SSAB : Result for the third quarter 2020 presentation

Presentation of the Q3/2020 results

Martin Lindqvist, President & CEO

Håkan Folin, CFO

October 22, 2020

Agenda

• Q3/2020 in brief
• Financials
• Outlook and summary
• Q&A

2

Q3/2020 in brief

3

Volatile market conditions since mid-19

Order intake, SSAB Europe

tonnes

400,000

Short-lived

recovery

350,000Cyclical slowdown

300,000

250,000

200,000

150,000

Covid-19 and

lockdowns

4

Q3/20 - Low demand and planned maintenance

• Shipments remained at low level
• Low capacity utilization
• • One BF idled in Raahe
  • Adjustment to lower demand in SSAB
    Special Steels' mill in Oxelösund
• Annual planned maintenance in all three steel divisions - impact SEK -670m
• EBIT SEK -973m (300) in Q3
• Operating cash flow supported by release of working capital

Ktonnes	1,976	2,000	2,100			2,081		-15%
1,911	1,902
1,621	1,779	1,519

1,646	1,634	1,744	1,722	1,614	1,479	1,787		+4%
		1,472
					1,422

SEK million
1,600		1,674	1,316
		1,035
					300		343
								-251
						-1,131			-973
1,922	1,960		1,696
					1,321
			1,139		1,038
						629
								313
							-411
	18Q3	18Q4	19Q1	19Q2	19Q3	19Q4	20Q1	20Q2		20Q3

Crude

production

Shipments

EBIT

Operating cash flow

5

Managing the downturn

• Extensive cost savings:
• • Short-timework and time banks
  • Avoided summer seasonal workers
  • Reduction of external services
  • Maintenance conducted by own personnel
• Strategic direction intact:
• • Develop own channels - stocks, Tibnor, RC
  • Improving product mix - example CC
  • Global business in high strength steels -

growth in Latin America and Asia

Revenue trend y/y (%)

-6

-27-23

Q1/20 Q2/20 Q3/20

Fixed cost y/y (SEK m)

-40

-600

-800

Q1/20 Q2/20 Q3/20

• Some of the cost savings continue into Q4
• Strong balance sheet, liquid assets and committed credit lines at comfortable level of SEK 20bn (as of Sep 30)
• Planned maintenance done in Q3 - positioned for ramp-up when demand improves

6

Impact of Covid-19 on SSAB's operations

• Avoided Covid-19 issues in conjunction to the extensive annual planned maintenance - good cooperation with suppliers
• Several measures taken to safeguard the health and safety of our personnel
• • Work from home
  • Travel restrictions
  • Restriction on face-to-face meetings
  • Contingency plans for critical operations
• Focus to secure supply chain, only minor disturbances during the first nine months

7

Operating profit by division

SEK million

		678
536			544			458	485
				358
									SSAB
								73	Special
								Steels
	-72				-126
18Q3	18Q4	19Q1	19Q2	19Q3	19Q4	20Q1	20Q2	20Q3
790		956	872
	553			522					SSAB
						106			Americas
							-10
					-222
								-435
18Q3	18Q4	19Q1	19Q2	19Q3	19Q4	20Q1	20Q2	20Q3
103	78		95	134	67		86	145	Ruukki
		11		Construction
		-14
18Q3	18Q4	19Q1	19Q2	19Q3	19Q4	20Q1	20Q2	20Q3

			733
460		347												SSAB
					66					0						Europe
						-480	-609		-566
							-631
18Q3	18Q4	19Q1	19Q2	19Q3	19Q4	20Q1	20Q2	20Q3

53	38
28	29	29	Tibnor
		2	12	6

-39

18Q3 18Q4 19Q1 19Q2 19Q3 19Q4 20Q1 20Q2 20Q3

8

SSAB Special Steels

Operating result held up well for a maintenance quarter

Operating profit/loss, SEK million

• Shipments impacted by weak market
• Planned maintenance of SEK -250m
• Better performance than previous maintenance quarters - despite lower rolling production in Oxelösund
• Positive effects from cost savings - fixed cost SEK -100m vs. Q3/19

