price for the year ended
December 31, 2013 decreased 5%
compared to the year ended
December 31, 2012, following
continued weakness in demand in
Europe, a slight decline of demand
in North America combined with
increased competition in
international markets. Average
steel selling price in the first half of
2013 decreased by 6% from the
Total steel shipments reached 9.8
million tonnes for the year ended
Total steel shipments were 22.5
December 31, 2013, which was a
million tonnes for the year ended 1% increase from steel shipments
December 31, 2013 and remained for the year ended December 31,
relatively flat compared to the year 2012. Shipments were 4.9 million
ended December 31, 2012.
tonnes in the first half of 2013,
Shipments were 11.0 million tonnes which remained relatively flat
in the first half of 2013, down 4%
compared to the same period in
from the same period in 2012,
2012, while shipments in the
while shipments in the second half second half of the year were up
of the year were 11.5 million
by 4% as compared to the second
tonnes, up 5% from the same
half of 2012.
period in 2012. The decrease in
steel shipments in the first half of
Average steel selling price
2013 reflected lower crude steel
decreased 1% for the year ended
Average steel selling price
production in the United States due December 31, 2013 as compared
decreased 4% for the year ended
ArcelorMittal had own iron ore
production of 58.4 million tonnes
for the year ended December 31,
2013, an increase of 4% as
compared to 55.9 million tonnes
for the year ended December 31,
2012. ArcelorMittal had own
coking coal production of 8.1
million tonnes for the year ended
December 31, 2013, a decrease of
2% as compared to 8.2 million
tonnes for the year ended
December 31, 2012. The increase
in iron ore production resulted
primarily from expanded
operations in Canada.
NAFTA
Sales in the NAFTA segment were
$19.6 billion for the year ended
December 31, 2013, representing
a decrease of 5% as compared to
$20.8 billion for the year ended
December 31, 2012. Sales
decreased primarily due to a 6%
decrease in average steel selling
prices as shipments were relatively
flat. Sales in the first half of 2013
were $9.7 billion, down 12% from
the same period in 2012 primarily
driven by a 4% decrease in
shipments and 8% decrease in
average steel selling prices. In the
second half of the year sales were
$10 billion, up 2% from the same
period in 2012 primarily driven by a
5% increase in shipments along
with a 3% decrease in average
steel selling prices.
to labor issues at Burns Harbor and
operational incidents at Indiana
Harbor East and West, partially
offset by the use of inventory and
supplies from other NAFTA units.
The increase in the second half of
the year reflected the resolution of
the labor issues and operational
incidents that had affected the
second quarter of 2013.
Average steel selling price
decreased 6% for the year ended
December 31, 2013 as compared
to the year ended December 31,
2012. Average steel selling price in
the first half of 2013 was down 8%
from the same period in 2012
(which reflected slightly lower
demand and decreasing trend in
raw material prices and subdued
market sentiment), while average
steel selling price in the second half
of the year was down 3% from the
same period in 2012, although
average steel selling price in the
fourth quarter of 2013 was flat as
compared to the fourth quarter of
2012.
Brazil
In the Brazil segment, sales were
$10.1 billion for the year ended
December 31, 2013 which was
relatively flat compared to the
year ended December 31, 2012.
Sales in the first half of 2013
were $5.1 billion, down 3% from
the same period in 2012, while
sales in the second half of the
year were $5 billion, up 3% from
the same period in 2012.
to the year ended December 31,
2012. Average steel selling price in
the first half of 2013 was down 2%
from the same period in 2012 due
to currency devaluation in
Venezuelan and lower production
and selling prices for the Tubular
business. The average steel selling
price in the second half of the year
was down 1% from the same
period in 2012, although average
steel selling price in the fourth
quarter of 2013 was 7% higher as
compared to fourth quarter of
2012.
Europe
Sales in the Europe segment were
$40.5 billion for the year ended
December 31, 2013, representing
a decrease of 5% as compared to
$42.5 billion for the year ended
December 31, 2012. The decrease
was primarily due to a 4% decrease
in average steel selling price while
steel shipments increased by 2%.
Sales for the year ended December
31, 2012 also included a $0.4
billion contribution from Skyline
Steel, which was disposed of in
June 2012. Sales in the first half of
2013 were $20.8 billion, down
10% from the same period in
2012, and in the second half of the
year sales were $19.8 billion, up
2% from the same period in 2012.
Total steel shipments were 38.3
million tonnes for the year ended
December 31, 2013, an increase of
2% from steel shipments for the
year ended December 31, 2012.
Shipments were 19.5 million
tonnes in the first half of 2013,
down 3% from the same period in
2012, while shipments in the
second half of the year were 18.7
million tonnes, up 8% from the
same period in 2012. The decrease
in the first half of 2013 was
primarily driven by continued
decline in demand due to
macroeconomic conditions. The
increase in the second half of 2013
resulted in particular from recovery
in demand following an
improvement in market sentiment.
Interim Management Report 25
Business overview
continued
December 31, 2013 as compared
to the year ended December 31,
2012. Average steel selling price in
the first half of 2013 and in the
second half of 2013 were down
5% and 3%, respectively, as
compared to the first and second
half of 2012, reflecting weaker
buyer sentiment, strong domestic
competition and declining raw
material prices.
ACIS
In the ACIS segment, sales were
$8.4 billion for the year ended
December 31, 2013, representing
a decrease of 17% from sales of
$10.2 billion for the year ended
December 31, 2012. The decrease
was primarily due to a 9% decrease
in average selling price with
shipments decreasing 4%. Sales for
the year ended December 31,
2012 also included a $0.5 billion
contribution from Paul Wurth,
which was disposed of in
December 2012. Sales in the first
half of 2013 were $4.3 billion,
down 22% from the same period in
2012, while sales in the second half
of the year were $4.1 billion, down
12% from the same period in 2012.
Total steel shipments reached 12.4
million tonnes for the year ended
December 31, 2013, a decrease of
4% from steel shipments for the
year ended December 31, 2012.
Shipments were 6.2 million tonnes
in the first half of 2013, down 8%
from the same period in 2012
(primarily due to lower volumes in
South Africa, caused by fire
disruption at the Vanderbijlpark
site, and Kazakhstan) while
shipments in the second half of the
year were 6.2 million tonnes and
remained flat against the same
period in 2012.
$5.5 billion for the year ended
December 31, 2012. The increase
was primarily due to higher iron ore
selling prices driven by the
evolution in international prices and
higher iron ore shipments from
own mines, partly offset by lower
prices for a portion of iron ore
shipments priced on a quarterly lag
basis, lower coal prices as a result
of evolution in international prices
and lower coal shipments from own
mines. Sales in the first half of
2013 were $2.6 billion, down 12%
Average steel selling price
from the same period in 2012,
decreased 9% for the year ended
while sales in the second half of the
December 31, 2013 as compared
year were $3.2 billion, up 24%
to the year ended December 31,
from the same period in 2012.
2012. This decrease was mainly
Sales in the second half of 2013
related to the weakening of local
were higher than in the first half
currencies (South African rand and primarily due to higher marketable
Russian ruble) against U.S. dollar,
iron ore shipments in the second
lower prices in CIS and weak
half of 2013 as compared to the
international demand. Average
first half following the
steel selling price in the first half of commissioning of additional
2013 was down 11% from the
capacity in the Company’s
same period in 2012, while average Canadian operations.
steel selling price in the second half
of the year was down 6% from the Sales to external customers were
same period in 2012.
stable at $1.7 billion for the year
ended December 31, 2013 as
compared to $1.7 billion for the
Mining
In the Mining segment, sales were year ended December 31, 2012.
Iron ore shipments to external
$5.8 billion for the year ended
customers increased 12% from
December 31, 2013, representing
10.4 million tonnes in 2012 to 11.6
an increase of 5% from sales of
million tonnes in 2013 while coal
shipments to external customers
decreased by 2% from 3.33 million
tonnes to 3.26 million tonnes. The
increase in the volume of external
sales of iron ore was mainly due to
the Company’s increasing
marketing efforts in anticipation of
increasing mining production. The
Company expects the trend
toward an increase in the external
sales as a percentage of overall
mining sales to continue in the near
to mid-term. In the second half of
2013, iron ore shipments to
external customers were 68%
higher than in the first half primarily
as a result of higher shipments
from the Company’s Canadian
operations. With respect to prices,
for example, the average
benchmark iron ore price per tonne
in 2013 of $135.2 CFR China (62%
Fe) and the average benchmark
price for hard coking coal FOB
Australia in 2013 of $158.5 per
tonne were 4% higher and 24%
lower than in 2012, respectively. It
should be noted, however, that
there may not be a direct
correlation between benchmark
prices and actual selling prices in
various regions at a given time.
Operating income (Loss)
The following table provides a summary of operating income (loss) and operating margin of ArcelorMittal for the year ended December 31, 2013,
as compared with operating income and operating margin for the year ended December 31, 2012:
Operating income (Loss)
for the year ended December for the year ended December
1
31, 2012 (in $ millions)
31,1 2013 (in $ millions)
NAFTA
Brazil
Europe
ACIS
Mining
Total adjustments to segment operating income and other 2
Total consolidated operating income
1,243
561
(5,725)
(54)
1,209
121
(2,645)
630
1,204
(985)
(457)
1,176
(371)
1,197
Operating margin
2012 (%)
2013 (%)
6
6
(13)
(1)
22
(2)
3
12
(2)
(5)
20
7
1 Segment amounts are prior to inter-segment eliminations.
2 Total adjustments to segment operating income and other reflects certain adjustments made to operating income of the segments to reflect corporate
costs, income from non-steel operations (e.g. energy, logistics and shipping services) and the elimination of stock margins between the segments. See
table below.
26 Interim Management Report
Business overview
continued
Year ended December Year ended December
31, 2012 (in $
31, 2013 (in $
millions)
millions)
Corporate and shared services 1
Financial activities
Shipping and logistics
Intragroup stock margin eliminations
Depreciation and impairment
Total adjustments to segment operating income and other
(82)
13
24
216
(50)
121
(207)
(12)
(29)
(73)
(50)
(371)
1 Includes primarily staff and other holding costs and results from shared service activities.
ArcelorMittal’s operating income for
the year ended December 31, 2013
was $1.2 billion, as compared with
an operating loss of $2.6 billion for
the year ended December 31, 2012.
The operating income in 2013
reflected $0.4 of fixed asset
impairment charges and $0.6 billion
of restructuring charges.
Operating income in the first nine
months of 2013 ($1.2 billion) was
lower than in the first nine months
of 2012 (when it reached $2.1
billion), while the operating loss in
the fourth quarter of 2013 ($36
million) was a significant
improvement over the operating
loss recorded in the fourth quarter
of 2012 ($4.7 billion). The fourth
quarter of 2013 was negatively
affected by the above-mentioned
impairment losses and restructuring
charges for $0.7 billion while the
fourth quarter of 2012 was
negatively affected by a $4.3 billion
impairment of goodwill and $1.3
billion of charges related to asset
optimization ($0.7 billion of fixed
asset impairment charges and $0.6
billion of restructuring charges).
Cost of sales consists primarily of
purchases of raw materials
necessary for steel-making (iron
ore, coke and coking coal, scrap and
alloys), electricity, repair &
maintenance costs, as well as direct
labor costs, depreciation and
impairment. Cost of sales for the
year ended December 31, 2013
was $75.2 billion as compared to
$83.5 billion for the year ended
December 31, 2012. Excluding
impairment losses of $0.4 billion
and restructuring charges for $0.6
billion as described below for the
year ended December 31, 2013 and
$5.6 billion for the year ended
December 31, 2012, cost of sales
decreased by 5% as a result of lower
raw material prices. Selling, general
and administrative expenses
(“SG&A”) for the year ended
December 31, 2013 were $3.0
billion as compared to $3.3 billion
for the year ended December 31,
2012. SG&A remained relatively
stable compared to sales as it
represented 3.8% of sales for the
year ended December 31, 2013 as
compared to 3.9% for the year
ended December 31, 2012.
HDG5. ArcelorMittal also
recognized an impairment charge of
$24 million relating to the closure of
the organic coating and tin plate
lines at the Florange site of
ArcelorMittal Atlantique et Lorraine
in France (Europe). Additionally, in
connection with the agreed sale of
certain steel cord assets in the US,
Europe and Asia (Europe) to the
joint venture partner Kiswire Ltd.,
ArcelorMittal recorded an
impairment charge of $41 million
with respect to the subsidiaries
included in this transaction (see
Note 5 to ArcelorMittal’s
consolidated financial statements
Operating income for the year
for a breakdown of the impairment
ended December 31, 2013 included charges with respect to this sale.
impairment losses of $444 million,
which compared to impairment
Operating income for the year
losses of $5,035 million for the year ended December 31, 2013 was
ended December 31, 2012. These
positively affected by a non-cash
impairment losses included a charge gain of $92 million corresponding
of $181 million related to the
to the final recycling of income
Thabazimbi mine in ArcelorMittal
relating to unwinding of hedges on
South Africa (ACIS) following the
raw material purchases and a $47
transfer of the future operating and million fair valuation gain relating to
financial risks of the asset to Kumba DJ Galvanizing in Canada, a joint
as a result of the iron ore supply
operation in which the Company
agreement signed with Sishen on
acquired the remaining 50%
November 5, 2013. ArcelorMittal
interest held by the other joint
also recognized impairment charges operator.
of $101 million and $61 million for
the costs associated with the
Operating income for the year
discontinued iron ore projects in
ended December 31, 2013 was
Senegal and Mauritania (Mining),
negatively affected by restructuring
respectively. The Company
charges totaling $552 million
recorded an impairment loss of $55 primarily related to costs incurred
million in connection with the long for the long term idling of the
term idling of the ArcelorMittal
Florange liquid phase in
Tallinn galvanizing line in Estonia
ArcelorMittal Atlantique et Lorraine
(Europe) and reversed an
(including voluntary separation
impairment loss of $52 million at
scheme costs, site rehabilitation /
the Liège site of ArcelorMittal
safeguarding costs and take or pay
Belgium (Europe) following the
obligations) and to social and
restart of the hot dip galvanizing line environmental costs as a result of
the agreed industrial and social plan
for the finishing facilities at the
Liège site of ArcelorMittal Belgium.
Operating loss for the year ended
December 31, 2012 was negatively
impacted by the $4.3 billion
impairment of goodwill in the
European businesses and $1.3 billion
charges related to asset
optimization (of which $0.7 billion
of fixed asset impairment charges
and $0.6 billion of restructuring
charges).
NAFTA
Operating income for the NAFTA
segment amounted to $0.6 billion
for the year ended December 31,
2013, compared to operating
income of $1.2 billion for the year
ended December 31, 2012.
Operating income for the segment
amounted to $0.4 billion for the
second half of the year, compared
to $0.2 billion in the first half.
Operating income in the first half of
2013 was negatively affected by
lower shipments following labor
issues at Burns Harbor and
operational incidents at Indiana
Harbor East and West during the
second quarter and positively
affected by a $47 million fair
valuation gain relating to DJ
Galvanizing in Canada, a joint
operation in which the Company
acquired the remaining 50% interest
held by the other joint operator. The
higher operating income in the
second half of 2013 compared to
the first half was largely driven by
5% higher volumes partly offset by
lower average steel selling prices in
particular in the third quarter.
Interim Management Report 27
Business overview
continued
Operating income for the year
ended December 31, 2012 was
positively affected by the
curtailment gain of $285 million
resulting from the changes to the
pension plan and health and dental
benefits in ArcelorMittal Dofasco in
Canada and included a charge of
$72 million corresponding to
one-time signing bonus and
actuarial losses related to post
retirement benefits following the
conclusion of the new US labor
agreement.
Brazil
Operating income for the Brazil
segment for the year ended
December 31, 2013 was $1.2 billion
compared to $0.6 billion for the
year ended December 31, 2012.
Operating income for the segment
amounted to $0.7 billion for the
second half of the year, compared
to operating income of $0.5 billion
in the first half of the year.
Operating income improved by
$0.6 billion in 2013 as compared to
2012 primarily due to a positive
price cost squeeze and improved
profitability in South America.
material purchases, operating
income improved by $0.4 billion
reflecting higher shipment volumes
and benefits from management
gains and asset optimization.
Europe’s operating loss included
restructuring costs amounting to
$517 million, including $137 million
of costs incurred for the long term
idling of the Florange liquid phase in
ArcelorMittal Atlantique et Lorraine
(including voluntary separation
scheme costs, site rehabilitation /
safeguarding costs and take or pay
obligations) and $354 million
(including social and environmental
costs) as a result of the agreed
industrial and social plan for the
finishing facilities at the Liège site of
ArcelorMittal Belgium. These
charges were partially offset by a
reversal of provisions of $38 million
in France and Spain following the
revision of certain assumptions.
Europe’s operating loss was reduced
by a non-cash gain of $92 million
corresponding to the final recycling
of income relating to unwinding of
hedges on raw material purchases.
