Report for the first three quarters 2001

Report for the first three quarters of 2001 · Profit for the first three quarters, excluding non-recurring items, was largely unchanged and amounted to SEK 790 (816) million. · Profit for the third quarter amounted to SEK 82 (-142) million. Excluding non-recurring items, profit increased by almost SEK 100 million, mainly because metallurgy operations in Luleå continued throughout the summer. · Cash flow for the first three quarters was positive and amounted to SEK 237 (-514) million. Consolidated Profit and Loss Account 2000 2001 2000 2001 2000 Oct 00- SEK millions Q 3 Q 3 Q 1-3 Q 1-3 Full Sep 01 year Sales 4,161 4,535 14,010 15,111 19,271 20,372 Cost of goods sold -3,851 -4,142 - -12,934 - -17,192 11,842 16,100 Gross profit 310 393 2,168 2,177 3,171 3,180 Selling and -421 -394 -1,322 -1,357 -1,830 -1,865 administrative expenses Other operating 5 135 608 155 601 148 revenues and expenses* Affiliated 3 -5 12 9 20 17 companies Operating profit -103 129 1,466 984 1,962 1,480 Financial items -39 -47 -75 -116 -92 -133 Profit after -142 82 1,391 868 1,870 1,347 financial items Tax 39 -30 -396 -266 -517 -387 Minority shares -5 -12 -39 -20 -42 -23 Profit after tax -108 40 956 582 1,311 937 Return on capital - - - - 15 11 employed before tax (%) Return on equity - - - - 14 10 after tax (%) Earnings per share -1.00 0.40 8.70 5.80 12.00 9.20 (SEK) Equity per share 91.10 96.40 91.10 96.40 94.80 96.40 (SEK) Equity ratio (%) 51 51 51 51 50 51 Number of shares at 105.03 100.90 105.03 100.90 102.54 100.90 end of the period (million) Average number of 107.75 100.90 110.37 101.12 108.84 101.91 shares (million) *) The profit from the sale of Tibnor's industrial supplies group for SEK 135 million is included as "Other operating revenues" in the third quarter. The effect on the profit of surplus funds from SPP was included in last year's results in the amount of SEK 625 million for the second quarter and SEK 636 million for the full year. The Market Steel consumption in Western Europe has declined somewhat during the year. On the other hand, consumption in the US fell sharply as early as the second half of last year and has since then remained at the same level. In September, though, steel consumption further declined in the US. However, in its autumn forecast, IISI still anticipates that global steel consumption this year will increase somewhat as a consequence of continued strong growth in China. The inflow of orders for the Group's sheet products declined significantly towards the end of last year, which resulted in lower volumes during the first quarter. However, as a consequence of an increased inflow of orders, the rate of delivery and production could once again be increased during the second and third quarters. Demand for quenched steels and ordinary plate has been strong. However, a certain weakening was noted in respect of both sheet and plate products at the end of the third quarter. Consumption by Swedish customers within, primarily, the telecom and heavy vehicle sectors, declined at the beginning of the year and has subsequently remained at this lower level. Accordingly, the steel operation's deliveries to the Swedish market have been 10% lower than last year. During the third quarter, it was possible to carry out minor price increases in local currencies in respect of hot-rolled sheet, whilst it was necessary to accept minor price reductions in respect of cold-rolled and metal-coated sheet. For both quenched steels and ordinary plate, prices in local currencies have remained at the same level as at the end of the second quarter. In total, the Group's steel prices in local currencies are approximately unchanged compared with the second quarter. However, as a result of a weaker Swedish krona and an improved product mix, prices in Swedish krona were 4% higher. Thus far this year, prices in the steel operations in Swedish krona have been 5% higher than last year. Production and Deliveries The new blast furnace in Luleå has been operated this year without a summer break. The Group's crude steel production during the third quarter thus amounted to 781 thousand tonnes, which was 235 thousand tonnes higher than last year when an extended summer stop in conjunction with the construction of the new blast furnace entailed a loss in production of 80 thousand tonnes. In total, crude steel production this year has been just over 15% higher than last year and amounted to 2,771 (2,398) thousand tonnes. Production in the hot rolling strip mill was stable and at a high level during the quarter, whilst the four-high rolling mill was affected by a breakdown and stood still for just over two weeks in conjunction with the start-up after the summer break. Nevertheless, sheet production increased by 50 thousand tonnes to 587 (537) thousand tonnes and, thus far this year, has amounted to 2,182 (2,124) thousand tonnes. Compared with last year, deliveries in the steel operations have increased during the third quarter by 8% to 588 thousand tonnes. Thus far this year, deliveries have been largely unchanged compared with last year and amounted to 2,056 thousand tonnes. The customer base for high strength sheet products has continued