investor pack Market Information JSE Top 40 index position: #22 Free float 41% Market cap $3.1bn Daily value traded $6.1m for past 12 months Annualised turnover 77% of total issued shares Major shareholders - LNM Group IDC Institutional - 50.01% (#2 global steel producer) 8.8% 41% South Africa 28% International 13% Good liquidity and high turnover 2 Company Profile 1928 – Iscor established as parastatal 1989 – Iscor privatised and listed on JSE 1994 – Start of major re-engineering program 2001 – Unbundling of mining division as Kumba Resources 2001 – LNM Holdings N.V. buys initial stake in Iscor 2002 – Iscor enters into BAA with LNM 2004 – LNM/Iscor merger approved; LNM holding goes over 50% 2004 – Name changed to Ispat Iscor Steel industry ranking - Africa #1 Global #29 Largest regional steel producer 3 Successful Restructuring History Major re-engineering - 1994-2001 significant headcount reduction (30 000 people) steel grades down from 302 to 50 inefficient capacity closed (1mtpa) moved to lowest quartile on global cost curve Value added products: - Flat 61% Long 72% Mining division (Kumba) unbundled November 2001 - iron ore mining rights retained to ensure supply at cost Market value increase* since unbundling (Nov ‘01): 500% * Including effect of rights issue in April 2002 Major value release 4 Production Operations - 3 integrated steel mills 1 steel mini-mill surplus coke batteries producing market coke captive iron ore (toll-mined by Kumba Resources) Output - Steel: 6.4 mtpa Long 31% Flat 69% - Market Coke: 400 ktpa for ferro-chrome industry Largest regional steel producer 5 Geographic Location Flat Products Overview of operations Thabazimbi Vanderbijlpark 3.1 Mtpa final product Saldanha 1.3 Mtpa final product Long Products Vanderbijlpark Johannesburg Vereeniging Newcastle Sishen Durban Newcastle 1.7 Mtpa final product Vereeniging 0.3 Mtpa final product 6.4 Mtpa final product South Africa Market Coke Vanderbijlpark and Newcastle 400 ktpa Saldanha Cape Town Iron ore supply at cost + 3% Steel plants Captive iron ore source Southern African location 6.25 Mtpa iron ore from Sishen 2 Mtpa iron ore from Thabazimbi 6 Geographic Sales South Africa Rest of Africa Total Africa Far East European Union North America 1H’03 2H’03 1H’04 Middle East Other % 0 10 20 30 40 50 Switch to better paying markets 60 70 80 7 Domestic Market Sound South African economic fundamentals Good prospects for long-term sustainable growth Underlying demand recovery throughout 2004 Other Africa market share growing strongly Domestic margins $100/t > non-African exports Imports % ’000t 1 500 Quarterly consumption Steel imports Consumption trend 14% 12% 10% 1 300 8% 1 100 6% 900 Imports 1 700 Consumption 4% 700 2% 0% 500 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Switch to sustainable growth 8 Domestic Pricing Policy Domestic prices based on International Parity Principle Competition Commission (Feb 2004) ruling that Iscor pricing policy is fair and reasonable: complainants have lodged appeal Government has asked for review of downstream support programme Downstream industry support programme ($70m pa) through: - export rebates - strategic concessions - long-term contracts (auto industry, packaging) Current import duty – 5% - risk of removal considered low - SA’s duty amongst lowest in world International parity pricing model 9 Invoiced Export Prices US$/t (c&f) 630 580 Hot rolled coil Low carbon wire rod 530 480 Based on order book & expectations 430 380 330 280 230 180 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: Ispat Iscor Record high prices 10 Global Steel Demand ‘mt 1 200 WSD forecast China Rest of world +7% 1 000 +3% +3% +6% +8% 0% +6% 800 +2% +22% +21% +22% +10% +4% +6% +4% +1% +6% +3% 600 400 +9% 2000 +2% +6% +3% +2% +4% +0% -4% +3% 2001 2002 2003 2004 2005 2006 2007 2008 200 0 Source: World Steel Dynamics China driving growth in steel demand 11 China – Supply and Demand ‘mt 350 WSD forecast Consumption Production China forecast to become net exporter by 2008 300 250 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: World Steel Dynamics China expected to become net exporter 12 World Steel Consumption Trends World Steel Consumption and GDP Per Capita, 1950-2010 2010 7 000 China takes off! 6 500 6 000 $US/capita ($1995) 5 500 5 000 4 500 Asian crisis 1999 1997 1994 1989 Phase 2 1983 Post war expansion to 1970 led to predictions of seemingless endless growth 3 500 2004 2002 Collapse of USSR led to steel consumption collapse in Eastern Europe 4 000 Phase 3 1979 1975 1971 1973 1970 3 000 1961 2 500 1954 Phase 1 2 000 First and second oil prices and subsequent recessions led to massive light-weighting of steelcontaining products 1 500 50 55 60 65 70 75 80 85 90 95 100 105 110 115 120 125 130 135 140 145 150 155 160 kg steel/capita Source: Macquarie Research Per capita steel demand entering growth phase 13 Global Input Price Trends Based to 100 170 Based to 100 Coking coal - contract (LHS) Iron ore fines - contract (LHS) 800 Freight rates (RHS) Coke (RHS) Scrap (RHS) 160 700 150 600 140 500 130 400 120 300 110 200 100 100 90 Jul-01 0 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Source: Ispat Iscor Global input prices still under pressure 14 Raw Material Integration Internally sourced (at cost) Iron ore 92% Domestic supply agreement s 3% Imported 5% Coke 100% - - Coal 8% 55% 37% Scrap 81% 19% - DRI 98% 2% - Actual 1H’04 data Cost benefit for raw material integration 15 Key Performance Indicators 1H’03 2H’03 1H’04 13 303 464 0.2 4.3 6.1 13 045 12 539 12 072 1 756 1 637 1 686 221 231 254 1 535 1 529 1 543 193 217 231 - flat 37 44 61 - long 60 72 72 CI savings (Rm) - percentage Number of employees (’000) HRC cash cost - R/t - US$/t Billet cash cost - R/t - US$/t Percentage value-add exports Exchange rate impacting good productivity performance 16 Headline Earnings Rm 1H’03 2H’03 1H’04 Revenue Comparable operating profit Financing cost - net interest expense - long-term provision top-up Tax Equity earnings* Minority interest Comparable earnings - in US$m BAA remuneration* Restructuring costs* Power contract settlement* Headline earnings 9 312 1 871 (31) (28) (608) 48 1 1 253 156 9 175 1 504 (16) (53) (492) 67 (3) 1 007 145 (429) (116) 10 544 2 948 (14) (133) # (914) 179 (4) 2 062 311 (511) 462 1 551 * After tax (110) 1 143 # Lower discount rate accounts for R100m Record earnings 17 Comparable Headline Earnings Trend Rand million 1 500 US$ million 240 1 393 212 1 350 210 1 200 180 1 050 150 900 750 657 655 120 669 97 596 600 79 450 352 99 90 77 60 48 300 30 150 0 1Q’03 2Q’03 3Q’03 4Q’03 1Q’04 2Q’04 * Average R/US$ spot rate 0 1Q’03 2Q’03 3Q’03 4Q’03 1Q’04 2Q’04 * R8.32/$ R7.73/$ R7.40/$ R6.72/$ R6.75/$ R6.57/$ Steel cycle overshadows Rand strength 18 Key Result Drivers Positive 1H’04 vs 1H’03 HRC cash cost per tonne (Rands) Negative -4% Domestic sales volume +22% HRC US$ price +40% Exchange rate +21% Operating margin* 20% 28% * Excluding BAA remuneration (1H’04) & power contract settlement (1H’03) Strong Rand only negative factor 19 Sensitivity Analysis Operating Income* Headline Earnings* EPS (SAc)* Variable Change International steel price ±$10/tonne 197 134 30 Exchange rate ±10c 116 79 18 Domestic sales ±10% 187 127 29 * Based on impact for full six months forecast July-December 2004 Significant