ARCELORMITTAL SOUTH AFRICA LIMITED - Reviewed group interim financial results for the six months ended 30 June 2014

Release Date: 01/08/2014 07:05
Code(s): ACL
 
Wrap Text
Reviewed group interim financial results for the six months ended 30 June 2014

ArcelorMittal South Africa Limited 
Registration number: 1989/002164/06
Share code: ACL ISIN: ZAE 000134961
(“ArcelorMittal South Africa”, “the company” or “the group”)
Reviewed group interim financial results for the six months ended 30 June 2014
- Balanced headline earnings in H1
- Rebuild of Blast Furnace in Newcastle progressing

Overview
Overall the trading conditions remained challenging. The economy in the United States gained strength, and the
Eurozone is now slowly showing signs of recovery. However, with the slowdown of growth in China, excess capacity remains the
biggest obstacle for the sector worldwide to achieve sustainable profit margins. New capacities for iron ore supply came
on stream which has unfavourably impacted international ore and steel prices. In South Africa, the implementation of the
large infrastructure development projects remains slow, and the low levels of production and investment in the mining
sector continued which was also driven by the protracted labour disputes. Consequently GDP growth and domestic steel
demand were negatively affected, while other countries in the sub-Saharan region showed robust growth.

Our liquid steel production was 2 386 000 tonnes, a decrease of 95 000 tonnes compared to the same period last year.
This is due to the planned shutdown for the reline of the blast furnace in Newcastle which commenced in May 2014. The
effect of the reline was partly countered by higher production volumes at Vanderbijlpark (which was negatively affected in
the first six months of the prior year by the fire incident). Sales volumes increased 3% due to a rise in exports of
59%, while local sales volumes were down 10%. Though the production of crude steel at Newcastle is stopped due to the blast
furnace reline, the rolling of products continues using the billet stocks built up prior to the project. The project
which was planned for a duration of 125 days is currently subject to a delay of approximately a month due to the
unsatisfactory performance of a contractor on the critical path. We have initiated additional imports to mitigate any impact on
our customers. 

Notwithstanding our quest to achieve zero fatalities and injuries, two fatal incidents occurred at Vanderbijlpark
works during the second quarter of this year. These regrettable incidents have strengthened management’s resolve and
commitment to improve safety performance.

ArcelorMittal South Africa recorded a headline loss of R6 million for the period, compared to a headline loss of R123
million in the corresponding period last year. EBITDA was R167 million lower at R810 million compared to the same period
last year. 

A net current borrowing position reflects the cash outflow required for the stocks and capital expenditures of the
reline project in Newcastle.

Key statistics                                                                                                                                                
           Quarter ended                                                              Six months ended  Year ended                                                                         
  30 June    31 March     30 June                                                   30 June    30 June 31 December        
     2014        2014        2013                                                      2014       2013        2013       
Unaudited   Unaudited   Unaudited                                                  Reviewed   Reviewed     Audited                                                                                                                                                                                                                                                      
    8 769       9 158       8 124     Revenue (R million)                            17 927     15 890      32 421       
       56         754         808     EBITDA (R million)                                810        977       1 768       
       53         665         778     EBITDA/tonne (R/t)                                369        460         418       
      0.6         8.2         9.9     EBITDA margin (%)                                 4.5        6.1         5.5       
     (236)        395         441     Loss/(profit) from operations (R million)         159        233          47       
     (337)        322         135     Net (loss)/profit (R million)                     (15)      (140)     (2 147)      
     (329)        323         147     Headline (loss)/earnings (R million)               (6)      (123)       (224)                                                                             
      (82)         81          37     Headline (loss)/earnings per share (cents)         (2)       (31)        (56)      
     (594)       (191)      1 106     Net (borrowings)/cash                            (594)     1 106         285       
                                      Unaudited information                                                              
    1 145       1 241       1 453     Liquid steel production (’000 tonnes)           2 386      2 481       5 096       
    1 061       1 134       1 038     Steel sales (’000 tonnes)                       2 195      2 123       4 230       
      762         772         834     - Local                                         1 534      1 706       3 126       
      299         362         204     - Export                                          661        417       1 104       
      117          91         125     Commercial coke sales (’000 tonnes)               208        210         545       
       71          77          81     Capacity utilisation (%)                           74         73          76       
     0.63        0.44        0.95     Lost time injury frequency rate                  0.54       0.66        0.56       

Market review
International
The global economy, which experienced a setback in the first quarter of 2014 due to tough weather conditions in the
USA picked up in the second quarter of 2014 amid improvements in the USA economy. Consumer demand in durable goods showed
tremendous growth with vehicle sales in May 2014 recording the highest sales since February 2007. The growth follows an
improvement in the level of employment coupled with improved household finances. This growth is boosting production in
the sector and partly driving demand for steel products. Manufacturing performance is at a four year high and recovery in
the housing market continues to gain momentum.

