Report for the first quarter of 2012
- Sales were largely unchanged and amounted to SEK 11,023 (11,056) million
- Operating profit of SEK 479 (621) million
- Profit after financial items of SEK 329 (509) million
- Earnings per share of SEK 0.87 (1.16)
- Operating cash flow improved to SEK 1,887 (242) million and cash flow from current operations to SEK 1,684 (-89) million
- Shipments of niche products now account for 39 (37)% of steel shipments
(In the report, amounts in brackets refer to the corresponding period of last year. The comparison period has been adjusted as a consequence of changed accounting principles; for details, see page 12).
Comments by the CEO
As expected, the first quarter of 2012 was characterized by a degree of inventory replenishment in the market, at the same time as spot market prices increased. However, as far as SSAB was concerned, quarterly prices during the first quarter were lower compared with the fourth quarter 2011 due to the fact that many of our sales agreements were signed at the end of 2011, at a time when there was clear pressure on prices.
Demand improved during the first quarter, with Material Handling and large construction equipment within Construction Machinery being the strongest segments, together with large parts of the energy sector in North America.
Our efforts to optimize working capital are continuing to show results, and we were able to report an operating cash flow of SEK 1.9 billion for the first quarter. The cost efficiency program initiated within the EMEA business area is proceeding according to plan, and among other things approximately 200 white collar positions will be phased out.
During the quarter, we resumed operation of our larger blast furnace in Oxelösund, at the same time as we are now making preparations for suspension of production at the smaller blast furnace. A gas pipe breakdown at the plant in Oxelösund resulted in a 10-day outage in production, with approximately 10 thousand tonnes of production loss. It has been possible to make up for some of the loss in production, and a full assessment of the effect can be made during the second quarter.
Prospects for the future indicate a continuation of the recovery in North America, while developments in Europe are uncertain. Despite signs of a lower degree of growth rate in China, we see continued great opportunities for our products, both there as well as in the rest of Asia. As a consequence of the price rises we witnessed on the spot market during the first quarter, we anticipate some price increases, especially within EMEA, during the second quarter.
During the second quarter, we will also experience the impact on earnings of the 12 percent reduction in iron ore prices which entered into effect for deliveries for the first quarter. No iron ore price agreement has yet been signed for the second quarter and onwards. So far this year, spot prices for coal have remained stable at levels which are more than 10 percent lower than the levels at which we purchased coal in the autumn of 2011, while spot prices for scrap metal in North America fell by approximately five percent during the quarter.
Our major capital expenditure projects aimed at further strengthening our position on the quenched steels market have now begun to be brought into commission. Through these projects, we will be able to expand our customer offering of our unique range of quenched steels. The investments will enable us to achieve our goal that high strength steels will account for 50% of our shipments in 2015. It also means that capital expenditures this year will be significantly lower than last year, which will contribute to achieving our ambition of further reducing the net debt/equity ratio.
Martin Lindqvist, President and CEO
SSAB is a global leader in value added, high strength steel. SSAB offers products developed in close cooperation with its customers to create a stronger, lighter and more sustainable world.SSAB has employees in over 45 countries and operates production facilities in Sweden and the US. SSAB is listed on the NASDAQ OMX Nordic Exchange, Stockholm.