SSAB AB (publ)

Good morning and welcome to this presentation of the SSAB year-end report. Another relatively strong year for us. Together with us presenting today is President and CEO Martin Lindqvist and CFO Lina Kraelius. And if we look at the agenda, we will have Martin starting by summarizing the year and the quarter. And then Lena, as always, will present the details on the financials. And then at the end, Martin will come back with the outlook. And then we will also have good time for questions at the end of the session. conference so by that please martin start your the presentation thank you parent and good morning

Start with some highlights in 2023. We had another strong year, not as strong as the record year last year, but still 16.5 billion SEC in operating result. We continue to generate strong cash flows. We had a net cash flow before dividend of 16.2 billion, and that gives us also a very strong cash conversion. We continue to develop our safety performance. We have, as you know, and we have talked about it before, the ambition to become the safest steel company in the world. We are not there really yet, but we are progressing. And I would say most of our major sites closed 2023 without any lost time injuries. We continue to lead the green transition. We have seen commercial shipments of SSAB 0 during 2023, and we continue with the pilot shipments of fossil-free steel. And the transformation of the new Nordic assets have started now with the transformation in Oxelösund, and I will come back to that. If you zoom in then more on Q4, it was It's impacted by maintenance in both special steels, Europe and America. And we also saw, both in Q3, but also in Q4, a weaker European market. And we saw profitability going down in all three steel divisions sequentially compared to Q3. If you look at some business highlights and start with the high strength steels or QNT, advanced high strength steels and QNT, we saw stable prices despite the weaker market. Special steel prices were down 2% versus the record level in 22. We also saw that customers were more and more buying from stocks, favoring short lead times due to the uncertain environment. We saw continued good growth in advanced high-strength steels to automotive, where we were outperforming the general steel market volume-wise. And we are, as you know, the world leader when it comes to these smart and synthetic advanced high-strength steels, especially for cold forming. And that is, of course, also helped by the introduction of SSAB and the fossil-free journey that paves the way for new businesses. We are into new platforms, working with new OEMs, and that volume will continue to grow in the coming years. Another strong year on the US plate market. We increased our market share to 31%, one percentage point, compared to 22%. And as I said, we had a successful ramp-up of the SSAB0 production in Montpellier during the year. And we launched SSAB Syrup as a new unique product in 2023. That is a product based on recycled steel using fossil-free electricity, bio-carbon and bio-gas. So no emissions and we are not using emission offsetting or mass balancing allocation scheme. So this is 0.0 kilo carbon dioxide per kilo of steel. We had the ambition to produce and ship more than 40,000 tons in 2023. We ended up shipping and producing 50,000 tons. And we have seen a huge interest for this product, not only on the European market, but also globally, and especially, I would say, in the US. I will come back to that. And this is, of course, also one of the platforms to leverage future growth. When we look at partnerships, we, during Q4, announced three new partnerships. One together with Scania, where we will decarbonize all steel deliveries from SSAB to Scania's heavy-duty vehicles at the latest 2030. Sandvik, another important partnership, where they will use fossil-free steel initially in the production of their loaders and trucks. A very important partnership. And then GE Vernova, that are now producing wind towers with the lowest carbon footprint in the wind industry using SSAB0. So three very important partnerships during Q4. And we see, as said, strong interest from customers for these more environmentally friendly plate products in the North American market. We also see that the underlying demand is helped by the federal programs that drives investments in, I would say, especially energy and infrastructure. And on top of that, the demand for melted in America favors local producers. So when we look at the demand, U.S. plate demand, we expect that to once again, in mid-term, reach historical peak levels of around 10 million tons. So a very positive view on the North American plate market, medium to long term. We continue to run our transformation. Oxelösund is the first mill out where we are building now the electric arc furnace and that will be up and running 2026 and then we will close the blast furnaces and the coke oven batteries. We have the environmental permit in place. We have secured the power allocation and in January just this Monday. We actually got the final permit for the power lines approved as well. So we are following our plan and we had the start of the construction work in November visited by the Swedish prime minister. We have also now in January gotten the power allocation for our transformation up in Luleå. So I would say that to sum it up so far so good we are following our plans and keeping to our ambitions with that lena i hand over to you for financials thank you

