Steel Update

EUROPEAN STEEL

EQUITY RESEARCH

Buy Ahead of Sector Re-Rating

June 23, 2011 Sector view Remains

Sentiment Turning, Valuations Attractive, Re-Rating Likely as H2 Pessimism Recedes

Risks to Chinese steel prices now skewed to upside Despite recent bearish newsflow on Chinese steel market sentiment, we are optimistic on the outlook for Chinese steel prices. We believe tighter monetary policy has driven flat steel inventories down 15-20% since March, setting the stage for a return of pricing power in H2. We expect underlying Chinese steel demand to improve in H2 as both industrial production growth and auto production pick up from Q2 softness. European/US steel prices may be bottoming The spread of European steel prices over Chinese prices has now fallen below $100/t, significantly reducing the threat of imports and removing downward pressure on European prices. The broad recovery in underlying steel demand appears solidly entrenched. In addition, key raw material prices remain elevated, while scrap prices in both the US and Europe have risen c.5% in the past month, suggesting further support to steel prices. Sector re-rating likely as H2 pessimism recedes The ongoing resilience of steel prices should allay investor fears of an H2 2011 margin squeeze and earnings slowdown comparable with H2 2010. With inventories relatively low and continued positive momentum in key end markets, we expect the seasonal slowdown in Q3 to be less pronounced in Europe than in previous years. Modest upward momentum in European and US steel prices could serve as a catalyst for sentiment towards the sector and this could lead to a relatively rapid re-rating as investors begin to discount a more stable H2 and a recovery in 2012 and beyond. We believe the current soft patch of economic data will be shortlived and recent share price weakness provides an attractive entry point. MT offers greatest upside; buy now for multi-year cyclical recovery At 5.7x 2012 EBITDA, we believe ArcelorMittal (MT) in particular is undervalued in the context of a continued steel recovery (5.5x is a midcycle multiple). We expect MTs EBITDA to grow at a CAGR of 21% to 2013 and its current share price (down 20% since Feb) offers an attractive entry point ahead of its multi-year march towards normalised earnings. The stock could be one of the biggest beneficiaries of a sector snapback, with c.40% upside in our price target of 32. Upcoming Q3 guidance a potential catalyst for MT The market appears to be pricing in a y/y decrease in like-for-like H2 EBITDA, which we consider highly pessimistic given H2 2010 was characterised by a significant de-stocking. We expect MTs Q3 guidance to be solid in light of a more moderate summer slowdown in volumes, the repricing of legacy auto contracts and continued Mining expansion. We believe the stock could re-rate in the coming month as pessimism towards Q3 guidance and the H2 outlook recedes ahead of Q2 results (27 July).
Rating: See report end for details of Nomuras rating system.

Bullish

Research analysts
European Metals & Mining Neil Sampat - NIplc neil.sampat@nomura.com +44 20 7102 1808 Paul Cliff - NIplc paul.cliff@nomura.com +44 20 7102 4349 Patrick Jones - NIplc patrick.jones@nomura.com +44 20 7102 5486 Ashraf Khan ashraf.khan@nomura.com +91 22 3053 3231

See Appendix A-1 for analyst certification and important disclosures. Analysts employed by non US affiliates are not registered or qualified as research analysts with FINRA in the US.

Nomura | Steel Update

June 23, 2011

With this report, Neil Sampat assumes coverage as primary analyst for Acerinox, Aperam, ArcelorMittal, Kloeckner, Norsk Hydro, Outokumpu, Salzgitter, SSAB, ThyssenKrupp and Voestalpine.

Steel Price Sentiment Bottoming

The last three months have seen some normalisation of global steel pricing The rapid and sizeable steel price hikes that US and European steelmakers achieved in 4Q 2010 and 1Q 2011 led to spreads above Chinese steel prices that we argued were unsustainable (see 1Q Steel Preview and Calendar, 20 April 2010). Price differentials of up to $250/t inevitably increased the relative attractiveness of Chinese imports and have led to a moderation of US and European steel prices, which are down c.10% in the last three months. Chinese steel prices have continued their gradual ascent over the same period (up c.5%), reflecting both cost push pressures and export opportunities. As a result, the spreads of US and European steel prices over Chinese prices have fallen to more normalised levels (see Figure 2). Historically, spreads of greater than $150/t have materially increased the threat of rising import volumes and, at c.$90/t currently, our channel checks suggest that the European-Chinese price differential has fallen sufficiently to abate significant import pressure. The recent weakness in the Euro (down c.4% vs RMB in the past seven weeks) further insulates the European steel industry from the threat of Asian imports.
Fig. 1: Steel prices have found support globally
Domestic HRC, USD/tonne
1,000 900 800 700 600 500 400

The differential of European steel prices above Chinese prices has now fallen to more sustainable levels (i.e. <$100/t).

Fig. 2: The spread over Chinese prices has narrowed

Domestic HRC, USD/tonne
300 250 200 150 100 50 0 -50 -100

US domestic HRC

EU domestic HRC

China domestic HRC

US spread
Source: Metals Bulletin, Nomura research.

EU spread

Source: Metals Bulletin, Nomura research.

Despite negative newsflow, risks to Chinese prices are skewed to the upside The market appears to be pricing in further significant falls in European and US steel prices as concerns over the global macroeconomic backdrop and bearish newsflow on Chinese steel prices weigh on investors. In the past ten days, three of Chinas largest steelmakers (Baosteel, Wugang and Anshan Iron & Steel) announced reductions of up to $30/t in their hot rolled coil list prices for July deliveries, raising concerns that sluggish steel demand in China could serve to depress global steel prices in the coming months. Indeed the months of June, July and August traditionally see a moderation in Chinese steel demand, while Chinese crude steel production in May reached all-time record levels, suggesting adverse supply-demand dynamics in the coming months. However, we are more optimistic on the outlook for Chinese steel prices and believe near-term risks are now skewed to the upside for three key reasons: Inventories are falling. We believe tighter monetary policy and availability of capital in China have encouraged steel users and steel distributors to draw down inventories in

Recent newsflow on Chinese steel prices has been negative, however we are optimistic on the outlook.

