Swedish steelmaker SSAB AB (SSABa.ST) has reported a stable Q2 operating profit just shy of SEK 3 billion, despite facing lower plate prices in the US and challenging market conditions.
The company, known for its high-strength steel products, is on a transformative path towards fossil-free steelmaking, having produced and sold 40,000 tonnes of its carbon dioxide emission-free SSAB Zero steel. Additionally, SSAB is reinforcing its environmental commitment by updating its greenhouse gas reduction targets and launching a new green finance framework.
Key Takeaways
- SSAB's Q2 operating profit remained stable, with a slight decrease influenced by lower US plate prices.
- The company is advancing its commitment to safety and sustainability, working towards becoming the world's safest steel company and transforming to fossil-free steel production.
- SSAB has updated its science-based targets for reducing emissions and has implemented a green finance framework.
- Special Steels division experienced weaker demand in Europe but remained stable globally, while SSAB Europe improved slightly and Americas faced cautious markets.
- A SEK 2.5 billion share buyback program was announced, along with a CapEx estimate for the year set at 6.3%.
- The company expects a seasonal downturn in Q3 due to maintenance outages and predicts lower shipments and prices across its divisions.
Company Outlook
- SSAB anticipates a seasonal Q3 downturn with lower shipments in Special Steels, Europe, and Americas due to scheduled maintenance.
- Prices for Special Steels are expected to be somewhat lower, with a reduction in Europe and the Americas.
- Strong earnings were reported in Special Steels, with a record level of automotive advanced high-strength steel shipments.
- The company remains optimistic about the US market, particularly for offshore wind projects.
Bearish Highlights
- The automotive market is experiencing a slowdown, with a reduction in heavy truck production in Europe.
- Construction machinery demand is weaker in Europe and North America.
- The Nordic construction market remains weak with no signs of improvement.
Bullish Highlights
- There is stable demand within the Material Handling segment, particularly for mining energy and renewables, especially in North America.
- The company is seeing strong demand for wind power, with interest in SSAB Zero products being especially high.
- Despite a temporary slowdown, a rebound is expected in the North American construction machinery segment.
Misses
- Net cash position decreased by around SEK 4 billion compared to the previous year.
- Service centers are taking a cautious approach to inventory levels, indicating potential uncertainty in the market.
Q&A Highlights
- CEO Martin Lindqvist expects the construction machinery slowdown in North America to be temporary and foresees a rebound.
- Lindqvist highlighted that profitability between oil and gas plates and wind plates shows no significant differences.
- CFO Leena Craelius indicated that inventories will decrease during maintenance outages, but the net effect on Q3 working capital is uncertain.
- Discussions with the Department of Energy for funding a potential DRI/HBI plant in the US are ongoing.
SSAB's continued focus on environmental sustainability and innovation in high-strength steel products positions the company to meet the growing demand for emission-free products. With its commitment to safety and strategic investments, SSAB is navigating market uncertainties while maintaining a strong outlook for its unique product offerings.
Full transcript - None (SSAAF) Q2 2024:
Per Hillström: Good morning, and welcome to this presentation of the SSAB Q2 Report. My name is Per Hillström. I'm Head of Investor Relations at SSAB. And presenting today we have Martin Lindqvist, President and CEO; and CFO, Leena Craelius. And the agenda as normal Martin will start to talk about the quarter shortly, Leena will then go into the financials in more details and then Martin comes back with the outlook and a summary. And then we will have good time for questions at the end. So by that please Martin start.
