On February 5, 2016, we announced our Action 2020 plan, which represents a five-year strategic roadmap for each of our main business segments. Action 2020 is over and above our ongoing management gains plan and seeks to deliver real structural improvements unique to our business. It targets an improvement in structural Ebitda of $3 billion and to deliver annualised free cash flow in excess of $2 billion by 2020.
To put this into context in terms of where we are today, these numbers equate to generating Ebitda per tonne of steel produced in excess of $85, and increasing shipments to 90 million tonnes by 2020. In 2015, our Ebitda per tonne was $62, and we shipped just under 85 million tonnes of steel.
The plan is not dependant on an improvement in market conditions; our forecasts are based on current steel and raw material prices. Nor will it require capex – it is a series of internal actions to create value in each of our business segments.
Action 2020 outlines specific improvement targets for each of our operating segments and details what each segment plans to focus on in order for the group to meet its long-term profitability and cash flow targets. Each segment’s plan is based on its operating profile, market dynamics and opportunity set. We understand our geographical locations very well and the potential that exists to adapt and improve.
Click on image to open it in a new window
Some of the key segment initiatives included in the Action 2020 plan are:
- NAFTA: Our downstream footprint optimisation in the USA targets a minimum improvement of $250 million in operating results. We intend to continue to ramp up our AM/NS Calvert steel processing facility to full capacity during 2016 and 2017 which we anticipate will deliver a further $250 million improvement. Other projects are expected to boost the higher added value (HAV) product mix and generate further improvement.
- Europe: Our transformation plan involves the clustering of finishing sites to centralise certain activities and improve logistics and service, thereby removing substantial overhead. Together with an expected improvement in our product mix, with an increased proportion of HAV products, and volume gains, we are targeting a $1 billion improvement in operating results over the period.
- ACIS: We plan to continue our strategic focus on operational excellence to deliver the volumes that will leverage the new competitive cost base we have in CIS, following currency devaluations; in South Africa we will continue to implement our improved competitiveness plan and will benefit from a new long-term iron ore supply agreement.
- Brazil: Our value plan over the next five years targets an improvement in our sales mix as a result a recovery of higher margin domestic volumes.
We believe Action 2020 is unique to ArcelorMittal; not every company can deliver this kind of value creation plan through internal actions. The uniqueness of the plan comes from our size and scale – single site operations for example would not have the opportunity to replicate something like the European transformation plan or the US asset optimisation.
Action 2020 is the key to unlocking long-term improved performance from our company. Each segment has its own set of unique actions to contribute to this group-wide target but they are constructed upon an underlying philosophy of ensuring we maintain and grow market share based on an optimised asset base, grouping assets appropriately to ensure maximum operational efficiency and rigorously reducing and controlling costs across the board.
Lakshmi N MittalChairman and CEO