Nomura | Steel Update

June 23, 2011

recent months. Chinese flat steel inventories fell c.5% in May (see Figure 3), amid record crude steel monthly production, suggesting Chinese steel demand remains healthy. Despite this de-stocking, Chinese spot prices have held steady and the recent reduction in list prices by major steelmakers has largely been a catching up with lower spot prices. Chinese flat inventories are now c.10% lower than at the beginning of the year and 15-20% lower than in March. As underlying steel consumption has continued to grow, inventories are even lower in terms of days of consumption, suggesting a restocking cycle could be imminent, driving up Chinese steel prices. Figure 3 shows that falling inventories are historically consistent with rising prices. As we explain below, we believe Chinese steel demand will remain healthy, preventing a significant build up of inventories in the near term.

Fig. 3: Chinese steel inventories have been falling...

HRC inventories ('000 tonnes) and prices (RMB)
560 540 520 500 480 460 440 420 400 380 360 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 3,800 4,200 4,400 5,000

Fig. 4:
65,000

..as steel production reaches record levels

Chinese crude steel production, '000 tonnes

Prices rose as inventories fell

4,800

60,000
4,600

55,000

50,000

4,000

45,000

40,000 Jan-10 Jul-10 Jan-11

HRC inventories

HRC prices (RMB)

Source: HRC inventories in major Chinese cities sourced from MySteel data; Chinese HRC prices sourced from MetalBulletin; Nomura research.

Source: MetalBulletin, Nomura research.

Steel demand is set to improve in H2. Our house economists view (set out in more detail on page 9) is that the soft patch the Chinese economy is currently experiencing will be short lived and both GDP and industrial production growth should accelerate in H2 2011 from Q2 2011 softness (see Figures 5 and 6). As steel consumption is highly geared to both of these measures, we expect Chinese steel demand to improve in H2, further supporting a re-stocking and higher steel prices. In addition, we note that recent Chinese automotive production has been weak, falling 12% m/m and 5% y/y in May, and we believe this drag on steel demand may also prove short lived as Japanese supply chain issues are resolved and a recently announced scrappage scheme will likely prompt the replacement of older buses and heavy duty vehicles. While recent policy measures to reduce traffic congestion in Beijing have impacted vehicle demand in that region and tight credit has also played a role in dampening demand, we believe the outlook for auto demand across China remains very positive, driven by per capita income growth, a growing middle class, and a rising share of personal consumption within the Chinese economy.

Improving Chinese industrial production growth and automotive production in H2 should serve as a tailwind for steel demand.

Nomura | Steel Update

June 23, 2011

Fig. 5: 9%+ Chinese GDP growth expected to continue

Annualised Chinese GDP growth
9.9 9.8 9.7 9.6 9.5 9.4 9.3 9.2 9.1 9.0 8.9 3Q10 4Q10 1Q11 2Q11e 3Q11e 4Q11e

Fig. 6: IP growth expected to reaccelerate in H2 2011

Annualised Chinese industrial production growth
14.6 14.4 14.2 14.0 13.8 13.6 13.4 13.2 13.0 12.8 12.6 3Q10 4Q10 1Q11 2Q11e 3Q11e 4Q11e

Source: Nomura estimates.

Source: Nomura estimates.

Chinese steelmaker margins are wafer thin. The supply of key raw materials such as iron ore and coking coal has remained very tight, supporting market prices which remain elevated by historic standards. At $172/t, the current iron ore spot price is less than 10% below its peak, while coking coal spot prices have rebounded back above $300/t as volumes from Queensland remain low. Figure 7 examines Chinese steelmakers cash margins, taking the spot prices for key raw materials and comparing them with spot steel prices (given the impact of contract pricing and inventory accounting, we believe spot margins are a good guide to margins later in the year). The analysis demonstrates that Chinese steelmaker margins are currently wafer thin and downside to Chinese steel prices is very limited as a result, absent a material (and, in our view, unlikely) decrease in raw material costs in the near term. We note that on 1 June, electricity tariff hikes were announced in 15 provinces, adding incremental cost pressures to some Chinese steel producers, which we do not yet capture in our analysis.
We believe the marginal Chinese steelmaker is barely profitable at current steel prices, suggesting a floor has been reached absent a fall in raw material costs.

Fig. 7: Chinese cash margins imply very little downside to current prices
$/tonne
750 700 650 600 550 500 450 400 Chinese cash costs Raw materials Energy Labour

Chinese HRC steel price

Source: Nomura estimates. Cash costs reflect marginal Chinese blast furnace steelmaker based on spot raw materials prices.

Nomura | Steel Update

June 23, 2011

So global steel prices may have found a near-term floor Underlying steel demand (particularly for flat steel) in Europe and North America continues to develop positively, with a solidly entrenched recovery evident in key end markets such as the automotive, capital goods, mechanical engineering and energy sectors. We do not believe inventory levels are particularly high, while EU steel production in May was down 1.3% y/y and the threat of imports (particularly in Europe) has receded as the spread over Chinese steel prices has fallen below $100/t (freight costs, higher lead times and potential quality issues justify such a premium over Chinese prices). As argued above, we do not expect further weakness in Chinese steel prices and, as a result, believe European steel prices will stabilise at current levels, with upside potential. The spread of European prices over Chinese prices has averaged $100/t (a level which we think is sustainable) since January 2010, however we acknowledge that European prices have tended to overshoot this average on the way down, before correcting sharply. Figure 8 shows that, despite this overshooting, the spread has tended to bottom at c.$35/t, even during times of severe de-stocking (such as late 2010). If, as we argue, Chinese steel prices develop some upward momentum in the near term, Figure 9 shows that downside to European steel prices should be limited to c.5% (based on a minimum $35/t spread).

We believe risks to European steel prices are now skewed to the upside.

