Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SSAB AB (SSAAF, Financial) reported a stable operating profit of just under SEK3 billion, despite lower US plate prices.
- The company achieved a significant milestone in safety, with an LTI frequency per million working hours including contractors at 0.64.
- SSAB AB (SSAAF) produced and sold 40,000 tonnes of SSAB Zero in North America, a fossil-free steel product with zero Scope 1 and 2 emissions.
- The company updated its science-based targets for reducing greenhouse gas emissions, which were approved by the Science-Based Targets initiative.
- SSAB AB (SSAAF) launched the world's first emission-free steel powder for commercial deliveries, enhancing its product portfolio for 3D printing applications.
Negative Points
- The operating profit was lower compared to the same quarter last year, primarily due to decreased US plate prices.
- The European market showed weaker demand, affecting the Special Steels division.
- The strike in Finland had a negative cost impact of SEK125 million in Q2, with lingering market hesitations post-strike.
- The Americas division experienced a 7% decrease in prices compared to the first quarter, reflecting a cautious market.
- Tibnor and Ruukki Construction faced challenging market conditions, with a slow construction market in Europe, particularly in the Nordic region.
Q & A Highlights
Q: Can you provide guidance on aggregate CapEx for 2025 and discuss the possibility of spreading out CapEx to avoid a free cash flow crunch?
A: The outlook provided was for this year, not next year. We don't have guidance for next year yet. CapEx is restricted by environmental permits expected by the end of this year, and ongoing negotiations with OEMs. The peak CapEx is expected in 2026 and 2027, with funding plans still ongoing. (Leena Craelius, CFO)
Q: Do you think the market structure in the US plate market is changing, and is supply discipline still present?
A: Structurally, the US plate market is undersupplied. Prices are coming down from high levels, and there is hesitation among steel service centers. We are adjusting production with planned maintenance outages. We see good possibilities for plate products in energy, bridges, and railcars due to onshoring, the Inflation Reduction Act, and infrastructure bills. (Martin Lindqvist, CEO)
Q: Is there a risk of idling blast furnaces in Europe if prices don't improve?
A: We have seen better discipline within the European steel industry, with capacity idling when prices are low. We have not idled any blast furnaces and don't plan to, given our strong growth in automotive and other segments. (Martin Lindqvist, CEO)
Q: Can you clarify the timeline for peak CapEx years and whether it includes the Luleå investment?
A: The peak CapEx years of 2026 and 2027 mainly pertain to the Luleå investment. (Martin Lindqvist, CEO)
Q: What is the expected volume decline in Americas for Q3?
A: We expect significantly lower volumes due to semiannual maintenance outages in Montpelier. Historically, these outages result in a notable volume decline. (Martin Lindqvist, CEO)
Q: Do you think the slowdown in North American construction machinery is temporary or structural?
A: We believe it is temporary. The Inflation Reduction Act and other programs will support heavy plate consumption. We expect a rebound in this segment. (Martin Lindqvist, CEO)
Q: Can you discuss your market position in traditional versus new energy in the US?
A: We see strong demand in wind, utility poles, and especially wind towers using SSAB Zero. Offshore wind projects are also positive. There is no significant difference in profitability between oil and gas plates and wind plates. (Martin Lindqvist, CEO)
Q: Are you seeing momentum building for SSAB Zero, and is there upside risk to the 100,000-tonne target for the year?
A: We are on track to meet the 100,000-tonne target for the year. The premium for SSAB Zero remains valid. Production may vary between quarters due to setup requirements. (Martin Lindqvist, CEO)
Q: Are you still engaging with the DOE regarding funding for a potential DRI/HBI plant in the US?
A: Yes, discussions are ongoing, and we see strong interest from US customers for environmentally friendly products. (Martin Lindqvist, CEO)
Q: Will the CapEx for the power line at Oxelösund fall into 2025 or 2024?
A: The CapEx for the power line will mostly fall into next year or the future, with very limited impact this year. (Leena Craelius, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