Let us start by looking at the steel shipment performance. As the graph is illustrating, the outcome in Q4 was 1,491 kilotons, which was deviating 19 kilotons from Q3 and 11 kilotons from last year, or the previous year, Q4. So rather stable performance in this comparison. And if we briefly do the analysis versus the outlook we gave, we were indicating special steels to have stable volumes and Europe and America somewhat lower volumes. And the outcome was that Europe and America was relatively stable, while the special steels was 11% lower. And the reasons being that the demand in the European market was lower than anticipated. To mention on top of that, we did have some logistic challenges at year end related to weather conditions, and that was causing some delays in Special Steels and Europe Division. Then if we look at the revenue performance, 26.5 billion in Q4, which was then a drop of 10% compared to Q3 and 13% compared to previous year. And again, if we do a quick analysis compared to the outlook that we gave, we were indicating that special steel's division will have somewhat lower prices. europe division significantly lower and america slower and the outcome was that with special steels we were spot on with the outlook while a europe division was slightly better compared to outlook and america's slightly lower compared to outlook driven by the market price development EBITDA performance Q4 3.4 billion compared to 5.3 in Q3 and compared to 4.6 in previous year. So let's have a look more detailed analysis in the quarterly comparison. We start by comparing Q4 operating result of 2.4 billion with Q3 4.4, the drop of 2.6 billion. And as you can see from the graph, the biggest impact was with prices. All divisions had lower prices in Q4 compared to Q3. Biggest impact coming from Europe Division and Americas, which both were contributing slightly below 1 billion negative impact, while Special Steel Division was still holding prices slightly better, and the impact was less than 400. Volume was 19 kilotons lower, and this was coming mainly from the Special Steel Division, as already commented. Variable cost. Nordic mills had lower raw material and energy cost, and they were contributing positively, while the scrap and alloys in Americas were slightly higher during Q4. Fixed cost, negative impact, but that was mainly due to the more extensive maintenance activities during Q4 compared to Q3. We had maintenance activities in Oxelösund, Mobil and Raahe strip mill. And on top of that, smaller maintenance activities at other sites. Also to bear in mind that Q3 is seasonally lower when it comes to personal cost. That is the holiday season. And Q4, that's more normal quarter when it comes to personal related cost. Minor impact of the effects related to balance sheet revaluated items and the capacity utilization also giving a negative impact with lower production, which was then again mainly related to the annual maintenance outages. We were also running a bit lower pace to keep the inventory levels in good control for year end. The other in this graph is related to insurance compensation in US, which was actually related to the incident during 22 with the burn through in the furnace. Then if we compare Q4 23 versus previous year, the drop is 1.4 billion. And again, fairly similar graph as previous slide. Biggest impact coming from the prices. On average, prices were 10% lower during 23 than 22. The biggest impact coming from division Americas with over 1 billion negative impact, Europe division slightly less than a billion impact and again special steels division holding prices better than other steel divisions. Also Rukki Construction and Tipno had lower prices. Volume deviation 11 kilotons, again related to special steels. And also in this comparison, the raw material in Nordic mills and energy cost was lower than the previous year and scrap cost was slightly higher. Fixed cost higher. We had more extensive maintenance during 2023 compared to previous year. And also personal costs slightly higher with index increases. Also transformation office related costs were slightly higher. Minor impact with the FX and the capacity utilization in this graph actually positive impact. We had higher production in Q4 during 23. Just to remind that 22, we had the blast furnace repair in Raahe. And the other similarly related to the insurance compensation. If we then have a look at the cash flow performance, Table comparing year on year, quarters and full year, and maybe just to pick some things from Q4. First of all, of course, stating that the good performance with working capital, targets set in the divisions to reduce the inventories, the targets were met, good performance by the organization. The acquisition of shares and operations was related to stall shopping in Örebro, acquisition done by TIPNO. And the contribution to affiliated companies was related to hybrid. And on a separate line item, you can see the purchase of own shares, which is then related to the share buyback program we started at the end of October. Briefly comparing full year performance. Lower earnings were well supported by the positive impact in the working capital. Other is related to purchases of CO2 emission allowances. Previous year we were swapping forward and this year we were purchasing more of the allowances. Strategic investments slightly lower than previous year, but this is not related to any delays in the projects, rather the timing of the costs. And we were indicating that we would be spending 5 billion a capex this year, but we turned out to spend only 4.5, but these costs will be moved forward to next year. And as in the report stating, we estimate to spend 5.5 billion next year. Dividend paid close to 9 billion. And the purchases of own shares, as already commented, related to share buyback program and the net cash flow performance was close to 6 billion, which is then leading to net cash position 18.2 billion. The frame set for the share buyback program was 2.5 billion and we will continue the program during Q1 and we will finalize it before the coming AGM in April. And the idea is to propose to renew the mandate for the share buyback program also next year. The dividend proposal is five crowns per share, and this would mean around five billion payout in the second quarter this year. Raw material view, iron ore as well as coking coal prices were increasing during Q4. as did the scrap price picking up towards year end, leveling out in January. And the outlook for Q1 is that the cost of consumption when it comes to raw materials is somewhat higher. And I will end my part with this maintenance cost estimate updated for this year. The difference compared to 2023 is that we will have more extensive maintenance in Americas at Montpellier Mill. Last year we had the maintenance in Mobile Mill, but this year it will be in Montpellier. And a bit more extensive maintenance in Luleå coming summer, but otherwise fairly similar timing-wise and plan-wise with maintenance this year as was last year. And then I give it back to Martin.

Thank you, Leena. So, looking into the near-term future and the coming quarter, or Q1, when we look at the market, we see that the underlying demand is fairly stable, with two exceptions. We expect, or I would say that construction is also stable, but on weak levels, especially in the Nordic region. But heavy transport in Europe slowing down from very high levels, slowing down a bit. Positive in the US for railcars and vessels. automotive signs of slowdown in car demand in Europe but structurally growing advanced high strength steel markets and as said we're into new platforms into new OEMs ramping up in front of fossil free and and zero deliveries construction machinery more mixed pictures strong demand and stable demand in north america slightly weaker in europe and china material handling stable demand mining recycling energy very good demand for wind power and other renewables especially in in u.s which is of course in a very important segment And then the swing factors, service centers, I would say a neutral underlying, but potential for some restocking in Q1 compared to Q4. So when we sum it up, we expect to see seasonal improvement, which we typically see in Q1, both for Europe and special steels. And Q4 were, as Lena mentioned, impacted by plant maintenance. We will have no plant maintenance in Q1. And we guide for significantly higher shipments in special steels, higher in Europe and Americas and somewhat lower prices in the three steel divisions. And the market prices or the spot prices started to increase again end of Q4. end of December and we will have some delays as always in that because we only sell on quarterly prices, half year prices and yearly prices so we will have some delay but the market prices will impact the realized prices with a certain delay as said typically between half and quarter and one quarter. So if we sum it up, I would say that 23 was a good year, good level of earnings. Q4, planned maintenance and a weaker European market. Continued to generate strong cash flows. Cash conversion, which is one of the internal KPIs, came out very good at 107%. We continue with the share buyback program. And as Lena said, the board will propose to the AGM to pay out 5 kronor per share in dividend which is exactly 40% or around 40% according to our financial targets. We continue to lead the green transition into fossil-free steel. All required permits in place for the Oxelösund transformation. Also now the power allocation in place for Luleå. And we continue to see strong demand for SSAB 0, actually stronger demand than we were hoping for. So that's very positive as well. So all in all, we close a good year, good performance, and we continue to focus very much on low point profit. becoming more and more flexible, more and more agile when it comes to cost, continue to develop the product mix into more stable products. And that work is far from over, and we will continue to work with that as continuous improvements. And that will, in relative terms, continue to strengthen SSAB. So with that, Per.