to expand, at the same time as demand from existing customers, especially within the heavy vehicle sector, has declined. However, deliveries of both extra and ultra high strength products, as well as high strength sheet in general increased during the third quarter by just over 15% compared with last year. In total, deliveries of extra and ultra high strength steel thus far this year have increased by 3% and deliveries of high strength sheet generally by 1%. Deliveries of quenched steels were 7% lower than during the third quarter of last year and, thus far this year, have been 6% lower than last year. Last year, it was possible to maintain a high pace of delivery by reducing existing inventories. The new quenching line in Oxelösund was brought into operation as planned at the beginning of August and has produced 3 thousand tonnes during the quarter. Volumes of building-related products in the trading operations which are dependant on the Swedish market have continued to be higher than last year, while deliveries of sheet products remained approximately 10% lower. Accordingly, total deliveries thus far this year have been largely unchanged compared with last year. Sales and Profits Sales during the third quarter increased by 9% to SEK 4,535 (4,161) million. The industrial supplies group were sold on 1 September. Excluding that business, sales thus far this year have increased by 9% to 14,225 (13,063) million. Of the increase, 6 percentage points are attributable to higher prices and 3 percentage points are due to higher volumes. Iron ore and coal are purchased through annual agreements and prices are quoted in USD. The year's iron ore and coal agreements resulted in price increases in USD of 2% and 13% respectively. The agreements for last year were hedged at a level of 8.70. This year's agreements have not been hedged and the strengthened dollar rate, together with the price increases, have resulted in significantly higher raw materials costs than last year. Costs for iron ore thus far this year have been 19% higher than last year, while coal costs have been 16% higher. In all, total raw material costs have been 14% higher than last year. Processing costs thus far this year have increased by 5% compared with last year. Of the increase, 1 percentage point consists of the expanded operations of SAAB HardTech, and an additional 1 percent relates to additional staffing for the new quenching line in Oxelösund and for the year-round operation of the blast furnace in Luleå. Operating profit for the third quarter, improved by SEK 104 million to SEK 51 (-53) million, excluding non-recurring items of SEK 78 (-50) million. Volume increases in both the steel operations and the trading and processing operations contributed positively, while weaker margins in the trading and processing operations and increased processing costs and depreciation had a negative effect on profits. Thus, operating profit excluding non-recurring items increased slightly during the first three quarters of the year to SEK 906 (891) million. A weaker Swedish krona has improved margins in the steel operations and thus also profits by approx. SEK 300 million. Operating profit including non-recurring items amounted to SEK 984 (1,466) million. The profit analysis is set forth in the table below. Change in operating profit between the first three quarters of 2001 and of 2000 (SEK millions) Steel operations - improved margins +30 - increased volumes +280 Trading and processing operations - weaker margins -120 - increased volumes +125 Increased processing costs -200 Increased depreciation -36 Non-recurring items -497 Other -64 Change in operating profit -482 An increase in net debts resulted in a deterioration in financial items to SEK -116 (-75) million. Thus, profit after financial items amounted to SEK 868 (1,391) million. Excluding non-recurring items, profit after financial items was SEK 790 (816) million. Earnings per share amounted to SEK 5.80 (8.70). Excluding non-recurring items, earnings per share amounted to SEK 5.10 (5.40). Non-recurring items The sale of Tibnor's industrial supplies group to Ahlsell was completed on 1 September following approval from the Swedish Competition Authority. Sales by the industrial supplies group last year amounted to just over SEK 1,300 million, with a profit after financial items of SEK 36 million. The transaction gave rise to a pre-tax capital gain of just over SEK 135 million. In addition, the transaction positively affected liquidity by just under SEK 430 million, of which just over SEK 380 million was included in cash flow for the third quarter and the remaining amount, just under SEK 50 million, will be included in cash flow for the fourth quarter. SSAB Tunnplåt has been delivering liquid crude steel to Inexa Profil in Luleå pursuant to a fifteen year agreement. In the middle of September, the Board of Directors of Inexa Profil filed a petition for bankruptcy. Net claims against the bankruptcy estate amount to SEK 57 million. The operating profit for the quarter has been affected by a write down of this entire claim. Non-recurring items last year consisted of revenues relating to SPP's surplus funds, amounting to SEK 625 million, and