2006 First Half Results: Arcelor Delivers Excellent Operating Result in Buoyant Market Despite High Costs of Raw Materials.LUXEMBOURG -- Arcelor (ISIN Isin (ĭs`ĭn), capital of an ancient Semitic kingdom of N Babylonia. The city became important after the third dynasty of Ur fell to the Elamites and the Amorites (c.2025 B.C.). The phase from c.2025–c.1763 B.C. :LU0140205948) (Pink Sheets:ARLOF) (Paris:LOR LOR Letter Of Reprimand (military) LoR Lord of the Rings (J.R.R. Tolkien) LOR Learning Object Repository LOR Linux.Org. ): --Excellent contribution of all divisions despite price cost squeeze compared to H1 2005 --Substantial management gains at EUR EUR In currencies, this is the abbreviation for the Euro. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 350 million --Active portfolio management: acquisition of Dofasco and a controlling stake in Moroccan Sonasid, disposal of long stainless producer Ugitech --Performance confirms Arcelor's 2008 Value Plan targets --Strong outlook for second half thanks to increasing sales prices Arcelor delivers an excellent operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. in a positive demand environment despite strong raw material price increases, confirming its Value Plan targets: --Excellent EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become generation: EBITDA is at EUR 2.84 billion. After reprocessing Reprocessing may refer to:
The phrase pro forma EBITDA is at EUR 3.1 billion, an excellent level in line with Arcelor's 2006-2008 Value Plan objectives. --Outstanding performance despite massive price cost squeeze that will be alleviated al·le·vi·ate tr.v. al·le·vi·at·ed, al·le·vi·at·ing, al·le·vi·ates To make (pain, for example) more bearable: a drug that alleviates cold symptoms. See Synonyms at relieve. as of Q3 thanks to sales prices increases. Raw material prices (iron ore, zinc zinc, metallic chemical element; symbol Zn; at. no. 30; at. wt. 65.38; m.p. 419.58°C;; b.p. 907°C;; sp. gr. 7.133 at 25°C;; valence +2. Zinc is a lustrous bluish-white metal. It is found in Group 12 of the periodic table. , coal,...) attain record levels, burdening H1 performance. Sales prices, which were lower in 1H06 than in 1H05, will rise in 2H06, favourably impacting the second half of the year. Between 1H05 and 1H06 the price cost squeeze represented more than EUR 1.8 billion. --Buoyant demand on all markets, allowing for shipments of 26.5 million tonnes after a weak level of demand in 2H05. --Remarkable results of all divisions supported by substantial management gains at EUR 350 million for the six first months of 2006. --Long Carbon Steel in Europe reports record results (EUR 333 million). --Turnaround of the Flat Stainless Steel stainless steel: see steel. stainless steel Any of a family of alloy steels usually containing 10–30% chromium. The presence of chromium, together with low carbon content, gives remarkable resistance to corrosion and heat. activity in Europe is almost completed and Brazilian operations are very profitable. EBITDA of EUR 240 million, which confirms the pertinence per·ti·nent adj. Having logical precise relevance to the matter at hand. See Synonyms at relevant. [Middle English, from Old French partenant, pertinent, from Latin of the improvement plans launched in that Business Unit. --Within the Flat Carbon Steel division, Dofasco confirms its excellent profit generation potential, with a pro forma EBITDA of EUR 294 million over the half year, confirming the rapid and smooth integration of this newly acquired asset. --Increasing margins at A3S, the service and distribution arm of Arcelor. --Working capital increases due to Dofasco integration and to the impact of seasonal and cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. effects on receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed , while inventories remain fully under control. --Cash flow before growth investments and dividend at EUR 1 billion, despite the impact of a strongly rising activity and materials costs on working capital. --Continued investments in Brazil, including a 50% capacity increase at CST CST abbr. 1. Central Standard Time 2. convulsive shock treatment CST Central Standard Time Noun 1. that will help to further expand the low cost production base of the group. Business environment and outlook The first half of the year has been excellent for the world steel industry in terms of volume. Since January, the world economic climate has improved considerably and simultaneously in all regions. Real GDP Real GDP This inflation-adjusted measure that reflects the value of all goods and services produced in a given year, expressed in base-year prices. Often referred to as "constant-price", "inflation-corrected" GDP or "constant dollar GDP". and industrial production growth have supported real steel demand in mature economies as well as in emerging markets. The real steel consumption growth year over year should be around 6% this year. In developed economies, the steel consuming industries have started to replenish re·plen·ish v. re·plen·ished, re·plen·ish·ing, re·plen·ish·es v.tr. 1. To fill or make complete again; add a new stock or supply to: replenish the larder. 