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WIKI ANALYSIS
ArcelorMittal (NYSE:MT)
Company Overview
History
ArcelorMittal was formed in 2006 by the merger of Arcelor and Mittal Steels. Previously, Mittal Steels produced the largest amount of steel by volume and Arcelor produced the second largest. After the merger, ArcelorMittal represents around 10% of the world's steel output.
Before the acquisition, Arcelor and Mittal Steels independently acquired various smaller companies. After the acquisition, ArcelorMittal continues this strategy of horizontal integration. ArcelorMittal is now listed in the stock exchanges in New York, Paris, Amsterdam, Brussels, Luxembourg, and the Spanish stock exchanges. Its headquarters is located in Luxembourg.
CEO and the Board of Directors
ArcelorMittal's CEO is Lakshmi Mittal, currently the fourth richest man according to Forbes. He's a citizen of India who headed Mittal Steels before the acquisition. He's also a non-executive board member of Goldman Sachs.
ArcelorMittal has chosen an international board of directors, with members from France, India, Luxembourg, and other countries. ArcelorMittal maintains that these choices were made to reflect the wide array of international operations conducted by the company.
Financial Analysis
ArcelorMittal's most recently released market cap figure is $34.02 billion.
In 2007, ArcelorMittal had sales of $105.2 billion, up 78.7% from $58.9 billion in 2006. Its net income was $11.9 billion with a net profit margin of 11.3%. The company attributed this increase in sales to the acquisition of Arcelor by Mittal Steel on 1 August 2006.
In 2006, ArcelorMittal had sales of 58,9 billion, up 109.3% from $28.1 billion in 2005. Its net income was $6.1 billion with a net profit margin of 10.4%.
Since September 2006, ArcelorMittal has issued dividends to shareholders that represented 30% of ArcelorMittal's profits.
Business Segments
ArcelorMittal's six business segments are Flat Carbon Americas, Flat Carbon Europe, Long Carbon Americas and Europe, AACIS, Stainless Steel, and Steel Solutions and Services.
Flat Carbon Americas (21.8% of total sales and 20.1% of operating income in 2007)
Flat Carbon Americas makes a range of flat carbon steel products, including slab, hot-rolled, cold-rolled and coated plates and sheets. In 2007, this segment accounted for 27.9 million tonnes in steel shipments, $22.9 billion in sales and $3.0 billion in operating income.
In North America, ArcelorMittal USA and ArcelorMittal Hamilton are the largest flat-rolled supplier in the United States and Canada respectively. In 2007, more than 25% of the 14 million tonnes of steel shipped by ArcelorMittal USA was consumed by the United States automotive industry. In the same year, more than 25% of the 4.5 million tonnes of steel shipped by ArcelorMittal Hamilton was consumed by the NAFTA automotive industry. ArcelorMittal USA is also the largest plate producer in North America.
In South America, ArcelorMittal Tuburao and ArcelorMittal Lazaro Cardenas are the largest slab producers in Brazil and Mexico respectively. In 2007, ArcelorMittal Tuburao produced 7.5 million tonnes of slabs, making it the largest single-site operation in the Southern hemisphere. In the same year, 4.0 million tonnes of slabs were produced by ArcelorMittal Lazaro Cardenas, which specializes in high-quality slabs for high-strength applications.
Flat Carbon Europe (32.8% of total sales and 28.0% of operating income in 2007)
Like Flat Carbon Americas, Flat Carbon Europe makes a range of flat carbon steel products, including slab, hot-rolled, cold-rolled and coated plates and sheets. In 2007, this segment accounted for 34.4 million tonnes in steel shipments, $34.6 billion in sales and $4.1 billion in operating income. With major production facilities in Belgium, France, Germany and Spain, this segment is the largest supplier of steel sheets to the European automotive industry.
Long Carbon Americas and Europe (22.6% of total sales and 26.3% of operating income in 2007)
Long Carbon Americas and Europe makes a range of long carbon steel products, including rebars, rails, sections, sheet piles and wire rod. In 2007, this segment accounted for 24.6 million tonnes in steel shipments, $23.8 million in sales and $3.9 million in operating income. With major production facilities in the United States, Canada and Brazil, Long Carbon Americas shipped 9.4 million tonnes of steel in 2007. Similarly, with major production facilities in France, Germany, Luxembourg and Spain, Long Carbon Europe shipped 14.4 million tonnes of steel in 2007 and is the world's largest producer of sections, sheet piles and wire rod.
AACIS (17.3% of total sales and 21.5% of operating income in 2007)
AACIS makes flat and long carbon steel products for Asia, Africa and the Commonwealth of Independent States. In 2007, this segment accounted for 20.9 million tonnes in steel shipments, $18.2 billion in sales and $3.2 billion in operating income. With major production facilities in Kazakhstan, South Africa and Ukraine, AACIS is the largest producer of steel products in Africa and one of the largest producers in Asian and the Commonwealth of Independent States.
Stainless Steel (8.9% of total consolidated sales and 5.9% of operating income in 2007)
As the name indicates, this segment of ArcelorMittal makes stainless steels, electrical steels and nickel alloys. In 2007, Stainless Steel accounted for 1.9 million tonnes in steel shipments, $9.3 billion in sales and $876 million in operating income. With major production facilities in Belgium, Brazil and France, Stainless Steel is one of the world's largest producer of nickel alloys and the only producer of stainless and electrical steels in South America.
Steel Solutions and Services (3.9% of operating income in 2007) Steel Solutions and Services offers a range of services from steel processing and engineering to technical consultancy and project management. In 2007, this segment accounted for 15.9 million tonnes in steel shipments, $16.2 billion in sales and $579 million in operating income. With major facilities in Poland, the Czech Republic, Romania and Austria, Steel Solutions and Services in the world's largest steel distributor and processor.
Geographic Regions
ArcelorMittal runs plants and businesses in both emerging and mature markets. It operates in the Americas, Europe, and Africa. ArcelorMittal is looking to develop plants and positions in China and India. The company has recently sold a few plants to other companies to reflect its interests in emerging markets.
Key Trends & Forces
Raw Materials Prices Affect Costs
ArcelorMittal consumes several resources with volatile prices, such as iron ore, coal, and scrap metal. ArcelorMittal produces 46% of its own iron ore and 13% of its own coal, but must buy the remainder from outside suppliers. Increasing demand for iron ore, especially by China, drove ore prices up by 71.5% in 2005 and 19% in 2006.
ArcelorMittal has sold various less-profitable plants to other companies in an attempt to downsize and cut costs.
Acquisitions
Mittal Steel has grown rapidly through a number of acquisitions, including ISG in 2005, Arcelor in 2006, and Sicartsa in 2007. This has made ArcelorMittal the world’s largest steel manufacturer, but has also created the risk of not properly integrating these new acquisitions efficiently. At the times of acquisition, ArcelorMittal estimated that its acquisitions of ISG and Sicartsa would result in total annual operations savings of $380 million. [20-F, RF 11-12]
Emerging Markets
ArcelorMittal's agenda includes capitalizing the productive power of the emerging markets of China and India. Although not yet specified how, ArcelorMittal is actively pursuing emerging markets and recognizing them as sources of profit.
Competition
References
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