Europe’s operating loss included also
impairment charges of $86 million,
Europe
of which was $55 million in
Operating loss for the Europe
connection with the long term idling
segment for the year ended
of the ArcelorMittal Tallinn
December 31, 2013 was $1.0 billion galvanizing line in Estonia largely
compared to operating loss of $5.7 offset by the reversal of an
billion for the year ended December impairment loss of $52 million at
31, 2012. Operating loss for the
the Liège site of ArcelorMittal
segment amounted to $0.7 billion Belgium following the restart of the
for the second half of the year,
hot dip galvanizing line HDG5, $24
compared to operating loss of $0.3 million primarily relating to the
billion in the first half of the year.
closure of the organic coating and
Despite the continuous difficult
tin plate lines at the Florange site of
economic environment in Europe
ArcelorMittal Atlantique et Lorraine
reflected in lower average steel
in France and an impairment charge
selling prices in 2013 compared to
of $41 million with respect to the
2012 (which represented a
subsidiaries included in the agreed
decrease of approximately €50/
sale of certain steel cord assets in
tonne for flat products), shipments the US, Europe and Asia to the joint
increased by 2% in 2013 as a result venture partner Kiswire Ltd..
of a mild pick-up in demand
particularly in the second half of
Europe’s operating loss for the year
2013. Excluding impairment and
ended December 31, 2012 mainly
restructuring charges, gain on sale resulted from a $4,308 million
of carbon dioxide credits and
($2,493, $1,010 and $805 million
unwinding of hedges on raw
for the former Flat Carbon Europe,
Long Carbon Americas and Europe
and Distribution Solutions
segments, respectively) impairment
charge of goodwill and $502 million
impairment losses related to
property, plant and equipment in
the framework of asset
optimization, including $130 million
in respect of the long term idling of
the liquid phase at the Florange site
of ArcelorMittal Atlantique et
Lorraine in France, $296 million with
respect to the intention to
permanently close the coke plant
and six finishing lines at the Liège
site of ArcelorMittal Belgium and
$61 million related to the extended
idling of the electric arc furnace and
continuous caster at the Schifflange
site in Luxembourg. Impairment
losses also included a charge of
$222 million relating to facilities in
Spain and North Africa in the Long
Carbon Europe operating segment;
in determining these expenses, the
Company analyzed the recoverable
amount of these facilities based on
their value in use and determined
that the recoverable amount from
these facilities was less than their
carrying amount. In addition,
operating loss for the year ended
December 31, 2012 was increased
by restructuring costs amounting to
$587 million as part of asset
optimization, of which $231 million
related to the closure of the primary
facilities at the Liège site of
ArcelorMittal Belgium and $64
million associated with separation
schemes primarily relating to
ArcelorMittal Poland. These charges
were partially offset by a gain of
$220 million recorded on the sale of
carbon dioxide credits (the
proceeds of which will be reinvested in energy saving projects),
a non-cash gain of $566 million
relating to unwinding of hedges on
raw material purchases and the
$331 million gain on disposal of
Skyline Steel.
year ended December 31, 2012.
Lower profitability in 2013 was
primarily due to a negative
price-cost squeeze, lower average
steel selling prices, which declined
9% compared to 2012 and lower
shipments (down 4% as compared
to 2012). Operating loss for the
segment amounted to $317 million
for the second half of the year,
compared to $140 million in the first
half. Operating loss in the second
half included a charge of $181
million related to the Thabazimbi
mine in ArcelorMittal South Africa
following the transfer of the
operating and financial risks of the
asset to Kumba as a result of the
iron ore supply agreement signed
with Sishen on November 5, 2013.
Operating loss for the first half of
2013 was increased by the impact of
the fire that occurred in February at
the Vanderbijlpark plant in
ArcelorMittal South Africa. It caused
extensive damage to the steel
making facilities resulting in an
immediate shutdown of the
facilities. No injuries were reported
as a result of the incident. Repairs
were completed and full operations
resumed during the second week
of April 2013. An estimated 361,000
tonnes of production volumes was
lost as a result of the incident. The
resulting operating loss net of
insurance indemnification is
currently estimated at $56 million.
Operating loss for the year ended
December 31, 2012 included the
gain on disposal of Paul Wurth for
$242 million.
Mining
Operating income for the Mining
segment for the year ended
December 31, 2013 was stable at
$1.2 billion, compared to operating
income of $1.2 billion for the year
ended December 31, 2012. The
stability in operating income in 2013
generally reflected slightly improved
ACIS
iron ore prices partly offset by lower
Operating loss for the ACIS segment coal selling prices. As noted above,
for the year ended December 31,
the average reference price of iron
2013 was $0.5 billion, compared to ore increased from $130/tonne CFR
operating loss of $0.1 billion for the China for 62% Fe in 2012 to
28 Interim Management Report
Business overview
continued
$135.2/tonne in 2013. Coal prices
decreased by $51/tonne between
2012 and 2013. Iron ore marketable
volume for the year ended
December 31, 2013 was 35.1
million tonnes, compared to 28.8
million tonnes for the year ended
December 31, 2012. Coal
marketable volume for the year
ended December 31, 2013 was
slightly lower at 4.8 million tonnes,
compared to 5.1 million tonnes for
the year ended December 31, 2012.
Operating income for the year
ended December 31, 2013 was
negatively impacted by impairment
charges of $0.2 billion including
$101 million and $61 million for the
costs associated with the
discontinued iron ore projects in
Senegal and Mauritania,
respectively. The increase in cost of
sales from $4.0 billion in 2012 to
$4.4 billion in 2013 resulted from
the $0.2 billion impairment charge
mentioned above and the remaining
increase by 5% was primarily related
to higher shipments.
Operating income for the segment
amounted to $0.6 billion for the
second half of the year, compared
to $0.6 billion in the first half.
Operating income for the second
half of 2013 was negatively
affected by the above mentioned
impairment charges.
Income (loss) from associates,
joint ventures and other
investments
ArcelorMittal recorded a loss of
$442 million from associates, joint
ventures and other investments for
the year ended December 31,
2013, as compared with income
from associates, joint ventures and
other investments of $185 million
for the year ended December 31,
2012. Loss for the year ended
December 31, 2013 included
impairment charges for a total
amount of $422 million, of which
$200 million related to the
Company’s 47% stake in the
associate China Oriental as a result
of current expectations regarding
future performance. In addition, the
Company recorded an impairment
charge of $111 million relating to
the Company’s 50% interest in the
associate Kiswire ArcelorMittal Ltd
in the framework of the agreed sale
of certain steel cord assets to the
joint venture partner Kiswire Ltd.
(with another impairment charge
recorded in cost of sales in the
Europe segment as described above
and in note 5 to ArcelorMittal’s
consolidated financial statements).
Loss for the year ended December
31, 2013 also included an
impairment charge of $111 million
relating to the associate Coal of
Africa as a result of lower
profitability and decline in market
value. Loss for the year ended
December 31, 2013 included a
charge of $57 million following the
disposal of a 6.66% interest in
Erdemir shares by way of a single
accelerated bookbuilt offering to
institutional investors. In addition,
loss for the year ended December
31, 2013 included a $56 million
expense for contingent
consideration with respect to the
Gonvarri Brasil acquisition made in
2008 partly offset by a gain of $45
million with respect to the sale of a
10% interest in Hunan Valin Steel
Tube and Wire Co. Ltd. (“Hunan
Valin”) following the exercise of the
first and second put options. On
February 8, 2014, the Company
exercised the third put option and
decreased its interest in Hunan Valin
to 15.05%.
foreign currency other than the
functional currency of a subsidiary)
and other net financing costs (which
mainly include bank fees, accretion
of defined benefit obligations and
other long term liabilities). Net
financing costs were slightly higher
for the year ended December 31,
2013, at $3.1 billion, as compared
with $2.9 billion for the year ended
December 31, 2012.
Net interest expense (interest
expense less interest income) was
$1.8 billion for the year ended
December 31, 2013 as compared
to $1.9 billion for the year ended
December 31, 2012. Interest
expense was slightly lower for the
year ended December 31, 2013 at
$1.9 billion, compared to interest
expense of $2.0 billion for the year
ended December 31, 2012,
primarily due to the positive effect
of lower debt following the tender
and repayment of bonds and
privately placed notes at the end of
June 2013, partly offset by
step-ups in the interest rate payable
on most of the Company’s
outstanding bonds as a result of the
Company’s rating downgrades in
the second half of 2012. Interest
income for the year ended
December 31, 2013 amounted to
$0.1 billion, compared to $0.2
billion for the year ended December
31, 2012.
Foreign exchange and other net
financing costs (which include bank
Income from associates, joint
fees, interest on pensions and fair
ventures and other investments for value adjustments of derivative
the year ended December 31, 2012 instruments) increased slightly from
included a net gain of $101 million $0.9 billion for the year ended
on the disposal of a 6.25% stake in December 31, 2012 to $1.3 billion
Erdemir and an impairment loss of for the year ended December 31,
$185 million, reflecting the
2013. Foreign exchange and other
reduction of the carrying amount of net financing costs for the year
the investment in Enovos to the net ended December 31, 2013 included
proceeds from the sale.
an expense of $80 million relating
to interest and penalties with
respect to the settlement of a tax
Financing costs - net
amnesty program in Brazil.
Net financing costs include net
interest expense, revaluation of
financial instruments, net foreign
Income tax expense (benefit)
exchange income/expense (i.e., the ArcelorMittal recorded a
net effects of transactions in a
consolidated income tax expense of
$0.2 billion for the year ended
December 31, 2013, as compared
to a consolidated income tax benefit
of $1.9 billion for the year ended
December 31, 2012. The full year
2013 income tax expense includes
an expense of $222 million related
to the settlement of two tax
amnesty programs in Brazil. For
additional information related to
ArcelorMittal’s income taxes, see
Note 21 to ArcelorMittal’s
consolidated financial statements.
ArcelorMittal’s consolidated income
tax expense (benefit) is affected by
the income tax laws and regulations
in effect in the various countries in
which it operates and the pre-tax
results of its subsidiaries in each of
these countries, which can vary
from year to year. ArcelorMittal
operates in jurisdictions, mainly in
Eastern Europe and Asia, which have
a structurally lower corporate
income tax rate than the statutory
tax rate as in effect in Luxembourg
(29.22%), as well as in jurisdictions,
mainly in Western Europe and the
Americas, which have a structurally
higher corporate income tax rate.
Interim Management Report 29
Business overview
continued
The statutory income tax expense (benefit) and the statutory income tax rates of the countries that most significantly resulted in the tax expense
(benefit) at statutory rate for each of the years ended December 31, 2011 and 2012 are as set forth below:
United States
Argentina
France
Brazil
Belgium
Germany
Spain
Luxembourg
Mexico
South Africa
Canada
Algeria
Russia
Kazakhstan
Czech Republic
Poland
Romania
Ukraine
Dubai
Others
Total
2012
Statutory income tax
Statutory income tax rate
133
35.00%
43
35.00%
(312)
34.43%
(124)
34.00%
(44)
33.99%
(225)
30.30%
(253)
30.00%
(1,343)
29.22%
71
28.00%
(24)
28.00%
174
26.90%
(21)
25.00%
18
20.00%
13
20.00%
19
19.00%
(23)
19.00%
(4)
16.00%
(58)
16.00%
0.00%
(156)
(2,116)
2013
Statutory income tax
Statutory income tax rate
(120)
35.00%
52
35.00%
(224)
34.43%
94
34.00%
(208)
33.99%
(138)
30.30%
(218)
30.00%
203
29.22%
(93)
30.00%
(57)
28.00%
240
26.90%
(26)
25.00%
(14)
20.00%
(24)
20.00%
(7)
19.00%
(8)
19.00%
(29)
16.00%
(32)
16.00%
0.00%
18
(591)
Note: The statutory tax rates are the (future) rates enacted or substantively enacted by the end of the respective period.
Non-controlling interests
Net loss attributable to noncontrolling interests was $30 million
for the year ended December 31,
2013, as compared with net loss
attributable to non-controlling
interests of $117 million for the year
ended December 31, 2012. Net loss
attributable to non-controlling
interests decreased in 2013
primarily as a result of income
attributable to non-controlling
interests in ArcelorMittal Mines
Canada following the sale of a 15%
stake in the first half of 2013.
Net loss attributable to equity
holders of the parent
ArcelorMittal’s net loss attributable
to equity holders of the parent for
the year ended December 31, 2013
amounted to $2.5 billion compared
to net loss attributable to equity
holders of $3.3 billion for the year
ended December 31, 2012, for the
reasons discussed above.
30 Interim Management Report
Recent Developments
Recent Developments
The uses of proceeds from the
issuance are for general
corporate purposes.
controlled by Bekaert,
will be principally responsible for
transferred
the
steel
wire
marketing the product on behalf
• On July 29, 2014, ArcelorMittal
products business of
of the joint venture. The price
and Billiton Guinea B.V. (“BHP
ArcelorMittal
Costa
Rica
and
its
ArcelorMittal will receive for its
Billiton”) have signed a sale and
• On June 30, 2014, ArcelorMittal
55% interest in Cimaf Cabos, a
slabs will be determined by the
purchase agreement for the
completed
the
sale
of
its
78%
cable
business
in
Osasco
(São
volume, price and cost
acquisition by ArcelorMittal of a
stake in the European port
Paulo) Brazil that is currently a
performance of the joint venture.
43.5% stake in Euronimba
handling
and
logistics
company
branch
of
Belgo
Bekaert
Arames
Limited (“Euronimba”), which
ATIC for €155 million ($144
(“BBA”) to Bekaert. The
• On February 20, 2014,
holds a 95% indirect interest in
million
net
of
cash
of
$68
million
transaction
also
included
wire
ArcelorMittal redeemed all of its
the Mount Nimba iron ore
disposed of ) to H.E.S. Beheer
rod supply agreements between
outstanding $650 million
project in Guinea (“Project”). The
N.V.,
who
held
the
remaining
the
Company
and
Bekaert,
and
a
subordinated perpetual capital
Project comprises a 935 million
22% non-controlling interest.
cable wire supply agreement
securities following the
tonne direct shipped ore
The
transaction
is
consistent
with
between
BBA
and
Bekaert.
occurrence of a “Ratings Agency
resource with an average grade
ArcelorMittal’s stated strategy of
Event”, as defined in the terms of
of 63.1% Fe and is located
selective
divestment
of
non-core
•
On
March
25,
2014,
ArcelorMittal
the securities. The notes were
approximately 40 kilometres
assets.
issued €750 million 3.00% Notes
redeemed at a redemption price
from ArcelorMittal Liberia’s mine
due
March
25,
2019
under
its
€3
of 101% of the principal amount
and infrastructure operations.
billion wholesale Euro Medium
thereof, plus any interest accrued
ArcelorMittal has simultaneously • On June 10, 2014, ArcelorMittal
entered
into
a
loan
agreement
Term
Notes
Programme.
The
to but excluding the redemption
entered into a sale and purchase
with a financial institution for
uses of proceeds from the
date.
agreement with Compagnie
$1.0
billion.
The
financial
issuance
were
for
general
Française de Mines et Métaux (a
institution has the right to
corporate purposes.
• On January 17, 2014,
member of the Areva group) for
request
early
repayment
once
ArcelorMittal extended the
the acquisition of its 13% stake in
per year beginning in February
• On February 26, 2014,
conversion date for the $1 billion
Euronimba. The closing of these
2015
until
the
final
maturity
on
ArcelorMittal,
together
with
privately placed MCB issued on
two transactions would give
April 20, 2017.
NSSMC, completed the
December 28, 2009 by one of its
ArcelorMittal a 56.5% ownership
acquisition
of
ThyssenKrupp
wholly-owned Luxembourg
of Euronimba. The remaining
Steel USA (“TK Steel USA”), a steel
subsidiaries. The mandatory
43.5% of Euronimba is owned by • On May 30, 2014, the Company
completed
the
disposal
of
its
processing
plant
in
Calvert,
conversion date of the bond has
Newmont LaSource S.A.S.
50% stake in the joint venture
Alabama, having received all
been extended to January 29,
(“Newmont”). As part of the
ArcelorMittal
Kiswire
Ltd
in
South
necessary
regulatory
approvals.
2016. The other main features of
transaction, ArcelorMittal has
Korea and certain other entities
The transaction – a 50/50 joint
the MCB remain unchanged. The
granted Newmont a limited
of
its
steel
cord
business
in
the
venture,
AM/NS
Calvert
bond was placed privately with a
duration option which, if
United States, Europe and Asia to (“Calvert”), with NSSMC – was
Luxembourg affiliate of Crédit
exercised, would result in
Kiswire
Ltd.
The
Company
completed
for
an
agreed
price
of
Agricole Corporate and
Newmont and ArcelorMittal
received a preliminary cash
$1,550 million plus working
Investment Bank and is not
owning equal stakes in
consideration
of
$55
million
($39
capital
and
net
debt
adjustment.
listed. The subsidiary has
Euronimba. The transaction is
million net of cash of $16 million
The Calvert plant has a total
simultaneously executed
subject to certain closing
disposed
of)
to
be
adjusted
upon
capacity
of
5.3
million
tonnes
amendments providing for the
conditions, including merger
final determination of the net
including hot rolling, cold rolling,
extension of the outstanding
control clearance and certain
debt
and
working
capital
coating
and
finishing
lines.
The
notes into which it invested the
approvals from the Government
balance at closing date. The
transaction was financed
proceeds of the bond issuance,
of Guinea.
Company’s existing intra group
through a combination of debt
which are linked to shares of the
debt of $102 million was
at the joint venture level and
listed companies Eregli Demir Va
• On July 10, 2014, ArcelorMittal
assumed
by
Kiswire
Ltd.
and
will
equity,
of
which
$258
million
was
Celik Fab. T. AS of Turkey and
signed an agreement with
be repaid at the latest during the
paid by the Company. The
China Oriental, both of which are
Doosan Corporation, a South
first
half
of
2015.
