SSAB AB (publ)

We can drive our transformation from a position of strength. The level of earnings during the last years has been record high. We have achieved a 40% global market share in wear-resistance steels. And we have taken the lead in the green transformation of the steel industry. We plan for major investments in the Nordic operations, putting SSAB in a superior cost position The blast furnaces and coking plants will be closed and our CO2 emissions will largely be eliminated. Pilot shipments of fossil-free steel to customers already began in 2021. We will continue to increase the share of high-strength steels and premium steels. This will be done with industry-leading profitability and create value for all stakeholders. Join us when we're transforming the future of steel.

So welcome. Good morning and welcome to this presentation of the SSA Big Q3 result. My name is Per Hilstrom. I'm responsible for investor relations. And presenting today, we have our president and CEO, Martin Lindqvist, and our CFO, Lena Kraelius. We will start here with Martin. We'll give an overview of the third quarter. Then Lena comes in and goes deeper into the numbers. And then Martin comes back at the end with the outlook and the summary. And at the end, we will have good time also for your questions. So by that, please, Martin, start the presentation.

Thank you, Per. And good morning and welcome to this Q3 report presentation. If you look at the highlights for Q3, we had somewhat lower earnings compared to Q2, but I would claim that we still had, given the circumstances and the headwind we experienced, especially on the European market, we had a good profitability. We continued to generate good results in special steels in America. We had an operating margin in special steels of 24% in America. We were at 35% during the third quarter. But we do what we typically do when we experience headwind on the market. We become more cost-cautious. We have set a target on group level to reduce cost by more than 500 million SEK, where over 50%, roughly 50%, is structured. And that is a good thing to use the possibility to become more, when the market is tougher, to become more cost-cautious. It is about permanent and temporary layoffs. It's work, our banks and so on, and restrictions on new hires. But the most important part, I would say, is what we internally call multi-skillings. We start already now to prepare for the future and develop people so all of us working within SSAB can do more than one job in the future. So that's an important part, building for the future, but also handling the headwind on the European market. We continue to see a good trend in safety, rolling 12 months. We were at 0.94 in LTI frequency. That's not world-class yet, and we are not at our target to be the safest steel company in the world. But we have a couple of big sites like Hemelina, Rohe, Montpellier, and Oxidesund that are really approaching world-class performance when it comes to safety. We continue, as we should, to generate strong cash flows. We had an operating cash flow of more than 6.3 billion during the quarter, which is in line with the second quarter and slightly lower than the fourth quarter, 22, but still good and strong cash flow generation. And with that cash flow generation, we come outside our financial target, which is to have a net gearing or a net cash position of 20% of equity, so plus minus 20%. We ended the third quarter of 24%. When we look at that financial position and when we think about the market outlook and the upcoming investments in the transformation, we see the possibility to launch now a share buyback program of 2.5 billion SEC until the next AGM. And the reason why we do this is that we are confident that we will continue to perform well and we are performing well by increasing our product mix with focusing more and more on high strength steels and QNT and I will come back to that in a second. If we look at special steels during the third quarter, shipments were impacted by a weaker market, especially for strip-related products in Europe. The good thing is that prices held up, and they should do that over the business cycle, and that means that the profitability were still on fairly stable level compared to Q1 and Q2, so around or just below 2 billion. We are continuing to build our strong market position with products that add significant customer value in the form of higher productivity, better sustainability performance, lower weight, better fuel consumption, and more stable prices over the business cycle. And if we look at the product family, we usually divide it up between wear Q&T, structural Q&T, protection Q&T, tooling Q&T, and in our latest segments, additive powder or powder manufacturing. We start with the wear segment or the wear Q&T that typically goes to, as an example, truck and bodybuilders, material handling, mining, quarries, recycling. We have a very strong market position. The global market share is above 40%. And in certain segments, certain geographies, it's much stronger than that. So that's our prime product where we constantly develop new products and help our customers to develop new applications. Structure QT, we sell under the name of strength, goes mainly to lifting and forestry. So these are structural steels with long resistance. So a strong market share there as well globally. Protection, unfortunately, the uncertainty in the world has increased the demand for protection. QNT goes both to civil application and military application. Our brand name there is Armox probably. the best armoured plate produced in the world. Tooling, we work towards tooling and engineering companies under the brand name Toolox. And then AM powder or the powder we have started to produce now in Oxelösund goes mainly to customers 3D printing. And this is a very good way of getting fossil free powder and use it for prototyping and small series or small batches of products that we develop ourselves, but mainly together with customers. We look at Europe, weaker market, headwind, more pronounced seasonal slowdown than we usually see. Typically, we see slow July in the Nordics and a slow August in mainland Europe. But this year, it was slower than normal. We have measures to lower cost, both structurally and short-term, and increase flexibility. And here is where we mainly work with what we internally call multi-skilling. What is holding up pretty good is even though the volumes are going down, automotive, advanced high strength steels at automotive is holding up pretty well. And if you look at some recent examples where we increase our market share or take market shares is for the most advanced high strength steels. We are talking yield strength up to 2,000 megapascals. for examples of new products. But this is also part of the partnership program together with the future customers for fossil free steels. We start already now to ramp up volumes and come into new platforms in advance of being able to produce and deliver both SSAB 0, but also in the future, fossil free steel. So this is a good business driver and makes, together with the uniqueness of the products, us to grow and continue to grow this market over time. If you look at Americas, I would say when I look at this picture and I looked at it yesterday and I said this is stable, stable prices, fairly stable volumes, stable profitability, EBIT margin of 35%, which is really, really good. Some pressures on market prices on the spot market in Q3, but stable, generally stable demand. We had some during the quarter transport problems and conjunctions in the transport system. But apart from that, I would say stability. To ignore the reflection of the European, I would say the Nordic steel market, weak market conditions in Q3, lower shipments, lower volumes, measures to lower costs. I would say more than 50% here are structurally lowering costs. If we look at the EBIT, it was minus 113. If we take away revaluation of inventories, we had the positive underlying operating results. So, of course, we were hit a lot by revaluation of stocks. Rookie construction, seasonal improvement versus Q2, less pronounced than normal. And the reason for that is, of course, that the construction market is very, very weak and has been weak so far this year and will continue to be weak. But they are doing a good job reducing costs and structurally change the company. And even though the market conditions are very tough, they can post an operating result for the third quarter of the 28 million second. Some words then about SSAB0, the ramp up of zero, SSAB0 continues, and as you might remember, these are products based on recycled steel using fossil-free electricity, biocarbon and biogas. So no carbon emission offsetting or mass balancing allocation schemes, so this is purely fossil-free steel production. We see a very strong demand from segments like heavy transport, automotive construction, not only in Europe but also in the U.S. And this is, as said earlier, our platform to continue to leverage growth. So part of our partner program where we now start to deliver zero steel, small volumes of fossil-free steel, and ramping up new customers, new segments, new applications for the future. So with that, Lena, it's time for a deep dive into the financials.

