Report for the second quarter of 2009
The quarter • Sales declined by 56% to SEK 6,583 (14,957) million • Operating profit of SEK -952 (3,149) million • Profit after financial items of SEK -1,096 (3,006) million • Profit after tax of SEK -636 (2,031) million, entailing earnings per share of SEK -1.95 (6.16) • Operating cash flow of SEK 2,119 (2,536) million and cash flow from current operations of SEK 1,917 (1,379) million • Net debt/equity ratio was 52%, unchanged compared with the end of the first quarter. The half year • Sales declined by 48% to SEK 14,618 (27,867) million • Operating profit of SEK -1,086 (5,897) million • Profit after financial items of SEK -1,311 (5,378) million • Profit after tax of SEK -483 (3,732) million, entailing earnings per share of SEK -1.45 (11.32) • Operating cash flow of SEK 3,043 (5,326) million and cash flow from current operations of SEK 1,541 (3,118) million • The return on capital employed for the most recent twelve-month period was 5 (17)% and the return on equity was 7 (22)%.
Comments by the CEO The steel market continues to be sluggish. The second quarter has been characterized by weak demand and continued pressure on prices. As a consequence, we are reporting an operating loss of SEK 952 million for the quarter. At the same time, our efficiency and cost-savings programs have had a more rapid impact than we had previously calculated. Accordingly, we have a positive operating cash flow of SEK 2,119 million and are able to report significantly lower fixed costs than last year. Production during the quarter has remained well under 50 percent of capacity. Following the extended summer outages at our Swedish production plants, we now expect to resume production at one of our blast furnaces in Oxelösund as well as the blast furnace in Luleå towards the end of August. Our raw materials costs will be lower. Prices in the coal agreements are approx. 36 percent lower in Swedish kronor than last year, but the impact will not be felt until towards the end of the year. SSAB’s negotiations regarding iron ore pellet agreements have not yet been completed, but agreements reached on the world market show significantly greater price reductions for pellets compared with fines, a factor which benefits SSAB's pellet-based operations. The indicated price reduction for pellets would, in Swedish kronor, mean a decrease of approx. 34 percent for SSAB. The global steel market is characterized by major uncertainty and it is not yet possible to foresee the full impact of the financial and economic crisis. It is too early to talk about a definite turnaround. What we can note is stabilization. Prices during the second quarter were lower than during the first quarter, but together with volumes have stabilized at this level. During the third quarter we expect market conditions to be similar to those in the second quarter. We expect that the result for the third quarter will be weaker than for the second quarter, primarily due to seasonal variations as a consequence of our customers' holiday outages. The trend going forward is still difficult to assess. By the end of the year, inventory liquidation at end users may have led to a certain strengthening in demand and an improvement on the market. In the long term, I remain optimistic. Thus far this year, customer interest in cooperating with SSAB in developing new products has been greater than ever. The world needs steel and SSAB is well equipped to meet future needs for lighter and more sustainable steel products. The briefing will be live webcasted on SSAB’s website at www.ssab.com. Instructions how to participate in the webcast will be available on SSAB’s website, including presentation material for downloading. If you want to participate in the briefing via telephone or if you want to ask questions during the briefing, please dial the following numbers: +46 (0)8 505 598 53 (Sweden), +44 (0)20 3043 2436 (UK), +1 866 458 40 87 (USA). Should you have questions regarding the webcast, please contact Heidi Wendt, phone: +46 (8) 45 45 756. The webcast will be available on: www.ssab.com/en/Investors/Webcast