Earnings Call: SSAB Reports Progress and Challenges in Third Quarter Results
Swedish steel company SSAB AB (SSAB-A.ST) reported its third-quarter earnings, highlighting the impact of market challenges on its financial performance. Although revenues and EBITDA decreased compared to the previous quarter, the company emphasized its progress in transformation projects aimed at increasing flexibility, reducing costs, and lowering CO2 emissions. Construction of an electric arc furnace in Oxelösund and preparations for a mini mill in Luleå are ongoing, with an environmental permit expected in the fourth quarter. The company is adjusting production in response to low demand but is maintaining a strong net cash position and unchanged capital expenditure (CapEx) plans.
Key Points: SSAB's third-quarter revenue amounted to 24.4 billion SEK, representing a 14% decrease from the second quarter, while EBITDA fell to 2.3 billion SEK. Shipments totaled 14.57 kilotons, reflecting seasonal effects and maintenance downtime. The company's European division experienced a 13% volume decline, while the Americas and Special Steels divisions saw decreases of 9% and 10%, respectively. Prices, primarily in the Americas, negatively impacted earnings by 3.5 billion SEK. By the end of the third quarter, the net cash position stood at 13.3 billion SEK, with a capital expenditure plan of 6.3 billion SEK for the year. Maintenance costs are expected to be 1.65 billion SEK in the fourth quarter. SSAB anticipates growth in the automotive market and expects to complete maintenance and adjust production in the fourth quarter.
Company Outlook: The company plans to complete maintenance and adjust production in response to low demand. SSAB expects to receive an environmental permit for the Luleå project in the fourth quarter, which is critical for the project's launch. The outlook for heavy transport and construction sectors remains cautious, while demand for energy-related products in the U.S. is strong.
Declining Points: The company experienced a decline in revenue and EBITDA compared to the previous quarter. Significant volume decreases across all divisions negatively impacted earnings. Lower shipments are expected in Europe and Special Steels in the fourth quarter.
Rising Points: SSAB reported ongoing progress in transformation projects that will enhance flexibility and reduce costs. The company maintains a strong net cash position and has met its financial targets. There is strong demand for advanced high-strength steel, particularly in the automotive market.
Underperforming Performance: The company's revenue and EBITDA declined due to maintenance costs of 950 million SEK. Prices and volumes negatively impacted earnings on a year-over-year basis.
Q&A Highlights: CEO Martin Lindqvist discussed improvements in product quality and safety, noting an expected volume increase in the automotive sector. CFO Leena Craelius confirmed that raw material costs in Europe remain stable and mentioned that some price reductions are expected in the fourth quarter. Lindqvist highlighted the company's flexibility measures in operations to manage fixed costs effectively. The company's export strategy focuses on a unique product mix, especially in advanced high-strength steels. SSAB AB (SSAB-A.ST) continues to focus on managing market volatility and maintaining profitability through internal efforts, product mix improvements, and strategic positioning in both the U.S. and European markets. The company's commitment to the green steel transition and adapting to market changes underscores its long-term strategy despite current market volatility and macroeconomic challenges.