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

Our health and safety result for the quarter further improved to a lost time injury frequency rate of 1.1x, the best quarterly performance we have achieved to date. We remain fully focused on driving further safety progress and succeeding in our Journey to Zero harm.

During the first quarter we saw improved sentiment in a number of key markets. Demand in North America continues to grow driven by the automotive and white and yellow good sectors. Europe remains the biggest challenge and during the first quarter we announced the extended idling of a number of facilities inline with our strategy of meeting demand from our more competitive sites. Although impacted by seasonal factors in the first quarter, our mining business remains a key area for growth and we are targeting a further increase in production in 2012.

We have also made good progress with our strategy to divest non-core assets and expect to take further steps in this regard throughout the year. Together with improved operating cash flows, this will reduce net debt which remains a priority for the group.

First quarter 2012 earnings analyst conference call

ArcelorMittal management will host a conference call for members of the investment community to discuss the first quarter 2012 financial performance at:

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 Stock Market Authority for the Financial Markets ( Commission de Surveillance du Secteur Financier ) and the United States Securities and Exchange Commission (the “SEC”) made or to be made by ArcelorMittal, including ArcelorMittal’s Annual Report on Form 20-F for the year ended December 31, 2011 filed with the SEC. ArcelorMittal undertakes no obligation to publicly update its forward-looking statements, whether as a result of new information, future events, or otherwise.

ArcelorMittal first quarter 2012 results

ArcelorMittal, the world’s leading steel company, today announced results for the three month period ended March 31, 2012.

Corporate social responsibility and safety performance

Health and safety - Own personnel and contractors lost time injury frequency rate[2]

Health and safety performance, based on own personnel figures and contractors lost time injury frequency rate, improved to 1.1x in first quarter of 2012 (“1Q 2012”) as compared to 1.2x for the fourth quarter of 2011 (“4Q 2011”) and 1.4x for the first quarter of 2011(“1Q 2011”), with significant improvements primarily in Flat Carbon Americas partially offset by deterioration in the Mining segment. All other segment’s performance remained relatively constant quarter on quarter.

Analysis of results for 1Q 2012 versus 4Q 2011 and 1Q 2011

ArcelorMittal recorded a net income for 1Q 2012 of $11 million, or $0.01 per share, as compared with net loss of $1.0 billion, or $0.65 loss per share, for 4Q 2011, and a net income of $1.1 billion, or $0.69 per share, for 1Q 2011.

Total steel shipments for 1Q 2012 were 22.2 million metric tonnes as compared with 20.6 million metric tonnes for 4Q 2011 and 22.0 million metric tonnes for 1Q 2011.

Sales for 1Q 2012 increased by 1.1% to $22.7 billion as compared with $22.4 billion for 4Q 2011, and were up 2.3% as compared with $22.2 billion for 1Q 2011.  Sales were higher during 1Q 2012 as compared to 4Q 2011 primarily due to higher steel shipment volumes (+8.1%) offset in part by lower average steel selling prices (-2.9%) and foreign exchange.

Depreciation amounted to $1.1 billion for 1Q 2012, compared to $1.2 billion for 4Q 2011 and $1.1 billion for 1Q 2011.

Impairment charges for 1Q 2012 totaled $69 million, primarily related to the extended idling of the electric arc furnace and continuous caster at the Schifflange site in Luxembourg (Long Carbon Europe). Impairment charges for 4Q 2011 totaled $228 million, including $151 million related to the extended idling of the Madrid electric arc furnace (Long Carbon Europe) and $56 million relating to assets within the Flat Carbon Europe perimeter. Impairment charges for 1Q 2011 totaled $18 million.

Restructuring charges for 1Q 2012 totaled $107 million and consisted of costs associated with the implementation of the Asset Optimisation Plan primarily impacting Flat Carbon Europe and Long Carbon Europe operations. Restructuring charges for 4Q 2011 totalled $219 million and consisted of costs associated with the implementation of the Asset Optimisation Plan primarily impacting Flat Carbon Europe and Long Carbon Europe operations, as well as various Distribution Solution entities. There were no such restructuring charges in 1Q 2011.

Operating income for 1Q 2012 was $663 million, as compared with $47 million for 4Q 2011 and $1.4 billion for 1Q 2011. Operating income during 1Q 2012 was positively impacted by changes to the employee benefit plans at Dofasco, leading to curtailment gains of $241 million.

