ANNUAL REPORT ARCELOR 2003 - paperJam

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From a financial standpoint, and excluding any exceptionalitems, trends in these three factors directly affectedperformance. Efficiency savings proved insufficient tooffset the substantially deteriorated market conditions,in terms of both demand and prices. The appreciationof the euro relative to the dollar adversely affectedcompetitiveness not only in domestic markets but alsoin export markets. Sales prices retreated in mostmarkets within a climate of weak demand and greatercompetition, with the increases in alloy surcharges(+85% in Europe for the year) contributing to the erosionof margins by the end of the year.Apparent consumption in stainless steel flat productsended up 6% on a worldwide basis over 2002*,essentially fuelled by Asia (approximately +10%), whilethe European and American markets advanced onlybetween 1.5 and 2%.In Europe, demand was normal for the first few monthsand then suffered a setback during the second and thirdquarters. The year-end order books of the principalEuropean producers point to a recovery in 2004, thusconfirming the signs of a recovery recorded in the lastquarter. In a climate of weak demand and strongcompetition, base prices eroded steadily (down 10% inDecember on a year-to-year basis). After the low pointreached in the fourth quarter, and in spite of the currentlevels of the alloy surcharge, base prices are againtrending up for 2004.Business in the United States recovered steadily aftera relatively pessimistic start for the year, but industry didnot feel the first positive effects of the recovery until theend of the year. Prices were under pressure anddeteriorated further from their already weak level, tofinally stabilise only in the third quarter. Helped by thewithdrawal of certain operators, producers have alreadyannounced significant price increases for 2004.The Asian markets, where firm demand at the beginningof the year was greatly disrupted by the effects of SARS,recovered during the second half. This improvement,linked partially to the need to replenish stocks, wasaccompanied by an increase in prices in the fourthquarter tied to the increase in nickel prices, which iscontinuing into 2004.With the exception of some weakness at mid-year,the economic climate in Brazil was relatively favourable.At the end of the year, the business was able to takeadvantage of the interest rate cuts and the incentivesintroduced by the Government to stimulate consumption.Base prices remained stable overall in dollar termsin spite of the further appreciation of the real relative tothe dollar.After a difficult year, 2004 is off to a more promising start.The firming-up of demand, linked in part to speculativeprocurement, also reflects the prospect of a real recoveryfuelled by low inventories.In long products, the weakness of the dollar improvedthe competitiveness of Asian producers and maintainedstrong pressure on prices. In a context of stagnatingconsumption, the aggressive behaviour on the part ofEuropean competitors and imports translated into a verylow level of orders and prices. Base price levels have yetto recover, in spite of a slight recovery and the increasein nickel prices at the end of the year.In an economic climate unfavourable to major investments,the demand for specialty plates was weak.This climate, like the unfavourable euro/dollar parity andprice increases in alloys as well as scrap, lockedIndusteel into a negative price squeeze and contributedto a decline in performance.From an industrial standpoint, the operation of mostproduction facilities was adapted to the apparentconsumption level. After a pronounced slowdown inthe second and third quarters in response to particularlyweak demand and the summer business slowdown,production rates returned to more normal levels in thefourth quarter, reflecting a business improvement for thebeginning of 2004. Production volumes of crude steel forthe year showed a decline of 4% from the averagerecorded for 2002*.The competitiveness of production equipment wasenhanced by the commissioning of a new electricfurnace at Genk and the modernisation of an annealingand pickling line at Gueugnon.2003 also witnessed:- the shutdown of perforated tube production at Mattheyin England;- the production shutdown of stainless steel tube plantsin Italy;- the sale of the foundry (CFI) and of a stake in the Creusotsteelworks to the France Essor Group;- the start-up of construction work by UGINE & ALZ forthe new steelshop, upstream of the Carlam strip mill(Belgium).* Numbers for 2002 are proforma (unaudited)76ANNUAL REPORT ARCELOR 2003
Distribution-Processing-TradingIn million of euros2003 2002 2002Proforma(unaudited)Revenues 7,954 9,444 8,780Change (1) (15.8%) - -Gross operating result 284 319 294% of revenues 3.6% 3.4% 3.3%(1) Change from 2002 proforma (unaudited)At 7,954 million euros in 2003 versus 9,444 million in2002*, revenues in the Distribution-Processing-Tradingsector suffered a decline of 16% due in part to thechange in consolidation, notably the transfer of thepackaging business to the Flat Carbon Steels sector.At comparable consolidation, revenues decreased by4.2% even though the volume sold remained virtuallyunchanged (-1%). International business transactedthrough Arcelor International and Arcelor Projectsremained steady even though the weakness of the dollarlessened the financial impact. The other companies ofthe sector posted a decrease in volumes as a result oftheir desire to give priority to price over volume in orderto pass on upstream price increases to the end user tothe extent possible. However, the price increases appliedto customers were insufficient to cover the increasesin upstream prices, which had a noticeable impact onmargins.The two effects combined, namely lower volume andsqueezed margins, heavily affected the performanceof the sector. Thus, gross operating result in 2003came to 284 million euros versus 319 million in 2002*and includes +112 million in non-recurring items,essentially related to the sale of PUM Plastiques inthe fourth quarter.Operating result, at 124 million euros versus 209 millionthe year before, includes +32 million euros in nonrecurringitems, including (71) million in charges linkedto the restructuring of the Tubes business, which wasput up for sale.business report > group consolidated management report* Numbers for 2002 are proforma (unaudited)ANNUAL REPORT ARCELOR 2003 77
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ANNUAL REPORT ARCELOR 2003ANNUAL RE
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Message from the Chairman ofthe Boa
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Message from the Chairman ofthe Man
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Does this mean that the Group is en