2. their 2005 low level of steel inventories for long and flat products. The strong demand for steel products explains that the replenishment replenishment the addition of an appropriate quantity of properly prepared solution containing the correct concentration of chemicals to the developer solutions used in radiography. of inventories has not yet been completed at the end of H1. Therefore, the contribution of the technical recovery has been very positive and strong on 1H06. The simultaneous surge in demand in different regions of the world and higher raw materials prices (iron ore: + 19% in 2006, after a 71% surge in 2005, zinc: + 160 % between Q2/05 and Q2/06, carbon scrap: + 30% and nickel nickel, metallic chemical element; symbol Ni; at. no. 28; at. wt. 58.69; m.p. about 1,453°C;; b.p. about 2,732°C;; sp. gr. 8.902 at 25°C;; valence 0, +1, +2, +3, or +4. + 22% over the same period) have increased costs and have started to lead to increase world steel prices, featuring regional variations. Supply has matched the high demand. In EU 15, for example, deliveries on the five first months - which have been very robust - were already higher than the peak of the year 2004 (Eurofer). In the US, May deliveries were also above March 2004 peak in this country. As a result of high demand, steel imports in Europe and North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. have increased significantly. In 2005, apparent consumption growth of finished steel without China was -1.5% and should be + 6 % this year, showing the strength of the 2006 sharp recovery in the rest of the world (annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. around 4% on H1 and 8% on H2, resulting in an annual average of 6%). The global apparent steel consumption growth including China which was 3.5% in 2005 should be above 8.0 % this year. Based on first half 2006 achievements, sustained demand, selling price increases for third and fourth quarters, as well as further management gains, full year prospect looks very bright for all Arcelor activities. This positive outlook confirms Arcelor's Value Plan targets. New acquisitions will contribute to supply Arcelor's clients' growing global needs. The Board of directors of Arcelor met on July 26, 2006 under the chairmanship of Joseph Kinsch. It reviewed the consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge for the second quarter of 2006 and approved the Group consolidated financial statements for the first half of 2006. At June 30, 2006, consolidated net result, group share, was EUR 1,414 million, versus EUR 1,970 million for the first half of 2005. With EUR 19,992 million for the first half of 2006 compared to EUR 16,822 million for the same period last year, consolidated revenue increased substantially reflecting essentially last year's sharp shipments reduction and significant production cuts led by adjustments to unfavourable market conditions. This evolution also translates the acquisition and full consolidation of Huta Warsawa (long products-Poland), Acesita (stainless-Brazil), Dofasco (flat products-Canada) and lately Sonasid (long products-Morocco). Ugitech, long products stainless steel producer has been sold as of January 1st 2006. Geographical breakdown of revenue was as follows: total Europe: 69.1% (EU 25 and others Europe), South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. : 12.2%, North and Central America Central America, narrow, southernmost region (c.202,200 sq mi/523,698 sq km) of North America, linked to South America at Colombia. It separates the Caribbean from the Pacific. : 13.9%, Rest of the world: 4.8%. Consolidated gross operating result amounted to EUR 2,835 million for the first half of 2006 versus EUR 3,389 million for the same period last year, results reduction being attributable to selling prices differential and strong increase in raw materials, (more than EUR 1.8 billion price/cost squeeze effect over the first six months of 2006 compared to the same period 2005). Management gains amounted to EUR 350 million. Consolidated operating result amounted to EUR 2,084 million for the first half of 2006 versus EUR 2,647 million for the same period last year. After a financial result of EUR -458 million, merger incurred costs of EUR 182 million (including 140 million euros of break-up fee paid to Severstal), a contribution from associates of EUR 156 million (including Dillinger Hutte - DHS DHS Department of Homeland Security (USA) DHS Department of Human Services DHS Department of Health Services DHS Demographic and Health Surveys DHS Dirhams (Morocco national currency) , for EUR 111 million) and tax profit of EUR 64 million (current tax charge of EUR 393 million), the consolidated net result, group share, was EUR 1,414 million, compared to EUR 1,970 million for the first half of 2005. Key Figures
In millions of euros 1st Half 1st 2nd 1st
2005 Quarter Quarter Half
(restated) 2006 2006 2006
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Revenue 16,822 9,565 10,427 19,992