Fig. 8: EU-Chinese steel price spread

Domestic HRC, USD/t
200

Fig. 9: Downside to European prices limited to c.5%

Domestic HRC, USD/t
1,000

150

Average spread c.$100/t

900 800

100

Minimum spread $35t/

700 600 500 400

50

-50 EU spread
Source: MetalBulletin, Nomura research
US domestic HRC EU domestic HRC China domestic HRC

Source: MetalBulletin, Nomura research

North American steel production in May increased only 1.6% y/y, however uncertainty over the additional capacity coming to market has weighed on pricing. We note the risk of oversupply in North America, where the ongoing ramp up of capacity by ThyssenKrupp, RG Steel and Severstal may apply downward pressure to steel prices, but see the normalisation of automotive production as positive for steel demand (Toyota announced last week that its North American production is recovering earlier than initially expected and is to return to full production by September). US steelmakers, including MT, have recently announced steel price hikes of $30-40/t in order to stabilise declining steel prices, offering optimism that a near-term bottom may have been reached. Figure 1 shows that European steel prices may have bottomed, while the rate of decline in US prices (where the spread over Chinese prices remains slightly higher) has slowed in recent weeks. In addition, Figure 10 shows that scrap prices (which are usually a good leading indicator of steel prices) in the US and Europe have shown recent signs of positive momentum and are up 7% and 5% over the past two months.

Nomura | Steel Update

June 23, 2011

Fig. 10: Scrap prices are trending upward...

USD/tonne
460

Fig. 11: ...and iron ore spot prices remain elevated

USD/tonne
800 750 700 200 190 180 170 160 150 140 130 120 110 100 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11

450

440

650 600 550

430

420

500
410

450 400
Mar-11 EU shredded fob Rotterdam Apr-11 May-11 US No 1 heavy melt

400 Feb-11

Jan-10

China HRC

Iron ore fines spot

Source: Bloomberg, Metals Bulletin, Nomura research.

Source: Bloomberg, Metals Bulletin, Nomura research.

Nomura | Steel Update

June 23, 2011

Pricing and volume outlook suggests pessimism on 2H earnings overdone

The tight supply outlook for iron ore and coking coal (exacerbated by unexpected weather and industrial action in some regions) suggests prices for key raw materials will remain elevated through 2011, though they are unlikely to trend significantly higher. Against this backdrop, investor concerns have centred around the possibility of steep declines in US and European steel prices causing a significant margin squeeze in H2. There has been a sector rotation in the past two months into more defensive stocks such as TKA and VOE (see Figure 12) that have demonstrated greater pricing power and proven more successful at maintaining margins due to their high capacity utilisation and product/customer mix, while names such as MT have underperformed on the expectation of a significant fall in margins. However, as we explain above, we see limited downside to steel prices from current levels following the recent rebalancing of global prices and absent a double-dip recession. Figure 13 shows that European steel equities have tended to move in anticipation of steel prices, so early signs of positive momentum on European steel prices could serve as a catalyst for a re-rating.
TKA and VOE have outperformed in the past two months as the market has sought relative safety in their ability to pass on higher raw material costs and maintain margins.

Fig. 12: The market has rotated into more defensive stocks such as TKA and VOE
Indexed share price performance
120 115 110 105 100 95 90 Apr-11 MT Apr-11 TKA May-11 SZG May-11 SSAB May-11 VOE Jun-11 Jun-11 KCO

Source: Datastream, Nomura research.

Nomura | Steel Update

June 23, 2011

Fig. 13: European steel equities have historically moved ahead of steel prices
European HRC steel prices ($/t) and European steel equity index
650 600 550 500 90 450 85 400 350 300 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 80 75 70 110 105 100 95

European steel equities have historically been highly responsive to prospective movements in steel prices; we feel now is the time to buy steel equities ahead of improving sentiment on steel prices.

European HRC steel price (LHS)

European steel equity index (RHS)

Source: Datastream, MetalBulletin, Nomura research. Note: European steel equity index represents a weighted average of MT, TKA, VOE, SSAB, SZG and KCOs market capitalisation.

We believe underlying steel demand in Europe and North America continues to develop positively, while steel inventories remain at relatively low levels. Although H2 2011 steel volumes will be seasonally lower than H1, we expect the H2 reduction in apparent steel demand to be much less pronounced than in H2 2010, which was characterised by a significant steel destocking. As a result we expect capacity utilisation in H2 2011 to be higher than in H2 2010 (e.g., for MT 75% in H2 2011 vs 70% in H2 2010), with positive implications for the earnings outlook. Figures 14 and 15 examine the impact of our raw material cost and steel price assumptions on cash margins for Chinese and European steelmakers. We believe Chinese steel pricing will largely track raw material cost developments, given wafer thin margins, so we do not expect Chinese steel prices to soften until 4Q, when, for example, coking coal supply (and therefore prices) should have become more normalised following the Queensland floods. We believe European steel prices can maintain their c. $100/t premium above Chinese steel prices and, as a result, European steelmakers should continue to generate healthy margins through H2.

Fig. 14: Chinese margins suggest little downside to Q3 pricing

USD/tonne

Fig. 15: European margins may narrow in 2H, but are unlikely to collapse
USD/tonne

900 800 700 600 500 Q1 2011 Q2 2011

Cash cost

900 800 700 600 500

Q3 2011
China HRC price

Q4 2011

Q1 2011

Q2 2011
Cash cost

Q3 2011
EU HRC price

Q4 2011

Source: Nomura estimates. Chinese cash costs based on marginal blast furnace steel producer with full exposure to seaborne market for iron ore and coking coal.

Nomura estimates. European cash costs based on German blast furnace steel producer with full exposure to seaborne market for iron ore and coking coal.

