SSAB Ab

Good morning and welcome to the presentation of the SSABQ2 report. My name is Per Hillström. I'm responsible for Investor Relations. And with us today is our President and CEO Martin Lindqvist and our CFO Lena Crayelius. And if we look at the agenda, Martin will start going through the quarter in brief. Then Lena will explain more details on the financials. And then Martin comes back with the outlook and summary. And then at the end, we will have a good time for questions. So by that, please, Martin, go ahead.

Thank you, Per, and good morning. I will start to go through the second quarter in brief. And the second quarter was a record quarter by many means. We had a combination of high realized prices, I would say solid, decent internal performance and good cost control. And we had an operating profit for the first time exceeding 10 billion in a quarter, 10.4 billion. And that is 29% EBIT margin. We continued to grow special steels. We reached almost 400,000 tons. in a single quarter, and we have been growing now special steels volumes with 8% per year since 2015. Safety performance continued to move in the right direction. We had moving 12, 1.56 in lost time injury frequency. And if we look year to date, we are at 1.1, including contractors, which is, I would say, in the steel industry, a very good performance. Not where we would like to be. We want to be at zero and being the safest steel company in the world, but still a good development. And we closed the quarter with a strong balance sheet with a net cash position of 7.2 billion. If we look into the divisions, we had record results for all divisions during Q2. We had a result of almost 2.4 billion in special steels, an EBIT margin of 27%. In SSAB Europe, we did just north of 4 billion SEC. meaning an EBIT margin of 28%, which is very strong. Then, of course, Americas with 3.5 billion and an EBIT margin of 40%, so very strong earnings and profitability in the three steel divisions. Tibnor had an EBIT of a bit more than 600 million and an EBIT margin of 13%, which is good and strong, and Roke Construction a bit more than 200 million and a margin of 10%. If we look at other important achievements during the second quarter, we continue to build up our unique value chain for fossil-free steelmaking. We continue to deliver volumes, pilot volumes to customers and partners. We also inaugurated our big hydrogen storage pilot up in Luleå during Q2, and it's now up and running. So what we aim to do and continue to do is to develop this fossil free value chain and start to produce fossil free steel in a big scale at the latest 2026 and then be completely fossil free around 2030. And we are following that plan. We see good development. We are now manning up the project office, hiring project leaders and so on. So far in line with internal expectations and plans. We saw during the second quarter also the first construction machine built by using fossil free steel from SSAB. And that one was delivered by Volvo to the construction company NCC during the second quarter. This was a big achievement. So now we start to see also finished products out in the market used by end users. And it has been received very positive from the end user side. Liana, some words about the financials.

