Daniel Fairclough - Vice President, Investor Relations Lakshmi Mittal - Chairman and Chief Executive Officer Aditya Mittal - Chief Financial Officer; Chief Executive Officer, ArcelorMittal Europe Louis Schorsch - Chief Executive Officer, ArcelorMittal Americas Davinder Chugh - Chief Executive Officer, ArcelorMittal Africa and CIS.

Michael Shillaker - Credit Suisse Alessandro Abate - Berenberg Roger Bell - J.P. Morgan Carsten Riek - UBS Seth Rosenfeld - Jefferies LLC Michael Flitton - Citibank Ioannis Masvoulas - RBC Capital Markets Rochus Brauneiser - Kepler Cheuvreux Anthony Rizzuto - Cowen Group Inc.

Thomas O’Hara - Redburn Philip Ngotho - ABN AMRO Philip Gibbs - KeyBanc Capital Markets Inc. Luc Pez - Exane BNP Paribas.

Daniel, you may go ahead..

Thank you. Good afternoon and good morning, everybody. This is Daniel Fairclough from the ArcelorMittal Investor Relations team. Thank you very much for joining us today on our conference call to discuss the third quarter 2015 results. First, I’d like to remind you that this call is being recorded. We’re going to have a brief presentation from Mr.

Mittal and Aditya, followed by a Q&A session. The idea is that the whole call should last about one hour. [Operator Instructions] With that, I will hand over the call to Mr. Mittal..

Thank you, Daniel. Good day to everyone. [Technical Difficulty] Thank you, Daniel. Good day to everyone and welcome to ArcelorMittal’s third quarter 2015 results call. I’m joined on this call today by Aditya Mittal, Lou Schorsch, Davinder Chugh, and Simon Wandke. Before I start the presentation today, I would like to make a couple of opening remarks.

Firstly, that we have reported $1.4 billion of EBITDA this quarter against a very challenging backdrop. I believe this positively reflects the improvements we have made to our business in recent years. It is fair to say that the operating environment has continued to deteriorate through the third quarter.

Very aggressive export and unsustainably low prices have muddied the waters. Domestic prices in our core markets are falling in response to low price imports and customers are destocking as the way for prices to find a bottom.

So whilst EBITDA this year is falling short of our initial expectations, I’m very encouraged that we remain on track to hit our objectives of positive free cash flow and debt reduction.

As we move forward, I do not believe this challenging environment to be sustainable; nevertheless, we are making the necessary changes to the business to further improve our competitiveness. These actions together with some positive market developments are expected to support EBITDA in 2016 and ensure that our deleveraging process continues.

I will begin today’s presentations with a brief overview of our third quarter 2015 results, followed by an update of our recent developments. I will then spend some time on the outlook for our markets, before I turn the call over to Aditya. He will go through the results in greater detail and provide an update on our guidance and targets for 2015.

As usual, I will start with safety, the lost time injury frequency rate in third quarter 2015 was 0.78 times compared with 0.68 times in second quarter 2015, stable as compared to 0.78 times in Q3 2014. The left hand side, you can see the clear progress we have made in recent years, reflecting our continued focus on this priority.

As a company, we remain committed to this journey towards zero harm. Turning to the financial and operating highlights of third quarter as shown on Slide #4, we have reported EBITDA of $1.4 billion for the third quarter. This is stable relative to the first and second quarters of 2015 despite lower shipments.

Our steel performance remained relatively resilient against the backdrop of the seasonally lower volumes in Europe, as well as lower steel prices across all divisions. Supporting the group results for the third quarter was important in mining EBITDA. Given stable prices, this reflects the further cost out.

Mining segment cost improvement has exceeded our targets set at the beginning of 2015; more will be achieved in 2016. Post-tax exceptional charges of $500 million and $200 million non-cash foreign exchange losses explain the headline net loss of $700 million.

The positive, our liquidity position remains strong at $9.6 billion and our net debt of $16.8 billion is $1 billion lower than the 12 month ago level. Moving on to the segment results in a little more detail. Beginning firstly with Mining segment performance on Slide 5.

Mining profitability in third quarter 2015 improved 24.5% compared to the second quarter. This was primarily driven by further improved cost performance with nine-month 2015 iron ore unit cash cost down 17% year-on-year, somewhat ahead of our 15% target for the full year. Performance at Mines Canada continues to be strong in terms of volume and cost.

Nine-month 2015 marketable shipments are at 19.1 million tonnes and we expect approximately 26 million tonnes shipment by the end of the year, well above the nominal capacity of 24 million tonnes. Our cost performance at Mines Canada has been excellent.

[indiscernible] of volume improvement, cost optimization and the benefits of foreign exchange [Technical Difficulty] cost means that concentrated cash cost in 2015, over 40% lower than 2012. You see FOB cash cost move below $30 in the fourth quarter 2015 and there will be further improvement as we realize the full potential at Mines Canada.

For Liberia, we are currently reviewing a structural cost improvement program for our existing operations. We’ll improve the cost position by focusing volumes on the natural European markets.

This will result in a smaller, but more profitable DSO operation with a more flexible cost base and in short, that Liberia is not a cash flow drag on the group even at iron ore price below $50 per tonne.

Moving to Slide 6 and the results of our Steel segment, steel-only performance during the quarter has been negatively impacted by a seasonal slowdown in Europe as well as the impact of lower steel prices across all divisions driven by unsustainably low price Chinese exports.

Despite lower prices, the results for our NAFTA business have improved during the third quarter, primarily due to lower cost and improved performance in Calvert. Europe segment EBITDA declined during the third quarter, but this was on account of seasonally lower shipment volumes. Volume impact was partially offset through lower cost of goods sold.

Moving to Brazil, EBITDA further declined during the third quarter, reflecting the negative impact of continued domestic demand weakness. Our domestic margins have been squeezed in dollar term due to lower realized selling prices.

With the benefit of an excellent cost position, we have been able to further increase export volumes, but price competition in export led markets has been very aggressive. For the ACIS segment, performance this quarter has been disappointing, reflecting significantly weaker market conditions across all geographies, in particular South Africa.