gearing to major variables 20 Financial Ratios 1H’03 2H’03 1H’04 Operating margin (%) - on comparative basis (%) 18 20 8 16 21 28 EBITDA margin (%) - on comparative basis (%) 23 25 13 22 26 33 Revenue/invested capital (times) 1.3 1.3 1.4 Return on equity (%) - on comparative basis (%) 18 20 7 16 23 30 Net cash/equity (%) 5.8 0.2 9.7 Margins approaching cyclical peak levels 21 Distribution to Shareholders In view of our strong cash flow: Current distribution policy being reviewed Capital reduction proposal to be put to shareholders before end-2004 Programme of capital reduction to be instituted Current stated capital R14/share No interim dividend declaration Surplus capital to be returned to shareholders 22 3-Year Focus Further quantum reduction in costs Increase production from current assets by 1mtpa Focus on value-add projects Lowest quartile producer (delivered EU cost basis) Defer South African steel industry consolidation Join select group of steel companies earning in excess of WACC 23 Outlook for 2004 Positive steel business environment - ongoing global consumption growth prices increasing from current levels continued strength in domestic demand Operations - ongoing cost reduction increased throughput Earnings - Q3 up on Q2 Positive outlook 24 Investment Case Competitive producer - vertically integrated lowest cost quartile focus part of major global steel group naturally protected domestic market Growth potential - growing, more profitable regional market sweat current assets for extra 1mtpa expansion of market coke operations domestic steel industry consolidation Gearing to Chinese growth - steel market fortunes dependent on continued Chinese growth Ispat Iscor revenue directly linked to international steel prices Competitive low-cost producer 25 Market Data Steel Equity Performance Base to 100, all prices in US$ 600 500 400 300 200 Ispat Iscor Gerdau CSN POSCO China Steel Severstal Bluescope Arcelor Nucor US Steel 100 0 Source: Bloomberg Ispat Iscor amongst best performers 27 Steel Equity P/E’s (Forward) 14 12 10 8 6 4 2 0 Source: Bloomberg, 24 August 2004 Ispat Iscor still attractively valued 28 Steel Equity Price/Book 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 Source: Bloomberg, 24 August 2004 Ispat Iscor still attractively valued 29 Steel Equity Market Capitalisation US$m 14 000 12 000 10 000 8 000 6 000 4 000 2 000 0 Source: Bloomberg, 24 August 2004 Mid-sized market cap 30 extra slides Relationship with LNM Iscor’s long-term desire to link-up with a major steel group Business assistance agreement signed with LNM (Jan ‘02) - remuneration linked to performance target cost savings (excl. labour + first 1%) R350m to R700m pa LNM reward: 5-10% Iscor issued shares or cash equivalent Sustainable savings to June 2004 – R1 326m per annum - cost savings target exceeded by 132% R613m (value of 25.7m shares) paid to LNM Dec ‘03 R731 (value of 18.9m shares) paid to LNM Aug ’04 BAA expires at end-2004 - allowance for renegotiation approval of minority shareholders required Value from international tie-up 32 Business Assistance Agreement Savings achieved % of max target Rm pa* Dec ‘02 644 82% Jun ‘03 388 58% Dec ‘03 687 115% Jun ‘04 1 326 232% Dec ‘04 Further savings expected Remuneration due Cum % of shares Number of shares (m) 5.8% 25.7 613 Dec ‘03 (cash) 10.0% 18.9 731 Aug ‘04 (cash) 44.6 1 344 Rm Settled * Measured from Jul-Dec ’01 base, indexed BAA payback approximately 1 year 33 BAA Savings Analysis By Savings Annualised Savings (Rm) Efficiencies 858 65% Procurement 468 35% 1 326 100% Total BAA Savings By Plant % Annualised Savings (Rm) % Vanderbijlpark 506 38% Saldanha 251 19% Newcastle 