SSAB - Greater focus on efficiency October, 2015
Agenda SSAB in brief SSAB’s strategic focus areas Financial development Outlook 2
A stronger, lighter and more sustainable world Together with our customers, we will go further than anyone else in realizing the full value of lighter, stronger and more durable steel products. 3
SSAB is market leader in defined areas of the global carbon steel market Global market Carbon Steels SSAB Focus markets Market size , M tonnes SSAB Market share , % 100% = ~1400 M tonnes High strength steels 5-40% (QT & AHSS) ~25* Higher share in Globally Q&T in some groups/regions 3% Flat carbon steels and tubes 4-5 40-50% Nordics Heavy plate ~10 20-25% Americas *Q&T steels, Strip steels ≥700 MPa Source: World Steel Association, Eurofer, SSAB analysis 4
Our five divisions Leading in their businesses SSAB Special Steels SSAB Europe SSAB Americas Net sales SEK 13.2 billion* Net sales SEK 25.9 billion* Net sales SEK 13.2 billion* Nordic-based steel producer of high- North America-based steel producer of Global steel and service partner in value-added Advanced High Strength quality strip, heavy plate, and tubes high-quality heavy plate Steels (AHSS) and Quenched & Tempered steels (Q&T) Tibnor Ruukki Construction Net sales SEK 8.2 billion* Net sales SEK 6.2 billion* Nordic full-service steel distribution European provider of energy-efficient partner building and construction solutions *Sales pro forma full year 2014 5
A global highly-specialized steel company Main production locations in Sweden, Finland and US 17,000 employees in over 50 countries Rest of world Nordic North America Other Europe Net sales by region 2014 pro forma SSAB production locations SEK 60 bn Sales coverage 6
SSAB targets end users in core segments Differentiator vs. most steel companies Construction Materials Heavy Machinery/ handling Transport Yellow Goods Energy Automotive Industrial Applications/ Construction Engineering Direct to end customers Via steel distributors (mainly standard grades) 7
Agenda SSAB in brief SSAB’s strategic focus areas Financial development Outlook 8
SSAB’s strategy – Taking the lead Global leadership in high-strength steels Leading Leading home market value-added positions services Taking the Lead! Most Superior flexible customer operations experience High-performing organization 9
Clear strategic direction for each division SSAB SSAB SSAB Tibnor Ruukki Special Steels Europe Americas Construction Global leader in Northern North American Leading Nordic European leader Q&T and AHSS European leader leader in Heavy multi-metal in construction Mission segments in Strip, Plate Plate distributor and building and Tubes solutions 1. Growth on a 1. Capture cost 1. Expand 1. Win market 1. Continue Priorities global basis synergies market share in turnaround leadership Nordics 2. Improve cost 2. Secure and 2. Growth and and service grow home 2. Protect low 2. Capture portfolio offerings market share cost business cost optimization model synergies 3. Capture 3. Portfolio 3. Right-sizing synergies optimization 3. Remain 3. Reduce cost of operations preferred and supplier complexity 10
Agenda SSAB in brief SSAB’s strategic focus areas Financial development Outlook 11
Summary of Q3/2015 Weak result – further measures to increase efficiency EBIT amounted to SEK -191m (409) Key figures, SSAB Group Q3/2015 Main deviations vs Q3/2014 SEKm Q3/2015 Q3/2014 1 − Negative currency impact Sales 13 594 15 039 − Costs for blast furnace relining EBITDA 2 751 1 246 − Lower prices in North America % of sales 5.5 8.3 − Partly compensated by lower costs EBIT 2,3 -191 409 Relining of the blast furnace Operating cash flow -160 77 4 completed Shipments, ktonnes 1 544 1 632 Higher duration of debt portfolio 1) Pro forma figures as if SSAB had owned Rautaruukki during the and more balanced maturity profile period 2) Excluding items affecting comparability Additional efficiency measures 3) The pro forma figures for 2014 exclude depreciation and amortization on surplus values related to the acquisition of announced Rautaruukki 4) Actual 12