If we look at the chart on the bottom right of the slide, you can see that the steel shipments for the first nine months of 2015 have increased 1.4% compared to the same period of 2014. Clearly, this is well below initial expectations of a 3.5% increase in shipments.

This shortfall in volumes reflects the exceptionally challenging market we have faced so far in the second-half of this year. With the exception of Europe, all major markets have seen apparent demand contract in 2015. We are now forecasting global apparent steel consumption to decline by between 1.5% up to 2% this year.

China, the ongoing weakness in real estate and machinery end-markets has caused a contraction of real demand by around 3% up to 4% this year. Chinese steel production is sticky, so exports have increased. Here the volumes, price, excluding China have declined to less than $300 per tonne.

But this is not a profitable business model for Chinese mills as they have no structural cost advantages. This is highlighted by Sesa reports that mills lost an average of $35 per tonne in the third quarter. My view is that this is unsustainable.

In order to arrest these losses, steel prices in China need to increase, either as a result of improved demand or as a result of production curtailment.

The weak international price environment is eroding prices in our core domestic markets, also prompting customers to hold off on their order and their inventories down, so apparent demand has been running below real demand. And expected stabilization of prices will bring steel buyers back to the table.

There is already some indication of this happening at the margin. This would be encouraging as we transition into 2016. As this is delighting, the outlook for ArcelorMittal Group volumes in 2016 is somewhat positive. In U.S. we expect continued positive real demand growth and a rebound in apparent demands, driven by an end of destocking.

Europe, we expect to see similar growth in 2016 levels similar to this year. For Brazil and the CIS, we expect further but smaller declines in apparent steel consumption in 2016. As the rate of decline for real estate slows, we see stabilization in real demand next year.

So overall 2016 is likely to see a slight improvement in global steel demand, positively biased towards ArcelorMittal’s core market.

As we look ahead of 2016, I wanted to at this early stage, to highlight some of the actions we have taken and some of the market developments that we are exposed to, which is expected to provide a $1 billion structural improvements to EBITDA versus fourth quarter of 2015.

Starting with some of the actions we have taken on the left of Slide 8, in Brazil, we’re responding to the challenging domestic environment with a new value plan to improve EBITDA. This is a combination of fixed cost initiatives and market initiatives.

At Calvert, as you know this was a considerable drag on NAFTA segment performance in first-half 2015. Given no recurrence of the slab cost headwinds, as well as ramp up of volumes and improved sales mix towards high added value, we expect an improvement in Calvert’s EBITDA contribution in 2016.

As you know, we are planning to optimize our downstream footprint in NAFTA and barring details on this one, we have signed a new CLA. Europe, as you know, we have successfully optimized our industrial footprint, a process of transformation continues and we have identified significant further savings to be generated in 2016.

Moving to the ACIS division, in South Africa there are two positive developments that will support results in 2016. The first is that the government is implementing in import tariffs. Second is that we are renegotiating the terms of our iron ore supply agreement with Kumba.

Also expects benefit from coke and PCI upgrades in Ukraine, benefits to accrue in 2016. The Mining segment will reduce costs further in 2016, driven by operational improvements in Canada and the reduced scope of Liberia. Finally, we will be reducing corporate cost in 2016.

Overall, I’m confident in the actions we are taking to improve results, that these that expected structural gains more than offset headwinds in 2016 of lower iron ore prices and increased contract margins, whether with some of the market development such as foreign exchange, import tariffs, these actions will support EBITDA in 2016.

Moving to the theme of improving cash conversion of the business and net debt levels, since 2012 we have reduced the cash requirements of the business by $2.5 billion. As a result, despite the cyclically low level of EBITDA, we are still on course to generate positive free cash flow in 2015.

As we move forward, the cash required by the business is expected to decline further. CapEx will decline in 2016. Cash taxes will be lower and cash interest will decline by $150 million. Together with the suspension of the dividend for the financial year 2015, we therefore see cash requirements declining in 2016 by $1 billion.

These actions and developments are expected to ensure that the company continues to generate positive free cash, reduce net debt and maintain a strong liquidity and as a result, the EBTIDA free cash flow breakeven has been reduced to $9 billion.

With this, I hand over to Adit, who will discuss the third quarter 2015 financial results and guidance in more detail..

Thank you. Good afternoon and good morning to everybody. I’m starting on Slide 11, where we - sorry, I’m starting on Slide 11, where we show the EBITDA reduction in the second quarter of $1.399 million to $1.351 million in the third quarter of 2015.

This represents a decline of 3.4% during the period, reflecting relatively weaker steel pricing and seasonally lower volume offset by improved Mining business performance.

In steel, the negative contribution from seasonally lower shipment volumes in Europe was partially offset by improved cost performance in Europe and NAFTA, and an improved contribution from Calvert. In Mining, despite a decline in prices, EBITDA increased due to the improved mix and cost performance.

Moving along the bridge, we can see a negative $44 million impact from others, this largely represents translation loses following the strengthening of the U.S. dollar. Moving to slide 12, our P& L bridge from EBITDA to net loss. We’ll focus on the chart in the upper half of the slide, which shows the bridge for this quarter.

During third quarter we booked an impairment charge of $27 million relating to the closure of Vereeniging Meltshop in South Africa. During the third quarter, we also booked exceptional charges totaling $527 million. This includes $27 million of retrenchment costs in South Africa and $0.5 billion related to write down of inventory.

As we follow IFRS standards, we’re required to write down the value of inventory to lower our cost for market value. Given the rapid decline of prices following aggressively priced inputs, the write-down is significant and therefore classified as exceptional, so as not to distort from the true operating performance during the quarter.

Moving to income/loss from investments associates and joint ventures, in the third quarter, our share of income was $30 million as compared with an income of $125 million in the previous quarter. Third quarter income was positively impacted by income generated from the share swap in Gerdau, Brazil, offset by weaker performance from Chinese investees.

Second quarter income was higher as it also included annual dividends from Erdemir. Net interest remained stable in the third quarter as compared to the second quarter. Foreign exchange and other net financing costs in the third quarter was $409 million, as compared to $73 million in second quarter of 2015.

