MEASURES TO LOWER COSTS AND IMPROVE EFFICIENCY

LKAB is continuing to focus on improving efficiency through cost control and through volume and productivity increases. Stable production and improved delivery volumes resulted an operating loss of MSEK -277 (-228) for the quarter, where hedging activities had the main negative impact.

“The hedges were entered into at the low iron ore prices that prevailed during the fourth quarter of 2015. The hedging was carried out in order to alleviate the effects of price and exchange rate changes in the market. This meant that LKAB was not able to take full advantage of the price increase during the second quarter of 2016“, says Jan Moström, President and CEO.

Demand for LKAB’s processed iron ore products remains good. The production volume amounted to 6.1 (5.8) Mt for the quarter and deliveries reached 6.7 (5.3) Mt, with pellets accounting for 83 percent.

During April the spot price1 rose to USD 70.5/tonne, its highest level in the year to date. The increase was largely driven by speculation and stabilized shortly thereafter at around USD 50/tonne. The average price for the quarter was USD 56 (58)/tonne.

In the first half of 2016 we have worked intensively to transform the organization into three business divisions in order to create the conditions to increase production, at the same time as reducing our costs. The efficiency programme initiated in 2015, aimed at reducing the number of employees by 400, was completed in the first half of 2016. LKAB will continue to reduce its cost base.

“The aim is to reduce the cost base by at least MSEK 800 by the end of the first quarter in 2017. This will primarily be done by reducing the requirement for consultants and contractors. Further cuts in personnel, equivalent to 200 positions, will also be implemented“, says Jan Moström, President and CEO.

All mining operations require the use of land, and LKAB’s commitment to and responsibility for urban transformation in the mining communities remain unchanged.

1. Platts IODE X 62% Fe CFR North China

APRIL – JUNE

•  Net sales totalled MSEK 3,800 (3,567)
•  Operating profit/loss was MSEK -277 (-228)
•  Costs for urban transformation provisions totalled MSEK 103 (251)
•  Profit/loss for the period was MSEK -214 (-416)
•  Operating cash flow was MSEK -600 (-1,488)
•  Deliveries of iron ore totalled 6.7 (5.3) Mt

JANUARY - JUNE

•  Net sales totalled MSEK 7,568 (7,745)
•  Operating profit/loss was MSEK -105 (147)
•  Costs for urban transformation provisions totalled MSEK 439 (475)
•  Profit for the period was MSEK 119 (190)
•  Operating cash flow was MSEK -2,600 (-1,195) 
•  Deliveries of iron ore totalled 13.0 (11.2) Mt

Contact: Bo Krogvig, Senior Vice President of Communications at LKAB, Tel: 46 (0)8 429 34 45. E-mail:bo.krogvig@lkab.com

LKAB is an international high-tech minerals group that mines and upgrades the unique iron ore of northern Sweden for the global steel market. Sustainability is core to our business and our ambition is to be one of the industry’s most innovative, resource-efficient and responsible companies. The group had sales of more than SEK 16 billion in 2015 and employs about 4,500 people in 13 countries. Other group business include industrial minerals, drilling systems, rail transport, rockwork services and property management.

Tags: