ANNUAL REPORT ARCELOR 2003 - paperJam

GROUP CONSOLIDATED RESULTSThe Arcelor group was the result of a merger of Aceralia,Arbed and Usinor that came into effect on February 28,2002. In compliance with the International FinancialReporting Standards (IFRS), this merger operation wasaccounted by using the acquisition method. Usinor isidentified as the buyer.Under this principle, the Group’s profit and loss accountfor the 2002 financial year includes 2 months of tradingfor the Usinor group and 10 months of trading forthe Arcelor group. The results for 2003 correspond to12 months of actual trading for Arcelor.The results for 2002 are presented on a proforma basisso as to provide homogeneous and comparable financialinformation.The Arcelor group’s consolidated financial statementsfor the financial year ending December 31, 2003 wereprepared in accordance with IFRS internationalaccounting standards current on that date. As noted inthe appendix to the consolidated financial statements,the standards were partially modified by the IASB inDecember 2003 (thirteen amended standards werepublished, effective year-end 2003) and they willcontinue to be so, specifically in view of the 2005deadline set by the European Union.Arcelor has adopted a proactive approach in order toanticipate these changes in progress and adapt itsaccounting policies accordingly if applicable.Nevertheless, some uncertainties remain in the currentstate of definition and implementation of the standards.One of the greatest uncertainties for Arcelor, as well asfor all European industrial groups, involves the applicationof the revised IAS 39 standard, and specifically whetheror not foreign exchange hedges applied on a blanketbasis through centralised management mechanisms(“macro-hedges”) are recognized.Arcelor regrets the inconsistent nature of the internationalaccounting benchmark, which has the effect of changingthe comparability and legibility of its consolidated financialstatements over time, and is actively participating, bothnationally and internationally, in advisory groups to promotechanges in the IFRS standards.To ensure optimal transparency and legibility of thefinancial statements, changes in the Group’s accountingpolicies and the impacts caused by the various changesmentioned above will be detailed and clarified in thenotes to the annual consolidated financial statements, aswell as in Arcelor’s quarterly (and half-yearly, respectively)consolidated information, as applicable.As at December 31, 2003, the consolidated net result(Group share) amounted to 257 million euros.For its second financial year, the Arcelor group showeda clear improvement in results despite a difficulteconomic environment in Europe. This performancewas accompanied by a 1.5 billion euros reduction innet financial debt, allowing the Group to achieve itsbalance sheet restructuring objectives and opening upnew prospects for growth.This very positive performance, which marks the completionof the Group’s consolidation phase, is based on thefollowing factors:- synergies of 405 million euros, 100 million ahead of thecommitments made during the merger;- a policy of stable margins in spite of the cyclical natureof steel consumption and its negative effect on productionand shipments by the Group;- investments or joint ventures in growth markets –Eastern Europe, Turkey, China and Brazil.The formulation and progressive implementation ofthe strategic orientations for the Flat Carbon Steelsand Stainless Steels sectors resulted in significantnon-recurring charges (543 million euros in respect ofoperating income, net of gains or losses on disposals),which must be taken into account to fully asses thefinancial performance of the Group in 2003.business report > group consolidated management reportANNUAL REPORT ARCELOR 2003 67