The
Company
transaction
includes
a
six-year
held by ArcelorMittal
Korean conglomerate, for the
will receive an additional
agreement to purchase two
subsidiaries.
sale of all of the shares of Circuit
consideration
for
the
net
debt
million
tonnes
of
slab
annually
Foil Luxembourg, which
outstanding at closing date.
from TK CSA, an integrated steel Recent Developments in Legal
manufactures electrodeposited
mill complex located in Rio de
Proceedings
copper foils for the electronics
• On April 30, 2014, the Company
Janeiro, Brazil, using a marketindustry, and certain of its
completed the extension of its
based price formula. TK CSA has Tax Claims
subsidiaries for cash
partnership
in
Latin
America
to
an option to extend the
Brazil
consideration of $50 million. The
Costa
Rica
and
Ecuador
with
agreement for an additional
In 2011, ArcelorMittal Brasil
sale was completed on July 31,
Bekaert Group (“Bekaert”), a
three years on terms that are
received a tax assessment for
2014.
worldwide market and
more favorable to the joint
corporate income tax (known as
technology leader in steel wire
venture, as compared with the
IRPJ) and social contributions on
• On July 4, 2014, ArcelorMittal
transformation and coatings.
initial time period. The remaining net profits (known as CSL) in
issued €600 million 2.875%
ArcelorMittal became a minority
slab balance will be sourced from relation to (i) the amortization of
Notes due July 6, 2020 under its
shareholder
in
the
Ideal
ArcelorMittal plants in the US,
goodwill on the acquisition of
€3 billion wholesale Euro
Brazil and Mexico. ArcelorMittal Mendes Júnior Siderurgia (for the
Medium Term Notes Programme. Alambrec Ecuador wire plant
Interim Management Report 31
Recent Developments
continued
2006 and 2007 fiscal years), (ii)
the amortization of goodwill
arising from the mandatory
tender offer (MTO) made by
ArcelorMittal to minority
shareholders of Arcelor Brasil
following the two-step merger of
Arcelor and Mittal Steel N.V. (for
the 2007 tax year), (iii) expenses
related to pre-export financing
used to finance the MTO, which
were deemed by the tax
authorities to be unnecessary for
ArcelorMittal Brasil since it was
used to buy the shares of its own
company; and (iv) CSL over
profits of controlled companies
in Argentina and Costa Rica. The
amount claimed totals $583.4
million. On January 31, 2014, the
administrative tribunal of first
instance found in partial favor of
ArcelorMittal Brasil, reducing the
penalty component of the
assessment from, according to
ArcelorMittal Brasil’s calculations,
$265.5 million to $140.6 million
(as calculated at the time of the
assessment), while upholding the
remainder of the assessment. The
Brazilian Federal Revenue Service
has appealed the administrative
tribunal’s decision to reduce the
amount of the original penalty.
ArcelorMittal Brasil has also
appealed the administrative
tribunal’s decision to uphold the
tax authority’s assessment
(including the revised penalty
component).
correctly calculate tax credits on
interstate sales of electricity
from the February 2012 to
December 2013 period. The
amount claimed totals $59.6
million. ArcelorMittal
Comercializadora de Energia filed
its defense in June 2014.
Competition/Antitrust Claims
United States
On September 12, 2008, Standard
Iron Works filed a purported class
action complaint in the U.S.
District Court in the Northern
District of Illinois against
ArcelorMittal, ArcelorMittal USA
LLC, and other steel
manufacturers, alleging that the
defendants had conspired to
restrict the output of steel
products in order to fix, raise,
stabilize and maintain prices at
artificially high levels in violation
of U.S. antitrust law. Other similar
direct purchaser lawsuits were
also filed in the same court and
were consolidated with the
Standard Iron Works lawsuit. In
2009, the court denied a motion
by ArcelorMittal and the other
defendants to dismiss the direct
purchaser claims. A hearing on
class certification of the direct
purchaser claims took place in
March/ April 2014 and a decision
remains pending. On May 29,
2014, ArcelorMittal entered into
an agreement to settle the direct
purchaser claims. ArcelorMittal
may terminate the settlement
In April 2014, Comércio Exterior
agreement if more than a certain
S.A. (“Comex”), a Brazilian
percentage of members of the
subsidiary of ArcelorMittal,
received a tax assessment in the purported plaintiffs’ class opt-out
of the settlement. In addition to
amount of $76.9 million
any opt-out direct purchaser
concerning certain deductions
made by Comex in relation to the claimants who may pursue their
claims, two putative class actions
Fundap financial tax incentive;
on behalf of indirect purchasers
the Brazilian Federal Revenue
have been filed and are not
Service considers that Comex
covered by the settlement of the
owes corporate income tax
direct purchaser claims. On June
(known as IRPJ) and social
13, 2014, the court gave its
contributions on net profits
preliminary approval of the
(known as CSL) on the amounts
settlement and scheduled a
deducted. Comex filed its
hearing for final approval on
defense in June 2014.
October 17, 2014.
In May 2014, ArcelorMittal
Comercializadora de Energia
South Africa
received a tax assessment from
On September 1, 2009, the South
the state of Minas Gerais alleging African Competition Commission
that the company did not
referred a complaint against four
producers of long carbon steel in
South Africa, including
ArcelorMittal South Africa, and
the South African Iron and Steel
Institute to the Competition
Tribunal. The complaint referral
followed an investigation into
alleged collusion among the
producers initiated in April 2008,
on-site inspections conducted at
the premises of some of the
producers and a leniency
application by Scaw South Africa,
one of the producers under
investigation. The Competition
Commission recommended that
the Competition Tribunal impose
an administrative penalty against
ArcelorMittal South Africa, Cape
Gate and Cape Town Iron Steel
Works in the amount of 10% of
their annual revenues in South
Africa and exports from South
Africa for 2008. ArcelorMittal filed
an application to access the file of
the Competition Commission
that was rejected. ArcelorMittal is
appealing the decision to reject
the application, and has applied
for a review of that decision and a
suspension of the obligation to
respond to the referral on the
substance pending final outcome
on the application for access to
the documents. The appeal was
upheld by the Competition
Appeals Court (CAC) and the
matter was referred back to the
Competition Tribunal for a
determination of confidentiality
and scope of access to the
documents. The Competition
Commission appealed the
decision of the CAC, and, on May
31, 2013, the Supreme Court of
Appeal dismissed the appeal of
the Competition Commission
and confirmed the decision of
the CAC. In 2014, ArcelorMittal
South Africa requested the
documents from the Competition
Commission, which provided an
index thereof. On July 7, 2011,
ArcelorMittal filed an application
before the Competition Tribunal
to set aside the complaint referral
based on procedural
irregularities. It is too early for
ArcelorMittal to assess the
potential outcome of the
procedure, including the financial
impact.
Other Legal Claims
Argentina
Over the course of 2007 to 2013,
the Argentinian Customs Office
Authority (Aduana) notified the
Company of certain inquiries that
it is conducting with respect to
prices declared by the Company’s
Argentinian subsidiary, Acindar
related to iron ore imports. The
Customs Office Authority is
seeking to determine whether
Acindar incorrectly declared
prices for iron ore imports from
several different Brazilian
suppliers and from ArcelorMittal
Sourcing on 35 different
shipments made between 2002
and 2012. The aggregate amount
claimed by the Customs Office
Authority in respect of all of the
shipments is approximately $165
million. The investigations are
subject to the administrative
procedures of the Customs Office
Authority and are at different
procedural stages depending on
the filing date of the
investigation. By February 2014,
in 17 cases, the administrative
branch of the Customs Office
Authority ruled against Acindar
(representing total claims of
$29.8 million). These decisions
have been appealed to the
Argentinian National Fiscal Court.
Canada
In 2008, two complaints filed by
Canadian Natural Resources
Limited (“CNRL”) in Calgary,
Alberta against ArcelorMittal,
ArcelorMittal USA LLC, Mittal
Steel North America Inc. and
ArcelorMittal Tubular Products
Roman S.A were filed. CNRL
alleges negligence in both
complaints, seeking damages of
$56 million and $25 million,
respectively. The plaintiff alleges
that it purchased a defective pipe
manufactured by ArcelorMittal
Tubular Products Roman and
sold by ArcelorMittal Tubular
Products Roman and Mittal Steel
North America Inc. In May 2009,
in agreement with CNRL,
ArcelorMittal and ArcelorMittal
USA were dismissed from the
cases without prejudice to CNRL’s
right to reinstate the parties later
if justified. In April 2014, the
32 Interim Management Report
Recent Developments
continued
parties participated in a
mediation procedure and
reached a settlement subject to
certain conditions, which have
now been satisfied. The
proceedings before the Calgary
court were formally discontinued
in June 2014 and the case is
therefore now closed.
buyer. In September 2011, the
court rejected Finmasi’s claims
other than its second claim. The
court appointed an expert to
determine the quantum of
damages. In May 2013, the
expert’s report was issued and
valued the quantum of damages
in the range of €37.5 million to
€59.5 million. ArcelorMittal
appealed the decision on the
Italy
merits. In May 2014, the Court of
In January 2010, ArcelorMittal
received notice of a claim filed by Appeals issued a decision
rejecting ArcelorMittal’s appeal.
Finmasi S.p.A. relating to a
On June 20, 2014, ArcelorMittal
memorandum of agreement
filed an appeal of the Court of
(“MoA”) entered into between
Appeal’s judgment with the
ArcelorMittal Distribution
Italian Court of Cassation. A
Services France (“AMDSF”) and
hearing in relation to the
Finmasi in 2008. The MoA
quantum of damages took place
provided that AMDSF would
on June 24, 2014 and the judge
acquire certain of Finmasi’s
businesses for an amount not to set a deadline of October 8, 2014
exceed €93 million, subject to the for the parties to file their briefs.
satisfaction of certain conditions
precedent, which, in AMDSF’s
Senegal
view, were not fulfilled. Finmasi
In 2007, ArcelorMittal Holdings
sued for (i) enforcement of the
AG entered into an agreement
MoA, (ii) damages of €14 million with the State of Senegal relating
to €23.7 million or (iii) recovery
to an integrated iron ore mining
costs plus quantum damages for and related infrastructure
Finmasi’s alleged lost
project. The Company
opportunity to sell to another
announced at the time that
implementation of the project
would entail an aggregate
investment of $2.2 billion. Project
implementation did not follow
the originally anticipated
schedule after initial phase
studies and related investments.
The Company engaged in
discussions with the State of
Senegal about the project over a
long period. In early 2011, the
parties engaged in a conciliation
procedure, as provided for under
their agreement, in an attempt to
reach a mutually acceptable
outcome. Following the
unsuccessful completion of this
procedure, in May 2011 the State
of Senegal commenced an
arbitration before the Court of
Arbitration of the International
Chamber of Commerce, claiming
breach of contract and
provisionally estimating damages
of $750 million. In September
2013, the arbitral tribunal issued
its first award ruling that Senegal
was entitled to terminate the
2007 agreements. The arbitral
tribunal also ruled that a new
arbitration phase would be held
relating to the potential liability
of ArcelorMittal as well as the
amount of any damages which
could be awarded to Senegal.
The parties have since agreed to
settle the dispute.
Interim Management Report 33
Corporate Governance
Please refer to the “Corporate
Governance” section of our 2013
Annual Report for a complete
overview of our corporate
governance practices. The
purpose of the present section is
solely to describe the events and
changes affecting the corporate
governance of ArcelorMittal
between December 31, 2013 and
June 30, 2014.
For a description of the changes
to the board of directors of the
Company (the “Board of
Directors”) after the annual
general meeting of shareholders
held on May 8, 2014, please refer
to “—Board of Directors” below.
Annual general meeting of
shareholders held on May 8, 2014
Equity-based compensation
The May 8, 2014 annual general
meeting of shareholders
authorized the Board of Directors
to allocate up to 5 million of the
Company’s fully paid-up ordinary
shares (the “2014 Cap”), and to
adopt any rules or measures to
implement the Group
Management Board Performance
Share Unit Plan (the “GMB PSU
Plan”).
The GMB PSU Plan is designed to
enhance the long-term
performance of the Company
and align the members of our
Group Management Board
(“GMB”) to the Company’s
objectives. The GMB PSU Plan
complements ArcelorMittal’s
existing program of annual
performance-related bonuses,
which is the Company’s reward
system for short-term
performance and achievements.
The main objective of the GMB
PSU Plan is to be an effective
performance-enhancing scheme
for GMB members based on the
achievement of ArcelorMittal’s
strategy aimed at creating
measurable long-term
shareholder value.
The members of the GMB
including the Chief Executive
Officer will be eligible for
Performance Share Unit (“PSU”)
grants. The GMB PSU Plan
provides for cliff vesting on the
third year anniversary of the
grant date, under the condition
that the relevant GMB member
continues to be actively
employed by the ArcelorMittal
group on that date. If the GMB
member is retired on that date or
in case of an early retirement by
mutual consent, the relevant
GMB member will not
automatically forfeit PSUs and
pro rata vesting will be
considered at the end of the
vesting period at the sole
discretion of the Appointments,
Remuneration & Corporate
Governance Committee of the
Board of Directors. Awards under
the GMB PSU Plan are subject to
the fulfillment of cumulative
performance criteria over a
three-year period from the date
of the PSU grant. The value of the
grant at grant date will equal one
year of base salary for the Chief
Executive Officer and 80% of
base salary for the other GMB
members. Each PSU may give
right to up to one and half (1.5)
shares of the Company,
compared to two (2) shares on
the previously approved GMB
PSU plan.
will be 50% for achieving 80% of
the median TSR, 100% for
achieving the median TSR and up
to a maximum of 150% for
achieving 120% of the median
TSR, compared to 200% on the
previously approved GMB PSU
plan. None of the PSUs will vest if
the Company’s TSR performance
is below 80% of that of the peer
group.
The allocation of PSUs to eligible
GMB members is reviewed by the
Appointments, Remuneration &
Corporate Governance
Committee of the Board of
Directors, which is comprised of
four independent directors, and
which makes a proposal and
recommendation to the full
Board of Directors. The vesting
criteria of the PSUs are also
monitored by the Appointments,
• For 25% of PSUs, performance Remuneration & Corporate
is compared to the median of the Governance Committee. The
S&P 500 companies. The
Company will report in its annual
percentage of PSUs vesting will
reports on the progress of
be 50% for achieving
meeting the vesting criteria on
performance equal to 80% of the each grant anniversary date as
median of the S&P 500
well as on the applicable peer
companies, 100% for achieving a group.
performance equal to the
median of the S&P 500
The 2014 Cap for the number of
companies and up to a maximum PSUs that may be allocated to the
of 150% for achieving a
GMB members and other
performance equal to the
retention based grants below the
median of the S&P 500
GMB level, if any, is proposed to
companies plus an annual
be set at a maximum of 5 million
outperformance of 2%,
shares, representing less than
compared to 200% and 5% on
0.28% on a diluted basis and
the previously approved GMB
0.30% of the Company’s issued
PSU plan. None of the PSUs will
share capital (net of treasury
vest if the Company’s TSR
shares) on an outstanding basis.
performance is below 80% of
that of the median of the S&P 500 Board of Directors
companies.
The May 8, 2014 annual general
The other 50% of the criteria to
be met to trigger vesting of the
PSUs is based on the
development of Earnings Per
Share (EPS), defined as the
amount of earnings per share
outstanding compared to a peer
group of companies. The
percentage of PSUs vesting will
be 50% for achievement of 80%
of the median EPS, 100% for
achieving the median EPS, and
up to a maximum of 150% for
achieving 120% of the median
EPS, compared to 200% on the
previously approved GMB PSU
plan.
Fifty percent of the PSUs granted
to each GMB member will be
eligible to vest based on the
Company’s Total Shareholder
Return (TSR) defined as the share
price at the end of period minus
the share price at start of period
plus any dividend paid divided
by the share price at the start of
the period. “Start of period” and
“end of period” will be defined by
the Appointments, Remuneration
& Corporate Governance
Committee of the Board of
Directors. The TSR will then be
compared with the TSR of a peer
group of companies and the TSR
of the companies forming the
An explanatory presentation is
S&P 500 Index, each counting for available on www.arcelormittal.
half of the weighting.
com under Investors – Equity
investors – Shareholders’
• For 25% of PSUs, performance meetings – Annual General
is compared to the peer group.
Meeting May 8, 2014.
The percentage of PSUs vesting
meeting of shareholders
acknowledged the expiration of
the mandates of Mr. Lakshmi N.
Mittal, Mr. Lewis B. Kaden, Mr.
Antoine Spillmann, Mr. Bruno
Lafont and HRH Prince Guillaume
of Luxembourg as directors,
elected Mr. Michel Wurth as
director and re-elected Mr.
Lakshmi N. Mittal, Mr. Lewis B.
Kaden, Mr. Antoine Spillmann
and Mr. Bruno Lafont for a
three-year term that will
automatically expire at the
annual general meeting of
shareholders to be held in 2017.
The Board of Directors is
composed of 11 directors, of
whom ten are non-executive
directors and seven are
independent directors. The 11
directors are Mr. Lakshmi N.
Mittal, Ms. Vanisha Mittal Bhatia,
Mr. Antoine Spillmann, Mr. Wilbur
34 Interim Management Report
Corporate Governance
continued
L. Ross, Mr. Lewis B. Kaden, Mr.
Narayanan Vaghul, Mr. Jeannot
Krecké, Ms. Suzanne Nimocks, Mr.
Bruno Lafont, Mr. Tye Burt and
Mr. Michel Wurth. The four non
independent directors are Mr.
Lakshmi N. Mittal, Ms. Vanisha
Mittal Bhatia, Mr. Jeannot Krecké
and Mr. Michel Wurth. The Board
of Directors comprises one
executive director: Mr. Lakshmi
N. Mittal, the Chairman and Chief
Executive Officer of ArcelorMittal.
Share Capital
Share buy-back
The share buy-back authorization
approved by the annual general
meeting in May 2010 is valid for
five years, i.e., until May 11, 2015,
or until the date of its renewal by
a resolution of the general
meeting of shareholders if such
renewal date is prior to the
expiration the five-year period.
