Friday, October 28, 2011

SSAB Report for the third quarter of 2011

The quarter
  • Sales increased by 10% and reached SEK 10,917 (9,902) million
  • Operating profit improved to SEK 502 (289) million.
  • Profit after financial items improved to SEK 392 (151) million
  • Earnings per share of SEK 1.19 (0.51)
  • Operating cash flow SEK 301 (-686) million and cash flow from current operations SEK 16 (-900) million
  • Shipments of niche products were up 19% compared with the third quarter 2010
Nine months
  • Sales increased by 14% and reached SEK 33,742 (29,678) million
  • Operating profit improved to SEK 2,441 (1,165) million.
  • Profit after financial items improved to SEK 2,075 (858) million
  • Earnings per share of SEK 5.12 (2.60)
  • Operating cash flow SEK 1,128 (-89) million and cash flow from current operations SEK 372 (-355) million
  • Niche products now account for 37 (31)% of steel shipments
(In the report, amounts in brackets refer to the corresponding period of last year.)
Comments by the CEO

Operating profit for the third quarter was SEK 502 million, which was more than SEK 200 million up on the corresponding period of last year. Due to the seasonal decline in demand and the extensive investment and maintenance projects carried out during the period, as anticipated, earnings for the third quarter were below those of the preceding quarter.

During the third quarter, the American operations once again delivered the strongest earnings and cash flow. Despite the volatile market trend, both earnings and cash flow generation in the North American units have been good since the end of 2008. Because of these generated cash flows, more than 60% of the purchase price has been repaid since the acquisition of IPSCO in 2007. The synergies identified in connection with the acquisition have been realized according to plan; among other things we are now producing several of our most important niche products - Hardox 450 and Hardox 500 - at our plants in the US.

APAC experienced stable growth during the quarter, while EMEA was affected by a normal seasonal decline, as well as the investment and maintenance projects. These capital expenditure projects have been carried out on schedule and are well within the anticipated cost limits. Consequently, in order to meet shipment commitments it has not been necessary to utilize the inventories we built up to address any technical problems which might arise in these extremely complicated projects. Thus, during the latter part of the quarter we have worked on reducing those inventories and have curtailed production.

All business areas have increased their niche product prices during the period, but we have witnessed a continued negative spot price trend, which will impact on prices for our standard products for the fourth quarter. Quenched steel prices are expected to be more stable, despite a weakening trend in demand.

Short-term prospects remain uncertain and the clear recovery we witnessed at the beginning of the year has leveled off, but the total inventory levels are low in the supply chain. With the flexibility we have in our production system, it is easier for us to adjust the rate of production to market demand. A planned maintenance outage in Montpelier, Iowa, will negatively impact on earnings in the fourth quarter in the amount of approximately SEK 275 – 300 million.

SSAB's strategic investment package will be fully completed during the first quarter of next year. We will then have capacity to produce 1.3 million tonnes of the highest quality quenched steels, with a world-unique product range. Consequently, we are well equipped to meet our customers' future needs.

Martin Lindqvist, President and CEO

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