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Annual Financial Results

ArcelorMittal South Africa Limited. Annual Financial Results. for the 12 months ended 31 December 2007. Introducing New CEO and member of the Board. Me. Nku Nyembezi-Heita. Introducing new President and member of the Board. Luc Bonte. Market and Operations. Rick Reato.

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Annual Financial Results

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  1. ArcelorMittal South Africa Limited Annual Financial Results for the 12 months ended 31 December 2007

  2. Introducing New CEO and member of the Board Me. Nku Nyembezi-Heita

  3. Introducing new President and member of the Board Luc Bonte

  4. Market and Operations Rick Reato

  5. Introduction and Overview • Earnings increase to R5.7bn • Earnings per share of 1 288c up 21% • Net cash flow of R2.9bn • Domestic market retained momentum • Demand essentially unchanged on 2006 • Domestic sales constitute 76% of total sales • Cost pressures continue • Raw material cost increased by 14% • Cost of steel sales increased 17% • Operations • BFD rebuild completed • Liquid steel production down 10% • Sales down 6% Earnings increase by 21%

  6. Key Result Drivers 2007 vs 2006 HRC US$ export price +22% LCWR US$ export price +26% Total sales volume -6% Export sales volume -22% Domestic sales volume +1% HRC Rand cash cost per tonne +18% Billet Rand cash cost per tonne +16% Labour productivity -3% ZAR movement -4% Production volumes impacted on sales volumes

  7. Global Environment – General Market Trends • World economic growth in 2007 decreased marginally from 3.9% to 3.6% • Chinese economy grew by 11% despite measures to cool it down • World consumption and production of steel increased by 7.5% in 2007 • Global steel industry consolidation still priority • Input costs remain high & will continue to support prices • Lower price volatility expected to continue Global steel consolidation supports a less volatile market environment

  8. Import Net Export Global Environment - Chinese Market Trends • China remained a net exporter of total steel products in 2007 • China accounted for 37% of world steel production and 35% of consumption • Export taxes increased ktonnes Source : TEX Report China expected to retain its status as a net exporter

  9. Global Environment – Input Cost Trends • Iron ore price expected to increase substantially • China iron ore spot @ premium of US$40/t • Coking Coal cost pressure expected in 2008 due to scarcity worldwide • Coking coal spot prices have increase by 65% • Sharp increase in scrap prices in early 2008 • Scrap prices increased by 30% during 2007 • Reduction in supply from traditional markets due to local consumption • Port delays & changing trade patterns lead to rising freight rates • Freight rates almost doubled during 2007 • Prices of base metals and alloys increased substantially • Tin (+66%); Nickel (+55%); Ferro Alloys (+60%); Zinc stable after +146% in 2006 Raw material prices exert pressure on steel prices

  10. Global Environment – Benchmark Prices Based to 100 Global input costs continue to increase

  11. 800 700 600 500 400 300 200 100 1994 1995 1996 1997 1998 1999 2000 2001 HRC Low carbon wire rod Global Environment - Export Prices Achieved Export prices (c&f) US$/t 2002 2003 2004 2005 2006 2007 Steel prices established new trading range

  12. Long (t) Flat (t) Domestic Environment – Shipments Source : SAISI Long steel local despatches again achieved a record level

  13. Week’s despatches Stocks (t) Domestic Environment – Inventory Levels Source : SAISI Industry inventory levels below recent averages

  14. % of consumption Imports (t) Domestic Environment – Imports Source : SAISI Imports slightly down from 2006

  15. Key Performance Indicators 2006 2007 Employees per million tonnes produced 1 385 1 429 Revenue per head (R000) 2 594 3 220 HRC cash cost - R/t 2 150 2 538 - US$/t 318 360 Billet cash cost - R/t 1 993 2 310 - US$/t 295 327 Percentage value-add exports - flat 96% 97% - long 94% 100% Productivity influenced by lower volume

  16. 2005 2004 2006 2007 Liquid Steel Production ktonnes Blast furnace rebuild and Corex reduced output volumes

  17. Liquid Steel Production ktonne 2006 liquid steel output 7 055 Recoupment of 2006 losses +323 Vanderbijlpark - BFD Rebuild -813 Vanderbijlpark - BFD Cold hearth conditions -177 Saldanha - Corex condition -49 Newcastle - Furnace condition -57 Efficiency improvements +93 2007 liquid steel output 6 375 BFD biggest impact on output volumes

  18. Operational developments • Blast Furnace D • Market Coke production at battery N2 at Newcastle Works • Galvanizing line 5 achieved full capacity • Colour coating line achieved record output • EAF at Vereeniging produced record volume • Various records at all rolling mills at Newcastle Blast Furnace D overshadowed production

  19. Domestic Export Shipment Volumes 6 230 6 223 6 194 5 829 4 329 4 283 4 268 3 928 ktonnes 1 947 1 926 1 901 1 894 Total Flat Products Long Products Substantial shift to meet local demand on long products

