SSAB AB (publ)

and welcome to ssab's quarterly review yes good morning everyone thank you to start off here welcome to this presentation of the year-end report my name is per hillstrom i'm head of investor relations at ssab and with me today is our president ceo johnny schoenstrom and cfo denna cayenne and if we look at the We can see that Johnny will be starting here with an introduction and also look at Q4 under here. The introduction, Johnny will talk a little bit about the strategic path going forward. And then the Q4 is normal. Lena will then come back with the financials. And at the end, Johnny will close up with outlook and a summary. And as always, you will have the opportunity to ask questions. at the end. So by that, please, John, if the floor is yours. Thank you, Per, and good morning again, everyone.

We just briefly went through the agenda, so I will not go through that again. So looking at our vision, this is a vision we've had for a very long period of time, but I just want to emphasize the importance of it. It's more valid now than ever. SSAB is a company with a long history of product development, working with uniqueness and unique products. And our vision is to make the world more lighter and more stronger and more sustainable through our advanced high-strength steels that we are developing and producing and selling. I also want to take the opportunity sort of to highlight the cornerstone of our strategy. So we've had for a long period of time a market leader, a whole market leader strategy, both in the Nordics, and as a part of that, of course, we have the subsidiaries, Rookie Construction and Tenor, but we also have a whole market leader position in the United States, something that we would like to maintain. But one of the things that is extremely important for me, and I think that we are also very, very good at, is the global leadership in special steel and premium steels. We have seen a very strong growth, not only in special steel, but also in SSAB Europe, where we've had record sales to the automotive industry selling advanced high-strength steels. And then, of course, we cannot forget about sort of leading the green steel transition or transformation, something that we have been good at, and we continue to do that, and And we have a lot of customers asking for corporations with us so they can get green steel for their electrical vehicles, as an example. Now, looking at sort of the Luleå investment, if you take that as an example, there have been some questions about the logic behind the transformation in Luleå. I just want to highlight that the Luleå investment is not only related to a green transformation. The fact is that we have today a setup where we produce slabs in Luleå and then transported by train all the way down to Borlänge and then we produce the plate or the sheets in Borlänge. The whole strip mill we have in Borlänge is from around 1965. It's quite old. We have a need to upgrade our equipment to make it more efficient and also to be able to make more advanced and increase our capabilities. That is extremely important for us. But one of the things that I just want to emphasize that we're also building a cold mill complex in Luleå. The cold mill complex will give us additional capacity in The bottleneck production processes such as continuous annealing that we have in Borlänge, that is where we do our very unique products. But we also have a bottleneck in our galvanizing line, number three in Hemelina, and we need more additional capacity there. And I will get back to that later on in my presentation. But if we all do all of this, we are also able to reduce the CO2 emissions in Sweden, also reduce it by 50% for the whole SSAB Corporation. And that's also an important target for us. Now, looking at the highlights of 2024, I can't... underline more the importance of the safety work that we are doing. I think that everyone is focusing on the safety and the safety behavior and our safety culture. We continue this improvement, and this year we ended up on 0.75. It's a very, very good level. I think that I've seen a lot of good efforts from the whole organization, and we are achieving results that no one thought we could do a couple of years ago. So really proud of that safety behavior and safety leadership that we show within the organization. If you look at the operating result, we ended up at 7.8 billion as an operating result for the full year 2024. It is lower than it was last year. And if we start assessing what the reasons are behind it, we can see that we have had price decreases on the American market. And that's a big change compared to 2023. And we have less contribution from there. But despite that, we have a division specialty that has been performing or shown resilience and kept prices on a good level. But it's not only specialty that sells specialty grades. We also have an automotive segment within SSAB Europe. And those sales have increased through the years. In a market where automotive sales have dropped and automotive production has actually decreased, we're still able to grow this market. And this is actually the area where we want to invest in more capacity, and that's going to be in Luleå, which is a part of the transformation program we have in Luleå. That gives us the possibility to reposition SSAB as a whole. And then looking at our net cash situation, we're pretty much on the same level as we were last year. That is a good achievement. It shows that we have a strong balance sheet and the muscles to do investments going forward. Now, speaking again about special steels, we can see that the volumes in Q4 were lower than they were 2023. Now, normally Q4 seasonally is a lower quarter. We've seen that in the past. But we also see now, looking forward, that we expect the volumes to come back in Q1. And we have also given of a forecast of significantly higher, and that's what we're expecting. And I think that special steel, even though we have segments like construction and automotive that is down, we still have a strong demand from the mining industry, which is still quite strong, and that's very good for special steel. Looking at the operating result, it was slightly lower than it was Q4, or Q4 2024 was slightly lower than it was Q4 2023. But I would say we had some one-offs effect. It was quite similar, so no big change. I think that, you know, maintaining the prices as we have shows that we do deliver unique customer value and that the customers are willing to pay a premium even though the general market price has dropped to very low levels. And I think that the team has done an excellent job on this. Talking about Europe, I could see from this morning announcement that a lot of analysts are saying that SSAB Europe is showing resilience much more than they expected. And I'm personally not surprised. I think that even though the market in Europe has has had a very tough environment. As I say, Europe are still producing a lot of premium grades to a lot of different segments. And we're not only dependent on the general market as such. And that is, I think, the main reason why our profitability is held up on this level. And we also, if you look at the volumes, I think they maintain on a fairly good level. showing that we are companies selling to more unique rates than maybe. And that's also shown by the fact that we've grown the automotive industry in the last couple of years. Looking at Americas from a volume perspective, we maintain the fairly good level and in Q3 this year or 2004, we also had a maintenance outage and we have that every other year. And that's the reason why we have a lower Q3 in 2004. But other than that, I think it's pretty stable. The volumes were pretty stable. The American market is very, very sensitive to supply and demand and prices can drop very, very fast but it can also increase very, very fast. So now prices have been going down in the United States for quite some time. And that's also, of course, has a negative impact on our financial performance. And clearly that's the main reason why our Q4 was slower than it was in 2023. Now, if you look at the two subsidiaries, Tibnor and reconstruction, they are very sensitive to seasonal changes, even though we are taking measures now to try to reduce or increase the impact from the seasonality. If you look at the shipments, I think it was also fairly good in Tibnor. But then again, we also see that they are suffering from lower prices, and looking at the rookie construction, we can also see that the operating result was slightly lower than it was previous year. But then again, this is no surprise. This is something, a behavior we have every year. We are quite