Operating performance for 1Q 2012 was positively impacted by $159 million of dynamic delta hedge (DDH) income recognised during the quarter. Operating performance for 4Q 2011 was positively impacted by $163 million of DDH income recognised during the quarter and by a net gain of $93 million recorded on the sale of carbon dioxide credits, the proceeds of which will be re-invested in energy saving projects. Operating performance for 1Q 2011 was positively impacted by a non-cash gain of $336 million related to the reversal of provisions for inventory write-downs and for litigations and included a non-cash gain of $119 million relating to DDH income.

Loss from equity method investments and other income in 1Q 2012 was $14 million, as compared to income of $177 million in 4Q 2011 and $148 million for 1Q 2011. The net impact from the partial sale of the Company’s stake in Erdemir[7] and the agreed sale of Enovos[8] resulted in a net loss of $85 million. After considering acquisition costs, net of dividends received both transactions will be cash positive.

Net interest expense (including interest expense and interest income) increased to $461 million for 1Q 2012 from $429 million for 4Q 2011. Net interest expense increased in 1Q 2012 due to higher net debt and also a reduction in interest income due to lower cash balances in subsidiaries. Net interest expense for 1Q 2011 was $459 million.

Due to exchange rate effects, foreign exchange and other net financing losses were $347 million for 1Q 2012 as compared to gains of $26 million for 4Q 2011 and losses of $667 million for 1Q 2011.

ArcelorMittal recorded an income tax benefit of $190 million for 1Q 2012, as compared to an expense of 833 million for 4Q 2011. The 4Q 2011 income tax expense was higher due to lower recognition of deferred taxes following dividend upstreaming which prevented interest deductibility in Luxembourg, partial reversal of deferred taxes in our Belgian operations triggered by changes in local tax legislation, and reversal of deferred tax assets in Spain imposed by time limitations for compensation of tax losses. Income tax benefit in 1Q 2011 was $166 million.

Gains attributable to non-controlling interests for 1Q 2012 was $5 million as compared with losses of $25 million for 4Q 2011 and gains of $11 million for 1Q 2011. 

Capital expenditure projects

The following tables summarize the Company’s principal growth and optimization projects involving significant capital expenditures.

Flat Carbon Americas crude steel production increased 4.0% to 6.2 million tonnes for 1Q 2012, as compared to 6.0 million tonnes for 4Q 2011, driven by strong market demand in North America (following seasonal weakness in 4Q 2011).

Steel shipments for 1Q 2012 were 5.7 million tonnes, 3.9% higher than 4Q 2011. Higher shipments from North American operations were partially offset by lower shipments in Brazil, which was impacted by a weak slab market.

Sales in the Flat Carbon Americas segment were $5.3 billion for 1Q 2012, an increase of 4.8% as compared to $5.0 billion for 4Q 2011. Sales increased primarily due to higher average steel selling prices (+2.1%) and steel shipment volumes.

EBITDA in 1Q 2012 increased by 166.7% to $632 million as compared to $237 million in 4Q 2011, driven by a positive price-cost squeeze, higher steel shipment volumes and the positive impact of changes to the employee benefit plans at Dofasco which resulted in curtailment gains of $241 million[4].

Flat Carbon Europe crude steel production amounted to 7.2 million tonnes for 1Q 2012, an increase of 8.5% as compared to 6.6 million tonnes for 4Q 2011, primarily due to stronger export activity.

Steel shipments for 1Q 2012 were 7.5 million tonnes, an increase of 20.6% as compared to 6.2 million tonnes for 4Q 2011. Steel shipments increased due to better domestic demand following improved sentiment and the end of destocking activity.

Sales in the Flat Carbon Europe segment were $7.7 billion for 1Q 2012, an increase of 10.2% as compared to $7.0 billion for 4Q 2011. Sales increased primarily due to higher steel shipments volumes offset in part by lower average steel selling prices (-9.7%).

EBITDA for 1Q 2012 was $130 million, as compared to $26 million for 4Q 2011, primarily driven by higher steel shipment volumes and lower cost, partially offset by lower prices. EBITDA for 1Q 2012 includes $159 million of DDH income recognised during the quarter. EBITDA for 4Q 2011 was positively impacted by $163 million of DDH income recognised during the quarter and by a net gain of $93 million recorded on the sale of carbon dioxide credits.

Operating performance in 1Q 2012 was negatively impacted by restructuring costs totalling $56 million associated with the separation schemes primarily relating to Polish entities as part of the implementation of the Asset Optimisation Plan. Operating performance in 4Q 2011 was negatively impacted by impairment charges of $56 million and restructuring costs of $143 million associated with the implementation of the Asset Optimisation Plan.

