Report for the third quarter of 2015: Earnings down – greater focus on efficiency
- Sales were SEK 13,594 (13,314) million
- Operating profit/loss, excluding items affecting comparability, was SEK-191 (483) million
- The result after financial items, excluding items affecting comparability, was SEK -438 (379) million
- Earnings per share were SEK -0.52 (-0.35)
- Items affecting comparability had an impact of SEK 0 (-450) million on the profit after tax
- Operating cash flow was SEK -160 (77) million
- Currency effects impacted sales positively by over SEK 700 million while operating profit/loss was impacted negatively by around SEK 260 million compared with pro forma 2014,
- Ongoing and new efficiency actions will result in savings of around SEK 2 billion at full annual run rate from the end of 2016 onwards
Comments by the CEO
SSAB posted an operating loss of SEK 191 million for the third quarter. The quarter was adversely affected by negative currency effects of around SEK 200 million. These largely relate to the translation of balance sheet items, primarily in Brazil, and the sharp devaluation of the Brazilian real. A review is ongoing to reduce currency exposure in Brazil. The relining of the blast furnace in Luleå was completed during the quarter and the investment was within budget. The blast furnace was re-started later than planned due to delays in the deliveries of spare parts. This increased operating expenses by around SEK 75 million.
Compared with the third quarter of last year (pro forma), earnings were down by SEK 600 million. This was primarily due to lower margins on heavy plate in North America (SEK 420 million), the costs of relining the blast furnace in Luleå (SEK 180 million), and negative currency effects (SEK 260 million). Operating cash flow in the third quarter was slightly negative at SEK -160 (77) million. This was primarily due to the capital expenditure costs of relining the blast furnace in Luleå (SEK 300 million) and the weak result. Overall, in the first three quarters, the operating cash flow amounted to more than SEK 2 billion and the net debt/equity ratio has decreased by 1 percentage point since year-end 2014.
During 2016, the underlying demand for steel is expected to pick up somewhat in both Europe and North America. Nevertheless, profitability in the industry as a whole remains low and negative effects of increased exports and low prices as a result of overcapacity in Asia make it difficult to achieve a satisfactory return. Although SSAB considers free trade to be important with regard to development of the global steel industry, the current situation of unhealthy competition means measures are called for to preserve the steel industry in Europe and North America.
During the third quarter, SSAB completed two significant investments in the production of crude steel in the Nordic region; total renovation of the blast furnace in Luleå and a new pulverized coal injection (PCI) system at the blast furnaces in Raahe. The renovation of the blast furnace in Luleå will give SSAB flexibility in crude steel production, which was one of the main reasons behind the combination with Rautaruukki. The investment in coal injection at Raahe will generate annual savings of around SEK 200 million from 2016. This is in addition to the synergies announced earlier. The integration of Rautaruukki is progressing according to plan, and the achievement of the synergies is progressing somewhat faster than communicated earlier. Synergies of SEK 175 million were achieved during the third quarter and the annual run rate at the end of the third quarter amounted to SEK 750 million. We expect the annual run rate at the close of 2015 to be at least SEK 1 billion.
SSAB has today given notice of workforce reductions in Raahe (Finland) and in Ruukki Construction. The planned workforce reduction of around 200 employees in Raahe is part of the synergy program. The savings program initiated by the new management at Ruukki Construction is in addition to synergies identified earlier, and is intended to permanently cut costs by at least SEK 200 million. The program will be completed during 2016.
Together, the synergies of at least SEK 1.4 billion, Ruukki Construction’s saving program of at least SEK 200 million and lower blast furnace operating costs of around SEK 200 million in Raahe will enable SSAB to reduce costs by around SEK 2 billion compared to the situation at the time of the combination with Rautaruukki, with full effect from 2017 onwards.
This information is such that SSAB must disclose in accordance with the Securities Markets Act. The information was submitted for publication on October 22, 2015 at 07.30 am.
Invitation to SSAB’s third quarter 2015 results briefing
SSAB invites you to a presentation of the quarterly report at 09.30am CEST on Thursday October 22, 2015
The interim report for the third quarter of 2015 will be presented by SSAB’s President and CEO Martin Lindqvist, and CFO Håkan Folin.
The press conference will be held in English and live webcast on SSAB’s website www.ssab.com. It is also possible to participate in the briefing via telephone.
Venue and time of briefing: World Trade Center (WTC) Stockholm, Kungsbron 1, Conference room Atlanta, 09.30am CEST.
+46 8 5055 64 74 (Sweden)
+44 203 364 53 74 (UK)
+1 855 753 22 30 (USA)
Link to webcast: Go to webcast
Instructions on how to participate in the webcast will be available on SSAB’s website, including presentation material for downloading.
For further information:
Andreas Koch, Director IR and Financial Communications, Tel. +46 70 509 77 61
Marie Elfstrand, Director Media Relations and PR, Tel. +46 8 45 45 734