Martin Lindqvist: Thank you, Per and good morning and welcome to this quarterly presentation. If I start with the highlights, I would say that the result was fairly stable just south of SEK 3 billion in operating profit and it was lower versus the same quarter last year mainly due to lower US plate prices and I will come back to that. We continue to see a good development of one of our most important focuses to become the safest steel company in the world. We are now at an LTI frequency per million working hour including contractors at 0.64 and we also see the total recordable continue to decrease. The quarter we made a decent cash flow generation. We had an operating cash flow of SEK 3.2 billion during the quarter and Leena will come back to that. A short update on the transformation to fossil-free steelmaking that continues. During the second quarter in North America we produced and sold 40,000 tonnes of SSAB Zero. And SSAB Zero as you might remember is produced out of scrap, but with Zero Scope 1 and 2 emissions. So 0.0 kilo carbon dicide emissions per kilo produced steels. We have also updated our science-based targets when it comes to reducing greenhouse gas emissions and they were approved by science-based targets initiative. We have also put in place a new combined green and sustainability-linked finance framework, which provides an opportunity for us then in the future to issue both green and sustainability-linked financing instruments. And we have also signed an early service agreement with the supplier of equipment for the mini-mill in Luleå consisting of two electric arc furnaces secondary metallurgy caster and strip mill strip rolling mill. So that is also -- did also take place during the second quarter. If you look into the divisions I would say in Special Steels like in Europe we saw a weaker market in Europe and more stability in demand in Rest of the World. So fairly similar volumes slightly higher volumes compared to Q1. We had an operating result of SEK 1.659 billion so earnings still on a good level. We saw prices down 2% versus the first quarter 2024. We also during the quarter launched the world's first emission-free steel powder for commercial deliveries. So we are now selling fossil-free steel powder, which is -- gives the possibility to combine the properties of our high-strength steels with light structural possibilities of 3D printing and I've said it before this will be a very important product for SSAB in the future. If you look at SSAB Europe, we saw a slight seasonal improvement versus Q1 in volumes. We saw fairly stable prices and we saw an operating result of SEK 400 million was still effected by the strike in Finland in two ways I would say the negative effect of the cost of the strike was SEK 125 million in Q2 and it was of course bigger in Q1 but still we saw effects of it in Q2, but we also saw effects on the market that the Finnish market didn't really pick up directly after the strike there was a hesitation also on the market. But all-in-all fairly okay result given the circumstances. What was good was the strong development or continued strong development and of advanced high-strength steels to automotive. We had shipments in Q2 at record levels SEK 185 million tonnes. And it is a combination of two first of all the advanced product offering we have including these market take steel grades for cold forming and the third generation you will face this deal with high formability. Here you have one example to skill [ph] shop where we sell the call CR [ph] 2000 megapascal for battery protection to ID bus. And the other part is, of course, that we are now starting to ramp up volumes in advance of fossil-free steel production, and coming into new platforms starting to qualify materials. So that gives the good and positive development that we have seen now in the automotive segment. Looking at Americas, I would say that shipments fairly much in line with the previous quarter and I would say a cautious market. If we look at prices, they were down 7% versus the first quarter and the second quarter, and they have decreased but from a very high level. And as I said we continue the ramp-up of SSAB Zero. And as I said in the first picture, we produced and sold 40,000 tonnes in Q2. Tibnor and Ruukki Construction clearly feeling the weaker market challenging market conditions. In Tibnor shipments were supported by project orders and we also saw positive effects from cost savings during the quarter, the cost savings that we have implemented both in Tibnor and Ruukki construction. And the same goes for Ruukki Construction, challenging market conditions, yes, a seasonal improvement but with a very slow construction market in Europe and I would say especially in the Nordic market. And even here we saw positive effects from implemented cost savings and that work continues. So with that Leena?
Leena Craelius: Thank you, Martin. A bit more detailed analysis around the figures. But let's start with the shipment, which is on the top right-hand side on the slide. Q2 shipments amounted to 1,646 kilotonnes. And compared to Q1 it was 63 kilotonnes higher. Seasonally Q2 tends to be the best quarter of the year. But when we compare to the previous year second quarter, we can see that the reduction is 76 kilotonnes and that is indicating the lower or weaker market in the European market as already mentioned, but also downward trend in the North American plate market. If we compare the shipment outcome with the outlook we gave in April, we were in line in Europe division and Americas but missing in the special deals with slightly lower volumes. Revenues in Q2, SEK28.3 billion increase of SEK1.2 billion compared to Q1 and that is driven by the shipments as the prices on group level were on average relatively flat. And then the reduction compared to previous year was SEK3.5 billion and that is then both prices and shipments impacting that. But I will explain more detail shortly. EBITDA Q2 SEK4 billion. Q1 was SEK4.1 million and then last year being SEK5.9 million, so reduction SEK1.9 billion. The same trend illustrated in the EBITDA per tonne. More details around the result. And firstly we compare with the first quarter of this year. EBIT was SEK3.2 million and Q2 outcome on SEK3 million, minor positive impact with the prices. And just to bear in mind that here in this graph we have also added the FX impact, which was positive and then also the mix impact and already mentioned the good mix support from the automotive business. So the positive contribution from Europe division, which was actually almost fully offset by the reduction in the prices in Americas. Volumes, 63 kilotonnes higher than Q1, biggest contribution from Europe division, 52 kilotonnes higher than previous quarter, slightly higher in special steels and Americas being relatively flat. Variable cost, the main raw materials in Nordic mills has developed downwards as well as the scrap in US mill. But this positive impact was offset by the higher cost of consumables, freight and energy. And also here we have the negative impact of the FX added. Fixed cost seasonally compared to first quarter this is always higher. A majority of this is coming from the higher personnel cost, which is related