Seasonally lower shipments in Q3 Group figures 1 Shipments 3 Sales 18 000 18 000 16 000 16 000 14 000 14 000 SEK million 12 000 SEK million 12 000 10 000 10 000 8 000 8 000 6 000 6 000 4 000 4 000 2 000 2 000 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2014 2015 2013 2014 2015 EBITDA and EBITDA margin 2 EBITDA 2 per tonne/delivered steel 3 1000 1600 14% 1400 12% 800 1200 10% SEK million 1000 SEK/tonne 8% 600 800 6% 600 4% 400 400 2% 200 200 0 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 0 2013 2014 2015 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 EBITDA EBITDA % 2013 2014 2015 1) Information for the reference periods (2013 and 2014) is based on pro forma figures 3) Including the steel operations: Special Steels, 13 as if SSAB had owned Rautaruukki during those periods Europe and Americas 2) Excluding items affecting comparability
SSAB’s key customer segments’ development Q3 vs Q2 Segment Comments on Q3 development development Heavy Transport remained at a high level in Europe Heavy Transport Continued good demand in Europe and US but slower development in China Automotive Stable demand at a low level in Europe Construction The US market did not improve and the Chinese market remained depressed Machinery Continued slow demand in all regions Mining Continued good demand for wind towers in North America Energy Pipeline activity impacted by low oil price Seasonally higher demand but lower than previous year Construction Material Good demand in Sweden and Poland. Weak demand in Finland, and very weak demand in parts of Eastern Europe and Russia Demand did not pick up in Q3 as expected Service Centers Destocking continued in Q3 (US) 14
Strong cash flow in first nine months of 2015 Key figures SEK million (except for EPS) Q3/2015 Q3/2014 1 1-3Q/2015 13 594 15 039 44 365 Sales 751 1 246 3 498 EBITDA 2 -191 409 674 Operating profit 2,3 -438 261 0 Pre-tax profit 2,3 41 206 -285 Net profit 2,3 0.52 - 0.30 Earnings per share (EPS), SEK -160 - 2 086 Operating cash flow 1) Pro forma figures as if SSAB had owned Rautaruukki during the whole of 2014 2) Excluding items affecting comparability 3) In the pro forma numbers for 2014, depreciation and amortization on surplus values related to the acquisition of Rautaruukki are not included 15
Change in operating profit Q3/2015 vs. Q2/2015 301 -250 -150 -80 3 -570 -191 550 2015 Q2 Price Volume COGS and FX Under Other 2015 Q3 absorption Fixed cost Note: Excluding items affecting comparability. 16
Change in operating profit Q3/2015 vs. Q3/2014 409 -260 -1 145 50 15 -191 860 -120 Under Other 2014 Q3 Price Volume COGS and FX 2015 Q3 absorption Fixed cost Note: Excluding items affecting comparability. Information for the reference period Q3/2014 is based on pro forma figures as if SSAB had owned Rautaruukki during the period. Q3/2014 is excluding depreciation/amortization on surplus values on intangible and tangible fixed 17 assets related to the acquisition of Rautaruukki.
Update on synergies from Ruukki integration SEK millions Q1/2015 Q2/2015 Q3/2015 Q1-Q3 2015 Run rate at the end of the period 450 525 750 750 Synergies, gross 100 125 175 400 Synergies, net 85 120 175 380 Status of synergy realization Recently announced or achieved activities Synergy program runs faster than The coating line in Borlänge initial plan was discontinued in Q3 (10 weeks earlier than planned) P&L impact of synergies during Q3 approx. SEK 175m Negotiations of staff reduction in Virsbo and Borlänge concluded, reduction of 270 Run-rate SEK 750m at the end of Q3 jobs Lower costs to realize synergies, now Negotiations of workforce reductions in estimated to be SEK 200m (earlier estimate Raahe, Finland announced impacting was SEK 550m) around 200 jobs 18
Additional measures to increase efficiency New cost savings program in Ruukki Construction − Reduced staffing in administration, processing, sales and marketing in all geographies − Will lower cost base by at least SEK 200m − Impacting around 300 positions globally Investment in coal injection in Raahe completed in Q3 − Pulverized coal injection (PCI) replaces more expensive oil injection − At current oil/coal prices, saving amounts to approx. SEK Pulverized coal injection 200m annually from Q1/2016 plant in Raahe − Coal injection is already in use in Luleå and Oxelösund 19
Summary of actions to increase efficiency Lowering cost base by approximately SEK 2bn from 2014 level. Full impact in 2017 Actions Target Previous Full run-rate Target Synergies from Ruukki acquisition > SEK 1.4bn SEK 1.4bn Mid-2016 Savings program in Ruukki Construction > SEK 200m New target H2/2016 Coal injection in Raahe ~SEK 200m - Q1/2016 Total ~SEK 2 billion SEK 1.4bn 20
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