SSAB : Report for the first quarter 2021

INTERIM REPORT JANUARY - MARCH 2021

Strong recovery - SSAB Special Steels posts record result and shipments

April 26, 2021

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Interim Report January - March 2021

The first quarter

∙ Revenue was SEK 19,661 (18,772) million ∙ EBITDA was SEK 2,860 (1,286) million

∙ Operating profit was SEK 1,993 (343) million ∙ Earnings per share were SEK 1.46 (0.17)

Key figures

	2021	2020	2020	2020
SEK millions	Q1	Q1	Q4	Full year
Revenue	19,661	18,772	16,988	65,396
Operating profit/loss before depreciation and amortization, EBITDA	2,860	1,286	1,439	3,364
Operating profit/loss	1,993	343	557	-325
Profit/loss after financial items	1,887	221	418	-802
Profit/loss after tax	1,510	178	346	-490
Earnings per share (SEK)	1.46	0.17	0.33	-0.50
Operating cash flow	1,429	-411	2,930	3,460
Net debt	8,896	12,692	10,278	10,278
Net debt/equity ratio (%)	15	20	19	19

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

Comments by the CEO

SSAB's earnings improved sharply during the first quarter of 2021. Demand is strong, prices are increasing and we have taken strategic steps in our transition to a fossil-free steel production. The recovery that started during autumn last year has strengthened during the first quarter. SSAB's production level has been stable and together with better prices and higher shipments, the result increased by SEK 1.4 billion compared to the fourth quarter of 2020. Operating profit for the first quarter amounted to SEK 1,993 (343) million.

There is strong demand for high-strength steel and SSAB Special Steels maintained a high, stable production rate. Shipments reached a record high SEK 376 (305) thousand tonnes and operating profit increased to a record level of SEK 904 (458) million in the first quarter of 2021. The operating margin increased to 18% (10%).

SSAB Europe's result increased to SEK 758 (0) million. Strong demand has resulted in higher shipments and better prices. SSAB America's result also increased, to SEK 268 (106) million. Better margins contributed positively, whereas shipments were affected by weather-related issues in North America as well as low opening balance of slab inventories.

Measures to limit the spread of Covid-19 continue and production has run without any major impact. Market conditions are favorable and we expect good activity during the second quarter of 2021.

SSAB is leading the green transition in the steel industry and the goal is to be fossil free by latest 2045. We have taken additional steps during the quarter to be world-first with fossil-free steel. Fossil-free steel will not only reduce our own emissions, we can also help our customers to reduce their climate impact, while strengthening their competitiveness. In April, we entered into a strategic collaboration with AB Volvo on the world's first vehicles to be made of fossil-free steel with shipments for concept vehicles already this year. The great interest in fossil-free steel shown by customers, means that SSAB is exploring how to convert to fossil-free production in Luleå faster than currently planned. The conversion of Oxelösund proceeds according to plan and investments have started.

Together with our partners, LKAB and Vattenfall, we will create something unique for our customers - the most efficient fossil-free value chain in the world. The three companies have together decided that the industrialization of HYBRIT will begin in Gällivare, with the world's first demonstration plant for fossil-free sponge iron, the feedstock for fossil-free steel. The plant is scheduled for completion in 2026 and capacity will amount to 1.3 million tonnes of fossil- free sponge iron. We are also starting the construction of a hydrogen storage facility outside Luleå to develop the storage technology. Storage will play an important role for future power and energy balancing by, for example, using stored hydrogen gas when the electricity system is under strain. SSAB:s transition is progressing at the highest pace possible and I am convinced that we can further strengthen our leading position.

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Outlook for the second quarter 2021

Demand for steel during the second quarter of 2021 is estimated to be very strong, driven both by underlying demand and by customer restocking. Global demand for high-strength steel is also estimated to be very strong during the second quarter in almost all markets in all geographies.

Special Steels' shipments are expected to be at a high level during the second quarter of 2021, albeit somewhat lower than the record high shipments reported in the first quarter. SSAB Europe's and SSAB Americas' shipments are expected to be somewhat higher in the second quarter than in the first quarter of 2021.

Prices realized by SSAB Americas and SSAB Europe are expected to be significantly higher on average compared with the first quarter of 2021. For SSAB Special Steels, prices are expected to be somewhat higher in the second quarter of 2021 compared to the first quarter. The higher prices will be partly counteracted by higher raw material costs, primarily of iron ore, in the second quarter of 2021.

Outlook for steel divisions

		Q2 2021 vs. Q1 2021
	Shipments	Realized prices
SSAB Special Steel	Somewhat lower	Somewhat higher
SSAB Europe	Somewhat higher	Significantly higher
SSAB Americas	Somewhat higher	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 1,165 million, compared to the earlier forecast of SEK 1,200 million communicated in the Year-end report 2020. The somewhat lower figure can be explained by lower estimated costs for SSAB Europe and SSAB Americas. 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.