optimistic. We do think that when the interest rates comes down, we also believe that the construction segment is gonna come back strong. And I think speaking with Rocket Construction, they're quite optimistic and believe that they have new projects coming in. So we're quite optimistic for the future. Now to the part of the agenda, I guess that a lot of people are interested in and I am as well. And I just want to emphasize the importance of this strategic investment. I can understand that some people have their doubts, a lot of money, big undertaking for SSAB as a group. But I will try, in this part, try to explain the rationale behind the investment, why we are doing this and why it's important. Right now, we have two transformation projects ongoing. One is in Oxelösund. And in Oxelösund, we're only replacing the blast furnace with a new electric arc furnace. Normally, we produce and sell around 600,000 tons from Oxelösund. It's a rather small production site if you compare to other producers in the world. If it's somewhere you can benefit from using an electric arc furnace, it's actually because of the lower volumes that you need to produce. It's not cost efficient to have a blast furnace in a production site where the volumes are quite low. And this gives us a lot of flexibility. A part of Special Steel, we also have the mobile facility in the United States, and they are using electric arc furnace. We have experience from working with electric arc furnace. We have shown that we can produce all the advanced grades that we produce in oxyzone today in an electric arc furnace. I think the benefits we will have in this case is the higher flexibility from a production point of view, but we also expect us to be a little bit more efficient in oxyzone and also, of course, reduce the CO2 emissions significantly going forward. But when it comes to Luleå, The plan is also, again, to replace the blast furnace there with the electric arc furnace. And in this case, it's going to be two electric arc furnaces, giving us a total capacity of roughly 2.5 million tons, which is pretty much the same capacity as the blast furnace have today. And then on top of that, we're also planning to invest in a cold mill complex. This is a slide I think is quite important. I think it's important to understand the rationale behind the investment. When we talk about green transformation or green transition, the main emitter for the CO2 is actually the blast furnace. And the blast furnace will be replaced by electric arc furnace. So that's You know, if you talk about the cost of green transformation, it's mainly the electric arc furnace. But then again, the blast furnace in Luleå was up for relining, a lot of maintenance. That drives a lot of costs for us. And instead of investing in old technology, I think to invest in electric arc furnace, it is much wiser. And in this case, we're going to be able to invest in a very unique electric arc furnace. And I will get back to that further on in my presentation. So that's the first part of sort of the Luleå investment. The second part is the Holstrip mill. And today we're using the Holstrip mill in Borlänge, a Holstrip mill that was built around 1965. It has a lot of years, and the technique has improved significantly since the 60s. Even though it was upgrading during the 80s, it's still comparably comparable. The technique today is much more advanced than it was in the 80s. In order for SSAB to maintain our competitive position, it's needed for us to invest in a new hot strip mill. And another benefit of course, is that this hot strip mill will be in Luleå and it will be a continuous production process from the electric arc furnace to the hot strip mill. I think that creates a lot of benefits and production efficiency. The third part of this investment is the cold mill complex. And this is something I wanna stress and highlight. This part of the investment will be able to give SSAB Europe a chance to reposition them to more or less a special steel producer or a premium producer. The cold mill complex will be focusing advanced high stream primarily, and we will also be able to produce new galvanizing metal coatings. And that's extremely important for the market, but also a big demand from the market that there are other suppliers than the few or the only supplier of one of the coatings that we're looking at at this moment. It is a very important strategic investment for us. And I think if you talk about supplying superior customer value and also talk about long-term competitiveness, the coal mill complex will be able to give SSAB Europe and SSAB as a group a competitive edge, a long-term or sustainable competitive advantage. It will be a state-of-the-art equipment. We will be able to produce unique grades to unique markets. So that's something which is extremely strategically important for SSAB. So this investment is a lot more than a green transformation. This is going to reposition Europe. and create a lot more customer value. So I guess a lot of concerns will be related to the raw material that we're going to use in the electric arc furnace in Luleå. We have been talking about the hybrid project. We have been talking about hydrogen DRI and so on. And, of course, there could be some concerns for people who are in the industry about this. This electric arc furnace is designed and built to be able to use not only DRI, not only HBI, but also scrap. It's a very unique production unit where the scrap and the iron carriers such as HBI or the DRI will be fed into the electric arc furnace. And that's going to give a lot of advantages. And we're also going to use bottom pouring in this. So it is designed for various types of iron carriers, not only scrap, as I said, but also the DRI and the HBI. And that gives us a lot of production flexibility and also lower dependency on a few suppliers. And we would say that this is a future-proof investment, an electric arc furnace, since we can use a lot of iron carriers that we can find on the market. Now looking at the hot strip mill as such, we can see that this hot strip mill will not only be much more efficient because it's a continuous production line, but we also will be able to widen the width of the band that we produce up to two meters. And there is a demand for that from the market. So we will be able to capture a new part of the market. but also we will be able to produce more advanced steels with a higher flexibility. So this is a very unique production line, creating a lot of uniqueness for us. But I guess for me, the most important part of the investment is this part. Here, we will be able to produce the third generation of advanced high strength steels. We're going to be one of the few producers in the world. And already today, we have customers like Tesla and General Motors. And in the future, we will be able to serve other companies who are electrifying, looking for, you know, advanced high strength steel to be able to make their cars more lighter, but also more safe. Because today, we're supplying crash barriers. not only in the front, but also on the side. And with the new coatings, the magnesium zinc coating and aluminum silicon, we will also create uniqueness to the market in that sense. And that is very important for me going forward. But we also combine this with a continuous annealing line to add more capacity to what we have in Borlänge today. And our production line has been pretty much fully loaded the last three years. We need more capacity there. And that's what this investment is going to give us. So looking at the EBITDA effect of this digital transformation, we can see that, first of all, we will be able to reduce the fixed costs by 50%, and that's a very strong contribution. We will be able to lower or reduce the CO2 emissions significantly, and of course, lower the maintenance costs. But I made it quite clear, if you have equipment from the 60s and replace it with a new one, of course, you're going to have much better efficiency, productivity, and lower maintenance costs, clearly. I think For me, this mix change or being able to reposition, as I say, the Europe to a more specialty producer, that's extremely important for me. And here we estimate the contribution to be an average per year, 2.5 billion. It's just an estimate. It could be more. But this is important for us going forward and looking at our competitiveness long term. And then we have the net green premium. that we are taking, we have an estimate, a lower amount here, just to be on the safe side. But all in all, this gives us a DA contribution of roughly 5 billion SEK per year. Now, speaking of the financials, I'm leaving it over to you, Lena.