Thank you, Martin. Let us begin by looking at the shipment volumes, which is the graph on top on the right-hand side on the slide. This is the total of steel division shipment volumes, and as already mentioned, a reduction from Q2. Reduction was 12% in Q3. And if we shortly analyze this versus the outlook that we gave, we know that the special steel division was lower in shipments than the outlook. And that was mainly related to the European market demand being lower than what we anticipated. Europe division was in line with the outlook and America's only slightly lower. And that was due to the logistic constraints that Martin already mentioned. If we then look at the revenue, which is next to the shipment graph, we can see that the reduction was not as big as it was in shipment. It was 7%. And if we also analyze briefly the prices, the outlook that we gave, all the divisions were better than in the outlook we gave. And that was mainly due to the strong premium mix that was in the outcome and also slight support of the FX impact. If we then look at the profitability EBITDA figures below on this slide, 18% in Q3, which was stable with the Q2 performance, 5.3 billion in EBITDA in Q3, while Q2 was 5.9. And if we split this 5.3 per delivered steel ton, we can see that it was very stable with the previous quarter. And then analyzing the reasons underneath this performance, Q2 performance close to 5 billion and Q3 4.4 in operating result. Prices, as already mentioned, slightly higher compared to previous quarter. and the main contribution coming from special steel division. Total was 400 million positive impact on the EBIT and special steels contributing 320. Slightly less from Europe with 30 and Americas with 50. Volumes already discussed, 12% lower, and here the biggest contributors were Europe Division and Special Steels. Europe Division dropping 16% and Special Steels 14%, both related to the market demand. Stable variable cost and that is supported by stable raw material cost. Fixed cost giving a positive impact and that's primarily due to seasonality with lower summer temporary workers. But also we can claim that part of the savings actions start to be visible in this, as Martin already mentioned. Minor impact of revaluation of FX items and the capacity utilization with negative impact to EBIT 330 million SEK. And that is mainly due to the annual maintenance outages during Q3. in a Europe division, and Oxelösund was starting the maintenance at the end of the quarter. When comparing to previous year, clearly the biggest impact coming from the prices And as it says here, Special Steel Division is the only division still having a higher price level compared to last year. Contribution here with 100 million positive, while Europe Division and Americas with 1.3 billion negative. Volumes slightly higher. And here we have the positive impact from Europe division and Americas, while Special Steel division was 7% lower. And also here to comment about the automotive shipments holding the Europe shipments on a good level. Variable cost supported by the lower raw material cost contributing positively. The fixed cost being higher than last year, and here we also have the impact of the FX rate, weaker Swedish crown of 200 million negative, and the rest is coming from the higher FTE with higher salary-related cost and higher materials and services cost. Minor impact also in this comparison with the revaluation of balance sheet items, and the capacity utilization is having minor negative impact, To remind that last year we had higher cost of maintenance during Q3, this year a lower cost. But we have also reduced the capacity utilization in the Nordic mills to balance with the demand. So that is also included here and increasing the unused capacity cost during this year. Cash flow, strong cash flow generation, and here we compare with the previous year. Earnings lower. Big difference in the working capital. As you know, this year the focus has been in the cash generation. And here we have a positive impact of working capital also in Q3, which is opposite to when we analyzed previous year. That was impacted by the buildup of raw material safety stocks. Maintenance capex higher than last year. Taxes lower. And the strategic capex in Q3 was 700 million SEK. And here in this table, it is netted by the accounts payable of 360. Year-to-date strategic capex is 1.3 billion. And as you know, it will start to increase along with the Oxelösund EAF conversion project. All of this summing up to 5.1 net cash flow in Q3. And if we sum it up with the Q2 net cash position of 11.7, we are landing on the level of 16.8 at the end of Q3. And this will be now the basis to start up the share buyback program as Martin already presented earlier. Raw material view, if we compare the volatility this year compared to last year, it is clearly less volatile. And also between quarters we can see that relatively stable purchase prices. Iron ore stable as in also in coking coal prices. And the outlook remains stable. Similar trend with the scrap prices. All in all, we anticipate that the average raw material cost remains stable also during Q4. Maybe to remind that we have the winter stocking season started in the Nordic mills, and that will continue during Q4. And we can see then the raw material inventory increasing during the last quarter. And the maintenance cost table, which has not changed a lot since we previously showed this one. During Q3, a lot of maintenance actions in the Europe division and also starting the maintenance audits in Oxelösund at the end of Q3, which will also continue during Q4. There will also be maintenance in Mobilmil and Raahestripmil. So a lot of maintenance activities during the last quarter. And the table here is illustrating how the costs are impacting the divisions. I guess that's my last slide, and then Martin will continue with the outlook.