In the Eurozone, there is a gradual recovery of the economy backed by an accommodating monetary policy and low
inflation. Improving consumer and business sentiment is being reflected by improved economic growth rates data, with the
manufacturing sector registering some improved performance amid a flourishing automobile sector and recovery in the
construction sector. This is influencing steel demand positively in the region.

In the emerging economies, some pressure remains and the slowdown in economic growth rates is clearly illustrated by
falling manufacturing PMI data from emerging markets where a slight contraction is particularly evident from May 2013
onwards. The governments of emerging economies are implementing structural reforms to rebalance their economies. The
Chinese government, for example, is shifting to a consumption-based economy, whereas the Brazilian and the Indian governments
are removing barriers to investment. Under these conditions, China is experiencing a weak real estate market and a dip
in infrastructure investment that is putting a strain in steel demand patterns. Despite these structural issues and
volatile financial markets in emerging markets, the majority of demand was still propelled by these economies.

The sub-Saharan African region continues to offer market opportunities for steel as large infrastructure investments
are being implemented, with a wider range of projects in roads, rail, housing development and energy projects, and more
investments in the mining sector. Prospects for further growth remains high as new investments in the oil and gas sectors
are also stimulating steel demand.

Domestic
The South African economic performance has been somewhat disappointing as evidenced recently by a contraction in the
first quarter of 2014. Although some improvements have emerged based on recent data, it is still worrying times. The key
PMI data shows a contraction in the manufacturing sector as the index is below the 50 point mark. Although the patterns
in the construction sector have registered improvements in building plans, the completion or implementation of this
remains low. Some of the key steel market demand segments were negatively affected by the strikes in the platinum mining
sector. Despite a favourable currency environment, the overall high transformation costs in the manufacturing sector are
limiting the export potential for domestic steel producers. Cheap imports continue to flood the domestic market regardless
of the current currency position. The much anticipated positive story for the steel market will depend on the
government’s infrastructure investment implementation, which as of now is moving at a slow pace. 

Financial review
Six months ended 30 June 2014 compared with six months ended 30 June 2013 (reviewed)
Revenue increased 13% to R17.9 billion primarily due to an 8% increase in average net realised prices. Domestic prices
were 12% higher while exports rose 2%, reflecting a less favourable regional mix of exports. Prices for flat and long
steel rose 7% and 8% respectively. Steel shipments were up 3% with export shipments increasing 59% while local shipments
decreased 10% on the back of subdued domestic demand. Long shipments dropped 9% while flats were up 11%, reflecting the
low base of the previous year due to the fire incident. Revenue from the Coke and Chemicals business of R1 019 million
was 23% higher following an 8% increase in commercial coke sales prices offset by a 1% drop in sales volumes. Tar sales
volumes remained flat while prices increased 18%.

Cash costs of hot rolled coil and billets increased 15% and 14% respectively. Sishen iron ore prices rose 18% while
Beeshoek increased 13%. Tshikondeni coal, pulverized coal and scrap climbed 18%, 6% and 11% respectively while zinc and
tin prices climbed 18% and 15%. Import coal prices declined 20% in US dollars while pellets increased 3%. In rand terms
import coal prices decreased 3% while pellets increased 14%. 

Liquid steel production was 4% lower, a decrease of 95 000 tonnes. Capacity utilisation for flat steel improved from
68% to 83% with the BOF fire incident impacting the 2013 results negatively. Long steel capacity utilisation decreased
from 82% to 58% following the start of the blast furnace reline in Newcastle.

Operating profit was down R74 million to a profit of R159 million. Net financing costs of R207 million were R11
million higher due to the lower net cash position partly offset by higher foreign exchange profit. Our share of the profit
from equity accounted investments after taxation of R102 million compares with a loss of R148 million in the corresponding
period last year. This relates mainly to better export results from Macsteel International Holding BV.

Quarter ended 30 June 2014 compared with quarter ended 31 March 2014 (unaudited)
Revenue decreased 4% to R8.8 billion following a 6% decrease in steel shipments. Local shipments remained subdued and
decreased 1% while exports decreased 17%. Shipments for flat and long steel decreased 6% and 8% respectively. Overall
steel prices rose 2% with local and export prices rising 2%. Flat steel prices rose 3% and long steel 2%. Revenue from the
Coke and Chemicals business of R540 million was 13% higher following a 29% increase in commercial coke sales volumes
and a 15% increase in net realised prices. Tar sales volumes increased 2% while prices decreased 3%.

Cash costs of hot rolled coil and billets increased by 3% and 6% respectively. Local coking coal, scrap and
electricity climbed 7%, 6% and 12% respectively. Sishen iron ore price decreased following a quarterly adjustment received in
quarter two relating to quarter one, however, without which the price increased 18%. Import coal and pellets decreased by 4%
and 7% on a US dollar FOB basis. In rand terms import coal decreased by 5% and pellets 8%.