Nomura | Steel Update

June 23, 2011

Macroeconomic concerns provide an attractive entry point The macroeconomic backdrop remains a risk to our assumptions, however our house economists view is that the current soft patch of economic data will prove temporary and that the underlying momentum of the global economic recovery remains intact. We expect a soft landing in China, where our economists forecast real GDP to grow by 9.4% in 2011 and 9.2% in 2012. Lower Chinese industrial production growth in May (13.3% y/y vs 14.8% in March) and a low PMI reading in May (52.0 vs 52.9 in April and 53.4 in March) have partly reflected cautious bank lending and higher borrowing costs, contributing to a likely slowing of economic growth in Q2. However, we believe this slowdown will be short-lived as headwinds such as supply chain disruptions from Japan and power shortages start to fade in H2 and Chinas robust underlying economic development continues. Similarly in the US, the outlook for H2 appears more optimistic than near term indicators suggest as auto production will benefit from improved supply of Japanese components, one-off impacts from severe weather will fade and oil prices (though still volatile) have moderated from recent peaks. The US Conference Boards Leading Economic Index jumped 0.8% m/m in May, higher than consensus expectations of +0.3%, supporting an improving outlook for H2. Meanwhile, our Japanese economists expect a marked upturn in H2 2011 with GDP growth turning positive, following the recent earthquake and tsunami-related contraction. Indeed, with auto production normalising and the reconstruction effort likely in full flow, our economists recently raised their Japanese 2012e industrial production growth forecasts from 10.1% to 11.2%. Therefore, although a further weakening of global economic growth and a double-dip recession in the US and Europe would represent downside risks to our assumptions, we believe the H2 prospects for the worlds three largest economies underpin our optimistic outlook for global growth, to which steel demand is highly geared. As such, we believe now is the time to be buying steel equities, which have sold off on pessimism on the outlook for global growth, steel demand and steel prices. We believe steel valuations are undemanding and see the current share price weakness as an attractive entry point with the continued steel recovery in 2012 in mind and an easing of pessimism towards H2 earnings a likely catalyst.

We believe weak macroeconomic data have been driven by largely short-term factors and that the global economic recovery remains intact. Now is the time to buy steel equities to position for continued recovery in 2012.

Nomura | Steel Update

June 23, 2011

MT shares could see the largest rebound if the sector re-rates

As a proxy for the global steel industry and most leveraged to a cyclical recovery, MT shares have borne the brunt of recent investor risk aversion. At 5.7x 2012 EBITDA we believe the stock is oversold (5.5x is a mid-cycle multiple) and would be buyers of the name with a continued steel recovery in mind through 2012. With Q2 2011 costs, revenues and volumes largely booked, Q2 EBITDA guidance of $3.0bn$3.5bn should be relatively secure. Average selling prices in Q3 are likely to be lower to reflect the dip in steel prices in Q2, however volumes (though seasonally lower) should be supported by continued steel demand strength. We expect MTs capacity utilisation to slow from 80% in 2Q to 75% in H2 2011, somewhat above the 70% it achieved in H2 2010. MTs shares are trading c.30% below the levels they reached in April 2010, when the market appeared to be pricing in a sustained global steel recovery. Figures 16 and 17 show that MT is now a step closer to normalised earnings from a capacity utilisation rate and EBITDA/t perspective than it had been in 2010 and we expect its gradual progression towards these normalised levels will drive a significant re-rating over time. We see c.40% upside to the current share price and view this as an attractive entry point to benefit from the cyclical recovery that we expect in 2012 and beyond. MT reports its Q2 results on 27 July and the shares could rally ahead of this as pessimism towards H2 recedes and the likelihood of solid Q3 guidance is absorbed by the market.
We see c.40% upside to MTs current share price, which represents an attractive entry point for the stock.

Fig. 16: MT capacity utilisation rate is higher than in 2010

34 32
MT share price (EUR)

Fig. 17: MTs EBITDA/t is significantly above 2010 levels

34 32 160 150 140
MT share price (EUR) MT EBITDA/t (USD)

82% 80%
MT Capacity utilisation rate

30 28 26 24 22 20 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11

Capacity utilisation

78% 76% 74% 72% 70% 68%

30 28 26 24 22 20 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11

EBITDA/t

130 120 110 100 90 80 70 60

MT share price

MT share price

Source: Company data, Nomura estimates.

Source: Company data, Nomura estimates.

What is the market pricing in for MT? We have taken a stab at quantifying what the market appears to be pricing in for MT in H2 2011 to highlight the pessimism. Assuming MT achieves the mid-point of its Q2 EBITDA guidance (i.e., $3.25bn), its H1 2011 EBITDA would total $5.8bn. We believe that, at this stage of the cycle, MT should be trading around at least 7.5x 2011 EBITDA (vs 5.5x EV/EBITDA in a normalised year, which is likely two years away), suggesting that the market is pricing in H2 2011 EBITDA of only $4.4bn. We note that this is only c.8% higher than H2 2010 EBITDA, a period characterised by steel price weakness, elevated raw material costs and a significant steel de-stocking across the market. The majority of MTs end markets, with the exception of construction, have experienced a solid recovery in the past year and as a result MT is operating at higher capacity utilisation rates than in 2010 and generating higher EBITDA/t, so we view such a weak y/y increase in H2 EBITDA as unlikely. We would also point out that MT has expanded

The market appears to be pricing in like-for-like H2 2011 EBITDA to be below H2 2010 levels.

10

Nomura | Steel Update

June 23, 2011

its externally marketable Mining production since 2H 2010. We estimate c.3mt of incremental iron ore production and c.0.3mt of coking coal production in H2 2011, which should contribute $0.4bn of incremental EBITDA in H2 2011. If we exclude these earnings, the current share price implies a like for like drop in H2 2011 EBITDA from H2 2010 levels, which we believe is overly pessimistic. Assuming steel volumes for H2 2011 are in line with our estimates and MT runs at 75% capacity utilisation, this implies group EBITDA/t falls from $128 in H1 2011 to $87 in H2 2011, which is lower than H2 2009 levels (see Figure 18).
The contraction in H2 2011 EBITDA/t that the current share price suggests appears overly pessimistic.

Fig. 18: Current share price implies H2 2011 EBITDA/t below H2 2009 levels
EBITDA/t, USD

205
130 120 110 100 90 80 70 60 50 H1 2008

233

Nomura H2 11 EBITDA/t

Implied H2 11 EBITDA/t

H2 2008

H1 2009

H2 2009

H1 2010

H2 2010

H1e 2011

H2e 2011

Note: Implied H2 11 EBITDA/t on a like-for-like basis (i.e. excludes new Mining production capacity added in 2011). Source: Company data, Nomura estimates.