Thank you, Jonny. So let's get back from the future scenarios to Q4. We start with the shipments. In Q4, shipments were 1,448, which was 9 kilotons lower than the previous quarter, and 43 kilotons lower than previous year, which is reflecting the market sentiment that Jonny was already talking about. If we then refer to the outlook we gave, We were actually in line with Europe Division and Americas and slightly lower in Special Steel Division. If we look at the revenue, Q4 revenue being 23.6 billion. It was 3% lower than previous quarter and 11% lower than previous year. And then of course, analyzing this, it is mainly related to the prices and the outlook we gave for Q4 prices. We were well in line in Americas and slightly better in Europe and special steers. EBITDA on the lower part of the graph illustrating Q4, EBITDA level 1.6 billion. It was lower than Q3, which was on a level of 2.3. And of course, compared to previous year level 3.4, it was lower. But I will explain more. in the coming slides. Let's start the bridge analysis comparing quarter on quarter. Q3 performance 1.2 billion. The reduction in prices clearly illustrated here. The biggest contribution is coming then from the Europe Division and Americas as these special steel prices were stable. Volumes also slightly lower and that's coming mainly from the Special Steel Division. To remind that in America's division we had the annual maintenance during Q3, thus they were picking up the volumes for Q4. Rather large positive impact with the variable cost and here we have a combination of different things. The raw material in Nordic Mills were lower in Q4, contributing 500, and then lower maintenance cost, contributing 400. Also, the biggest portion here actually is related to change in inventory and capitalized fixed costs. During Q3, during the maintenance outages, the inventories actually came heavily down, having a negative impact in Q3, And then we recovered from those very low levels during Q4, so that in the BRITS analysis has significant positive impacts, close to 700. Maybe to mention that the emission cost was also lower and the energy cost slightly lower in Q4. Fixed cost illustrating well the seasonality. Q3, we have the vacation pay, so the personal cost in Q4. are always higher, and that's contributing here 600. And then we also had higher costs of external services and repairs in a processing cost. That's contributing 600 and then slightly higher SG&As. But I must add that the costs were in a good control throughout the quarter. Capacity utilization, negative impact, and that's mainly related to oxalozoon maintenance. different cost when it comes to unused capacity, and we did have maintenance, of course, in Q3 and also now Q4, but the cost is different depending on the mill. Minor impact of the effects related to revaluation of balance sheet items. If we then continue to look at the performance Q4 versus previous year, rather big drop. and as already mentioned, mainly related to the prices, which are then reflecting the market prices and market sentiment. Special steel division contributing here 255, Europe 280, and thus the biggest impact is coming through Americas. Impact is 1.6 billion and with close to 25% lower prices. Good reminder of the volatility of that division when it comes to prices. Volumes, minor impact, but yes, the volumes were lower, and this is mainly related to special steel division. On average, volumes were 3% lower on the group level. Positive impact in the variable cost, not compensating the price reduction, but these are now representing the lower raw material cost. both Nordic Mills having a positive impact, Special Skills 440, Europe Division 450, and also Americas with 100. Fixed cost, and I think this is well illustrating that we have had a good cost control. Here, the biggest part is related to personal related cost with salary index increase and some higher FTEs. And then of course, some costs related to transformation activities started. Capacity utilization, minor negative impact, and this is related to lower production in Oxelösund and Bolänge. Minor positive impact of the FX, and the other here, 220, is a reminder of the insurance compensation that we received last year or previous year during Q4. It was the furnace burn-through incident in Americas, which took place 22, compensation received 23. So this is related to that. If we then continue with the cash flow, as already mentioned, good performance of the cash flow, and that's well supported by the working capital. But as you can see here, the Q4 working capital, it tends to be seasonally also giving a positive contribution. Accounts receivable, of course, in line with the sales, went slightly down. Maybe to mention that we haven't had any big bad debt losses, so that's a good thing. Accounts payable, and that is related to the winter stocking of raw materials. So we have a large portion of... significantly big invoices during Q4 with long payment terms so that is of course supporting but that seasonality thing that happens during Q4 as you can see also previous year and then the inventory is kept in a good control also helping in the working capital performance. Maintenance capex slightly lower in quarter on quarter comparison but then the full year you can see that the Maintenance capex was slightly higher than 23. The frame, as we're going to discuss shortly, is around 3 billion. So that continues to be on a similar level also for coming year. The other line here is mainly related to purchases of emission rights and the net impact of that. Positive impact with the financial items, interest income. And then the strategic expenditures, here we have a bit lower than last year when it comes to quarter. But, of course, in the annual comparison, you can see that the expenditure is higher compared to 2023, and that's mainly related to Oxelosun project that Jonny was just talking about. And the acquisition of shares is... Small figure here, 38, is related to rookie construction purchasing shares in a Swedish entity. All in all, very good performance in Q4. And the outlook for Q1 with the working capital is that we return back to this seasonality during Q1. So it tends to be that we need to build up the inventories and the accounts receivables goes up with the sales, and then we need to pay out the accounts payables. the net impact is then different than Q4. Already mentioned the strong cash position at the end of the year, 24. 17.8 billion gives us a net debt equity ratio of minus 25, which is exceeding the financial target, plus minus 20. Excellent starting point for the strategic investments planned. And actually yesterday in the board meeting, board decided to propose a dividend of 2.6 crowns per share. And that will be proposed in the AGM in April 19th. And if so approved, then this leads to dividend payment of 2.6 billion to the shareholders. The payment day is May 7th. We promised to give some guidance for the CAPEX for 2025, and here it is. But firstly, if we look at the 2024 CAPEX spend, it is fairly equal split between maintenance and strategic investments. And of course, in 2024, majority of the strategic CAPEX is then related to Oxelosund project. And then the plan for 2025 with the maintenance is to keep this 3 billion level when it comes to R&C, and then the strategic capex will be increasing, and that is then picking up mainly due to LULO investment starting. And if I split this 7 billion to different areas, I would say that Oxelosun is roughly three, Luleå roughly three, and then the rest is related to other smaller strategic investments during next year. Raw material. We know that the raw materials, iron ore, caulking coal, has developed downwards compared to last year. And the outlook when it comes to iron ore and coking coal is that it will be rather stable or somewhat higher during Q1. To remind the lag in iron ore price and then the cost impact in P&L is one quarter and with coking coal is one quarter and a half. And then in the US, scrap prices have started to develop upwards. So the outlook is that during Q1, the prices or the scrap cost will be slightly higher, thus squeezing the margin during Q1 compared to Q4. And then the maintenance cost plan for 2025. As you can see, the table is fairly similar as we had 2024. We do not plan maintenance outages for Q1 or Q2, so we have the biggest part of the maintenance taking place Q4 and Q3. As already mentioned, in Americas we had maintenance in Montpellier mill during 24, thus we will not have that in 25, but instead we will have the maintenance in Mobile mill. And also the full year spend will be slightly lower in 2025 compared to 2024. And that's due to the sort of less extensive maintenance that took place in Luleå during 2024. So fairly similar plan for next year, as was the maintenance during 2024. This was my last slide, so I give it back then to Jonny to go through the outlook.

