efficiency October, 2015 Agenda SSAB in brief SSABs strategic - - PowerPoint PPT Presentation

SSAB - Greater focus on efficiency

October, 2015

Agenda

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SSAB in brief SSAB’s strategic focus areas Financial development Outlook

A stronger, lighter and more sustainable world

Together with our customers, we will go further than anyone else in realizing the full value of lighter, stronger and more durable steel products.

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SSAB is market leader in defined areas of the global carbon steel market

High strength steels (QT & AHSS)

Globally

Flat carbon steels and tubes

Nordics

Heavy plate

Americas

40-50% 20-25%

Source: World Steel Association, Eurofer, SSAB analysis

3%

5-40% Higher share in Q&T in some groups/regions

100% = ~1400 M tonnes

Global market Carbon Steels SSAB Focus markets Market size, M tonnes SSAB Market share, %

~25* ~10 4-5

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*Q&T steels, Strip steels ≥700 MPa

Our five divisions

Leading in their businesses

SSAB Europe

Net sales SEK 25.9 billion*

SSAB Americas

Net sales SEK 13.2 billion*

SSAB Special Steels

Net sales SEK 13.2 billion* Nordic-based steel producer of high- quality strip, heavy plate, and tubes Global steel and service partner in value-added Advanced High Strength Steels (AHSS) and Quenched & Tempered steels (Q&T) North America-based steel producer of high-quality heavy plate

Tibnor

Net sales SEK 8.2 billion* Nordic full-service steel distribution partner

Ruukki Construction

Net sales SEK 6.2 billion* European provider of energy-efficient building and construction solutions

*Sales pro forma full year 2014

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Main production locations in Sweden, Finland and US 17,000 employees in over 50 countries

A global highly-specialized steel company

SSAB production locations Sales coverage

Net sales by region

2014 pro forma SEK 60 bn

Other Europe North America Rest of world Nordic

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Energy Automotive

SSAB targets end users in core segments

Differentiator vs. most steel companies

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Materials handling Construction Industrial Applications/ Engineering Heavy Transport Construction Machinery/ Yellow Goods

Direct to end customers Via steel distributors (mainly standard grades)

Agenda

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SSAB in brief SSAB’s strategic focus areas Financial development Outlook

SSAB’s strategy – Taking the lead

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Global leadership in high-strength steels Leading home market positions Leading value-added services Superior customer experience Most flexible

• perations

High-performing

• rganization

Taking the Lead!

Clear strategic direction for each division

Priorities Mission

SSAB Special Steels

• 1. Growth on a

global basis

• 2. Improve cost

and service

• fferings
• 3. Capture

synergies Global leader in Q&T and AHSS segments

SSAB Europe

Northern European leader in Strip, Plate and Tubes

• 1. Capture cost

synergies

• 2. Secure and

grow home market share

• 3. Portfolio
• ptimization

SSAB Americas

North American leader in Heavy Plate

• 1. Expand

market leadership

• 2. Protect low

cost business model

• 3. Remain

preferred supplier

Tibnor

Leading Nordic multi-metal distributor

• 1. Win market

share in Nordics

• 2. Capture

cost synergies

• 3. Reduce cost

and complexity

Ruukki Construction

European leader in construction and building solutions

• 1. Continue

turnaround

• 2. Growth and

portfolio

• ptimization
• 3. Right-sizing
• f operations

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Agenda

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SSAB in brief SSAB’s strategic focus areas Financial development Outlook

Summary of Q3/2015

Weak result – further measures to increase efficiency

EBIT amounted to SEK -191m (409) Main deviations vs Q3/2014

− Negative currency impact − Costs for blast furnace relining − Lower prices in North America − Partly compensated by lower costs

Relining of the blast furnace completed Higher duration of debt portfolio and more balanced maturity profile Additional efficiency measures announced

1) Pro forma figures as if SSAB had owned Rautaruukki during the period 2) Excluding items affecting comparability 3) The pro forma figures for 2014 exclude depreciation and amortization on surplus values related to the acquisition of Rautaruukki 4) Actual

SEKm Q3/2015 Q3/20141 Sales 13 594 15 039 EBITDA2 751 1 246 % of sales 5.5 8.3 EBIT2,3

• 191

409 Operating cash flow

• 160

774 Shipments, ktonnes 1 544 1 632

Key figures, SSAB Group Q3/2015

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Seasonally lower shipments in Q3

