06 <strong>Arcelor</strong> <strong>Mittal</strong> <strong>Activity</strong> <strong>Report</strong> <strong>2006</strong>Message from the President and CEO<strong>2006</strong> has been a groundbreaking year for the steel industry.It saw the creation of <strong>Arcelor</strong> <strong>Mittal</strong>, the world’s first 100 million tonnesplus steel company in a merger which highlighted the benefitsof a more consolidated steel industry and which I am pleased to say,has been followed by a new phase of consolidation in our industry.
<strong>Arcelor</strong> <strong>Mittal</strong> <strong>Activity</strong> <strong>Report</strong> <strong>2006</strong> 07It has been some nine months sincewe announced the merger and I amdelighted by how quickly the two companieshave become aligned. I can say withconfidence that the success of themerger to date has surpassed even myown expectations. The collaborationbetween people is very strong andeffective, and everyone is motivated by theconsiderable opportunities ahead of us.Today <strong>Arcelor</strong> <strong>Mittal</strong> enjoys a uniqueprofile in the steel industry, witha balanced operating portfolio acrossEurope, America and Asia. Additionaldiversity is provided by our broadproduct portfolio, which encompassesboth long and flat products for a widerange of customer segments, includingautomotive, white goods and construction.Furthermore, we are the only steelcompany to operate a truly integratedmodel from mining through steelproduction to distribution.One of the clear priorities for 2007is ensuring a successful integration.I am very pleased to report that weare making excellent progress in thisregard. It was clear from the beginningthat the two businesses benefitedfrom complementary business models,which have formed the basis fora positive integration.The first task of the integration processwas to establish the senior managementof the company. I believe that inmy colleagues on both the GroupManagement Board and the ManagementCommittee we have the strongestsenior team in the steel industry today,offering a collective wealth of knowledgeand experience. In particular I wouldlike to thank Roland Junck, Aditya <strong>Mittal</strong>,Malay Mukherjee, Gonzalo Urquijoand Michel Wurth for their commitmentand hard work over these critical firstmonths of the merger, ensuring the newcompany sets off in the right directionfrom the outset.It is their leadership which hashelped set the tone for the considerableexcitement now permeating thecompany. People are motivated bythe future opportunities and prospectsthe merger has created and this givesme great optimism for the future.The merger is creating many benefitson both a geographic and product basis.For example our plants in EasternEurope are benefiting from the expertiseof their new colleagues in WesternEurope. This will enable them to morequickly improve product mix and takeadvantage of the demand growth formore sophisticated products in this market.Similarly in automotive, our teams fromEurope and the United States are workingclosely together to create a global solution,supported by our combined industry-leadingResearch and Development function.I have been delighted to see how wellpeople are working together, sharing theirknowledge and expertise to enhanceperformance. In order to maximise thisopportunity we have adopted a newapproach of “twinning” operating facilitieswith similar units in order to accelerateand enhance operational excellence acrossthe company. This approach is alreadyproving very effective and also providesemployees with an opportunity to integratedirectly and share knowledge, ideasand best practice with their new colleagues.The success of the merger is alsoreflected in the financials. <strong>Mittal</strong> Steelreported record results for the twelvemonths ended 31 December <strong>2006</strong>with sales soaring 109.3% to US$58.9billion, EBITDA increasing 68% toUS$9.8 billion and net income up 52.4%to US$5.2 billion on account of themerger with <strong>Arcelor</strong>. The pro formanumbers for the year clearly demonstratethe financial strength of the newcompany with revenues of US$88.6 billion,EBITDA of US$15.3 billion and netincome of US$8 billion, a result whichwould place us amongst the world’slargest corporations according toFortune 500’s <strong>2006</strong> global ranking.I believe that our stronger, morediversified business model will enableus to maintain a consistent earningsbase. Indeed, over the past three years,<strong>Arcelor</strong> <strong>Mittal</strong> has reported pro formaEBITDA of approximately US$15 billion,demonstrating a stability that neithercompany would have achieved on its own.This is a great achievement which manystakeholders would not have believedpossible only a few years ago.Cashflow continues to be strong,with the company generating US$4.3billion of cashflow in the fourth quarter.Net debt was reduced by US$2.3 billionin the quarter and at 31 December<strong>2006</strong> stood at US$20.4 billion,representing an NFD/EBITDA of 1.3x.Our confidence in the continued financialstrength of the company is reflectedin our decision to implement a newdividend policy, paying out 30% of profitsby way of a dividend and share buy-backto shareholders each year, and havinga minimum dividend payout commitment.This is an unprecedented step fora steel company and one which webelieve serves to underline the resilienceof our business model.The stability of the new global anddiversified model is reflected in thestock price, which has risen some40% since the merger was announced.There can be no greater an endorsementfrom the financial community.Whilst integration is a main priority,we do not intend to allow this to distractus from continuing to look for opportunitiesto create further value.
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