Thank you, Lena. So now this part of the presentation will be focusing on the Q1 primarily. This slide, the format you've seen before, looking at heavy transport. We can see that we expected to maintain neutral on the lower level. We don't think it's going to go down further. but it is on the lower level. There's a lot of heavy transport that goes into mining, that goes well, but then there are a lot of heavy transport that goes into construction. That is on a very low level. So, but we expect for Q1, it's gonna maintain neutral. Looking at the automotive, it is a blend between weak and neutral. I think it's leaning more towards neutral because it's still on a very low level, I think the positive side is the growth that we've had in the automotive segment, even though there is a very tough condition. And that's mainly driven by the demand from the United States in this case. And then we have the construction machinery. That also, of course, is related to construction, just like heavy transport is in a way. We can see that we have a weaker demand in Europe. But then again, we see that we also... have a bigger demand in China for this kind of vehicles and equipment. But still, we don't think it's going to grow much in Q1, so it's going to maintain on neutral. And then we have material handling. That's a lot of yellow goods, just like heavy transport is. And this is mainly driven by mining. This has been on a higher level, and I don't think it's going to go down. I think it's going to maintain on this level. And I think that generates a lot of value for special seed. I think the only green or strong segment here is actually energy. It's driven by wind power, and it's been like that for some time, and it's going to continue to be like that. I think for Special Steel Division, they supply material for the bigger crawler cranes or the bigger cranes just to be able to erect these wind power mills. That demand has been very, very strong, and it looks like the order books for some of these producers are three, four year long. And then we have the construction segment, of course, still down. We don't expect it to change in Q1. And then we have the service centers. I think it's going to maintain pretty much on the same level as it is, as it was in Q4. And then looking at the outlook, I mean, since we're already through almost through January, we have a pretty good insight of the market and the order book that we have. And hence, that's also why we believe that we're going to have significantly higher shipments in both special deals in Europe and somewhat higher in America. So, America's had a better, you know, shipments last year than those other two divisions. When looking at the prices, we've indicated it's going to be somewhat lower for special seals. But then again, the price levels for special seals are on a high level. And then we have for Europe somewhat lower, or sorry, lower, it's going to be lower. And then for America, somewhat lower. Yes, that look is, I would say, quite optimistic in that sense. So if you summarize this then, I think that our safety performance has been very good. We have implemented a safety culture all over the company. People are following this and working hard on this on a daily basis. I think that we had stable prices in special steel that generated good results. And we expect that to grow in Q1. And then looking at the investment programs in Luleå, I think it's important, and also in Oxfam, of course, but I think it's important to understand that these investments, especially the one in Luleå, is not only a green transformation initiative. It has a lot more to it. And one of the most important things is actually to reposition SSAB Europe to more of a premium and special steel producer, but also generates a lot of other values. We will have a lot more flexibility when it comes to raw material. We will also be able to reduce the fixed costs significantly, both in Oxytocin and also in Luleå. And we have the flexibility to manage short-term swings. Blast furnace, you don't close it down, but electric arc furnace, you can close it down for a few days and then start it up again. You have a very high flexibility. And then last but not least, we will be able to eliminate the CO2 emissions and taking down hopefully 10% of the CO2 emissions for Sweden. I think that was my last slide. So having said that, I'm going to move over to my two colleagues here, and then it's time for questions, I guess.

Yes, indeed. Thank you, Johnny and Lena. We will now open up for the Q&A. Just a reminder, I mean, you're much welcome to ask more than one question, but please state them one at a time to make the process run smoothly here. So by that, operator, please, can you present the instructions?

Thank you so much, dear participants. As a reminder, if you wish to ask a question, please press star 1-1 on the telephone keypad and wait for a name to be announced. To withdraw a question, please press star 1-1 again. We'll take a few moments. And now we're going to take our first question. And it comes from line of from ABG . Your line is open. Please ask your question.

Yes, hello and good morning. I'd like to start off with a question on the Q1 outlook. There was a bullet point that said it excludes effects from Finnish strikes. Could you just give us an update on what's the latest on the strike situation and how big of an impact that potentially could have on Q1 earnings?

Do you want me to take that? Yeah. Well, the strike is ongoing in Finland, as we know, unfortunately. And the plan at the moment is that – or plan – The announcement is that it will take place six days and remains to be seen how it will continue, if it will continue. So far, we have been discussing with the Europe Division of the impact. And of course, we try to sort of catch up the impact of the strike during the quarter. But unfortunately, most likely, it will have some impact fairly well in line what we had in the previous strike incident. So difficult to say and predict at this stage, but we try to minimize the impact as much as possible. So we consider that to be sort of on a similar level as the previous strike we had.

