Arcelor’s profitability improved significantly in the first half of 2004, driven by strong contributions from the Long Carbon Steel and Distribution-Transformation-Trading sectors, particularly in the second quarter. Consolidated Group revenue was EUR 14,593 million, up 7.4% compared to the first six months of 2003 while operating result rose 66% to EUR 1,237 million. The increase in selling prices over the period has, on average at Group level, only compensated for much higher raw materials costs. The year-on-year improvement of results was therefore primarily due to Arcelor focusing on its core business, realizing synergies and operating its plants efficiently. Management aggressively pursued the implementation of its “Transformation” strategy, reducing debt, divesting non-core activities and expanding in key geographical areas through internal and external growth.

The successful EUR 1.17 billion capital increase completed by Arcelor in July 2004 will allow the Group to finance the development of its Brazilian interests, facilitate further acquisitions and maintain a strong financial profile

Net result more than doubled to EUR 865 million;
Strong cash generation reduced net financial debt – gearing down to
38%;
Good set of numbers expected for 2004.


Luxembourg, July 30, 2004 – The board of directors of Arcelor met on July 29, 2004 under the chairmanship of Joseph Kinsch. It reviewed the consolidated financial statements for the second quarter of 2004 and approved the Group consolidated financial statements for the first half of 2004.
At June 30, 2004, consolidated net result, group share, was EUR865 million, versus EUR 358 million for the first half of 2003.
At EUR 14,593 million for the first half of 2004 compared to EUR13,582 million for the same period last year, consolidated revenue increased 7.4% (+10.6% on a comparable basis). This evolution reflects the overall increase of steel prices, with the rise being less pronounced in the Flat Carbon Steel sector, and year-on-year changes in the scope of consolidation. The growth strategy of the Long Carbon Steel sector led to acquisitions in Argentina and Italy (integration of Acindar in May 2004 and Travi e Profilati di Pallanzeno
in July 2003) while Arcelor’s carbon tubes business, considered as non-core, exited the perimeter of the Distribution-Transformation-Trading sector in early April 2004.
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Consolidated gross operating result amounted to EUR 1,779 million for the first half of 2004 versus EUR 1,276 million for the same period last year, or a 12.2% margin compared with 9.4% last year. It was negatively impacted (EUR45 million) by several non-recurring items (restructuring charges and capital gains on disposals).
Consolidated operating result amounted to EUR 1,237 million for the first half of 2004 versus EUR 745 million for the same period last year, which corresponds to a 8.5% margin versus a 5.5% margin respectively. The result no longer includes the amortisation of negative goodwill, which had contributed +EUR 49 million to the 2003 first half operating result.
After a financial result of EUR -134 million, a contribution from associates of
EUR 188 million (incl. EUR 85 million for CST and Acesita) and income tax of EUR 305 million, the consolidated net result, group share, increased 141%, to EUR 865 million versus EUR 358 million for the first half of 2003.

Net Financial Debt
Net financial debt decreased by EUR 937 million to EUR 3,527 million at the end of June 2004 versus EUR 4,464 million at 31 December 2003 and EUR 4,027 million at the end of March 2004. The net debt-to-equity ratio (including minority interests) decreased to 0.38 from 0.55 at the end of 2003 and 0.46 at the end of the first quarter of 2004.
Cash-flow from operations amounted to EUR 1,309 million over the first six months of 2004, reflecting higher margins and a tight control on working capital needs. Capital expenditure remained in line with depreciation. Free cash flow was used to pay EUR 223 million of dividends in May 2004 and to reimburse debt. Debt reduction was also
helped by the conversion of Arcelor’s O.C.E.A.N.E. 3% 2006 in the first quarter of 2004 (impact of EUR -277 million).

Prospects
Over the past six months, the global economy in general and steel markets in particular have been driven by sustained growth in North America and Asia, while Western European economies were lagging behind (which contrasted with good economic performances of Eastern European countries). These regions are not expected to show any particular weakness in the second part of the year, in terms of industrial production.
The Chinese GDP growth rate has started to reflect the political measures taken to cool down the economy but remains robust and should continue to drive favourably the steel industry.
Raw materials and logistics prices remain high with freight rates, coke, scrap and nickel prices on the rise again early July, after downward adjustments on international spot markets in the second quarter of 2004.
As announced by the Group, quarterly prices for flat carbon steel products will increase significantly in the third quarter in a move to offset rising costs and to adjust European prices to international levels. In the current business context, there may be room for further upward price adjustments in the fourth quarter of 2004.
Demand for long carbon steel products remains generally good. Prices either continue to increase or adjust depending on products. The average realised selling price should therefore stabilize for the sector over the coming months.
The order book for the Stainless Steel Sector (flat stainless steels) is full until the end of September and base prices will remain firm for the rest of the year. A decline in nickel prices in the fourth quarter, if it were to materialize, could however lead to wait-and see attitudes from European customers at year end.

Finally, the Distribution-Transformation-Trading sector will see its activity slowing down for seasonal reasons in the third quarter and will monitor its offer accordingly.
In the current business environment, Arcelor’s execution of its industrial, commercial and financial strategy should lead to good results for the year ending in December 2004.
Arcelor is the world's largest steel producer, with a turnover of 25.9 billion euros and shipments of 40.2 million tonnes of steel in 2003. Employing 98,000 employees at the end of 2003 in over 60 countries, the company is a major player in all its main markets: automotive, construction, household appliances and packaging as well as general industry. Arcelor places its commitment to sustainable development at the heart of its strategy and ambitions to become a benchmark for economic performance, labour relations and social responsibility in the world of steel.