Thank you. Thank you, Martin and Lena, for the presentations. And now we can open up for the Q&A. And before that, I just remind people it's perfectly okay to ask more than one question, but please state them one at a time to make the process run a bit smoother here. So by that, I will ask the operator now to present the instructions. So operator, please.

Thank you so much. Dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone and wait for a name to be announced. To withdraw a question, please press star 11 again. Please stand by. We'll compile your Q&A roster. This will take a few moments. And now we're going to take our first question, and it comes from the line of Adrian Ghilani from OPG Sundal Collier. Your line is open. Please ask your question.

Yeah, a couple of questions from my end. First of all, I want to start in Europe. I think most of us expect a negative operating profit here, and you surprised us on the upside. But looking into Q1 with somewhat lower prices, but on the other hand, higher volumes and no maintenance, do you expect that that profitability can be maintained in Europe into Q1 as well?

Well, as you said, we guide for volume and prices, and that's what we guide for. But we saw that spot prices in Europe started to move upwards towards the end of Q4. And then I said we will have, as always, some lag. You saw that on the downside. You also see that on the upside. So we have a certain lag in the P&L due to that we are selling the majority of the volumes on quarterly contracts.

Okay, I understand. A bit more of a long-term question. Also, I know you don't guide for CapEx more than one year ahead, but given that you are now going to be taking the investment decision for the first mini-mill at some point this year, Can you say anything about whether we will start seeing much of that CapEx already in 2025 or are we talking 26 and beyond for that?

Let's come back to that guidance when we are ready to take the decision. But we are lining up now to get the preconditions in place to be able to take that decision during 2024. So far, so good. And one important step was, of course, the power allocation in Luleå. But another very important step, even though we have already taken the decision, was, of course, the final decision for the power line in Oxelösund as well. So far, so good would be the conclusion.

Okay, I understand. A final one from my end as well. Following strong cash flow now in Q4, you once again go below the lower end of that gearing target that you set up. And given that you have the mandate, I believe, to buy back 5 billion in shares, Is there any reason you chose to sort of not increase the ongoing program that you have right now?

No, but we took the decision after Q3 when we were breaching the financial targets. And now we're aiming to pay out around 5 billion as well. So you should expect us to stick to the financial targets and act accordingly. And as Lena said, the board is planning to ask the AGM for another meeting. mandate or prolonged mandate. And I guess we will try to do that most of the years or every year. So I think we have the instruments to tackle the balance sheet if and when it becomes too strong.

Okay, thank you. That was all from me.

Thank you. Now we're going to take our next question. Just give us a moment. And the question comes from Elaine Gabriel from Morgan Stanley. Your line is open. Please ask a question.

Yes, good morning. Good morning. Thank you for taking my question. I have three of them. Firstly, the pricing in the Americas, the price outlook seems to be a bit out of sync with the prices reported by flats. How can we reconcile the divergence there? And can you give us some color on the near-term market dynamics? And in the U.S., you've clearly elaborated on the medium to long-term, but how are you seeing it in the short-term, given the lower lead times? That's the first question. Thanks, Marta.

No, but I think we are positive to the U.S. plate market. And if anything, I mean, spot prices are moving up a bit now from very high levels. So we are positive both short-term, mid-term and long-term. And as a market leader, I think we have benefited, of course, from the strong underlying demand. And then, of course, one important part is this SSAB 0 steel that we are now shipping and producing in the US and the huge interest for that. And that is also helping us to grow market presence, grow interest from new and existing customers, of course, and That is very positive, both short, mid and long term.

Thank you. My second question is slightly longer term. I guess LKAB has taken over the implementation of hybrids. It's true that you have access to technology, but why is this sudden change in strategy there? And how can you ensure that you get your fair share of the economics when it comes to securing green sponge iron when your larger shareholder is sitting on the other end of the bargaining table?

but as you know hybrid is a joint venture together with lkb and vattenfall and we said from the beginning that we will optimize the synergies within the value chain and share the synergies in in a good way and it makes a lot of sense for LKAB to build a pilot plant up by their mine in Gällivare, and we will get the volumes from that pilot plant. So I'm not worried about that. So I think for SSAB and for the joint venture, it's a very positive thing.

Thank you. And last quick question is on the insurance payment in the Americas. Can you reiterate how much you said was the insurance payment in Q4?

It was around 200 million SEK.

Thank you very much. That's what I have. Thanks.