Then we refer to the political strikes in the last year.

Yeah, perfect, thank you. And then on the Livlio investment, I appreciate the rundown on why it's so important, apart from just the environmental angle. But if we continue to see a weaker environment in the near term, is there still a possibility to postpone that in some way or even scale it down? Or is that not on the table at all?

I just want to emphasize the strategic importance of the investment. But we're not stupid. Of course, we have the flexibility to postpone or, delay or take the necessary measures needed if we have a market downturn. But then again, it's really important for us and we have the intention to fulfill the plans that we have.

Okay. That's very clear. Thank you. And the final one from my end, perhaps a more broader question to you, Janne. Are there any significant strategic changes you have made or want to make that will affect the operations more in the near term? So sort of disregarding the long-term transformation agenda, is there anything you want to change today?

I'm looking at the short-term. I guess that we will have more focus on the cost structure, try to optimize that and increase the efficiency. I think what's more important is the long-term initiative is to try to go a lot more towards specialty grades and premium. So that's what the whole organization is working for, that's what we're aiming for, and that's also the reason why the Luleå investment is so important for us going forward, so we can reposition SSAB Europe to become sort of a premium or a specialty supplier.

Understood. Thank you. That was all for me, so thanks for taking my questions.

Thank you. Now we're going to take our next question. And the questions come from line of Caleb Solomon from SEB. Your line is open. Please ask your question.

Hi. Thank you. Just two questions for me. First one, can you just give some more color on the special SILS volumes? I think there were about 14% sequentially, which is quite a bit below your Q3 guidance. So was that just lower overall demand or something else?

Yeah, first of all, we were a little bit surprised also that we were not able to reach a higher level for shipments in Q4 2024. We had some smaller issues with the startup for the maintenance in Oxelison. The debt had a negative impact on our shipments. But there is a very strong underlying demand, and the order intake has been strong. So we're quite optimistic and confident for the Q1 outcome. But just like you said, we were a little bit surprised about the lower volumes in Q4. But that was not only related to a lower demand, but also some shipment issues.

Okay, that's clear. And just another question on the Luleå investment to you, maybe, Johnny. I mean, you touched on this earlier, but I guess part of the rationale behind that investment is improving your product mix and kind of reducing the share of standard products, right?

Correct.

correct me if I'm wrong, but you're increasing processing capacity by a bit more than a million tons. So I was just curious about the decision to build two electric arc furnaces with a combined capacity of 2.5 million tons instead of just one to match the kind of increase in processing capacity. Is that simply to maintain volumes or can you give some color on that?

Yeah, sure. I mean, first of all, I mean, the whole Ludo system as it is today is designed for roughly 2.5 Half of that is being sent down to Borlänge for further processing. And the plan is that we're going to continue to do that. And then the other half is going to be used for the cold mill complex. So all in all, we're going to be able to produce very unique grades through the whole production line. So that's the main reason why we're, you know, keeping the 2.5 million tons. And the idea is that more than 80% of the products that we're going to produce are going to be specialty grades or premium grades. in one way or another. So that's the main reason. And like I said before, we have been, our continuous annealing line in Borlänge has pretty much been fully loaded for the last three years. And we have the same situation with the hot tip galvanizing line in Hemelin on number three. We need to increase the capacity, and especially since we've seen this growth in the automotive segment and the bigger demand, a lot more customers are coming to us, turning to us for more safer crash beams, side collision beams, et cetera. And we will be able to supply that to them. And on top of that, we also believe that we can supply material that's going to be metal coated with the more new advanced metal coating systems that only one other supplier can do on the markets. I think that's going to put us in a very unique position. And when we do this investment, the coal mill complex, we will need the full capacity of the 2.5 million tons.

Okay. That's all from me. Thank you for taking my questions.

Thank you.

Thank you. And now we're going to take our next question. And it comes from the line of Tristan Gresser from BNP Paribas Exxon. Your line is open. Please ask your question.

Yes, hi, good morning, and thank you for taking my questions. I have two. First, on the free cash outlook for this year on working capital, you were initially quite cautious for Q4, so you had a big release. So if you can a bit explain that. And what does it mean for Q1 and 2025? I'm going to start there.

Maybe I can comment on that. Yes, we had a strong focus to keep the inventories on a controlled level to match the sort of the lower demand. So that definitely helped in Q4. And I said also the raw material purchases, that has a positive impact. And that's a seasonal always Q4 demand. And then Q1, we know for sure that the accounts receivable, which will go up potentially now with the higher shipments and higher sales, that will have a negative impact in the working capital. And then we need to pay out these raw material invoices. And we do that, as you can see, seasonally in the historical figures. We tend to do that during Q1. And then the inventories, they are not on a high level at year end. I would say that we have still room to replenish the sales inventories. So there will be an opposite trend during Q1. But to point out that that also is a sort of a seasonality that we have, and it's part of this sort of the industry and our behavior quarter on quarter.

Okay. That's clear. So there is no structure or reason for working capital after release in 2023 and 2024 that you will see once again a release in 2025?

We have actually been working a lot with the working capital throughout the years, and I think it's a work we continue to work with, and sort of the efficiency target remains there, of course. But I would say that no big structural... benefits seen in short term as such. So the performance today is on a normal level and the seasonality you need to take into account when you make the outlook.

Okay, that's clear. And then on the free cash flow again, can you clarify that your carbon cost situation, how much of your polluting needs you receive currently with the free allowances What's your deficit? How do you think it's going to evolve next year with Oxila soon? And basically, how much do you need to buy or do you expect to buy? We've seen the cash flow statement for 2025 and onwards.

Of course, we continue to buy the emission allowances, and that's part of the strategy we've had for quite many years already. And, of course, depending on the emission prices, it will – it will have an impact on the outcome. I would say that it's a slightly lower level than it was this year, the impact, but as I said, it depends on the emission allowance prices. But as I said, we continue to purchase the allowances as part of the sort of the hedging strategy.

And just to add on Uppsala Sun, Tristan, that new mill will start up in 26, so it will have no impact on CO2 in 25.