Adjusting MT estimates; 2011e group EBITDA unchanged at $11.46bn MT should benefit from higher average selling prices in Q2, following the strong steel price rises in Europe and North America in Q1. Underlying demand continues to develop positively in key sectors such as energy, automotive, manufacturing and capital goods, while the construction market continues to lag. We believe the modest downward momentum in steel prices in Q2, coupled with supply chain disruptions to automotive production in the US, has likely caused some customers to delay their orders and we moderate our Q2 group EBITDA estimate from $3.5bn to $3.4bn, still within managements guidance range of $3.0bn - $3.5bn. We raise our estimates for Q3 and Q4 as the outlook for volumes appears more solid. We believe some orders will be pushed out to later in the year, while the seasonal slowdown in Europe will likely be less pronounced compared to previous years as demand remains healthy and inventories benign. Average selling prices may be weaker in Q3, reflecting steel price moderation in Q2, however MT recently announced a c.$30-40/t increase in US prices, while the repricing of 12-18 month legacy contracts representing c.25% of European automotive shipments should serve as a tailwind. We believe MTs Mining division will be a strong contributor to growth as new iron ore production in Liberia ramps up and raw material costs remain elevated. We raise our Q3 and Q4 group EBITDA estimates to $2.8bn and $2.7bn, respectively, leaving our full year group EBITDA unchanged at $11.5bn.

We lower our Q2 EBITDA slightly for MT, but raise our Q3 and Q4 estimates.

11

Nomura | Steel Update

June 23, 2011

Fig. 19: MT P&L highlights

USD millions, except per share data

F11E 1QA Mar-11 Group Sales EBITDA Flat Carbon Americas Flat Carbon Europe Long Carbon Steel AA&CIS AMDS Mining Group EBITDA EBITDA Margin Group EBIT EBT Margin EPS
Source: Nomura estimates.

2QE Jun-11 25,303

3QE Sep-11 25,043

4QE Dec-11 25,487

Year Dec-11 98,017

22,184

528 471 480 254 127 607 2,582 11.6% 1,431 6.5% $0.39

631 620 593 413 113 1,018 3,407 13.5% 2,192 8.7% $1.11

463 387 370 326 97 1,104 2,767 11.0% 1,552 6.2% $0.64

467 415 355 351 99 996 2,704 10.6% 1,489 5.8% $0.60

2,089 1,893 1,797 1,344 436 3,724 11,459 11.7% 6,663 6.8% $2.74

Prospects for 2012 and beyond remain undervalued; we reiterate our Buy rating We believe the market is largely ignoring the recovery trend in underlying steel demand that is set to continue through 2012 and beyond, which should lead to steady improvements in both MTs capacity utilisation rate and its pricing power (and therefore EBITDA/t). MT is highly leveraged to a steel recovery and we expect EBITDA to grow at a CAGR of 21% between 2010 and 2013. The additional disclosure of MTs Mining division has improved visibility on this earnings growth; we expect Mining to account for approximately one-third of MTs EBITDA growth to 2013, lowering the hurdle for earnings growth in MTs steelmaking divisions. The stock, however, has underperformed amid concerns over H2 margins, but at 5.7x 2012 EBITDA, we believe the valuation is undemanding. We believe the risks are firmly weighted to the upside and we believe investors are unlikely to be presented with such an attractive entry point ahead of a multi-year earnings recovery. We reiterate our Buy recommendation and 32 target price for MT, which represents c.40% upside to the current share price.

We expect MTs EBITDA to grow at a CAGR of >20% from 2010 to 2013.

12

Nomura | Steel Update

June 23, 2011

Fig. 20: European steel multiples

Rec

EBITDA Price Upside Market P/E EV/EBITDA Price Margin Target to Cap () () Current (m) 2011E 2012E 2011E 2012E 2011E 2012E

Div Yield 2011E

Carbon steelmakers ArcelorMittal Salzgitter SSAB* ThyssenKrupp** voestalpine** Sector Average BUY 32.00 22.52 50.71 91.80 34.89 35.55 42% 16% 14% 15% 1% 34,906 2,923 3,292 16,210 5,993 11.7 23.1 15.4 15.7 9.0 15.0 8.3 11.6 10.7 10.2 8.4 9.8 6.7 6.4 8.7 8.0 6.5 7.3 5.7 5.1 7.0 6.3 6.2 6.0 12% 6% 12% 8% 14% 10% 13% 7% 14% 9% 15% 12% 2.3% 1.5% 1.1% 1.3% 1.4% 1.5%

NEUTRAL 59.00 REDUCE 105.00 BUY 40.00

NEUTRAL 36.00

Metal distribution Klckner Average Sub-Sector

Source: Nomura estimates. Notes: * (1) price and price target in SEK; ** (2) ThyssenKrupp and voestalpine estimates reflect Sept and Mar year ends respectively; (3) Aperam (Neutral, TP34, 22.0 close Jun 21); Norsk Hydro (Neutral, TPNOK53, NOK39.19); and Outokumpu (Reduce, TP10, 8.69)

BUY

28.00

20.10

39%

1,337

9.6 9.6

7.7 7.7

4.5 4.5

3.9 3.9

5% 5%

6% 6%

1.5% 1.5%

13

Nomura | Steel Update

June 23, 2011

Appendix A-1
Analyst Certification
I, Neil Sampat, hereby certify (1) that the views expressed in this Research report accurately reflect my personal views about any or all of the subject securities or issuers referred to in this Research report, (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this Research report and (3) no part of my compensation is tied to any specific investment banking transactions performed by Nomura Securities International, Inc., Nomura International plc or any other Nomura Group company.

Issuer Specific Regulatory Disclosures

Mentioned companies
Issuer name ArcelorMittal Ticker MT NA Price EUR 22.52 Price date 21-Jun-2011 Stock rating Buy Sector rating Bullish Disclosures 12,50,123

Disclosures required in the U.S.

50 Nomura Beneficial Ownership of Securities Disclosures Nomura Securities International, Inc and /or its affiliates beneficially owns 1% or more of the common equity securities of the company.

123 Market Maker - NSI Nomura Securities International Inc. makes a market in securities of the company.

Disclosures required in the European Union

12 Nomura 1% shareholdings Nomura International plc and/or its affiliates in the global Nomura group have shareholdings exceeding 1% of the total issued share capital of the issuer.