Thank you, Lena. So if we look into Q4 then and start with the segments, the customer segments, I would put heavy transport as neutral, healthy level of heavy truck production in Europe, good activity and ship building in the US. So yellow or neutral automotive. Signs of slowdown in the core demand due to inflation and higher interest rates, but structurally growing the advanced high strength steel market and share and especially for the most advanced products. And I said earlier, also moving into new platforms, new customers in advance of the shipments of a zero and fossil free steel. So I would put that neutral as well compared to sequentially compared to Q3 construction machinery slower. I would put it between weak and neutral. Good demand in North America, weaker demand in Europe and China, definitely weak. Material handling, somewhat cautious sentiment within mining. Stable demand in recyclings overall around neutral. Energy, strong. Good demand for wind power and other renewables, and that is, of course, an important segment for our plate business in North America. And then we have the two red dots, construction, European market impacted by inflation, higher interest rates, etc. So construction business clearly seeing a very weak surrounding. And then service centers, the flip coin of it, focus on inventory management towards year end. And the big question will, of course, as always be, if prices move up in Q1, we will see apparent demand or restocking. from service centers at the end of the quarter. And if prices continue to move down, we will see continued destocking into Q1. So that's always hard to predict, especially for the second half of December. But looking at the volumes and the stock levels at service centers, they are not on a very high level. In some areas, I would say rather the opposite. So when we look at the outlook for fourth quarter and guide, as we always do for shipments and prices, we say that in special steels, we will see stable shipments and somewhat lower prices. In Europe, we will see somewhat lower shipments due to outages and so on, and significantly lower prices. And in Americas, we will see somewhat lower shipments and lower realized prices. And what we also see is that the demand for high-strength steels weakened, especially for strict products in Europe. And the fourth quarter outlook remains to continue to be on that level. So nothing new, really. So to sum it up, continued good trend in safety. And why do I talk so much about safety? First of all, that safety is our priority number one, and the target we have is to become the safest steel company in the world. but also that the correlation between good safety performance, a well-run company, and a profitable company, that correlation is very high. So that is a very good KPI for many obvious reasons. The weak European market, we handled that by measures to reduce cost. We have good cash flow generation, and we are launching now the share buyback program. We continue to lead the green transition. The investments in Oxelösund and in other places continues. One very important verdict came here beginning of October from the environmental court in Sweden regarding the Oxelösund cable. And that, of course, verdict, which was very clearly written, could, of course, be appealed and will most probably be appealed. But this was a very important step for the transformation in Oxidozone. And I said now a couple of times, we continue to see strong demand for SAB0, huge interest for our transformation into fossil-free steel production. And we will pretty soon here in the coming weeks launch a couple of new, very interesting partnership programs with the big OEMs. With that, Per.

Thank you, Martin and Lena, for the presentations. And then we can start to go into the Q&A. Just a reminder there, as always, if you have more than one question, please state them one at a time to give Lena and Martin the chance to answer. So by that, I will ask the operator to present the instructions for the Q&A. So please, operator.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Once again, if you would like to ask a question, please press star 1 and 1 on your telephone keypad. We will now go to your first question. And your first question comes from the line of Alan Gabrielle from Morgan Stanley. Please go ahead.

Thank you. Good morning. I have two questions. The first one is on decarbonization. Martin, can you give us an update where we stand with your various decarbonization projects? How comfortable are you with the CAPEX figures you have given us? And why not really engage more actively with countries like Finland or the US as alternative locations for your green melt if Sweden would not really offer any incentives? That's the first question.

No, but we haven't changed the ambition. We are, as I've said many times, we are dependent on outdoor circumstances. We need environmental permits, we need power allocation, and we need cables. And that is moving on with the latest verdict in Oxelösund, I would say quite nicely, knock on wood. Of course, it might be or will probably be appealed to the higher court and we'll see what happens then. But I would say so far so good. So we have started those investments and we will pretty soon have a groundbreaking ceremony for the electric arc furnace. But we have done a lot of investments around it. And when it comes to Luleå and Ra, we are working hard with the authorities, we are working hard with a lot of stakeholders to create the preconditions for that transformation. So in Ra, it's moving on quite nicely. We are now in the process, we are in a fast track when it comes to the environmental permits so we will have we applied for that in august and in finland the fast track is within 12 months and if i know finland after all these year correctly it will not necessarily take all the 12 months it could go faster the power cable is on its way the 400 kilovolt cable In Luleå, we are struggling a bit more. We are very happy that Svenska Kraftnät has announced that they will build a 400 kilovolt cable, and that will be hopefully in service 2028. We are working with environmental permits, so that's moving on. And then we see, of course, as said before, huge interest from other parts of the world. But the main focus is the Nordic transformation, and we are We are working with that and trying to, as said, create circumstances in order to do that in a timely manner. But it's not 100% under our control. That's what I'm trying to say.