That's clear. So if prices of carbon stay the same, would you expect that they step up in this line in the cash flow statement for 2025?

No, I would say fairly similar or rather might be slightly lower.

Okay. All right. And maybe that's very clear. Maybe one last question for Johnny on just the policy issue. a landscape in Europe. Obviously, there are a lot of talks about the steel action plan and potential support for the steel industry. And maybe you can comment on what specifically would you expect from the new commission. But do you believe there is a probability as well of the European Union walking back on, you know, green regulations, the free allocations, all that, facing the risk of deindustrialization in Europe? And if that's the case, if you already started to invest, In which situation would you be in? What could you do? What would be your options?

I think we have the regulations that we have in Europe right now, and it has been implemented. When we do our risk assessment, our sensitivity analysis that we have done several times over and over again, we look at how can we make this investment future-proof no matter what happens to the investment. And our calculations show that if there are changes to the ETS system, this investment stands on its own anyway. We will still be able to be competitive. I think that's extremely important for me to feel confident with this investment. But then again, to speculate what's going to happen to the ETS system or the regulation, that's something we try to avoid, but be prepared for changes. that we are in full.

Okay. That's clear. But is there anything from the sea action plan you can think you can benefit? I mean, if I look at it, if there's more state aid support, it's not something you, it's more something your peers have been benefiting. If we see measures on imports, the Nordics market is a bit less exposed to imports. So, I'm wondering if there could be any positive for you in this kind of policy for this year. What would you be asking?

We have done this assessment as well, but I guess we would like to keep those analysis for ourselves for the time being. So I don't prefer not to comment on that. Okay.

Thank you.

Thank you.

Thank you. Now we're going to take our next question. And the question comes from the line of Tom Zhang from Barclays. Your line is open. Please ask a question.

Hi, morning. Thanks very much for taking your questions. Congrats, Johnny. Two for me. The first one is the guide for the $5 billion earnings uplift from Lulia and the Cold Raw Complex. I guess if I compare that to the CMD from 2023, you guys have been talking about $10 billion of the DA uplift from the entire transformation. So I guess we were slightly surprised you only get half of that $10 billion from the first days, even though it includes the cold rolling complex. And I guess that implies you're getting another $5 billion at some stage from Raha. Has there been any changes in the assumptions that you've been making to get that EBITDA uplift? I'm just surprised, yeah, that this $5 billion number wasn't a little bit higher. That's what I think.

Regarding the $5 billion, I mean, so... I have personally been a part of assessing this inside out, and we have updated the model with the latest ERU numbers. We have looked at the average of other estimates for the future, you know, scrap price, you know, the cost of producing hydrogen-reduced DRI, using hydrogen-reduced DRI, not using it, using HBI, you know, also doing a lot of different sensitivity analysis. What if the ETS system goes down by 50%? Or what if we run this without any green premium? What if we've done all of those exercises, taken into account a lot of different variables, And our conclusion is that the case is strong. I think in the fundamentals in this is, I mean, first of all, if we exclude all of the ETS and all of that, and just look simply at what we're doing, we're investing in a new modern equipment, very advanced, very automated, and replacing the old equipment, very manual, very maintenance driven, very inefficient. That gives us a lot of benefits And then secondly, being able to reposition Europe to be able to produce and sell more of the specialty grades that they are selling today, but have a minimum capacity. They've reached a maximum capacity, more or less. And being able to maybe double that, that is what we're expecting. So that's walking away from a very... sensitive market situation where you follow some of the market prices, where you're able to set more or less your own prices and also supply a unique customer value. That, at the end of the day, is really what we're focusing on. How do we supply unique customer value? And that's the main focus for the Alulia project going forward.

Okay. No, that makes sense. Maybe just ask in a slightly different way then. So with the Raha expansion, I know that that is still a little bit further down the line, but I think the plan was to make a decision on it in 2026. Are you getting the same kind of benefits with premiumization and sort of grade increase with what's planned for Raha, or is that more a sort of, you know, just a fixed cost reduction switch from blast furnace to electric arc furnace? And maybe just a comment on the timeline of that if you're still – looking at a 2026 decision or if there's any risk that that gets pushed out. Thank you.

So it's not likely that we're going to make a decision in the year 2026. I think the focus for us right now is the LULU and Oxelösund. That's what our focus is right now. We are not ready yet to make any type of decisions on RAE and we're not ready to present what's going to happen in RAE either. I think Our primary focus is on the Luleå and Oxford and so on, and make sure that we have stable financing for it, that we have a stable balance sheet to handle it, and also having a look at what's happening on the market and market conditions. And then based on that, of course, long-term, then we have the intention to convert Roar also, but when that's going to happen, it's really hard to say right now.

Okay, that's very clear. Maybe if I just squeeze one more. In the release for Europe, you mentioned further measures around flexible working hours being restricted on costs into Q1. Could you just elaborate a bit on what that means, particularly around potentially taking any capacity out? I think you've previously talked about the likelihood of entire furnaces being idled. But I guess with this current European market condition, maybe you can talk about how you expect to see supply being taken out of the market.

For the time being, we have the demand, so there are no plans to shut down any furnaces because the demand is there. When it comes to the flexible measures that you mentioned, of course, if we have set a budget and we're deviating from that budget, we take measures to try to get back on track. And these flexible measures are one of the measures that were taken to sort of achieve the budget we set for 2020. And we have other initiatives as well, which I prefer not to comment on. But of course, you're running a company like this, if you don't fulfill the expectations, you need to do, you know, whatever you can to get back on that level. So that's, you know, a part of that.

Okay, very good. Thanks very much.

Thank you.

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

Good morning, and thanks for the opportunity to ask the question. Maybe just one more on Lulu. Could you maybe talk a little bit about the expected return on investment on this? So, I mean, you know, to follow on from Tom's question, I think a benefit of 5 billion SEK a year on an investment of, you know, 4.5 billion euros is okay, but it's not that attractive. but I also understand, you know, you've got lower working capital, higher flexibility, and you avoid capex on the existing production system. And then also, thank you very much for the split of the capex between the hot end and the cold rolling mill. Is there a big difference in returns between that, between the sort of different parts of the project? Thanks, that's my first question.

