Apple Inc.

Good morning and welcome to this presentation of the SSAB Q3 report. My name is Per Hillström. I'm the Head of Invest Relations at SSAB. I'm presenting today, we have Matti Lindqvist, President and CEO, and also Lena Krejeljus, CFO. And if we have a look at the agenda, we can see that Matti will start. Sorry, we. Here we have the agenda on the screen as well. Matti will start as usual, overview of the quarter, and then Lena comes to have a deeper look at the financials, and then Matti closes with outlook and summary. And then we will also open up for questions at the end. So by that, the floor is yours, Matti, please.

Thank you, Per. And yes, let's dive into it. If we start with the transformation, it's moving on according to plan. In Oxelösund, and this is a picture from yesterday, we have started now to erect the building for the electric arc furnace, and that project is ongoing. And as you know, we will build a new electric arc furnace, we will close down the coking plant and the two blast furnaces, but we will keep the existing advanced rolling mill and the QT lines. So it's moving on according to plan. In Luleå, we are more in the preparation phase for the mini-mill and that's ongoing. The next big step will be the environmental permit and we are foreseeing that in Q4 to get that environmental permit but until then it's more about preparations. And just as a reminder, why do we do this? We do the transformation because we want to build a more flexible production setup with lower costs and a bigger portion of variable cost and lower portion of fixed cost. We want to, with the Luleå investment, increase capacity for high strength steels and premium steels. We have the ability with this new mill to shift the product mix with one million tons. And that is very important because we see that also in Q3, and I will come back to it. We see much more stability when it comes to prices and earnings for our niche products compared to more standardized steels. So that's one other important aspect. Then, of course, elimination of CO2 emissions from our own operations, having the possibility to take away quite a few million tons of carbon dioxide emissions that will be very costly for us in the future. And then, of course, meet the growing demand of emission-free steel products or more environmentally friendly products. but it's also about avoiding both in Oxelösund and in Luleå, avoiding to invest in old technique and in mills that are mainly built during the 60s and in the Swedish strip system we have the blast furnaces and the steel shop up in Luleå and then we have the rolling mills and everything else in in in Borlänge and that requires a lot of transportation a lot of working capital and we have 900 kilometers between the slab machine and the reheating furnaces in Oxelösund so or in Borlänge so that would also be a huge difference and the segments where we see a strong and increasing demand for emission-free steels is automotive heavy vehicles and construction machinery, construction and industrial equipment and distribution partners and consumer products. So far so good, we are moving on according to plan and the next big step will be the environmental permit in Luleå and that will be hopefully then and we are very hopeful for that in Q4. If we then move into the quarter, I would summarize the quarter as a decent or strong quarter in a very demanding market. Also impacted by planned maintenance, we had a cost of 950 million in Q3. We had the semi-annual maintenance stop in Montpellier, and we also had other maintenance stops. So as we discussed last time, we put them a bit forward, especially in US, because the market fundaments were better to have the outage in Q3 than later. If we look at safety, which is one of our many very important KPIs, we continue to become safer and safer. This is the LTI frequency per million working hours, including contractors. We are now at 0.82. We are not where we would like to be at zero, but we have some of the major sites being at zero since a couple of years, and then you always, of course, need to knock on wood. But continued good development when it comes to safety. When we look into Q4, the focus areas will be of course to finalize the plan maintenance in Q4 and adjusting production to lower parent demand. utilize the framework we have introduced in Sweden and Finland for flexible working hours. In the US, we have a slightly different setup with more call it flexibility in the pay structure. And then of course, as always, when the market is a bit tougher, a very restrictive approach to cost. So I would say nothing new, but the usual things we do and implement when the business cycle is a bit tougher. If we dive into the divisions, special deals, weak market in Europe, more stable demand in the rest of the world. I think that the earnings is still on a good level. Prices very stable and they should be stable over time, up 1% compared to Q2204. So I would claim that very good pricing management during weak conditions. So good profitability given the circumstances. If we look at Europe, we as always see a seasonal slowdown versus the second quarter and also a weaker apparent demand in Europe. Fairly stable prices versus a second quarter and also of course the usual impact from the maintenance outages which are typically done during Q3 and beginning of Q4. So all in all I would say a positive result but on the low side given the apparent demand and the seasonal slowdown and also the planned maintenance. If you look into America's cautious market, as said, the maintenance in Montpellier, the same annual maintenance were done during Q3. Prices came down compared to Q2 with 8% from still a very high level, but still came down 8%. The maintenance, the cost of the maintenance was about 450 million. And I would say in line with our external expectations. If we look at two daughter companies, Tibnod and Roki Construction, there was of course Roki Construction impacted by the underlying still very weak construction market. We have been focusing a lot on the renovation segment, which is slightly better than new buildings. We clearly see the positive effects from the cost cutting program, which is on a yearly basis around 150 million SEK. So we see that if you compare to a year ago or if you compare to Q2. In Tibnor, shipments was impacted by seasonality in a weak underlying market and weak apparent demand. The difference between Q3-23 and Q3-24 was a combination of lower inventory losses compared to a year ago, but also here positive effects from cost savings. So with that, Lena will take you through some more details when it comes to financials.

Thank you, Martin. And I try to be brief so that you have a chance to ask questions last time from Martin in his current role. But let us start the financial analysis by looking at the steel shipments, which is on top of the graph on the right. This is the sum of all the steel division shipments. And in Q3, the shipments were 1,457 kilotons. As already mentioned, you can see from the graph that the seasonality has an impact in the Q3 being lower than Q2 throughout the years. But as Teheira says, the market sentiment in Europe was rather weak and turned more cautious also in the US. Already mentioned the maintenance audits. We have maintenances during Q3 and Q4. And this year we had maintenance audits in Montpellier mill, impacting the Americas division. And that's good to bear in mind when we do the year on year comparison, as we didn't do that last year. And then in case of a Europe division, we had audits in Luleå and Borlänge. And also in the case of Luleå, we had a bit more extensive maintenance this year. The similar scope maintenance we've done last time, 2015. So that we don't do also every year. Oxelösund was starting the maintenance audits at the end of the quarter. And already last time we released the result, we mentioned that the production pace has been reduced somewhat to balance with the demand, and we continue to do that also during Q3. So the shipments compared to Q2 were 11% lower. And if we do a bit of a comparison with the outlook we gave, we were in line with special steels being 10% lower. Europe division was slightly lower than the outlook we gave with 13% lower shipments, while the Americas was slightly better being 9% lower when we were indicating significantly lower volumes. Compared to last year, the shipments were 3% lower, which is then reflecting the market sentiment. The revenue graph next to steel shipments, revenues 24.4 billion in Q3. The reduction compared to Q2 was 14%, shipments being 11% lower, having a big impact, but also prices coming slightly down. And then if we do the comparison of revenue with the previous year, Q3, the reduction is 17%. While the shipments were 3% lower, it is indicating a clearly lower price level compared to last year. EBITDA Q3 this year, 2.3 billion, reduction of 1.7 compared to previous quarter, and then reduction of three compared to last year. But let us look into more details. First, comparing Q3 with the previous quarter. And this is comparing operating result, 1.2 in Q3 compared to 3 in last quarter or previous quarter. Deviation, negative deviation reflecting the story already told. The prices, volumes, variable cost and capacity utilization having a negative impact, while the fixed cost having a positive impact. If we first look at the prices, 690 negative impact. The majority of this is, of course, coming through the Americas, and Special Steels and Europe already mentioned we're stable in this quarterly comparison. Volumes being lower, 842 million negative impact. Now here the biggest contribution is coming from the Europe division, lowering volumes with 13 percent, and then also Americas with nine and Special Steels ten, but the biggest portion coming through Europe division. While the Ruki construction being the only division with some higher volumes, quarter on quarter. And the variable cost here also, the biggest contribution is coming through the maintenance allergies. Fixed cost seasonally, we always see this kind of positive impact in this quarterly comparison. The positive impact with the holiday season, we did some minor adjustment to the bonus programs and also some minor impact of the effects here. And the capacity utilization already mentioned coming through the maintenance outages, while we didn't have any of those during the second quarter. Then in the comparison with the previous year, already indicated that the biggest impact clearly coming from the prices, negative impact of 3.5 billion. Special steels and Europe division, they were both 5% lower in their average prices, contributing then special steels 0.7 and Europe 0.8 billion. And America's prices were 24% lower, thus the biggest contribution, 1.8 coming through that. Volumes 3%, 53 kilotons lower than last year. And here also the majority of this coming through SSAB Americas. 300 of that is coming from Americas. Special steel 70, Europe 10, Dibno 10, and Ruki construction already mentioned having a positive impact of 30 in this. Positive impact with the variable cost, 675 million, and the majority in this case is coming through with the lower raw material cost in the Nordic mills, which is then offset with the maintenance audits cost in the US. slightly lower fixed cost, and here we have positive impact with the effects, bonus accrual adjustments, and already mentioned the cost savings in Tipno and Roki construction, and the capacity utilization also, more extensive maintenances as already discussed. If we then have a look at the cash flow, Quarterly performance comparison year on year. Earnings, yes, lower. And the release in working capital slightly less positive than last year. The maintenance capex on similar level, but if you look at the year-to-date figure, you can see that the R&C investments is on a higher level this year than last year. And the other item, the negative item in Q3, that is majority related to purchase of CO2 emission allowances. That was done in Q3 this year. Last year we did it during Q4. That's why the deviation in that line. Still positive impact in the financial items, interest income. And then the strategic expenditures, quarterly comparison already illustrating that that is on a higher level. And if you look at the year to date figure, you can see that clearly higher and naturally related to Oxelö-Sund. And also to some extent Q4, we will have the higher spend in Luleå project as well. So the cash flow before dividend positive quarter and yet to date and as a reminder the dividend payout was five billion and share buyback program impact this year during Q1 was this 1.2. Net cash position at the end of Q3 13.3 billion that is still well in line with the financial targets And the main deviation with the end of 2023 is the dividend payout 5 billion and the share buyback program 1.2. COPEX plan for this year. We have not changed this since last time we showed it. Still plan is to spend 6.3 when it comes to RNC and strategic CAPEX. Year to date, we have spent 3.5, but the forecast is higher in Q4. So there will be more spent in RNC and strategic going forward. Raw material. This is illustrating the iron ore, coke and coal price development. Iron ore as well as coking coal prices have gone downwards during Q3. And since China announced their stimulus packets in September, the prices started to go upwards. And the outlook is that the special steels raw material cost in Q4 is somewhat lower compared to Q3 because of the low priced inventories. While the European division, the cost will be stable, and the reason being that the Lule will be hit by the increasing price of iron ore sooner than other mills. They don't have the pellet inventory. And then if we look at the scrap price, it has moved sideways during summer months in the US. Expectation is that it would start to go upwards, indicating that the raw material cost for Americas would be somewhat higher during Q4. Just to remind the maintenance cost, as this table illustrating Q3, we had more maintenance than what we have planned for Q4. In Oxelösund, we started maintenance at the end of Q3, and majority of that will be done during Q4. We will have maintenance in SSAB Europe in Raahe, and as a total, Q4 will sum up to 700. And compared to previous time we showed this, we have done some minor update to the cost. So it will be 1.65 billions for the full year. But then back to Martin.