to the summer temps and also some higher repair and external services costs. And also, FX has a negative impact of SEK 70 million in this part. Capacity utilization, slab production in both quarters on a similar level but rolling production was 165 kilotonnes higher in Q2 thus we have a positive impact. Of course, both quarters were impacted by the strikes, as already Martin mentioned, more so in Q1 and also partially in Q2. If we then do the comparison with the previous year, EBIT on a level of SEK 5 million, this year SEK 3 million, so the deviation of SEK 2billion, majority of which is coming from the prices as illustrated here. And the biggest contribution coming from Americas division, there the prices reduced 18% quarter-on-quarter compared and the contribution here is negative SEK 1.4 billion. Prices in Europe division were on average 6% lower and in Special Steels 3% lower. So this is a good reminder of the fact that the Americas division is the most volatile division when it comes to prices. And while the Special Steels prices being more resilient. Volume impact, a negative SEK 365 million and this is now split majority, of which split between Europe division and Special Steel division, which is illustrating the weaker market demand. Variable cost SEK 1.2 billion positive impact and this is now coming through all the division, majority of which are naturally coming from the Europe division. FX impacting the fixed cost negatively of SEK 25 million, so actually fairly small deviation in this quarter-on-quarter analysis. To bear in mind that, yes, we have done the cost savings in Tibnor and Ruukki Construction, which is supporting to keep this deviation on such a small level. Capacity utilization, negative SEK 180 million and this is now coming both from Special Steel division and Europe division volumes being slightly lower than last year. Cash flow, as I already said, a fairly decent operating cash flow generation in Q2. Not going to go through line-by-line but to summarize in the comparison of year-to-date versus last year, earnings are slightly lower. The working capital having slightly higher negative impact during 2023, we were reducing the inventories from exceptionally high level while this year the inventories are more on a normal level. I would claim that the working capital is in a good control. Of course, for the annual maintenance, there is some preparation with the inventories during Q2. We can also see that the CapEx expenditure this year-to-date is higher than last year. And that is, of course, linked to this transformation activities. And then the dividend payout was done in Q2, almost SEK 5 billion. Last year it was close to SEK 9 million. And then the share buyback, you can see here on a separate line, the Q4 and Q1 activities amounting to the total share buyback program of SEK 2.5 billion. And during Q2, we actually canceled the shares that we were buying under this program. Here an updated view on the CapEx estimate for this year. Previous estimate was 5.5% and now we have updated that along with the Luleå mini-mill CapEx plan to be on a level of 6.3%. We don't have a longer-term CapEx plan because what we know is that it will for sure change still. But the estimate is that it will peak during 2026 and 2027. Net cash position end of Q2 on a level of SEK 14.1 billion reduction around SEK 4 billion compared to end of last year. And the biggest item here is clearly, the dividend that was paid in Q2. The net debt equity ratio being only slightly higher than the financial targets we have for this ratio. All the raw material graphs illustrating the latest raw material price development. During Q2, it came down in all iron ore, coking coal and scrap. We don't foresee that, the prices will peak during Q3 rather remain stable. And when it comes to raw material availability, we don't foresee any risk related to that in coming quarter either. Maintenance table, as illustrated here majority of our maintenance outages will take place in Q3 and Special Steel starting their outage at the end of Q3. In Europe division, we have more extensive maintenance this year in Luleå, there will be maintenance in Borlänge and tube mills. And then in case of Americas, they have semiannual maintenance in Montpelier. Last year, they didn't have but this year we will have, and they have also rescheduled the maintenance to start a bit earlier during Q3. And with that, Martin will continue with the outlook.
Martin Lindqvist: So if we look at the segments and start with heavy transport we see a reduction in heavy truck production in Europe. But on the other hand, a stable trend, I would say for railcars in Americas. Automotive we see clearly a structurally growing advanced high-strength steel market and we have a strong position there. Other parts of automotive being a bit more call it slow. So, all-in-all, also neutral construction machinery, weaker demand in Europe and a slowdown in North America. There are potential for some recovery in China. Material Handling, I would say also neutral fairly stable demand within mining energy, the only green dot with a strong market, and especially for wind power and other renewables, and I would say especially in North America. Construction is clearly weak and continues to be weak and no signs of an improvement yet in the Nordic market, and service centers cautious approach both in Europe and the US with the inventory levels on normal, or slightly lower than normal side. So there will be a restocking, but for the time being a cautious approach. If we then sum it up, and look at Q3, we see a seasonal downturn, I would say, more pronounced than normal. We have tried to move as much of the scheduled outages into Q3. And as Leena said Americas has brought it forward in the maintenance compared to previous plan and we'll take it fully in Q3 instead of previously planned Q3, Q4, and that will of course -- that planned maintenance will adjust production to the lower demand. If you look at shipments, we expect lower shipments in Special Steels and Europe and then significantly lower in Americas, where we have the same annual maintenance outage in Montpelier. Prices somewhat lower for Special Steels and lower in Europe and in Americas. So, if we sum it up, before we start the Q&A strong focus on safety is yielding results. We are not at zero yet, but we are approaching that level. We have a good level of earnings in Special Steels, and we have been focusing on pricing management, we should see more stability in earnings more stability in pricing in Special Steels. We had a record level of automotive advanced high-strength steel shipments, and we see a continued strong market for our products into automotive and the investment programs in Luleå and Oxelosund continues, and we are targeting there substantial benefits. We're eliminating all the CO2 emissions from operations. We are meeting the growing demand of emission-free products and harvesting a green premium. We build systems with much more flexibility and lower costs. And we can with these systems, new systems continue to grow the high-strength steel and premium steel products and this gives a lot of benefits compared to continue to invest in existing production. So with that Per?