The maximum number of own
shares that ArcelorMittal may
hold at any time directly or
None of the members of the
indirectly may not have the effect
Board of Directors, including the of reducing its net assets (“actif
executive director, have entered net”) below the amount
into service contracts with
mentioned in paragraphs 1 and 2
ArcelorMittal or any of its
of Article 72-1 of the Law. The
subsidiaries that provide for
total amount allocated for the
benefits upon the termination of Company’s share repurchase
their mandate.
program may not in any event
exceed the amount of the
For additional information on the Company’s then available equity.
functioning of the Board of
Directors and the composition of In accordance with the
its committees, please refer to
Luxembourg laws transposing
the 2013 annual report of
Directive 2003/6/EC regarding
ArcelorMittal available on www. insider dealing and market
arcelormittal.com under
manipulation (“market abuse”)
“Investors – Financial reports –
and EC Regulation 2273/2003
Annual reports.”
regarding exemptions for
buyback programs and
stabilization of financial
instruments, any acquisitions,
disposals, exchanges,
contributions and transfers of
shares may be carried out by all
means, on or off the market,
including by a public offer to buy
back shares or by the use of
derivatives or option strategies.
The fraction of the capital
acquired or transferred in the
form of a block of shares may
amount to the entire program.
Buy-back transactions may be
carried out at any time, including
during a tender offer period. Any
share buy-backs on the New York
Stock Exchange must be
performed in compliance with
Section 10(b) and Section 9(a)(2)
of the Securities Exchange Act of
1934, as amended (the “Exchange
Act”), and Rule 10b-5
promulgated under the
Exchange Act.
The purchase price per share
paid may not represent more
than 125% of the trading price of
the shares on the New York Stock
Exchange and on the Euronext
markets where the Company is
listed, the Luxembourg Stock
Exchange or the Spanish stock
exchanges of Barcelona, Bilbao,
Madrid and Valencia, depending
on the market on which the
purchases are made, and no less
than one cent. For off-market
transactions, the maximum
purchase price is 125% of the
price on the Euronext markets
where the Company is listed. The
reference price will be deemed to
be the average of the final listing
prices per share on the relevant
stock exchange during 30
consecutive days on which the
relevant stock exchange is open
for trading preceding the three
trading days prior to the date of
purchase.
Interim Management Report 35
Cautionary Statement Regarding 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
financial and stock market
regulator (Commission de
Surveillance du Secteur
Financier) and the United States
Securities and Exchange
Commission (the “SEC”).
ArcelorMittal undertakes no
obligation to publicly update its
forward looking statements,
whether as a result of new
information, future events, or
otherwise.
36 Interim Management Report
Chief executive officer and chief financial officer’s responsibility statement
We confirm, to the best of our knowledge, that:
1. the condensed consolidated financial statements of ArcelorMittal presented in this Half Year Report 2014, prepared in conformity with
International Financial Reporting Standards as issued by the International Accounting Standards Board and as adopted by the European
Union, give a true and fair view of the assets, liabilities, financial position, profit or loss of the Company and significant off balance sheet
arrangements.
2. the interim management report includes a fair review of the material events that occurred in the first six months of the financial year
2014 and their impact on the interim condensed consolidated financial statements, of the main related party transactions, and a
description of the principal risks and uncertainties for the remaining six months of the year.
By order of the Board of Directors
Chief Executive Officer
Mr. Lakshmi N. Mittal
August 4, 2014
Chief Financial Officer
Mr. Aditya Mittal
August 4, 2014
Financial statements 37
Condensed consolidated statements of financial position
(in millions of U.S. dollars, except share and per share data)
(unaudited)
Assets:
Current assets:
Cash and cash equivalents
Restricted cash
Trade accounts receivable and other (including 424 and 535 from related parties at December 31, 2013 and June
30, 2014, respectively)
Inventories (note 4)
Prepaid expenses and other current assets
Assets held for sale (note 5)
Total current assets
Non-current assets:
Goodwill and intangible assets
Biological assets
Property, plant and equipment (note 2)
Investments in associates and joint ventures (note 3)
Other investments (note 3)
Deferred tax assets
Other assets
Total non-current assets
Total assets
December 31, 2013
June 30, 2014
6,072
160
4,214
190
4,886
19,240
3,375
292
34,025
5,260
18,627
3,122
125
31,538
8,734
132
51,232
7,195
738
8,938
1,314
78,283
112,308
8,753
136
50,699
6,948
1,136
8,972
1,421
78,065
109,603
Liabilities and equity:
Current liabilities:
Short-term debt and current portion of long-term debt (note 8)
Trade accounts payable and other (including 143 and 182 to related parties at December 31, 2013 and June 30,
2014, respectively)
Short-term provisions (note 10)
Accrued expenses and other liabilities
Income tax liabilities
Liabilities held for sale (note 5)
Total current liabilities
Non-current liabilities:
Long-term debt, net of current portion (note 8)
Deferred tax liabilities
Deferred employee benefits
Long-term provisions (note 10)
Other long-term obligations
Total non-current liabilities
Total liabilities
Commitments and contingencies (note 12 and note 13)
Equity (note 6):
Equity attributable to the equity holders of the parent
Non-controlling interests
Total equity
Total liabilities and equity
December 31, 2013
June 30, 2014
4,092
3,702
12,604
1,206
7,071
179
83
25,235
12,494
1,125
6,070
156
42
23,589
18,219
3,115
9,494
1,883
1,189
33,900
59,135
18,132
3,235
9,222
1,900
1,301
33,790
57,379
49,793
3,380
53,173
112,308
48,923
3,301
52,224
109,603
The accompanying notes are an integral part of these condensed consolidated financial statements.
38 Financial statements
Condensed consolidated statements of operations
(in millions of U.S. dollars, except share and per share data)
(unaudited)
Six months ended
June 30, 2013
Sales (including 2,417 and 3,111 of sales to related parties for 2013 and 2014, respectively)
Cost of sales (including depreciation and impairment of 2,336 and 2,011 and purchases from related parties of 635
and 655 for 2013 and 2014, respectively)
Gross margin
Selling, general and administrative expenses
Operating income
Income (loss) from investments in associates, joint ventures and other investments
Financing costs - net
Income (loss) before taxes
Income tax expense (note 7)
Net income (loss) (including non-controlling interests)
Net income (loss) attributable to:
Equity holders of the parent
Non-controlling interests
Net income (loss) (including non-controlling interests)
Earnings (loss) per common share (in U.S. dollars):
Basic
Diluted
Weighted average common shares outstanding (in millions):
Basic
Diluted
The accompanying notes are an integral part of these condensed consolidated financial statements.
39,949
Six months ended
June 30, 2014
40,492
37,708
2,241
1,485
756
(42)
(1,634)
(920)
196
(1,116)
37,517
2,975
1,469
1,506
154
(1,516)
144
217
(73)
(1,125)
9
(1,116)
(153)
80
(73)
Six months ended
June 30, 2013
Six months ended
June 30, 2014
(0.65)
(0.65)
(0.09)
(0.09)
1,769
1,770
1,791
1,793
Financial statements 39
Condensed consolidated statements of other comprehensive income
(in millions of U.S. dollars, except share and per share data)
(unaudited)
Net income (loss) (including non-controlling interests)
Items that can be recycled to the condensed consolidated
statements of operations
Available-for-sale investments:
Gain (loss) arising during the period
Reclassification adjustments for (gain) loss included in the condensed
consolidated statements of operations
Derivative financial instruments:
Gain (loss) arising during the period
Reclassification adjustments for (gain) loss included in the condensed
consolidated statements of operations
Six months ended June 30, 2013
Six months ended June 30, 2014
(1,116)
(73)
(114)
253
(114)
56
309
39
87
(132)
(93)
5
92
(1,501)
145
(10)
(1,511)
(18)
127
(171)
(85)
(171)
(54)
(139)
Income tax benefit (expense) related to components of other
comprehensive income that can be recycled to the condensed
consolidated statements of operations
Total other comprehensive income (loss)
82
(1,807)
(7)
382
Total other comprehensive income (loss) attributable to:
Equity holders of the parent
Non-controlling interests
(1,598)
(209)
388
(6)
Exchange differences arising on translation of foreign operations:
Gain (loss) arising during the period
Reclassification adjustments for (gain) loss included in the condensed
consolidated statements of operations
Share of other comprehensive income (loss) related to associates and
joint ventures:
Gain (loss) arising during the period
Reclassification adjustments for (gain) loss included in the consolidated
statements of operations
Total comprehensive income (loss)
Total comprehensive income (loss) attributable to:
Equity holders of the parent
Non-controlling interests
Total comprehensive income (loss)
The accompanying notes are an integral part of these condensed consolidated financial statements.
(1,807)
(2,923)
382
309
(2,723)
(200)
(2,923)
235
74
309
40 Financial statements
Condensed consolidated statements of changes in equity
(in millions of U.S. dollars, except share and per share data)
(unaudited)
Reserves
Shares1,2
Balance at
December 31, 2012
Net loss (including
non-controlling
interests)
Other comprehensive
loss
Total
comprehensive loss
Offering of common
shares
Mandatorily
convertible notes
Disposal of
15% interest in
ArcelorMittal Mines
Canada
Dilution in Baffinland
Recognition of share
based payments
Dividend (0.20 per
share)
Coupon on
subordinated
perpetual capital
securities
Other movements
Balance at June 30,
2013
Balance at
December 31, 2013
Net income (loss)
(including noncontrolling interests)
Other comprehensive
income (loss)
Total
comprehensive
income (loss)
Redemption of
subordinated
perpetual capital
securities (note 6)
Mandatory
convertible bonds
extension (see note
6)
Option premiums
on treasury shares
(note 6)
Recognition of share
based payments
Dividend (0.2 per
share)
Coupon on
subordinated
perpetual capital
securities
Other changes in
non-controlling
interests
Other movements
Balance at June 30,
2014
Subordinated
perpetual Mandatorily
Share Treasury
capital convertible
capital
shares
securities
notes
Additional
paid-in
capital
2
Excludes treasury shares
In million of shares
Equity
attributable
Recognized to the equity
Nonactuarial
holders of controlling
losses
the parent
interests
3,450
Total equity
1,549
9,403
(414)
650
-
19,082
26,186
(2,244)
(214)
(173)
(5,260)
47,016
-
-
-
-
-
-
(1,125)
-
-
-
-
(1,125)
9
(1,116)
-
-
-
-
-
-
-
(1,393)
(80)
(125)
-
(1,598)
(209)
(1,807)
-
-
-
-
-
-
(1,125)
(1,393)
(80)
(125)
-
(2,723)
(200)
(2,923)
105
608
-
-
-
1,148
-
50,466
-
-
-
-
1,838
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,654
-
-
-
-
1,756
-
1,756
-
-
-
-
-
1,838
-
1,838
-
726
-
-
-
-
-
726
-
374
(208)
1,100
(208)
-
9
-
-
-
-
-
9
-
9
-
-
-
(332)
-
-
-
-
(332)
(9)
(341)
-
-
-
-
(28)
1
-
-
-
-
(28)
1
(7)
(28)
(6)
10,011
(414)
650
1,838
20,239
25,428
(3,637)
(294)
(298)
(5,260)
48,263
3,400
51,663
1,654
10,011
(414)
650
1,838
20,248
24,037
(2,910)
(324)
(105)
(3,238)
49,793
3,380
53,173
-
-
-
-
-
-
-
-
-
-
(153)
80
(73)
-
-
-
-
-
-
7
66
315
-
388
(6)
382
-
-
-
-
-
-
(153)
7
66
315
-
235
74
309
-
-
-
(650)
-
-
(7)
-
-
-
-
(657)
-
(657)
-
-
-
-
-
-
-
-
-
-
-
-
(47)
(47)
-
-
-
-
-
-
(309)
-
309
-
-
-
-
-
-
-
-
-
-
12
-
-
-
-
-
12
-
-
-
-
-
-
(333)
-
-
-
-
(333)
-
-
-
-
-
(22)
-
-
-
-
(22)
-
(22)
-
-
-
-
-
-
(40)
(65)
-
-
-
-
(40)
(65)
(52)
(5)
(92)
(70)
1,654
10,011
-
1,838
20,260
51
210
(414)
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
Items that can be recycled to the
condensed consolidated statements of
operations
Unrealized
Unrealized
Foreign gains (losses) gains (losses)
currency on derivative on availableRetained
translation
financial
for-sale
earnings adjustments instruments
securities
Items that
cannot be
recycled
to the
condensed
consolidated
statements of
operations
(153)
-
23,108
(2,903)
(3,238)
48,923
(49)
3,301
12
(382)
52,224
Financial statements 41
Condensed consolidated statements of cash flows
(in millions of U.S. dollars, except share and per share data)
(unaudited)
Six months ended June
30, 2013
Six months ended June
30, 2014
(1,116)
(73)
2,336
1,000
(51)
196
42
318
(92)
342
2,011
850
(40)
217
(154)
289
92
(982)
442
1,263
(1,075)
38
(334)
233
94
(62)
(535)
2,057
(374)
380
(56)
(933)
69
(352)
291
118
(224)
(1,034)
1,077
(1,636)
(1,649)
139
(100)
77
(1,520)
183
(258)
27
(1,697)
874
(3,942)
2,222
1,756
(37)
1,100
(76)
1,897
2,434
(85)
2,945
(3,318)
(657)
(62)
(26)
(1,118)
(1,738)
(127)
4,402
6,072
7
4,214
Operating activities:
Net loss (including non-controlling interests)
Adjustments to reconcile net loss to net cash provided by operations and payments:
Depreciation and impairment
Interest expense
Interest income
Income tax expense
Loss/(income) from associates, joint ventures and other investments
Provisions for labour agreements and separation plans
Recycling of deferred (gain)/loss on raw material hedges
Unrealized foreign exchange effects, provisions and other non-cash operating expenses (net)
Changes in operating assets and liabilities, net of effects from acquisitions:
Trade accounts receivable
Inventories
Trade accounts payable
Interest paid
Interest received
Cash contributions to plan assets and benefits paid for pensions and OPEB
VAT and other amounts from public authorities
Dividends received from associates, joint ventures and other investments
Taxes paid
Other working capital, provision movements and other liabilities
Net cash provided by operating activities
Investing activities:
Purchase of property, plant and equipment and intangibles
Disposal of net assets of subsidiaries and non-controlling interests (net of cash disposed of nil and (84) as of
June 30, 2013 and 2014, respectively)
Acquisition of associates and joint ventures
Other investing activities (net)
Net cash used in investing activities
Financing activities:
Proceeds from short-term and long-term debt
Payments of short-term and long-term debt
Proceeds from mandatorily convertible notes
Common stock offering
Payment of subordinated perpetual capital securities
Dividends paid
Disposal of non-controlling interests
Other financing activities (net)
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Effect of exchange rate changes on cash
Cash and cash equivalents:
At the beginning of the period
Reclassification of the period-end cash and cash equivalents from assets held for sale
At the end of the period
The accompanying notes are an integral part of these condensed consolidated financial statements.
6,751
-
42 Financial statements
Notes to the condensed consolidated financial statements for the six months ended June 30, 2014
(in millions of U.S. dollars, except share and per share data)
(unaudited)
Note 1: Basis of
presentation and
accounting policies
complexity and layers;
the recognition and
simplification of processes; regional
measurement of levies.
synergies and taking advantage of
the scale effect within the regions. • On June 27, 2013, the IASB
published Amendments to IAS 39
Preparation of the condensed
As
a
result
of
the
organizational
“Financial Instruments:
consolidated financial statements
changes, the Company’s reportable
Recognition and Measurement”,
The condensed consolidated
segments changed to NAFTA, Brazil,
issued on June 27, 2013, clarifies
financial statements of ArcelorMittal Europe, ACIS and Mining. NAFTA
the treatment of hedge
and Subsidiaries (“ArcelorMittal” or includes the Flat, Long and Tubular
accounting.
the “Company”) as of December 31, operations of the USA, Canada and
2013 and June 30, 2014 as well as
Mexico. Brazil includes the Flat
The preparation of consolidated
for the six months ended June 30,
operations of Brazil and the Long
financial statements in conformity
2013 and 2014 (the “Interim
and Tubular operations of Brazil and with IFRS recognition and
Financial Statements”) have been
its neighboring countries including measurement principles requires
prepared in accordance with
Argentina, Costa Rica, Trinidad and the use of estimates and
International Accounting Standard Tobago and Venezuela. Europe is
assumptions that affect the
(“IAS”) No. 34, “Interim Financial
comprised of the Flat, Long and
reported amounts of assets,
Reporting”. They should be read in Tubular operations of the European liabilities, revenues and expenses.
conjunction with the annual
business, as well as Distribution
Management reviews its estimates
consolidated financial statements
Solutions (AMDS). The ACIS
on an ongoing basis using currently
and the notes thereto in the
segment is largely unchanged
available information. Changes in
Company’s Annual Report for the
except the addition of some Tubular facts and circumstances or
year ended December 31, 2013,
operations and distribution
obtaining new information or more
which have been prepared in
activities (ArcelorMittal
experience may result in revised
accordance with International
International). The Mining segment estimates, and actual results could
Financial Reporting Standards
remains unchanged. The changes
differ from those estimates.
(“IFRS”) as issued by the
in reportable segments are
International Accounting Standards presented in note 11.
Board (“IASB”) and as adopted by
the European Union. The Interim
Adoption of new IFRS standards
Financial Statements are unaudited. and interpretations applicable from
They were authorized for issuance January 1, 2014
on July 31, 2014 by the Company’s
Board of Directors.