Previous Rating
Issuer name ArcelorMittal Previous Rating Not Rated Date of change 18-Aug-2009

ArcelorMittal (MT NA)

Rating and target price chart (three year history)

EUR 22.52 (21-Jun-2011) Buy (Sector rating: Bullish)

Date 09-Feb-2011 27-Oct-2010 01-Sep-2010 18-Jan-2010 04-Dec-2009 18-Aug-2009 18-Aug-2009 Rating Target price 32.00 29.00 32.00 42.00 33.00 37.00 BUY Closing price 27.50 23.55 23.91 32.06 26.98 24.57 24.57

For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our target price is based on an average of 8.0x 2011E EBITDA of $11.5bn and 7.0x 2012E EBITDA of $13.5bn, which we view as appropriate multiples for this point in the cycle. We calculate that ArcelorMittal has traded at an average mid-cycle multiple of 5.5x, but 2011 and 2012 represent recovery years and mid-cycle earnings are not expected before 2013. The benchmark index for this stock is Dow Jones STOXX 600 Basic Resources.

14

Nomura | Steel Update

June 23, 2011

Risks that may impede the achievement of the target price If steel prices fail to match the increase in raw material costs into 2011, this would adversely affect MTs earnings, given its significant exposure to steel prices. Likewise, if steel demand were to weaken and volumes fail to continue to recover in 2011, this could adversely affect MTs earnings recovery and cause underperformance relative to its peers, which are running at higher utilisation rates. MT has significant emerging market exposure, which we estimate is key to supporting its growth profile through the steel cycle. If economic growth rates and steel demand in emerging market economies slow materially, our earnings forecasts for MT could fail to materialise and place our rating and price target at risk. MT could pursue M&A to further backward integrate into raw materials or gain steelmaking capacity in attractive emerging markets. Given MTs balance sheet position, large M&A deals could significantly leverage the company and weigh on valuation and share price performance.

15

Nomura | Steel Update

June 23, 2011

Important Disclosures
Online availability of research and additional conflict-of-interest disclosures
Nomura Japanese Equity Research is available electronically for clients in the US on NOMURA.COM, REUTERS, BLOOMBERG and THOMSON ONE ANALYTICS. For clients in Europe, Japan and elsewhere in Asia it is available on NOMURA.COM, REUTERS and BLOOMBERG. Important disclosures may be accessed through the left hand side of the Nomura Disclosure web page http://www.nomura.com/research or requested from Nomura Securities International, Inc., on 1-877-865-5752. If you have any difficulties with the website, please email grpsupporteu@nomura.com for technical assistance. The analysts responsible for preparing this report have received compensation based upon various factors including the firm's total revenues, a portion of which is generated by Investment Banking activities. Unless otherwise noted, the non-US analysts listed at the front of this report are not registered/qualified as research analysts under FINRA/NYSE rules, may not be associated persons of NSI, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account. Industry Specialists identified in some Nomura International plc research reports are employees within the Firm who are responsible for the sales and trading effort in the sector for which they have coverage. Industry Specialists do not contribute in any manner to the content of research reports in which their names appear. Marketing Analysts identified in some Nomura research reports are research analysts employed by Nomura International plc who are primarily responsible for marketing Nomuras Equity Research product in the sector for which they have coverage. Marketing Analysts may also contribute to research reports in which their names appear and publish research on their sector.

Distribution of ratings (US)

The distribution of all ratings published by Nomura US Equity Research is as follows: 38% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified as a Buy rating; 4% of companies with this rating are investment banking clients of the Nomura Group*. 55% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classified as a Hold rating; 1% of companies with this rating are investment banking clients of the Nomura Group*. 7% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classified as a Sell rating; 0% of companies with this rating are investment banking clients of the Nomura Group*. As at 31 March 2011. *The Nomura Group as defined in the Disclaimer section at the end of this report.

Distribution of ratings (Global)

The distribution of all ratings published by Nomura Global Equity Research is as follows: 49% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified as a Buy rating; 37% of companies with this rating are investment banking clients of the Nomura Group*. 40% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classified as a Hold rating; 46% of companies with this rating are investment banking clients of the Nomura Group*. 11% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classified as a Sell rating; 16% of companies with this rating are investment banking clients of the Nomura Group*. As at 31 March 2011. *The Nomura Group as defined in the Disclaimer section at the end of this report.

Explanation of Nomura's equity research rating system in Europe, Middle East and Africa, US and Latin America for ratings published from 27 October 2008
The rating system is a relative system indicating expected performance against a specific benchmark identified for each individual stock. Analysts may also indicate absolute upside to target price defined as (fair value - current price)/current price, subject to limited management discretion. In most cases, the fair value will equal the analyst's assessment of the current intrinsic fair value of the stock using an appropriate valuation methodology such as discounted cash flow or multiple analysis, etc. STOCKS A rating of 'Buy', indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of 'Neutral', indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of 'Reduce', indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of 'Suspended', indicates that the rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the company. Benchmarks are as follows: United States/Europe: Please see valuation methodologies for explanations of relevant benchmarks for stocks (accessible through the left hand side of the Nomura Disclosure web page: http://www.nomura.com/research);Global Emerging Markets (exAsia): MSCI Emerging Markets ex-Asia, unless otherwise stated in the valuation methodology. SECTORS A 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next 12 months. A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next 12 months. A 'Bearish' stance, indicates that the analyst expects the sector to underperform the Benchmark during the next 12 months. Benchmarks are as follows: United States: S&P 500; Europe: Dow Jones STOXX 600; Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia.

Explanation of Nomura's equity research rating system for Asian companies under coverage ex Japan published from 30 October 2008 and in Japan from 6 January 2009
STOCKS

16

Nomura | Steel Update

June 23, 2011

Stock recommendations are based on absolute valuation upside (downside), which is defined as (Target Price - Current Price) / Current Price, subject to limited management discretion. In most cases, the Target Price will equal the analyst's 12-month intrinsic valuation of the stock, based on an appropriate valuation methodology such as discounted cash flow, multiple analysis, etc. A 'Buy' recommendation indicates that potential upside is 15% or more. A 'Neutral' recommendation indicates that potential upside is less than 15% or downside is less than 5%. A 'Reduce' recommendation indicates that potential downside is 5% or more. A rating of 'Suspended' indicates that the rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the subject company. Securities and/or companies that are labelled as 'Not rated' or shown as 'No rating' are not in regular research coverage of the Nomura entity identified in the top banner. Investors should not expect continuing or additional information from Nomura relating to such securities and/or companies. SECTORS A 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation. A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation. A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation.