378 29% Vereeniging 190 14% 1 326 100% Total BAA Savings BAA savings spread over group operations 34 Currency Strength Rand has strengthened 37% against US$ over past 24 months Rand relatively stronger than currencies of competitor countries Costs 65% Rand-based Focus to maintain position on cost curve 3-yr programme - restructuring improvement projects efficiency programmes Pro-active initiatives to counter strong Rand 35 Capital Projects Planned Completion Newcastle - pulverised coal injection Vanderbijlpark - Blast Furnace C – throat armour repair Blast Furnace D – interim repair Roofer galvanising line* Coke & chemicals - market coke expansion* 1H’05 Completed 2H’04 1H’06 2H’06 Thabazimbi - iron ore mine: life expansion project* * Still to be approved Significant spend for value-add 36 Environmental Environmental master plans approved All steel operations ISO 14001 certified Major environmental projects in progress - Vanderbijlpark - - main water treatment plant coke oven gas & water cleaning Newcastle - reverse osmosis water treatment plant Focus on environmental compliance 37 Cash Flow Rm 1H’03 2H’03 1H’04 Cash generated by operations 2 302 2 022 3 452 (48) (292) (1 069) 41 46 13 Working capital Asset sales BAA remuneration (613) Capex (780) (499) (405) Finance cost (96) (9) (22) Tax (55) (1 032) (273) (446) (446) (334) 918 (823) 1 362 Dividends Net cash flow Strong cash flow 38 Capital Expenditure Fcast Rm 1H’03 2H’03 1H’04 2H’04 Value adding 219 124 82 378 Replacement 452 300 267 352 Environmental 109 75 56 130 Total 780 499 405 860 Depreciation 451 469 478 519 Increased value-add and environmental spend 39 Sales Volumes ’000t 3 500 3 000 Export Domestic DSP* Domestic other 3 225 3 034 2 500 1 483 1 603 3 101 1 210 2 000 1 664 1 500 1 509 232 588 1 000 290 1 569 722 470 176 134 150 565 500 787 792 548 395 438 350 98 114 114 72 70 84 1H’03 2H’03 1H’04 923 0 1H’03 622 2H’03 1H’04 Vanderbijlpark Saldanha 960 939 984 500 443 390 460 496 594 1H’03 2H’03 1H’04 Long products 264 1 319 1 358 1 601 1H’03 2H’03 1H’04 Total * Duferco Steel Processing – re-roller mainly for export Strong domestic sales growth 40 Liquid Steel Production ’000t 4 000 3 490 3 500 3 595 3 477 3 000 2 500 2 000 1 811 1 870 1 829 1 500 1 073 1 080 1 085 1 000 606 645 563 1H’03 2H’03 1H’04 500 0 1H’03 2H’03 1H’04 Vanderbijlpark Saldanha 1H’03 2H’03 1H’04 Long products Production affected by Saldanha breakout 1H’03 2H’03 1H’04 Total 41 Flat Product Prices – Hot Rolled Coil US$/t c&f 850 750 US Midwest Germany Far East 650 550 450 350 250 150 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: CRU Geographical divergence 42 Long Product Prices - Wire Rod US$/t c&f 750 650 US Midwest Germany Far East 550 450 350 250 150 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: CRU Geographical divergence 43 Ispat Iscor Cash Cost Base General 6% Iron ore 7% Labour 15% Coal : Local 7% Coal : Import 7% Services 3% Scrap/DRI/Pellets 6% Consumables 4% Other raw material 4% Electricity, gas & petroleum 10% Spares & repairs 8% Transport 10% Alloys & coating 9% Refractories 4% Total production cost base H1 2004: R6.5 billion Cash cost breakdown 44 Raw Material and Energy Impact US Integrated plant – without coke US Integrated plant – with coke 350 350 +$81/ton 250 250 200 200 150 150 100 100 50 50 0 0 Q1 02 400 Q2 04 Q1 02 US Minimill –flat products Ispat Iscor 300 +$199/ton 250 250 $/ton $/ton Q2 04 350 350 300 +$135/ton 300 $/ton $/ton 300 200 +$40/ton 200 150 150 100 100 50 50 0 Q1 02 Q2 04 Coking coal Coke Iron ore/sinter/pellets 0 Q3 02 Pig iron Q2 04 Scrap DRI Energy Source: World Steel Dynamics Iscor’s cost push relatively muted 45