SSAB : Report for the second quarter 2021

INTERIM REPORT

JANUARY - JUNE 2021

Historical quarter - Solid internal performance in a strong market

21 July, 2021

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Interim report January-June 2021

The second quarter

∙ Revenue was SEK 23,673 (15,155) million ∙ EBITDA was SEK 4,899 (705) million

∙ Operating profit was SEK 4,083 (-251) million ∙ Earnings per share were SEK 3.13 (-0.28)

Key figures

	2021	2020	2021	2021	2020	2020
SEK millions	Q2	Q2	Q1	Jan-Jun	Jan-JunFull-year
Revenue	23,673	15,155	19,661	43,334	33,927	65,396
EBITDA	4,899	705	2,860	7,759	1,991	3,364
Operating profit/loss	4,083	-251	1,993	6,076	92	-325
Profit/loss after financial items	3,981	-365	1,887	5,869	-145	-802
Profit/loss after tax	3,221	-280	1,510	4,732	-102	-490
Earnings per share (SEK)	3.13	-0.28	1.46	4.59	-0.11	-0.50
Operating cash flow	3,910	629	1,429	5,339	218	3,460
Net debt	6,461	12,782	8,896	6,461	12,782	10,278
Net debt/equity ratio (%)	11	21	15	11	21	19

(In the report, the figures in parentheses refer to the corresponding period for the previous year.)

Comments by the CEO - a historical quarter for SSAB

For Q2 2021, we report the highest quarterly operating profit ever, driven by strong demand, high steel prices and stable production. At the same time, we consolidated our position as the leading force in the green transition of the steel industry. The quarter saw us take groundbreaking steps towards full-scalefossil-free steelmaking and enter into new collaboration agreements, which will enable also our customers to reduce their climate footprint.

The result for Q2 2021 increased to SEK 4,083 (-251) million, a historic high for a single quarter. Net cash flow was strong and amounted to SEK 3,024 (48) million.

SSAB Special Steels' shipments remained high and rose to 388 (266) ktonnes. Operating profit increased to SEK 1,109

1. million and the operating margin to 19% (12%). Growth in high-strength steel is a key element in our strategy for improved profitability. Our special steels are also important for the sustainability strategies of our customers to reduce their climate footprint, since our steels contribute to lighter weight and a longer useful life in many applications.

SSAB Europe's operating profit rose to SEK 1,512 (-566) million and the operating margin increased to 15% (-9%), driven by a strong market, stable production and an improved product mix. SSAB America's operating profit increased to SEK 1,151 (-10) million, driven by rising market prices for plate. The operating margin rose to 24% (0%).

The spread of Covid-19 has decreased at SSAB's production sites. We continue with a number of measures to limit the risks of infection and production has run without impact. Looking ahead, the market outlook is positive. During Q3, SSAB Special Steels and SSAB Europe will complete planned maintenance and we expect seasonally lower activity on the European market.

SSAB has long been at the forefront of the green transition in the steel industry. During Q2, we took further steps towards being first in the world to get fossil-free steel on the market. For the first time ever, iron ore has been directly reduced at a pilot scale using hydrogen made from fossil-free electricity. This groundbreaking step took place at HYBRIT's plant in Luleå. So far, over 100 tonnes of sponge iron of good quality have been produced. We have also initiated a strategic collaboration with Volvo Cars, which will be the first carmaker to secure SSAB steel made from hydrogen-reduced iron ore. The great interest shown by customers means that we are exploring the prerequisites to convert to fossil-free production in Luleå earlier than the original plan. We see positive effects from our leading position in sustainability and in June, we issued a five-yearsustainability-linked (SLBP) bond of SEK 2bn. This gives us better conditions to finance activities and to reach our sustainability goals.

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Outlook for the third quarter of 2021

Demand for steel during the third quarter of 2021 is estimated to be strong, driven both by underlying demand and by customer restocking. Albeit a seasonal slowdown, especially in Europe, is expected. Global demand for high-strength steel is expected to be very strong during the third quarter in more or less all geographical markets.