Liquid steel production was 8% lower, a decrease of 96 000 tonnes. Capacity utilisation for flat steel was higher at
86% compared to 79% in the previous quarter. Long steel capacity utilisation was at 43% against the previous quarter of
75% following the start of the blast furnace reline in Newcastle.

Operating profit was down R631 million to a loss of R236 million. Net financing costs of R140 million for the quarter
are R73 million higher due to a lower net cash position and a higher discount rate used to unwind long-term provisions
such as environmental obligations and onerous contracts. Our share of the profit from equity accounted investments after
taxation of R42 million compares with a profit of R60 million in the previous quarter. This relates mainly to lower
results from Macsteel International Holding BV.

Environment (unaudited)
Notwithstanding the tough economic conditions the company operates under, key environmental projects remain a focus
area in order to ensure environmental compliance. The most important project in this regard is the Newcastle zero effluent
discharge project which entails the improvement of effluent treatment and the recovery thereof at an estimated cost of
R430 million. The project is in progress and should be completed by end of July 2014.

The proposed implementation of a carbon tax by the National Treasury remains a concern as the company’s
competitiveness may be affected. The Minister of Finance indicated that the design of the proposed tax may be revisited in order for
it to be aligned with the Desired Emission Reduction Outcomes (“DEROs”) which will be defined by the Department of
Environmental Affairs within the near future. This proposed tax remains a significant concern as the financial impact could be
very significant. Very limited opportunities exist to reduce carbon emissions in the steel production process and no
feasible low carbon alternatives exist at this stage to produce steel from iron ore. 

Contingent liabilities 
The Competition Commission (“the Commission”) has thus far referred five cases, detailed below, against ArcelorMittal
South Africa to the Competition Tribunal (“the Tribunal”) for prosecution. ArcelorMittal South Africa disputes the
allegations made in each of these cases and is defending itself accordingly. There has been no concrete progress regarding
these matters since last reported at 31 March 2014.

1st wire rod matter - alleged price discrimination
In January 2007, the Commission referred a case to the Tribunal for prosecution. In the referral papers, the
Commission alleges that ArcelorMittal South Africa engaged in price discrimination on wire rod in contravention of section 9(1)
of the Competition Act. The Commission requests the Tribunal to find ArcelorMittal South Africa guilty of engaging in
this alleged conduct.

Pleadings on the matter are now closed and it will now be set down for hearing before the Tribunal.

2nd wire rod matter - alleged price discrimination
In November 2012, the Commission referred another case relating to alleged price discrimination on wire rod to the
Tribunal for prosecution. This case is essentially the same as the case that was referred in January 2007. The parties and
the issues are identical save for the fact that the contravention alleged in this case is alleged to have taken place
during a later period being 2004 - 2006. Pleadings on this matter have also closed and it is also yet to be set down for a
hearing before the Tribunal. The Commission has in the meantime applied to the Tribunal to have this matter
consolidated with the 1st wire rod matter. This application is yet to be heard before the Tribunal.

Long steel matter - alleged cartel conduct
In September 2009, the Commission referred a case against ArcelorMittal South Africa and other primary steel
manufacturers to the Tribunal for prosecution. In the referral papers, the Commission alleges that the respondents fixed prices
and allocated markets in respect of certain long steel products, in contravention of section 4(1)(b) of the Competition
Act. 

The Commission requests the Tribunal to find ArcelorMittal South Africa guilty of the alleged contraventions and to
impose an administrative penalty of up to 10% of its total/group turnover for the year preceding the Tribunal’s decision
on the matter.

Subsequent to the referral, ArcelorMittal South Africa wrote to the Commission requesting copies of the documents that
make up the Commission’s investigation record to enable it to draft and file its answering affidavit. This request was
declined by the Commission, prompting ArcelorMittal South Africa to file an application with the Tribunal in December
2009 for an order compelling the Commission to provide these documents. In September 2010, the Tribunal handed down
judgment refusing ArcelorMittal South Africa access to the bulk of the requested documents for reasons of privilege and
confidentiality. ArcelorMittal South Africa subsequently appealed this judgment to the Competition Appeal Court (“CAC”). In
April 2012 the CAC ruled essentially that the matter be referred back to the Tribunal for a hearing to properly determine
the validity of the privilege and confidentiality claims. The Commission appealed this ruling to the Supreme Court of
Appeal (“SCA”). On 31 May 2013 the SCA handed down judgment effectively concurring with the CAC and further ordering the
Commission to pay ArcelorMittal South Africa’s legal costs for the appeal.

Before the matter could be set down for the hearing before the Tribunal, ArcelorMittal South Africa wrote to the
Commission inquiring if the Commission would be amenable to availing the documents in question without there being a need to
convene a Tribunal hearing. The Commission agreed, subject to confidentiality undertakings being made by ArcelorMittal
South Africa regarding the documents claimed to be confidential. ArcelorMittal South Africa made these undertakings and
the Commission duly provided the documents. These are currently being reviewed by ArcelorMittal South Africa.