This includes a foreign exchange loss of $170 million, mainly on account of a 22% appreciation of the U.S. dollar against the Brazilian real and 31% tenge devaluation. This is in line with ForEx model and sensitivities though exchange rate movements that we provided at previous results.

Taxes and non-controlling interests amounted to a negative $34 million, as a result overall we reported a net loss of $711 million, but this is fully explained by the exceptional charge and non-cash ForEx impacts. Next, turning to Slide 13, we turn to the waterfall taking us from EBITDA to free cash flow.

During the quarter we invested $0.1 billion in operating working capital. This is a normal seasonal movement and more than reverse in the next quarter. The third bar shows the combined impact of net financial costs, tax expenses and other items related to the prepayment of liabilities totaling $0.7 billion.

Cash flow from operations are $473 million, combined with CapEx of $684 million, resulted in negative free cash flow of this quarter of $211 million. Turning to Slide 14, we show the bridge for the change in our net debt from the second quarter to third quarter.

The main components of the debt movement during the quarter was a negative free cash flow as described earlier, there was a small M&A inflow due to the proceeds from Gerdau share swap, as well as sale of tangible assets, offset by the final installment for Ostrava acquired back in 2009.

Our dividends of $21 million were also paid to minorities and foreign exchange had a negative impact of $9 million. The combined result of these movements, net debt increased during third quarter to end the period at $16.8 billion. Finally, on Slide 15, let me now talk about our guidance and targets for this year.

As all of you are aware, operating conditions have deteriorated in recent months, both in terms of international steel price environment, which has been driven by unsustainably low export prices from China and order volume as customers adopt a wait-and-see mindset.

We now expect 2015 steel shipment volumes to be slightly higher than 2014, as a result, the company now expects 2015 EBITDA of $5.2 billion to $5.4 billion. Full year 2015 CapEx is expected to be approximately $2.8 billion, down from our previous guidance of $3 billion.

As I mentioned earlier, our net interest expense for the year will be slightly lower than our previous guidance at approximately $1.3 billion. Finally, we continue to expect positive free cash flow and end the year with net debt below $15.8 billion. This concludes our presentation and we’re happy to answer your questions..

Great. Thank you. So we’re ready to start the Q&A session now. We have a queue already, so we will take the first question from Mike Shillaker at Credit Suisse, please..

Good morning. So thank you, Daniel, for taking my question. So I’ve got two questions if I can. On the first question, I think, Aditya, you said about one or two years ago that about 30% of the business was making about 80% of the profits.

If you now look at the current spot market, and just assuming that that stays stable for some time to come, how much of the business now is actually non-viable in the current environment? Are you sure that $1 billion - I mean, it’s great that you are taking remedial actions that you’re taking, but is the $1 billion actually going to be enough? And I know that everyone says that Chinese exports are non-sustainable, but ultimately what actually gives, because they are unsustainable for the global market, but that doesn’t necessarily mean to say that Chinese are going to cut output and cut exports.

So looking forward, is it enough what you’re doing and what do you think the end game is in terms of who actually ends up having to close capacity, will it be the Chinese or does it happen outside of China, is question number one.

Question number two, just going to Slide 8, which looks at your various elements of the $1 billion versus some of the headwinds, can you give us a little bit more on the timing of the $1 billion, because I guess that doesn’t all start on Jan 1.

So it’s going to be spread through the year in terms of a run rate basis? And can you then just talk a little bit about the contracts, which I guess is European contracts to go in here as well, which I guess we’ll get negotiated down.

Can you give us a little bit in terms of the actual magnitude of the size, of volume, of contracts in Europe and the US; and the magnitude to some extent, which you were expecting those contracts to be lower? Thank you..

Okay, Michael. They were few questions, not two; and a lot of questions in between. But I’m going to try and attempt to answer all of them. So let’s start with the sustainability of our operations, because that’s an important subject. Our operations in the last few years have been improved, performance has improved.

We’ve restructured non-profitable facilities. We have exited businesses, which we believe are not viable in the medium to long run. So if you look at the company today, in Europe, we continue to make good progress in terms of transformation gains, the Mining business has had a dramatic program of reducing costs from its business.

We’re actually ahead of plan. And Simon I’m sure will speak later about it, but he intends to make even more progress in Q4, as well as next year. So we’re in good shape in those two markets. The area that we have been focused on for the last 12 months and not just today has been our Americas footprint.

We talked a lot about the fact that we need to optimize our downstream business in the US, but we still make money in NAFTA in spite of these very difficult conditions. We have very good asset base at Dofasco and Calvert. And as we improve our US operations, we will be sustainable there.

In terms of the ACIS operations, clearly there is a lot of work ahead of us, but we have made good progress.

If you look at South Africa, there are a number of announcements we made this morning, including creating a level playing field in terms of trade, 10% tariff protection, anti-dumping duties and new raw material contracts which itself saves $10 on 6.25 million tonnes et cetera, et cetera.

In the CIS, we had a tenge devaluation in September and we continue to make progress in our Ukrainian operations. So when you look at these businesses in the market context, we are sustainable.

If we look at Q4, we expect to be free cash flow positive, even though overall volumes in Q4 are significantly lower than the run rate of 2015 as well as our expected run rate of 2016.

So what does a $1 billion do? The $1 billion adds to the sustainability of our operations and is really targeted at the areas where we see further opportunity, again it’s the same areas that I just addressed, Americas, ACIS being the primary drivers followed by continuing gains in Europe, as well as in our Mining business.

In terms of timing, this is not a run rate EBITDA at the end of 2016. This is the structural improvement in 2016 versus 2015. We expect a third of the $1 billion to impact first-half EBITDA and the remaining two-thirds roughly to impact the second-half.

The full benefit of the structural improvement is not only in 2016, some of it runs into 2017 and 2018, the U.S. AOP program is a good example. In terms of China sustainability, so the way I think about it in a nutshell is the following. The company’s strategy is intact. We have a basis of being sustainable.

We are going to be free cash flow positive this year, free cash flow positive next year. We’re making improvements to our business. That’s in an environment where we don’t see Chinese prices being sustainable.