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Gross Operating Result 3,389 1,427 1,408 2,835
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Operating Result 2,647 1,091 993 2,084
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Net Result, Group share 1,970 761 653 1,414
------------------------------------==================================
Earnings per Share (in EUR) 3.21 1.23 1.04 2.27
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Net Financial Debt Net financial debt amounted to EUR 6,864 million compared to EUR 5,742 million at March 31, 2006 and EUR 1,266 million at December 31, 2005 thus reflecting both the acquisition of Dofasco during the first quarter and the payment of the yearly dividend in June (EUR 1,149 million). Financial charges for the first quarter included IAS See iPlanet Application Server. 1. (computer) IAS - The first modern computer. It had main registers, processing circuits, information paths within the central processing unit, and used Von Neumann's fetch-execute cycle. 32 compliance leading to the recognition of Arcelor share price increase in the convertible bond value (O.C.E.A.N.E.) which amounted to EUR 295 million at March 31. Cash-flow from operations amounted to EUR 1,479 million over the first six months of 2006. The variation of working capital needs over this period is mainly due to increased activity, to the high prices of inputs and receivables which increase in line with price increases, inventories remaining under tight control. Capital expenditure (EUR 1,067 million of which 489 million for growth capex) remains normal in Europe and includes expansion expenses at CST. Net debt-to-equity ratio debt-to-equity ratio The relationship between long-term funds provided by creditors and funds provided by owners. A firm's debt-to-equity ratio is calculated by dividing long-term debt by owners' equity. Both items are shown on the balance sheet. (including minority interests) increased to 0.38 at June 30, 2006, from 0.07 at the end of 2005 and 0.31 at the end of the first quarter of 2006.
In millions of euros December 31, March 31, June 30,
2005 2006 2006
(restated)
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Shareholders' equity(a) 17,430 18,602 17,954
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Net financial debt 1,266 5,742 6,864
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Net financial debt/Shareholders'
equity(a) 0.07 0.31 0.38
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(a) Including minority interests Flat Carbon Steel Revenue for the Flat Carbon Steel sector was EUR 11,374 million. This compares with EUR 9,665 million for the first half of 2005, the 17.7% increase (2.9% on a comparable basis) being essentially due to the consolidation of Dofasco (EUR 1,413 million). Total shipments increased by 21% to 18,035 thousand tonnes from 14,893 thousand tonnes for the first half of 2005. Auto deliveries show a small decrease (-2%) while, in general industry, deliveries grow substantially and average selling prices The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. trend improves during the second quarter after marked decreases since last year. Profitability of coated products (HDG HDG Heading HDG Haus der Geschichte (German) HDG Hot Dip Galvanized HdG Havre de Grace HDG Hab Dich Gern (German) HDG Heavy-Duty Gasoline-Powered Vehicle HDG Heeresdisziplinargesetz ) was significantly reduced by the strong surge in zinc costs (over EUR 200 million from 1H05 to 1H06) leading to the implementation of a new surcharge An overcharge or additional cost. A surcharge is an added liability imposed on something that is already due, such as a tax on tax. It also refers to the penalty a court can impose on a fiduciary for breaching a duty. pricelist as of July 1st. Gross operating result was EUR 1,566 million, or 13.8% margin for the first half of 2006, compared to EUR 2,381 million, or 24.6% margin, for the same period of 2005 and reflects the negative selling price variation incurred since July 2005 particularly strong for semi finished products (CST) and all spot related selling prices as well as the strong increase of raw material prices (EUR 900 million on 1H06 compared to 1H05). Positive contribution from Dofasco started only in May due to purchasing accounting method. EBITDA contribution was EUR 92 million for four months. Operating result amounted to EUR 1,105 million, or a 9.7% margin for the first half of 2006, compared to EUR 1,964 million, a 20.3% margin for the same period last year. Total crude steel production for the first half year of 2006 was 18,921 thousand tonnes (including Dofasco for 1,479 thousand tonnes) compared to 17,057 thousand tonnes for the same period of 2005. Figures for 2006 include a blast furnace blast furnace, structure used chiefly in smelting. The principle involved in this means of extracting metals is that of the reduction of the ores by the action of carbon monoxide, i.e., the removal of oxygen from the metal oxide in order to obtain the metal. relining at Gijon (Spain). Long Carbon Steel Revenue for the Long Carbon Steel sector was EUR 3,827 million, which compares with EUR 3,230 