Group figures1

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

Sales EBITDA and EBITDA margin2 Shipments3 EBITDA2 per tonne/delivered steel3

1) Information for the reference periods (2013 and 2014) is based on pro forma figures as if SSAB had owned Rautaruukki during those periods 2) Excluding items affecting comparability

2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 18 000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2014 2015 SEK million 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 18 000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2014 2015 SEK million 0% 2% 4% 6% 8% 10% 12% 14% 200 400 600 800 1000 1200 1400 1600 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2014 2015 SEK million EBITDA EBITDA % 200 400 600 800 1000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2014 2015 SEK/tonne

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SSAB’s key customer segments’ development

Segment

Q3 vs Q2 development

Comments on Q3 development Heavy Transport

 Heavy Transport remained at a high level in Europe

Automotive

 Continued good demand in Europe and US but slower development in China

Construction Machinery

 Stable demand at a low level in Europe  The US market did not improve and the Chinese market remained depressed

Mining

 Continued slow demand in all regions

Energy

 Continued good demand for wind towers in North America  Pipeline activity impacted by low oil price

Construction Material

 Seasonally higher demand but lower than previous year  Good demand in Sweden and Poland. Weak demand in Finland, and very weak

demand in parts of Eastern Europe and Russia

Service Centers (US)

 Demand did not pick up in Q3 as expected  Destocking continued in Q3 14

SEK million (except for EPS) Q3/2015 Q3/20141 1-3Q/2015

Sales 13 594 15 039 44 365 EBITDA2 751 1 246 3 498 Operating profit2,3

• 191

409 674 Pre-tax profit2,3

• 438

261 Net profit2,3

• 285

41 206 Earnings per share (EPS), SEK 0.52

• 0.30

Operating cash flow

• 160
• 2 086

Strong cash flow in first nine months of 2015

Key figures

1) Pro forma figures as if SSAB had owned Rautaruukki during the whole of 2014 2) Excluding items affecting comparability 3) In the pro forma numbers for 2014, depreciation and amortization on surplus values related to the acquisition of Rautaruukki are not included 15

Change in operating profit

Q3/2015 vs. Q2/2015

Note: Excluding items affecting comparability.

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301

• 80
• 191

2015 Q3

Other

3

Under absorption

FX

• 150

COGS and Fixed cost 550 Volume

• 570

Price

• 250

2015 Q2

Change in operating profit

Q3/2015 vs. Q3/2014

Note: Excluding items affecting comparability. Information for the reference period Q3/2014 is based on pro forma figures as if SSAB had

• wned Rautaruukki during the period. Q3/2014 is excluding depreciation/amortization on surplus values on intangible and tangible fixed

assets related to the acquisition of Rautaruukki.

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• 191
• 120

409 50

Under absorption

FX COGS and Fixed cost 860 Volume Price

• 1 145

2014 Q3 2015 Q3 15

Other

• 260

Update on synergies from Ruukki integration

Status of synergy realization Synergy program runs faster than initial plan P&L impact of synergies during Q3

• approx. SEK 175m

Run-rate SEK 750m at the end of Q3 Lower costs to realize synergies, now estimated to be SEK 200m (earlier estimate was SEK 550m)

SEK millions Q1/2015 Q2/2015 Q3/2015 Q1-Q3 2015 Run rate at the end of the period 450 525 750 750 Synergies, gross 100 125 175 400 Synergies, net 85 120 175 380

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Recently announced or achieved activities The coating line in Borlänge was discontinued in Q3 (10 weeks earlier than planned) Negotiations of staff reduction in Virsbo and Borlänge concluded, reduction of 270 jobs Negotiations of workforce reductions in Raahe, Finland announced impacting around 200 jobs

Additional measures to increase efficiency

New cost savings program in Ruukki Construction

− Reduced staffing in administration, processing, sales and marketing in all geographies − Will lower cost base by at least SEK 200m − Impacting around 300 positions globally

Investment in coal injection in Raahe completed in Q3

− Pulverized coal injection (PCI) replaces more expensive oil injection − At current oil/coal prices, saving amounts to approx. SEK 200m annually from Q1/2016 − Coal injection is already in use in Luleå and Oxelösund

Pulverized coal injection plant in Raahe

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Summary of actions to increase efficiency

Lowering cost base by approximately SEK 2bn from 2014 level. Full impact in 2017

Actions Target Previous Target Full run-rate

Synergies from Ruukki acquisition > SEK 1.4bn SEK 1.4bn Mid-2016 Savings program in Ruukki Construction > SEK 200m New target H2/2016 Coal injection in Raahe ~SEK 200m