energy tax expenses for the years 1995-1999 amounting to SEK 50 million. Thus, in total, non-recurring items amounting to SEK 78 (-50) million are included in the results for the third quarter, and SEK 78 (575) million for the first three quarters. Capital Expenditures During the year, decisions have been taken regarding new capital expenditures totalling SEK 530 (620) million. Of this amount, SEK 175 million relates to a decision to invest in additional capacity for the formatting of high-strength sheet. The production in the new cutter lines will commence at the beginning of next year. A second quenching line has been built in Oxelösund. The quenching line provides the possibility to expand the product range within quenched steels and increase quenching capacity by approximately 50%. The production in the quenching line started as planned at the beginning of August. The investment amounted to just over SEK 550 million. 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 at the beginning of 2002. Capital expenditures declined to SEK 686 (1,501) million. Financing and Liquidity Working capital since the beginning of the year has increased by approx. SEK 800 million. Increased inventories accounted for SEK 450 million and increased receivables for SEK 390 million. Increased raw material prices account for approx. SEK 300 million of the increase in inventories, while the increased receivables are a consequence of increased sales. In addition, cash flow has been positively affected by just over SEK 380 million from the sale of the industrial supplies group. In total, cash flow in the business operations thus far this year has improved by SEK 751 million to SEK 237 (-514) million. Including the effect of the SPP funds, total cash flow amounted to SEK 143 (-367) million. Notwithstanding the positive cash flow, the repurchase of shares at the beginning of the year for SEK 150 million and the payment of dividends of SEK 504 million resulted in an increase in net debts by SEK 547 million since the beginning of the year to SEK 3,632 million. Liquid assets at the end of September amounted to SEK 221 (825) million, of which SEK 96 (134) 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 September, borrowing within these programmes amounted to SEK 3,526 million. 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 repurchased for SEK 150 million. Thus, a total of 11.2 million shares, equivalent to 10% of the total number of outstanding shares, have been repurchased for SEK 974 million since the repurchase programme began last year. The Annual General Meeting resolved in April that the share capital be reduced without a repayment in respect of the repurchased shares. Share capital has therefore during the third quarter been reduced by SEK 280 million and presently amounts to SEK 2,522 million, consisting of 74.5 million class A shares and 26.5 million class B shares. Prospects for the Remainder of the Year At the end of the third quarter, activity on the market declined and the inflow of orders for sheet was somewhat lower. In order to maintain the high pace of deliveries within the sheet area which was achieved during the second and third quarters, a few transactions of a spot-trading nature have been conducted outside ordinary markets for delivery during the fourth quarter. Prices for most sheet products and ordinary plate are under pressure. However, in the agreements signed for deliveries during the fourth quarter, prices in local currencies have been largely unchanged in conjunction with sales on ordinary markets. It is possible to find examples of both minor price increases and minor price reductions. A certain weakening in activity has also been noted on the Swedish market. The pace of deliveries from the trading operations which are dependent on the Swedish market might thus decline somewhat during the fourth quarter. Sensitivity Analysis Change during Effect on Effect on the fourth Profit, Earnings per quarter, % SEK millions Share, SEK Prices - steel 5 150 1.10 operations Volumes - steel 5 60 0.45 operations Volumes - trading 5 15 0.10 operations Margin - trading 2%-pts 35 0.25 operations SEK Index 5 40 0.30 The sensitivity analysis describes the manner in which changes in the stated factors during the remainder of the year, compared with the first three quarters, will affect profit for the year before tax and earnings per share. Stockholm, 25 October 2001 Anders Ullberg Review Report We have generally reviewed this interim report in accordance with the recommendation issued by the Swedish Institute of Authorised Public Accountants. A general review is significantly more restricted than an audit. Nothing has arisen which in any way indicates that the interim report fails to comply with the requirement of the Securities Exchange Act and the Annual Reports Act. Stockholm, 25 October 2001 Göran Tidström Åke Danielsson Authorised Public Accountant Authorised Public Accountant A year-end report for 2001 will be published on 13 February 2002. 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/2001/10/25/20011025BIT00990/bit0002.doc The full report http://www.waymaker.net/bitonline/2001/10/25/20011025BIT00990/bit0002.pdf The full report