SSAB Special Steels' shipments are expected to remain at a high level, considering the seasonality during the third quarter, albeit significantly lower than the record high level seen in the second quarter of 2021, primarily because of the planned annual maintenance outage in Oxelösund during the quarter. Also SSAB Europe's shipments are expected to be significantly lower during the third quarter than in the second quarter, due to planned annual maintenance outages and a seasonal slowdown. SSAB Americas' shipments are expected to be stable during the third quarter compared with the second quarter of 2021.

Prices realized by SSAB Americas and SSAB Europe are expected to be significantly higher on average than in the second quarter of 2021. For SSAB Special Steels, prices are expected to be higher in the third quarter than in the second quarter of 2021. Improved prices will be partly counteracted by higher costs of raw materials, primarily iron ore, in the third quarter.

Outlook for steel divisions

	Q3 2021 vs. Q2 2021
	Shipments	Realized prices
SSAB Special Steels	Significantly lower	Higher
SSAB Europe	Significantly lower	Significantly higher
SSAB Americas	Stable	Significantly higher

Definitions: Significantly lower (>10 %), Lower (5-10 %), Somewhat lower (0-5 %), Stable (~0 %), Somewhat higher (0-5 %), Higher (5-10 %), Significantly higher (>10 %)

Major planned maintenance outages 2021

The Group's total maintenance costs for the full year 2021 are expected to be SEK 1,210 million, compared to the earlier forecast of SEK 1,165 million communicated in the report for the first quarter. The somewhat higher figure can be explained by higher estimated costs for SSAB Special Steels. The table below shows the major planned maintenance outages for 2021 and the costs of outages completed during 2020. The figures include the impact of the direct maintenance cost and the cost of lower capacity utilization (underabsorption), but exclude lost margins.

Expected maintenance costs for 2021

	2021	2020	2021	2020	2021	2020	2021	2020	2021	2020
SEK millions	Q1	Q1	Q2	Q2	Q3	Q3	Q4	Q4	Full-year	Full-year
SSAB Special Steels	-	-	-	-	370	250	-	-	370	250
SSAB Europe	-	-	-	-	275	250	145	85	420	335
SSAB Americas	-	-	-	50	-	170	420	-	420	220
Total	-	-	-	50	645	670	565	85	1,210	805

The market

According to the World Steel Association, global crude steel production for the first five months of 2021 amounted to 838 (731) million tonnes, up 14.6% compared to the same period in 2020. Chinese steel production increased by just under 14%. Steel production increased in North America by 11% and in the EU-27 by 15%.

In North America, demand for heavy plate was strong in most customer segments during the second quarter. Inventory levels are generally still low, including at distributors.

In Europe, demand was also strong during the second quarter. The shortage of semiconductors somewhat muted demand from the vehicle industry. Imports into Europe increased somewhat during the quarter, but a shortage of steel still prevails on the market.

Global demand for high-strength steel was strong during the quarter. In principle, markets in all geographies are showing good demand, which is exceeding supply.

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In North America, the sharp increase in market prices for heavy plate continued during the second quarter. In Europe, market prices for strip and heavy plate rose sharply during the second quarter. In China, prices for strip and heavy plate rose during the second quarter, albeit to a lesser extent than in North America and Europe.

SSAB Group - First half year of 2021

Revenue and operating result

Revenue for the first half of 2021 was SEK 43,334 (33,927) million, up 28% compared to the first half of 2020. The first half of 2020 was characterized by the outbreak of Covid-19 and if revenue is compared to the first half of 2019, the increase amounts to 7%.

Operating result for the first half of 2021 was SEK 6,076 (92) million, up SEK 5,984 million compared to the first half of 2020. All business segments contributed to the improvement. If the operating result is compared to the first half of 2019, the increase is SEK 3,086 million.

