SSAB Ab

to this presentation of the SSAB Q4 and full year report for 2022. My name is Per Hillström. I'm Head of Investor Relations. And with us today, here is President and CEO, Martin Lindqvist, and also our CFO, Lena Kralius. And the agenda, Martin will start to go through the year and the quarter, another record year for SSAB. Lena will go into the financial a bit more in detail. And then Martin will handle the outlook and the summary. And we finish off, as usual, with questions and answers. So by that, please, Martin, take the stage.

Thank you, Per. and good morning 2022 was i would say very volatile year with a lot of of things that we needed to handle with started with the invasion of ukraine problems with transports and so on but having said that we had a very good year and if we start with one of the most important kpis safety We continue to improve our lost time injury frequency. We were just above 1.0, which is, compared to the history, really good. And I would also say, compared to the industry, on a good level. We are not done. We need to come down to zero. And we have, of course, the ambitions to become the safest steel company in the world. We also had record earnings. The adjusted operating profit or EBIT was 29.3 billion SEK, which was the best year we've ever had. 21 was a good year, but this was more than 10 billion better for the full year. And we continue to generate decent and strong cash flows. Cash flow before dividend amounted to 14.2 billion SEK, so another year with strong cash flow generation. And when we ended the year, we had a net cash position of 14.3 billion, compared to not that many years ago, a net debt position. In Q4, we also took an impairment write-down of the goodwill related to the acquisitions of Ipsco and Ruki of 33.3 billion. that affected as a one-off the fourth quarter. And the board, we had a board meeting yesterday, the board will propose to the AGM a dividend of 8 kronor and 70 öre per share. And we have, as you know, a dividend policy of putting out dividend between 30 and 50% of net profit, and this is smack in the middle, 40%. The board will also ask the AGM for an authorization to buy back up to 10% of the shares in SSAB. If we move into the divisions, special deals, record earnings, we had strong price realization, good development of the product mix, and the EBIT margin for the full year was 24.6%, which is really, really good. Q4, prices and product mix held up very well. We had planned maintenance in Q4, but we also saw a slightly weaker apparent demand in Europe that impacted shipments and result, these two reasons, but still a very good profitability of 1.4 billion in Q4. Another strong achievement is our US plate operations, where we at the full year had an EBIT margin of 38.1%, so more than 38% in EBIT margin. We had record earnings and we continued to increase prices during the year. If we look at Q4, Still very good earnings of 2.7 billion. We saw that prices decreased somewhat in Q4 from very high levels. But all in all, a very strong achievement from North American plate or SSAB Americas. If we look into the plate-related divisions and start with SSAB Europe, for the full year, we had an EBIT margin of 17.1, which is slightly lower than we had in 2021. In Q4, we had a planned maintenance outage. We decided to do the maintenance on one of the blast furnaces in Råå that was planned for the second half of 2023. Given the low apparent demand in Europe, we decided to do that already in Q4. And the idea then was that if the market normalizes, we would start it up again early in January. And I think we started it up 2nd or 3rd January, so it's now up and running again. And we saw during Q4, as we knew we would see, lower realized prices. Tibnor, it's a function of the, I would say, Nordic strip market to a large extent. We saw weak demand, weak apparent demand at lower prices. In this turbulent environment, we managed to continue to take market shares on the distribution market in the Nordics in, I would say, all countries, Finland, Sweden, Norway, and Denmark. The main reason for the big negative result is the inventory losses that we take them when prices go down. So the underlying EBIT was much better, but including inventory losses, it was minus 403. And then rookie construction. typically run into a lower season in Q4 and Q1. And on top of that, the Nordic construction market slowed up. So they were around zero for the fourth quarter. So all in all, three high-performing divisions in the fourth quarter. The strip-related divisions with focus on the European business met lower apparent demand. If we then continue over to what we are aiming for in mid-term and long-term, 2022 was a very important year for the transition of SSAB. We actually delivered 500 tons of fossil-free steel to our strategic customers. We start now to see not only yellow goods, we see machines from Epiroc, trucks from Volvo and cars starting to use now fossil-free steel. We see from the partnerships we have in automotive, heavy transport, construction, machinery and material handling, and also construction, we see a strong demand for these kind of products and a huge interest for this development. And I would say overall, our transformation is on plan. And you know what we are going to do. We are going to replace the blast furnaces and coke oven plants with new integrated mini mills in Rae and Luleå. So build complete new mills in Rae and Luleå. And we are going to take away the blast furnaces and the coke oven battery in Oxelösund and install an electric arc furnace there as well. And this is nothing new for us because we have been running electric arc furnaces in our US operations for many, many years. This will give us much better flexibility, much shorter lead times and virtually no carbon dioxide emissions from our operations. And we are now in Luleå and Rae running our feasibility studies. They are ongoing. We have started in Luleå the public consultation process for the plant. We started that in Q4. And we have also, in hybrid development, continued to develop the technique. And we have, during the quarter, filed for a number of very, very interesting patents at the European Patent Office. One prerequisite for this is, of course, that we have fossil-free electricity. And this transformation will require, for SSAB's part, three to four terawatt hours more electricity than we consume today. But it is, in total, we are going to need less energy. We are just shifting from coal as an energy carrier into electricity. And this will also, the mini mills, help us to get more flexibility in the mix. So we could use either a sponge iron or scrap in the melt. And that will also help us to be able to reduce volatility, because what we are doing in the company, and you see effects of that during 2022, we are reducing, working with increasing flexibility, moving the product mix and everything in order to reduce low point profitability and have a more stable development or a stable situation when it comes to earnings in a very volatile industry. So I'm a strong believer in that the most stable steel company in this volatile industry will over time be the winner. And when we do this transformation, we will be able to reduce 10% of all the carbon dioxide in Sweden and all the carbon dioxide emissions in Finland, we will reduce with 7%. So we are also leading the way for the steel industry, showing that what was usually called a hard to bait industry, that this is actually possible. And I usually say that without the steel industry doing its homework, there will be no possibility to meet the targets we have set up in the Paris Agreement. On top of this, the three to four terawatt hours we need for SSAB, we will also need for Hybrids demonstration plant in Gällivare, another five terawatt hours for 2026 in order to start now to produce sponge iron in large scale. So with that, Lena, I hand over the financials to you.

