2010 began in a much more optimistic light than the preceding year. The recovery has been perceptible, albeit that the intensity of the recovery weakened somewhat during the year.
For SSAB, 2010 has meant a return to profit. Although the recovery proved to be somewhat weaker than expected, we see a clearly positive growth trend. Thanks to the investments which we are now carrying out, we will be able to realize our strategy of growing within our niche products, high strength steels. By 2015, they will account for 50 percent of our shipments.
During the year we have continued our work on the construction of a direct quenching line in Borlänge, which will initially provide a capacity of 300,000 tonnes of quenched steel. We are also continuing to expand our plant in Mobile, Alabama, in order to increase quenched steel capacity by 200,000 tonnes. Both of these investment projects were approved in the autumn of 2008 and will be completed during the first half of 2012. During the coming year, a new finishing line in Kunshan, outside Shanghai, will also be commissioned. This will enhance our opportunities to provide better service to the growing Chinese market.
At the same time as we are expanding production technology to achieve growth in our niche products, we are also increasing our efforts within research and development. This involves developing existing areas of use for high strength steels together with our customers, while at the same time identifying new applications. During the year we opened a state-of-the-art research facility at our plant in Montpelier, Iowa. A research centre is also under construction adjacent to the finishing line in Kunshan, China. At the same time, we have coordinated our applications know-how and our research and development at the Swedish plants. We have also co-operated with the SwereaKimab research institute in order to develop the next generation of high strength steels. A common denominator for all of our research and development facilities is that they are to provide increased possibilities for the customer co-operation projects which represent an important aspect of SSAB’s strategy for the future.
In order to further enhance SSAB’s customer focus, a new organization was introduced at the beginning of 2010. Instead of the former divisions; Strip Products, Plate and North America, three new business areas have been established. SSAB EMEA, which covers Europe, the Middle East, and Africa. The previous North American division has been expanded into a business area, SSAB Americas, covering both North and Latin America. And, we have now an entirely new business area in Asia, Australia and New Zealand, SSAB APAC, where we are in the process of creating a strong foothold, wholly in line with our strategy to grow in this part of the world. The new organization is also aimed at providing a clearer offering to our customers. With the new organization, our sales personnel can offer customers SSAB’s entire product range. During the year, demand was strongest from Asia, especially China, as well as parts of Latin America. Demand has been weaker in Europe and the US. The strongest customer segments were mainly the mining sector and heavy transports. Within Americas, demand within the energy sector has also been strong. Demand from the automotive industry, where we deliver primarily safety components and beams, was relatively good during the year. Demand from crane manufacturers has been weak throughout the year.
For SSAB’s customers, the use of high strength steels renders possible the manufacture of products which are lighter, stronger, and more durable than products made of ordinary steels. Light and high strength steel constructions save material both in production and at the end use. For vehicles, excavating machinery and cranes, high strength steels provide increased lifespan and lower fuel consumption. These are properties which are increasingly in demand as energy prices increase and environmental awareness grows. In this way, SSAB’s focus on high strength steels constitutes a focus on the environment.
At the same time, steel production places strains on the environment. Iron ore-based steel production results in carbon dioxide emissions. With current technology, it is not possible to go much further in reducing these emissions. SSAB is already among the steel companies which have gone furthest in the world in reducing carbon dioxide emissions from production. Nevertheless, we have set ourselves a target of reducing emissions by two percent per produced tonne under normal production conditions by 2012. We also actively participate in international research projects which are aimed, in the long term, at halving carbon dioxide emissions from steel production.
Prices for our raw materials — iron ore pellets and coal — rose sharply during the year. Initially, prospects were favorable that it would be possible to compensate for the raw materials costs, but prices of ordinary products came under pressure as several steel companies increased their production from 2009. However, prices of high strength steels remained more stable. All in all, the result has been that we have not been able to compensate in full for the increased raw materials costs. Thus, during the year we have continued our work on stringent cost controls. The savings program initiated at the end of 2008 is now generating annual savings of approximately SEK one billion.
Profit after financial items improved during 2010 compared with 2009 and reached SEK 682 million, representing earnings per share of SEK 1.70. The return on capital employed was 2 percent. The Board has proposed a dividend of SEK 2 per share.
The steel industry is characterized by great fluctuations. During the past year our employees have demonstrated great understanding for the Company’s need to be able to adapt rapidly to changes. Despite the strains of the past few years, our employee satisfaction survey shows that SSAB’s employees feel better with their work environment now than they did at the time of the last survey two years ago. The survey also demonstrates strong confidence among our employees as regards the future. It is, of course, extremely gratifying that our employees enjoy a sense of wellbeing and belief in SSAB’s future. Thus, when I am now leaving the company to take up a new appointment, I feel great confidence as regards SSAB’s continued development.
President and CEO
Although 2010 did not develop as strongly as we had initially hoped, I feel very confident as regards the coming year.
We have a clear and distinct strategy for the future. We have committed and skilled employees. We are carrying out investments which will ensure that we are well equipped for further growth within high strength steels. And demand for steel is expected to increase.
During the year, we will continue to develop our operations. We will continue to develop our employees’ skills and use our production plants to the best effect, and we will manufacture where it is most cost-efficient to do so. We will continue our close cooperation with our customers and, together, develop new steel products and applications. We will improve products that are already available, while at the same time identifying new areas of use for high strength steels through our expanded research and development work. We will drive development forwards. With our new organization we are able to offer our customers a composite offering of the most advanced steels on the market.
President and CEO,
from January 1, 2011