Per Hillström: Thank you, Martin and thank you Leena. And now we can prepare for the Q&A session. And just a reminder there as usual, if you have more than one question, please take them one at a time to make the process work run a bit smoother here. So then, I would ask the operator, to please present the instructions.
Operator: Thank you. [Operator Instructions] We will now go to the first question. One moment please. And your first question comes from the line of Alain Gabriel from Morgan Stanley (NYSE:MS). Please go ahead.
Alain Gabriel: Good morning, team. I have two questions. I'll ask them one at a time. So the first one is on the aggregate CapEx guidance for 2025 or at least indication of guidance in light of the spending that was put forward at Luleå, do you see the case? And so that's the first part of that question. And the second part of that question is, that do you see a case for you spreading out the CapEx over a longer time period to avoid this free cash flow crunch should the current pricing environment persist? That's my first question.
Leena Craelius: The outlook we gave that was for this year actually, it was not for the next year. We don't have the guidance for next year yet. Remains to be see how it turns out. We will get back to that closer to end of this year. Do bear in mind that the CapEx is restricted with the environmental permit that we haven't received yet and that is expected by the end of this year and of course the negotiations still with the OEMs ongoing so it remains to be seen how it will be spread. How it looks now it seems that the peak of the CapEx will be taking place in 2026 and 2027. And of course the…
Alain Gabriel: Okay.
Leena Craelius: … funding plans we have ongoing not yet finalized.
Alain Gabriel: Thank you. Thank you and my second question is probably for Martin on the US plate market. Do you think that the market structure is changing at all in the Americas? And would it be fair to assume that the supply discipline that we have seen over the last few years is no longer there in light of a bit more aggressive competitors from within the US but also from Canada?
Martin Lindqvist: No. I think structurally the plate market in US is undersupplied. And we need to remember that prices are coming down from very high-levels. And when prices are coming down and they are still on good levels prices are coming down. We see hesitations among steel service centers, I would say especially and that gives a lower apparent demand. And that's why we are then adjusting the production plant maintenance outage. Given the focus in US with onshoring with Inflation Reduction Act with infrastructure bill we see a very good possibilities and bright future for plate products within energy, within bridges, within tank cars, railcars and so on. So we expect that Q3 is a bit slower, yes, let's use that opportunity to do the maintenance and then be ready to kick off when the market turns.
Alain Gabriel: Thank you.
Operator: Thank you. We will now take the next question from Adrian Gilani from ABG Sundal Collier. Please go ahead.
Adrian Gilani: Yes. Hello, a couple of questions from my end as well. First off in Europe, if we don't see any improvement in prices from the current sort of very low-levels that are -- that we're seeing right now. Is there any risk that you might need to idle any of your blast furnaces? And is that an option that you're evaluating at the moment already?
Martin Lindqvist: What we have seen in the last, I would say, couple of years is a better discipline within the European steel industry. And we have been seeing idling of capacity when prices are at these levels or lower, because you need to take into account the marginal cost of buying emission rights also for European producers. So, one would expect if history repeats itself that we would see idling of blast furnaces. We have not been doing that. And now we have reported -- the second quarter, of course, it remains to be seen how we come out in relative terms with peers. But I think with the strong growth in automotive and so on and the prospects we have, I think it needs to be a bit tougher than this if we are going to start to think about idling blast furnaces.
Adrian Gilani: Okay. I understand. And then also when you say that 2026 and 2027 will be the peak CapEx years. Is that also sort of including the raw timeline? Or is that specifically just for the Lulea investment just to be clear on that?
Martin Lindqvist: That's mainly and specifically for the Lulea investment.
Adrian Gilani: Okay. Thank you.
