Report for the Third Quarter of 2010
The quarter (Unless otherwise stated, the report relates to continuing operations, i.e. excl. tubular business)
- Sales increased by 43%, to SEK 9,902 (6,936) million
- Operating profit of SEK 289 (-936) million
- Profit after financial items of SEK 151 (-1,098) million
- Earnings per share of SEK 0.51 (-2.33)
- Operating cash flow of SEK -686 (1,026) million and cash flow from current operations of SEK -900 (990) million
Nine months (Unless otherwise stated, the report relates to continuing operations, i.e. excl. tubular business)
- Sales increased by 38% to SEK 29,678 (21,554) million
- Operating profit of SEK 1,165 (-2,022) million
- Profit after financial items of SEK 858 (-2,409) million
- Earnings per share of SEK 2.60 (-3.78)
- Operating cash flow of SEK -89 (4,069) million and cash flow from current operations of SEK -355 (2,531) million
- Net debt/equity ratio of 54 (52)%
(In the report, amounts in brackets refer to the corresponding period of last year.)
Comments by the CEO
The recovery continued during the third quarter, although at a slower pace than at the beginning of the year which, among other things, had benefited from inventory restocking by our customers. The underlying demand for our niche products enjoyed a continued positive trend and several end customers demonstrated good demand growth. Growth was strongest in China and South America, and within the mining industry and heavy transport segment. On the other hand, we have noted a more cautious approach among our customers within ordinary products in Europe and the US. During the quarter, we were able to carry out price increases which, however, were insufficient to compensate in full for higher raw materials costs. We are adhering to cost-savings targets and continuing to focus on optimizing cash flow.
Our ability to deliver has been negatively affected by an unscheduled production outage in Oxelösund during the summer. Thereafter, we have been at almost normal production levels at all plants in Sweden and the US.
The mining industry and the heavy transport segment are expected to continue to develop positively. In SSAB Americas, this is also the case as regards parts of the energy segment. Demand within the lifting segment, on the other hand, is expected to remain soft and growth within the automotive segment to slow down somewhat. The regions showing continued strong growth are China, South America, and Australia. A more cautious approach can be discerned among strip product customers and customers for ordinary plate, which has resulted in a weaker order book. Due to this, we believe that during the fourth quarter our plants will take some planned outages to adjust production to the order situation.
Our contract prices for coal fell somewhat pending the fourth quarter; however, due to existing stocks this will have no impact during this quarter. The iron ore agreement involves unchanged prices for the fourth quarter.
Currency hedging has already been employed as regards costs for coal and iron ore during the fourth quarter, and thus the recent decline of the US dollar will not have any positive effect during the fourth quarter.
Prices for quenched steels are expected to remain stable during the fourth quarter, while it is believed that prices of other products will be lower. As a consequence of the price trend combined with the fact that we will not achieve full plant capacity utilization, margins will come under pressure during the fourth quarter.
The recovery in the economy is expected to continue, and therefore in the somewhat longer term I remain optimistic as regards the growth of the steel market, and particularly for our niche products.
CEO and President