		678
536			544			458	485
				358
								73
	-72
				-126
18Q3	18Q4	19Q1	19Q2	19Q3	19Q4	20Q1	20Q2	20Q3

• Market focus reduces volatility:
• • Stock sales more stable and more profitable than OEM-sales
  • Growth in markets outside of EU and the US
  • Services sales less impacted

Rolling production Oxelösund, ktonnes

145		145	130	134		151	156
	89				83
								60
Q3/18	Q4/18	Q1/19	Q2/19	Q3/19	Q4/19	Q1/20	Q2/20	Q3/20

9

SSAB Europe

Weak market conditions

• Low shipments, recovery in September
• Planned maintenance of SEK -250m
• Positive effect from cost savings - fixed cost SEK -300m vs. Q3/19
• One of the blast furnaces in Raahe idled for most of Q3, restarted in mid-September

Operating profit/loss, SEK million

733

460			347
				66					0
						-480
						-609		-566	-631
18Q3	18Q4	19Q1	19Q2	19Q3	19Q4	20Q1	20Q2	20Q3

Shipments, ktonnes

810	850	907	909			955
794
		752			751
				695
18Q3	18Q4	19Q1	19Q2	19Q3	19Q4	20Q1	20Q2	20Q3

10

SSAB Americas

Weak market conditions

• Sales margin impacted by low demand
• Planned maintenance SEK -170m
• Positive effects from cost savings - fixed cost SEK -150m vs. Q3/19

Operating profit/loss, SEK million

790			956	872
			553			522
										106
											-10
									-222
												-435
18Q3	18Q4	19Q1	19Q2	19Q3	19Q4	20Q1	20Q2	20Q3

Change in realized prices y/y, %

39

25

31

10

-14

-26-30 -27-22

18Q3 18Q4 19Q1 19Q2 19Q3 19Q4 20Q1 20Q2 20Q3

11

Tibnor

• Demand impacted by the lower economic activity
• Sales decreased by 20% vs. Q3/19
• The restructuring program and additional cost measures offset the weak market - earnings in line with Q3/19

Operating profit/loss, SEK million

53
	38
28	29			29
		2	12	6

-39

18Q3 18Q4 19Q1 19Q2 19Q3 19Q4 20Q1 20Q2 20Q3

Sales, SEK billion

	2.2	2.3	2.5	2.2	2.2	2.4
		2.0
1.9
						1.8
18Q3	18Q4	19Q1	19Q2	19Q3	19Q4	20Q1	20Q2	20Q3

12

Ruukki Construction

• Focus on product business has clearly improved margins
• The project business, Building Systems, was divested in Q2
• Comparable revenue on stable level
• Good underlying demand

Operating profit/loss, SEK million

				134				145
103			95				86
	78
				67
						11
		-14
18Q3	18Q4	19Q1	19Q2	19Q3	19Q4	20Q1	20Q2	20Q3

Sales, SEK billion

1.8	1.7		1.7	1.8	1.8
				1.5
		1.3				1.4	1.4
18Q3	18Q4	19Q1	19Q2	19Q3	19Q4	20Q1	20Q2	20Q3

13

Financials

14

Lower shipments and production - positive effects from savings

SEK million

Sales

25,000

20,000

15,000

10,000

5,000

0

17Q1

17Q2

17Q3

17Q4

18Q1

18Q2

18Q3

18Q4

19Q1

19Q2

19Q3

19Q4

20Q1

20Q2

20Q3

2017

2018

2019

2020

ktons

Shipments1

2,000

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

17Q1

17Q2

17Q3

17Q4

18Q1

18Q2

18Q3

18Q4

19Q1

19Q2

19Q3

19Q4

20Q1

20Q2

20Q3

2017

2018

2019

2020

1) Including the steel operations: Special Steels, Europe and Americas

EBITDA and EBITDA margin2

EBITDA per tonne delivered steel2

	3,000														14.0 %		1800
	2,500														12.0 %		1600
	2,000														10.0 %		1400
millionSEK															1200
														8.0 %	SEK/tonne
1,500														1000
														6.0 %
	1,000															800
														4.0 %		600
	500
														2.0 %		400
	0														0.0 %		200
	-500														-2.0 %		0
					18Q2										-200
	17Q1	17Q2	17Q3	17Q4	18Q1	18Q3	18Q4	19Q1	19Q2	19Q3	19Q4	20Q1	20Q2	20Q3						18Q2
		17Q1	17Q2	17Q3	17Q4	18Q1	18Q3	18Q4	19Q1	19Q2	19Q3	19Q4	20Q1	20Q2	20Q3
		2017			2018			2019			2020				2017			2018			2019			2020
15
					EBITDA		EBITDA %