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8ANNUAL REPORT ARCELOR 2003
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Portrait of the GroupArcelor was bo
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The Arcelor/Nippon Steel Corporatio
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Key Figures for 2003Revenues (1) Re
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2003 highlightsOn January 24, 2003,
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Corporate GovernanceBoard of Direct
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Report of the Chairman of the Board
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Role and authority of the Board of
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4.2. The Audit Committee andthe App
Page 28 and 29: AuthorityThe powers of the Manageme
Page 30 and 31: B. Internal Control Procedures1. GO
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Page 34 and 35: Information regarding capital, mark
Page 36 and 37: Market informationListingArcelor sh
Page 38 and 39: Information policyArcelor intends t
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Page 42 and 43: table of contents >Flat Carbon Stee
Page 44 and 45: Within this context, and in order t
Page 46 and 47: 3.3. Packaging steelsThe packaging
Page 48 and 49: table of contents >Long Carbon Stee
Page 50 and 51: 3. THE SECTOR’S PRODUCTS ANDMARKE
Page 52 and 53: table of contents >Stainless Steels
Page 54 and 55: The distribution of the UGINE & ALZ
Page 56 and 57: The adaptation plan - industrial re
Page 58 and 59: table of contents >Distribution-Pro
Page 60 and 61: 2. ORGANISATION OF THE SECTORThe ye
Page 62 and 63: Other ActivitiesThe “Other Activi
Page 66 and 67: Group Consolidated Management Repor
Page 68 and 69: Trends in global crude steel produc
Page 70 and 71: Financial highlights for the GroupI
Page 72 and 73: Return on capital employed (ROCE) b
Page 74 and 75: BUSINESS BY SECTORFlat Carbon Steel
Page 76 and 77: Even though shipments in 2003 in th
Page 80 and 81: The Trading and Distribution busine
Page 82 and 83: - in September 2003, the sale of th
Page 84 and 85: The market tightness provoked by th
Page 86 and 87: Risk ManagementGeneral legal risks
Page 88 and 89: Group purchasing performanceIn addi
Page 92 and 93: Implementation of the Sustainable D
Page 94 and 95: Arcelor’s principles Principal ac
Page 96 and 97: Organisation of Sustainable Develop
Page 98 and 99: indicators 2002 2003Principle 4 - O
Page 100 and 101: Group profitabilityObjectives• Av
Page 102 and 103: Arcelor Health and Safety policyArc
Page 104 and 105: Safety certificationsSeveral Arcelo
Page 106 and 107: Arcelor Environmental PolicyArcelor
Page 108 and 109: Implementation of a monitoring plan
Page 110 and 111: Dialogue with all stakeholdersObjec
Page 112 and 113: Dialogue with societyArcelor partic
Page 114 and 115: Development of individual interview
Page 116 and 117: Scientific CouncilChairman:• Marc
Page 118 and 119: Corporate governanceObjectives• E
Page 120 and 121: SponsorshipEvery year, the various
Page 122 and 123: Durability: Manufacturers are now a
Page 126 and 127: GENERAL INFORMATION ABOUTARCELORCor
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Cold-rolled flat products: In 2001,
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Safeguard clause• United States:
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130ANNUAL REPORT ARCELOR 2003
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Consolidated financial statementsof
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CONSOLIDATED CASH FLOW STATEMENTIn
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NOTES TO THE CONSOLIDATED FINANCIAL
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Assets intended to be disposed of o
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AmortisationAmortisation is recogni
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13) EquityRepurchase of share capit
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18) Other provisionsA provision is
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The major changes in the consolidat
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NOTE 4 - INTANGIBLE ASSETSGoodwill
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NOTE 5 - PROPERTY, PLANT AND EQUIPM
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NOTE 7 - OTHER INVESTMENTSThe main
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NOTE 13 - EQUITY13.1 Issued capital
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NOTE 15 - MINORITY INTERESTSIn the
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16.6 Detail of main individual long
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17.2.2 Additional pension plansFran
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17.2.3 Leaving indemnities (continu
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18.2 Early retirement plansAn actua
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NOTE 22 - NET FINANCING RESULTIn EU
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NOTE 24 - RELATED PARTY DISCLOSURES
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The portfolio of financial instrume
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NOTE 26 - COMMITMENTS GIVEN AND REC
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27.1 Breakdown by activity (continu
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27.2 Geographical breakdown(Figures
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NOTE 29 - RECONCILIATION OF THE ARC
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Company name Consolidation Country
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Audit31, Allée Scheffer Telephone
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Annual accounts Arcelor S.A.ANNUAL
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INCOME STATEMENT FROM JANUARY 1 TO
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NOTE 3 - STATEMENT OF TANGIBLE FIXE
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NOTE 8 - PROVISIONS FOR LIABILITIES
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NOTE 14 - DIRECTORS’ REMUNERATION
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Arcelor Ordinary General Meeting on
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GlossaryAnnealing:The heat treatmen
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How steel is made?a 3-stage process
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Arcelor’s main steel-manufacturin
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NOTES210ANNUAL REPORT ARCELOR 2003
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Concept and realization133, avenue
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