million for the first half of 2005 (+27.4% on a comparable basis). Variation takes into account the full integration of Huta Warszawa but also the divestment divestment to strip one's investment from an entity. of rods and bars in Spain and of small tubes in Argentina and noticeable price improvement. Total shipments were 7,022 thousand tonnes for the first half of the year to be compared to 6,216 thousand tonnes for the same period last year, translating both an improved market situation (production cuts of more than 500 thousand tonnes last year) and changes in perimeter The boundary of a system or network, which defines the inside and outside. It is typically determined by firewalls and addresses. See DMZ. . Gross operating result for the first half year reached EUR 840 million, or 21.9% margin, compared with EUR 662 million or 20.5% margin for the same period last year. Performance improved, reflecting the very good contribution of assets in the Americas. Scrap costs for Europe have increased considerably during the last six months and margins were maintained. Operating result was EUR 685 million, a 17.9% margin for the first half year, compared to EUR 522 million or a 16.2% margin for the same period of 2005. Total crude steel production amounted to 6,389 thousand tonnes for the first half of 2006 compared to 5,889 thousand tonnes for the same period last year. Arcelor has acquired 50% of SONASID in Morocco Morocco, country, Africa Morocco (mərŏk`ō), officially Kingdom of Morocco, kingdom (2005 est. pop. 32,726,000), 171,834 sq mi (445,050 sq km), NW Africa. , consolidated as of June 2006, and assumes management. The company enjoys a leading market position in construction products. Stainless Steel and Alloys This is a list of alloys for which an article exists in Wikipedia (or is proposed but not yet written). They are grouped by base metal, in order of increasing atomic number. Within these headings they are in no particular order. Revenue for the Stainless Steels sector for the first half year 2006 was EUR 2,789 million compared to EUR 1,975 million for the same period of 2005. The increase is essentially due to the full consolidation of Acesita (October 1, 2005) which accounts for EUR 560 million. Improved demand leading to increased base prices starting from a very low level, also contributes to a positive variation. Nickel prices have reached unprecedented levels leading the stainless business to implement in "third countries" a pricing system Noun 1. pricing system - a system for setting prices on goods or services system - a procedure or process for obtaining an objective; "they had to devise a system that did not depend on cooperation" (base price plus alloy alloy (ăl`oi, əloi`) [O. Fr.,=combine], substance with metallic properties that consists of a metal fused with one or more metals or nonmetals. surcharge) as of August 1 similar to the ones applicable in Europe and the Americas. Shipped volumes amounted to 1,203 thousand tonnes for the fist half 2006 compared to 778 thousand tonnes last year (Acesita accounting for 352 thousand tonnes for the first six months of 2006). Gross operating result reached EUR 240 million for the first half of 2006, an 8.6% margin, compared to EUR 151 million, or a 7.6% margin, for the same period last year. Improved demand, management gains, the ramp up Ramp Up To increase a company's operations in anticipation of increased demand. Notes: A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product. See also: Demand, Economies of Scale of the Carinox steel shop, as well as the very competitive Brazilian activities have contributed to a significant improvement despite depressed base prices which have risen only lately. Inventories remain at a low level. Operating result, at EUR 166 million, a 6% margin, for the first half of 2006 compares to EUR 59 million, a 3% margin, for the first half of 2005. Crude steel production amounted to 1,406 thousand tonnes for the first half of 2006 (including 415 thousand tonnes for Acesita), compared with 834 thousand tonnes for the same period last year. Ugitech, the long stainless products activity has been divested. A3S (Arcelor Steel Solutions and Services) Revenue of the sector was EUR 4,621 million for the first six months of 2006 compared to EUR 4,403 million for the same period last year. This variation is due to the beginning of rising prices during the second quarter. Shipped volumes amounted to 7,409 thousand tonnes for the first half 2006 compared with 6,865 thousand tonnes for the same period last year. Gross operating result, at EUR 188 million for the first half of 2006 compares with EUR 176 million for the first half of 2005 and the operating result, at EUR 152 million for H1 2006, compares with EUR 106 million for the same period of 2005. Improvement in margin reflects the positive trend both in demand and selling prices. Inventories are estimated to be at low levels. Revenue, Gross Operating Result and Operating Result by business sector
In millions of euros 1st Half 2005
(restated)(b)
unaudited
-----------------------------------------
Gross
Op. Op.