2) Excluding items affecting comparability

Change in operating profit

Q3/2020 vs. Q3/2019

SEKm

	300			Mainly from SSAB	Substantial	Planned maintenance in SSAB
			Special Steels and SSAB
			Americas, and also	savings actions
				Americas, generally low
				SSAB Europe	from Q2
				capacity utilization
					continued in Q3

-180

-1 820

600

-575

102

-973

			980
		-380
2019 Q3	Price	Volume	Var COGS	Processing	FX	Unabsorption	Other	2020 Q3
				cost & SGA

16

Note: Excluding items affecting comparability

Change in operating profit

Q3/2020 vs. Q2/2020
SEKm
		Mainly from SSAB	Mainly		Planned maintenance
		Americas, and also		in the steel divisions,
		seasonal effect
		SSAB Europe			generally low
			in the Nordics
					capacity utilization
-251
					-70
	-630			330
			90			-560
		90
							28
								-973
2020 Q2	Price	Volume	Var COGS	Processing	FX	Unabsorption	Other	2020 Q3
				cost & SGA

17 Note: Excluding items affecting comparability

Cash flow supported by release of working capital

	SEKm	Q3/2020	Q3/2019		Q2/2020		2019
	EBITDA	-66		1 177		705	6,177
	Change in working capital	699		205		237	896
	Maintenance expenditure	-332		-456		-381	-1,875
	Other	11		113		68	-4
	Operating cash flow	313		1 038		629	5,194
	Financial items	-164		-140		-202	-432
	Taxes	3		-262		-173	-1,315
	Cash flow from current operations	151		636		254	3,447
	Strategic capital expenditure	-75		-235		-230	-1,035
	Acquisitions of shares and operations	-43		-3		-82	-1,221
	Divestments of shares and operations	-1		-		106	118
	Cash flow before dividend	32		398		48	1,309
	Dividend paid to shareholders	-		-		-	-1,545
	Dividend, non-controlling interest	-4		0		-	-7
	Acquisition, non-controlling interest	-		-		-	-46
	Net cash flow	27		398		48	-289

Maturity profile and net debt

• Net debt amounted to SEK 12,926m (11,424m)
• Net gearing was 22% (18%)
• Duration of the loan portfolio was 4.9 (7.0) years
• Liquid assets and committed credit lines at comfortable level of SEK 20 billion (as of Sep 30) - corresponds to 31% of rolling 12 month revenue
• Most maturities in 2020 refers to commercial papers

Maturity profile Q3/2020

SEKm

25000

20000

Back-up facilities

15000

SEK 8.8bn

10000

5000

Cash

0

Cash and

2020

2021

2022

2023

2024

2025+

back-up facilities

19

Cash needs of the business

• Total cash needs* estimated at SEK 2.7-3.2 billion in 2020, unchanged to earlier forecast
• Projects postponed:
• • Capacity expansion in Mobile
  • Start of Oxelösund conversion
• Slight increase in interest paid
• Lower taxes paid expected in 2020 (2019 unusually high due to lag in the US)

*Cash needs defined as capex, interest paid and taxes paid. Excluding working capital

4.6

Capex (maintenance and strategic)	2.9	2.7-3.2

Net interest	2.0-2.5
0.4
Taxes and other	1.3

2019

2020F

20

Higher prices for iron ore, lower for coking coal

Iron ore

• Average pellet purchase price in Q3/20 was 8% higher in terms of SEK (+17% in USD) vs. Q2/20
• Iron ore spot prices started to increase in May and moved upwards during Q3

Coking coal

• Average coking coal purchase price in Q3/20 was 32% lower in terms of SEK (-26% in USD) vs. Q2/20
• Coal spot prices decreased during the quarter

SSAB's purchase price, coking coal and iron ore

Indexed

180

160

140

120

100

80

60

40

20

0

Q1/18	Q2/18	Q3/18	Q4/18	Q1/19	Q2/19	Q3/19	Q4/19	Q1/20	Q2/20	Q3/20
	Iron ore (SSAB purchase price, indexed)			Coal (SSAB purchase price, indexed)