Yeah, so we have also, of course, assessed the different parts and looking at the internal rate of return of each part of it. And it's slightly higher for the cold milk complex. I prefer not to go into the details, but of course, it's slightly higher that I can say. What was your first question? Sorry for not remembering it.

No, it was just around the return on capital. So saying, you know, if you just took the 5 billion EBITDA, I mean, you know, work that out on the total capital base, it doesn't look particularly attractive. But I also understand, you know, you have the offsetting impacts of a working capital release or lower working capital investment, and also you avoid the CapEx on the existing production system. So I was just trying to, you know, put those items together to see how it builds into a return profile.

I think that's a good comment because that's something that we forget to talk about. So what is the investment need in the current system? And if you take the delta between these two, then, you know, what does it look like? And we've done that. We looked at the investment need in the current system, you know, with relining the blast furnace, working with the coke furnace, and also doing some necessary investments in the Holstrup Mill in Borlänge. You know, it amounts – I don't know, can I be –

Two billion euros we have talked about.

Two billion euros, that is the investment need in the current system. And then you compare that with the 4.5. So looking at the Delta, it becomes extremely attractive to go for the more upgraded investment. And it makes a lot of sense then invest in old technology, CO2 emitting technology, and then invest in the fully automated, advanced, high flexibility, high capability investment. And then being able to reposition, as I say, the Europe to be able to supply unique customer value. I think... that investment decision makes sense to me. And I think, for me, we also have a good IRR. That's also important. It is good enough. It is good, actually.

Okay, thanks. And then maybe a quick follow-up on that. You said the peak CapEx is 2026 and 2027. Is that roughly split between the two years equally? How should we think about that?

We don't have a At this stage, we're still negotiating the cold meal complex, so we have to see after the finalization of those negotiations how the split will turn out. Yeah.

Thanks. And then, sorry, my last question. Could you maybe just talk a little bit about the plate markets in the U.S.? You're obviously one of the biggest players in there. You said it's very sensitive to supply-demand. you know, it was a huge earner for you the last few years. You know, obviously now it's a lot lower. What's your view on the outlook there?

Thanks. You're right that the market in the market was unique, very high earnings. And it was a little bit a market on steroids based on the IRA, Inflation Reduction Act. But then there was some other infrastructure subsidies a couple of years before that. But we look at this and we do different scenarios. We look at if there are 25% import taxes to Canada, then Algoma will not be able to supply inventory into the United States. That's going to have a big benefit for us. Then our price is going to go up very, very fast. The demand is going to go up very, very fast. But even though there are no taxes implemented, we know that even though there are some new capacity invested in the American market, they are still struggling. And we're following this, we monitor this. And we are now trying to push up prices. And I think that there is a likelihood that we were able to do this. Market is going to come back and the demand is going to come back. The question is when, but it's going to come back. And there is a lot of investments ongoing, not only in wind power and so on, but it's a lot of other. We sell a lot to pipeline, and we already know that there are a lot of projects ongoing. So we're quite optimistic that we're going to get back on track in the USA market. Up to what level, that's really hard to say because there's so many variables right now, but we're quite optimistic.

Thank you.

Thank you. Now we're going to take our next question, and it comes from the line of Dominique O'Tain from JPMorgan. Your line is open. Please ask your question.

Thank you, guys. Two questions for me, please. Just could you maybe, you've spoken at a high level about steel Europe, but could you maybe just help us with the bridge, how we think about Q1? I think the Q4 EBITDA numbers that you reported were significantly more impressive than the market we're expecting. Do you think you could generate a comparable level for Q1, given your comments, particularly around stable raw material prices? And then my second question, again, going back to Lulia, How are you thinking about the timing of the cold mill complex? Would it be a seamless capex spend and project development from the hot end or should we think about there maybe being a staging to that second phase? Thank you.

So, first of all, talking about the SSAB Europe and sort of what we see in Q1, I think We have grown significantly in the automotive segment. We ended up selling roughly 700,000 tons into the automotive segment in the year 2024, and we have the ambition to continue to grow this market. All of that is unique grades, and a lot of that is not sold into Europe at all. It's exported to countries like the United States. Hence, we're not as dependent on the European market as many others are. But also, if you talk about what we see is going to happen in Q1, we already know pretty much the order book for Q1. Things can happen, the strike in Finland and so on. Things can happen, of course, but we are quite optimistic. And also then, talking about profitability, it has a lot to do with the mix. What kind of grades are we selling? And if you look back in 2004, we have seen a mixed change where we've been around 48% premium sales from Europe as well. And if we maintain on that level, we're really optimistic for the future for SSAB Europe. And then to your other question regarding, you know, the Luleå investment and the cold milk complex. The way we're setting things up is that we will have full flexibility regarding the cold meal complex. So if we decide for any reason to postpone it or delay it, we can do that if we want to. But then looking at from a strategic point of view, this is something that we want to do because there is a demand from the market to have these qualities, this material, et cetera. But I just want to highlight that we have the flexibility to move it a little bit forward or or keep it where it is, or even start earlier. So we have flexibility here. I think that's important to understand that they're not so dependent on each other, these two parts of the investment. Thank you.

Johnny, can I just come back to your answer to my first question, which was really helpful? You mentioned 700,000 tons was sold in the auto segment, and you mentioned exporting to the U.S. Are those type of grades of steel potentially exempted from US tariffs? Is there any sheltering within the system that you have that could mitigate your risk to how the regulatory and tariff framework might evolve? Or are they considered steel that's moving from Europe into the US within your books?

Yeah, so the way it works today is that we have a quotation system. So we can export at an amount as an average of the last three years. And we believe that there's no reason for the United States to change that system. If they talk about unhealthy competition or overcapacity in the world being dumped in the United States, I don't think Europe is a part of that. We already have a very clear quotation system. It's being controlled. It's being monitored. So our belief is that we're going to continue with this quotation system. Let's say if there were any changes, of course, we are speculating that there could be some exemptions because this is sort of a little bit unique and there's a big demand from the market because it has to do with safety in cars, car safety, side... crash beams or that helps, you know, if you have a side crash. It's typically our material that we use on those protection beams. So we're, you know, we can always speculate, see what happens. We have done similar things in the past, but I am not super concerned myself.