Why? If you look at the level of profitability, Sesa announced that the Chinese steel industry lost about $8 billion in the nine months of this year, which is $35 a tonne, and Q4 pricing is even lower. You multiply that by the tonnages in China, that’s quite a staggering amount. So we don’t think that’s sustainable in the medium term.

But nevertheless, we are focused on enacting - create legislation to ensure that we have a level playing field in all of these markets. In terms of contract, I’ll talk about Europe and then I’ll hand it over to Lou, he can talk about the U.S. Europe is about 7 million tonnes out of 12 million tonnes of contract. Prices adjust to raw materials.

And then therefore I expect in Europe to have similar margins in 2016 compared to 2015 in terms of automotive. You must recognize that we have a very strong franchise. We continue to make progress in improving our mix. We continue to promote third generation steels, which also contributes to protecting this margin..

So turning to the contract issue in North America, maybe a couple of points, first I think all negotiations are always driven by multiple factors.

I think increasingly now because of the pressures on environmental regulations and fuel economy regulations, the technology factor and what support a supplier can give to the OEMs on technology is becoming an increasingly important factor. I think that plays into one of our strengths.

Secondly, the current contract price always sets a baseline, if you will, and these contracts frankly are a little bit sticky whatever direction they are moving in. And then finally, the spot environment clearly is also an important factor. So just those contracts is not only driven by the spot price environment.

The second point I’ll make as context is that, while in fact a little bit more than half of our contracts do run on a calendar year basis, we have multiple periods where we’re negotiating these contracts. We have a little bit of experience with the softer market of this year in terms of negotiating.

And I would say to-date, certainly the spot environment does affect the outcomes here, but I think we’ve had good success in making the argument that the current - particularly in the current spot levels are not sustainable and shouldn’t be used as a baseline for these sorts of contracts.

So that we’re seeing to date, I think, substantially less than the spot price movement in terms of the readjustment in these contracts..

Okay. Alright, thanks for the time. That’s sounds a rational behavior. It ultimately comes back to the market. Thank you..

Thanks, Mike. So, taking the next question, please, from Alessandro at Berenberg..

Hi, good afternoon, everybody. I just have two questions. The first one is related to the analyze run rate to EBITDA, that you’re using as kind of benchmark on top of which to add this $1 billion, analyze EBITDA into 2016.

Is there any kind of confidence that Q4 2015 EBITDA can actually be the trough? Or do you think that might be further downside into Q1 2016 considering that most of the weakness of steel prices will be reflected into next quarter. If not, if you can actually highlight a little bit the pillars of your perception.

The second one is related the US-European anti-dumping. Just will I do get an update on the European space, because it seems to be significantly lagging behind which is basically only on the cold rolled. And I was wondering whether considering that in U.S.

they’re already pushing up in terms of counter [indiscernible], if there might be a positive impact on the speed of implementation of cold rolled in the European space further other actions probably in whole tool-colts [ph] and galvanized materials? Thank you..

Thank you. In terms of Q4 being a trough, I would point to a number of negative factors impacting Q4 results. Clearly week volumes, this is being held by destocking because customers are adopting a wait-and-see approach that typically happens in a falling market. And also weak prices, as prices are trending down in Q4 versus Q3.

I talked about earlier, how the level of profitability in China, which is already minus $35 a tonne, is getting further exacerbated into Q4 result. In terms of is it a trough or not, I think when we look out into 2016, clearly we’re seeing a normal seasonal recovery of shipments.

We always see first-half being stronger than the second half to the extent that there is a re-stock that would further support the business and we briefly talked about all the structural improvements the business is making and that should also support results in the first-half of 2016 and 2016 overall.

In terms of European trade protection measures, so if you just look at what has happened in trade, you see that in the U.S. the surge in imports of Chinese steel, which was impacting pricing was very, very acute in the first-half of this year. And therefore the US steel industry reacted appropriately. In Europe, that impact is more a Q3 event.

So we see a significant surge in Q3 where imports are up about 40% in Europe and these imports are inappropriately priced and therefore right now you’re seeing much more action that is occurring at Brussels and the trade associations that all steel companies in Europe are part of such as Eurofer are acting.

So I do expect there to be more progress in Europe than what you have seen in the last nine months..

Aditya, just going back to the first question, I guess, that there are signs of destocking ongoing in the U.S. and European space, and also indication that their import is declining.

If we assume that demand, underlying demand, is to be quite robust into Q4, will remain relatively stable into Q1, in terms of potential upside to utilization rate, do you think that into Q1 a likely increase in utilization rates could be able to offset the current price weakness?.

So, I appreciate the question. I think we’re getting very specific into what Q1 may look like. I think it’s very early to talk about Q1. Normally, we provide you with an annual framework in February. And so we are sticking to that.

But since markets have been quite volatile and there have been significant changes, we thought we would talk to you today about what are the key structural changes we’re making to our business, 2015 versus 2016, both EBITDA and cash.

In terms of just the level of volumes, if you were to look at our guidance for 2015 Q4, which implies slightly lower shipments than Q3, and you were to compare that with the first-half of 2015, you would see an annualized rate which is 4 million tonnes less.

And that’s very significant, because as you know, we’re a fixed cost heavy business and the contribution per tonne is roughly $200. So that’s a significant uplift that could occur compared to where Q4 is. I think you alluded to the fact which we buy into and which we agree with, and we have briefly mention that in the presentation.

We see that real demand is still good. I mean, automotive is hitting records and in NAFTA we see 8% growth. In Europe year-to-date, we’re still forecasting real demand growth in the U.S. as well as in Europe next year and positive apparent steel consumption growth.

So, yes, I do agree with you that volume impact could be quite significant into 2016 versus what we’re seeing in the fourth quarter of 2015..

Thanks for this. I mean, just a little question on the automotive contracts. Do you see any major risks related to the Volkswagen scandal in terms of volumes and potential downside even though you just mentioned that probably much will remain the same in 2016? Thank you..

Go ahead, Lou..

No, I don’t think we see any significant risk to the automotive values from the VW situation. So I think the markets in our - particular in our core market, so they’re actually the bright spots, North America and now increasingly Europe for global automotive sales. And we think that’s really demand driven and that momentum will continue..

Thank you very much. Thank you..

Thanks, Alessandro. So we’ll move to the next question from Roger at J.P. Morgan..