On January 1, 2014, the Company
adopted the following amendments
Accounting policies
and interpretation which did not
have any material impact on the
The Interim Financial Statements
financial statements of the
have been prepared on a historical Company:
cost basis, except for available for
sale financial assets, derivative
• Amendments to IAS 32 “Financial financial instruments and biological Instruments: Presentation”, issued assets, which are measured at fair
on December 16, 2011, clarifies value less cost to sell, and
the application of the offsetting inventories, which are measured at of financial assets and financial the lower of net realizable value or liabilities requirement.
cost. Unless specifically described
herein, the accounting policies used • Amendments to IFRS 10
to prepare the Interim Financial
“Consolidated Financial
Statements are the policies
Statements”, IFRS 12 “Disclosure
described in note 2 of the
of Interests in Other Entities” and
consolidated financial statements
IAS 27 “Separate Financial
for the year ended December 31,
Statements”, issued on October
2013.
31, 2012, clarifies the definition
and measurement of investment
On January 1, 2014, the Company
entities.
implemented changes to its
organizational structure which has • On May 20, 2013, the IASB issued
a greater geographical focus. The
IFRIC Interpretation 21 “Levies”,
principal benefits of the changes
issued on May 20, 2013, clarifies
are to reduce organizational
Financial statements 43
Notes to the condensed consolidated financial statements for the six months ended June 30, 2014
continued
(in millions of U.S. dollars, except share and per share data)
(unaudited)
Note 2: Property, plant and
equipment
the operating life of certain of these
assets, while operating practices in
the current economic environment
have also contributed to the
During the period ended June 30,
extension of asset useful life
2014, the Company performed a
review of the useful lives of its assets beyond previous estimates. The
Company thus revised the useful
and determined its maintenance
lives due to its determination that
and operating practices have
enabled a change in the useful lives certain of its existing assets have
been used longer than previously
of plant and equipment.
anticipated and therefore, the
Maintenance practices employed
have served to preserve and extend estimated useful lives of certain
Asset Category
Land
Buildings
Property plant & equipment
Auxiliary facilities
Other facilities
Former Useful Life Range
Not depreciated
10 to 50 years
15 to 30 years
15 to 30 years
5 to 20 years
plant and equipment have been
lengthened. The previously applied
useful lives and the revised ones are
presented in the table below. The
Company applied this change in
accounting estimate prospectively
as of January 1, 2014, in accordance
with IAS 8 “Accounting Policies,
Changes in Accounting Estimates
and Errors”. The reduction of
depreciation charge as a result of
changes in estimated useful lives for
the six months ended June 30, 2014
was approximately 350. The
Company expects the depreciation
charge for the current year and
future years to decrease by
approximately 700 as compared to
the amounts that would have been
charged if no change in estimate
occurred.
Revised Useful Life Range
Not depreciated
10 to 50 years
15 to 50 years
15 to 40 years
5 to 20 years
There were no impairment charges recorded during the six months ended June 30, 2014. Impairment charges for the six months ended June 30, 2013
amounted to 39 and were primarily related to the closure of the organic coating and tin plate lines in the Florange site in France, which is part of the
Europe reportable segment.
Note 3: Investments in
associates, joint ventures
and other investments
On April 30, 2014, following
simultaneously with the exercise by
Deutsche Bank of its put option
with respect to a 7.5% stake in China
Oriental Group Company Ltd
(“China Oriental”) acquired on April
30, 2008 from ArcelorMittal in
connection with a sale and
purchase agreement it entered into
with ArcelorMittal to restore the
restoration of the public float of
China Oriental on the Hong Kong
Stock Exchange (“HKSE”), the
Company sold this investment to
Macquarie Bank and entered into a
put option arrangement with the
latter maturing on April 30, 2015.
The Company extended the
existing put option agreement with
ING in relation to a further 9.9%
stake in China Oriental for one year.
Accrued expenses and other
liabilities and prepaid expenses and
other current assets decreased by
312 as a result of these changes. The
Company has not derecognized the
17.4% stake in respect of China
Oriental as it has retained its
exposure to that the significant risk
and rewards of the investment
through the put options.
On February 8, 2014, the Company’s
interest in the associate Hunan Valin
Steel Tube and Wire Co. Ltd.
(“Hunan Valin”) decreased from
20% to 15% following the exercise
of the third put option granted by
Hunan Valin Iron & Steel Group Co,
Ltd. Accordingly, the Company
discontinued the accounting for its
investment under the equity
method and reclassified its interest
as available-for-sale within other
investments in the statement of
financial position. The resulting loss
on disposal was recorded as income
(loss) from investments in
associates, joint ventures and other
investments and amounted to 76.
This amount consisted of a gain of
13 on disposal of the 5% stake and
the reclassification of the
accumulated positive foreign
exchange translation difference
from other comprehensive income
to the statements of operations of
61, offset by a loss of 150 with
respect to the remeasurement at
fair value of the remaining interest
of 15%. As of June 30, 2014, the fair
value and the other comprehensive
income related to Hunan Valin
investment were 141 and 5,
respectively. The Company also
recognized a gain of 64 in relation
to the fourth and last put option
with an exercise date August 6,
2014, which is a level 2 financial
instrument with a carrying value of
64 as of June 30, 2014.
slab balance will be sourced from
ArcelorMittal plants in the US, Brazil
and Mexico. ArcelorMittal will be
principally responsible for
marketing the product on behalf of
On February 26, 2014, the Company the joint venture. The price
together with Nippon Steel &
ArcelorMittal will receive for its slabs
Sumitomo Metal Corporation
will be determined by the volume,
(“NSSMC”) completed the
price and cost performance of the
acquisition of ThyssenKrupp Steel
joint venture. The carrying amount
USA (“TK Steel USA”), a steel
and the net income of Calvert were
processing plant in Calvert,
297 as of June 30, 2014 and 33 for
Alabama, USA, for a total
the six months ended June 30, 2014,
consideration of 1,550 financed
respectively.
through a combination of debt at
entity level and equity, of which 258 The Company concluded that its
was paid by ArcelorMittal. The
investment in Ereğli Demir ve Çelik
Company concluded that it has
Fabrikalari T.A.S. (“Erdemir”)
joint control of the arrangement,
experienced a prolonged decline in
AM/NS Calvert (“Calvert”), together fair value that remained
with NSSMC and accounted for its
continuously below cost for more
50% interest in the joint venture
than two years. Accordingly, it
under the equity method. The
recorded an impairment charge of
transaction includes a six-year
56 in income from investments in
agreement to purchase two million associates, joint ventures and other
tonnes of slab annually from TK
investments. Following the
CSA, an integrated steel mill
subsequent increase in the fair
complex located in Rio de Janeiro, value of Erdemir, the Company
Brazil, using a market-based price
recorded a revaluation gain of 213
formula. TK CSA has an option to
in other comprehensive income at
extend the agreement for an
June 30, 2014.
additional three years on terms that
are more favorable to the joint
venture, as compared with the
initial time period. The remaining
44 Financial statements
Notes to the condensed consolidated financial statements for the six months ended June 30, 2014
continued
(in millions of U.S. dollars, except share and per share data)
(unaudited)
Note 4: Inventories
Inventory, net of the allowance for slow-moving inventory, excess of cost over net realizable value and obsolescence as of December 31, 2013 and
June 30, 2014, is comprised of the following:
Finished products
Production in process
Raw materials
Manufacturing supplies, spare parts and other
Total
December 31, 2013
June 30, 2014
6,523
4,350
6,590
1,777
19,240
6,857
4,054
5,896
1,820
18,627
The amount of write-downs of inventories to net realizable value recognized as an expense was 447 and 363 during the six months ended June
30, 2013 and 2014, respectively.
Note 5: Assets and
liabilities held for sale
net debt and working capital
situation on closing date. The
existing intra group debt of the sold
subsidiaries of 102 was assumed by
Kiswire and will be repaid at the
latest during the first half of 2015.
ordinary shares do not have a
nominal value.
Authorized share capital
At the Extraordinary General
Meeting held on May 8, 2013, the
shareholders approved an increase
On April 30, 2014, the Company
of the authorized share capital of
completed the extension of its
ArcelorMittal by €524 million
partnership with Bekaert Group
represented by 223 million shares,
(“Bekaert”) in Latin America to
or approximately 8% of
Costa Rica and Ecuador. It
ArcelorMittal’s outstanding capital.
transferred 73% of the wire
Following this approval, which is
business of ArcelorMittal Costa Rica valid for five years, the total
and its 55% interest in Cimaf Cabos, authorized share capital was €8.2
a cable business in Osasco (São
billion represented by 1,996 million
Paulo) Brazil, previously a branch of shares without nominal value.
Belgo Bekaert Arames (“BBA”), to
Bekaert. ArcelorMittal acquired a
Treasury shares
27% non-controlling interest in the
ArcelorMittal held, indirectly and
Ideal Alambrec Ecuador plant
On June 30, 2014, ArcelorMittal
directly, approximately 11.8 million
completed the sale of its 78% stake controlled by Bekaert. The two
and 11.8 million treasury shares as
in the European port handling and transferred businesses were part of of December 31, 2013 and June 30,
logistics company ATIC Services S.A. the Brazil reportable segment.
2014, respectively.
(“ATIC”) for €155 million (144 net of
The result on disposal for the
cash of 68 disposed of) to H.E.S.
Dividends
above mentioned disposals was
Beheer, who held the remaining
The dividend for the full year of
22% non-controlling interest. ATIC immaterial. The aggregate net
2014 amounted to 333 and was
assets disposed of amounted to
was part of the Europe reportable
paid on July 15, 2014. For the six
198.
segment.
months ended June 30, 2013,
dividend payments of 332 were
On May 30, 2014, the Company
made on July 15, 2013.
completed the disposal of its 50%
Note 6: Equity
stake in the joint venture Kiswire
Option premium on USD
Share capital
ArcelorMittal Ltd. (“Kiswire”) in
convertible bonds
South Korea and certain other
Following the completion of an
The Company reclassified from
entities of its steel cord business in offering of ordinary shares on
reserves to retained earnings
the US, Europe and Asia to Kiswire January 14, 2013, ArcelorMittal
premiums paid for an amount of
Ltd. These various entities were part increased share capital by €455
of the Europe reportable segment. (608) from €6,428 (9,403) to €6,883 435 (309 net of tax) with respect to
expired USD denominated call
On the closing date, the Company (10,011) through the issuance of
options on treasury shares acquired
received a preliminary cash
104,477,612 new shares fully paid
on December 18, 2010 in order to
consideration of 55 (39 net of cash up. The aggregate number of
hedge its obligations arising from
of 16 disposed of) subject to
shares issued and fully paid up
the potential conversion of the 800
revision upon final determination of increased to 1,665,392,222. The
On July 10, 2014, the Company
signed an agreement to sell its
wholly-owned subsidiary Circuit
Foil Luxembourg, which
manufactures electrodeposited
copper foils for the electronics
industry, and certain of its
subsidiaries (“Circuit Foil”) to
Doosan Corporation, a South
Korean conglomerate. Accordingly,
the related assets and liabilities
were classified as held for sale at
June 30, 2014. The agreed cash
consideration amounts to 50. Circuit
Foil was included in the Europe
reportable segment.
Convertible Senior Notes into
ArcelorMittal shares.
Mandatorily convertible notes
On January 16, 2013, ArcelorMittal
issued mandatorily convertible
subordinated notes (“MCNs”) with
net proceeds of 2,222. The notes
have a maturity of 3 years, were
issued at 100% of the principal
amount and are mandatorily
converted into ordinary shares of
ArcelorMittal at maturity unless
converted earlier at the option of
the holders or ArcelorMittal or upon
specified events in accordance with
the terms of the MCNs. The MCNs
pay a coupon of 6.00% per annum,
payable quarterly in arrears. The
minimum conversion price of the
MCNs was set at $16.75,
corresponding to the placement
price of shares in the concurrent
ordinary shares offering as
described above, and the maximum
conversion price was set at
approximately 125% of the
minimum conversion price
(corresponding to $20.94). The
minimum and maximum
conversion prices are subject to
adjustment upon the occurrence of
certain events, and were, as of June
30, 2014, $16.28 and $20.36,
respectively. The Company
determined the notes met the
definition of a compound financial
instrument and as such determined
the fair value of the financial liability
component of the bond was 384 on
the date of issuance and recognized
it as long-term obligation. The value
of the equity component of 1,838
was determined based upon the
difference of the cash proceeds
Financial statements 45
Notes to the condensed consolidated financial statements for the six months ended June 30, 2014
continued
(in millions of U.S. dollars, except share and per share data)
(unaudited)
received from the issuance of the
bond and the fair value of the
financial liability component on the
date of issuance and is included in
equity.
2013 and 2014 were 28 and 22,
respectively.
difference between the carrying
amount of the previous instrument
and the fair value of the new
On February 20, 2014, ArcelorMittal instrument amounted to 49 and
redeemed all of its outstanding 650 was recognized as financing costs
subordinated perpetual capital
in the consolidated statements of
Subordinated perpetual capital
securities following the occurrence operations.
securities
of a “Ratings Agency Event”, as
defined in the terms of the
On September 28, 2012, the
securities. The notes were
Note 7: Income tax
Company issued subordinated
redeemed for 657, at a redemption
perpetual capital securities for a
The tax expense for the period is
price of 101% of the principal
nominal amount of 650 and a
coupon of 8.75%, which was to be amount, plus accrued interest of 22. based on an estimated annual
effective rate, which requires
reset periodically over the life of the
management to make its best
securities. As the Company had no Mandatory convertible bonds
obligation to redeem the securities On January 17, 2014, the conversion estimate of annual pre-tax income
for the year. During the year,
and the coupon payment was to be date of the 1,000 mandatory
management regularly updates its
deferred by the Company under
convertible bonds was extended
certain circumstances, it classified
from January 31, 2014 to January 29, estimates based on changes in
various factors such as geographical
the net proceeds from the issuance 2016. The Company determined
mix of operating profit, prices,
of subordinated perpetual capital
that this transaction led to the
shipments, product mix, plant
securities (642 net of transaction
extinguishment of the existing
operating performance and cost
costs) as equity. Coupon payments compound instrument and the
estimates, including labor, raw
to holders of subordinated
recognition of a new compound
materials, energy and pension and
perpetual capital securities for the instrument including nonsix month periods ended June 30,
controlling interests for 902 (net of other postretirement benefits.
tax and fees) and debt for 91. The
The income tax expense was 196
and 217 for the six months ended
June 30, 2013 and 2014,
respectively.
Note 8: Short-term and long-term debt
Short-term debt, including the current portion of long-term debt, consisted of the following:
Short-term bank loans and other credit facilities including commercial paper*
Current portion of long-term debt
Lease obligations
Total
December 31, 2013
June 30, 2014
545
3,491
56
4,092
1,581
2,059
62
3,702
* The weighted average interest rate on short term borrowings outstanding were 4.1% and 5.6% as of December 31, 2013 and June 30, 2014, respectively.
Short-term bank loans and other credit facilities include short-term loans, overdrafts and commercial paper.
During the six months ended June 30, 2014, ArcelorMittal entered into short-term committed bilateral credit facilities totaling approximately
$0.9 billion. As of June 30, the facilities remain fully available.
On June 10, 2014, ArcelorMittal entered into a new bank loan for an amount of $1 billion. The credit institution has the right to demand
repayment of the loan once per year, starting February 2015, until the final maturity date on April 20, 2017. Accordingly, the loan was classified
as current liabilities.
46 Financial statements
Notes to the condensed consolidated financial statements for the six months ended June 30, 2014
continued
(in millions of U.S. dollars, except share and per share data)
(unaudited)
The Company’s long-term debt consisted of the following:
Corporate
3.6 billion Revolving Credit Facility
2.4 billion Revolving Credit Facility
€1.25 billion Convertible Bonds
800 Convertible Senior Notes
€0.1 billion Unsecured Bonds
€0.36 billion Unsecured Bonds
750 Unsecured Notes
1.0 billion Unsecured Bonds
500 Unsecured Notes
500 Unsecured Notes
€1.0 billion Unsecured Bonds
€1.0 billion Unsecured Bonds
1.4 billion Unsecured Notes
1.5 billion Unsecured Notes
€0.5 billion Unsecured Notes
1.5 billion Unsecured Notes
€750 billion Unsecured Bonds
1.0 billion Unsecured Bonds
1.5 billion Unsecured Notes
1.1 billion Unsecured Notes
1.5 billion Unsecured Bonds
1.0 billion Unsecured Notes
Other loans
EBRD loans
EIB loan
300 Term Loan Facility
ICO loan
Other loans
Total Corporate
Americas
600 Senior Unsecured Notes
Other loans
Total Americas
Europe, Asia & Africa
Other loans
Total Europe, Asia & Africa
Total
Less current portion of long-term debt
Total long-term debt (excluding lease obligations)
Lease obligations 2
Total long-term debt, net of current portion
1
2
Year of maturity
Type of interest
2016
2018
2014
2014
2014
2014
2015
2015
2015
2016
2016
2017
2017
2018
2018
2019
2019
2020
2021
2022
2039
2041
2014-2021
2015
2016
2016
2017
2015-2035
Floating
Floating
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Floating
Floating
Floating
Floating
Floating
7.25%
5.00%
5.50%
4.63%
9.50%
4.25%
4.25%
4.25%
10.63%
5.88%
5.00%
6.13%
5.75%
10.35%
3.00%
5.75%
6.00%
6.75%
7.50%
7.25%
3.46%-3.75%
1.24%
1.71%
2.08%
2.83%
0.00%-2.47%
2014
2014-2026
Fixed
Fixed/ Floating
6.50%
0.78%-15.08%
2014-2025
Rates applicable to balances outstanding at June 30, 2014.