Yes. Let's start with the shipment volumes. The outcome of Q2 being 1,711 kilotons. Improvement versus Q1 of 3%, while being 8% lower than last year. The main reason for this deviation It is linked to this incident we had during Q1 that we told about related to Raahe blast furnace and Chilthardt being idled most of the Q1. The startup took place in March and then Q2 was still the ramp up phase. The transportation and logistic challenges that we've been reporting, there was a slight improvement during Q2, not fully resolved yet, but the situation at the end of Q2 was slightly better than end of Q1. Then also to repeat what Martin already showed in the previous slides, the special steels had the record shipments, almost 400 kilotons. So that's indicating also that the premium decent. If we then look at the sales graph, the revenues 35.5 billion, improvement from Q1 of 12%, which is then the sales going up 12% and shipments 3%, that's telling the story of the improved sales prices. EBITDA per ton delivered steel improved during Q2 compared to Q1. And maybe if we just summarize once again the strong performance, it is with more stable production, continued good cost control and the higher prices all leading up to the EBITDA total of 11 and EBITDA margin then almost 32%. If we look at the analysis a bit more, comparing to the Q2 last year, and here we are comparing the operating profit outcome of 10.4 billion this year versus last year 4 billion. Biggest positive impact definitely with the sales prices. And if we compare the average sales prices of steel divisions versus last year, with special steel division, we are talking about 55% higher price level. With Europe division, 64% and America's 67%. Also, Rukki Construction and Tipno contribute positively for the positive result. Volume being 8% lower as already illustrated in the previous slide and the main reason being the Europe division with 140 kilotons lower shipment volumes. Then if we look at the variable cost, the variable cost had a negative impact And this is now coming mainly through with the PCI, coking coal. Alloy scrap energy and logistics costs were higher compared to last year, while the iron ore was relatively flat. Fixed cost, they were higher this year. We did have some higher manning this year. We also took this full profit sharing for 2022 at the end of Q2 in line with the good result. And then we had some higher repair and maintenance work done during this year. Also to mention that the cost for external materials and services is somewhat higher this year along with inflation. And also some minor item to mention that some of the costs related to transformation program starting to occur, which is telling that things are starting to happen. FX rate had a negative impact of 140 million SEK with the weaker Swedish crown versus US dollar and euro. Capacity utilization also linked to this ramp up phase in Raahe. And then if we look at the comparison versus Q1, Prices developed still positively. Special steels and Europe division, around 10% increase in prices. Americas, 4%. Tipno and ruuki construction also contributing positively in this comparison. Volumes already mentioned, the 3% increase, and the increase coming mainly from Americas and special steels. The variable cost from quarter one to Q2 did go upwards, and this is coming from all the main raw materials. Fixed cost having negative impact this month or this quarter being the summer quarter with higher level of summer workers, temporary personnel. Full profit sharing that we already mentioned in the previous slide, and then some higher repair and maintenance activities. FX deviation the same as versus last year. And the capacity utilization in this comparison, it is positive. And that's also related to this ramp-up of Raahe blast furnace. The positive item in other is related to the provision we did for oxylosun harm during Q1. Then let's continue to analyze the strong cash flow. Good earnings partially offset with negative impact from working capital. Inventories have gone up in value with higher raw material cost. And we have some higher raw material volumes as well. We were securing during Q2 the safety stock for raw materials to secure the production for coming months. We also have some higher accounts receivables, which is then related to higher sales prices. The net operating working capital over net sales ratio is still on a lower level than last year, end of Q2 being on a level of 18.7%. Last year was 20%. So we are in good control with the net working capital still. Taxes on a high level, as we have been indicating, this is mainly now related to the outcome of 2021. So far, we have paid almost 3 billion in taxes. And I said that's related to previous year result. Also to mention, in April, we did the payout of the dividend, 5.4 billion. But when we compare the cash flow from current operations this year versus last year, we were doing a better result. All this led to the financial position of net cash of 7.2 billion at the end of Q2. The cash need for the business, this slide we have not updated or changed since last time. We still see that the cash need for business for this year is 8.5 billion, with the 5 billion related to strategic investments, including Oxelösund conversion and the expansion of this QL line in Mobil. Interest expenses are expected to decrease. Our rating was improved to BBB-, and we have a lower level of debt. And also, the taxes will be higher than already discussed in the previous slide. Then, if we continue to discuss a bit more about the raw materials that had developed upwards since Q1 and last year, That development unfortunately will continue also for Q3. This graph on top illustrating iron ore prices. As in the bridge, we also referred to the deviation from last year being relatively flat. the cost will be slightly higher for Q2 and then thus impacting Q3 cost, but minor negative impact with the pellets, which is then the opposite of the development of coking coal, which is the graph illustrating below the price development going heavily up during this year. So the prices during Q2 will have an impact in Q3 of consumption cost. And we are talking around 30%, 35% even increase quarter on quarter with the coal cost. So definitely having impact to our margins. But on the other hand, the scrap spot prices developing downwards. Our purchase prices during Q2 were somewhat higher than Q1, but now the latest development with spot prices is that they have gone down. You can see the July prices on this graph. Before I let Martin continue with the outlook details, a reminder that Q3 is the quarter of maintenance outage. Here the table illustrating that during Q3 we start the maintenance in Special Steel Division. We have maintenance ongoing in Europe and Americas. And compared to last report, we have shifted the audits in Americas from October to September, thus shown in the different quarter here. But then I let Martin continue to tell details about the outlook.