Thank you. And my second question is on Europe. You are guiding for stable costs, lower volumes, but also significantly lower realized prices. So on an Excel spreadsheet, this would imply negative EBITDA for Europe. Do you think you have done enough cost optimization to avoid a negative EBITDA for that division going forward?

But what we really do now is to not only be cost cautious, but structurally and fundamentally change the cost. So what we are focusing very much on internally as one of the main focus areas is what we call low point profitability. So increased flexibility, increase. I mean, every krona we can move from fixed to variable is worth a lot of money for us. And so we also do a lot there to make sure that, we can come out better every downturn than the previous downturn and with the ambition to become the most profitable steel company not only on the top of the cycle but also in relative terms on the bottom of the cycle. So I think that work is ongoing. It has been ongoing for quite a while. But what you typically do on top of that, when you experience headwind on the market, is you do this usual stuff. And after all these years in the steel industry, I usually say internally you should never, ever underestimate the possibilities it gives when the market becomes a little bit tougher. We have done it before, we will continue to do it and we will become better day by day, week by week, month by month, quarter by quarter. Thank you.

Thank you. We will now go to your next question. And your next question comes from the line of Tristan Gressa from BNP Paribas. Please go ahead.

Yes, hi, good morning and thank you for taking my questions. I have also two, the first one on special steel. You got four stable shipments into Q4 despite the maintenance outage and some market weakness you flagged. Is that fair to see this 300,000 ton volume as kind of the trough volumes moving forward? And also, how much of that demand weakness you flagged is already baked into your ASP guidance? Should we expect further pricing weakness into next year? And if that's the case, do you think this pricing weakness, what you have with your backlogs, is going to accelerate or the scale of the pricing weakness is going to be somehow consistent with what we've seen so far? That's my first question.

But I don't know if this is an answer to your question, but over time, you should expect us to continue to grow special steel volumes. Then it can differ between quarter, of course, but... Structurally, we should continue to grow the special steel business and the volumes, and we have strategic targets that we have communicated, and we have targets beyond that as well. So over time, I'm not worried because the products are so unique that if you want to work with productivity or environmental efficiency or cost efficiency, it is worth using these kind of products and the products I presented earlier in the presentation. it will continue to grow structurally that I'm 100% sure of. Then how it goes between one quarter sequentially and another quarter, of course, some ups and downs. When it comes to prices, you should also expect prices to be volatile, but much less volatile than for standard products. So on a higher level with less amplitude. So they should be. And that's what we see now. They follow to some extent or they follow other steel prices but but with less with much less amplitude and and much more stable over time so you should expect us to continue to develop the volumes increase the volumes and become over time better and better to to generate profitability in that division all right that's um that's helpful um and my second question is on

So we've heard U.S. mail saying that very little of the infrastructure spending has actually flowed through so far. Is that also your sentiment? What are you seeing on the ground? And does that mean that we still have this big catalyst ahead of us? And more short-term as well on the plate market in the U.S., have you seen demand moderated a bit? And what has been driving recent pricing weakness there? Thank you.

I think what we have partly seen in Q3 is a little bit of wait and see from certain segments, and I would say especially from the steel service segments. But structurally, it's important to remember that the U.S. plate market is structurally undersupplied. And now with the Inflation Reduction Act and infrastructure bill, the the demand or the demand will structurally increase and we talk about a lot about energy about the offshore wind and so on also a lot of of needs for infrastructure like bridges and so on so power transmission power poles and so on so so we are quite over time positive to the us plate market then of course i mean there will always be a difference between real demand and apparent demand, and there will always be... I mean, the steel service segment in the US is quite big compared to Europe, and you typically see them playing with stocks in anticipation of price movements. So you will see volatility there as well, and typically, if you look historically, that has been one of our most... volatile divisions. But now, structurally, this has partly changed. And if you also look at it as an important part of both the infrastructure bill and the Inflation Reduction Act, before there was a lot of talk about produced in America. Now the demand is, or In order to participate in these programs, it needs to be melted in America. So over time, I have a very strong confidence in the U.S. plate market. And us being the market leader with sometimes above 30%, but I would say around 30% of the U.S. plate market, we should be well off. And especially when you look at our cost position at our two mills, X Works, we are...

they're really good so so i'm not worried and it can differ between one quarter and another exactly like it can like it can in in any division but over time it looks positive all right that's uh that's helpful just maybe a quick follow-up on that so in in terms of the timing of this higher infrastructure spending coming through and positively impact demand and potentially prices is that something you see more to come in Let's say Q2 next year. Is that where you think this could actually hit?

I think it will come to a larger extent. I mean, with this big wind farms is one example being planned. I think on the east coast in the U.S., there is a lot of interesting projects being planned. So we will see more of that coming, yes. If it's exactly the second quarter when it is, but it will come. That's my opinion.

All right. Thank you.

