SSAB Ab

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.