21

Scrap spot prices increased in September

• SSAB's average purchase price for scrap in Q3/20 was 4% lower (in terms of USD) vs. Q2/20
• Scrap spot prices in US started to increase in September and stabilized in October

Scrap spot price

USD/gross ton

400
350
300
250
200
150
100
50
0
Q1/18	Q2/18	Q3/18	Q4/18	Q1/19	Q2/19	Q3/19	Q4/19	Q1/20	Q2/20	Q3/20	Q4/20

Chicago #1HM Scrap (AMM) [USD/gross ton]

Source: AMM

22

Major planned maintenance outages in 2020

• The Group's total maintenance cost in 2020 forecasted at SEK 805 (previous forecast SEK 900m and in 2019 SEK 1,135m)
• Somewhat lower cost than forecasted in Q3 in all three divisions

SEKm	Q1/20	Q2/20	Q3/20	Q4/20	2020	2019

SSAB Special	-	-	250	-		250	300
Steels
SSAB Europe	-	-	250	85		335	420
SSAB Americas	-	50	170	-		220	415
Total	-	50	670	85		805	1,135
Note: The estimates shown in table includes direct maintenance cost and cost of lower capacity utilization (under absorption), but excludes lost margins.

23

Outlook and summary

24

SSAB's climate goals approved by the Science Based Targets initiative

• SSAB is committed to reducing its greenhouse gas (CO2e) emissions by 35% by 2032 (based on 2018 figures).
• • The goal applies to both direct and indirect emissions (Scope 1 and 2)
  • In line with the objective of keeping global warming well below 2°C
• Objective is scientifically based and in line with the Paris Agreement
• SSAB's aims to be the first to offer the market fossil-free steel in 2026

25

Hybrit: Start up of world unique pilot plant

• The world unique pilot plant for fossil-free steel, producing sponge iron (DRI/HBI), was started up in Luleå, Sweden
• First using natural gas and then hydrogen to be able to compare production results
• The Swedish Energy Agency granted the joint venture SEK 22m for a study to establish the prerequisites for the demonstration plant

26

SSAB's outlook for main customer segments Q4/2020

	Segment	Q4/2020	Comments	Strong	Healthy	Weak
	Heavy Transport		 Some recovery of heavy truck production
		 Low activity in the US, e.g. rail cars
	Automotive		 Recovery in production
		 Underlying structural growth in AHSS
	Construction Machinery		 Relatively low production levels in main markets, especially Lifting
		 Some improvement compared to Q3
	Material Handling		 Mining operations continue at a fairly stable level
	Energy		 Low activity in oil and gas
		 Wind power and transmission more stable
	Construction		 Stable underlying demand, seasonal slow down
	Service Centers		 Generally cautious sentiment
		 Low inventory levels in the US
	27

SSAB's outlook for Q4/2020

• In Q4 demand for steel is expected to recover somewhat following two weak quarters
• • However, the increased spread of Covid-19 in particular is creating major uncertainties
  • Normal seasonal slowdown is expected towards the end of Q4
• Shipments for all steel divisions are expected to increase somewhat vs. Q3
• Prices realized during Q4/20 (compared to Q3/20) are expected to be:
• • SSAB Europe: somewhat lower, because of a weaker

product mix in Q4

• SSAB Special Steels: relatively stable
• SSAB Americas: relatively stable

Volume outlook

Volume trend Q4/20

Business segment

vs. Q3/20

SSAB Special Steels

SSAB Europe

SSAB Americas

Demand

expected to

recover

somewhat,

but seasonal slowdown at the end of Q4

28

Summary

• Lower demand and planned maintenance weighed on earnings in Q3
• Fixed costs reduced by over SEK 600m vs. Q3/19 and SEK 1.5bn YTD
• Demand picked up towards the end of Q3, especially in Europe and the activity level is expected to improve slightly in Q4
• SSAB continues to focus on developing the special steels business and the transition to fossil-free steel