Hi, good afternoon, gentlemen. Thanks for taking my questions. First question is just on the $1 billion EBITDA lift that you alluded to for next year.

So just - can you break it down a little bit more clearly for us? How much of that uplift is cost savings and how much is top-line important sort of, A, through price important, but you’re assuming and B, through mix improvement? And then to the extent that you are making cost savings, to what extent, how you assume that you’re going to have to pass those savings on to your customers? And then, also in relation to this, you mentioned in response to question from Alessandro that there will be a volume impact relative to the sort of seasonally weak Q4.

I mean, is that an impact that we need to factor in over and above this guidance or how where does that sort of come into the forming issue like? And then, the second question is just around your balance sheet, so if we were to assume that the steel market deteriorates further in 2016.

What level of net debt to EBITDA would you be willing to tolerate before considering having to sort of raise new capital or selling assets or some more structural sort of responses? Thanks very much..

Sure, Roger. So if you look at the structural improvements that we’ve outlined in our presentation. I think the most important takeaways that these are structural improvements, so the ability of our competition to replicate that, we think is actually very limited.

What we have not talked about is understood is that we continue to make progress in terms of improving the consumption factors in our business, further improving variable costs, sharing knowledge, improving maintenance practices. But as we have seen in the past that a lot of that progress that we’ve made the competition can do the same.

A lot of these are unique to our footprint or to our business, and therefore we believe are structural improvements. Most of them are cost related. I would say more than 75% and maybe there is 20%, 25% of revenue. And just to walk you through them what was that breakdown is.

So in Americas, you see asset optimization, that’s the cost plan, Brazil value plan is a bit of both, in terms of improving the domestic parity price premium in Brazil, which has shrunk, because steel consumption has been very negative this year.

But when we look at Calvert ramp up, that will improve both costs at Calvert and as the markets recover that will provide volume recovery. ACIS, that’s primarily all cost. New iron ore contractings, low raw material, coke-PCI upgrade is all cost. South Africa tariff provides some revenue protection, because the domestic price level will increase.

Transformation gains continuing in Europe that is all cost, we see the progress we have made this year, when Q3 EBITDA is still higher than Q3 last year in dollar terms, and this is not because of the price environment, this is because we have a more efficient business, and we see mining.

Mining is all cost related, we’re actually thinking that the headwind could be price for us. So that’s how I look at it, I don’t know if I provided enough color, but at this point in time, I think that’s appropriate, so 75% is largely cost. I think the competition find it very difficult to replicate this.

In terms of volume, most of this apart from the Calvert ramp up, does not include the volume pick up. So I would add the volume pick up or shipment pickup in 2016 versus Q4 2015 as a positive headwind. We spoke about the negative headwinds, iron ore price risk and contract margin.

In terms of the balance sheet, I think we’re demonstrating that we are free cash flow positive in 2015. Into 2016, there are two key changes, one that EBITDA will improve structurally $1 billion, plus we are also reducing the cash cost of our business by $1 billion.

So combined, those two factors are quite significant, and as a result, we expect to continue to delever the balance sheet and make progress in terms of net debt to EBITDA coverage ratios.

And we also are continuing to look at optimizing our portfolio, we’ve been quite successful over the last few years, we have generated $5.2 billion by optimizing our portfolio and those actions also continue. I think if you put everything I said in context, I think it’s quite obvious that we don’t need to raise capital..

Okay.

And just, so that I’m clear, so none of these kind of measures that you are talking assume an improvement in pricing from here?.

Yes, that’s right..

Yes, okay. Thank you..

Thanks, Roger. So we’ll take next question please from Carsten at UBS..

Thank you very much. I want to stick to the two questions. The first one is on ACIS. We have seen now for four consecutive years an underperforming of this business. When would you actually consider strategic steps, because you do a lot here, but it seems like every time you do one step forward there, after something happening and you do two steps back.

When would you actually say enough is enough, and we could actually reconsider ACIS? First question. Second question, revaluation of inventories, you put this below the EBITDA line and I would guess that part of it was still reduced costs going forward.

How much will that be?.

Yes, it is true that this quarter has not been particularly good for ACIS, because we faced a few issues, more particularly besides the continues weakening of the price involvement particularly in Black Sea area, where we operate.

We have also seen low demand in CIS region, and of course intense competition from China and Russia, particularly, backed by the weaker Russian ruble. So our core markets that is CIS, Middle East and Africa have not showed big growth rates also.

So that has been our, let say, draw back up this quarter, but we have a number of actions in hand as has been brought out in this presentation, also that we are looking at our cost very carefully. We do have a good cost performance coming through and we have more actions in hand, stable operations should deliver and strengthen those efforts.

We do have trade actions coming up in South Africa, where we are making good progress in our engagement with the government, as well as the support we are getting there. Then we have some energy optimization initiatives in our CIS region.

So if I look at all of them, I’m very hopeful that we will contribute strongly to the $1 billion value plan, which has been already spoken to..

Okay. Thank you, Davinder.

In terms of the charge that we have taken in terms of our inventories, it doesn’t have an impact on operating income, because what we do is - or EBITDA, excuse me, because what we do is, we revalue the inventory at markets, so it does not create or generate an EDITDA into Q4, so I’m not sure, if I have answered your question..

Usually what happen is, you take down you inventory, so the value of the inventory, it benefits your COGS going forward.

So the question for me is, was it just a third quarter event and all your inventories, which you revalued will be consumed in the third quarter or will that spread over the fourth and first quarter, which will actually lower your COGS and will then be EBITDA relevant?.

Yes. So what we have done is, we’ve looked at the inventory and all the inventory which is higher than market is revalued at market price, but does not generate EBITDA into Q4.

To the extent, the we produce into Q4 at lower than market that generates EBITDA and to the extent that we have existing inventory, which is lower than market that generates EBITDA. So it doesn’t generate operating - so the charge that we have taken IFRS accounting standards and because the amount is so large, we have treated as exceptional..

Okay. Thank you..

Thanks, Carsten. So we’ll move onto the next question please from Seth at Jefferies..