Thank you. Now we're going to take our next question. Just give us a moment. And the next question comes line of Christian Agarwal from City. Your line is open. Please ask a question.

Hi, thanks a lot for taking my question. I actually, if I can The first one is on Europe, so I mean the volumes in the Q4 was better and then you're guiding for significant increase in the Q1 as well. Can you walk us through which of the industries that are contributing to this positive outlook on the volumes and then have you taken the possible restocking into your guidance for the Q1?

Q4 is always and especially I would say the second part of December is always hard to predict. And typically what you see, if spot prices are moving down, apparent consumption or apparent demand is very slow during the second half of December. If spot prices are moving, and companies are typically restocking, and typically you see restocking in Q4, but if prices are moving down, you see that more pronounced. Now spot prices started to move up towards the later part of Q4 or second half of December from very low levels, but still, And then you typically don't see that call it destocking or as pronounced as when prices are moving down. So it was more effect of that apparent demand slightly better than we feared.

I understand. And the second question is on the specialty where, I mean, the guidance, medium-term guidance is 1.5 million tons. Prices are still holding better. 2023, you are running at 1.3 and probably some of the volumes will come back up in 2024. So does it sound kind of a positive thing for the pricing, given that the mix will get better and then the spot is still holding well? Is that a fair way to look at the specialty pricing dynamics?

Sorry, Christian, we did not fully catch you there. Were you asking about the second quarter prices or? Special steel. In general, I guess. Special steel for the second quarter. Or in general.

No, but I mean, special steel prices for special steel products, they are much more stable over the business cycle than any other prices. And I think that is visible if you compare 23 to 22. And then there is always, of course, a mix within special steels. I mean, typically we have stronger prices on stock sales than direct mill. If you take Hardox 500 tough, the prices are much higher than for Hardox 450 and so on. So it's a mix within there as well but overall the prices and the margins are much more stable and should be much more stable over the business cycle. And then of course when we see a slowdown in Europe you can see some volumes or you can see a volume drop which is fairly typical but that usually comes back and if you look at special steels long term we have since 2000 been able to grow the volumes with seven to eight percent per year in on average not every year but some some years slightly more some years slightly lower so it is Volume-wise, still slightly volatile, but the overall trend is 7-8%, and that is what we are expecting as well going forward, as an average, or around that number, with more and more, call it, stable margins and stable prices. So that's the whole business model. And that's also an important part when we talk about mixed shift in our product portfolio. So every kilo we can have into 500 tough will make a huge difference compared to other kilos or other volumes.

I understand. And then the third and the final question is on the timing of the buyback. So just a clarification from my side, you have the approval for the 10%. while the 2.5 billion is almost like 5%, something like that. Once you finish the 2.5 billion buyback, should we assume that the next round of the buyback will automatically get started or you will have to have mid-quarter announcement or something like that?

No, but you should expect us to finalize the buyback program of 2.5 billion. And why did we choose 2.5 billion? It was a combination of things. I mean, we are sticking to our financial targets and we want to give you confidence in that we are sticking to the financial targets. And then also there are limitations how many shares you can buy of the traded volumes. And the traded volumes are typically a little bit lower in December and so on. So 2.5 until the next AGM was a good number that we will execute on. And then I said the board is planning to ask the AGM for a renewed mandate. And if they get that, we will come back if and when we launch the next share buyback program. So no drama, it's fairly, I would say, straightforward, at least from my point of view.

Yes, yes, I understand. Okay, thanks a lot.

Thank you. Now we're going to take our next question. And the question comes from the line of Johannes Grussellus from DNB. Your line is open, please ask your question.

Yes, hi everyone, it's Johannes here. A few questions. My first question is, On your comments about significant better volumes for special steel Q1 versus Q4, if you can elaborate a little bit what's behind this, any particular end segment, or is it more about the inventory cycle? And also perhaps if you can give us some idea of what you mean, because significant is, I guess, more than 10% up, right?

That's the definition we have. And I mean, it's seasonality. We don't have any maintenance outages. We had it both in mobile and Q4. And we had it in Oxelösund. So I would say the underlying trend is definitely there. As I said, we expect the underlying trend to continue with 5, 6, 7, 8% growth over time per year. Will differ between quarters, will differ between years. But we see no reason to doubt the underlying trend. That's what we expect and that's what we see on the market. And then we are guiding for the volumes in Q1. But it's a combination of seasonality, strong, good underlying demand and no maintenance outages at the special steel mills.

Okay, got you. Then I have a question on advanced high strength steel. Apologies if you said this before, but I might have missed it. But could you remind us about the share you had of AHSS steel in the fourth quarter and how you see this This ratio is developing because you're heavily alluding to good growth there. Maybe Per, you have that.

Johannes, you can see in the slide the total shipments for the year. And those are fairly stable over the quarters. And we can come back also with the number, but that will give you an idea roughly how much. If you divide it by four, you're roughly also... Sure.

So what we see when it comes now, we are launching a number of new grades and new products for these advanced high-strength martensitic steels. We have also invested in capacity in the continuous annealing line in Borlänge that we are ramping up. And as I said, this SAV Zero and the fossil-free journey and the partnerships with big OEMs has also helped us into new platforms. So we are quite positive when it comes to the development of automotive volumes in the coming years.

And on the zero products, that's my final question, actually. I think you said here in the presentation 50,000 tons delivered this year. How do you see that for the next few years and maybe more emphasize on 2024? And if you can remind us about the premium, if that has changed compared to what you've indicated before?

