SSAB Ab

Good morning and welcome to this presentation of the SSAB Q2 report. My name is Per Hilsum. I'm Head of Investor Relations at SSAB. And presenting today, we have Martin Lindqvist, President and CEO, and CFO Lena Kraelius. And the agenda, as normal, Martin will start to talk about the quarter shortly. Lena will then go into the financials in more details. And then Martin comes back with an outlook and a summary. And then we will have a good time for questions at the end. So by that, please, Martin, start.

Thank you, Per, and good morning and welcome to this quarterly presentation. If I start with the highlights, I would say that the result was fairly stable, just south of the $3 billion in operating profits. And it was lower versus the same quarter last year, mainly due to lower U.S. plate prices. And I will come back to that. We continue to see a good development of one of our most important focuses to become the safest steel company in the world. We are now at an LTI frequency per million working hour, including contractors at 0.64. And we also see the total recordable continue to decrease. The quarter, we made a decent cash flow generation. We had an operating cash flow of 3.2 billion during the quarter, and Lena will come back to that. A short update on the transformation to fossil-free steelmaking. That continues. During the second quarter in North America, we produced and sold 40,000 tons of SSAB0, and SSAB0, as you might remember, is produced out of scrap, but with zero scope one and two emissions. So 0.0 kilo carbon dioxide emissions per kilo produced steels. We have also updated our science-based targets when it comes to reducing greenhouse gas emissions and they were approved by science-based targets initiative. We have also put in place a new combined green and sustainability linked finance framework, which provides an opportunity for us then in the future to issue both green and sustainability linked financing instruments. And we have also signed an early service agreement with the supplier of finance. equipment for the mini-mill in Luleå, consisting of two electric arc furnaces, secondary metallurgy, caster and strip rolling mills. So that did also take place during the second quarter. If you look into the divisions, I would say in special steels, like in Europe, we saw a weaker market in Europe and more stability in demand in the rest of the world. So fairly similar volumes, so slightly higher volumes compared to Q1. We had an operating result of 1.659 billion SEX, so earnings still on a good level. We saw prices down 2% versus the first quarter, 24. We also, during the quarter, launched the world's first emission-free steel powder for commercial deliveries, so we are now selling fossil-free steel powder, which gives the possibility to combine the properties of our high-strength steels with the light structural possibilities of 3D printing. And I've said it before, this will be a very important product for SSAB in the future. If we look at SSAV Europe, we saw a slight seasonal improvement versus Q1 in volumes. We saw fairly stable prices, and we saw an operating result of 400 million SEC. We were still affected by the strike in Finland in two ways, I would say. The negative effect of the cost of the strike was 125 million in Q2, and it was, of course, bigger in Q1, but still we saw effects of it in Q2. But we also saw effects on the market that the Finnish market didn't really pick up directly after the strike. There was hesitation also on the market. But all in all, a fairly okay result given the circumstances. What was good was the strong development, the continued strong development of advanced high strength steels to automotive. And we had shipments in Q2 at record levels, 185,000 tons. It is a combination of two. First of all, the advanced product offering we have, including the smart and synthetic steel grates for cold forming and the third generation dual-phase steel with high formability. Here you have one example to Kirchhoff where we sell Ducol CR. 2,000 megapascal for battery protection to IDBus. And the other part is, of course, that we are now starting to ramp up volumes in advance of fossil-free steel production and coming into new platforms, starting to qualify materials. So that gives the good and positive development that we have seen now in the automotive segment. Looking at Americas, I would say that shipments fairly much in line with the previous quarter, and I would say a cautious market. If we look at prices, they were down 7% versus the first quarter in the second quarter, and they have decreased, but from a very high level. And as I said, we continued the ramp-up of SSAB 0, and as I said in the first picture, we produced and sold 40,000 tons in Q2. Tidnor and Ruki Construction clearly feeling the weaker market, challenging market conditions. In Tidnor, shipments were supported by project orders, and we also saw positive effects from cost savings during the quarter, the cost savings that we have implemented both in Tidnor and Ruki Construction. And the same goes for Ruki Construction. Challenging market conditions, yes, a seasonal improvement, but with a very slow construction market in Europe, and I would say especially in the Nordic market. And even here, we saw positive effects from implemented cost savings, and that work continues. So with that, Lena.

