ArcelorMittal South Africa Annual Report 2009 Chairman and Chief Executive Officer’s report Johnson Njeke Chairman Nonkululeko Nyembezi-Heita Chief Executive Officer“The past year has tested the ability of the company to withstand the considerable vagaries of the steel market.” Dear Shareholders, The past year was not only one of the most challenging years since the Iscor unbundling in 2001, but also the most difficult period that many of us will have experienced in our professional careers. What started with problems in the financial sector sparked a chain reaction that spilled over into the global economy, resulting in considerable challenges for our company. The fundamental issue for ArcelorMittal South Africa was the substantial drop in steel demand and prices, further exacerbated by sharp destocking throughout the steel supply chain. The strong Rand/ USD exchange rate also hurt our financial performance on a number of fronts. At the bottom of the cycle, these combined factors resulted in a drop in apparent demand for steel products of almost 50%. Clearly this impacted the financial results for the year. Revenues dropped by 36% to R26 billion and a headline loss of R440 million was reported. While these numbers are disappointing particularly when compared with the record results of 2008 it is reassuring to the company and our stakeholders that we ended the difficult year with a strong rebound in the fourth quarter. Inventory levels are being rebuilt, customers have gradually resumed buying and prices are starting to inch upwards – albeit from low levels. Writing to you now, we can say with some conviction that we are through the worst. However, we must not mislead ourselves that there will be a swift return to the buoyant levels of growth that we had become accustomed to in recent years. Although the major economies in sub-Saharan Africa have now formally emerged from recession, the reality is that actual growth and growth forecasts for the coming year remain low. We cannot expect to return to anything like the precrisis levels anytime soon and it remains incumbent upon the company to be flexible in its operational strategies in the year ahead. Subsequent to the financial year-end on 5 February 2010, we received a letter from Sishen Iron Ore Company Limited (SIOC) informing us that it will no longer supply iron ore to ArcelorMittal South Africa from the Sishen iron ore mine under the terms of the supply agreement entered into in 2001. The letter alleges that since ArcelorMittal South Africa had not applied for the conversion of its 21.4% undivided share of the old order mining rights to the Sishen mine by 30 April 2009, the supply agreement had been wholly or partially terminated. ArcelorMittal South Africa disputes SIOC's assertions in this regard. These matters are addressed in more detail in note 39 in the financial statements. Icon key Making steel more sustainable Business issues Investing in people Enriching our communities