29

Questions & Answers

30

Appendix

31

Summary of Q3/2020

Earnings impacted negatively by lower demand, and planned maintenance outages

• Sales were down 23% vs. Q3/19, driven by lower prices and shipments
• EBIT of SEK -973 (300) million, down SEK 1,273m
• • Steel market continued to suffer from lower economic activity due to Covid-19
  • Planned maintenance breaks lowered the result
• Operating cash flow of SEK 313 (1,038)m, lower result
• Net debt SEK 12,926 (11,424)m
• Gearing ratio was 22% (18%)
• Earnings per share SEK -0.72 (0.03)

Key figures (SSAB Group)

SEKm	Q3/2020	Q3/2019	Q2/2020	2019
Sales	14,481	18,840	15,155	76,485
EBITDA1)	-66	1,327	705	6,375
EBIT1)	-973	300	-251	2,159
Operating cash flow	313	1,038	629	5,194
Net debt	12,926	11,424	12,782	11,696
Net debt/equity ratio (%)	22	18	21	19
Profit after tax1)	-734	184	-280	1,279
Earnings per share, SEK	-0.72	0.03	-0.28	1.04
Shipments, ktonnes	1,472	1,614	1,422	6,560

1) Excluding items affecting comparability.

32

SSAB Special Steels

Demand continued weak, planned maintenance outage impacted negatively

• Demand continued to be impacted by the Covid-19
• • Also seasonally lower demand due to summer vacation period
  • Heavy Transport recovered somewhat from Q2, but Construction Machinery customer segment remained cautious
• Shipments were down 13% vs. Q3/19, and down 3% vs. Q2/20
• EBIT of SEK 73m, down SEK 285m vs. Q3/19, and SEK 412m vs. Q2/20

• Planned maintenance outages (in 2019 in Q4), lower production
• Lower shipments, lower prices, currency effects

• + Lower raw material costs

• Several measures taken to reduce costs continued during Q3

33

Key figures

SEKm	Q3/2020	Q3/2019	Q2/2020	2019

	Sales	3,569	4,509	3,983	18,495
	EBITDA	228	509	639	2,081
	EBIT	73	358	485	1,454
	Shipments,	259	299	266	1,224
	ktonnes
SEKm	Sales and EBITDA margin

														25%
5,000
4,000														20%
3,000														15%
2,000														10%
1,000														5%
0														0%
17Q1	17Q2	17Q3	17Q4	18Q1	18Q2	18Q3	18Q4	19Q1	19Q2	19Q3	19Q4	20Q1	20Q2	20Q3
	2017			2018			2019			2020
						Sales		EBITDA %

SSAB Europe

Result declined mainly due to low demand, prices and low production rate

• Demand improved from Q2 in Automotive and Heavy Transport segments, but from very low level
• • Stable development in the Construction segment in the Nordic region
  • Steel Service Centers remained cautious
• Shipments were down 5% vs. Q3/19, but increased by 8% vs. Q2/20
• EBIT was SEK -631m, down SEK 151m vs. Q3/19
• • Lower prices and volumes
  • Low production rate and capacity utilization

• + Cost savings

• EBIT was down SEK 65m vs. Q2/20
• Several measures taken to lower costs

• BF in Raahe idled from mid-April until mid-September
• Short-timework allowances and temporary layoffs

34

Key figures

SEKm	Q3/2020	Q3/2019	Q2/2020	2019

Sales	6,153	7,637	6,189	31,730
EBITDA	-221	-67	-133	945
EBIT 1)	-631	-480	-566	-677
Shipments,	751	794	695	3,362
ktonnes

1) Excluding depreciation/amortization on surplus values on intangible and tangible fixed assets related to the acquisition of Rautaruukki.

SEKm			Sales and EBITDA margin
10,000														20%
8,000														15%
6,000														10%
4,000														5%
2,000														0%
0						18Q3								-5%
17Q1	17Q2	17Q3	17Q4	18Q1	18Q2	18Q4	19Q1	19Q2	19Q3	19Q4	20Q1	20Q2	20Q3
	2017			2018			2019			2020
					Sales		EBITDA %

SSAB Americas

Result decreased from mainly due to lower prices and planned maintenance outage

• Demand continued to be impacted by Covid-19
• Shipments were down 11% vs. Q3/19 and remained flat vs. Q2/20
• • Shipments to Energy segment, Infrastructure and Service Centers increased
• EBIT was SEK -435m, down SEK 957m vs. Q3/19

• • Lower prices and volumes
  • Planned maintenance outage + Cost savings
• EBIT was down SEK 425m vs. Q2/20

35

Key figures

SEKm	Q3/2020	Q3/2019	Q2/2020	2019
Sales	2,715	4,446	3,219	17,460
EBITDA	-263	697	178	2,852
EBIT 1)	-435	522	-10	2,128
Shipments,	462	521	460	1,974
ktonnes

1) Excluding depreciation/amortization on surplus values on intangible and tangible fixed assets related to the acquisition of IPSCO.