Good afternoon. This is Seth Rosenfeld at Jefferies. Just a couple of questions looking at your Brazilian operations where we talk about significant earnings contraction, despite a pretty significant move in FX, which you may expect, it might help stabilize your margins.

Can you just walk us through the current market conditions in Brazil to what extent you might be able to offset weak domestic demand with exports, and then perhaps if you’re seeing these domestic cost inflation beginning to eat into the benefit of the FX tailwind? Also wondering if you can give a bit more detail on the newly announced kind of restructuring or cost cutting programs there and the timeline or the scale of those measures? Thank you..

Yes. Currently, we are in a sustained weak market environment, weak macro environment in Brazil, I’m sure everybody is aware of that and as we talked before, it’s compounded by a very difficult political environment, very challenging political environment.

So the response is needed to kind of at political level to help turn the economy around everything that forthcoming. So I think the depth of this has been a bit surprising to people, it’s kicked in a lot in the second half and that’s certainly a major driver behind our results.

But as you pointed out, I think there is also some important exchange rate effects and those will feed into part of this value plan that we are talking about. So we’ve seen, in terms of exchange rate, both a much weaker real than we had expected and I think also tremendous volatility.

And as a result and this is what we see in Q3, and I think this will persist into Q4 that actually in dollar terms, the Brazilian prices are actually below the landed in many product categories, particularly in our flat rolled side, are below the landed price of imports. So, that’s clearly not a sustainable situation.

The timing of how quickly you can adjust to that, particularly when the exchange rates are quite volatile and even swinging 4.2 to 3.9 et cetera, in the space of a week, that makes it difficult to catch up there.

But I think we’re seeing already in the fourth quarter announcements of price changes that will take us back at least towards a more traditional kind of 10% premium over landed import prices, which is supported by the better local customer service, the lack of need to speculate and a long supply chain, et cetera.

And that’s the norm, I think that’s an important part of what we see as an structural improvement, affecting basically the entire industry in Brazil for next year. So I think that’s part of both the downturn that we’re seeing now and something that we think will ride itself going forward.

We do see in terms of the weakness in the domestic market and we do see the ability to offset that with exports.

Basically, we’re running our operation in Tubarao at 100% of production are even pushing to create some record levels of production there, because we haven’t given the location of that plant, given its cost position, the ability to easily export switching domestic sales to export markets. So that’s happening in the flat rolled side.

We keep the benefits of high operating rates, and therefore, good absorption of fixed costs with the high operating rate. But I will say that the export market and the products that we’re able to ship from there, particularly semi-finished slabs, that’s a very challenging market.

So these aren’t the most profitable exports for us, but they do keep the plant running well.

On long side, the locations of the facilities, don’t facilitate exports as easily, so whereas we export currently about 60% of the flat rolled production out of Tubarao, on the long product side, it’s only about 15% that’s going typically to regional markets, the silver lining and that smaller numbers that those markets tend to be much more profitable than the global markets that Tubarao have to ship to.

But on the long products side, we have had to make some adjustments in our operations, we have two very low cost competitive plants that we’re running flat out, the other two plants on the long side, we’ve cut back a bit on their production, but we’ve also been able to move the cost appropriately.

You’re right that there is some inflation in the cost base there. But I think we still have a lot of room to offset that and that’s important part of the value plan. I don’t want to give details of those activities, because again that there is competitive confidentiality aspects to that, but I think we’re confident we can offset that.

And of course, the stronger that inflation gets the more pressure there is on the exchange rate as well..

Just on the value plan, is there a timeline during, which we should expect more detail on exactly what’s happening or if it’s early for now.

Could you comment on if the focus will be more on the operating cost side, or if there should be any change in the footprint expected?.

I think just for Brazil, if you’re more likely - hopefully you see it in the results as opposed to discussion of individual initiatives. I don’t think, there’s any important footprint initiative for our company that we’re pursuing in Brazil.

Again, I think we’re always digital and that’s why we don’t want to assume it, but we have been more profitable consistently than other producers in Brazil, and you are starting to see, I think, some important announcements by others about footprint changes, but we don’t foresee that, in our case.

I will say the revenue side of this, I think there are already announcements we’ve made and others have made about price increases again reestablish that very acceptable and normal premium to import prices, those are being implemented more or less as we speak.

So I think those are things that, assuming they stick, we’ll see already in the very beginning of next year..

Thank you very much..

Thanks, Seth. So we’ll take the next question please from Mike at Citibank..

Yes. It’s Mike Flitton here. Thanks for taking my question. I just have one left, just on free cash flow number, looking to lower that by $1 billion.

I’m just wondering if you can give us bit of a breakdown on that, obviously you’ve mentioned the imports and where they come from in terms of interest costs and CapEx, but if you could give us a bit of a breakdown.

I mean, in terms of CapEx, you are already at $2.8 billion, I think, remember that was a guide for a sort of sustainable through cycle number you gave previously. So I’m wondering how much you’re able to actually cut from that and still not impact your operations? Thank you..

Okay. Thank you, Mike. So in terms of CapEx, if you go through our results, you will see that our depreciation charge is also $700 million down year-on-year, and it’s down because - primarily, because of ForEx impacts. So if you look at our European business, the euro has come down.

If you look at the CIS business, Brazilian business, Canadian business as well. So, if you just look at where we operate, a lot of these businesses have been in a deflationary currency environment bringing down CapEx cost. Number two, we also see that the cost of capital equipment is declining and so we’re taking advantage of that.

So the breakeven point for maintaining assets has actually declined significantly, primarily driven by ForEx and lower capital costs and I would guide you towards the number of $2.2 billion to $2 billion on that in terms of maintaining our assets. You see that we continue to produce well, we’re increasing output.

If you look at our result compared to the industry or the market, we compare quite favorably and we continue to make progress in terms of automotive franchise.

Your question on $1 billion cash flow, how do we reduce by $1 billion? Our cash, is that the question?.

No, it’s just - obviously you accounted for about $600 million of difference there in terms of $2.8 billion to $2.2 billion.

The rest of the $400 million, is that broadly split between interest and tax?.

Yes. So that’s a good question. So I’m not guiding towards CapEx of $2.2 billion for next year, I was just responding to the question, what is your level of CapEx you could go down to in terms of maintaining our asset base. So, the $1 billion of next year is CapEx, so some of it is CapEx.

