Report for the first quarter of 2001

Report for the first quarter of 2001 ·Profit after financial items was largely unchanged and amounted to SEK 465 (478) million ·Processing costs fell compared with the preceding quarter but costs for iron ore and coal are increasing significantly ·Cash flow in the business operations improved by just over SEK 200 million to approximately SEK 100 million Consolidated profit and loss account (unaudited) 2000 2001 2000 April '00- SEK millions Quarter QuarterFull March 1 1 year '01 Sales 4,774 5,281 19,271 19,778 Cost of goods sold -3,823 -4,341 - - 16,100 16,618 Gross profit 951 940 3,171 3,160 Selling and administrative -446 -471 -1,830 -1,855 expenses Other operating revenues and -19 12 601 632 expenses Affiliated companies 10 10 20 20 Operating profit 496 491 1,962 1,957 Financial items -18 -26 -92 -100 Profit after financial items 478 465 1,870 1,857 Tax -136 -139 -517 -520 Minority shares -8 -6 -42 -40 Profit after tax 334 320 1,311 1,297 Return on capital employed - - 15 15 before tax (%) Return on equity after tax - - 14 14 (%) Earnings per share (SEK) 3.00 3.20 12.00 12.10 Equity per share (SEK) 89.70 98.40 94.80 98.40 Equity ratio (%) 58 52 50 52 Number of shares at end of 112.11 100.90 102.54 100.90 the period (millions) Average number of shares 112.11 101.57 108.84 107.38 (millions) The Market Steel consumption in Western Europe peaked at the end of last year and prices for sheet came under pressure at this time. Orders for sheet also declined significantly towards the end of the preceding year but have recovered during the first quarter. However, they were still somewhat lower than during the first quarter of last year. Prices for sheet in local currencies declined on average by 5% during the first quarter compared with the preceding quarter. However, as a result of a weaker Swedish krona, the effect in Swedish krona was limited to 3%. However, it was possible to continue to carry out price increases for both ordinary plate and quenched steels. In total, the Group's steel prices in Swedish krona were 1% lower than during the fourth quarter of last year. However, as a consequence of the price increases of last year, prices in Swedish krona were still 10% higher than during the first quarter of last year. Production and deliveries Production in the hot rolling strip mill in Borlänge has been curtailed at times for market reasons but otherwise has been stable, as is the case with production in the four-high rolling mill in Oxelösund. During the quarter, sheet production amounted to 823 thousand tonnes, which was 1% higher than during the first quarter of last year and almost 7% higher than during the preceding quarter. Crude steel production amounted to 989 thousand tonnes, which was 5% higher than during the corresponding quarter of last year but 2% lower than during the final quarter of last year. As a consequence of a weaker order book, especially towards the end of last year sheet volumes were 6% lower than during the first quarter of last year, while plate volumes were 2% higher. In total, deliveries from the steel operations amounted to 747 thousand tonnes, which was 4% less than during the corresponding quarter of last year. Orders for high-strength sheet were also somewhat weaker, among other things from the automotive and telecommunications industries, which meant that deliveries were 5% lower than during the first quarter of last year. Deliveries of extra and ultra high-strength sheet were, however, at the same level as during the corresponding period of last year. Deliveries of quenched steels are still limited by access to quenching capacity and thus were 5% lower than last year when a higher rate of delivery could be maintained by reducing existing inventories. Deliveries in the trading operations dependent on the Swedish market fell somewhat compared with the autumn of last year but were nevertheless 3% higher than during the first quarter of last year. Sales and profit Sales increased by 11% to SEK 5,281 (4,774) million. The increase was due to higher prices. Sales were largely unchanged compared with the final quarter of last year. Prices for iron ore and coal are quoted in US dollars. Agreements for coal have been concluded and resulted in price increases in dollars of 13%. The agreements enter into effect on 1 April but, due to existing inventories, the full impact on profit will not be felt before the end of the second quarter. Iron ore agreements have not yet been concluded, but price trends on the world market indicate a price increase in dollars of approximately 3%. The ore agreements will be executed with effect commencing 1 January, and consequently they will have an immediate impact on profits. With the current dollar rate, this should result in cost increases in the Agreements for coal and ore of approximately 30% and 18% respectively. Processing costs fell by 7% compared with the preceding quarter but were 3% higher than during the first quarter of last year. Operating profit was largely unchanged compared with the preceding quarter and also the first quarter of last year. Compared with the first quarter of last year, improved margins in the steel operations and higher volumes in the trading and processing operations improved operating profit, while lower volumes in the steel operations and weaker margins in the trading and processing operations together with increased processing costs and depreciation had a negative effect on profit. Change in operating profit between the