Flat steel matter - alleged conscious parallelism
On 30 March 2012, the Commission referred a case against ArcelorMittal South Africa and Evraz Highveld Steel and
Vanadium Limited (“Highveld Steel”) to the Tribunal for prosecution. In the referral papers, the Commission alleges that
Highveld Steel and ArcelorMittal South Africa fixed prices and other trading conditions in respect of certain flat steel
products in contravention of section 4(1)(b) of the Competition Act. The form of price fixing alleged by the Commission in
this instance is one based on the “conscious parallelism” phenomenon. This mainly relates to Highveld Steel increasing
its prices each time ArcelorMittal South Africa increased its prices. The Commission requests the Tribunal to find
ArcelorMittal South Africa guilty of the alleged contraventions and to impose an administrative penalty of up to 10% of its
total/group turnover for the year preceding the Tribunal’s decision on the matter.

Subsequent to the referral, ArcelorMittal South Africa wrote to the Commission requesting copies of the documents that
make up the Commission’s investigation record to enable it to draft and file its answering affidavit. The Commission
reverted with a proposal on the disclosure to both ArcelorMittal South Africa and Highveld Steel of those documents which,
while constituting the investigation record, are confidential documents of both companies made available to the
Commission during the investigation stage.

This proposal is currently the subject of an ongoing dispute between the Commission and Highveld Steel’s legal
representatives. 

Scrap purchase - alleged cartel conduct
On 8 August 2013 the Commission referred a case against ArcelorMittal South Africa and other primary steel
manufacturers to the Tribunal for prosecution. In the referral papers the Commission alleges that the respondents fixed the
purchase price and other trading conditions for scrap metal, a secondary input product in steel making, in contravention of
section 4(1)(b) of the Competition Act. 

The Commission requests the Tribunal to find ArcelorMittal South Africa guilty of the alleged contraventions and to
impose an administrative penalty of up to 10% of its total/group turnover for the year preceding the Tribunal’s decision
on the matter.

ArcelorMittal South Africa is currently drafting its answering affidavit in this matter; this will be filed with the
Tribunal sometime during the second quarter of 2014.

The Commission is formally investigating one further complaint against ArcelorMittal South Africa relating to alleged
excessive pricing of tinplate and flat steel in general. Joined to this investigation is an investigation into alleged
excessive pricing arising from the iron ore surcharge introduced by ArcelorMittal South Africa for the period May 2010 to
July 2010. ArcelorMittal South Africa is fully cooperating with the Commission in this investigation and continues to
deliver all information and documentation as and when called upon to do so.

Corporate governance (unaudited)
The group complies with all significant requirements of the Code on Corporate Practices and Conduct as contained in
the third King Report on Corporate Governance. 

Changes to the Board of Directors
Mr Paul O’Flaherty was appointed as Chief Executive Officer and an executive Board member effective from 1 July 2014.
Dr Hans Rosenstock has reverted back to his role as Chief Operations Officer and Ex-Officio member of the Board.

Outlook for quarter three 2014 (unaudited)
ArcelorMittal South Africa’s results are expected to remain under pressure. The reline of the blast furnace in
Newcastle, high electricity tariffs during winter months, the weak local economy and the effects of the metal and engineering
strike will have short-term negative effects on our cost and on our customers. From mid-October 2014 our full production
capacity will be available as the reline will have been completed.

On behalf of the Board of Directors

PS O’Flaherty                      MJ Wellhausen
Chief Executive Officer            Chief Financial Officer
23 July 2014 