Long Carbon Americas and Europe crude steel production amounted to 5.8 million tonnes for 1Q 2012, an increase of 5.7% as compared to 5.5 million tonnes for 4Q 2011.

Steel shipments for 1Q 2012 were 5.7 million tonnes, a decrease of 1.8% as compared to 5.8 million tonnes for 4Q 2011.

Sales in the Long Carbon Americas and Europe segment were $5.8 billion for 1Q 2012, a decrease of 2.9%, as compared to $5.9 billion for 4Q 2011. Sales decreased primarily due to lower steel shipments.

EBITDA for 1Q 2012 was $437 million, a 29.3% increase as compared to $338 million for 4Q 2011 primarily driven by a positive price cost squeeze.

Operating performance in 1Q 2012 was negatively impacted by restructuring costs totalling $46 million associated with the implementation of the Asset Optimisation Plan primarily relating to Spanish entities. Additionally, due to ongoing construction market weakness impairment charges totalling $61 million were recorded during 1Q 2012 associated with the extended idling of the electric arc furnace and continuous caster at the Schifflange site in Luxembourg. Operating result in the 4Q 2011 was negatively impacted by impairment charges of $160 million and restructuring costs of $37 million associated with the implementation of the Asset Optimisation Plan.

AACIS segment crude steel production was 3.6 million tonnes for 1Q 2012, an increase of 1.0% as compared to 3.6 million tonnes for 4Q 2011.

Steel shipments for 1Q 2012 amounted to 3.4 million tonnes, an increase of 9.4% as compared to 3.1 million tonnes for 4Q 2011, primarily due to improved market demand in Africa.

Sales in the AACIS segment were $2.8 billion for 1Q 2012, an increase of 2.0% as compared to $2.7 billion for 4Q 2011 primarily due to higher steel shipments, offset by lower average steel selling prices (-1.1%).

EBITDA for 1Q 2012 was $160 million, 32.8% lower as compared to $238 million for 4Q 2011, with an improvement from our African operations more than offset by a negative price-cost squeeze in CIS operations.

Shipments in the Distribution Solutions segment for 1Q 2012 were 4.6 million tonnes, a decrease of 7.4% as compared to 5.0 million tonnes for 4Q 2011.

Sales in the Distribution Solutions segment for 1Q 2012 were $4.4 billion, a decrease of 9.1% as compared to $4.9 billion for 4Q 2011, due primarily to lower steel shipment volumes and lower average steel selling prices (-3.1%).

EBITDA for 1Q 2012 was $35 million, as compared to EBITDA loss of $19 million for 4Q 2011. Operating result in the 4Q 2011 was negatively impacted by restructuring costs of $40 million associated with the implementation of the Asset Optimisation Plan.

(a)  Own iron ore and coal production not including strategic long-term contracts
(b)  Iron ore and coal shipments of market-priced based materials include the Company’s own mines, and share of production at other mines, and exclude supplies under strategic long-term contracts

Own iron ore production (not including supplies under strategic long-term contracts) decreased 12.6% to 13.2 million tonnes for 1Q 2012, as compared to 15.1 million tonnes for 4Q 2011, primarily due to lower production from Canada and Serra Azul due to seasonal factors.  Own iron ore production (not including supplies under strategic long-term contracts) increased 12.1% to 13.2 million tonnes for 1Q 2012, as compared to 11.8 million tonnes for 1Q 2011, primarily due to higher production from Liberia.

Own coal production (not including supplies under strategic long-term contracts) for 1Q 2012 decreased by 4.9%, to 2.1 million tonnes as compared to 2.2 million tonnes for 4Q 2011. Own coal production (not including supplies under strategic long-term contracts) for 1Q 2012 increased by 9.5% to 2.1 million tonnes as compared to 1.9 million tonnes for 1Q 2011.

EBITDA attributable to the Mining segment for 1Q 2012 was $478 million, 38.6% lower as compared to $779 million for 4Q 2011, primarily due to lower marketable shipments and lower average selling prices following the change to the seaborne benchmark pricing system impacting a substantial portion of marketable volumes. EBITDA attributable to the Mining segment was $607 million for 1Q 2011.

Liquidity and Capital Resources

For 1Q 2012, net cash provided by operating activities was $0.5 billion, compared to net cash provided by operating activities of $2.9 billion for 4Q 2011. Cash flow from operating activities for 1Q 2012 included a $0.3 billion investment in operating working capital (due to seasonal pickup ahead of a seasonally strong second quarter) as compared to a release of operating working capital of $1.8 billion in 4Q 2011. Rotation days[11] increased to 69 days during 1Q 2012 from 67 days in 4Q 2011. 

