SSAB Ab

Welcome to the presentation of the first quarter 2024 from SSAB. My name is Per Hillström. I'm head of investor relations. With me today here is our president and CEO, Martin Lindqvist, and our CFO, Lena Creadeus. And the agenda, we will start with Martin giving a brief overview of the quarter. Then Lena comes with the financial details. And then Martin will close with the outlook and summary. And after that, we will be able to have a Q&A session as well. So by that, please, Martin, begin.

Thank you, Per, and good morning. The super summary of Q1, it wasn't an easy quarter. We had strikes and so on. I will come back to that. But the super summary is that we see clearly that we have more resilience in our niche products, advanced high strength steels and the QNT. They are holding up volume-wise and price-wise in a fairly good way. But if we look at the total quarter, we had a lower result than Q123. And that was to a large extent due to lower plate prices in North America coming down from a very high level. We made almost 3.2 or 3.157 in operating profit, which is quite good. What is also very satisfying is that we continue to develop towards our targets to have zero accidents and zero incidents at our mills. We are now at an LTI frequency of 0.81, not at zero, but approaching and with the ambition to become the safest steel company in the world. And that work is ongoing. And this is a way, work of changing or continue to enhance the culture within SSAB. we look at the divisions special steels holding up quite well increased sequentially shipments compared to q4 we had an operating result of almost 1.8 billion sex on a good level prices were slightly down two percent versus q4 one very important part of special sales during q1 was the launch of a the world's first emission-free steel powder for commercial delivery. So this is a new product where we produce in Oxelösund to start with fossil-free steel powder. And that powder combines the properties of our high strength steels with the light structural possibilities of 3D printing. And I'm convinced that this will over time grow into a very important and profitable product segment for SSAB. So that's really good that we have launched that on the market now with big interest from potential customers and already existing customers. If you look at SSAB Europe, we saw, as we usually see, a seasonal improvement versus Q4 when it comes to shipments. We were not having, but there was a political strike in Finland. And the cost of that strike for Q1 in SSAB Europe was around 350 million SEK. We will also see a lag effect and see another roughly 125 million affecting Europe. I think we handled it in a good way. But the strike with harbors being closed for four weeks reduced the shipments by 100,000 tons. Elena will come back to it. But we also, without being able to produce fully and definitely not ship from our Finnish operations, we were also building more working capital than we should have been doing under a normal situation. So more slab stocks, more work in progress and so on, and also more Finnish goods at the sites. But all in all, I think Europe handled it very well, and the operating result of 163 million, given that, is quite okay. What is important to mention is that we also see when we now experience a slightly tougher European market, or have experienced a slightly tougher European market, the automotive shipments continue to develop positively. So compared to Q4-23, the increase was 10%. And we are really good at these high strength martensitic steels for cold forming. And we have a very strong, compared to competition, very strong and sometimes very unique product offering. And this is also an effect of... building up and starting to qualify material in advance of the fossil-free steel offering. So this will continue to grow over time, and this will also show the strength of the strategy with mixed improvements in SSAB. If we look at America's cautious market without any meaningful restocking, stocks are on low levels, but no meaningful restocking in Q1. We also had in the beginning of the quarter weather-related problems with cold weather and snowstorms in Iowa that affected it. Prices down 3% versus Q4, but they have decreased from a very high level. As we saw in the film, the ramp-up of SSAB0 continues. We produced 21,000 tons of SSAB0 in Q1, and we are now ramping up the deliveries to customers, and the demand is really, really good for this kind of green solution. So that's also very positive. If we look at the big investment projects, Oxelösund continues according to plan and within budget. We have the environmental permit in place, the power allocation is secured, and we have got the permit for the power lines approved in January 2024. So it's moving on quite nicely. And on this picture, you will see a picture of how it will look in the future. And we are now starting to erect the building for the electric arc furnaces. When we started the hybrid project back in 2016, 2017, we thought the idea was that this would mainly be a product for the automotive industry where we would see the biggest interest and also mainly for Europe. When we now look at the interest and the demand, we see a strong demand and a huge interest from, I would say, a very broad variety of different sectors, automotive, of course, but also heavy vehicles and construction equipment, also construction and industrial equipment, but also distribution partners and consumer products. So a much broader interest and a much bigger interest than we could anticipate. And that's, of course, very positive. I've shown this slide before and it's growing day by day. But we have today 55 established partnerships for green steel and for hybrid steel and zero steel. And that is growing. We have quite a few blue ship world leading companies that are now getting more and more volumes, which is also very positive. During the pandemic, Beginning of the second quarter, we took the decision for the next step. The first step was to transform Oxelösund into fossil-free steelmaking. We took the decision now to, as the next step, transform the Luleå mill into fossil-free steelmaking, meaning that we will build a completely new mini-mill. And the investment is estimated to be 4.5 billion euro, including continuity. But it is very important to remember as well that we will, by doing this, avoid replacement investments of around 2 billion euro that would otherwise be needed to sustain the current system. And with this, we will take away another 7% of the Swedish carbon dioxide emissions. So in total, together with Oxelösund conversion, we will be able to take away 10% of the carbon dioxide emissions in Sweden. This mill will give us better profitability, much more flexibility and less costs, but it will also allow us to continue to develop the product mix in a meaningful way. So we will increase the total capacity with 500,000 tons, but have the possibility to shift the mix with 1 million ton into more advanced high strength steels and thin and wide Q and T, which is very important for the future. And this will also allow us to use a flexible mix of fossil-free sponge iron and recycled scrap as raw material. So the raw material flexibility will also increase for SSAB. This is the setup we are building. So we will build a new melt shop, a complete mini mill with a melt shop with an advanced metallurgy, including vacuum tank degassing, two electric arc furnaces and a total capacity of 2.5 million tons. We will build a hot strip mill with a caster and a direct rolling mill. And here we will have capacity for thin and wide high strength steels, two meter wide thin QNT, which is... becoming a more and more important product on the market. And then we will build also a cold mill complex, a tandem mill with pickling, a galvanizing line and a combined galvanizing and annealing line. So very compact state of the art, highly automated, And that means that we will start to ship ready products or finished products from Oxelösund, or from Luleå, instead of shipping slabs 900 kilometers down to Borlänge. There will still be volumes going to Borlänge to the downstream processing, to the tandem mill, the annealing lines, the pickling lines, and the cut-to-length lines. But this will be a very cost-effective, competitive, green setup up in Luleå. Lena?