Condensed group statement of comprehensive income            
           Quarter ended                                                                   Six months ended   Year ended                                                                                                                                                                                            
  30 June    31 March     30 June                                                         30 June    30 June 31 December        
     2014        2014        2013                                                            2014       2013        2013       
Unaudited   Unaudited   Unaudited                                                        Reviewed   Reviewed     Audited                                                                         
    8 769       9 158       8 124    Revenue                                               17 927     15 890      32 421       
   (5 394)     (5 378)     (5 183)   Raw materials and consumables used                   (10 772)    (9 507)    (19 652)      
   (1 009)       (864)       (892)   Employee costs                                        (1 873)    (1 694)     (3 408)      
     (855)       (806)       (931)   Energy                                                (1 661)    (1 594)     (3 288)      
                                     Movement in inventories of finished goods                                 
      (50)        (13)      1 167    and work in progress                                     (63)       670       1 196       
     (286)       (353)       (363)   Depreciation                                            (639)      (736)     (1 544)      
       (6)         (6)         (4)   Amortisation of intangible assets                        (12)        (8)        (19)      
   (1 405)     (1 343)     (1 477)   Other operating expenses                              (2 748)    (2 788)     (5 659)      
     (236)        395         441    (Loss)/profit from operations                            159        233          47       
                                     Impairment charges                                                           (1 950)      
        4          41                Finance and investment income                             45         16         108       
     (144)       (108)       (142)   Finance costs                                           (252)      (212)       (368)      
                                     Income/(loss) from equity accounted investments                           
       42          60         (66)   (net of tax)                                             102       (148)        (35)      
     (334)        388         233    (Loss)/profit before tax                                  54       (111)     (2 198)      
       (3)        (66)        (98)   Income tax (expense)/credit                              (69)       (29)         51       
     (337)        322         135    (Loss)/profit for the period                             (15)      (140)     (2 147)      
                                     Other comprehensive income                                                             
                                     Items that may be reclassified subsequently to                            
                                     profit or loss:                                                           
                                     Exchange differences on translation of                                    
       (1)         44         128    foreign operations                                        43        279         561       
                                     Gains/(losses) on available-for-sale investments                          
        2          (5)         11    taken to equity                                           (3)         5          (9)      
                                     Share of other comprehensive (loss)/income of                             
                   (6)         25    equity accounted investments                              (6)        63          28       
     (336)        355         299    Total comprehensive (loss)/income for the period          19        207      (1 567)      
                                     (Loss)/profit attributable to:                                                            
     (337)        322         135    Owners of the company                                    (15)      (140)     (2 147)      
                                     Total comprehensive (loss)/income attributable to:                                        
     (336)        355         299    Owners of the company                                     19        207      (1 567)      
                                     Attributable (loss)/earnings per share (cents)                                         
      (84)         80          34    - basic                                                   (4)       (35)       (535)      
      (84)         80          34    - diluted                                                 (4)       (35)       (535)      


Condensed group statement of financial position                                                                                                                      
                                        As at        As at       As at          As at            
                                      30 June     31 March     30 June    31 December            
                                         2014         2014        2013           2013            
In millions of rands                 Reviewed    Unaudited    Reviewed        Audited                                                                                                
Assets                                                                                          
Non-current assets                     18 923       18 504      19 765         18 602           
Property, plant and equipment          14 936       14 514      16 177         14 702           
Intangible assets                         143          145         125            146           
Equity accounted investments            3 830        3 834       3 432          3 737           
Other financial assets                     14           11          31             17           
Current assets                         13 668       14 826      14 922         14 113           
Inventories                            10 396       10 724       9 583         10 553           
Trade and other receivables             2 791        2 907       3 311          2 194           
Taxation                                   72           51         139             51           
Other financial assets                      3            5          24             17           
Cash and bank balances                    406        1 139       1 865          1 298                                                                                                            
Total assets                           32 591       33 330      34 687         32 715           
Equity and liabilities                                                                          
Shareholders’ equity                   20 723       21 053      22 458         20 694           
Stated capital                             37           37          37             37           
Non-distributable reserves             (1 521)      (1 517)     (1 970)        (1 614)          
Retained income                        22 207       22 533      24 391         22 271           
Non-current liabilities                 4 036        4 029       4 037          4 099           
Other payables                            258          234         255            267           
Finance lease obligations                 289          313         539            757           
Deferred income tax liability           1 754        1 782       1 848          1 747           
Non-current provisions                  1 735        1 700       1 395          1 328           
Current liabilities                     7 832        8 248       8 192          7 922           
Trade payables                          5 589        5 627       5 972          5 720           
Borrowings                              1 000        1 330         759            906           
Bank overdraft                                                                    107           
Other financial liabilities                 1            9          27                          
Finance lease obligations                  96           94          90             95           
Taxation                                   59           19         144              6           
Current provisions                        355          394         322            408           
Other payables                            732          775         878            680                                                                                               
Total equity and liabilities           32 591       33 330      34 687         32 715           
                                                                                                           
                                                                                                           
Condensed group statement of cash flows
           Quarter ended                                                                       Six months ended   Year ended                                                           
  30 June     31 March      30 June                                                          30 June     30 June 31 December        
     2014         2014         2013                                                             2014        2013        2013       
Unaudited    Unaudited    Unaudited                                                         Reviewed    Reviewed     Audited                                                                     
      158         (259)         436    Cash inflows/(outflows) from operating activities        (101)      1 028       1 084       
      275         (166)         690    Cash generated/(utilised in) from operations              109       1 285       1 595       
        3            4            2    Interest income                                             7           4           7       
      (88)         (73)         (33)   Finance cost                                             (161)        (63)       (169)      
      (14)         (17)        (147)   Income tax paid                                           (31)       (148)       (221)      
      (18)          (7)         (76)   Realised foreign exchange movement                        (25)        (50)       (128)      
     (622)        (193)        (366)   Cash outflows from investing activities                  (815)       (637)     (1 545)      
     (659)        (187)        (353)   Investment to maintain operations                        (846)       (574)     (1 500)      
      (14)          (6)         (10)   Investment to expand operations                           (20)        (28)        (69)      
                                       Shares acquired in associate and equity                                     
       (4)          (1)          (4)   accounted investment                                       (5)        (38)        (53)      
                                       Proceeds on disposal of assets                                          1          72       
        2            1            1    Investment income - interest                                3           2           5       
       53                              Dividend from equity accounted investments                 53                               
     (272)         363          639    Cash (outflows)/inflows from financing activities          91         536         674       
                                       (Repayment)/increase of borrowings, finance lease                           
     (272)         363          639    obligations and other payables                             91         536         674       
     (736)         (89)         709    (Decrease)/increase in cash and cash equivalents         (825)        927         213       
        3           37           42    Effect of foreign exchange rate changes                    40          54          94       
    1 139        1 191        1 114    Cash and cash equivalents at beginning of period        1 191         884         884       
      406        1 139        1 865    Cash and cash equivalents at end of period                406       1 865       1 191       