Okay, thank you.

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

Yeah, good morning all, and thanks for taking my questions. My first question, I would like to come back on the current market situation in special fields in particular. And I'm wondering how is demand really looking like, i.e., is the first quarter rebounding mostly because of seasonality, or do you see an underlying rebound in the market as well? And then maybe also, and related to that, with the current market environment you're seeing in special steels, do you think that you'll be able to get back on the growth path in 2025 already and grow fully volumes versus last year? That is my first question.

Of course, there is a seasonal effect. I would be lying if I say it wasn't, but of course, there's a seasonal effect. But then again, you know, we're able to maintain our market share in this tough situation, even keeping these prices. I mean, monitor our market share very carefully. And we know exactly what's happening on the market and what our competitors are doing and being able to maintain the market share even though our prices are sometimes significantly higher than our competitors. It shows that we supply superior superior customer value to the market. If you then start looking into if there is going to be an increase in demand, let's say that the German tipper market comes back because it's been down to almost 10% of what it used to be. That's the level that the European tipper market has been on when it comes to production. Let's say if that bounces back to, let's say, 70%, 80% of what it used to be, it means for us 30,000, 40,000 tons immediately, just in one segment, one country. And this has a lot to do with the interest rates in Europe. So if the interest rates comes down further and the construction segment comes down further, then we're quite optimistic that we will see an improvement in the year 2025.

And just to get clear on that, are you saying that you start to see that market is starting to inflect and turn better, or is that more like a scenario which you've been laying out there?

I think it's – we've seen some signs, but I can't really say that it's a trend yet. I think it would be wrong for me to say that, but we are optimistic.

Okay, understood. Okay, then my second question is just coming back to your green steel side. I'm wondering what the recent dynamics have been with regards to, I guess, placing green steel volumes. There has been a time when we heard about new off-take agreements almost every month. Also, I guess, generally across the wide industry, that has gone a little bit quiet. Do you still see the same degree of customer interest, or has the enthusiasm here faded a little bit?

Well, there is still a big demand, especially from automotive industry or truck industry and so on. So when they electrify, of course, they will go for or try to go for a fossil-free solution as much as they can. And there is a demand for it clearly on the market. But you're right that it has slowed down a little bit. But the partners that we have are still coming back to us, are concerned about our initiatives, wanting us to finalize the plans that we had from the very beginning. We have new potential partners coming to us asking for a partnership because they want to have this green steel. But, I mean, everyone can see that it's not a hot topic as much anymore. And it may be the demand has slowed down a little bit. But for the LOI partners we have, it's clear that they still want to have their supplies.

Okay, very interesting. Then very last question is on the ramp up of the new EF in Oxalicent, which I think will start in 2026. So just when we look at other EF mills, which have been ramped up, be it in the ESO elsewhere, it's pretty much all of the companies. And again, that would be not untypical, which were in the process of phasing in, basically faced startup losses at the beginning. When I look at Brandbook on Banuco, I think they're still loss making even after more than a year and a half when they started to ramp this up. So I'm wondering, is this something we should be provisioning for also for in 2026, i.e., shall we expect it to be incurring startup losses then, and is there already any color you could maybe even give us as we're moving closer to completion?

First of all, this is not a greenfield investment. This is a brownfield. So we're building this electric arc furnace next to our blast furnace. We will run these two systems in parallel. We will be able to supply all our customers, you know, even if we're delayed, and I don't think we will, but even if we're delayed with one year from electric arc furnace, we will still supply our customers from the blast furnace. Of course, we monitor what's happened on the market and the risks that are related to a startup. I think one of the benefits is that the rest of the production site in Oxfam will remain the same. It's only the iron or sort of the steel feed that's going to change. Everything else is the same. So it's going to be so much easier to qualify the new products. It's going to be so much easier to supply to the market. as long as we keep the chemistry from the electric arc furnace, it's going to be the same. And now we have experience from the United States, and these operators are already, you know, a changing experience. They've also been here, and they're going to be there at the startup, making sure that we do it right from the very beginning. So we have contingencies. We have mitigations. Of course, it's not a guarantee. But I think the important part of this is that the customer will get their material no matter what.

Yes, sorry to interrupt now, operator. Given the time, we can take one more question, and then we have to close. So please, operator.

Thank you so much. And now we're going to take our last question for today. And it comes from a line of your 100 group sellers from D&B. Your line is open. Please ask your question.

Yes, hi, everyone. It's Johannes here, DMV. I have a question, and it relates to what Sebastian just asked about volumes in special steel, because you have such a low level in the fourth quarter and your guidance is significantly higher. It's pretty obvious, really, but can you sort of help us if you see kind of stable year-over-year numbers for special steel, or if they could even be up, you know, year-over-year for the first quarter?

I think I pretty much touched upon that in my previous... Yes, and we can say that maybe to specify a little bit, because more than 10% is of course very wide, so maybe look a little bit on high teens maybe compared to Q4. Okay.

Good. And maybe also if you can comment on, and this hasn't been in focus over the past few quarters, but You have steel for, let's say, defense application, military application, the RMOCs. Could you just remind us about the share or the volumes to that pocket, and if you see any sort of volume growth there for 2025 versus 2024, because we know that you have very good margins in that product.

That's true. We have very good margins in the product, and we have a very high demand. Can we say?

We can say that protection is roughly 5% now, specifically total, something like that. And, of course, that's all civilian things.

Exactly. But it can grow really fast. We have talks in other parts of the world with other countries asking us for help because there's a lot of interest in making defense vehicles lighter so they can become faster. And then they need unique material. And we're the only one, as far as I know, that can supply this. So with some luck, this can grow a lot going forward.

And you have that capacity, right, available?

Yes, we do. And we will prioritize it because the margins are so good.

Yeah, okay. That's helpful. Thank you.

Thank you. And that concludes today's conference. Thank you, Johnny. Thank you, Lena. And thank you also to the audience. Very good questions. Thanks for the attention. And wish you a nice day.

Thank you. Thank you.