  20. 2005 2004 2006 2007 Geographic Shipments Maintain Africa focus

  21. Investment Programme Rm 2007 Major projects completed (and ongoing) in 2007 Vanderbijlpark Works1 183 - Blast furnace “D” rebuild completed - New direct reduction kilns 5 & 6 on track (2008) Saldanha Works260 - Corex/Midrex reline preparation - Ore screen & stockhouse upgrade Newcastle Works199 - Evaporator crystalliser & RO plant upgrade - Blast Furnace “N5” Mini-reline (2008) Vereeniging Works50 - EAF Dust extraction (2008) - Crane replacement and gantry upgrade at Steelmaking (2008) Coke & Chemicals59 - Battery rebuild (Newcastle) Other (mainly Mozambique)97 Total Expenditure in 2007 1 848 Furnace refurbishment absorbed 30% of total cash flow expenditure

  22. 7.0 6.0 5.0 Lost Time Injury Frequency Rate (LTIFR)* 4.0 3.0 2.0 2002 2003 2004 2005 2006 2007 ArcelorMittal South Africa IISI Safety Remains our Priority • ArcelorMittal South Africa achieved 26 LTI free days (3.7m LTI free man hours) • 1m LTI free hours achieved • 7x at Vanderbijlpark Works • 6x at Newcastle Works • 1x at Vereeniging Works • 1x at Saldanha Works • Best ever safety performance by Newcastle Works *Includes contractors Best ever safety performance

  23. Finance Kobus Verster

  24. Headline Earnings Rm 2006 2007 Revenue 25 350 29 333 Operating profit 6 082 7 703 Gains & losses on foreign exchange rates and financial instruments 301 -131 Financing cost - net interest income 294 369 - imputed interest on non-current provisions -101 -44 Income from investments 7 4 Tax -2 022 -2 455 Equity earnings* 135 270 Net deficit on disposal or scrapping of assets* 34 25 Headline earnings 4 730 5 741 - in US$m 693 816 *After tax Record earnings

  25. Headline Earnings Trend Rm 2003 2004 2005 2006 2007 Earnings remains within ‘new’ range

  26. Operating Profit Rm 2006 2007 Flat products 3 644 4 338 Long products 2 111 2 661 Coke & Chemicals 184 727 Corporate & other 143 -23 Operating profit 6 082 7 703 Long products and Coke & Chemicals continue to increase their contribution

  27. Cash Flow Rm 2006 2007 Cash profits from operations 7 132 9 021 Working capital -1 033 -606 Capex -1 446 -1 848 Net interest/Investment income 468 476 Investments -16 Tax -1 660 -2 209 Dividends -1 261 -1 948 Net cash flow 2 200 2 870 Capital reduction -6 352 Net cash flow after capital reduction 2 200 -3 482 Net cash 7 679 3 973 Cash flow remains robust

  28. Financial Ratios 2006 2007 Operating margin 24% 26% EBITDA margin 28% 30% Revenue / invested capital (times) 1.4 1.5 Return on equity 22% 26% Net cash/equity 33% 19% Improvement in financial ratios

  29. Share Performance Period 2003 to 2007 Average Dividend Yield at 5.7% (excl cap red) - double the market Average Price Earnings ratio of 7.2X - half the market Excellent medium to long term share performance

  30. Dividend • Dividend policy • Distributing one third of headline earnings • Dividend and cash declared • Interim dividend of 233 cents per share - 3 September 2007 • Final dividend of 196 cents per share - 17 March 2008 • Total dividend of 429 cents covered 3 times by EPS of 1 288 cents • Capital reduction of 1 425 cents - September & October 2007 • Total cash distribution of 1 854 cents over past twelve months Cash yield at 13.6%

  31. Other Developments Rick Reato

  32. Meeting local demand • Channels for capturing strong local demand and strong international prices • Production stability • Divert exports • N5 and Corex/Midrex relines • Investing in additional capacity • Electricity supply Focus on production stability

  33. Investment Programme Rm 2008 - 2011 Relines 450 Maintain capability 2 000 Steel capacity increase 2 900 Downstream value adding projects 2 700 Environmental investments 1 000 Expenditure in 2005 1 608 Expenditure in 2006 1 446 Expenditure in 2007 1 848 Investment programme support expansion strategy

  34. Major Investments up to 2011 • Flat products • DRI kilns (2008) • Corex and Midrex reline (2008) • New Colour Line (2009) • New Galvanising line (2011) • Power plant • Ore screen and stockhouse upgrade (2009) • Long products • N5 reline (2008) • Maputo mill (2008) • New Bar/Section Mill (2011) • New Blast Furnace “N6” (2011) • New Billet Caster (2011) • Crane and gantry upgrade (2008)

  35. Major Investments up to 2011 • Environmental • Sinter clean gas • EAF dust extraction at Vanderbijlpark Works • EAF dust extraction at Vereeniging Works • Calcium Carbide Desulphurisation at Newcastle Works • Evaporator crystallizer

  36. Ongoing developments • Competition Tribunal • SARS BAA dispute • Iron ore supply • Electricity supply • BEE

  37. Cost containment • Production stability • Increased throughput • Purchasing power • Efficiency improvements • Cost Control

  38. Outlook Rick Reato

  39. Outlook for Q1’08 • Business environment • Domestic demand expected to remain healthy • Higher international prices expected • Higher input prices will influence production costs • Earnings • Earnings to remain strong compared to Q4’07 • Power supply and the exchange rate may have an influence Earnings expected to remain strong in Q1’08

  40. ArcelorMittal South Africa Limited Annual Financial Results Thank you

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