Notes to the reviewed condensed group financial information 
1. Basis of preparation 
   The reviewed consolidated condensed interim financial statements have been prepared in compliance with the Listings
   Requirements of the JSE Limited, International Accounting Standard (IAS) 34 Interim Financial Reporting and the South
   African Companies Act, No. 71 of 2008, as well as the SAICA Financial Reporting Guides as issued by the Accounting
   Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council. These statements were
   compiled under the supervision of Mr MJ Wellhausen, the Chief Financial Officer.
   
2. Significant accounting policies
   The condensed consolidated interim results have been prepared using accounting policies that comply with
   International Financial Reporting Standards. The accounting policies and methods of computation applied in the presentation of the
   condensed interim financial statements are consistent with those applied for the year ended 31 December 2013, except for
   the following new or revised standards, amendments thereto and interpretations as issued by the International Accounting
   Standards Board, which are effective for the current reporting period that were adopted:
   - IFRIC 21 Levies
   - IAS 36 Impairment of assets
   
3. Change in accounting estimates
   - The useful lives of certain items of property, plant and equipment were reassessed and revised to reflect the
   current estimated life over which the group has the ability and intention to use such assets. The effect of these changes on
   the actual depreciation expense for the six months ended 30 June 2014 is a reduction of approximately R53 million, of
   which R26 million relates to the three months ending 31 March 2014. 
   - The group performed a review of the tax base of some of its assets to ensure that these reflect the tax
   consequences that will currently arise from the consumption of the assets. As a result of this review, the estimated deferred tax
   liability was increased by R82 million at 30 June 2014.
   
4. Independent review by the auditors 
   The condensed consolidated interim results have been reviewed by the company’s auditors, Deloitte & Touche, in
   accordance with International Standards on Review Engagements 2410. They expressed an unqualified conclusion on the interim
   financial information. The auditors’ report does not necessarily report on all of the information contained in this
   announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditors’
   engagement they should obtain a copy of that report together with the accompanying financial information from the
   company’s registered office.
   
            Quarter ended                                                       Six months ended    Year ended                                                                                                                                                           
     30 June     31 March      30 June                                         30 June     30 June 31 December        
        2014         2014         2013                                            2014        2013        2013       
   Unaudited    Unaudited    Unaudited     In millions of rands               Reviewed    Reviewed     Audited                                                                                   
                                           5. Capital expenditure                                                     
       1 077        1 491          565     Contracted                            1 077         565       1 170       
         761          960          776     Authorised but not contracted           761         776       1 258       

6. Related party transactions
   The group is controlled by ArcelorMittal Holdings A.G. which effectively owns 52.02% of the company’s shares. During
   the period the company and its subsidiaries, in the ordinary course of business, entered into various sale and purchase
   transactions with associates and joint ventures. These transactions occurred under terms that are no less favourable to
   the company than those arranged with third parties.
   
7. Fair value measurements
   Some of the group’s financial assets and financial liabilities are measured at fair value at the end of each
   reporting period. The following table gives information about how the fair values of these financial assets and financial
   liabilities are determined, particularly the valuation techniques and inputs used.

   Financial assets/                                                                    Fair value     Valuation techniques    
   financial liabilities                       Fair values as at                        hierarchy      and key inputs                                                                            
                                 30 June     31 March     30 June    31 December                                                              
                                    2014         2014        2013           2013                                                             
   In millions of rands         Reviewed    Unaudited    Reviewed        Audited                                                                                                          
   Available for sale assets          14           11          31             17        Level 1*       Quoted prices in an
                                                                                                       active market   
   Held for trading assets/                                                                            
   (liabilities)                       2           (4)         (3)            17        Level 1*       Quoted prices in an 
                                                                                                       active market     
   *Level 1: fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets or liabilities.                                                                                                                                   

8. Cash and cash equivalents
   For the purposes of the statements of cash flows, cash and cash equivalents include cash on hand and in the bank, net
   of bank overdraft.
   
9. Subsequent events
   The directors are not aware of any matter or circumstances arising since the end of June 2014 to the date of this
   report that would significantly affect the operations, the results and the financial position of the group.