I would take, compared to this year, $300 million to $400 million as CapEx. We have cash interest, which is down. We have MCM, which is maturing in January, and then along with that and lower cost of average borrowings, that’s about $150 million. We expect to have lower cash taxes.

And then we’ve also proposed to suspend our dividend, which is another $360 million. So if you add up all of those you get $1 billion..

Great. Thank you very much..

Sure..

Thanks. We will take the next question from Ioannis at RBC, please..

Yes, hi. Two quick questions from me. First, in terms of the medium term net debt guidance, you don’t - you didn’t reiterate it in your results today.

Could you indicate if $15 billion still the target? And second question, in terms iron and steel demand in the U.S., you seem to be indicating down 6% year-on-year versus the oil field association that estimate down 3%.

Could you explain the differential there?.

Yes. So I’ll talk about our debt targets and then Lou, can address the U.S. question. In terms of our debt targets, you’re right, we haven’t explicitly mentioned the $15 billion target, but I wouldn’t read into that. I think the whole release is about how we intend to further delever the balance sheet.

How we intend to be free cash flow positive in 2015 and positive in 2016.

And so I would just focus on the fact that ArcelorMittal intends to delever beyond this target and we do not want to put out a new target out there, but just highlight the fact that we have good plans in terms of how we can strengthen the balance sheet even in these unsustainable market conditions.

Lou?.

Yes, I think, we have revised our view of apparent steel consumption for this year down to the 6%, to be honest, I don’t really want to comment on the WSA numbers.

I think we are seeing a de-stock in the fourth quarter, we haven’t changed our view of the real steel consumption, clearly part of the apparent consumption is driven by a drop in oil country markets that accounts for about a third of that 6% that we’re seeing.

But I think the major change right now is we are seeing customers, particularly, spot buyers would be very reluctant to restock their inventories. I think, as Aditya mentioned, this is a standard behavior as the market is falling, people don’t want be buying if they don’t have to and find out that two weeks later, the prices go up a little bit.

So I think the real demand is driving things. We certainly, we don’t want to give a number for next year, but we see apparent consumption being positive next year.

So that gives you some idea that’s kind of minimum swing we’d be looking for, but we think people as the pricing does bottom out, people get a sense of that, that people will be coming back into the market..

Okay. Thank you..

Thanks. We will take the next question, please from Rochus at Kepler Cheuvreux..

Yes. Thanks for taking the question. Just a follow-up point on this previous question on net financial debt.

You comment on how to stay free cash flow positive or at least breakeven, is that really where you feel confident in a sense that you run with a flat net financial debts sort of 2016 in pretty challenging environment, and obviously you shouldn’t bet too much on the help from the market.

So would that be a sufficient trend for your business, or is there any other elements, which significantly help you to progress in direction of $15 billion, such as the asset depository.

Is that anything which could contribute materially here? And that context, context, what would be the pre-condition for resuming the dividend? Is this kind of based on kind of a minimum EBITDA? Is it big based on reaching the $15 billion net financial debt target? And finally, what is required to happen that you would take the next steps in terms of improving the business and getting the EBITDA breakeven - even lower, considering maybe you’ll see that trade action in U.S., but maybe Europe stays tough until the measures are taking effect, it could be mid-2016 until things are getting better.

What needs to happen for you to go to the next level in terms of restructuring measures?.

Okay, thank you. In terms of your question on net financial debt. We won’t be satisfied just treading water. We want to make progress in terms of deleveraging.

And we plan to make progress in 2015 and continue that progress in 2016, and that is why we’ve tried to outline the actions underpinning that the structural EBITDA improvement, lowering the cash breakeven of the company and suspending the dividend. In terms of asset optimization, we continue to remain focused on that. We have a decent track record.

What we want to ensure every time we look at that and generate ideas is that we get appropriate value. So we don’t want to identify where the asset is, because that makes it a buyer’s market versus a seller’s market. And in these conditions it probably is not the most expedient way to or most value creating way to raise the cash.

So we are conscious of ensuring that we generate value as we go through our portfolio optimization.

In terms of restoring the dividend, we have suspended the 2015 dividend payment, we would review that in the third quarter, because in the third quarter of next year, we would have clarity on where we are in terms of the earnings profile as well as in terms of deleveraging objectives.

What we have been consistent about in terms of your last question was what needs to happen is, we need to be on a path of deleveraging the balance sheet, strengthen our credit metrics, and then we would be using discretionary free cash flow to either increase CapEx or to restart dividend or if we don’t like those two options to further delever.

So that point in time, I think we can provide you more clarity as to what we would be doing..

Great. Thanks, Rochus. So we’ll move to the next question from Tony at Cowen, please..

Thanks very much, gentlemen. Thanks for taking my question. I just wanted to pursue your comments about optimizing the downstream footprint in the U.S., we’re seeing a lot of other companies announce initiatives to attack redundant capacity in cost and inefficiencies in the upstream.

And I was wondering along these lines, can you say definitively that there is no need to rationalize your U.S. upstream operations, is my first question..

Yes, I think, I would say, definitively is a strong term, I don’t know if we’re talking for eternity or whatever.

But I think we see major opportunities for the business in terms of rationalizing the downstream footprint, I think we have a solid market position, we’ve been able to maintain our share, about a third of our production goes into just the automotive alone, not to mention other high-value added attractive market.

So I think we feel comfortable and confident about the upstream footprint that we have, we see the opportunities primarily in the downstream. It doesn’t mean that based on markets up and down and inventory cycles and so on that you might not temporarily idle a furnace, we have one furnace idled currently.

But in terms of structural closure and exiting business that’s certainly not something in our expectations are that we’re thinking about or discussing currently..

All right, Lou. And this is probably another one for you, if I may. It’s about Brazil and I see that shipments were up sharply sequentially in spite of the weak domestic demand trends as you guys talked about.

I assume this is primarily due to higher slab demand from Calvert and it must be a tough balance for you, because while you’re trying to optimize your most competitive plants in the U.S., you’re also in a way contributing to the current over supply.