Thank you. We will now go to the next question. And your next question comes from the line of Bastian Sunnigowitz from Deutsche Bank. Please go ahead.

Yes, good morning all. My first question is just on the price dynamics and special deals. And I guess you touched on that already briefly, but I just wanted to check again. I guess you've been guiding obviously for prices to be down a little. Yet obviously the margins are still significantly above previous levels relative to where we can see current margins in the more spot-oriented business such as European operations. So from the way you look at this, is there basically still just a time lag for how far margins have been holding up and they still will reverse back towards the levels we've seen in the previous years? Or do you think anything has really also structurally changed here in terms of march and mix, et cetera? That is my first question.

What is changing over time is the mix, both in Europe, but also in special states. We talk a lot about them. Sometimes we're a bit sloppy talking just about Q&T, but there is a lot of different products within Q&T. If you take the prime segment or the Crown UL hard ox, we are launching now new products that are developing on the market, better weldability, better bendability, thinner plates with the same abrasive-resistant material properties and so on so it's about shifting the market so i mean if we can move from from hardox 450 to hardox high tough or hardox 650 there is a huge difference in in prices and margins so it is a combination of stability in prices on a higher level or more stable prices even though they are not of course fully unaffected by spot prices but more stable on a higher level and then constantly moving with a mixed day by day by day. You won't see any huge changes week by week or quarter by quarter, but constantly also improving the mix gives us better resilience and better stability. That goes for Europe as well. Every kilo we can shift from, if you take hot rod coils to outside the Nordic region, every kilo we can move from that segment to automotive advanced high-strength steels makes a huge difference when it comes to profitability, margins, and last but not least, stability.

Okay, great. Now that's very interesting. Kalle Martin, would you be as confident to say, I mean, the sub 200 levels on margins, which we've had like in the years, like 17, 18, 19, et cetera. We're not going to see those again. Would you be as confident to say that?

No, because I don't know what will happen. I mean, especially now in a very, very unsecure world. But structurally, we should be much better off as a company and also in special steels than last time. And we will continue to be that over the cycle. So everything else equal, I would say that we will be better off. But then you never know. I mean, the world is changing constantly. For me, this is about, I wouldn't call it a relative game, but relativity. I mean, we need to come out better and better and better, given the circumstances, and also better than our peers. And that's a constant struggle. We have a program for that in SSAB. It's our ways of working. We call it SSAB 1. Day by day, we become better and better, involving all 16,000 employees, including myself.

Okay, great. No, thanks for that. Then my next question is just on your capacity utilization and the way you run your mills. You obviously have quite a bit of maintenance upcoming. I think most of those breaks are, however, I think more in the downstream side of the operations. Do you have any plans to react to the current market environment while also taking out some of your upstream capacity?

I think the timing for our maintenance here in Q3 Q4 is given the market quite good. So apart from that, of course, you never know where the market will go. But I think we have decent order book, decent circumstances. So we'll see. But we plan to run the maintenance as Lena described. And in Mobil now, in U.S., we have two meals and we do every second year we do a maintenance. So last year it was Montpellier, now it's Mobil. So no plans right now on top of that.

Okay, great. And then my last question is on your coal inventory. And here I'm wondering whether you have completed the build of your coal inventory ahead of the winter. And if so, is your inventory prices here already reflecting the very strong recent coal price development which we've seen in the last couple of months?

Part of the winter stocking has been started and is ongoing. So not all the winter stocking done yet. And the pricing is, of course, tied also to the index, so we will be seeing some increase in the purchases. But I would say that the timing also with the winter stocking has been good, because now it seems that the prices have been continuing increasing, so we are in a good process in that.

We went into this year as well with higher stocks than normal due to the invasion of Ukraine. We had to find new suppliers and build higher safety stocks. So we have, in that aspect, a pretty good starting point.

Could you let us know how far you're done with the restocking? Is it like 70% or so, 80%?

I don't have the figure, and I know that it is ongoing.

Nothing different. We do as we always do. And that's, of course, as you know, due to the ice situation up in the Northern Baltic Sea. We need to do it before the ice comes because then we can't bring in the ships anymore.

Yeah, exactly. Okay, great. Thank you.

Thank you. We will now go to the next question. And your next question comes from the line of Moses Allout from JP Morgan. Please go ahead.

Hi, good afternoon, everyone. Thank you for taking my question. So my question is just on Europe and the market and recent talks between Europe and the US on how to tackle the global excess capacity issue. What do you hope from these discussions here between the EU and the US on how we can potentially level the playing field here, especially from imports with China? This is the second year now that European steel producers are having to curtail capacity to address market imbalance. And I guess just a quick follow up to that is now with talks um halted until year end do you see possibility to uh perhaps direct some uh shipments into the us market that's my first question but if you talk about what what can we do then to avoid