So if we look at the different segments, they are either neutral or weak. If we start with heavy transport, we see a slowdown of heavy truck production in Europe and that continues. We see a stable trend for railcars and shipbuilding, two important segments for our US operations. Automotive, yes, the European market is weakening and the US market is a bit more stable, but we are still continue and expect to continue to structurally grow the advanced high-strength steel markets for us. So increasing volumes when it comes to these advanced high-strength steel, martensitic steels for mainly coal forming. Construction machinery, weak demand in Europe and a slowdown in North America. China more stabilizing. Material handling, we see and foresee fairly stable demand within mining. Energy, good demand for wind power and other renewables, especially in US. Construction continues to be weak. It has been weak for a while. Renovation market is slightly better than new production, but it will continue in Q4 to be weak. And then service centers, the big swing factor, Well, a cautious approach both in Europe and the US. If we look at the inventory levels among steel service centers, both in Europe and in the US, the inventory levels are on the lower side, so steel service centers are going from hand to mouth and at some point they need to see some restocking. So all in all, I would say neutral to weak looking into Q4 with the exception of the energy related business, especially in North America. And when we then guide for the outlook, as Lena said, we will have a planned maintenance in Oxelösund and in RAE in Q4. We guide for somewhat lower shipments in Europe and special steels and higher shipments in US because of the outage was done in Q3. When we look at realized prices, we say somewhat lower in special steels and lower in Europe and Americas and this is of course an effect of spot prices and also what we typically see is somewhat of a lag effect when spot prices move until we see it in our P&L. So if I would sum it up, strong focus on safety is yielding results. We are not, as said, where we want to be at zero, but we are slowly and steadily getting there. And we have some very good examples, which one is the raw Emil, where we had number of years now without lost time injuries. Good levels of earnings in special steels. We have been focusing the last couple of years on pricing management, which has also yielded results. The investment programs for Luleå and Oxelösund continues. And we have said targeting substantial benefits when it comes to cost and flexibility. The platform to further increase our mix with one million ton more special steels, more Q&T products, less standard products. The possibility to eliminate CO2 emissions from our operations and also the possibility to meet the growing demand of emission-free products. And we see that also already in automotive where we are coming into more and more new platforms in advance of also building up the fossil-free steel production. So my last slide is something that Per presented to me. I was a bit not willing to show this, but then I realized that it's quite funny. I've been releasing 55 interim reports as a CEO. And then before that, I had a couple of years in the line organization, but also in addition, 29 interim reports as a CFO. So after 84 interim reports, me standing here, either as a CFO or a CEO, you will at last get rid of me. But I want to thank you all, and many of you have had contacts since I was a CFO, so I just wanted to show this and say thank you. And with that, Per.