Explanation of Nomura's equity research rating system in Japan published prior to 6 January 2009 (and ratings in Europe, Middle East and Africa, US and Latin America published prior to 27 October 2008)
STOCKS A rating of '1' or 'Strong buy', indicates that the analyst expects the stock to outperform the Benchmark by 15% or more over the next six months. A rating of '2' or 'Buy', indicates that the analyst expects the stock to outperform the Benchmark by 5% or more but less than 15% over the next six months. A rating of '3' or 'Neutral', indicates that the analyst expects the stock to either outperform or underperform the Benchmark by less than 5% over the next six months. A rating of '4' or 'Reduce', indicates that the analyst expects the stock to underperform the Benchmark by 5% or more but less than 15% over the next six months. A rating of '5' or 'Sell', indicates that the analyst expects the stock to underperform the Benchmark by 15% or more over the next six months. Stocks labeled 'Not rated' or shown as 'No rating' are not in Nomura's regular research coverage. Nomura might not publish additional research reports concerning this company, and it undertakes no obligation to update the analysis, estimates, projections, conclusions or other information contained herein. SECTORS A 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next six months. A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next six months. A 'Bearish' stance, indicates that the analyst expects the sector to underperform the Benchmark during the next six months. Benchmarks are as follows: Japan: TOPIX; United States: S&P 500, MSCI World Technology Hardware & Equipment; Europe, by sector Hardware/Semiconductors: FTSE W Europe IT Hardware; Telecoms: FTSE W Europe Business Services; Business Services: FTSE W Europe; Auto & Components: FTSE W Europe Auto & Parts; Communications equipment: FTSE W Europe IT Hardware; Ecology Focus: Bloomberg World Energy Alternate Sources; Global Emerging Markets: MSCI Emerging Markets ex-Asia.

Explanation of Nomura's equity research rating system for Asian companies under coverage ex Japan published prior to 30 October 2008
STOCKS Stock recommendations are based on absolute valuation upside (downside), which is defined as (Fair Value - Current Price)/Current Price, subject to limited management discretion. In most cases, the Fair Value will equal the analyst's assessment of the current intrinsic fair value of the stock using an appropriate valuation methodology such as Discounted Cash Flow or Multiple analysis etc. However, if the analyst doesn't think the market will revalue the stock over the specified time horizon due to a lack of events or catalysts, then the fair value may differ from the intrinsic fair value. In most cases, therefore, our recommendation is an assessment of the difference between current market price and our estimate of current intrinsic fair value. Recommendations are set with a 6-12 month horizon unless specified otherwise. Accordingly, within this horizon, price volatility may cause the actual upside or downside based on the prevailing market price to differ from the upside or downside implied by the recommendation. A 'Strong buy' recommendation indicates that upside is more than 20%. A 'Buy' recommendation indicates that upside is between 10% and 20%. A 'Neutral' recommendation indicates that upside or downside is less than 10%. A 'Reduce' recommendation indicates that downside is between 10% and 20%. A 'Sell' recommendation indicates that downside is more than 20%. SECTORS A 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation. A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation. A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation.

Target Price
A Target Price, if discussed, reflect in part the analyst's estimates for the company's earnings. The achievement of any target price may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market, and may not occur if the company's earnings differ from estimates.