Net of current portion of 56 and 62 as of December 31, 2013 and June 30, 2014, respectively.
Interest rate1
0.00%-13.75%
Fixed/ Floating
December 31, 2013
June 30, 2014
1,692
780
138
497
747
996
499
498
1,373
1,371
1,394
1,500
686
1,471
986
1,487
1,089
1,465
983
77
25
345
68
177
20,344
137
492
749
997
499
499
1,361
1,359
1,395
1,500
679
1,473
1,016
987
1,488
1,089
1,465
983
69
17
341
300
57
160
19,112
188
448
636
366
366
31
31
21,011
(3,491)
17,520
699
18,219
46
46
19,524
(2,059)
17,465
667
18,132
Financial statements 47
Notes to the condensed consolidated financial statements for the six months ended June 30, 2014
continued
(in millions of U.S. dollars, except share and per share data)
(unaudited)
On April 15, 2014, at maturity,
require compliance with a financial
ArcelorMittal repaid the remaining covenant.
outstanding amount of 188.5 of its
600 6.50% Unsecured Notes.
The Company’s principal credit
facilities (2.4 billion Revolving
On May 15, 2014, at maturity,
Credit Facility, 3.6 billion Revolving
ArcelorMittal repaid its 800 5.00% Credit Facility and certain
unsecured and unsubordinated
borrowing agreements) include
Convertible Senior Notes.
the following financial covenant:
Additional information on the call the Company must ensure that the
options on the 800 Convertible
ratio of “Consolidated Total Net
Senior Notes is set forth in Note 6. Borrowings” (consolidated total
borrowings less consolidated cash
On July 4, 2014, ArcelorMittal
and cash equivalents) to
completed the offering of €600
“Consolidated EBITDA” (the
consolidated net pre-taxation
2.4 billion Revolving Credit Facility million 2.875% Notes due July 6,
2020 issued under the €3 billion
profits of the Company for a
On May 6, 2010, ArcelorMittal
wholesale Euro Medium Term
Measurement Period, subject to
entered into a $4 billion facility, a
certain adjustments as defined in
syndicated revolving credit facility Notes Programme. The proceeds
the facilities) does not, at the end
which may be utilized for general of the issuance were used for
of each “Measurement Period”
corporate purposes. On November general corporate purposes.
(each period of 12 months ending
26, 2013, the facility was amended
on the last day of a financial
and reduced to $2.4 billion and the Other
On December 20, 2013,
half-year or a financial year of the
maturity date extended to
ArcelorMittal entered into a term
Company), exceed a certain ratio,
November 6, 2018. As of June 30,
loan facility in an aggregate
currently 4.25 to 1 and 3.5 to 1
2014, the $2.4 billion Revolving
amount of 300, with a final
depending on the borrowing
Credit Facility remains fully
repayment date on December 20, agreement.
available.
2016. The facility may be used by
the Group for general corporate
The Company was in compliance
Bonds
purposes and amounts repaid
with the financial covenants
On March 25, 2014, ArcelorMittal
under the agreement may not be contained in the agreements
completed the offering of €750
re-borrowed. As of June 30, 2014,
related to all of its borrowings as of
million 3% Notes due March 25,
the term loan facility was fully
June 30, 2014.
2019 issued under the €3 billion
drawn.
wholesale Euro Medium Term
Notes Programme. The proceeds
Certain debt agreements of the
of the issuance were used for
Company or its subsidiaries
general corporate purposes.
contain certain restrictive
covenants. Among other things,
On April 1, 2014, at maturity,
these covenants limit
ArcelorMittal repaid its €1.25
encumbrances on the assets of
billion 7.25% unsecured and
ArcelorMittal and its subsidiaries,
unsubordinated Convertible
bonds. Additional information on the ability of ArcelorMittal’s
the call options on the €1.25 billion subsidiaries to incur debt and
ArcelorMittal’s ability to dispose of
Convertible bonds is set forth in
assets in certain circumstances.
Note 9.
Certain of these agreements also
Corporate
3.6 billion Revolving Credit
Facility
On March 18, 2011, ArcelorMittal
entered into a $6 billion facility, a
syndicated revolving credit facility
which may be utilized for general
corporate purposes and which
matures in 2016. On November 26,
2013, the facility was amended and
reduced to $3.6 billion. As of June
30, 2014, the $3.6 billion Revolving
Credit Facility remains fully
available.
48 Financial statements
Notes to the condensed consolidated financial statements for the six months ended June 30, 2014
continued
(in millions of U.S. dollars, except share and per share data)
(unaudited)
Note 9: Financial instruments
The Company enters into derivative financial instruments to manage its exposure to fluctuations in interest rates, exchange rates and the price of
raw materials, energy and emission rights allowances arising from operating, financing and investment activities.
Fair values versus carrying amounts
The estimated fair values of certain financial instruments have been determined using available market information or other valuation
methodologies that require judgment in interpreting market data and developing estimates. The following tables summarize assets and liabilities
based on their categories at June 30, 2014.
Carrying
amount in
statements Non-financial
of financial
assets and
position
liabilities
Loan and
receivables
Liabilities at
Fair value
amortized recognized in Available-forcost profit or loss
sale assets
Derivatives
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Trade accounts receivable and other
Inventories
4,214
190
5,260
18,627
18,627
4,214
190
5,260
-
-
-
-
Prepaid expenses and other current assets
Assets held for sale
Total current assets
3,122
125
31,538
1,778
125
20,530
1,138
10,802
-
-
-
206
8,753
136
50,699
6,948
1,136
8,972
1,421
78,065
109,603
8,753
50,699
6,948
8,972
506
75,878
96,408
816
816
11,618
-
136
136
136
1,136
1,136
1,136
99
99
305
Current liabilities:
Short-term debt and current portion of long-term debt
Trade accounts payable and other
Short-term provisions
Accrued expenses and other liabilities
Income tax liabilities
Liabilities held for sale
Total current liabilities
3,702
12,494
1,125
6,070
156
42
23,589
1,103
1,410
156
42
2,711
-
3,702
12,494
22
4,567
20,785
-
-
93
93
Non-current liabilities:
Long-term debt, net of current portion
Deferred tax liabilities
Deferred employee benefits
Long-term provisions
Other long-term obligations
Total non-current liabilities
18,132
3,235
9,222
1,900
1,301
33,790
3,235
9,222
1,877
412
14,746
-
18,132
23
887
19,042
-
-
2
2
48,923
3,301
52,224
109,603
48,923
3,301
52,224
69,681
-
39,827
-
-
95
Non-current assets:
Goodwill and intangible assets
Biological assets
Property, plant and equipment
Investments in associates and joint ventures
Other investments
Deferred tax assets
Other assets
Total non-current assets
Total assets
206
LIABILITIES AND EQUITY
Equity:
Equity attributable to the equity holders of the parent
Non-controlling interests
Total equity
Total liabilities and equity
Financial statements 49
Notes to the condensed consolidated financial statements for the six months ended June 30, 2014
continued
(in millions of U.S. dollars, except share and per share data)
(unaudited)
The following tables summarize the bases used to measure certain assets and liabilities at their fair value.
As of December 31, 2013
Assets at fair value:
Available-for-sale financial assets
Derivative financial current assets
Derivative financial non-current assets
Total assets at fair value
Liabilities at fair value:
Derivative financial current liabilities
Derivative financial non-current
liabilities
Total liabilities at fair value
As of June 30, 2014
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
522
522
64
7
71
-
522
64
7
593
919
919
206
16
222
83
83
919
206
99
1,224
-
206
-
206
-
93
-
93
-
1
207
-
1
207
-
2
95
-
2
95
Available-for-sale financial assets classified as Level 1 refer to listed securities quoted in active markets. A quoted market price in an active market
provides the most reliable evidence of fair value and is used without adjustment to measure fair value whenever available, with limited
exceptions. The total fair value is either the price of the most recent trade at the time of the market close or the official close price as defined by the
exchange on which the asset is most actively traded on the last trading day of the period, multiplied by the number of units held without
consideration of transaction costs. The increase in the available-for-sale financial assets is related to the reclassification of Hunan Valin under this
account following the decrease in the Company’s stake in February 2014, and an increase in the share price of Erdemir.
Derivative financial assets and liabilities classified as Level 2 refer to instruments to hedge fluctuations in interest rates, foreign exchange rates, raw
materials (base metal), freight, energy, emission rights and equity. The total fair value is based on the price a dealer would pay or receive for the
security or similar securities, adjusted for any terms specific to that asset or liability. Market inputs are obtained from well-established and
recognized vendors of market data and the fair value is calculated using standard industry models based on significant observable market inputs
such as foreign exchange rates, commodity prices, swap rates and interest rates.
Derivative financial assets classified as Level 3 refer to the call option on the 1,000 mandatory convertible bonds. The fair valuation of Level 3
derivative instruments is established at each reporting date in relation to which an analysis is performed in respect of changes in the fair value
measurement since the last period. ArcelorMittal’s valuation policies for Level 3 derivatives are an integral part of its internal control procedures
and have been reviewed and approved according to the Company’s principles for establishing such procedures. In particular, such procedures
address the accuracy and reliability of input data, the accuracy of the valuation model and the knowledge of the staff performing the valuations.
ArcelorMittal establishes the fair valuation of the 1,000 mandatory convertible bonds (“MCB”) through the use of binomial valuation models.
Binomial valuation models use an iterative procedure to price options, allowing for the specification of nodes, or points in time, during the time
span between the valuation date and the option’s expiration date. In contrast to the Black-Scholes model, which provides a numerical result based
on inputs, the binomial model allows for the calculation of the asset and the option for multiple periods along with the range of possible results
for each period. On January 17, 2014, the Company extended the conversion date of the mandatory convertible bonds and the maturity date of
the call option on the mandatory convertible bonds from January 31, 2014, to January 29, 2016.
Observable input data used in the valuations include zero coupon yield curves, stock market prices, European Central Bank foreign exchange
fixing rates and Libor interest rates. Unobservable inputs are used to measure fair value to the extent that relevant observable inputs are not
available. Specifically the Company computes unobservable volatility data based mainly on the movement of stock market prices observable in
the active market over 90 working days.
The following table summarizes the reconciliation of the fair value of the call option on the 1,000 mandatory convertible bonds as of December 31,
2013 and June 30, 2014:
Balance as of December 31, 2012
Change in fair value
Foreign exchange
Balance as of June 30, 2013
Balance as of December 31, 2013
Balance of MCB call option as of January 17, 2014
(extension)
Change in fair value
Balance as of June 30, 2014
€1.25 billion convertible
bond
Euro-denominated call
option on treasury shares
Call option on 1,000 mandatory
convertible bonds
Total
(25)
14
(11)
-
25
(14)
11
-
12
(11)
1
-
12
(11)
1
-
-
-
32
51
83
32
51
83
As a result of the repayment of the €1.25 billion Convertible Bonds on April 1, 2014, the euro-denominated call options on treasury shares acquired
on December 14, 2010 expired.
50 Financial statements
Notes to the condensed consolidated financial statements for the six months ended June 30, 2014
continued
(in millions of U.S. dollars, except share and per share data)
(unaudited)
Portfolio of Derivatives
The Company manages the counter-party risk associated with its instruments by centralizing its commitments and by applying procedures which
specify, for each type of transaction and underlying, risk limits and/or the characteristics of the counter-party. The Company does not generally
grant to or require from its counter-parties guarantees of the risks incurred. Allowing for exceptions, the Company’s counter-parties are part of its
financial partners and the related market transactions are governed by framework agreements (mainly of the International Swaps and Derivatives
Association agreements which allow netting only in case of counter-party default). Accordingly, derivative assets and derivative liabilities are not
offset.
The portfolio associated with derivative financial instruments classified as Level 2 as of December 31, 2013 is as follows:
Notional Amount
Interest rate swaps - fixed rate
borrowings/loans
Other interest rate instruments
Total interest rate instruments
Foreign exchange rate
instruments
Forward purchase of contracts
Forward sale of contracts
Currency swaps purchases
Exchange option purchases
Exchange options sales
Total foreign exchange rate
instruments
Raw materials (base metal),
freight, energy, emission
rights
Term contracts sales
Term contracts purchases
Total raw materials (base metal),
freight, energy, emission rights
Total
Assets
Fair Value
188
-
3
3
49
396
641
184
2
13
5
12
-
Notional Amount
4.55%
339
20
(11)
(11)
5,323
83
641
167
(85)
(2)
(72)
(11)
32
44
458
4
32
36
71
Liabilities
Fair Value
Average Rate*
Average Rate*
1.17%
(170)
153
196
(16)
(10)
(26)
(207)
* The average rate is determined for fixed rate instruments on the basis of the U.S. dollar and foreign currency rates and for the variable rate instruments generally on the basis of
Euribor or Libor.
Financial statements 51
Notes to the condensed consolidated financial statements for the six months ended June 30, 2014
continued
(in millions of U.S. dollars, except share and per share data)
(unaudited)
The portfolio associated with derivative financial instruments classified as Level 2 as of June 30, 2014 is as follows:
Assets
Interest rate swaps - fixed rate
borrowings/loans
Total interest rate instruments
Equity Instruments
Equity option purchases
Total equity instruments
Foreign exchange rate
instruments
Forward purchase of contracts
Forward sale of contracts
Currency swaps purchases
Exchange option purchases
Exchange options sales
Total foreign exchange rate
instruments
Raw materials (base metal),
freight, energy, emission rights
Term contracts sales
Term contracts purchases
Total raw materials (base metal),
freight, energy, emission rights
Total
Liabilities
Notional Amount
Fair Value
Average Rate*
Notional Amount
Fair Value
Average Rate*
1,249
4
4
6.14%
50
(1)
(1)
1.60%
370
64
64
3,366
1,632
546
143
14
37
11
22
7
-
4,231
346
330
23
152
77
58
581
3
74
77
222
(18)
(4)
(48)
(5)
(75)
214
103
(16)
(3)
(19)
(95)
* The average rate is determined for fixed rate instruments on the basis of the U.S. dollar and foreign currency rates and for the variable rate instruments generally on the basis of
Euribor or Libor. 52 Financial statements
Notes to the condensed consolidated financial statements for the six months ended June 30, 2014
continued
(in millions of U.S. dollars, except share and per share data)
(unaudited)
Note 10: Provisions
Provisions, as of December 31, 2013 and June 30, 2014, are comprised of the following:
Environmental
Asset retirement obligations
Site restoration
Staff related obligations
Voluntary separation plans
Litigation and other (see note 13)
Tax claims
Other legal claims
Other unasserted claims
Commercial agreements and onerous contracts
Other
Short-term provisions
Long-term provisions
Note 11: Segment and
geographic information
As of January 1, 2014,
ArcelorMittal implemented
changes to its organizational
structure which provide a greater
geographical focus. Accordingly,
the Company modified the
structure of its segment
information in order to reflect
changes in its approach to
managing its operations and
prior period segment disclosures
have been retrospectively
adjusted to reflect this new
segmentation in conformity with
IFRS. ArcelorMittal’s reportable
segments changed to NAFTA,
Brazil and neighboring countries
(“Brazil”), Europe, Africa &
Commonwealth of Independent
States (“ACIS”) and Mining. The
NAFTA segment includes the Flat,
Long and Tubular operations of
USA, Canada and Mexico. The
Brazil segment includes the Flat
operations of Brazil, and the Long
and Tubular operations of Brazil
and its neighboring countries
including Argentina, Costa Rica,
Trinidad and Tobago and
Venezuela. The Europe segment
comprises the Flat, Long and
Tubular operations of the
European business, as well as
Distribution Solutions (AMDS).
The ACIS segment is largely
unchanged with the addition of
some Tubular operations and
distribution activities
(ArcelorMittal International). The
Mining segment remains
unchanged.
Reportable segments
ArcelorMittal reports its
operations in five segments:
NAFTA, Brazil, Europe, ACIS and
Mining.
• NAFTA represents the flat, long
and tubular facilities of the
Company located in North
America (Canada, United States
and Mexico). NAFTA produces
flat products such as slabs,
hot-rolled coil, cold-rolled coil,
coated steel and plate. These
products are sold primarily to
customers in the following
industries: distribution and
processing, automotive, pipe
and tubes, construction,
packaging, and appliances.
NAFTA also produces long
products such as wire rod,
sections, rebar, billets, blooms
and wire drawing, and tubular
products;
• Brazil includes the flat
operations of Brazil and the
long and tubular operations of
Brazil and neighboring
countries including Argentina,
Costa Rica, Trinidad and
Tobago and Venezuela. Flat
products include slabs,
hot-rolled coil, cold-rolled coil
and coated steel. Long
products consist of wire rod,
sections, bar and rebar, billets,
blooms and wire drawing.
• Europe is the largest flat steel
producer in Europe, with
operations that range from
Spain in the west to Romania in
the east, and covering the flat
carbon steel product portfolio
in all major countries and
markets. Europe produces
hot-rolled coil, cold-rolled coil,
coated products, tinplate, plate
and slab. These products are
sold primarily to customers in
the automotive, general
industry and packaging
industries. Europe produces
also long products consisting
of sections, wire rod, rebar,
billets, blooms and wire
December 31, 2013
June 30, 2014
915
516
75
169
138
954
355
299
300
93
229
3,089
1,206
1,883
3,089
939
479
60
175
105
969
378
291
300
72
226
3,025
1,125
1,900
3,025
drawing, and tubular products.