No, we have the same premium. And the problem we have, or the challenge we have is the bottlenecks are biocoal and biogas. And to get enough of that, the demand is clearly there. And I'm really happy that we managed to do 50,000 tonnes of with the target of producing at least 40 000 tons and i've said to the american organization that we should do whatever we can to increase the volumes because the market and and the interest is definitely there so and and now we are to be honest allocating volumes to customers unfortunately we We are working hard with bio coal and bio gas and to get the preconditions in place. And as we have said before, we invested a year ago in Montpelier quite a lot in order to be able to do this. So it has been actually the interest has been beyond my expectations, which is positive.

Okay, interesting. But how much can you actually make practically of this product?

As I said, it will depend on volumes of bio coal and bio gas, and we are working hard with that.

OK, OK, thank you.

Because I said, I mean, we are taking a very hardcore definition. So it's 0.0 kilo carbon dioxide per kilo steel, no mass balancing, no allocation. So this is the way we have defined it and the way our customers and partners like to see it. Thanks.

Thank you. Now we are proceeding to the next question. And the next question comes from the line of Patrick Mann from Bank of America. Your line is open. Please ask your question.

Good day, Martin, Lina, Per. Thank you very much for the presentation. I just wanted to ask about the Nordic Transformation Plan now. Am I right that with the power allocation at Lulu now, That's probably the preference for which one gets invested in first. I seem to remember that was the preference, but possibly power allocation meant you might have to go for Rahi first. Is that not an issue anymore? Is it now fully up to just the economics of the investment case as to which one goes first? That's my first question. Thank you.

That's a very correct description. Now we have the preconditions in place, with the exception of environmental permits, but that work is ongoing both in Finland for Roa and Luleå. We wanted to have them standing at the same starting line. So we will be able to take the best financial decision. I mean, look at the RFEs, look at the payback, look at the internal rate of return and what makes most sense. And that stage, as you said, we have reached now during Q1. So that's very positive. So now we will be able to take that decision during 2020. 24, how we sequence which one we actually start with. And that's positive. That was not the case last time we met. Then we knew that we wouldn't... The formal answer was that we didn't have any power allocation for Luleå. Now that's in place.

Okay, great. Thank you for that. And then the second question is just, can you remind us with Hebrids how the contribution will work from the JV partners and when you would expect to... put anything in, what do you think that could be? Thanks very much.

No, but as Lena said, during Q4, I think we paid 20 million or something as contribution into hybrid. And we continue to running these pilot trials and developing the IT, sending in patent applications and so on, and learning more and more day by day. Quite interesting findings in this area. very important r&d project but the good thing is that we are not just doing r&d we are actually using also as you know the volumes coming out from the pilot plant to produce pure fossil free steel and shipping that to customers like volvo volvo cars and others so they can start to prototype and even do low serial productions of fossil free or equipment produced by fossil free steel so so it has been really really a positive development so far

Okay, so just so I'm 100% clear, so with LKAB deciding to build the plant next to the mine, that's on their balance sheets, on their books. There's no capital call on SSAB, is that right?

That's not the current plan, no.

Okay, thank you. Got it. Thanks very much.

But the volumes will go to SSAB? Yes.

Yeah. Yeah. Got it. Thank you.

Thank you. Now we're going to take our next question. And the question comes from the line of Andrew Jones from UBS. Your line is open. Please ask your line.

Hello. Hi. Just as a follow-up on the earlier question about US play lead times, I mean, clearly a pretty low of a moment. I'm wondering what your expectations are for the demand pickup you would expect to see from some of this IRA spending? I mean, I'm guessing not much of that is in the current demand stats, but, you know, could you give us an idea for what sort of demand uplift you expect through 2024 and, you know, how we should see that phased? And like, when do you expect to see that pickup in demand really coming through? Thanks.

As I tried to explain in my part of the presentation, the combination of things, the Inflation Reduction Act is favoring infrastructure and energy. It will be bridges, it will be wind tower, it will be offshore wind, it will be a lot of other areas that are smack in the middle of the plate market. And that in combination with the requirements of not only produced in Americas, but also melted in Americas leads us to believe that it's far from impossible that we will see the U.S. plate market coming back to historical peak levels of around 10 million tons. And that's what we are expecting to see in the coming years. Exactly when that happens and how this will be faced quarter by quarter is, of course, impossible. But we have a strong belief in the North American plate market.

But nearer term, do you expect some further deterioration in spot prices in the coming months, potentially before that demand comes through?

What we see right now is spot prices moving up into Q1 and we are also guiding for higher volumes in Q1 and that's what we are guiding for. As I said, the spot prices started to move up late Q4 and that's why we have a bit of a delay in the P&L, which we typically have. But apart from that, no drama at all on the market. And we need to remember that if you compare plate prices and plate margins spot on spot, they are moving up from high levels. And our capacity utilization has been, if you compare with the overall North American steel market, it has been quite good in relative terms.

Okay. That's clear.

Thank you. Thank you.

Coming back to that once again with the risk of repeating myself, one driver on top of Inflation Reduction Act and all the others is, of course, the launch of SSAB 0 and the huge interest of SSAB 0 also in the North American market. Thank you.

Thank you. Now we're going to take our next question. And the question comes from Christian Koffer from Handelsbanken. Your line is open, please ask a question.