17

Nomura | Steel Update

June 23, 2011

Disclaimers
This publication contains material that has been prepared by the Nomura entity identified at the top or bottom of page 1 herein, if any, and/or, with the sole or joint contributions of one or more Nomura entities whose employees and their respective affiliations are specified on page 1 herein or elsewhere identified in the publication. Affiliates and subsidiaries of Nomura Holdings, Inc. (collectively, the 'Nomura Group'), include: Nomura Securities Co., Ltd. ('NSC') Tokyo, Japan; Nomura International plc ('NIplc'), United Kingdom; Nomura Securities International, Inc. ('NSI'), New York, NY; Nomura International (Hong Kong) Ltd. (NIHK), Hong Kong; Nomura Financial Investment (Korea) Co., Ltd. (NFIK), Korea (Information on Nomura analysts registered with the Korea Financial Investment Association ('KOFIA') can be found on the KOFIA Intranet at http://dis.kofia.or.kr ); Nomura Singapore Ltd. (NSL), Singapore (Registration number 197201440E, regulated by the Monetary Authority of Singapore); Capital Nomura Securities Public Company Limited (CNS), Thailand; Nomura Australia Ltd. (NAL), Australia (ABN 48 003 032 513), regulated by the Australian Securities and Investment Commission ('ASIC') and holder of an Australian financial services licence number 246412; P.T. Nomura Indonesia (PTNI), Indonesia; Nomura Securities Malaysia Sdn. Bhd. (NSM), Malaysia; Nomura International (Hong Kong) Ltd., Taipei Branch (NITB), Taiwan; Nomura Financial Advisory and Securities (India) Private Limited (NFASL), Mumbai, India (Registered Address: Ceejay House, Level 11, Plot F, Shivsagar Estate, Dr. Annie Besant Road, Worli, Mumbai- 400 018, India; SEBI Registration No: BSE INB011299030, NSE INB231299034, INF231299034, INE 231299034); Banque Nomura France (BNF); NIplc, Dubai Branch (NIplc, Dubai); NIplc, Madrid Branch (NIplc, Madrid) and OOO Nomura, Moscow (OOO Nomura). THIS MATERIAL IS: (I) FOR YOUR PRIVATE INFORMATION, AND WE ARE NOT SOLICITING ANY ACTION BASED UPON IT; (II) NOT TO BE CONSTRUED AS AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE ILLEGAL; AND (III) BASED UPON INFORMATION THAT WE CONSIDER RELIABLE. NOMURA GROUP DOES NOT WARRANT OR REPRESENT THAT THE PUBLICATION IS ACCURATE, COMPLETE, RELIABLE, FIT FOR ANY PARTICULAR PURPOSE OR MERCHANTABLE AND DOES NOT ACCEPT LIABILITY FOR ANY ACT (OR DECISION NOT TO ACT) RESULTING FROM USE OF THIS PUBLICATION AND RELATED DATA. TO THE MAXIMUM EXTENT PERMISSIBLE ALL WARRANTIES AND OTHER ASSURANCES BY NOMURA GROUP ARE HEREBY EXCLUDED AND NOMURA GROUP SHALL HAVE NO LIABILITY FOR THE USE, MISUSE, OR DISTRIBUTION OF THIS INFORMATION. Opinions expressed are current opinions as of the original publication date appearing on this material only and the information, including the opinions contained herein, are subject to change without notice. Nomura is under no duty to update this publication. If and as applicable, NSI's investment banking relationships, investment banking and non-investment banking compensation and securities ownership (identified in this report as 'Disclosures Required in the United States'), if any, are specified in disclaimers and related disclosures in this report. In addition, other members of the Nomura Group may from time to time perform investment banking or other services (including acting as advisor, manager or lender) for, or solicit investment banking or other business from, companies mentioned herein. Furthermore, the Nomura Group, and/or its officers, directors and employees, including persons, without limitation, involved in the preparation or issuance of this material may, to the extent permitted by applicable law and/or regulation, have long or short positions in, and buy or sell, the securities (including ownership by NSI, referenced above), or derivatives (including options) thereof, of companies mentioned herein, or related securities or derivatives. For financial instruments admitted to trading on an EU regulated market, Nomura Holdings Inc's affiliate or its subsidiary companies may act as market maker or liquidity provider (in accordance with the interpretation of these definitions under FSA rules in the UK) in the financial instruments of the issuer. Where the activity of liquidity provider is carried out in accordance with the definition given to it by specific laws and regulations of other EU jurisdictions, this will be separately disclosed within this report. Furthermore, the Nomura Group may buy and sell certain of the securities of companies mentioned herein, as agent for its clients. Investors should consider this report as only a single factor in making their investment decision and, as such, the report should not be viewed as identifying or suggesting all risks, direct or indirect, that may be associated with any investment decision. Please see the further disclaimers in the disclosure information on companies covered by Nomura analysts available at www.nomura.com/research under the 'Disclosure' tab. Nomura Group produces a number of different types of research product including, among others, fundamental analysis, quantitative analysis and short term trading ideas; recommendations contained in one type of research product may differ from recommendations contained in other types of research product, whether as a result of differing time horizons, methodologies or otherwise; it is possible that individual employees of Nomura may have different perspectives to this publication. NSC and other non-US members of the Nomura Group (i.e. excluding NSI), their officers, directors and employees may, to the extent it relates to non-US issuers and is permitted by applicable law, have acted upon or used this material prior to, or immediately following, its publication. Foreign-currency-denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of, or income derived from, the investment. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies, effectively assume currency risk. The securities described herein may not have been registered under the US Securities Act of 1933, and, in such case, may not be offered or sold in the United States or to US persons unless they have been registered under such Act, or except in compliance with an exemption from the registration requirements of such Act. Unless governing law permits otherwise, you must contact a Nomura entity in your home jurisdiction if you want to use our services in effecting a transaction in the securities mentioned in this material. This publication has been approved for distribution in the United Kingdom and European Union as investment research by NIplc, which is authorized and regulated by the UK Financial Services Authority ('FSA') and is a member of the London Stock Exchange. It does not constitute a personal recommendation, as defined by the FSA, or take into account the particular investment objectives, financial situations, or needs of individual investors. It is intended only for investors who are 'eligible counterparties' or 'professional clients' as defined by the FSA, and may not, therefore, be redistributed to retail clients as defined by the FSA. This publication may be distributed in Germany via Nomura Bank (Deutschland) GmbH, which is authorized and regulated in Germany by the Federal Financial Supervisory Authority ('BaFin'). This publication has been approved by NIHK, which is regulated by the Hong Kong Securities and Futures Commission, for distribution in Hong Kong by NIHK. This publication has been approved for distribution in Australia by NAL, which is authorized and regulated in Australia by the ASIC. This publication has also been approved for distribution in Malaysia by NSM. In Singapore, this publication has been distributed by NSL. NSL accepts legal responsibility for the content of this publication, where it concerns securities, futures and foreign exchange, issued by their foreign affiliates in respect of recipients who are not accredited, expert or institutional investors as defined by the Securities and Futures Act (Chapter 289). Recipients of this publication should contact NSL in respect of matters arising from, or in connection with, this publication. Unless prohibited by the provisions of Regulation S of the U.S. Securities Act of 1933, this material is distributed in the United States, by NSI, a US-registered broker-dealer, which accepts responsibility for its contents in accordance with the provisions of Rule 15a-6, under the US Securities Exchange Act of 1934. This publication has not been approved for distribution in the Kingdom of Saudi Arabia or to clients other than 'professional clients' in the United Arab Emirates by Nomura Saudi Arabia, NIplc or any other member of the Nomura Group, as the case may be. Neither this publication nor any copy thereof may be taken or transmitted or distributed, directly or indirectly, by any person other than those authorised to do so into the Kingdom of Saudi Arabia or in the United Arab Emirates or to any person located in the Kingdom of Saudi Arabia or to clients other than 'professional clients' in the United Arab Emirates. By accepting to receive this publication, you represent that you are not located in the Kingdom of Saudi Arabia or that you are a 'professional client' in the United Arab Emirates and agree to comply with these restrictions. Any failure to comply with these restrictions may constitute a violation of the laws of the Kingdom of Saudi Arabia or the United Arab Emirates. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means; or (ii) redistributed without the prior written consent of the Nomura Group member identified in the banner on page 1 of this report. Further information on any of the securities mentioned herein may be obtained upon request. If this publication has been distributed by electronic transmission, such as e-mail, then such transmission cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. The sender therefore does not accept liability for any errors or omissions in the contents of this publication, which may arise as a result of electronic transmission. If verification is required, please request a hard-copy version. Additional information available upon request NIPlc and other Nomura Group entities manage conflicts identified through the following: their Chinese Wall, confidentiality and independence policies, maintenance of a Restricted List and a Watch List, personal account dealing rules, policies and procedures for managing conflicts of interest arising from the allocation and pricing of securities and impartial investment research and disclosure to clients via client documentation. Disclosure information is available at the Nomura Disclosure web page: http://www.nomura.com/research/pages/disclosures/disclosures.aspx

18