first quarter of 2001 and the first quarter of 2000 (SEK millions) Steel operations - Improved margins +140 - Lower volumes -25 Trading and processing operations - Weaker margins -55 - Increased volumes +55 Increased processing costs -45 Increased depreciation -14 Other -61 Change in operating profit -5 Financial items amounted to SEK -26 (-18) million. Profit after financial items thus amounted to SEK 465 (478) million. Earnings per share increased to 3.20 (3.00) SEK. Capital expenditures During the first quarter, decisions were taken regarding new capital expenditures totalling SEK 312 (261) million. Of this amount, SEK 175 million relates to a decision to invest in new capacity for the formatting of high-strength sheet in Borlänge. The new cutting lines will be brought into operation during the summer of next year. In 1999, a decision was taken to invest in a second quenching line in Oxelösund. The quenching line will provide the possibility to expand the product range within quenched steels and will increase quenching capacity by approx. 50%. The investment amounts to SEK 550 million and the quenching line will be brought into operation after the summer break this year. Last year, a decision was taken regarding a significant environmental investment at the coking plant in Luleå at which a cover will be installed in order to collect particulates from the coking process. In addition, a decision was taken regarding a fifth press-hardening line at SSAB HardTech's plant in Luleå and a third press-hardening line at the plant in the United States. It is estimated that these three major investments, totalling SEK 250 million, will be brought into operation around the end of the current year. Capital expenditures fell to SEK 217 (317) million. Financing and liquidity Since the beginning of the year, accounts receivable have increased seasonally while the value of inventories was largely unchanged. Cash flow from business operations amounted to nearly SEK 100 million. A lower seasonal increase in operating capital and reduced capital expenditures resulted in the cash flow in the business operations improving by SEK 200 million compared with last year. However, as a consequence of the payment of tax on the SPP funds received last year, in total cash flow was negative at SEK -36 million. The negative cash flow and continued repurchase of shares resulted in an increase of SEK 185 million in net debts to SEK 3,270 million. Liquid assets at the end of the quarter amounted to SEK 558 (822) million, of which SEK 140 (127) million were in the parent company. There is a Medium Term Note programme for long-term borrowing while short-term borrowing primarily takes place within a commercial paper programme. Borrowing possibilities within each of these programmes amounts to SEK 2,000 million. At the end of March, borrowing within the programmes amounted to SEK 3,555 million. Repurchase of own shares - reduction in share capital During the first quarter, 1.6 million shares (0.8 million class A shares and 0.8 million class B shares) were purchased for SEK 150 million. Thus, since May 2000 a total of 11.2 million shares, equivalent to 10% of the total number of outstanding shares, have been purchased for SEK 974 million. The Board has thereby exercised its entire mandate to repurchase shares and currently proposes to the Annual General Meeting that the share capital be reduced by SEK 280 million through the cancellation of the repurchased shares without repayment. Prospects for the remainder of the year Steel consumption in Western Europe is expected to decline from the top level reached last year. Prices for sheet continue to be under pressure and it has been necessary to accept certain additional price reductions in the agreements that have been renegotiated pending the second quarter. However, it has been possible to carry out certain price increases with respect to both ordinary plate and quenched steels. The new coal agreements will result in a significant increase in costs commencing at the end of the second quarter. In combination with price trends, it is thus estimated that gross profit margins in the steel operations during the remainder of the year will be lower than during the first quarter. It is estimated that it will be possible to achieve some increase in volumes in the sheet operations during the remainder of the year and, with the start-up of the new quenching line after the holidays, it will be possible to increase quenched steel volumes. However, it is believed that volumes in the trading operations dependent on the Swedish market will decline somewhat during the next quarter. Change during Effect on Effect on the rest of profit, earnings per the year, % SEK millions share, SEK* Prices - steel 10 800 5.70 operations Volumes - steel 5 150 1.05 operations Volumes - trading 10 90 0.65 operations Margin - trading 2%-pts 100 0.70 operations SEK index 5 145 1.05 The sensitivity analysis describes the manner in which changes in the stated factors during the remainder of the year compared with the first quarter will affect this year's profit before tax and earnings per share. *) The effect has been calculated on the basis of the number of outstanding shares as per 31 March 2001. Stockholm, 24 April 2001 Anders Ullberg The Half-Year Report will be published on 23 July ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/04/24/20010424BIT00660/bit0002.doc The full report http://www.bit.se/bitonline/2001/04/24/20010424BIT00660/bit0002.pdf The full report