All right. Thanks for that. Just a few questions from my side. Firstly, on the balance sheet, I can see in the balance sheet that you take, I mean, you have an exceptionally strong net cash position obviously but you still carry some six billion in long-term debt what's your thoughts about that it's i mean take that down significantly i guess you have to pay a lot of interest on that no but we have a positive financial net as you see but but i mean we we have decided that that it is prudent for us to have as one example a sustainability linked bond

that is appreciated by the market and by investors and so on. And you could always of course argue about that. Do we really need to carry any gross debt at all with with the balance sheet but that that is decision and we think it is important and that helps us also in discussions with investors and so on and it seemed like a positive thing but of course we we we we have a strong balance sheet and we are not yet mentally used to that being a problem but we are trying to be clear and try to stick to our financial targets and that's why we launched a share buyback program that's why we The board is also proposing a dividend according to the financial targets. So you should expect us to stay true to the financial targets and act accordingly. And then we just want to make sure that we have all possibilities to do that.

All right. Then on the realized prices in Europe was definitely better than I expected here. And I think you said it as well.

You know that it's always a slight delay and it's hard to predict exactly how that delay comes. But when prices are moving down, they are slightly slower to move down in our P&L and vice versa. And that's what we saw, I guess, in Q4 in Europe. And that's what we are guiding for in Q1 as well. That delay factor, which is typically half a quarter or a quarter.

Yeah. And then maybe one follow-up on special steels. My feeling is that this area continues to call it outperform when it comes to prices versus your guidance or expectations. Is that fair to say that? Because previously you have said that in your guidance you are not including mix. And as I remember, Martin, you always talk about that you should more or less always continue to improve mix over time, not quarter over quarter, but over time. Is that also what we are seeing, to be honest?

No, but that is what we are seeing over time. And as I said, I mean, if you take one of the, I would say, many very promising products that are now ramping up, Hardox 500 Tough, of course the prices are higher than for Hardox 450. Hardox 450 is an excellent product, but Hardox 500 Tough is something completely different with very good bendability, very good weldability. We can, compared to Horlox 450, maybe decrease the weight with another 30-40% or up to 40%. We can decrease spendings. There is a huge difference. Of course, when you sell thinner and thinner and more and more high-performing plates, they will be less tons compared to standard products. the profitability per ton is very different and of course the stability or the volatility is much much lower so that's the day-to-day work that you're referring to and that's what we internally call when we focus on low low point profit mix improvement cost efficiency capital efficiency we as said we measure cash conversion and so on and and I wouldn't call it a daily struggle, but we call it continuous improvement. Try to do things slightly better today than yesterday, slightly better this week than last week. And that's a never-ending story. And we are far from done and still see potential. And that's what you will gradually see. Not huge differences quarter by quarter. And sometimes we might see a slight backlash. But as said, we have been able to grow the special steel volumes with 7% to 8% for now more than 20 years. And we expect to do that over time. And then, of course, we need to invest and we need to do the bottlenecking and so on. But that comes with it.

That's good. Finally, from Lena, I see that you managed to release a lot of working capital for 2023. Of course, you tied up a lot in 2022. But on the point where you are now, call it rolling fork workers or whatever.

we see convenient continued to continue potential to you know take out working capital or will it be tough from here well quarter one usually is the season when we are also restocking to mention that we also only an idea just talking about overtime i mean not quarter one i understand over time over time of course we want to improve as martin already said that continuous improvement but If we compare now the outcome in Q23 and then plans going forward, for sure, still try to push the improvement through. But just to comment that Q1 is usually the quarter when we are also restocking and this is going higher up, so it will have an impact in the accounts payable or the receivables. We don't see the performance to continue on the Q4 level.

No, no, no, of course. I just looked at the amount you tied up in capital in 2032 was more than 8 billion. And you freed some capital of 4.8 billion. That was just, you know, should you be able to return to the level that you were by the end of 2021 when it comes to working capital? Over time.

Over time, yeah. Yes.

But I mean, we need to remember that 22, the war in Ukraine started and all of a sudden we had to find new sources for PCI coal, for a lot of other things. And in that turbulence in the beginning, we did what we thought was right at that time. And I still think it was the right decision. We had to qualify new materials. We had to buy from new vendors. We had to buy more than we needed. then as we have talked about during 22 and 23 it takes some time to sweat it out but and the cash conversion for 23 was 107 percent you should not expect us to have cash conversion above 100 but we should be coming better and better when it comes to working capital efficiency and then of course the biggest shift will be when we have the mini meals up and running because then we will be able to release a lot of working capital the work in progress and so on. But it is, as Lena said, part of the continuous improvements.

Yeah, got it. Thank you very much.

Thank you. Now we're going to take our next question. And the question comes from the line of Bastian Sinagowitz from Deutsche Bank. Your line is open. Please ask your question.

Yeah, hi and good morning all, and thanks for taking my questions as well here. I just have two quick follow-ups, actually. The first one is on the pricing dynamics in Europe. And I guess, Martin, you've been outperforming your own pricing guidance in Europe quite a few times in a meaningful way over the last few quarters. I guess you've been talking about these pricing legs, but would you say that, I guess, in the context of the current price dynamics in the spot market, I guess also given the fact that usually automotive is actually one of the very strong sectors in the first quarter, that your pricing guidance for Q1 may again be a little bit on the conservative side? That is my first question.