• Q1/2016

Total ~SEK 2 billion SEK 1.4bn

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SSAB Special Steels

Stable performance in slow market environment

Sales and EBITDA margin1

Sales increased 17% vs. Q3/2014 due to currency effects and higher slab sales internally External shipments were down -17% vs. Q2/2015 (mainly due to seasonality), and -11% vs. Q3/2014 (mainly due to non-branded plate in the US) Operating profit was up SEK 312m vs. Q3/2014 due to better capacity utilization and lower

• perating costs (running 2 BFs and no maintenance outage in Q3)

SEKm

SEKm Q3/2015 Q3/20141 Change

Sales 3 743 3 203 17% EBITDA 391 72 443% EBIT2 251

• 61

N/A Shipments,

ktonnes

216 244

• 11%

Key figures

1) Information for the reference periods (2013 and 2014) is based on pro forma figures as if SSAB had owned Rautaruukki during those periods 2) Excluding depreciation/amortization on surplus values on intangible and tangible fixed assets related to the acquisition of Rautaruukki

• 5%

0% 5% 10% 15% 20% 25%

• 500

500 1 500 2 500 3 500 4 500 5 500 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2014 2015 Sales EBITDA %

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Sales were down 1% vs. Q3/2014 due to somewhat lower volumes and weaker product mix, compared with Q2/2015 sales were down 16% due to seasonally lower volumes External shipments were unchanged vs. Q3 2014, but 17% lower vs. Q2/2015 Operating profit was down SEK 389m vs. Q3/2014 due to lower prices and the costs of relining BF in Luleå. Lower operating costs (inc. synergy realization) improved profitability

SEKm

SSAB Europe

Loss due to relining & outages, lower cost base going forward

SEKm Q3/2015 Q3/20141 Change

Sales 5 965 6 006

• 1%

EBITDA 36 408

• 91%

EBIT2

• 328

61 N/A Shipments,

ktonnes

823 829

• 1%

Sales and EBITDA margin1 Key figures

0% 2% 4% 6% 8% 10% 12% 14% 1 000 2 000 3 000 4 000 5 000 6 000 7 000 8 000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2014 2015 Sales EBITDA % 1) Information for the reference periods (2013 and 2014) is based on pro forma figures as if SSAB had owned Rautaruukki during those periods 2) Excluding depreciation/amortization on surplus values on intangible and tangible fixed assets related to the acquisition of Rautaruukki

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Improved flexibility in crude steel production with completion of blast furnace relining in Luleå

The furnace was closed for relining from June to mid-September Start-up was delayed due to late supplier deliveries P&L impact SEK 180m in Q3

− Total P&L impact (Q2-Q3) SEK 250m

The CAPEX for the project is in line with budget SSAB has now better flexibility in crude steel production – one of the key reasons for the acquisition of Rautaruukki

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SSAB Americas

Continued destocking at Steel Service Centers and lower scrap costs

Shipments were down 10% vs. Q3/2014, but increased 7% vs. Q2/2015 Sales were down 17% vs. Q3/2014 due to lower prices and volumes, sales were 2% higher vs. Q2/2015 due to higher volumes (counteracted by lower prices) Operating profit was down SEK 480m vs. Q3/2014 due to lower prices, but somewhat offset by lower operating costs

SEKm

SEKm Q3/2015 Q3/2014 Change

Sales 3 080 3 716

• 17%

EBITDA 235 689

• 66%

EBIT1 78 558

• 86%

Shipments,

ktonnes

505 559

• 10%

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

Sales and EBITDA margin Key figures

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 1000 2000 3000 4000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2014 2015 Sales EBITDA %

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Stable net debt and gearing

Net debt amounted to SEK 24,814m in line with level at year-end 2014 Net debt/equity ratio amounted to 55%, a decrease of 1 percentage point since year-end 2014

SEKm %

Net debt and net debt/equity ratio

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48 50 52 54 56 58 60 62 2011 2012 2013 2014 Q3/14 Q3/15 5 000 10 000 15 000 20 000 25 000 30 000 Net interest bearing debt, SEKm Net gearing ratio, %

Balanced maturity profile in the years to come

• Significant cash and back-up facilities

SEK million

Debt maturity at September 30, 2015

The average term on the loan portfolio was 4.8 (3.7) years

− Averaged fixed interest term was 1.3 (1.4) years

Of the total maturities in 2016, commercial paper accounts for approximately 50% Continued no covenants on debt portfolio