Revenue and operating profit/loss by business segment

		Revenue			Operating profit/loss
	2021	2020			2021	2020
SEK millions	Jan-Jun	Jan-Jun	Change	Jan-Jun	Jan-Jun	Change
SSAB Special Steels	10,929	8,519	2,411		2,012	942	1,070
SSAB Europe	19,075	14,328	4,747		2,270	-566	2,836
SSAB Americas	8,482	7,097	1,385		1,419	96	1,323
Tibnor	5,870	4,457	1,413		667	41	626
Ruukki Construction	2,715	2,919	-203		210	97	113
Other	-	-	-		-338	-339	1
Depr. surplus values	-	-	-		-164	-180	16
Group adjustments	-3,738	-3,393	-345		-	-	-
Total	43,334	33,927	9,407		6,076	92	5,984

Result after tax and earnings per share

The result after tax (attributable to shareholders in the parent company) for the first half of 2021 was SEK 4,726 (-111) million, equating to SEK 4.59 (-0.11) per share. Tax was SEK -1,137 (43)million.

Cash flow, financing and liquidity

Operating cash flow for the first half of 2021 amounted to SEK 5,339 (218) million. Compared with the first half of 2020, cash flow was impacted primarily by higher operating profit.

Net cash flow amounted to SEK 4,229 (-703) million. Net debt at June 30, 2021 was SEK 6,461 (12,782) million.

The term to maturity of the total loan portfolio at June 30, 2021 averaged 6.1 (5.3) years, with an average fixed interest period of 1.2 (0.9) years.

Cash and cash equivalents were SEK 8,058 (5,559) million and non-utilized credit facilities were SEK 8,519 (14,757) million, which combined corresponds to 22% (29%) of rolling 12-month revenue.

Return on capital employed/equity

Return on capital employed before tax for the last 12 months was 10% and return on equity after tax was 8%, whereas the figures for the full year of 2020 were 2% and -1% respectively.

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Equity

With earnings of SEK 4,726 million and other comprehensive income (mostly consisting of translation differences) of SEK 1,752 (-4,015) million, the parent company's shareholders' equity amounted to SEK 60,392 (60,146) million, equating to 58.64 (58.40) per share.

SSAB Group - Second quarter of 2021

Revenue and operating result

Revenue for the second quarter of 2021 was SEK 23,673 (15,155) million, up 56% compared to the second quarter of 2020 and up 20% compared to the first quarter of 2021.

Operating result for the second quarter of 2021 was SEK 4,083 (-251) million, up SEK 4,334 million compared to the second quarter of 2020. All business segments contributed to the improvement. Compared with the first quarter of 2021, earnings were up SEK 2,090 million.

Revenue and operating profit/loss by business segment

		Revenue			Operating profit/loss
	2021	2020			2021	2020
SEK millions	Q2	Q2	Change	Q2	Q2	Change
SSAB Special Steels	5,824	3,983	1,841		1,109	485	624
SSAB Europe	10,246	6,189	4,057		1,512	-566	2,078
SSAB Americas	4,831	3,219	1,612		1,151	-10	1,161
Tibnor	3,214	2,037	1,177		449	29	420
Ruukki Construction	1,593	1,439	154		162	86	76
Other	-	-	-		-218	-186	-32
Depr. surplus values	-	-	-		-81	-89	8
Group adjustments	-2,034	-1,712	-322		-	-	-
Total	23,673	15,155	8,518		4,083	-251	4,334

Analysis of total change in revenue and operating profit/loss*)

Revenue			Operating profit/loss
		Change vs Q2 2020				Change vs Q2 2020
		%				Mkr
Volume		31		Price and product mix		4,110
Price		31		Volume		1,550
Product mix		1		Variable costs		-1,630
Currency effects		-11		Fixed costs		-540
Other sales		4		Currency effects		150
				Capacity utilization		650
				Other		44
Total		56		Total		4,334

*) Estimated change, the figures in the table have been rounded.

Raw materials

SSAB sources iron ore from LKAB in Sweden and from Severstal in Russia, and prices vary depending on the market index. SSAB sources coking coal from Australia, the USA and Canada, usually on annual supply contracts with monthly pricing. SSAB Americas regularly purchases scrap metal on the spot market as a raw material for their production. The increase in purchase prices of iron ore during the second quarter will affect SSAB's earnings during the third quarter of 2021.

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