	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	-	-	-	-	320	250	-	-	320	250
SSAB Europe	-	-	-	-	270	250	155	85	425	335
SSAB Americas	-	-	-	50	-	170	420	-	420	220
Total	-	-	-	50	590	670	575	85	1,165	805

The market

According to the World Steel Association, global crude steel production for the first two months of 2021 amounted to 315 (295) million tonnes, up 6.6% compared to the same period in 2020. Chinese steel production increased by just under 13%. Steel production decreased in North America by 7% and in the EU-27 by 4%.

In North America, demand for heavy plate was good during the first quarter. Despite several customer segments increasing their purchases during the fourth quarter of 2020 and the first quarter of 2021, inventory levels are generally still low in a number of segments, including distributors.

In Europe, demand was strong during the first quarter. Despite most European steel mills having restarted production that had been idled during parts of 2020, there is a shortage of steel. Imports into Europe were at a relatively low level during the quarter.

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, market prices for heavy plate increased sharply during the first quarter. In Europe, market prices for strip rose sharply during the first quarter. Prices for heavy plate were also up, albeit to a lesser extent. In China, prices for strip and heavy plate rose during the first quarter.

SSAB Group - First quarter of 2021

Revenue and operating result

Revenue for the first quarter of 2021 was SEK 19,661 (18,772) million, up 5% compared to the first quarter of 2020 and up 16% compared to the fourth quarter of 2020.

Operating result for the first quarter of 2021 was SEK 1,993 (343) million, up SEK 1,650 million compared to the first quarter of 2020. All business segments contributed to the improvement. Compared with the fourth quarter of 2020, earnings were up SEK 1,436 million.

Revenue and operating profit/loss by business segment

		Revenue			Operating profit/loss
	2021	2020			2021	2020
SEK millions	Q1	Q1	Change		Q1	Q1		Change
SSAB Special Steels	5,105	4,536	570		904	458		446
SSAB Europe	8,829	8,139	689		758	0		758
SSAB Americas	3,651	3,878	-226		268	106		162
Tibnor	2,656	2,421	236		218	12		206
Ruukki Construction	1,122	1,480	-357		48	11		37
Other	-	-	-		-120	-153		33
Depr. surplus values	-	-	-		-83	-91		8
Group adjustments	-1,703	-1,681	-22		-	-		-
Total	19,661	18,772	889		1,993	343		1,650

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

	Revenue		Operating profit/loss
	Change vs			Change vs
	Q1, 2020			Q1, 2020
	%			SEK m.
Volume	3	Price and product mix		1,630
Price	10	Volume		240
Product mix	2	Variable cost		-430
Currency effects	-9	Fixed cost		100
Other sales	-1	Currency effects		40
		Capacity utilization		70
		Other		0
Total	5			1,650

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

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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 first quarter will affect SSAB's earnings during the second quarter of 2021.

Change in SSAB's average purchase prices, first quarter of 2021

	Change vs. 2020 Q1	Change vs. 2020 Q4
% change	USD	SEK	USD	SEK
Iron ore	86%	62%	43%	40%
Coking coal	-16%	-27%	14%	11%
Scrap metal	48%	29%	36%	32%

Production and shipments

Crude steel production during the first quarter of 2021 was up 1% compared with the first quarter of 2020 and down 2% compared with the fourth quarter of 2020.

Rolling production during the first quarter of 2021 was down 1% compared with the same quarter of 2020 and down 2% compared with the fourth quarter of 2020.

SSAB's steel shipments during the first quarter of 2021 were 1,837 (1,787) thousand tonnes, up 3% compared with the first quarter of 2020 and also compared with the fourth quarter of 2020.

Production and shipments

	2021	2020	2020	2020
Thousand tonnes	Q1	Q1	Q4	Full year
Crude steel production	2,103	2,081	2,156	7,535
Rolling production	1,935	1,955	1,970	6,937
Steel shipments	1,837	1,787	1,779	6,459

Earnings after tax and earnings per share

The result after tax (attributable to shareholders in the parent company) for the first quarter of 2021 was SEK 1,507 (176) million, equating to SEK 1.46 (0.17) per share. Tax was SEK -377(-42) million.

Return on capital employed/equity

Return on capital employed before tax for the last 12 months was 4% and return on equity after tax was 1%, whereas the figures for the full year 2020 were 2% and -1% respectively.

Equity

With earnings of SEK 1,510 million and other comprehensive income (mostly consisting of translation differences) of SEK 2,814 million, the parent company's shareholders' equity amounted to SEK 58,305 (64,447) million, equating to SEK 56.62 (62.58) per share.

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