Chinese import in the future. I think the CBAM is very important. Now we have a very high ambitions in Europe and a strong pressure from authorities and politicians, but also huge interest from customers to reduce the emissions. And now for any European steel producer, it starts to cost money to buy emission rights and the marginal The cost of the marginal ton for a typical European steel producer has gone up with up to 200 euro per ton. Of course, we need to handle that. Exactly as you said, we need to see a level playing field. We can't burden the European steel industry and then allowing import from countries where they have a much worse environmental footprint, and then on top of that, chip it by a boat for a number of weeks, emitting a lot of more carbon dioxide emissions, and then let that... put pressure on the European steel, demands on the European steel industry, and then let everyone else just have a free ride. So I think that is very important. And I'm hoping that, of course, the best would be if we had global rules and a level playing field when it comes to emissions and emission rights. That would be the best case. But I think it's important, or I think it's wise for Europe to lead that. But then we need to also... create a level playing field you can't burden the european steel industry and let anyone everyone else just ship steel with even worse environmental performance into europe without any tax border adjustments so that's what i'm looking for just a very quick follow-up to that though do you do you believe that with the current cbam implementation that europe can remain competitive

uh near term especially when you account for higher production costs and any premiums on on lower co2 content um do you feel that you can still remain competitive on a global on a global scale yes i do because i think over time it will be us as end users uh set putting demands on on the products we buy so so for me this uh

problem with global warming is one of the most important problems we have as mankind to tackle. So I think ups and downs during the journey, but we need to go in this direction and the steel industry will definitely go in this direction. When we started to talk about this back in 2016, 2017, people were just, if you put it kindly, nodding their heads and said, this is Martin, this is completely wrong. Now you have really lost it. Now that the European steel industry is moving in this direction, I foresee that the global steel industry must and will also move in this direction. Then, of course, it will take longer time in certain parts of the world. But I think the demand will be there and it will be. a necessity for the steel industry that stands for 10% of the global emissions to take the responsibility, that we take our responsibility. Otherwise, there is no possibility that we can come even close to the targets we have set up in the Paris Agreement. So for me, this will be end user driven or demand driven from the market. But maybe that is a positive view, but that's what I believe.

Thank you very much for that. And I guess the only other question from me, so just on the annualized cost savings of the $500 million, do you know how much was realized in Q3? And perhaps what are your expectations into Q4? Should we just assume... It's a quarter of that 500 million already.

You should assume that we are at full run rate end of Q4, end of this year, and it's a bit more than 500, but still, and 50% of it or roughly a little bit less than 50% of it is structured. The rest is these usual cost measures that we do when we experience headwinds.

And the other cost savings at rookie construction as well?

The majority in Tidnoren rookie construction is structured. Okay. And rookie construction has come a little bit further because they experienced the headwind on the market earlier than the other divisions. Okay. Understood. Thank you.

Thank you. We will now go to your next question. And the next question comes from the line of Johannes from DMB. Please go ahead.

Hello, everyone. Hope you can hear me.

Yes, we can hear you, Johannes.

Great, great. So I have a good, good, just to follow up a bit on the networking capital. I mean, last year you had such a release on networking capital in the fourth quarter. Now you did really well on networking capital in the third quarter. Are you still expecting the fourth quarter to be a period where you can release more networking capital? Maybe some color on how you see networking capital because of your ambition for next year.

Q4 will continue on a good level, on a similar level at least compared to Q3.

So you mean an additional release?

Yes. And then typically in our business, we have the winter stocking, as already mentioned. And then during Q1, we tend to have a negative working capital behavior because of these big inventory piles that we will pay during Q1. So Q4 will still be a positive outcome.

We have set clear targets now. We haven't been so clear historically. We have been focusing a lot on working capital and capital efficiency, but now we have clear targets. We call it cash conversion per division, per business unit. So there is still room to become more effective.

Then on the new buybacks, how should we think about that? I mean, are you sort of using these two as kind of a mechanical way you're buying let's say every week or in a smooth way until the next AGM or any other plans of how to sort of pursue the buybacks, if you can shed some light on that. And also, how did you come up to 2.5 billion as a mandate?

And you should view it as a sign of confidence, first of all. And then secondly, 2.5, we were exceeding the targets. We looked at the market situation, the future investments and so on, and did, I would say, an assumption that we felt were prudent. And the trigger point was, of course, that we were exceeding our financial targets. So I think it's a round and nice figure. Okay. But we should.

Yeah.

Yeah. Do we purchase? Of course, the purchasing is done between the timeframe and it is given as assignment to our partner bank and 2.5 billion. is perhaps also a figure which is due to the limitations in the daily trade that you can do based on the regulations. So that was a good figure for this limited time span because we need to end it before the next AGM meeting.

Okay, that's helpful. And then my final question is on the new product, SSAB0. Is this something you expect to give you some kind of

extra earnings that can be visible in the group in the coming quarter or is it like still early stage in terms of you know it is early stage we are aiming for i think it's 40 000 tons this year this is a way of of first of all building market for the future and we felt that waiting for the hybrid steel to come out is still a number of years down the road so this is was one way to to build market and build market presence and knowledge and start to build products with customers and also give us the possibility to, as said, now come into new platforms, new segments, new customers. So that's good. And it was also a way, as we talked about on the Capital Markets Day, to establish a premium for these kind of products, which we have done in the market. Will it be visible by 40,000 tons? It is a lot of steel. If you see a pile of 40,000 tons, it's huge. But in the big scheme of it, what is it, seven, eight million tons, it's not so much. So it will be visible in the P&L, the coming quarter.

Yeah. Understood. Just a final thing there on the zero product. I think you mentioned that the capital markets say that the established premium is 300 US dollar. Is that true?

correct and and it is it still valid i mean it's actually said euro but i guess the exchange rate is close to one so so yes you're correct okay thank you thank you we will now go to the next question and your next question comes from the line of christian kopfer from handelsbank and please go ahead right uh thanks operator uh good morning

Just a few thoughts on my side, especially on specialty. I remember you guided for prices to come down somewhat.

