Arcelor Mittal Activity Report 2006 - paperJam

46 Arcelor Mittal Activity Report 2006Operational ReviewLong Products, AM3S, Wire DrawingcontinuedInvestmentsCapital expenditure in 2006 was US$136million. Arcelor Mittal Constructionexpanded its network with new facilitiesin Poland, Slovakia and Spain. Constructionof a new service centre was startedin Slovakia. The Foundation Solutionsbusiness established a new pipe millin the US (through Skyline) and a newsheet pile cold rolling mill in Malaysia(through Oriental Sheet Piling). As a result,Arcelor Mittal is now producing sheetpiles in Asia and is actively developing steelfoundations solutions in the region.Performance in 2006With the exception of Southern Europe,which suffered increased penetrationby Asian imports in the second halfof the year, market conditions werefavourable in most of AM3S’s marketsin 2006. On shipments of 14.3 milliontonnes, compared with 13.7 milliontonnes in 2005, revenues rosefrom US$10.8 billion to US$11.9billion. AM3S achieved an EBITDA ofUS$0.6 billion (2005: US$0.4 billion).OutlookMerger synergies of US$150 millionare targeted. These will come fromvolume growth in Central and EasternEurope, achieved through partnershipwith the Group’s steel mills in the region.A further integration benefit at ArcelorMittal International is the expectedsale of around 12 million tonnes of steelin the current year - this is a resultof a worldwide efficient sales networkwhich is close to the end user customers,and source optimisation throughan extended internal supplier base.AM3S’s strategy will focus on extendingthe range of services to anticipatecustomer developments, targeting morevalue-added products and seeding itsbusiness model outside of its core regions.Above all, it will continue to work to buildcustomer loyalty through reliability andspeed of supply, a willingness to innovateand the delivery of global steel solutionsWire DrawingArcelor Mittal Wire Drawing is the mostimportant and diversified steel wire drawerin the world with a production capacityclose to 3 million tonnes in the Americas,Europe, Asia and Africa. Its strategyis to pursue the consolidation that hasstarted in Europe and to grow in Asia,focusing on projects that reinforce itsposition as a global solution provider withsuperior R&D and innovation capability.Performance in 2006Price pressures led many of the WireDrawing operations to prioritise marginsover volume in 2006 in Europe and NAFTA.China is now the largest manufacturingplace for car and trucks tyres and thereforealso for steelcord wires and strands.The sector of energy is booming.Arcelor Mittal Wire Drawing benefitsfrom increasing demand in wire forthe construction of flexible pipes and wireropes for platforms mooring lines.The development of renewable energiessuch as solar power has lead ArcelorMittal Wire Drawing to develop new wires,contributing to the increased efficiencyof the photovoltaic industry.2006 was a good year for constructionapplications. Arcelor Mittal Wire Drawingis a major supplier to this industry in fibresand prestressed wire and strands.OutlookWhile global demand for wiressolutions in construction, automotiveor energy industries remains good,growing over-capacity in some regionsputs pressure worldwide on margins.2007 capacity investments in Hungaryand China for steelcord are followingthe shift in tyre manufacturers’ demandfrom NAFTA and Western Europe to Asiaand Central-Eastern Europe.Price increases are implementedfrom end of the first quarter of 2007to reflect higher raw material costs.