Yes, thank you, Martin, and thank you, Lena. Then we can get ready here for the Q&A. And just as a reminder, you're perfectly fine to ask more than one question, but please state them one at a time. to make the process a bit smoother here. So with that, I can ask the operator, please, if you can present the instructions.

Thank you, sir. To ask a question, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, please press star one and one to register your questions. And to withdraw your question, please press star one and one again. Thank you. We are now going to proceed with our first question. The questions come from the line of Adrian Gilani from ABG Central Collier. Please ask a question. Your line is opened.

Yes. Hello. I'll kick off the Q&A for your 84th interim report. I just wanted to touch on the, you said that you want to structurally grow with the automotive high strength steel volumes. and you've of course done well to outgrow the overall automotive market this year, but in terms of the near-term outlook, do you see a risk of a significant drop in these volumes in the coming quarters?

I think over time, we will continue to structurally grow those volumes in that market. I mean, in Borlänge, we have this quite unique line, the continuous annealing line, and we are constantly developing better and better grades, better and better energy absorption, lighter and lighter possibilities. We see possibilities also within safety for automotive, we see in battery protection and so on. So how it plays out certain quarter is always hard to predict, but over time we expect to continue to grow these volumes. And we know that now we're into a number of new platforms the coming years. So the volumes will over time continue to increase.

Understood. And then I guess your view on sort of the typical restocking cycle that we tend to see in the first quarter of the year. How do you view that going into 2025 considering we are in a weaker market? Do you think we will see the typical restocking or more hesitancy among distributors and customers?

always hard to predict the future but what we typically see is that we see restocking in Q1 and we have seen that the last couple of years and that will of course be dependent on the underlying market but as soon as prices start to show any signs of moving up we will see restocking and better apparent demand and I mean if you take hot or cold prices in Europe they are at very low levels compared to what we have seen the last year and also compared to call it the marginal costs when you need to take into account also costs for emission rights. So one could expect restocking in Q1.

Okay. And a final one from me. Your largest owner, LKAB, they announced yesterday that they're passing their green sponge iron plants in Kiruna. And I understand you're not dependent on sponge iron. You can always use scrap for your EAFs. But does LKAB changing their plants have any impact on you and how you evaluate your transition?

We take 100% of our volumes from Gjellivare, what they internally call the southern system. So I don't have a view on Kiruna because we are not taking volumes from there. But they also said that they continue with the transformation in Gjellivare. So no changes for SSAB.

Okay, perfect. In that case, that's all for me. So thank you for taking my questions. Thank you.

Thank you. We are now going to proceed with our next question. The questions come from the line of Alain Gabriel from Morgan Stanley. Please ask a question. Your line is opened.

Thank you. Thank you. And Martin, I just want to wish you also the very best in your next adventures. I have two questions from my side. First one is on the permitting at Luleå. You mentioned that you expect to receive the permitting Q4, but we are six or seven weeks effectively left for the quarter. How confident are you in receiving the permit? And in case you don't, what does that mean for your spending in 2025? That's my first question.

No, but of course we need an environmental permit to really start to build and it's impossible. Yes, we are into the fourth quarter and I mean, no one really knows of course, but we are very positive that we will and hopeful that we will get the needed environmental permit during Q4.

Again, if you don't get it, what does that mean for the spending?

Then we can't start the project. So we need an environmental permit to start to build. It's impossible in Sweden to do anything before you have the environmental permit, but maybe famous last words, but so far so good. And there is nothing pointing in that we wouldn't get it, but we don't know yet. But as said, we are hopeful and we need the environmental permit to start the project.

Thank you. My second question is on the, you've recently received a grant for more than 100 million euros. Should we see this grant as an orphan grant or do you think this is the start of a few more to come to fund your decarbonization plan? How should we think about these grants that you are receiving? Thank you.

I mean, the final decision is not taken yet. It was a positive, call it signal or decision from EU and now formally it needs to be taken also by in Sweden Tillväxtverket and we will come back to that when they take that decision. And then what comes next remains to see and we'll come back as soon as we have more information.

Thank you. Thank you and all the best.

Thank you.

Thank you. We are now going to proceed with our next question. The questions come from the line of Christian Agarwal from Citigroup. Please ask a question.