Revenue Result % Result %
--------------------------------------------------------------
Flat Carbon Steel 9,665 2,381 24.6% 1,964 20.3%
--------------------------------------------------------------
Long Carbon Steel 3,230 662 20.5% 522 16.2%
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Stainless & Alloys 1,975 151 7.6% 59 3.0%
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A3S
Arcelor Steel
Solutions & Services 4,403 176 4.0% 106 2.4%
==============================================================
Others 990 20 n.a. -3 n.a.
--------------------------------------------------------------
Intra-Group -3,441 -1 n.a. -1 n.a.
==============================================================
15.7%
Total
16,822 3,389 20.1% 2,647
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In millions of euros
1st Half 2006
unaudited
-----------------------------------------
Gross
Op. Op.
Revenue Result % Result %
--------------------------------------------------------------
Flat Carbon Steel 11,374 1,566 13.8% 1,105 9.7%
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Long Carbon Steel 3,827 840 21.9% 685 17.9%
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Stainless & Alloys 2,789 240 8.6% 166 6.0%
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A3S
Arcelor Steel
Solutions & Services 4,621 188 4.1% 152 3.3%
==============================================================
Others 1,004 2 n.a. -23 n.a.
--------------------------------------------------------------
Intra-Group -3,623 -1 n.a. -1 n.a.
==============================================================
Total 19,992 2,835 14.2% 2,084 10.4%
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(b) 2005 comparative information restated following the change in accounting policies in 2006. Arcelor prepares its consolidated financial information under International Financial Reporting standards International Financial Reporting Standards (IFRS) are standards and interpretations adopted by the International Accounting Standards Board (IASB). Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS). ("IFRS IFRS International Financial Reporting Standard(s) IFRS Inter Frame Relay Service IFRS Indiana Facilities Registry System ") since 2002. Revised IFRS standards are applicable as from 2005 in the perspective of the deadline fixed by the European Union European Union (EU), name given since the ratification (Nov., 1993) of the Treaty of European Union, or Maastricht Treaty, to the European Community . Those changes have had no impact on the Group consolidated financial position of the first semester se·mes·ter n. One of two divisions of 15 to 18 weeks each of an academic year. [German, from Latin (cursus) s and should not have significant impact on the Group consolidated financial position of the next quarters. About Arcelor Arcelor is a global leader in steel with a turnover of 32.6 billion euros in 2005. The company, which is to merge with Mittal Steel following a recommended public tender offer, holds leadership positions in its main markets: automotive, construction, household appliances and packaging as well as general industry. Arcelor is the number one steel producer in Europe and Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. and holds significant positions allowing it to capture the growth potential of developing economies and offer technologically advanced steel solutions to its global customers. Arcelor employs 110,000 associates in over 60 countries. The company places its commitment to sustainable development Sustainable development is a socio-ecological process characterized by the fulfilment of human needs while maintaining the quality of the natural environment indefinitely. The linkage between environment and development was globally recognized in 1980, when the International Union at the heart of its strategy and ambitions to be a benchmark for economic performance, labour relations labour relations (US), labor relations npl → relations fpl dans l'entreprise labour relations labour npl → Beziehungen pl and social responsibility. |
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