Thank you, Martin. A bit more detailed analysis around the figures, but let's start with the shipment, which is on the top right-hand side on the slide. Q2 shipments amounted to 1,646 kilotons and compared to Q1 it was 63 kilotons higher. Seasonally Q2 tends to be the best quarter of the year but when we compare to the previous year second quarter we can see that the reduction is 76 kilotons and that is indicating the lower or weaker market in the European market as already mentioned but also downward trend in the North American plate market. If we compare the shipment outcome with the outlook we gave in April, we were in line in Europe division and Americas, but missing in the special steels with slightly lower volumes. Revenues in Q2. 28.3 billion, increase of 1.2 billion compared to Q1, and that is driven by the shipments as the prices on group level were on average relatively flat. And then the reduction compared to previous year was 3.5 billion, and that is then both prices and shipments impacting that. But I will explain more details shortly. EBITDA Q2 4 billion, Q1 was 4.1 and then last year being 5.9 so reduction 1.9 billion. The same trend illustrated in the EBITDA per ton. More details around the result and firstly we compare with the first quarter of this year. EBIT was 3.2 and Q2 outcome on 3. Minor positive impact with the prices and just to bear in mind that here in this graph we have also added the FX impact which was positive and then also the mix impact and already mentioned the good mix support from the automotive business. So the positive contribution from Europe division, which was actually almost fully offset by the reduction in the prices in Americas. Volumes 63 kilotons higher than Q1. Biggest contribution from Europe division, 52 kilotons higher than previous quarter, slightly higher in special steels and Americas being relatively flat. Variable cost, the main raw materials in Nordic mills has developed downwards as well as the scrap in US mill. But this positive impact was offset by the higher cost of consumables, freight and energy, and also here we have the negative impact of the FX added. Fixed cost seasonally compared to first quarter, this is always higher. Majority of this is coming from the higher personal cost, which is related to the summer temps, and also some higher repair and external services costs. And also FX has a negative impact of 70 million in this part. Capacity utilization, slab production in both quarters on similar level, but rolling production was 165 kilotons higher in Q2, Thus, we have a positive impact. Of course, both quarters were impacted by the strikes, as already Martin mentioned, more so in Q1 and also partially in Q2. If we then do the comparison with the previous year, EBIT on a level of 5 this year 3, so the deviation of $2 billion majority of which coming from the prices as illustrated here. And the biggest contribution coming from America's division, there the prices reduced 18% quarter on quarter compared, and the contribution here is negative 1.4 billion. Prices in Europe division were on average 6% lower, and in special steels, 3% lower. So this is a good reminder of the fact that the Americas division is the most volatile division when it comes to prices, and while the special steels prices being more resilient. Volume impact. and negative 365 and this is now split majority of which split between Europe division and special steel division which is illustrating the weaker market demand. Variable cost 1.2 billion positive impact and this is now coming through all the division majority of which naturally coming from the Europe division. FX impacting the fixed cost negatively of 25, so actually fairly small deviation in this quarter-on-quarter analysis. To bear in mind that, yes, we have done the cost savings in TIPNO and RUKI construction, which is supporting to keep this deviation on such a small level. Capacity utilization, negative 180 million, and this is now coming both from Special Steel Division and Europe Division volumes being slightly lower than last year. Cash flow, as already said, fairly decent operating cash flow generation in Q2. Not going to go through line by line, but to summarize in the comparison of year to date, versus last year. Earnings are slightly lower. The working capital having slightly higher negative impact during 23. We were reducing the inventories from exceptionally high level, while this year the inventories are more on a normal level. I would claim that the working capital is in a good control. Of course, for the annual maintenances, there is some preparation with the inventories. during Q2. We can also see that the CAPEX expenditure this year, year-to-date, is higher than last year, and that is, of course, linked to these transformation activities. And then the dividend payout was done in Q2, almost $5 billion. Last year it was close to $9 billion. And then the share buyback, you can see here on a separate line, the Q4 and Q1 activities amounting to the total share buyback program of 2.5 billion. And during Q2, we actually canceled the shares that we were buying under this program. Here, an updated view on the CAPEX estimate for this year. Previous estimate was 5.5 and now we have updated that along with the Luleå Minimil CAPEX plan to be on a level of 6.3. We don't have a longer term CAPEX plan because what we know is that it will for sure change still, but the estimate is that it will peak during 26 and 27. Net cash position end of Q2 on a level of 14.1 billion. Reduction around 4 billion compared to end of last year. And the biggest item here is clearly the dividend that was paid in Q2. The net debt equity ratio being only slightly higher than the financial targets we have for this ratio. All the raw material graphs illustrating the latest raw material price development during Q2, it came down in all iron ore, caulking coal and scrap. We don't foresee that the prices will peak during Q3, rather remain stable. And when it comes to raw material availability, we don't foresee any risk related to that in coming quarter either. Maintenance table, as illustrated here, majority of our maintenance outages will take place in Q3. Special steel starting their outage at the end of Q3. In Europe division, we have more extensive maintenance this year in Luleå. There will be maintenance in Bålänge, Raahe and Tyvmills. And then in case of Americas, they have semi-annual maintenance in Montpellier. Last year they didn't have, but this year we will have. And they have also rescheduled the maintenance to start a bit earlier during Q3. And with that, Martin will continue with the outlook.