Arcelor: 2002 Annual Results; A Good Operational Performance in an Unfavourable Economical Environment.

Business Editors

LUXEMBOURG--(BUSINESS WIRE)--Feb. 27, 2003

Arcelor (Paris Exchange: CELR.PA)

-- Synergies higher than expected

-- Net dividend of 0.38 per share

The Board of Directors met on February 27, 2003 under the chairmanship of Joseph Kinsch, reviewed the consolidated accounts and approved the Company's accounts for 2002.

The Board of Directors will propose to the shareholders Meeting a net dividend of 0.38 euro per share. Dividend will be paid on May 22nd, 2003.

Despite a difficult environment for the world economy which was characterized by a pronounced growth slowdown, the Group realized a good gross operating result neighbouring two billion euro. This significant improvement is essentially due to cost reduction progress and more particularly to synergies which at 190 million represent almost the double of the target set by the industrial plan at the time of the merger.

At December 31, 2002, Pre-Tax amounted to 393 million euro. Pro forma consolidated net income was - 121 million. It corresponds to a consolidated net income adjusted for exceptional non cash items.

                       Key Figures of the Group

                In millions of euro
               Pro forma - unaudited*                2001***   2002
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 Revenue                                             27,512    26,594
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 EBITDA                                               1,379     1,978
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 EBIT                                                 - 200       780
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 Pre-Tax                                              - 681       393
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 Net income Group share                               - 339     - 121
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 EPS**                                               - 0.70    - 0.25
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    ** in euro
    *** as published in 2002

Revenue for the Group in 2002 amounted to 26,594 million euro compared to 27,512 in million for 2001 or a 3.34% decrease.

Geographical breakdown was as follows: 75% in the EU, 12% in North America, 5% in South America and 8% in the rest of the world.

Gross operating income amounted to 1,978 million or 7.4% of net sales compared to 1,379 million or 5% of net sales in 2001. It shows, additionally the positive effect of price increases which took place quarter after quarter, the significant cost cutting realization.

Operating income was 780 million euro or 2.9% of revenues compared to -200 million in 2001. Even though hit by one off non cash exceptional items (185 million of impairment), operating income shows significant improvement.

After financial interest expense of 464 million euro, a positive contribution from associates of 77 million and taxes of 462 million, net income (Group share) was - 121 million.

Taxes essentially comprise intangible assets write down (deferred taxes accounted for in some of the Group's subsidiaries) and constitutes a non recurring non cash item.

At December 31, 2002, cash generated by operations was 1,800 million euro. Capital expenditure was 1,415 million euro, or a slight decrease compared to 2001 (1,590 million).

                      Net Financial Indebtedness

            In millions of euro             December 31,  December 31,
          Pro forma - unaudited*                2001          2002
----------------------------------------------------------------------
Shareholders' equity **                        8,819         8,058
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Net financial debt                             6,510         5,993
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Net financial debt/shareholders' equity **      0.74          0.74
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    ** including minorities and residual negative goodwill.

At December 31, 2002 net financial debt was 5,993 million euro or a decrease of 517 million compared to December 31, 2001. This debt reduction is attributable to a good control of working capital requirements and capital expenditure. At December 31, 2002 the net financial debt/shareholder's equity/ (including minorities and residual negative goodwill) was 0.74 (0.74 at December 31, 2001). Stability of this ratio is due to the Brazilian real devaluation impact on Group equity.