Martin Lindqvist: It's more the profile, but we will come back to that during the fall I guess.
Adrian Gilani: Yes, I understand. And the final one end on the volume guidance in Americas. Obviously, whenever you guide for significantly lower, the question becomes -- that that can mean a lot of things. So, should we expect slightly more than a 10% decline? Or can it be 15% to 20% lower? What -- can you give us some color on that?
Martin Lindqvist: No. But as we said we have these references behind that table but we there is always significantly lower volumes when we take the semiannual outages. And this year, it is within Americas and it was two years ago since we had it. So, then we stop production and do the maintenance and we felt that the market situation was better to do it in Q3 than Q4. So, yes, look at the history and you see roughly how it looks.
Adrian Gilani: Okay, that’s clear. In that case, that’s all from me. So, thank you for taking my questions.
Operator: Thank you. Your next question comes from the line of Tom Zhang from Barclays (LON:BARC). Please go ahead.
Tom Zhang: Hi, morning. Thanks for taking our questions and three from me as well please, again, just on Americas. The first one if I look at the differences in your market outlook versus Q1 the slowdown in construction machinery in North America, sort of may change to me. Do you think that's just a bit of sort of pre-election concerns? Is it just something temporary? Or do you think it's the start of something slightly more structural? I guess we've had some slightly mixed data on sort of new starts and leading indicators for U.S. construction. Just curious on your thoughts there please.
Martin Lindqvist: It's, of course, very hard to tell, but what we think is that it is temporary. And as I said, the Inflation Reduction Act and some other programs will definitely help the consumption, if you call it that, of heavy plate. And as said, the market is structurally undersupplied. So, it's probably a combination of a lot of things, but I think we will see a rebound in that segment definitely.
Tom Zhang: Understood. And then the second one just on U.S. Energy, could you maybe talk a bit around your market position in the context of traditional versus new energy? You sort of mentioned wind is quite strong. But I think some of your competitors, particularly, with some the sort of thicker gauge of steel that you aren't able to produce have better position in sort of offshore wind. I'm just curious if we see a shift towards more traditional oil and gas investment in the U.S., is that potential for you to sort of regain or gain market share? Or is it more sort of neutral?
Martin Lindqvist: Definitely a possibility. But where we see very strong demand is within wind, utility poles, and so on but wind and the combination of our -- with our SSAB Zero products makes a lot of sense. So, we see wind fabricators very interested in using SSAB Zero when they produce these wind towers. So, we see a strong demand and a huge interest. And then offshore will eventually come on -- or big offshore projects, so that's also very positive. So, wind, I would say, in energy is probably one of the segments where we see the best possibilities short and mid-term.
Tom Zhang: Got it. Is there a significant difference in sort of mix profitability between sort of your oil and gas plates and wind plate other than SSAB Zero? Or is it the same thing?
Martin Lindqvist: Not any huge differences now.
Tom Zhang: Understood. Thank you. I'll turn it back.
Operator: Thank you. Your next question comes from the line of Mavis Liu from BNP Paribas (OTC:BNPQY). Please go ahead. Hello, Mavis, is this is your line on mute?
Tristan Gresser: Hi, this is Tristan Gresser from BNP Paribas. Can you hear me well?
Martin Lindqvist: Yes.
Tristan Gresser: My first question is a follow-up on the US market. Some of your peer yesterday have said that the outlook for plate may be improving into late 2024 with infrastructure picking up, wind picking up as well and import quota has been drilled down. So, is that a view you share as well that Q4 we could finally see a rebound there? And could that also be the reason why you're advancing maintenance for Q3?
Martin Lindqvist: A very short answer to that question is yes.
Tristan Gresser: All right. And then on Europe, you mentioned that inventory appear normal and not particularly low -- so does that mean you don't expect any type of restocking when in September? And do you -- what you take on the quarter change? Because there is a view that we could see lower imports a bit of restocking and that could be positive for European pricing momentum in September.
Martin Lindqvist: No. But when we guide we don't expect any restocking in September among steel service centers, as you said inventory levels in the supply chains are normal or slightly lower than normal. So we don't expect when we guide any restocking, if that would happen towards the end of the quarter that would be of course positive.
Tristan Gresser: All right. That's fair. And maybe a follow-up on that. When you say you expect a seasonal downturn that is more pronounced than normal. When I look at the guidance you have on volumes, it seems pretty in line with the typical Q3 maintenance quarter. So I'm wondering, if there's anything additional we should expect there. When I look at spreads in Europe they're relatively stable. Given the impact of really large maintenance, is there a possibility of any of the big three divisions approaching breakeven into Q3?