Net cash used in investing activities for 1Q 2012 was $1.0 billion, as compared to $0.5 billion for 4Q 2011. Capital expenditures decreased to $1.2 billion for 1Q 2012 as compared to $1.5 billion for 4Q 2011. The Company is focusing only on core growth capex in its mining business given attractive return profiles of projects under construction. Some planned steel investments remain suspended.

Other investing activities in 1Q 2012 of $285 million include an inflow of $264 million from the partial sale of Erdemir. Taking into account acquisition cost net of dividends received, the disposal of the 6.25% stake in Erdemir was cash positive. Other investing activities in 4Q 2011 of $941 million include an inflow of $796 million from the sale of the Company’s stake in MacArthur Coal and $129 million relating to the sale of the Company’s 12% stake in Baosteel-NSC/Arcelor (BNA) Automotive Co.

Net cash provided by financing activities for 1Q 2012 was $1.4 billion, as compared to cash used by financing activities of $1.2 billion for 4Q 2011. During 1Q 2012, the Company issued €500 million 4.500% Notes due 2018 under its €3 billion wholesale Euro Medium Term Notes Programme as well as three series of US dollar denominated notes, consisting of $ 500 million 3.750% Notes due 2015, $1.4 billion 4.500% Notes due 2017 and $1.1 billion 6.250% Notes due 2022.  The proceeds from these issuances were used to refinance existing indebtedness including a repayment of the Company’s syndicated credit facility. Furthermore, as part of a cash tender offer, the Company accepted for purchase $298,608,000 principal amount of its 5.375% Notes due 2013 for a total aggregate purchase price (including accrued interest) of $ 313,823,079; the remaining outstanding principal amount of such Notes is $1,201,392,000. During 4Q 2011, the Company repaid loans for a net amount of $816 million primarily related to commercial paper and bank loans.

Additionally, during 1Q 2012, the Company paid dividends amounting to $294 million as compared to $289 million in 4Q 2011.

At March 31, 2012, the Company’s cash and cash equivalents (including restricted cash and short-term investments) amounted to $4.9 billion as compared to $3.9 billion at December 31, 2011. As of March 31, 2012, net debt increased by $1.1 billion to $23.6 billion, as compared with $22.5 billion at December 31, 2011, driven by decreased cash flow from operations, foreign exchange losses (effect of USD depreciation on euro denominated debt) and dividends paid, offset in part by inflow from the partial Erdemir divestment. The Company will continue to seek to reduce net debt through its focus on working capital management and non-core asset disposals.

The Company had liquidity[12] of $15.2 billion at March 31, 2012, an increase of $2.8 billion as compared with liquidity of $12.5 billion at December 31, 2011, consisting of cash and cash equivalents (including restricted cash and short-term investments) of $4.9 billion and $10.3 billion of available credit lines.  Also our average debt maturity has extended to 6.4 years as at March 31, 2012.

Update on management gains program and asset optimization plan

At the end of 1Q 2012, the Company’s annualized sustainable management gains increased to $4.2 billion as compared to $4.0 billion at 4Q 2011. The Company maintains its target to reach management gains of $4.8 billion from sustainable SG&A, fixed and variable cost reductions and continuous improvement by the end of 2012.

Progress has been made on the Asset Optimization Plan launched in September 2011 to generate an annualized $1 billion sustainable EBITDA improvement by the end of 2012:

Outlook and guidance

Steel shipments in 2Q 2012 are expected to be similar to 1Q 2012 levels while the Mining segment is expected to benefit from seasonally higher iron ore shipments. All segments are expected to show improved underlying profitability in 2Q 2012 as compared to 1Q 2012. As a result, the Company maintains its guidance that 1H 2012 EBITDA is expected to be higher than the 2H 2011 level.