Thank you, Martin. pretty much was already covered in Martin's presentation. But if we have a look at the, first of all, the shipments, start with the steel shipments, we can see that the first half of the year, yes, it was strong, stable demand, volume still growing. And then we can see the lower demand on the second half of the year and mainly in the European market, as Martin already indicated, US holding up better and emerging markets as well. If we look at the sales graph, we can see that the prices, yes, they were increasing during the first half of the year, started to go down during the second half of the year. And then again, mainly related to European market demand coming down. Summing up these wonderful bars here, quarterly EBITDA for 22, and then analyzing the sales graph, we can say that the sales prices, they were well compensating for the higher raw material cost that we had, higher energy cost, logistic cost, higher maintenance and repair cost, fixed cost, and the lower activity level as well. And on top of that, making then billion higher result. so we can really be proud about the result in 2022. If we then look into Q4, analyzing Q4 2022 versus 21, Prices on group average level still positive impact. However, the only division here underneath is special steel division with higher prices. The other division already had the lower prices, so special steel compensating for that. We have also FX impact positive stronger US dollar in the price analysis impacting US. volumes lower and mainly with the Europe division, special steel division and rookie construction. Variable costs related to raw material cost being higher, PCI, coking coal, iron ore relatively flat compared to last year, and scrap prices slightly lower compared to last year. Fixed cost and capacity utilization were impacted with the oxaloosunt maintenance and the repair work in Raahe. Comparing to Q3, we can see the price development. During the fourth quarter, also the mix becoming slightly weaker. Prices came down in Europe division, in America's division, holding better still in the special steel division, as Martin said. Volumes only slightly higher. This mainly coming from the Europe division, having a higher portion of standard grades, thus impacting actually negatively the average price level. And the variable cogs here having positive impact, and this is primarily coming from the lower cost of US scrap. Other raw materials were relatively flat compared to quarter on quarter. And again, the maintenance and repair activities impacting the fixed cost and capacity utilization. What we were promising during Q3 result release, that we will focus on cash generation and releasing working capital. The outcome we can see here, it is actually providing more cash flow than the actual EBITDA. So organization did really, really good job with this task. And this is primarily again related to inventories. So we were heavily reducing inventories during Q4. Year-on-year comparison, more than 10 billion, better result. Change in working capital and the deviation here is mainly related to higher raw material cost in inventory. Maintenance capex on similar level, taxes being high, but as you know, a big part of this is related to 2021 result. Strategic capex up with the Oxelos on conversion program. And the dividend paid out this year, you can see here. And if the dividend is approved, what is proposed, the dividend payout this year will be around 9 billion. All this led to the very strong financial position that Martin already also showed, 14.3 billion net cash, positive net cash. And as already also mentioned, board yesterday proposed to have 8.7 SEG per share as a dividend corresponding to this 9 billion payable and the authorization for the mandate for share buyback program. The impairment on goodwill was done at the end of the year as a normal annual impairment test process. And it led to the write down of 33.3 billion. And it is not affecting the cash flow nor the taxes. Raw material prices. Iron ore leveling out. We saw an increase in prices at the end of the 22, mainly related to the China releasing lockdowns. And then, on the other hand, coking coal peaking during Q2 in year 22 started to... come down rather heavily, but to bear in mind that we do have this lag in the impact of our consumption cost. Iron ore is around one quarter and it is longer with coking coal. We do have quite substantial inventory still. So there is a longer lag with this price impact in our result. On average level, we can say that Q1 variable costs will be on similar level during Q1 than they were on Q4. What we know is that the scrap prices in US started to go up at year end and have gone up during January. So there we know that the cost will be higher during Q1 compared to Q4. I will end my presentation for this familiar graph, the cash need of the business. We were indicating that there is a need for 5 billion for this year. We didn't quite reach that, but we plan to ramp up and pick up and we plan to spend the 5 billion during this year. With that, Martin will tell about the outlook.