EuroBusiness Media (EBM) : Arcelor has just reported earnings for 2005. Guy Dollé, welcome. You are the CEO of Arcelor, what are your comments on the results for 2005 ?
Guy Dollé (GD) : Our results for 2005 are fantastic, but not exceptional. They are fantastic because of the strong improvement compared to 2004, despite a difficult economic climate for the steel industry. They are not exceptional because we do believe that in the future we will be able, with our growth, to reproduce such good results for our shareholders.
EBM : Could you confirm the price increases for annual and pluri-annual contracts in the automobile industry?
GD : In 2006 we had to renew two thirds of our previous contracts, with at least three of our major car customers. We were able to obtain a strong price increase, and we have built indexes which will be used in 2007 in order to adapt prices to trends in raw material prices.
EBM : What can you tell us about the on-going discussions regarding the price increases for iron ore ?
GD : Its tough. As you know, we have already succeeded in negotiations for coking coal. But for iron ore, we are just beginning discussions. Iron ore companies have asked for a price increase. We, and some others, have asked for a price decrease. I think the key player will be China. Why ? Because it's because of China that there has been a price increase, and now China has started an internal price war. They need to get a decrease in iron ore prices in order to improve their results. I think that in the coming weeks or months, China will fix the benchmark. We still think we could achieve a roll over.
EBM : What are your comments as the year begins about the import and export movements in Europe ?
GD : There are not so many imports in Europe, and import prices are increasing step by step. The situation now is much better than two months ago. Inventories are low and customers need to place orders, so volumes will be much higher this year than the previous year. It is clear that -- for flat carbon steel especially -- we are in a position to obtain a large price increase in the second quarter. So that means this first-half of the year will be better than we anticipated a couple of months ago.
EBM : What's the latest news coming out of Arcelor in terms of plant closing, and more generally speaking in terms of cost cutting ?
GD : If we look at our cost saving, compared to 2001, we have been able to make a cost saving of close to 2 billion euros :1.9 billion in four years, out of which just 700 million euros came from synergies. Our challenge is to be able, in the next four or five years, to achieve the same cost saving rate of between 500 and 600 million euros per year, with less synergy, but achieving what we anticipated in our communications, which is, step by step, to shut down the continental upstream phase until 2010.
EBM : Concerning Dofasco: what is your industrial project and how do you plan to increase Dofasco's profit margin?
GD : If you look at the results for Dofasco, you have to correct the fourth quarter result by taking into account some non-recurring items. Dofasco has been the most profitable steel company in North America for the last ten or twenty years, and I am sure the profitability will return. We have been partners for at least 10 years, we have a common subsidiary with our high-end technology, Extragal. With Dofasco, we will progress from a 1% market share in the North American car industry up to 10%, which is important. I think that we have also identified a lot of synergies, which will help Dofasco to improve its results dramatically, and also taking into account the iron ore price and availability they have through the QCM mine.
EBM : Do you have any intention of selling off or, on the contrary, keeping the Dofasco mine?
GD : For the moment, we have announced that we want to keep the mine within the company. 50% of the EBITDA will come from the mine now, with the iron ore price increase. If we receive a good proposal we will look at it, but for the moment we are close to deciding to keep the mine, at least for the coming quarters.
EBM : Now, getting to the news of the day, obviously investors are very curious to hear your comments on the Mittal bid. Arcelor's board has rejected the offer. What alternative industrial project can you propose that would create more shareholder value compared to the implicit valuation of Arcelor in Mittal's bid (about 30 euros per share) ?
GD : Just look at the results for the year 2005. Compare Arcelor and Mittal Steel. Compare the difference between 2004 and 2005 for each of these companies. It is evident, as I have explained to the market, that the Arcelor model is very successful, less volatile, and of course linked to our speciality iron products. The Mittal Steel model is running out of steam, needing a lot of investment. I am sure that the management of Arcelor will be in a position to convince investors and shareholders that with our strategic plan for the next few years, we will be able to continue to create value for our shareholders, as we have shown them over the last four years.
EBM : According to investors, you ought to consider every option for the future of the company, including a possible merger with Mittal. Are you going to have a meeting with Mittal to discuss the offer that's on the table ? And if not, why not ?
GD : I do believe that if [M. Mittal] had wanted a discussion, he would have handled the matter in another way. Just as an example, we were together ten days ago at the IISI meeting in Paris. I was chairing this meeting, we talked for 6 hours around the table, and he never tried to discuss this with me.
EBM : What assurances can you give the market that you won't destroy shareholder value by over paying for assets, in an effort to protect yourselves against the hostile Mittal bid ? (We are referring to on-going market rumours about certain potential acquisitions.)
GD : I also read some very crazy rumours in the newspaper. How could you imagine that this management, with what it has done over the last four years, would make a crazy move, destroying value for our shareholders. It's impossible. We have shown our shareholders that we are able to create value, that we have good projects, and I assure you, there will be no move that will destroy value for our shareholders. It's impossible, at least for me.
EBM : Is there or is there not a 'poison pill' at Arcelor which could allow the merger with Mittal to be blocked?
GD : I think the 'poison pill' for Arcelor is the Mittel Steel offer. I think it would take the huge cash flow out of Arcelor, to invest it in the outdated Mittel Steel plants, which would jeopardize our image in the eyes of some of our key customers. I do believe this would not be a good move for either Arcelor's shareholders, nor the company's stakeholders -- the customers or the employees.
EBM : To conclude, we should expect to hear more details about your industrial proposal in the coming days, and in the weeks to come ?
GD : I have met a lot of investors and shareholders and I told them that we are going to pay them a visit at the end of this month - we will probably start around February 28th -- in order to convince them that their future as shareholders of Arcelor will be much brighter with us than with the Mittel Steel offer.
EBM: Guy Dollé, thank you very much.
GD : Thank you.