I mean, we are guiding, as said, not... about mix, we are guiding about prices and what we expect, what we see and what we expect to see in the order book. But of course, we said we expect to continue to see good demand for our automotive products, and they are not standard products. They are niche products, advanced high strength steel. So we expect to continue to see that those volumes being much more resilient and growing over time so so then how that exactly will pay play out in q1 or a single month or a single quarter is of course hard to predict but over time you should see that effect okay i guess most of your peers would see typically like a seasonally lower fourth quarter in auto and then like a pretty strong pickup actually into q1 um but but you say that that is difficult for you to say at this point um No, but we are guiding for a seasonally stronger quarter in Q1 compared to Q4, volume-wise. Then, as I said, we have a certain lag when it comes to prices when they are realized in the P&L compared to where the spot market prices are moving. But we also need to remember that in Q4 we were, I mean, if you take into account the average cost, marginal cost for emission rights, we were, and that is typically for a standard year, for average European producer is around 200 euro per tonne with the current emission prices. Then we were at just above 400 euro per tonne or so for hot rolled coals, which is typically or historically at least has been around the rock bottom prices.

OK, all right. And then my second question is just on the timing for the decision for Ra and Lulea. I think last quarter you said that you expect the feasibility study at least for Raha, I guess, to conclude in the first quarter. Could you give us a bit more color, like when you actually expect to decide on whether you go ahead with Raha or Lulia? I mean, is this something which you basically have in mind for the first half, maybe second quarter or rather later this year?

but i think we have said that during the first half of of 24 and we still stick to that so so no updates i mean we are working with the feasibility studies for both raw and lulu and i said what is new compared to when we met last quarter is that now the preconditions with i said the exceptions of the environmental permits both for Roa and Luleå is in place. We know that we have power allocation. We will have a power line in place in both Roa and Luleå in time, so to say. So it's ongoing work and no changes. So, I mean, as I said before, we wanted to have them standing at the same starting line and then look at the calculations and sequence them in the best possible way for SSAB long term. Okay, great, thanks.

Thank you. Now we're taking our next question. And the question comes from the line of Tristan Gresser from BNP Paribas Exxon. Your line is open, please ask a question.

Yes, hi, thank you for taking the question. Just two quick follow-up, and maybe I missed that, but I saw your guidance for CapEx for next year, well, this year at 5.5, but Could you provide the total cash needs for the year, including interest and taxes?

Yeah, we didn't include a slide, Tristan, but we said also, I mean, you have the capex, and then, Liana, we don't expect anything on interest, really. No. Plus or minus. And then we have the tax, and that will depend on the result. So... You have the capex needed and you have some tax payment. That's what we look at.

Nothing specific to Flagler. Okay. And my second question is on the special CR business again. Could you discuss more precisely the demand trends you're seeing by end markets, notably the mining segment? And just wanted to confirm, then we view with the volume, the starting point you will have, do you view this 7%, 8% volume growth as still a likely scenario for this year? But yeah, first, maybe a bit of color on the demand-buyer market, given the weakness you flagged.

But we saw weaker demand in Europe during Q4 and during the second half. We see other regions with stronger demand, but overall the underlying demand is increasing i mean the the interest of of gaining productivity with lower weight higher payload less fuel consumption and so on is definitely there even maybe more pronounced than than historically and then on top of that the possibilities when we can start to produce fossil free and zero steel in oxford sun 2026 also gives a lot of possibilities and and these uh you Partnerships with big blue ship companies, big OEMs using also a lot of Q&T is positive. So I'm saying that when we look into it, we see no reason at all to doubt that we will continue to grow over time in the same I would say, phase or the same pace with the same pace as we have seen historically, then that can differ one year compared to the previous year or one quarter compared to a previous quarter. But the underlying trends are definitely there. We are not working with a static product portfolio either. And that's why I'm talking about 500 Tough, which is a fairly new product that is ramping up on the market. It has been there for a couple of years, but it always takes time to ramp it up. But now we see possibilities. We see, unfortunately, you can say from a... another perspective we see in volume interest for for arm ox and armored plate growing around the world so the structural underlying demand is definitely there and then when we can introduce new and more advanced products and products where we are clearly unique like the 500 tough globally that also helps helps the growth and then of course we need to match that with deeper bottlenecking and further investments and we have been investing quite a lot in in mobile to take up capacity so so it is a in that sense an iterative development but goes hand in hand and we don't want to have i mean we will we will continue to grow capabilities and capacity in line with how we are building the market

Okay, that's clear. Maybe a quick follow-up then, just to clarify. So you're not seeing that weaker demand in Europe further deteriorating into entering 2024? Is that correct? Is it stable?

No, but apparent demand is, of course, so dependent on... a lot of other things. I'm talking more about the underlying or real demand and the growth of real demand. Apparent demand will be impacted by geopolitical turbulence, by problems with freights not being able to use the Suez Canal and so on. So that will be ups and downs. It will be dependent on weather conditions, a lot of other things. But I'm more talking about the structural underlying demand growth, and there we haven't changed our mind. We are still very positive.

All right. Thank you very much.

Thank you. Now we're going to take our next question. And it comes from the line of Moses Ola from JP Morgan. Your line is open. Please ask your question.