   
Condensed group statement of changes in equity                                                                                                                                                   
                                                           Treasury                                                
                                                              share                                    Total          
                                                 Stated      equity       Other    Retained    shareholders’                                     
In millions of rands                            capital     reserve    reserves      income           equity                                                                                 
Balance at 1 January 2013                            37      (3 918)      1 740      24 383           22 242           
Total comprehensive income/(loss) for the 
period (net of income tax)                                                  347        (140)             207           
Share-based payment expense                                                   9                            9           
Transfer of equity accounted earnings                                      (148)        148                            
Balance at 30 June 2013 (Reviewed)                   37      (3 918)      1 948      24 391           22 458           
Total comprehensive income/(loss) for 
the period (net of income tax)                                              233      (2 007)          (1 774)          
Share-based payment expense                                                  10                           10           
Transfer of equity accounted earnings                                       113        (113)                           
Balance at 31 December 2013 (Audited)                37      (3 918)      2 304      22 271           20 694           
Total comprehensive income for the 
period (net of income tax)                                                   33         322              355           
Share-based payment expense                                                   4                            4           
Transfer of equity accounted earnings                                        60         (60)                           
Balance at 31 March 2014 (Unaudited)                 37      (3 918)      2 401      22 533           21 053           
Total comprehensive income/(loss) for the 
period (net of income tax)                                                    1        (337)            (336)          
Share-based payment expense                                                   6                            6           
Transfer of equity accounted earnings                                       (11)         11                            
Balance at 30 June 2014 (Reviewed)                   37      (3 918)      2 397      22 207           20 723           


Segment information
Flat steel products                                                                                                                                             
         Quarter ended                                                              Six months ended     Year ended                                                                              
  30 June    31 March      30 June                                                 30 June    30 June   31 December            
     2014        2014         2013                                                    2014       2013          2013           
Unaudited   Unaudited    Unaudited                                                Reviewed   Reviewed       Audited                                                                           
    6 023       6 157        5 115   Revenue (R million)                            12 180     10 044        20 697           
    5 648       5 924        4 848   - External                                     11 572      9 583        19 922           
      375         233          267   - Internal                                        608        461           775           
      (30)        214          290   EBITDA (R million)                                184        (25)          135           
     (226)       (284)        (292)  Depreciation and amortisation (R million)        (510)      (598)       (1 255)          
     (256)        (70)          (2)  Loss from operations (R million)                 (326)      (623)       (1 120)          
                                     Unaudited information                                                                    
      901         818          970   Liquid steel production (‘000 tonnes)           1 719      1 535         3 229           
      730         775          659   Steel sales (‘000 tonnes)                       1 505      1 361         2 771           
      494         475          538   - Local                                           969      1 095         2 003           
      236         300          121   - Export                                          536        266           768           
       86          79           79   Capacity utilisation (%)                           83         68            74           


Long steel products                                                                                                                                      
           Quarter ended                                                             Six months ended    Year ended                                                                              
  30 June     31 March     30 June                                                  30 June    30 June  31 December            
     2014         2014        2013                                                     2014       2013         2013           
Unaudited    Unaudited   Unaudited                                                 Reviewed   Reviewed      Audited                                                                              
    3 442        3 114       3 084   Revenue (R million)                              6 556      5 969       11 618           
    2 595        2 769       2 838   - External                                       5 364      5 503       10 616           
      847          345         246   - Internal                                       1 192        466        1 002           
     (142)         320         379   EBITDA (R million)                                 178        694        1 198           
      (64)         (73)        (72)  Depreciation and amortisation (R million)         (137)      (142)        (301)          
     (206)         247         307   (Loss)/profit from operations (R million)           41        552          897           
                                     Unaudited information                                                                    
      244          423         483   Liquid steel production (‘000 tonnes)              667        946        1 867           
      331          359         379   Steel sales (‘000 tonnes)                          690        762        1 459           
      268          297         296   - Local                                            565        611        1 123           
       63           62          83   - Export                                           125        151          336           
       43           75          84   Capacity utilisation (%)                            58         82           81           

   
Coke and chemicals                                                                                                                                               
           Quarter ended                                                             Six months ended    Year ended                                                                              
  30 June     31 March     30 June                                                  30 June     30 June 31 December            
     2014         2014        2013                                                     2014        2013        2013           
Unaudited    Unaudited   Unaudited                                                 Reviewed    Reviewed     Audited                                                                      
      540          479         448   Revenue (R million)                              1 019         828       1 937           
      526          465         438   - External                                         991         804       1 883           
       14           14          10   - Internal                                          28          24          54           
       96          109         120   EBITDA (R million)                                 205         267         514           
       (8)          (9)         (8)  Depreciation and amortisation (R million)          (17)        (17)        (35)          
       88          100         112   Profit from operations (R million)                 188         250         479           
                                     Unaudited information                                                                    
      144           85         119   Commercial coke produced (‘000 tonnes)             229         210         391           
      117           91         125   Commercial coke sales (‘000 tonnes)                208         210         545           
       27           26          24   Tar sales (‘000 tonnes)                             53          52         109           
  