Tristan, we have a fairly bad line.

Yeah, I have a bad line, too. I don't know why, to be honest. We can't hear you.

We can hear you, but if you speak loud, then we can hear you even better.

Okay, I try to be... Thank you. I try to be...

Yeah, I tried to talk to clear them. First of all, Martin, I think you guided ahead of the quarter that prices should come down somewhat. And then they ended up slightly upwards. So now you're guiding for prices to come down again. in Q4. So are you more certain this time around that prices really will come down, or is it still, you know, pretty big uncertainty there?

Your memory is so good, Christian. Yes, we were slightly wrong there. They held up better than we expected, yes, in Q3.

But the mix was also better.

It's a combination of prices and mix. But, I mean, as I said, we don't guide on mix, but mix over time, not quarter by quarter, but over time will continue to improve.

Yeah, okay. Fine. And then for America's Um, what can you say, because you said you had some transportation issues. Uh, what what is the call it? Underlying. Underlying, you know, a shipment that you should be able to to achieve for America.

You know, between take a look at the decent quarter and volume wise and that's a good proxy. We had. From time to time, you always have problems with race cars tracks. They have some storms coming in in mobile. You have, uh. Tornadoes in in Montpelier and so on. So it is a bit complicated from time to time. And we experienced that in, of course, in, in. Especially during this season time of the year in Europe as well with. Uh, the Morris with boats and so on, but used to winter, so we could have shipped more. Yes, in Q3, not massively more, but. Look at look at a decent quarter volume wise, and that's, I would say would be the run, right?

So over time in America should be, you know, at least north of 450,000 tons a quarter.

I don't remember the figures, but Paris Nordic.

Definitely. Definitely. Yes.

Yeah. Okay. Okay. Fine. And then just to finally maybe back to special fields again. It seems from my side that you are definitely prioritizing. prices over volume, even if, of course, you mentioned, Martin, that you should be able to and you are already structurally growing that business over time. But is it still fair to say that you try to keep up prices rather than to try to push out the volumes to the market?

Yes, yes. Because we have unique products, we have fantastic products. And I mean, for me, it's so much about stability and in a very volatile industry, creating as much stability as possible. And then it's about. being firm on prices, and especially if you are the market leader, you should take that responsibility to the extent possible. And then, of course, continuously work with upgrading new products. I mean, if we would have talked about it 10 years ago, we would have been extremely proud of Hardox 400. That's in our books and 450 commodities now. So we are constantly working with better and better products that helps our customers to And for them, it is about productivity. It's about load capacity. It's about fuel consumption. It's about environmental efficiency. It's about reducing the number or the length of the wells with 70%. So, I mean, yes, kronor per ton or euro per ton. But the material is getting thinner and thinner and the productivity among end users and customers are getting better and better. So it's a slightly different sales model. You're not selling necessarily at euro per ton. You're more selling a solution. And the more advanced products we can bring to the market and more unique we become, the better that sales model sticks. Not a huge difference once again between quarters, but this is part of the constant struggle we work with every day. And that's part of the business.

Yeah, that sounds very good. I think it sounds really good with the strategy for specialties as well. Thank you very much.

Thank you, Christian.

Thank you. We will now go to the next question. And your next question comes from the line of Maxime. Kage from OdoBHF. Please go ahead.

Yeah, good morning. Yeah, I'm coming back to these negotiations between the U.S. and Europe on free trade. It seems they are more difficult than initially planned, and there is increasing risk, apparently, that the U.S. removes the tariff rate quotas in favor of Europe. I know that your production is mostly done in the U.S. for U.S. demand, but still you have some some shipments from Europe to the US. Could you be affected by such a move by the US that would take place the 1st of January next year?

Yes, of course, but to a lesser extent than other steel companies, I would say, because, I mean, the majority, the absolute majority of the products we sell in the U.S., we produce in the U.S., not only standard plate, because that we don't produce and ship from the Nordics. But now with the investments and the ramp-up of the investments in Mobil, we can produce, I would say, 95, 90, 95 percent of the product spec in Mobil that we can produce in Oxelösund. So what we are really exporting... with probably some exceptions, is the advanced high strength steels from, I would say, especially Borlänge that goes into automotive. And if you take the products I showed earlier in the presentation, the high... strength yields as high strength martensitic grades to be honest there is no one else producing them in us so yes we will be affected but with the i mean us is our biggest market and and we have a very strong presence with the majority of our own products and then the the exception is i would say mainly automotive and mainly the the toughest grade toughest grades going to companies like gm and ford and others and their sub suppliers so in relative terms we will be less affected i guess than many steel companies but still affected okay yeah and and and yet second question is on the u.s auto strike do you have a

big exposure to the U.S. automakers, and do you see an impact from the strike, or is it manageable?

No, but we have seen impacts. I mean, we sell a lot to U.S. automotive producers, the most advanced products, so we have seen effects on that already in Q3. Then it depends where it goes in Q4 and onwards, but we have seen effects of it in Q3. Okay, thank you.

Thank you. One moment, please. We will now go to our next question. And the next question comes from Alan Gabriel from Morgan Stanley. Please go ahead.

Thank you. Just one follow-up question on Section 232. If that gets hypothetically removed, how do you expect it to impact the U.S. plate market in general, and how would your business react to such a measure if it were to happen? Thank you.