Thank you. Let us start the financials review firstly with shipments. Steel division shipment volumes in Q1 1583 compared to Q4 was an improvement of 6%. And as Martin already mentioned, that is driven mainly by the seasonality. To remind that in Q4, we also had the annual maintenance outages. The biggest ones were in Oxelösund and Mobilmil. We didn't have maintenance in Q1. As already mentioned, also the cold winter weather conditions in the beginning of Q1, that was impacting the production in US and also in Sweden. And then the political strikes in Finland were impacting the latter part of Q1. and already mentioned the impact of the strike was 100 kilotons. If we do a brief comparison of the shipment performance to our outlook that we gave, we were in line with the guidance in Special Steel Division and Europe Division, while in Americas we were slightly lower and already mentioned that that was market driven. The restocking anticipated for Q1 remained modest. If we compare the shipment versus the previous year, Q1, the drop in volumes was 9% and 154 kilotons. And if we exclude the impact of the strike, that is market-related drop. Then if we look at the revenue in Q1, the revenue of 27 billion, increasing compared to Q4 only 3%, which is less than the increase with shipments, indicating that the prices were lower. And also brief comparison of the prices against the outlook we gave. We were indicating somewhat lower prices in all the steel divisions. We were in line in special steel division and Americas, while the prices in Europe were actually slightly better. And that is mainly due to the fact that the product mix was better. Shipments lower, but the mix was stronger and again supported by the strong demand from the automotive segment. The EBITDA in Q1 4.1 compared to Q4 of 3.4 improvement, but lower than the previous year level of 5.6. If we then dive into more details, firstly comparing Q1 with Q4, Here you can see that the operating result ending up on a level of 3.2 billion compared to previous quarter 2.4. Deviation with prices already mentioned. Special steels with 2% lower. Europe division flat and then Americas with 3% lower. And to remind that in this analysis we include also the pricing, product mix and FX impact. With volumes increase, and this is now split between Special Steel Division and Europe Division, which were growing in volumes while America's was flat. Minor impact with the variable cost. Nordic mills had relatively stable raw material cost. In U.S., grab cost was slightly higher, but then all the other consumables were netting this impact, so 170 million positive. Fixed cost clearly lower than Q4, and this is mainly due to the maintenance outages in Q4. There were none in Q1, so much less materials and services spent in Q1. Capacity utilization, positive impact, regardless the strike, it could have been more positive. But this is again driven by the fact that there was less maintenance activities in Q1. Minor impact of FX and then the other here is related to the insurance compensation in US related to furnace burn through incident that actually took place already during 22, but the compensation was received during Q4 last year. And to remind that the strike impact was this 350 million SEC in Q1. And then the comparison with the previous year, the drop is 1.6 billion, and both price and volume having a negative impact. Prices in special steels were 5% lower in Europe, 3%, and the biggest contribution, as already mentioned, coming from America, with 10% lower prices. Volume also lower as a total of 154 kilotons. And this is now spread between all the steel divisions. Volumes were lower in all the divisions. Special steel 6%, Europe 10% and America's 8% lower volumes. Variable cost contributing 1 billion positive. We can see that especially the Nordic mills having much lower raw material and energy cost compared to previous year. Small deviation with fixed cost and the capacity utilization is lower this year and that is driven mainly by the strike in Finland. Operating cash flow analysis. Here we are comparing Q1 this year against previous year. You can see that the earnings were lower. Martin already mentioned that we had the negative change in working capital. Inventories were going up. We have rather high slap and working process inventory. The value chain is a bit unbalanced due to these challenges in production. And the target, of course, is that we will balance it during Q2. Maintenance capex slightly higher than last year, and the other here is related to emission purchases. Positive finance items related income here. Strategic capex majority related to oxalozoon conversion. And then on the last line, purchases for own shares, that is the share buyback program we launched at the end of October last year. We were finalizing the program early March and summing up this last year figure and Q1 figure, the total is 2.5 billion, which was the frame given to us. And we filled it early March. Net cash position compared to end of the year on a very stable level, 18.2 billion as a net cash position. The net debt equity ratio minus 25, exceeding our financial targets. And the comparison here is against the Q1 last year when the net cash position was 15.6 billion. Later today in the AGM, the proposal is to pay out the dividend of 5 crowns per share, which is then leading to around 5 billion payout in Q2. Raw materials during Q1, both iron ore and coking coal, were developing downwards in prices. And we don't foresee a big peak going forward in near term. Some increase was seen in April in iron ore prices. But the outlook when it comes to second quarter is that the cost of raw materials would be somewhat lower. And then the price of US scrap illustrated next to the other graphs, and that was also developing downwards during Q1. Maintenance table, we have not updated this, but just to remind that during Q1 no maintenance audits is, nor there will be during Q2. Most of the big maintenance is then happening during the second half of the year, but there hasn't been change to these plans since last time. That was it. Martin continues with the outlook.