Per Hillström: We had a little bit difficult to hear you there, Tristan, but I think your question boiled down to EBITDA result. And I think we will maybe not comment so much. But of course the result will be clearly lower of course given the outlook and given the maintenance. I don't know Leena, Martin, if you want to add something on the EBIT level.
Martin Lindqvist: That's a good summary.
Per Hillström: Was there anything Tristan in your question we might have missed it.
Tristan Gresser: No, my question was that, you're saying there is a more pronounced downturn than normal. When I look at the guidance for volumes, it's pretty standard for Q3, so is there anything specific we need to be aware of? And is any of the big three division could approach breakeven into Q3?
Leena Craelius: I think the only compared to previous year is the difference with the Americas maintenance being more extensive. Also in case of Europe, of course, there will be more cost related than and it will take longer time and then inventories will reduce during Q3. So, there are these elements of the negative impact. But as said, we don't give a guidance on the EBIT.
Tristan Gresser: All right. I'll leave it there. Thank you.
Operator: Thank you. Your next question comes from the line of Dominic O’Kane from JPMorgan (NYSE:JPM). Please go ahead.
Dominic O’Kane: Good morning guys. If I could just maybe dig into one of the previous questions. So as you said, the outlook for plate, US plate may be improving into Q4 and you've accelerated maintenance in Q3 to position you for any cyclical upturn there for Q4, but we also note that you're running quite significantly higher capacity utilization in the US. So just thinking about your capacity utilization into Q4, at what point would we need to see a recovery in Q3 when you will start to bring back your utilization late Q3? Or can you wait until the start of Q4? If you could maybe just give us some sense on sort of capacity utilization trends Q3 versus Q4, that would be really helpful.
Martin Lindqvist: About the base plan is to ramp -- start up the mill in Montpelier when the maintenance period is over as we always do. And we typically, if you compare us and maybe other producers, we typically run on a high and stable capacity utilization level.
Dominic O’Kane: Okay. So -- okay, fine. Thank you. That’s helpful.
Operator: Thank you. We'll now take the next question. And the next question comes from the line of Bastian Synagowitz from Deutsche Bank (ETR:DBKGn). Please go ahead.
Bastian Synagowitz: Yes, hey, good morning everyone. I've got a few questions left. The first one is just following up on the market and how you plan to navigate it. So you said you're not planning to take out any blast furnace capacity as of yet. But I guess still from your comments you seem to suggest that the market is obviously very weak in many of the segments you're operating in. So do you plan to extend the maintenance breaks actually versus what your original plans were?
Martin Lindqvist: Well, I mean, that of course depends on the market development. But as I said we don't -- if you look at the last couple of years, we have not been taking out any big production capacity. But you need to remember that we have one blast furnace idled in Oxelosund since many, many years. And we don't plan to start that one either. So that is -- that one is -- will continue to be idle. And then we'll see where the market takes us. But if you look at the pattern from previous from 2023 and 2022, and you see that there will -- there was capacity closures in Europe and -- but we did not have to take down any blast furnaces. And in the current plans we are not planning to do that either.
Bastian Synagowitz: Okay. Okay. Understood. Okay. And then my second question is just on your margin trajectory actually particularly in special steel. I guess, margins have been coming down. But if we look at them outly on a long-term comparison, they still remain very strong about like three times to four times literally versus pre-COVID levels, which is obviously very impressive. Martin do you expect to keep that mean reversion trend over the next few quarters i.e. are these margins still probably a little bit high versus maybe where they should be at this point of the cycle i.e., is there still a certain lagging effect of them maybe going a little bit back to what they previously were? Or do you think that you can pretty much preserve them right here where they are just now?
Martin Lindqvist: I must say that Johnny and his team in Special Steels, they have done a very good job in keeping prices stable and rather than maybe sacrifice some volumes in the swings, but they have also been quite good at continuing to develop new products new steel grades. And if you take some of the Hardox products that are now growing on the market with interesting, I would say, possibilities both volume-wise and profit-wise. So it is about continue to run the operations and the division as they have been doing with focus on price stability or margin stability, but also continue to grow the new products. And there is a difference. I mean, it's easy to think that special steel is set of products, but there is definitely mix possibilities and mix improvements being done day by day in special steel. So if you take the most call it advanced products and compare it within Special Steels with products that are at least compared to the most advanced ones less advanced. There is also a huge difference. So it's a combination of price management, volume management and mix improvement that should give this stability and have the possibility to continue to have better and better stability. So we are focusing, and we have talked about it a lot before. We are focusing a lot on what we call low point profit, so that we come out of the trough of the cycle with better profitability than the previous trough. And of course, it's always nice to earn money on the top of the cycle, but the focus internally is to low point profitability. And that we try to manage with things that we can control ourselves mix improvements both in special steels of course and in Europe, but also in Americas flexibility when it comes to costs and some other measures and that should improve then the stability over time. And that is a very strong focus area. And then of course on top of that continuous improvement day by day, week by week, month by month.