In addition, it includes
Distribution Solutions,
primarily an in-house trading
and distribution arm of
ArcelorMittal. Distribution
Solutions also provides
value-added and customized
steel solutions through further
steel processing to meet
specific customer
requirements;
• ACIS produces a combination of
flat, long products and tubular
products. Its facilities are
located in Asia, Africa and
Commonwealth of
Independent States; and
• Mining comprises all mines
owned by ArcelorMittal in the
Americas (Canada, USA, Mexico
and Brazil), Asia (Kazakhstan
and Russia), Europe (Ukraine
and Bosnia & Herzegovina) and
Africa (Algeria and Liberia). It
supplies the Company and
third parties customers with
iron ore and coal.
Financial statements 53
Notes to the condensed consolidated financial statements for the six months ended June 30, 2014
continued
(in millions of U.S. dollars, except share and per share data)
(unaudited)
The following table summarizes certain financial data relating to ArcelorMittal’s operations in its different reportable segments:
NAFTA
Brazil
Europe
9,592
89
193
383
160
4,903
178
542
358
122
20,532
218
(256)
978
24
473
10,300
51
77
359
226
4,581
206
592
247
241
20,692
148
414
810
518
ACIS
Mining
Others*
Eliminations
Total
4,213
90
(140)
266
15
188
637
1,913
572
293
687
72
289
(116)
19
6
(2,777)
(39)
-
39,949
756
2,297
39
1,636
4,158
149
5
260
215
707
1,932
507
314
429
54
233
(122)
21
20
(2,719)
33
-
40,492
1,506
2,011
1,649
Six months ended June 30, 2013
Sales to external customers
Intersegment sales**
Operating income
Depreciation
Impairment
Capital expenditures
Six months ended June 30, 2014
Sales to external customers
Intersegment sales**
Operating income
Depreciation
Capital expenditures
* Others include all other operational and non-operational items which are not segmented, such as corporate and shared services, financial activities, and shipping and logistics.
**Transactions between segments are reported on the same basis of accounting as transactions with third parties except for certain mining products shipped internally and
reported on a cost plus basis.
The reconciliation from operating income to net income is as follows:
Six months ended
June 30, 2013
Operating income
Income (loss) from investments in associates, joint ventures and other investments
Financing costs - net
Income (loss) before taxes
Income tax (expense)
Net income (loss) (including non-controlling interests)
756
(42)
(1,634)
(920)
(196)
(1,116)
Six months ended
June 30, 2014
1,506
154
(1,516)
144
(217)
(73)
54 Financial statements
Notes to the condensed consolidated financial statements for the six months ended June 30, 2014
continued
(in millions of U.S. dollars, except share and per share data)
(unaudited)
Geographical information
Sales (by destination)
Americas
United States
Brazil
Canada
Argentina
Mexico
Others
Total Americas
Europe
Germany
France
Spain
Poland
Italy
Turkey
United Kingdom
Belgium
Czech Republic
Romania
Netherlands
Russia
Others
Total Europe
Asia & Africa
South Africa
Kazakhstan
China
India
Others
Total Asia & Africa
Total
Six months ended
June 30, 2013
Six months ended
June 30, 2014
7,646
3,500
1,604
608
1,031
1,011
15,400
8,345
3,295
1,725
596
1,144
788
15,893
3,516
2,449
2,023
1,633
1,422
1,273
716
683
822
396
463
876
2,625
18,897
3,570
2,573
2,222
1,868
1,447
1,177
771
653
819
369
487
371
2,602
18,929
1,569
415
560
187
2,921
5,652
39,949
1,348
718
497
107
3,000
5,670
40,492
The table below presents sales to external customers by product type. In addition to steel produced by the Company, amounts include material
purchased for additional transformation and sold through distribution services. Others include mainly non-steel sales and services.
Product segmentation
Sales (by products)
Flat products
Long products
Tubular products
Mining products
Others
Total
Six months ended
June 30, 2013
Six months ended
June 30, 2014
22,191
9,856
1,117
637
6,148
39,949
22,377
9,778
1,181
707
6,449
40,492
Financial statements 55
Notes to the condensed consolidated financial statements for the six months ended June 30, 2014
continued
(in millions of U.S. dollars, except share and per share data)
(unaudited)
Note 12: Commitments
The Company’s commitments consist of the following:
Purchase commitments
Guarantees, pledges and other collateral
Non-cancellable operating leases
Capital expenditure commitments
Other commitments
Total
December 31, 2013
June 30, 2014
18,557
3,290
2,235
1,060
3,354
28,496
25,074
4,219
2,099
731
3,381
35,504
Purchase commitments
Purchase commitments consist primarily of major agreements for procuring iron ore, coking coal, coke and hot metal. The Company also has a
number of agreements for electricity, industrial and natural gas, scrap and freight contracts. The increase in purchase commitments is mainly
related to Calvert slab purchases.
Purchase commitments include commitments given to associates for 641 and 507 as of December 31, 2013 and June 30, 2014, respectively.
Purchase commitments include commitments given to joint ventures for nil and 101 as of December 31, 2013 and June 30, 2014, respectively.
Guarantees, pledges and other collateral
Guarantees related to financial debt and credit lines given on behalf of third parties were 89 and 154 as of December 31, 2013 and June 30, 2014,
respectively. Additionally, 32 and 21 were related to guarantees given on behalf of associates and guarantees of 320 and 943 were given on behalf
of joint ventures as of December 31, 2013 and June 30, 2014, respectively. Pledges and other collateral mainly relate to mortgages entered into by
the Company’s operating subsidiaries. The increase is mainly related to the guarantee issued on behalf of Calvert.
Other sureties, first demand guarantees, letters of credit, pledges and other collateral included 3 and nil of commitments given on the behalf of
associates as of December 31, 2013 and June 30, 2014.
Non-cancellable operating leases
Non-cancellable operating leases mainly relate to commitments for the long-term use of various facilities, land and equipment belonging to third
parties.
Capital expenditure commitments
Capital expenditure commitments mainly relate to commitments associated with investments in expansion and improvement projects by various
subsidiaries.
Other commitments
Other commitments given comprise mainly commitments incurred for undrawn credit lines confirmed to customers and gas supply to electricity
suppliers.
56 Financial statements
Notes to the condensed consolidated financial statements for the six months ended June 30, 2014
continued
(in millions of U.S. dollars, except share and per share data)
(unaudited)
Note 13: Contingencies
ArcelorMittal may be involved in
litigation, arbitration or other
legal proceedings. Provisions
related to legal and arbitral
proceedings are recorded in
accordance with the principles
described in note 2 to
consolidated financial statements
for the year ended December 31,
2013.
Most of these claims involve
highly complex issues. Often
these issues are subject to
substantial uncertainties and,
therefore, the probabilities of loss
and an estimate of damages are
difficult to ascertain.
Consequently, for a large number
of these claims, the Company is
unable to make a reasonable
estimate of the expected financial
effect that will result from
ultimate resolution of the
proceeding. In those cases, the
Company has disclosed
information with respect to the
nature of the contingency. The
Company has not accrued a
reserve for the potential outcome
of these cases.
In cases in which quantifiable
fines and penalties have been
assessed or the Company has
otherwise been able to
reasonably estimate the amount
of probable loss, the Company
has indicated the amount of such
fine or penalty or the amount of
provision accrued.
In a limited number of ongoing
cases, the Company is able to
make a reasonable estimate of
the expected loss or range of
possible loss and has accrued a
provision for such loss, but
believe that publication of this
information on a case-by-case
basis would seriously prejudice
the Company’s position in the
ongoing legal proceedings or in
any related settlement
discussions. Accordingly, in these
cases, the Company has disclosed
information with respect to the
nature of the contingency, but
has not disclosed the estimate of
the range of potential loss nor the
recorded as a loss.
These assessments can involve a
series of complex judgments
about future events and can rely
heavily on estimates and
assumptions. These assessments
are based on estimates and
assumptions that have been
deemed reasonable by
management. The Company
believes that the aggregate
provisions recorded for the above
matters are adequate based
upon currently available
information. However, given the
inherent uncertainties related to
these cases and in estimating
contingent liabilities, the
Company could, in the future,
incur judgments that could have
a material effect on its results of
operations in any particular
period. The Company considers it
highly unlikely, however, that any
such judgments could have a
material adverse effect on its
liquidity or financial condition.
Tax Claims
Brazil
In 2011, ArcelorMittal Brasil
received a tax assessment for
corporate income tax (known as
IRPJ) and social contributions on
net profits (known as CSL) in
relation to (i) the amortization of
goodwill on the acquisition of
Mendes Júnior Siderurgia (for the
2006 and 2007 fiscal years), (ii) the
amortization of goodwill arising
from the mandatory tender offer
(MTO) made by ArcelorMittal to
minority shareholders of Arcelor
Brasil following the two-step
merger of Arcelor and Mittal Steel
N.V. (for the 2007 tax year), (iii)
expenses related to pre-export
financing used to finance the
MTO, which were deemed by the
tax authorities to be unnecessary
for ArcelorMittal Brasil since the
financing was used to buy the
shares of its own company; and
(iv) CSL over profits of controlled
companies in Argentina and
Costa Rica. The amount claimed
totals 584. On January 31, 2014,
the administrative tribunal of first
instance found in partial favor of
ArcelorMittal Brasil, reducing the
penalty component of the
assessment from, according to
ArcelorMittal Brasil’s calculations,
266 to 141 (as calculated at the
time of the assessment), while
upholding the remainder of the
assessment. The Brazilian Federal
Revenue Service has appealed
the administrative tribunal’s
decision to reduce the amount of
the original penalty. ArcelorMittal
Brasil has also appealed the
administrative tribunal’s decision
to uphold the tax authority’s
assessment (including the revised
penalty component).
In April 2014, Comércio Exterior
S.A. (“Comex”), a Brazilian
subsidiary of ArcelorMittal,
received a tax assessment in the
amount of 76.9 concerning
certain deductions made by
Comex in relation to the Fundap
financial tax incentive; the
Brazilian Federal Revenue Service
considers that Comex owes
corporate income tax (known as
IRPJ) and social contributions on
net profits (known as CSL) on the
amounts deducted. Comex filed
its defense in June 2014.
In May 2014, ArcelorMittal
Comercializadora de Energia
received a tax assessment from
the state of Minas Gerais alleging
that the company did not
correctly calculate tax credits on
interstate sales of electricity from
the February 2012 to December
2013 period. The amount claimed
totals 60. ArcelorMittal
Comercializadora de Energia filed
its defense in June 2014.
Competition/Antitrust Claims
United States
On September 12, 2008, Standard
Iron Works filed a purported class
action complaint in the U.S.
District Court in the Northern
District of Illinois against
ArcelorMittal, ArcelorMittal USA
LLC, and other steel
manufacturers, alleging that the
defendants had conspired to
restrict the output of steel
products in order to fix, raise,
stabilize and maintain prices at
artificially high levels in violation
of U.S. antitrust law. Other similar
direct purchaser lawsuits were
also filed in the same court and
were consolidated with the
Standard Iron Works lawsuit. In
2009, the court denied a motion
by ArcelorMittal and the other
defendants to dismiss the direct
purchaser claims. A hearing on
class certification of the direct
purchaser claims took place in
March/ April 2014 and a decision
remains pending. On May 29,
2014, ArcelorMittal entered into
an agreement to settle the direct
purchaser claims for an amount
of 90 recognized in cost of sales.
ArcelorMittal may terminate the
settlement agreement if more
than a certain percentage of
members of the purported
plaintiffs’ class opt-out of the
settlement. In addition to any
opt-out direct purchaser
claimants who may pursue their
claims, two putative class actions
on behalf of indirect purchasers
have been filed and are not
covered by the settlement of the
direct purchaser claims. On June
13, 2014, the court gave its
preliminary approval of the
settlement and scheduled a
hearing for final approval on
October 17, 2014.
South Africa
On September 1, 2009, the South
African Competition Commission
referred a complaint against four
producers of long carbon steel in
Financial statements 57
Notes to the condensed consolidated financial statements for the six months ended June 30, 2014
continued
(in millions of U.S. dollars, except share and per share data)
(unaudited)
South Africa, including
ArcelorMittal South Africa, and
the South African Iron and Steel
Institute to the Competition
Tribunal. The complaint referral
followed an investigation into
alleged collusion among the
producers initiated in April 2008,
on-site inspections conducted at
the premises of some of the
producers and a leniency
application by Scaw South Africa,
one of the producers under
investigation. The Competition
Commission recommended that
the Competition Tribunal impose
an administrative penalty against
ArcelorMittal South Africa, Cape
Gate and Cape Town Iron Steel
Works in the amount of 10% of
their annual revenues in South
Africa and exports from South
Africa for 2008. ArcelorMittal filed
an application to access the file of
the Competition Commission
that was rejected. ArcelorMittal is
appealing the decision to reject
the application, and has applied
for a review of that decision and a
suspension of the obligation to
respond to the referral on the
substance pending final outcome
on the application for access to
the documents. The appeal was
upheld by the Competition
Appeals Court (CAC) and the
matter was referred back to the
Competition Tribunal for a
determination of confidentiality
and scope of access to the
documents. The Competition
Commission appealed the
decision of the CAC, and, on May
31, 2013, the Supreme Court of
Appeal dismissed the appeal of
the Competition Commission and
confirmed the decision of the
CAC. In 2014, ArcelorMittal South
Africa requested the documents
from the Competition
Commission, which provided an
index thereof. On July 7, 2011,
ArcelorMittal filed an application
before the Competition Tribunal
to set aside the complaint referral
based on procedural
irregularities. It is too early for
ArcelorMittal to assess the
potential outcome of the
procedure, including the financial
impact.
Other Legal Claims
Argentina
Over the course of 2007 to 2013,
the Argentinian Customs Office
Authority (Aduana) notified the
Company of certain inquiries that
it is conducting with respect to
prices declared by the Company’s
Argentinian subsidiary, Acindar
related to iron ore imports. The
Customs Office Authority is
seeking to determine whether
Acindar incorrectly declared
prices for iron ore imports from
several different Brazilian
suppliers and from ArcelorMittal
Sourcing on 35 different
shipments made between 2002
and 2012. The aggregate amount
claimed by the Customs Office
Authority in respect of all of the
shipments is approximately 165.
The investigations are subject to
the administrative procedures of
the Customs Office Authority and
are at different procedural stages
depending on the filing date of
the investigation. By February
2014, in 17 cases, the
administrative branch of the
Customs Office Authority ruled
against Acindar (representing
total claims of 30million). These
decisions have been appealed to
the Argentinian National Fiscal
Court.
Canada
In 2008, two complaints filed by
Canadian Natural Resources
Limited (“CNRL”) in Calgary,
Alberta against ArcelorMittal,
ArcelorMittal USA LLC, Mittal
Steel North America Inc. and
ArcelorMittal Tubular Products
Roman S.A were filed. CNRL
alleges negligence in both
complaints, seeking damages of
56 and 25, respectively. The
plaintiff alleges that it purchased
a defective pipe manufactured by
ArcelorMittal Tubular Products
Roman and sold by ArcelorMittal
Tubular Products Roman and
Mittal Steel North America Inc. In
May 2009, in agreement with
CNRL, ArcelorMittal and
ArcelorMittal USA were dismissed
from the cases without prejudice
to CNRL’s right to reinstate the
parties later if justified. In April
2014, the parties participated in a
mediation procedure and
reached a settlement subject to
certain conditions, which have
now been satisfied. The
proceedings before the Calgary
court were formally discontinued
in June 2014 and the case is
therefore now closed.
Italy
In January 2010, ArcelorMittal
received notice of a claim filed by
Finmasi S.p.A. relating to a
memorandum of agreement
(“MoA”) entered into between
ArcelorMittal Distribution
Services France (“AMDSF”) and
Finmasi in 2008. The MoA
provided that AMDSF would
acquire certain of Finmasi’s
businesses for an amount not to
exceed €93 million, subject to the
satisfaction of certain conditions
precedent, which, in AMDSF’s
view, were not fulfilled. Finmasi
sued for (i) enforcement of the
MoA, (ii) damages of €14 million
to €24 million or (iii) recovery
costs plus quantum damages for
Finmasi’s alleged lost opportunity
to sell to another buyer. In
September 2011, the court
rejected Finmasi’s claims other
than its second claim. The court
appointed an expert to
determine the quantum of
damages. In May 2013, the
expert’s report was issued and
valued the quantum of damages
in the range of €38 million to €60
million. ArcelorMittal appealed
the decision on the merits. In May
2014, the Court of Appeals issued
a decision rejecting
ArcelorMittal’s appeal. On June
20, 2014, ArcelorMittal filed an
appeal of the Court of Appeal’s
judgment with the Italian Court
of Cassation. A hearing in relation
to the quantum of damages took
place on June 24, 2014 and the
judge set a deadline of October
8, 2014 for the parties to file their
briefs.
Senegal
In 2007, ArcelorMittal Holdings
AG entered into an agreement
with the State of Senegal relating
to an integrated iron ore mining
and related infrastructure project.
The Company announced at the
time that implementation of the
project would entail an aggregate
investment of 2.2 billion. Project
implementation did not follow
the originally anticipated
schedule after initial phase
studies and related investments.
The Company engaged in
discussions with the State of
Senegal about the project over a
long period. In early 2011, the
parties engaged in a conciliation
procedure, as provided for under
their agreement, in an attempt to
reach a mutually acceptable
outcome. Following the
unsuccessful completion of this
procedure, in May 2011 the State
of Senegal commenced an
arbitration before the Court of
Arbitration of the International
Chamber of Commerce, claiming
breach of contract and
provisionally estimating damages
of 750. In September 2013, the
arbitral tribunal issued its first
award ruling that Senegal was
entitled to terminate the 2007
agreements. The arbitral tribunal
also ruled that a new arbitration
phase would be held relating to
the potential liability of
ArcelorMittal as well as the
amount of any damages which
could be awarded to Senegal.