A reduction in net debt is anticipated in 2Q 2012 through improved operating cashflows and further non-core asset divestments, per the Company’s stated objective to retain its investment grade credit rating

Appendix 9: End notes

[1]The financial information in this press release has been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). While the interim financial information included in this announcement has been prepared in accordance with IFRS applicable to interim periods, this announcement does not contain sufficient information to constitute an interim financial report as defined in International Accounting Standards 34, “Interim Financial Reporting”. Unless otherwise noted the numbers in the press release have not been audited. The financial information and certain other information presented in a number of tables in this press release have been rounded to the nearest whole number or the nearest decimal. Therefore, the sum of the numbers in a column may not conform exactly to the total figure given for that column. In addition, certain percentages presented in the tables in this press release reflect calculations based upon the underlying information prior to rounding and, accordingly, may not conform exactly to the percentages that would be derived if the relevant calculations were based upon the rounded numbers.
[2] Lost time injury frequency rate equals lost time injuries per 1,000,000 worked hours, based on own personnel and contractors.
[3]EBITDA is defined as operating income plus depreciation, impairment expenses and exceptional items.
[4]ArcelorMittal Dofasco has made a number of changes to its pension plan and health and dental benefits. Employees at Dofasco will be transitioned from an existing defined benefit pension plan to a new defined contribution pension plan. Changes to health and dental benefits will result in an increase the portion of the cost of health benefits that are borne by participants in the plans. These changes resulted in a curtailment gain of $241 million in 1Q 2012.
[5]Market price tonnes represent amounts of iron ore and coal from ArcelorMittal mines that could be sold to third parties on the open market.  Market priced tonnes that are not sold to third parties are transferred from the Mining segment to the Company’s steel producing segments and reported at the prevailing market price.  Shipments of raw materials that do not constitute market price tonnes are transferred internally and reported on a cost-plus basis.
[6]Net debt refers to long-term debt, plus short-term debt, less cash and cash equivalents, restricted cash and short-term investments.
[7]On March 28, 2012, ArcelorMittal announced that it had successfully completed an offering (through certain subsidiaries) of 134,317,503 shares and warrants in respect of a further 134,317,503 shares in Ereğli Demir ve Çelik Fabrikaları T.A.Ş. (“Erdemir”) generating total proceeds of TRY 478,170,311 by way of a single accelerated bookbuilt offering to institutional investors. Taking into account acquisition cost net of dividends received, the disposal of the 6.25% stake in Erdemir was cash positive (from an accounting point of view the transaction resulted in a gain of $0.1 billion which include the reclassification of reserves previously recorded in net equity). Following the transaction, ArcelorMittal holds approximately 18.7% of Erdemir’s share capital, which would decline to approximately 12.5% if all of the warrants are exercised. ArcelorMittal agreed to a 365 day lock-up period on its remaining stake in Erdemir. For every three shares purchased, investors received one Series A warrant maturing on July 2, 2012 with an exercise price of TRY 3.738, one Series B warrant maturing on October 1, 2012 with an exercise price of TRY 3.916 and one Series C warrant maturing on December 14, 2012 with an exercise price of TRY 4.094.
[8]On April 4, 2012 ArcelorMittal Luxembourg entered into an agreement to divest its 23.48% interest in Enovos International SA to a fund managed by AXA Private Equity for a purchase price of EUR 330 million.  The purchase price is split with EUR 165 million payable at closing, with the remaining portion deferred for up to two years.  Interest will accrue on the deferred portion.  Closing of the transaction is subject to certain customary conditions and is expected to occur prior to June 30, 2012. Taking into account acquisition cost net of dividends received, the disposal of the 23.48% stake in Enovos will be cash positive (from an accounting point of view the transaction resulted in a loss of $0.2 billion. Divestment of this minority interest is in line with ArcelorMittal’s announced strategy of selective divestiture of non-core assets.
[9]EBITDA/t includes total group EBITDA divided by total steel shipments.
[10]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 and 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 cost-plus is whether 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).
[11]Rotation days are defined as days of accounts receivable plus days of inventory minus days of accounts payable. Days of accounts payable and inventory are a function of cost of goods sold. Days of accounts receivable are a function of sales.
[12]Includes back-up lines for the commercial paper program of approximately $2.7 billion (€2 billion).
[13]Total of all finished production of fines, concentrate, pellets, lumps and coal (includes share of production and strategic long-term contracts).
[14]ArcelorMittal Distribution Solutions shipments are eliminated in consolidation as they primarily represent shipments originating from other ArcelorMittal operating subsidiaries.
[15]Changes in operating working capital are defined as trade accounts receivable plus inventories less trade accounts payable.
[16]Capex includes the acquisition of intangible assets (such as concessions for mining and IT support) and includes payments to fixed asset suppliers
[17]Average steel selling prices are calculated as steel sales divided by steel shipments.
[18]Shipments originating from a geographical location.
[19]Includes Tubular products business.
[20]Commercial paper is expected to continue to be rolled over in the normal course of business.
[21]Gearing is defined as (A) long-term debt, plus short-term debt, less cash and cash equivalents, restricted cash and short-term investments, divided by (B) total equity.