  
Corporate and other                                                                                                                                               
          Quarter ended                                                               Six months ended   Year ended                                                                              
  30 June     31 March     30 June                                                  30 June     30 June 31 December            
     2014         2014        2013                                                     2014        2013        2013           
Unaudited    Unaudited   Unaudited                                                 Reviewed    Reviewed     Audited                                                                              
      132          111          19   EBITDA                                             243          41         (79)          
                                     Tshikondeni mine closure cost                                             (158)          
        6            7           5   Depreciation and amortisation credit                13          13          28           
      138          118          24   Profit/(loss) from operations                      256          54        (209)          


Salient features
           Quarter ended                                                                           Six months ended       Year ended                                                    
  30 June     31 March     30 June                                                               30 June      30 June    31 December            
     2014         2014        2013                                                                  2014         2013           2013           
Unaudited    Unaudited   Unaudited    In millions of rands                                      Reviewed     Reviewed        Audited                                                          
                                      Reconciliation of earnings before interest, taxation,
                                      depreciation and amortisation (EBITDA)                 
     (236)         395         441    (Loss)/profit from operations                                  159          233             47           
                                      Adjusted for:                                                                                            
      286          353         363    - Depreciation                                                 639          736          1 544           
        6            6           4    - Amortisation of intangible assets                             12            8             19           
                                      Tshikondeni mine closure cost                                                              158           
       56          754         808    EBITDA                                                         810          977          1 768           
                                      Reconciliation of headline (loss)/earnings                                                               
     (337)         322         135    (Loss)/profit for the period                                   (15)        (140)        (2 147)              
                                      Adjusted for:                                                            
                                      Impairment charges                                                                       1 950           
       11            2          17    - Loss/(profit) on disposal of assets                           13           24            (37)          
       (3)          (1)         (5)   - Tax effect                                                    (4)          (7)            10           
     (329)         323         147    Headline (loss)/earnings                                        (6)        (123)          (224)          
                                      Headline (loss)/earnings per share (cents)                                                               
      (82)          81          37    - basic                                                         (2)         (31)           (56)          
      (82)          81          37    - diluted                                                       (2)         (31)           (56)          
                                      Selected ratios (%)                                                                                      
                                      Return on ordinary shareholders’ equity per annum                                                        
     (6.5)         6.2         2.4    - attributable (loss)/earnings                                (0.1)        (1.3)         (10.0)          
     (6.3)         6.2         2.6    - headline (loss)/earnings                                    (0.1)        (1.1)          (1.0)          
     (2.9)        (0.9)        3.2    Net (borrowings)/cash to equity                               (2.9)         3.2            1.4           
                                      Share statistics                                                                                         
                                      Ordinary shares (thousands)                                                                              
  401 202      401 202     401 202    - in issue                                                 401 202      401 202        401 202           
  401 202      401 202     401 202    - weighted average number of shares                        401 202      401 202        401 202           
  401 202      401 202     401 202    - diluted weighted average number of shares                401 202      401 202        401 202           
    31.06        33.51       32.35    Share price (closing) (Rand)                                 31.06        32.35          37.30           
   12 461       13 444      12 979    Market capitalisation (R million)                           12 461       12 979         14 965           
    51.65        52.47       55.98    Net asset value per share (Rand)                             51.65        55.98          51.58           


Other information
Registered office 
ArcelorMittal South Africa Limited, Room N3-5, Main Building, Delfos Boulevard, Vanderbijlpark, 1911

Directors 
Non-executive
PM Makwana* (Chairman), DK Chugh^, FA du Plessis*, S Maheshwari^, JRD Modise*, NP Mnxasana*, LP Mondi, 
DCG Murray*, G Urquijoº
^Citizen of India º Citizen of Spain *Independent non-executive

Executive 
PS O’Flaherty (Chief Executive Officer)
MJ Wellhausen (Chief Financial Officer)#
#Citizen of Germany

Company Secretary 
Premium Corporate Consulting Services Proprietary Limited

Sponsor 
JP Morgan Equities South Africa Proprietary Limited
1 Fricker Road Illovo, 2196
Private Bag X9936, Sandton, 2146

Transfer secretaries 
Computershare Investor Services Proprietary Limited, 
70 Marshall Street, Johannesburg, 2001 
PO Box 61051, Marshalltown, Johannesburg, 2107

Release date 
1 August 2014

Forward-looking statements
Statements in this release that are neither reported financial results nor other historical information, are
forward-looking statements, including but not limited to statements that are predictions of or indicate future earnings, savings,
synergies, events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by
their nature, they are subject to risks and uncertainties whose impact could cause actual results and company’s plans and
objectives to differ materially from those expressed or implied in the forward-looking statements (or from past results).
Any reference to future financial performance included in this announcement, has not been reviewed or reported on by the
company’s auditors.

http://www.arcelormittal.com/southafrica
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