Report for the first quarter of 2002

Report for the first quarter of 2002 · Profit after financial items was SEK 182 (465) million. · Processing costs were 1% lower than last year. · Operating cash flow improved by SEK 81 million to 171 (90) million. Consolidated profit and loss account (unaudited) 2001 2002 2001 April 01- SEK millions Quarte Quarter Full March r 1 1 year 02 Sales 5,281 4,934 19,682 19,335 Cost of goods sold -4,341 -4,322 - - 16,984 16,965 Gross profit 940 612 2,698 2,370 Selling and administrative -471 -370 -1,786 -1,685 expenses Other operating revenues and 12 -12 153 129 expenses Affiliated companies 10 0 3 -7 Operating profit 491 230 1,068 807 Financial items -26 -48 -155 -177 Profit after financial items 465 182 913 630 Tax -139 -55 -277 -193 Minority shares -6 -4 -17 -15 Profit after tax 320 123 619 422 Return on capital employed - - 8 6 before tax (%) Return on equity after tax - - 6 4 (%) Earnings per share (SEK) 3.20 1.20 6.10 4.20 Equity per share (SEK) 98.40 97.60 96.70 97.60 Equity ratio (%) 52 53 51 53 Net debt/equity ratio (%) 33 36 38 36 Number of shares at end of 100.90 100.90 100.90 100.90 the period (millions) Average number of shares 101.57 100.90 101.06 100.90 (millions) The Market Steel consumption in Western Europe continued to decline somewhat during the first quarter of the year, resulting in continued pressure on sheet prices. On the other hand, prices for both quenched steels and ordinary plate were stable during the quarter. It was possible to carry out price increases prior to the second quarter with respect to most sheet products. The price increases are due to the fact that the European steelcompanies have generally prioritised price over volume. The Group's sheet prices in local currencies declined by approx. 5% compared with the preceding quarter. In addition, there was the effect of a somewhat changed customer mix and a strengthening of the Swedish krona. In total, prices in Swedish kronor thus declined by 8% compared with both the preceding quarter and the first quarter of last year. Production and Deliveries Production was stable in all the heavy production lines. Sheet production amounted to 852,000 tonnes, which was 4% higher than last year and 2% higher than during the preceding quarter. Crude steel production amounted to 1,000,000 tonnes, an increase of 1% compared with last year but 5% lower than the very good production results achieved during the final quarter of last year. At the end of 2001, the inflow of orders for sheet was weak and orders for 160,000 tonnes were signed with customers outside ordinary markets in order to ensure utilisation in the hot rolling strip mill at the end of 2001 and beginning of 2002. Most of these orders were delivered during the first quarter. The inflow of orders for sheet has thereafter gradually improved. Deliveries in the steel operations amounted to 843,000 tonnes, an increase of 13% compared with last year and 18% compared with the final quarter of last year. Weakened demand from, among other things, the heavy vehicles sector, led to a fall in deliveries of high-strength sheet by 7% compared with the first quarter of last year. Deliveries of extra and ultra high-strength sheet and quenched steels were largely unchanged. SSAB HardTech's strong expansion is continuing and sales during the quarter increased by 20%. Deliveries in the trading operations dependent on the Swedish market were at the same level as last year. Sales and Profit Excluding the industrial supply group that was sold during the preceding year, sales were at the same level as the first quarter of last year. Lower prices resulted in a reduction in sales of five percentage points, while higher volumes led to a corresponding increase. In total, sales amounted to SEK 4,934 (5,281) million. Negotiations regarding iron ore and coal agreements have been protracted as a consequence of major differences of opinion between sellers and buyers. Thus, no iron ore agreements have yet been signed. With regard to coal, agreements have been signed only with respect to 30% of annual volume. Based on these agreements, prices in USD in the year's agreements should, in total, be somewhat lower than last year. Notwithstanding staffing last year for the new quenching line in Oxelösund, continued increases in volume in SSAB HardTech, and wage increases of just over 3%, processing costs have fallen and were 1% lower than in the first quarter of last year. In comparision with the strong first quarter of last year, the operating profit declined to SEK 230 (491) million. Weaker margins in the steel operations affected profit by SEK 330 million, while other factors contributed positively to profit by almost SEK 70 million. The profit analysis is set forth in the following table. Change in operating profit between the first quarter of 2002 and the first quarter of 2001 (SEK millions) Steel operations - Weakened margins -330 - Increased volumes +40 Trading and processing operations - Improved margins +10 - Lower volumes -10 Lower processing costs +15 Lower depreciation +13 Other +1 Change in operating profit -261 A weaker krona compared with the first quarter of last year affected profit positively by just over SEK 50 million. Financial items amounted to SEK -48 (-26) million. Profit after financial items thus amounted to SEK 182 (465) million. Earnings per share declined to SEK 1.20 (3.20). Capital Expenditures During the first quarter, decisions were taken regarding new capital expenditures totalling SEK 312 (312) million. Of these, almost SEK 140 million relate to a decision to invest in a first stage of the renovation of the coking plant in Luleå. It is estimated that this first stage will be completed at the end of 2002. In 2000, decisions were 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. Investments in these new press-hardening lines amount to just over SEK 150 million. Production in the new line in the United States commenced at the end of February, while it is estimated that the line in Luleå will be brought into operation in June. Capital expenditures during the quarter declined to SEK 128 (217) million. Financing and Liquidity Since the beginning of the year, accounts receivable have increased seasonally, while the value of inventories declined by almost SEK 500 million. Thus, in combination with the lower capital expenditures, operating cash flow improved by SEK 81 to SEK 171 (90) million, despite the lower profit. Including the effect of SPP surplus funds, cash flow amounted to SEK 182 (-36) million. The positive cash flow meant that net debt declined to SEK 3,491 million. Liquid assets at the end of the quarter amounted to SEK 182 (558) million, of which SEK 64 (140) 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 amount to SEK 2,000 million. At the end of March, borrowing within these programmes amounted to SEK 3,294 (3,555) million. Prospects for the remainder of the year No general increase in steel consumption in Europe has yet been noted. Assessments from Eurofer indicate that the bottom of the business cycle will be reached at the end of this year. In Europe, it has been possible to carry out price increases for most sheet products prior to the second quarter. The new prices will have an impact on the sheet operations' agreements that were re-negotiated prior to the quarter (approx. 50% of total agreements). Plate prices will continue to remain stable. Based on an improved inflow of orders towards the end of the first quarter, it is believed that it will be possible to increase deliveries of the Group's niche products, especially extra and ultra high-strength sheet, during the remainder of the year. The impact of the cost-cutting measures that have been taken in the Group will be felt gradually. Thus, it is believed that processing costs in absolute terms will not increase compared with last year. Sensitivity Analysis Change during Effect on Effect on the remainder profit, earnings per of the year, SEK millions share, SEK % Prices - steel 10 810 5.80 operations Volumes - steel 5 170 1.20 operations Volumes - trading 10 60 0.40 operations Margin - trading 2%-pts 80 0.60 operations Prices - raw 5 190 1.40 materials SEK index 5 180 1.30 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 profits for the year before tax, and earnings per share. Stockholm, 26 April 2002 Anders Ullberg The Half-Year Report will be published on 22 July. SSAB Svenskt Stål AB (publ) Company no. 556016-3429 ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/04/26/20020426BIT01260/wkr0001.doc The full report http://www.waymaker.net/bitonline/2002/04/26/20020426BIT01260/wkr0002.pdf The full report