Results for 2009
The quarter (Unless otherwise stated, the report relates to the continuing operations, i.e. excluding the tubular business)
• Sales declined by 37% to SEK 8,284 (13,063) million
• Operating profit of SEK 430 (979) million
• Profit after financial items of SEK 348 (841) million
• Profit after tax of SEK 350 (833) million, entailing earnings per share of SEK 1.09 (2.66)
• Operating cash flow of SEK 799 (2,415) million and cash flow from current operations of SEK 856 (1,366) million
• Net debt/equity ratio declined during the quarter from 52% to 49%
The full year (Unless otherwise stated, the report relates to the continuing operations, i.e. excluding the tubular business)
• Sales declined by 45% to SEK 29,838 (54,329) million
• Operating profit of SEK -1,592 (9,516) million
• Profit after financial items of SEK -2,061 (8,953) million
• Profit after tax of SEK -879 (6,508) million, entailing earnings per share of SEK -2.69 (19.90)
• Operating cash flow of SEK 4,868 (9,085) million and cash flow from current operations of SEK 3,387 (5,387) million
• Negative return on capital employed and on equity (last year 17% and 22% respectively)
• A dividend is proposed of SEK 1.00 (4.00) per share, equal to SEK 324 (1,296) million
(In the report, amounts within brackets refer to the same period last year.)
Comments by the CEO
As we had previously announced, the fourth quarter was significantly better than the preceding quarter, supported by higher volumes, although almost half of the earnings for the quarter are due to items of a more temporary nature. The increased volumes are due in part to the fact that inventory liquidation at our customers has now ended, and in part to a certain upturn in demand. Prices continued to experience downward pressure during the fourth quarter.
The full year 2009 closed with an operating loss of SEK 1.6 billion. In response to the economic downturn which affected all of our markets and segments, we introduced a cost reduction program which helped to reduce our fixed costs during the year by 19% or SEK 1.5 billion. In 2010, there is expected to be a sustainable saving of approximately SEK 1 billion. The operating cash flow amounted to SEK 4,868 million, primarily due to a reduction in working capital in all divisions.
Gradually during the second half of the year, all blast furnaces in Sweden were restarted and thus our plants in both Sweden and the United States are now almost at full operation. In light of the improved market conditions, we have decided to resume the work on the investment program that we presented in the autumn of 2008. This primarily means that we are continuing with the construction of the new quenching line in Mobile, Alabama in order to considerably increase our quenched steel production capacity. We will also complete the investment to enable production of quenched steel at our plant in Borlänge. Thus, of the original SEK 5.3 billion, projects of approximately SEK 1.5 billion have not yet been started. In light of the resumed projects, total capital expenditure payments in 2010 are expected to amount to almost SEK 3 billion, of which SEK 1.8 billion relate to strategic investments.
During the first quarter we expect our volumes to increase, but prices will be lower than during the fourth quarter. Production will be slightly below the normal level including a scheduled maintenance outage at our plant in Montpelier, Iowa. The outage will affect earnings by approximately SEK 250 million, of which just over half will be incurred in the first quarter. No new iron ore and coal agreements have been signed so far, but the market's assessment is that the prices will increase. However, over time we expect to be able to compensate for the higher raw material prices in light of the improving market conditions. Since our inventory levels of iron ore are low, the anticipated price increase will affect earnings for the first quarter, while an increase in the price of coal will impact earnings towards the end of the second quarter. The increasing price trend for scrap metal has thus far carried over into 2010. Changes in scrap prices have a relatively quick impact on earnings due to a high rate of inventory turnover.
It now appears that the bottom of the recession has been reached, but it is still difficult to assess the strength of the recovery.
Olof Faxander, President and CEO