You mean, Alain, if you would see opening up for imports into the U.S. plate market?

Yes, absolutely. Absolutely.

That would, of course, affect us. But once again, I mean, a big part of this infrastructure bill and everything related to Inflation Reduction Act is actually required to be melted in America. So I would say it would affect us and it would affect the market, but less so than three, four, five, six years ago due to that demand of melted in Americas. Thank you.

Thank you. We will now go to the next question. And your next question comes from the line of Andrew Jones from UBS. Please go ahead.

Hi, Martin. Thanks for the call so far. A couple of questions. First of all, on blast furnace closures, we've seen a few, by the maintenance time being taken in recent times. So this sort of time of the year when you have a weakening market, we often see that accelerate. Are you considering any such measures given the weakness in the market? And what has to change from here for you to actually close the furnace? That's my first question.

We actually have one blast furnace idle since many years in Oxelösund, the smaller one in Oxelösund. So that has been idle for a number of years.

That's true, but incrementally.

No, but in Q1, I think we saw in Europe, was it 11 or 13 blast furnace being idle? Now we see, of course, given the market situation and also the very weak demand from, I would say, specialty construction, one could be led to believe that we will see further closures of blast furnaces. We are not there yet. I mean, you never know what happens next week or next month. But we have no such plans for the time being.

Okay. Just on the buyback, you obviously saw authorization earlier in the year with the fourth quarter results for this 10% buyback. Obviously, it's smaller than that, and you've got a pretty large cash pile sitting there. I would have thought that you would have had the scope to do more. What put you off the idea of scaling it up more?

Was it just your... But as Lena said, I mean, the trigger point was that we were passing or exceeding the 20% target. So that was a trigger point. And then, of course, you need to take into consideration future investments, market situation and so on. And we did that. And Then you have certain limitations as well. You can only buy, I think it's 20, 20, 25% of the daily trade and so on. And next AGM is within five months. So, so I would say it's both pure mathematics, but also, I would say, uh. a decent sum. We test this now and see how it goes. But you should see it as a sign of confidence for the future as well. So even though the market is tough right now and we have big investments in the transformation ahead of us, we should continue to perform decently when it comes to cash flow generation. So it's a combination of a good figure, but also limitations when it comes to share buyback. Okay, that makes sense.

And just finally on Tibnor and Ruki, which we probably spend less of our time analyzing detail, what are your expectations for the fourth quarter? Should we see more windfall losses in Tibnor? Should it get worse?

Better in your view, I mean, is it we seem to be the wind forces, the pure mathematics, depending on where the prices are moving. So what I expect to see and what we will see is structurally. No, we're being improved. We have a new managing director. I didn't know what he used to run our tip north that business in Denmark in a very successful way. Now he stepped on in his new job as managing director for to know what in in. in 1st of July. He has launched these programs. It's not only about cost saving, it's about efficiency. We are constantly in Sweden building out what we call Handelsstolsgruppen in order to service the smaller fragmented markets. We are taking market shares, which is important. So I expect, independent on where the prices are moving, that Tidnor should continue to become structurally better quarter by quarter. in rocky construction i think they're doing a very good job handling a very tough situation in a weak construction market not only in in sweden and finland but also in in europe they are also running efficiency programs developing new products developing new solutions they should also over time become more and more effective and i think they're doing a great job samir and his team so so that what i that's what i expect to continue to see And they should be over time, improving and becoming better and better compared to peers.

Okay, thank you.

Thank you. We have one further question. And the question comes from the line of Christian Argo from Citibank, please go ahead. Hello, Krishan, are you on mute? Can you hear me? We can hear you now.

Hello? Yes. Thanks a lot for taking my question. And the last one I have remaining is on the cash deed. My apologies if you've answered it already. But the cash deed guidance for 11 billion for the fully-accounted key is unchanged from the last guidance, while if you look at the run date of the nine months, it is running at a significantly lower level. So should we expect some kind of no sharp catch up in the Q4, especially into the cash taxes?

Yes, we didn't update the cash need estimate. Of course, Q4 is still time to spend money. If we don't reach that level, it remains to be seen. Also in taxes, we most likely will be somewhat lower than in the previous estimate that we gave. And of course, if there are delays in the CAPEX spend when it comes to the OxyLosun project, that might have an impact. But the plan is still to, of course, fulfill the given frame.

I mean, it's important to say in the project as such, there are no delays, but it could be a timing issue with invoices.

Yeah. Okay, thank you. Thank you. There are currently no further questions. I will hand the call back for closing.

Okay, thank you. Thank you very much. A lot of good questions. But now we will conclude this conference. Thank you, Martin and Lena. And thank you for the attention, and we wish you a pleasant day.

Thank you very much.

Thank you. We can drive our transformation from a position of strength. The level of earnings during the last years has been record high. We have achieved a 40% global market share in wear-resistant steels, and we have taken the lead in the green transformation of the steel industry. We plan for major investments in the Nordic operations, putting SSAV in a superior cost position The blast furnaces and coking plants will be closed and our CO2 emissions will largely be eliminated. Pilot shipments of fossil-free steel to customers already began in 2021. We will continue to increase the share of high-strength steels and premium steels. This will be done with industry-leading profitability and create value for all stakeholders. Join us when we're transforming the future of steel.