How do you balance that strategically?.

I’m not sure, I understand how we’re contributing to over-supply. I mean….

So maybe just to answer the question, Calvert has not really increased shipments in 2015 versus 2014. So the increase that you see exports of slabs to third-parties.

And if you know in June of 2014 where we started the third furnace, we have a very strong cost competitive position in Tubarao and therefore we do generate value by selling those slabs in the export market..

And are those primarily, Aditya, to the U.S.

or Europe or both?.

So I don’t want to - I mean, they are to a broad range of customers. But your question was on Calvert and on Calvert, we have not really increased shipments year-on-year..

Okay. Thank you very much, gentlemen..

Thanks, Tony. So we’ll take the next question please from Tom at Redburn.

Tom, are you there?.

…contribute to achieving the $1 billion of net debt reduction in Q4.

It looked like at the end of the first half, you had about $500 million of spare capacity in that facility, and where did it stand at Q3 and where do you see that going towards the year-end?.

Sorry, Tom. We missed the start of your question.

Can you just repeat it again, please?.

Okay, sorry. So the question was on the trade sales receivables program and how much you will utilize that to help reduce Q4 net debt by about $1 billion that you’re talking about. And at the end of the first half, it look like you had about $500 million of spare capacity in that facility.

Well, how much is our facility utilized as of Q3 and where do you see it going into year end?.

So I can get you the specific numbers, but TSR overall down year-on-year. So it securitizes our receivables and as value of those receivables are declined, the TSR value is down and then the cash outflow in terms of overall capital..

Yes, but I suppose my question was more about the spare capacity that you have in that facility to take a more receivables off balance sheet and therefore reduce your consolidated working capital figure and that will help your net debt at the year-end?.

Yes, no, I understand your question. Overall TSR is down year-on-year, we can get you specifics that TSR is down..

Okay, fine. Thanks very much..

Thank you..

Thanks. We’ll move to the next question please from Philip at ABN AMRO.

Yes, good afternoon. Thanks for taking my question. I have two left. I was wondering, regarding the covenants. Are there any material adjustments that are made to the net debt number or EBITDA, maybe also in relation to the one-offs and the write-downs? So, that’s my first question. So that’s also in relation to the covenants testing limits.

And my second one, and I apologize for starting about it again, but it’s follow-up question on the net debt, I was wondering if you’d be willing to give your thoughts on, yes, the level that you might be targeting.

I mean, I remember back in two years ago, you issued your $15 billion net debt target, but you also gave a framework, where you indicated that it is the target that you are comfortable with through the cycle, based on the belief that the trough EBITDA should be some $7.5 billion and you would target a net debt EBITDA of two times.

So, I was wondering, given that it looks like the market fundamentals have probably structurally changed, have your thoughts about that or view of that net debt figure changed as well materially?.

Thank you. In terms of the covenant, the covenant is 4.25 times, its tested twice a year, it’s - on our last 12 months reported EBITDA and on reported net debt, as you see on our earnings release. In terms of the net debt, look, I think maybe I’m repeating myself, but I’ll go through it once more.

What we’re trying to get across in these results announcement is that we’re making structural improvement to EBITDA, we’re reducing the cash breakeven and we want to continue to delever the balance sheet.

We have not announced target, but clearly, the focus is to continue to delever the balance sheet, as a result, we have also suspended 2015 dividend. And so that is the direction we’re going. And in terms of your question on what is the final level of net debt.

We have not had those discussions in that much of detail with the board to be able to announce it to you, but I would take away from our comments that clearly the focus is to go beyond the previous $15 billion medium term net debt target..

Okay. Thank you..

Thanks, Philip. So we’ll move to the next question from Philip Gibbs at KeyBanc, please..

Thank you. Just had a question on the Samarco disaster for Lou.

What impacts might that have on your, call it, procurement of material moving forward?.

Our operations in Brazil, and so far as we use iron ore, we have some scrap based operations, but in the long side we use primarily our own material from a mine called Andrade that’s located, I think it’s eight kilometers or something from one of our steel plant and Tubarao was basically supplied by Vale, if you know the facility, it’s not the main rail line going to that port, which is one of the major ports, but it’s not the only port but one of major ones for Vale and essentially they dump, where our facility kind of on the way to the port if you will.

So obviously it’s a terrible tragedy, but it’s not as a source of materials for our operations in Brazil..

Is it a source of material for your operations in Europe or NAFTA?.

Yes, we do have a business relationship with Samarco, I think it’s inappropriate to comment on the specific front on how we procure our iron ore, but we do have a business relationship with Samarco..

Okay. And then, just lastly if I could for Lou, you said - I think you said half of your contracts in NAFTA run on a calendar basis, but any help you could give me in terms of how much of your total business is contract versus spot on NAFTA? Thanks..

Yes, I think typically we’re, let’s say, 40% or so on an annual contract basis and then there is another, call it, 15% to 20% that would be some form of lagged index deal with the timing of the index being somewhat variable, in other words, one quarter some for happy year or semester that kind of thing..

Thank you..

Great, thanks. We are running quite sort of time, so we’ll move to the last question, which will take from Luc at Exane, please..

Hello, gentlemen. One precision maybe because the line was bad. I was wondering if you had commented that the Q1 could possibly be lower than Q4 because of lower prices et cetera, that would be my first question.

And second question related to contract margin squeeze, you’ve been a lot taking about the U.S., I’m wondering to what extent this could also be duplicated to Europe situation? Thank you..

So I think, I had answered these questions earlier, so I’ll be very brief. In terms of Q1, we did not provide a Q1 guidance, we’ve just talked about trends and we went through 2016 versus 2015, structural improvement, supported by improved volumes relative to where we are in Q4. And in terms of the contract business, we spoke about the U.S.

and we went through the U.S.

In terms of Europe, they are just based on the raw materials, the European market is growing, the automotive segment continues to grow in Europe and we are also benefited by that fact that we have strong products in terms of third generation steel, which also provide for a mix improvement within that segment, so we’re not expecting a significant deterioration into our 2016 results in terms of European auto..

Thank you..

There being no more questions. Thank you for participating in this call and looking forward to be talking to you in the next quarter. Thank you..