Hi, everyone. Thank you for taking my question. I just have two questions here, please. I'll take them one at a time. So first one, again, it's also just on the pricing outlook. Obviously, your guidance here in Europe is a bit more cautious, but I just wanted to actually more discuss on the overall pricing power that you see here in Europe. You've talked about how you see potential demand risks from ongoing geopolitical tensions here. specifically at the Red Sea, but do you actually also see that that perhaps can contribute to lower supply here in Europe due to lower imports? And in that scenario, do you believe that the pricing power here in Europe can be strong despite weaker demand? That's my first question.

for for standard strip in europe we don't have any pricing power to be honest we we we follow the general price trend then the power we have is to continue to improve the mix so so we are following the market price development when it when it comes to strip in europe and that is typically led by ArcelorMittal and others. And then, of course, that pricing power is, of course, dependent on, as you said, the import volumes and things like that. So I don't have a clear answer to your question, but our pricing power for strip in Europe is... very limited. And then in the Nordic region, we have somewhat of a pricing power due to proximity, due to quality, and so on. But quality Nordics is still a reflection of the general price in Europe. in in europe but as said i mean the prices bottom out at levels that has at least historically been trough levels because you have to nowadays also add the marginal cost of emission rights because there is no steel company in europe having 100 percent or free allocations covering 100% of the production capacity. And that's why we also saw a weak quarter like Q4 this year and Q4 2023 and also Q4 2022, we saw companies idling blast furnaces.

Thank you for that. And then the other question I had was just into your AGM. Obviously, you've already talked about seeking a mandate for share buyback, but also, With the ongoing progress at Oxelosand with FID due at Rahi and Lulia and the opportunity to bring low CO2 steel volumes to market, do you view now it could be the right time to further strengthen the links between your CO2 emissions targets with executive compensation? Is this something that

you will also be looking to to present to shareholders at the agm that's already implemented in the long-term incentive program so that we have targets not only on tsr and relative tsr but also on volumes of sav0

Okay, but anything in terms of guiding towards the actual CO2 reduction targets themselves or more on the volume side?

Oh, it's more about the volumes. I mean, we know the CO2 reduction. We will take away roughly one and a half million tons of carbon dioxide emissions in Sweden in 2026. And then when we do the first mini mill, we will take away another, is it 2.5 or something, a million tons. So that's, I mean, that is what we have promised to execute. And then finally, we will take away all 10 million tons of CO2. carbon dioxide emissions that we are emitting. So in the LTI program, the way it's structured, it's one component, I wouldn't call it an ESG component, but a quality sustainability component, and it's the volume of SSAB0.

Okay, understood. Thank you.

Thank you. Now we're going to take our next question. And the question comes from line of Cole Hawthorne from Jefferies. Your line is open. Please ask your question.

Morning. Thanks for taking my question. Just like to get some color on what you're seeing in your auto contract negotiations for 2024. And then following up on the last question regarding shipping impact into Europe, do you see any impact from the shipping potentially supporting prices or as another derivative potentially supporting your customers looking at getting more safety stocks or kind of building some of their supply chains for steel at all. Thank you.

I think what we see is we clearly see, I would call it for more, I wouldn't say only standard products, but for more standardized products, we see more and more regional supply and a bigger interest since the COVID, since the war in Ukraine, since the turbulence in the world. We see more and more. interest of regional supply in Europe and other parts of the world. In the US, it's pretty obvious with this demand of melted in America. So the import is still visible, but is, I would say, less and less of a factor. And then the first question.

Sorry, Cole, can you repeat the first question?

I'm just wanting to know any color you can provide on your annual auto contract negotiations. No, but we don't guide for that.

We guide for the coming quarter. But what we are into, I mean, we are gradually... growing the number of platforms and, as I said, the number of OEMs where we are in. And that's why we expect the volumes to continue to grow in a decent way the coming years. But we don't comment on, what do you call it, price negotiations. And we just comment on realized prices the coming quarter.

Thank you. And then maybe just one follow-up. I mean, on the demand for SSAB0, am I right to assume that the majority of that customer demand is from the auto in-market or are there other areas that are seeing the pull-through demand for SSAB0?

Thank you. No, but our guess was that both for fossil-free and zero would be mainly Europe and only automotive. Now during Q4, I think, or beginning of Q1, we saw the first building built in the Nordics out of fossil-free steel. So construction is definitely very interested. Heavy transport, lifting, wind towers, as said. So if anything has surprised us in a positive way, it has been a huge interest from many regions and many segments that we didn't really put into our quality calculations. So it's much broader than automotive, but a strong interest from automotive, definitely. But if you take even as one example, building wind towers out of SSAB 0, you see railcars and tankcars built out of SSAB 0. You see construction equipment built out of SSAB 0. You even start to see now bridge contracts asking for fossil-free steel or SSAB 0.

Thank you.

Thank you. And now we're going to take our last question for today. And it comes from the line of Andrew Jones from UBS. Your line is open. Please ask a question.

Just to follow up on the Red Sea issues, you didn't comment on the impact on the overall market, which I guess is probably a margin positive. But in terms of your costs with shipments out of Europe and in terms of sea freight, can you just remind us approximately what your costs were in the fourth quarter or maybe in 2023 overall? in terms of sort of international sea freight. And if you have any sort of guidance around some cost pressure that you could see on the business coming from that issue in the near term. Thank you.

I don't have a figure to give for the sea freight cost regarding last year. But for sure, if we comment that, of course, these Suez Canal challenges is also impacting our cost when we import the raw material from Australia. But we don't have now figures to give related to freight cost or estimates even.

But of course, we are impacted as anyone else.

Yes.

Sure. Okay, thank you.

Thank you. There are no further questions. I would now like to hand the conference over to our speakers for any closing remarks.

Okay, thank you very much. So this, we can conclude the conference today. Thank you, Diana. Thank you, Martin. Thank you, the audience. Thank you for listening in. A lot of good questions. But thank you for us and we wish you a nice day.

Thank you.

Thank you.