Bastian Synagowitz: Okay. Okay. I mean, of course, I do believe that like you have done a lot of structural changes there, I guess, just it's more the magnitude, I'm wondering about which is still pretty much close to peak levels SEK 6,000 per tonne of the EBITDA. So it's a very impressive number. And so here I'm just wondering is this really the right new normal to think about or also likely comment?
Martin Lindqvist: But if you look at the product portfolio today and compare it to call it then pre-COVID, because COVID was a number of years back now, there is a different product portfolio. And the question then is are we done? Of course, not. This is a daily work, weekly work, monthly work. So there is still more room for improvement. So I would expect to see stability better stability than we have seen historically.
Bastian Synagowitz: Okay. Okay. And then my last question is probably one for Leena. You mentioned working capital that you probably have stocked a little bit ahead of the maintenance break. Is there any color you could give us maybe on the magnitude of the working capital release in the third quarter, which we should expect?
Leena Craelius: Well, I don't have a figure to give. But, of course, everybody understands that when the production is lower and then we continue, of course, with the shipments still during Q3, there will be a negative impact from the inventories at least. And at the same time during Q3, we also start some of the winter stocking activities. So you will see movement in the AP also on the other direction. But inventories should then come down with the maintenance outages ongoing.
Bastian Synagowitz: Do you think the net effect on working capital will be -- will still be a positive cash inflow in the third quarter?
Leena Craelius: That will be a challenge. Let's see.
Bastian Synagowitz: Okay. Thank you.
Operator: Thank you. Your next question comes from the line of Thomas Costello [ph] from Jefferies. Please go ahead.
Unidentified Analyst: Yes. Good morning, and thanks for taking my question. I actually have two. The first one is more a clarifying question, and it's about your advanced high-strength steel products, which I thought were falling under the Special Steel division. But then in your commentary, I see that they appear within the European division. Could you just like give me a brief explanation on why is that whether we should consider it belonging to the European division rather than the special steel one?
Martin Lindqvist: Then I apologize for us have been unclear. Automotive grades which is typically cold rolled grades or have always been within the SSAB Europe division. So -- and some of the products if you take the cold-rolled martensitic steels up to 2000 megapascal, I would say that we are very, very unique globally in those martensitic steel grades for cold forming, but they have always been within SSAB Europe. So special steels they have call it then within brackets hot rolled above 700 megapascal. But these products are cold rolled and they are run in the continuous -- mainly in the continuous annealing line in Borlänge and sold globally by SSAB Europe has always been and are still today.
Unidentified Analyst: Okay. Thanks. That's very clear now. And then maybe -- and I'm sorry if you've already touched on that. But speaking of your maintenance the bring forward of your maintenance, should we think of it more as an economic downtime or reduced production to align with demand?
Martin Lindqvist: No. Unfortunately, we as everyone else have to take annual maintenance outages. Before we had to schedule it more than a year in advance and then stick to the plan. We have been working a lot with improving flexibility, so we can manage on the margin given the business cycle. So sometimes we expect Q4 to be slower than Q3 then we try to push as much as possible into Q4 and vice versa like this year, we expect Q3 to be a bit slower in Q4 with the possibility of a rebound then we push it into Q3. Having said that, I mean, what limits us in flexibility is of course the climate in Northern Sweden and Northern Finland. So we can't typically stand still in December when it could be very, very cold. So then we need to do it earlier in Q4 or during Q3. But historically, we have always done it in Q3, but now we have the possibility. We have improved the flexibility. So we have the possibility to do it in Q3, Q4. And in Americas, where we expect a slower Q3 than in Q2, we pushed it into -- fully into Q3. So we start earlier.
Unidentified Analyst: That’s great. Thanks, and have a nice day.
Martin Lindqvist: Thank you.
Operator: Thank you. [Operator Instructions] We will now go to the next question. And your next question comes from the line of Maxime Kogge from ODDO BHF. Please go ahead.
Maxime Kogge: Yes. Good morning. My first question is on the auto market. I mean production forecast has been significantly lowered over the past few months, especially in Europe, which is now seen down around 5% versus broadly flat at the beginning of the year. So is this something you also witnessing I mean strong deterioration in the auto market over the recent months? Or are you – I mean given your client mix you're not that much affected.