SEKm	Sales and EBITDA margin

6,000														25%
5,000														20%
4,000														15%
3,000														10%
													5%
2,000														0%
1,000														-5%
0		17Q3		18Q1		18Q3								-10%
17Q1	17Q2	17Q4	18Q2	18Q4	19Q1	19Q2	19Q3	19Q4	20Q1	20Q2	20Q3
	2017			2018			2019			2020
						Sales		EBITDA %

Tibnor

• Market was characterized by the slowdown, especially in OEMs and their subcontractors
  − Demand vs. Q2 was seasonally lower
• Sales were down 20% vs. Q3/19 and down 14% vs. Q2/20
• EBIT was SEK 6m, slightly up from Q3/19

• Lower volumes and prices

• Cost savings from restructuring program and additional measures taken due to the market situation

Key figures

SEKm	Q3/2020	Q3/2019	Q2/2020	2019

Sales	1,752	2,179	2,037	9,149
EBITDA	42	47	65	206
EBIT 1)	6	2	29	30
Shipments	172	190	190	786
(ktonnes)

1) Excluding depreciation/amortization on surplus values on intangible and tangible fixed assets related to the acquisition of Rautaruukki.

SEKm	Sales and EBITDA margin

► EBIT was down SEK 23m vs. Q2/20	3,000														7%
2,500														6%
► The implementation of the cost restructuring	2,000														5%
													4%
1,500
program is according to plan, with annual savings	1,000														3%
													2%
impact of SEK 200m	500														1%
	0									19Q2					0%
− Full run rate from H2/20 onwards	17Q1	17Q2	17Q3	17Q4	18Q1	18Q2	18Q3	18Q4	19Q1	19Q3	19Q4	20Q1	20Q2	20Q3
		2017			2018			2019			2020
36							Sales		EBITDA %

Ruukki Construction

• Demand was at good level supported by seasonality
• • But somewhat negatively impacted by Covid-19 in Central and Eastern Europe, Baltics and Norway
• Sales down by 22% vs. Q3/19 - sales stable on comparable basis

Key figures

SEKm	Q3/2020	Q3/2019	Q2/2020	2019
Sales	1,391	1,794	1,439	6,510
EBITDA	185	179	128	466
EBIT 1)	145	134	86	283

1) Excluding depreciation/amortization on surplus values on intangible and tangible fixed assets related to the acquisition of Rautaruukki.

• EBIT was SEK 145m, up SEK 11m vs. Q3/19, and up SEK 59m vs. Q2/20 mainly due to seasonality
• Building Systems divested and not included in figures as of May 2020

37

SEKm				Sales and EBITDA margin
2,000														25%
														20%
1,500
														15%
1,000														10%
														5%
500
														0%
0														-5%
17Q1	17Q2	17Q3	17Q4	18Q1	18Q2	18Q3	18Q4	19Q1	19Q2	19Q3	19Q4	20Q1	20Q2	20Q3
	2017			2018			2019			2020
						Sales		EBITDA %

Debt portfolio duration and interest rate

• Duration of the loan portfolio was 4.9 (7.0) years
• Averaged fixed interest term was 0.9 (1.1) years
• Average interest rate was 1.85% (3.0%)

Debt cost and duration

Years																				%
8.0																						4.0
7.0																						3.5
6.0																						3.0
5.0																						2.5
4.0																						2.0
3.0																						1.5
2.0																						1.0
1.0																						0.5
0.0																						0.0
2017	2017	2017	2017	2018	2018	2018	2018	2019	2019	2019	2019	2020	2020	2020
	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3
								Avg. duration (rhs)			Avg. interest rate

38