2000 4000 6000 8000 10000 12000 Cash and back-up facilities 2015 2016 2017 2018 2019 2020-

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Higher duration and continued low interest rate

Debt cost and duration

Duration increased to 4.8 years vs. 4.2 in Q2/2015 Average interest rate was 2.36%

− (2.34% in Q2/2015)

Years %

0,0 1,0 2,0 3,0 4,0 5,0 6,0 1 2 3 4 5 6 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2011 2012 2013 2014 2015 Avg duration (rhs) Avg interest rate

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20 40 60 80 100 120 140 160 2-Jan-14 28-Feb-14 29-Apr-14 26-Jun-14 22-Aug-14 20-Oct-14 16-Dec-14 12-Feb-15 14 Apr 15 11 Jun 15 11 Aug 15 8 Oct 15 Platts-IODEX fines 62% Fe USD/dmt Platts-HCC Peak Downs region USD/mt

Iron ore pellet price for SSAB’s shipments during Q3 was:

− 1% lower in both USD and SEK vs. Q2/2015 − A new price agreement with Severstal was signed for supplies of iron ore

Average coking coal price for SSAB during Q3 was:

− 8% lower in USD and 5% lower in SEK vs. Q2/2015

Iron ore and coking coal spot prices were quite stable during Q3 after a drop in July

Iron ore and coking coal spot prices

USD/tonne Iron ore Coking coal Q3 28

50 100 150 200 250 300 350 400 450 500 2 Jan 14 3 Mar 14 29 Apr 14 25 Jun 14 21 Aug 14 20 Oct 14 17 Dec 14 17 Feb 15 15 Apr 15 11 Jun 15 7 Aug 15 5 Oct 15 Scrap / Shredded Midwest US / US domestic delivered $/l.ton

Scrap prices fell sharply during Q3 and into Q4

Prices now at lowest level since 2009

Scrap spot prices in US at the end of Q3/2015 were:

− 30% lower vs. Q2/2015 − 46% lower vs. Q3/2014 Scrap spot price

USD/tonne Scrap Q3 29

20 40 60 80 100 120 140

3 Jan 12 28 Feb 12 25 Apr 12 20 Jun 12 15 Aug 12 10 Oct 12 5 Dec 12 1 Feb 13 1 Apr 13 27 May 13 22 Jul 13 16 Sep 13 11 Nov 13 9 Jan 14 6 Mar 14 2 May 14 27 Jun 14 22 Aug 14 20 Oct 14 15 Dec 14 11 Feb 15 9 Apr 15 4 Jun 15 31 Jul 15 1 Oct 15

After a period of de-coupling, scrap and iron ore prices have converged

Price, indexed from 2012

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Iron ore Scrap, US

Agenda

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SSAB in brief SSAB’s strategic focus areas Financial development Outlook

SSAB’s outlook for Q4/2015

In North America, the wait-and-see sentiment in demand for heavy plate is expected to continue during Q4

Destocking at distributors is also expected to continue Underlying demand at end-customers is expected to be relatively stable, but with seasonal downturn towards the end of Q4

In Europe, demand is expected to remain stable

− Seasonal downturn towards the end of Q4

Demand for high-strength steels is expected to be unchanged during Q4 SSAB’s shipments during Q4 are expected to be somewhat higher than during Q3 Maintenance outage at Oxelösund in November (negative impact of ~SEK 100m on Q4 results)

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SSAB’s key customer segments – outlook

Segment Outlook for Q4 vs. Q3 Comments on outlook Heavy Transport

 Heavy Transport expected to remain at high level in Europe.  US market showing slowdown in railcar segment

Automotive

 Automotive is expected to remain at high level in Europe and in the US

Construction Machinery

 Uncertain short term demand in main markets. Export of construction

machinery from US is under pressure

 Chinese market remains depressed

Mining

 Continued downward adjustments of CAPEX in the mining sector  Stable demand for after-market services

Energy

 Continued solid demand for wind towers expected in North America  Demand for pipelines continues to be subdued

Construction Material

 Q4 is seasonally slower vs. Q3  Sweden expected to remain at high level, Finland stagnant. Good development

in Central Europe, especially Poland and Czech, while Russia contracts

Service Centers (US)

 No major changes in demand expected short term. Inventories at steel service

centers are normalizing, but continued destocking expected in Q4