            Breakdown of Revenue, EBITDA and EBIT by Sector

                                       2001 **
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In million euro
Pro Forma
Non audited               Revenue    EBITDA     %    EBIT        %
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Flat Carbon Steel          13,572      570    4.2    - 67     -0.5
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Long Carbon Steel           3,963      595   15.0     367      9.3
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Stainless Steel             4,240     - 53   -1.3   - 677    -16.0
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Distribution
 Processing and
 Trading                    9,541      292    3.1     186      2.0
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Other activities            1,251      - 1   -0.1      14      1.1
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Intra Group sales         - 5,055       ns     --      ns       --
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                                       2002
----------------------------------------------------------------------
In million euro
Pro Forma
Non audited               Revenue    EBITDA     %    EBIT        %
----------------------------------------------------------------------
Flat Carbon Steel          13,222      925    7.0     216      1.6
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Long Carbon Steel           4,256      613   14.4     430     10.1
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Stainless Steel             4,248      200    4.7      45      1.1
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Distribution
 Processing and
 Trading                    9,444      319    3.4     209      2.2
----------------------------------------------------------------------
Other activities              910     - 79   -8.7   - 120    -13.2
----------------------------------------------------------------------
Intra Group sales         - 5,486       ns     --      ns       --
----------------------------------------------------------------------

    ** as published in 2002

Revenue for Flat Carbon Steel amounts to 13,222 million euro in 2002 compared to 13, 572 million in 2001 or a slight decrease (-2.6%) reflected by lower average selling prices than in 2001 as first quarter registered low historical prices, which only started to increase as of second quarter. Compared to 2001 shipped volumes have only increased by 0.3%.

The significant improvement of gross operating income (925 million euro in 2002 compared to 570 million in 2001) is due to a better optimization of the mills but mainly to significant cost cutting. Operating income was 216 million euro in 2002 compared to a loss of 67 million in 2001, a significant progression despite the impact of one off exceptional item (asset impairment of 185 million).

For Long Carbon products, the revenue increase of 7.4% is attributable to the integration of new companies as well as to a sharp increase in shipped volumes (+4.2%). Average selling prices are slightly down (- 2.4%), prices in Northern Europe being hit by an increased weakness of the construction markets.

Revenue for Stainless Steel remain stable in 2002 at 4,248 million. However, at 200 million euro for 2002, gross operating income shows significant improvement compared with 2001 which was a loss of 53 million. This progress is essentially due to cost cutting and to synergies, shipped volumes increasing by 1.3%. Operating income is positive compared to a 677 million loss incurred in 2001 essentially due to one off exceptional items (asset impairment)

Revenue for the Distribution, Processing and Trading sector is down by 1% compared to 2001 and reflects a reduction of shipped volumes. Gross operating income increased in 2002 (319 million compared to 292 million in 2001) and translates clearly price increases for 2002 as well as significant cost reduction.

Revenue for other activities was 910 million euro compared to 1,251 million in 2001. Gross operating income was a loss of 79 million compared to a loss of 1 million in 2001. This sharp decrease, being essentially due to the decline of technological markets hitting copper foil activities.

Results of the parent company

At December 31, 2002, results of the parent Company were positive at 260 million euro. This result essentially comes from dividends paid by Group subsidiaries.

(Code Sicovam: 5786; Code Bloomberg: LOR FP; Code Reuters: CELR.PA)

PROSPECTS

The year 2003 has started amidst political and economical uncertainties which should weigh on investment and therefore on industrial activity. In such a context the Group nevertheless confirms the strategic objectives defined at the time of the merger, the implementation of synergies and debt reduction.

In an environment developing in very different ways, the Group is positive about a rigorous approach, in terms of appropriate supply following demand and margins evolution.

For 2003 the Group expects improved results considering higher than 2001 average selling prices, mastering of inventories and important progress in terms of cost reduction and synergies.

The organization of the Group is in place and integration is viewed as a success.

* Pro forma unaudited financial disclosures are meant to simulate the effects of the merger as of February 28, 2002 for periods of time starting prior to this date.

This press release contains certain forward looking statements regarding anticipated market evolution and the future prospects of Arcelor. While these statements are based on the Company's best estimations as of the date hereof, actual results will vary as a function of market conditions, the action of competitors consumer demand, steel prices, economic conditions and other factors.

This press release contains certain forward looking statements regarding anticipated market evolution and the future prospects of Arcelor. While these statements are based on the Company's best estimations as of the date hereof, actual results will vary as a function of market conditions, the action of competitors consumer demand, steel prices, economic conditions and other factors.