The parties have since agreed to
settle the dispute with the
amount of the settlement being
included within “Financing costs
– net”.
58 Financial statements
Notes to the condensed consolidated financial statements for the six months ended June 30, 2014
continued
(in millions of U.S. dollars, except share and per share data)
(unaudited)
Note 14: Subsequent
events
On July 29, 2014, ArcelorMittal
and Billiton Guinea B.V. (“BHP
Billiton”) signed a sale and
purchase agreement for the
acquisition by ArcelorMittal of a
43.5% stake in Euronimba Limited
(“Euronimba”), which holds a 95%
indirect interest in the Mount
Nimba iron ore project in Guinea
(“the Project”). ArcelorMittal has
simultaneously entered into a
sale and purchase agreement
with Compagnie Française de
Mines et Métaux (a member of
the Areva group) for the
acquisition of its 13% stake in
Euronimba. The closing of these
two transactions would give
ArcelorMittal a 56.5% ownership
of Euronimba. The remaining
43.5% of Euronimba is owned by
Newmont LaSource S.A.S.
(“Newmont”). As part of the
transaction, ArcelorMittal has
granted Newmont a limited
duration option which, if
exercised, would result in
Newmont and ArcelorMittal
owning equal stakes in
Euronimba. The transaction is
subject to certain closing
conditions, including merger
control clearance and certain
approvals from the Government
of Guinea.
Financial statements 59
Report of the Réviseur d’entreprises agréé on review of interim financial information
To the shareholders of ArcelorMittal
19, avenue de la Liberté
L-2930 Luxembourg
Luxembourg
REPORT ON REVIEW OF INTERIM FINANCIAL STATEMENTS
Introduction
We have reviewed the accompanying condensed consolidated statement of financial position of ArcelorMittal and its
subsidiaries as of June 30, 2014 and the related condensed consolidated statements of operations, other comprehensive
income, changes in equity and cash flows for the six month period then ended (collectively, the “interim financial statements”).
The Board of Directors is responsible for the preparation and fair presentation of the interim financial statements in accordance
with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union. Our responsibility
is to express a conclusion on the interim financial statements based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements 2410, Review of Interim Financial
Information Performed by the Independent Auditor of the Entity, as adopted by the Institut des Réviseurs d’Entreprises. A
review of interim financial information consists of making inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance
that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial
statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, Interim
Financial Reporting, as adopted by the European Union.
Emphasis of Matter
As discussed in Notes 1 and 11 to the interim financial statements, the accompanying interim financial statements have been
retrospectively adjusted for a change in the composition of reportable segments. Our conclusion is not qualified in respect of
this matter.
For Deloitte Audit
société à responsabilité limitée
Cabinet de révision agréé
Vafa Moayed, Réviseur d’entreprises agréé
Partner
August 4, 2014
560, rue de Neudorf
L-2220 Luxembourg
60 Financial statements
Recast explanatory information
On January 1, 2014, ArcelorMittal
implemented changes to its
organizational structure which
provide a greater geographical
focus. Accordingly, the Company
modified the structure of its
segment information in order to
reflect changes in its approach to
managing its operations and
internal reporting. ArcelorMittal’s
reportable segments changed to
NAFTA, Brazil and neighboring
countries (“Brazil”), Europe, Africa &
Commonwealth of Independent
States (“ACIS”) and Mining. The
NAFTA segment includes the Flat,
Long and Tubular operations of
USA, Canada and Mexico. The
Brazil segment includes the Flat
operations of Brazil, and the Long
and Tubular operations of Brazil
and its neighboring countries
including Argentina, Costa Rica,
Trinidad and Tobago and
Venezuela. The Europe segment
comprises the Flat, Long and
Tubular operations of the
European business, as well as
Distribution Solutions (AMDS). The
ACIS division is largely unchanged
with the addition of some Tubular
operations and distribution
activities (ArcelorMittal
International). The Mining segment
remains unchanged.
US Securities and Exchange
Commission (“SEC”) rules require
that, following the issuance of
interim financial statements
reflecting new reportable
segments (which will occur for the
interim financial statements for the
six months ended June 30, 2014), a
US SEC registrant must recast and
re-file its most recent annual
financial statements to include the
effects of the retrospective
application of the revised
reportable segments for all periods
presented in order to keep access
to the US capital markets until the
next annual financial statements
are filed. Such recast financial
statements must also be audited
by the Company’s independent
auditor for purposes of the SEC
filing.
The US SEC filing will provide to US
investors early information about
the impacts of the new reportable
segments on previous annual
periods. In order to ensure that
European investors have the
benefit of access to the full impact
of the new reportable segments
for all periods, similar to US
investors, the Company presents
hereafter recast Note 27 to the
The US SEC rule results in early
annual consolidated financial
presentation of the audited
statements for the year ended
retrospective impacts of the new
December 31, 2013 as
reportable segments which would supplementary information to its
normally be reported by a
Interim Financial Report for the
company in its next set of annual
half year ended June 30, 2014 filed
financial statements, in conformity with the Commission de
with IFRS (i.e. for the year ending
Surveillance du Secteur Financier
December 31, 2014). ArcelorMittal (“CSSF”).
has filed the audited recast
financial statements for the three
years ended December 31, 2013
with the SEC.
Financial statements 61
Updated disclosure of segment and geographic information included in note 27 to the consolidated financial
statements for the year ended December 31, 2013
(in millions of U.S. dollars, except share and per share data)
Note 27: Segment and
Geographic Information
As from January 1, 2014,
ArcelorMittal implemented
changes to its organizational
structure which provide a greater
geographical focus. Accordingly,
the Company modified the
structure of its segment
information in order to reflect
changes in its approach to
managing its operations and prior
period segment disclosures have
been recast to reflect this new
segmentation, in conformity with
IFRS. ArcelorMittal’s reportable
segments changed to NAFTA,
Brazil and neighboring
countries(“Brazil”), Europe, Africa
& Commonwealth of Independent
States (“ACIS”) and Mining. The
NAFTA segment includes the Flat,
Long and Tubular operations of
USA, Canada and Mexico. The
Brazil segment includes the Flat
operations of Brazil, and the Long
and Tubular operations of Brazil
and its neighboring countries
including Argentina, Costa Rica,
Trinidad and Tobago and Venezuela.
The Europe segment comprises the
Flat, Long and Tubular operations
of the European business, as well as
Distribution Solutions (AMDS). The
ACIS division is largely unchanged
with the addition of some Tubular
operations and distribution
activities (ArcelorMittal
International). The Mining segment
remains unchanged.
coated steel and plate. These
products are sold primarily to
customers in the following
industries: distribution and
processing, automotive, pipe and
tubes, construction, packaging,
and appliances. NAFTA also
produces long products such as
wire rod, sections, rebar, billets,
blooms and wire drawing, and
tubular products;
general industry and packaging
industries. Europe produces also
long products consisting of
sections, wire rod, rebar, billets,
blooms and wire drawing, and
tubular products. In addition, it
includes Distribution Solutions,
primarily an in-house trading and
distribution arm of ArcelorMittal.
Distribution Solutions also
provides value-added and
customized steel solutions
through further steel processing
to meet specific customer
requirements;
ArcelorMittal has a high degree of
geographic diversification relative
to other steel companies. During
2013, ArcelorMittal shipped its
products to customers in over 170
countries, with its largest markets
• Brazil includes the flat operations
in Flat and Long products in
of Brazil and the long and tubular
Americas and Europe. ArcelorMittal
operations of Brazil and
conducts its business through its
neighboring countries including
Operating Subsidiaries. Many of
Argentina, Costa Rica, Trinidad
• ACIS produces a combination of
these operations are strategically
and Tobago and Venezuela. Flat
flat, long products and tubular
located with access to on-site deep
products include slabs, hot-rolled
products. Its facilities are located
water port facilities, which allow
coil, cold-rolled coil and coated
in Asia, Africa and
for cost-efficient import of raw
steel. Long products consist of
Commonwealth of Independent
materials and export of steel
wire rod, sections, bar and rebar,
States; and
products.
billets, blooms and wire drawing.
• Mining comprises all mines
Reportable segments
• Europe is the largest flat steel
owned by ArcelorMittal in the
producer in Europe, with
Americas (Canada, USA, Mexico
ArcelorMittal reports its operations
operations that range from Spain
and Brazil), Asia (Kazakhstan and
in five segments: NAFTA, Brazil,
in the west to Romania in the
Russia), Europe (Ukraine and
Europe, ACIS and Mining.
east, and covering the flat
Bosnia & Herzegovina) and
carbon steel product portfolio in
Africa (Algeria and Liberia). It
• NAFTA represents the flat, long
all major countries and markets.
supplies the Company and third
and tubular facilities of the
Europe produces hot-rolled coil,
parties customers with iron ore
Company located in North
cold-rolled coil, coated products,
and coal.
America (Canada, United States
tinplate, plate and slab. These
and Mexico). NAFTA produces
products are sold primarily to
flat products such as slabs,
customers in the automotive,
hot-rolled coil, cold-rolled coil,
The following table summarizes certain financial data relating to ArcelorMittal’s operations in its different reportable segments.
NAFTA
Brazil
Europe
ACIS
Mining
Others*
Elimination
Total
20,576
185
1,243
776
(5)
494
9,902
255
561
729
600
41,996
503
(5,725)
1,944
5,032
1,207
9,976
221
(54)
657
8
436
1,674
3,819
1,209
546
1,883
89
592
(95)
50
97
(5,575)
216
-
84,213
(2,645)
4,702
5,035
4,717
19,416
229
630
767
422
9,877
271
1,204
691
276
40,086
421
(985)
2,003
86
990
8,254
164
(457)
542
196
398
1,659
4,107
1,176
642
162
1,342
148
606
(298)
50
24
(5,798)
(73)
-
79,440
1,197
4,695
444
3,452
Year ended December 31, 2012
Sales to external customers
Intersegment sales**
Operating income (loss)
Depreciation
Impairment
Capital expenditures
Year ended December 31, 2013
Sales to external customers
Intersegment sales**
Operating income (loss)
Depreciation
Impairment
Capital expenditures
* Others include all other operational and non-operational items which are not segmented, such as corporate and shared services, financial activities, and shipping and logistics.
** Transactions between segments are reported on the same basis of accounting as transactions with third parties except for certain mining products shipped internally and reported
on a cost plus basis.
62 Financial statements
Updated disclosure of segment and geographic information included in note 27 to the consolidated financial
statements for the year ended December 31, 2013
(in millions of U.S. dollars, except share and per share data)
The Company does not regularly provide assets for each reportable segment to the CODM. The table which follows presents the reconciliation of
segment assets to total assets as required by IFRS 8.
Assets allocated to segments
Cash and cash equivalents, including restricted cash
Deferred tax assets
Assets held for sale
Other unallocated assets and eliminations
Total assets
Year Ended
December 31,2012
Year Ended
December 31,2013
96,818
4,540
8,221
4,419
113,998
93,993
6,232
8,938
292
2,853
112,308
The reconciliation from operating income (loss) to net income is as follow:
Year Ended
December 31,2012
Operating income (loss)
Income from investments in associates and joint ventures
Financing costs - net
Income (loss) before taxes
Income tax expense (benefit)
Discontinued operations
Net income (including non-controlling interests)
Year Ended
December 31,2013
(2,645)
185
(2,915)
(5,375)
(1,906)
(3,469)
1,197
(442)
(3,115)
(2,360)
215
(2,575)
Year Ended
December 31,2012
Year Ended
December 31,2013
Geographical information
Sales (by destination)
Americas
United States
Canada
Brazil
Argentina
Mexico
Others
Total Americas
16,539
3,617
6,376
1,236
2,337
2,209
32,314
15,625
3,299
6,576
1,279
2,081
2,181
31,041
Europe
France
Spain
Germany
Romania
Poland
Belgium
Italy
United Kingdom
Turkey
Czech Republic
Netherlands
Russia
Others
Total Europe
5,062
3,764
7,645
779
3,614
1,262
2,671
1,654
2,577
1,660
978
1,770
5,105
38,541
4,764
3,900
6,834
755
3,523
1,264
2,771
1,442
2,469
1,608
904
1,618
5,071
36,923
Asia & Africa
South Africa
China
Kazakhstan
India
Others
Total Asia & Africa
3,338
1,218
659
686
7,457
13,358
2,908
1,395
791
406
5,976
11,476
Total
84,213
79,440
Financial statements 63
Updated disclosure of segment and geographic information included in note 27 to the consolidated financial
statements for the year ended December 31, 2013
(in millions of U.S. dollars, except share and per share data)
Revenues from external customers attributed to the country of domicile (Luxembourg) were 217 and 118 as of December 31, 2012 and 2013,
respectively.
Non-current assets* per significant country:
Non-current assets
As of December 31,
2012
Non-current assets
As of December 31,
2013
Americas
Brazil
United States
Canada
Mexico
Trinidad and Tobago
Venezuela
Argentina
Others
Total Americas
7,775
5,986
6,526
1,563
251
202
267
41
22,611
6,524
6,027
5,985
1,491
221
195
192
31
20,666
Europe
France
Ukraine
Germany
Spain
Belgium
Poland
Luxembourg
Czech Republic
Romania
Bosnia and Herzegovina
Italy
Others
Total Europe
5,801
4,182
3,301
3,265
3,306
2,635
1,686
816
818
256
263
761
27,090
5,806
3,959
3,355
3,170
3,047
2,712
1,886
854
799
259
253
554
26,654
Asia & Africa
Kazakhstan
South Africa
Liberia
Morocco
Others
Total Africa & Asia
2,056
1,910
1,040
189
510
5,705
2,126
1,424
1,144
178
171
5,043
Unallocated assets
Total
26,810
82,216
25,920
78,283
*Non-current assets do not include goodwill (as it is not allocated to the geographic regions), deferred tax assets, other investments or receivables
and other non-current financial assets. Such assets are presented under the caption “Unallocated assets”.
64 Financial statements
Updated disclosure of segment and geographic information included in note 27 to the consolidated financial
statements for the year ended December 31, 2013
(in millions of U.S. dollars, except share and per share data)
Product segmentation
Sales (by products)
Year Ended
December 31,2012
Flat products
Long products
Tubular products
Mining products
Others
Total
45,748
20,686
2,760
1,674
13,345
84,213
Year Ended
December 31,2013
43,737
19,331
2,401
1,659
12,312
79,440
The table above presents sales to external customer by product type. In addition to steel produced by the Company, amounts include material
purchased for additional transformation and sold through distribution services. Others include mainly non-steel sales and services.
Financial statements 65
Report of the réviseur d’entreprises agréé on the updated disclosure of segment and geographic information
To the Shareholders of
ArcelorMittal Société Anonyme
19, Avenue de la Liberté
L-2930 Luxembourg
Grand Duchy of Luxembourg
Report on the Updated Disclosure of Segment and Geographic Information
Following our appointment by the General Meeting of the shareholders held on May 8, 2013, we have audited, in accordance
with the International Standards on Auditing as adopted by Luxembourg by the Commission de Surveillance du Secteur
Financier, the consolidated financial statements of ArcelorMittal and its subsidiaries, which comprise the consolidated
statement of financial position as at December 31, 2013, and the consolidated statements of operations, other comprehensive
income, changes in equity and cash flows, and a summary of significant accounting policies and other explanatory information
for the year then ended and we have issued our report thereon dated March 12, 2014.
We have also audited the accompanying note which amends Note 27 to the aforementioned financial statements. This
amendment to Note 27 presents the disclosures giving effect to the change in composition of operating and reportable
segments for the years ended December 31, 2012 and 2013 (collectively the “Updated Disclosure of Segment and Geographic
Information”).
Responsibility of the Board of Directors for the Updated Disclosure of Segment and Geographic Information
The Board of Directors is responsible for the preparation and fair presentation of the Updated Disclosure of Segment and
Geographic Information in accordance with International Financial Reporting Standards 8 as adopted by the European Union,
Operating Segment (“IFRS 8”) and for such internal control as the Board of Directors determines is necessary to enable the
preparation of the Updated Disclosure of Segment and Geographic Information that are free from material misstatement,
whether due to fraud or error.
Responsibility of the réviseur d’entreprises agréé
Our responsibility is to express an opinion on the Updated Disclosure of Segment and Geographic Information based on our
audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the
Commission de Surveillance du Secteur Financier. Those standards require that we comply with ethical requirements and plan
and perform the audit to obtain reasonable assurance about whether the Updated Disclosure of Segment and Geographic
Information is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Updated
Disclosure of Segment and Geographic Information. The procedures selected depend on the réviseur d’entreprises agréé’s
judgement, including the assessment of the risks of material misstatement of the Updated Disclosure of Segment and
Geographic Information, whether due to fraud or error. In making those risk assessments, the réviseur d’entreprises agréé
considers internal control relevant to the entity’s preparation and fair presentation of the Updated Disclosure of Segment and
Geographic Information in order to design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors,
as well as evaluating the overall presentation of the Updated Disclosure of Segment and Geographic Information.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the Updated Disclosure of Segment and Geographic Information gives a true and fair view of such information
as it relates to the financial position and results of operations of ArcelorMittal and its subsidiaries as of and for the year ended
December 31, 2013, in all material respects, in accordance with IFRS 8.
For Deloitte Audit
société à responsabilité limitée
Cabinet de révision agréé
Vafa Moayed, Réviseur d’entreprises agréé
Partner
August 4, 2014
560, rue de Neudorf
L-2220 Luxembourg
66 Interim Management Report

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