Martin Lindqvist: No. But I mean we see that on the overall market. I mean as you know, the two big segments for steel in Europe is construction and automotive and construction is very weak and automotive we see those signals. What we – but we only sell or mainly sell these advanced high-strength steel. So the ultra-high-strength steel into the automotive market. So we are given the product properties with up to 2000 megapascal cold forming steel and also ramping up on new platforms in advance of being able to start to ship bigger volumes of fossil-free steel. We are in those segments with those products definitely taking market shares.
Maxime Kogge: And yes to question is on the import pressure in the US. Yes some of your competitors have flagged I mean higher import pressure through Mexico to Canada. Is that something that is also much more present in 2024 than it was for plates and also for special steel in the US?
Martin Lindqvist: For plate I mean we are the leading standard plate producers. Of course, we see exactly what the others see on the US plate market for Special Steels and for especially, Hardox, I mean many of our products are quite unique. So even if you can see some competitors producing quench and temper they are different products maybe 400-mega – maybe up to 450 but not 500 and above. So we don't see for special steels a huge difference.
Maxime Kogge: Okay. And the last one more generally speaking with a slightly higher CapEx budget this year a weaker economic environment. Is it fair to say that the possibility of share buybacks at slightly or somewhat subsided versus the situation a few months ago?
Martin Lindqvist: No. But as Leena pointed out, we have our financial targets and we expect to stick within them. After Q2, we were slightly above or had a slightly stronger balance sheet than the financial target. But so I mean we'll see what the future brings but we are committed to stay within our financial targets.
Maxime Kogge: Okay. Thank you.
Operator: Thank you. Your next question comes from the line of Mavis Lu [ph] from BNP Paribas. Please go ahead.
Tristan Gresser: Yes sorry. It's still Tristan Gresser from BNP Paribas Exane. A quick follow-up on SSAB Zero I think you did 40000 tonne in Q2. That's almost double the number you had in Q1 and you had a target for 100,000 tonnes for the year. So are you seeing momentum building up there and there is upside risk to that target? And if you can remind us where those SSAB sales are made where is the most interest? And if you can confirm also that the premium you previously communicated for those type of products is still valid?
Per Hillström: Yes. I think Tristan you were asking about SSAB Zero and the target of 100,000 if where we are or were a bit above that. And also the premium do we still harvest the SEK 300 premium?
Martin Lindqvist: Yes we do. And I don't know exactly how we are right now against the target. But the target is still there and I'm convinced that we will meet it for this year.
Tristan Gresser: So you would expect a slowdown in the run rate from the Q2 run rate in H2?
Per Hillström: Yes the production will differ a bit between quarters due to the way we have to set up the production. So yes, it can vary a bit.
Tristan Gresser: Okay. Okay. That's clear. And lastly just a quick one. In the US are you still engaging with the DOE regarding the funding for potential DRI/HBI plant – any update there?
Martin Lindqvist: As last time, as I said last time, a very positive thing. So we are in those discussions and we see big interest for our types of steel in the future and a lot of US customers focusing on, call it more environmental-friendly products. So, we have -- nothing has changed.
Tristan Gresser: Okay. Thank you.
Operator: Thank you. Your next question comes from the line of Dominic O'Kane from JPMorgan. Please go ahead.
Q – Dominic O’Kane: Just two follow-up questions. One on CapEx, is -- will the power line at Oxelösund, fall into 2025? Or is there potential that it might fall within 2024, and then just a comment on sort of the US steel plate market given your leading position, could you give us some sense of what you're hearing or seeing on downstream demand against a backdrop of rising risks of offshore wind cancellations under a Trump administration. Thanks a lot.
Per Hillström: The first question was CapEx. As we haven't really talked so much about the power line. Could the CapEx for that will start already this year? Or is it next year?
Leena Craelius: I think very limited, if it would be landing for this year
Per Hillström: Most for next year.
Leena Craelius: Or in future. Yes.
Per Hillström: The second one was on the US plate market and the risks of cancellations and offshore wind, what could that mean, for overall demand?
Martin Lindqvist: That remains to be seen, but we see a huge interest from on and offshore wins and especially with the combination as said, with SSAB Zero, it makes a lot of sense for these the investors or the ones building these wind farms to use SSAB Zero. So, we see a strong interest. And if that will be delayed or not in the future, we'll have to see them. But so far, there is a lot of projects out there or being planned for. So, we are quite optimistic.
Q – Dominic O’Kane: Okay. Thank you.
Operator: Thank you. There are currently no further questions. I will hand the call back to the room.
Per Hillström: Okay. Thank you very much. Thank you, Martin and Leena, thank you all participants. We can then conclude the conference for today and wish you a nice day.
Martin Lindqvist: And a nice summer. Thank you.
Leena Craelius: Thank you. Bye-bye.
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