Interim Report April–June 2024: Improved quarterly results but with continued challenges
For the first half of the year LKAB’s net sales and operating profit both decreased as a consequence of missed deliveries at the beginning of the year. In terms of the second quarter, however, operating profit increased to MSEK 2,666 (2,257) as parts of accumulated inventories were delivered.
Net sales for the second quarter amounted to MSEK 9,851 (9,350). The increase is mainly due to higher deliveries and a somewhat weaker Swedish krona. Operating profit amounted to MSEK 2,666 (2,257) and was also affected by insurance payouts received during the quarter as compensation for missed deliveries caused by derailments on the Iron Ore Line. For the first half of the year, net sales amounted to MSEK 15,322 (21,306) and operating profit decreased to MSEK 4,036 (7,443) as a result of the missed deliveries.
The average global spot price for iron ore products remained at a high level and was USD 112 (111) per tonne for the quarter, which was USD 12 lower than in the first quarter of 2024. Quoted pellet premiums were in line with the same period the previous year.
High inventory levels entailed higher deliveries for the quarter that amounted to 6.4 (5.8) Mt. However, the problems associated with the Iron Ore Line and the need to ensure delivery capacity remain. During the quarter we were reminded of the sensitivity of the track when track buckling or “sun kinks” occurred, which meant that traffic between Kiruna and Narvik was stopped for another ten days.
In view of the limited capacity on the Iron Ore Line, during the quarter LKAB decided to cut back production of finished products by around a million tonnes on an annual basis. As part of optimising mine production in the operating locations it was also announced that production in Konsuln, which is adjacent to the Kiruna mine, is being mothballed.
“Delivery capacity on the Iron Ore Line going forward continues to be crucial for the business both in the short term and over time. We are working at all levels together with the Swedish Transport Administration and other actors to manage the operational challenges in the short term. But political decisions and pace are required for the additional investments in the Iron Ore Line that are needed over time,” says Jan Moström, President and CEO.
Affected by extensive scheduled maintenance stoppages and production disruptions, production for the quarter amounted to 5.3 (5.3) Mt. Production in the second half of the year will again be limited because of maintenance efforts.
“During the autumn we will carry out extensive maintenance work at one of our pelletising plants in Kiruna over several months to remedy deficiencies. The production limitations resulting from this will also buy us time before we have to make decisions on further production cutbacks, enabling us to move forward together with the Swedish Transport Administration on the operational challenges of the Iron Ore Line,” says Jan Moström.
Tragically, a fatal accident occurred in the Kiruna mine during the quarter. Within about six months two people have lost their lives at work within LKAB’s operations which further puts the focus on security work going forward. The Swedish Work Environment Authority’s inspection indicates shortcomings that have also been noted in our internal investigation. Several measures are being implemented based on these reviews, including targeted safety inspections with a focus on machine safety. Safety is at the top of our agenda to ensure a healthy and safe work environment with us and our contractors, where a decisive part is our ongoing effort to build a proactive safety culture.
This information constitutes information that Luossavaara-Kiirunavaara AB is required to disclose under Sweden’s Securities Markets Act. It was released for publication at 14.00 CEST on 14 August 2024.
Contact: Niklas Johansson, Senior Vice President Public Affairs and External Relations LKAB. Tel: +46 (0)10-144 52 19. E-mail: niklas1.johansson@lkab.com