Hi, thanks a lot for taking my question. And before I move to the question, my best to Martin for the next adventure. I have two questions. I'll take one by one. The first question is on raw material cost. So, can you confirm that the raw material cost in the Europe is going to be stable? Does that mean that there is a lag effect for the raw material cost decline to come through? Is it coming into the Q1 or we've already seen that cost decline into the Q3 for the Europe?

In case of Europe division, yes, we have actually winter stocking taking place in the Nordic mills for the coking coal to secure the ice security or the situation in winter. So we do have quite substantial coke inventories. So we are consuming during Q4. that material, and then when we are buying new material, there is a lack definitely in the impact of coking coal. With the pellet prices already mentioned in Luleå, we don't have inventory, so there the impact will come rather immediately. And if the prices start to go up and continue to go up during Q4, there will be impact in Luleå's case. In Rahe, we do have inventory for the pellets, so there the delay is appropriate. approximately one quarter lag with the pellet and with the coking colder the lag is even longer it's a quarter and a half. So you're absolutely right the impact will come later.

Okay and then does that mean that the neuromaterial cost and the pellet cost for Rahe in the Q3 was lower?

I would say that it's stable or somewhat lower now during Q4.

Okay, okay, I understand. And then my next question is on the, on the capex. I mean, you maintain the guidance for this year and then you're saying that the capex probably will peak in 2026 and 2027. And I appreciate that you don't discuss the exact numbers for the next year and the year after that. But is there any way you can give us a sense that where or what will be the ranges for the capex to peak in 2026 and 2027? Just kind of a medium term capex directionally.

As it's already illustrated on the slide, the peak in the CAPEX is 26, 27. It will go up during next year, and we will actually then give more outlook for 25 during next result release. But I said still quite many moving elements, so we don't want to disclose closer figures or more detailed figures.

I understand. And the next question is mostly on the special steel. I mean, the margins for the last, I would say, eight to ten quarters have continued to be higher. And then if we look back the history of last five to seven years, there is a clear kind of a re-rating going on into the specialty margins. How comfortable you would be, or how confident you would be to say that these margins are structurally related and then sustainable in the longer period of time versus the margins you had five years back.

If you take special steels it's two things. I mean first I would say the last couple of years I would call it a better pricing management. So you see more volumes maybe fluctuating a bit but stable prices and that's a combination of better pricing management but it's also a combination with an improved mix. There is a huge difference between different products in special steels as well. If you take a Hardox 450 and then compare it to a Hardox 500 Tough which is a product that is now growing quite a lot. The margins and the prices are better for a 500 Tough compared to 450. If you go back a couple of years we were selling 400 Brinell material or Hardox 400 that's not the case anymore, that's for us more, I wouldn't call it a commodity, but more commodity-like. So it's about also moving the mix within specials deals, more and more advanced products every year and that typically takes a number of years to start to ramp up. But I think Hardox 500 Tough is one of very good, quite a few good examples. So it's about mix and quality pricing management. And we see that in Europe as well, fairly stable prices. Yes, there is a lag effect, but also a mix effect. And the mix effect is very important and over time quite substantial as well.

Understood. Okay, that's all from my side.

Thank you. We're now going to proceed with our next question. The questions come from the line of Tristan Groseff from BNP Paribas Exile. Please ask your question.

Yes. Hi. Good morning. Thank you for taking my questions. The first one is on Europe. When you look at the production adjustment measures, what exactly do you have in mind? I think very early last year when the market was pretty bad, you decided against keeping a blast furnace idle. What is your view on the market right now? Does it warrant some more prolonged blast from the shutdown? And also in Europe, just a quick follow up on that. Given the stable cost outlook, would you expect the division to remain profitable in Q4?

We are not guiding for absolute figures but I mean we have over the years now worked with quite a few things to internally we call it improve low point profitability. It is of course as we have discussed already about improving the mix and that's something we can drive to large extent I would say ourselves. But also in a quality rigid system with brass furnaces and coke oven batteries introduce flexibility. We have this TOF system which is time banks in Sweden now we have introduced it in Finland as well so we have possibilities to be flexible when it comes to fix costs and manning. So a lot of call it small but very important step that we have been constantly introducing the last couple of years that will pay off in a tougher market situation which we will continue to do and you will see effects of that in Q4, you see effects of it in rookie construction and in Tibnor already. So it's a combination of I mean structural things but also flexibility measures. So what we try to do is to every cycle improve slowly but steadily what we call low point profit.

Okay, that's clear. And the glass furnace outage, when did it start and how long should it last?

We haven't taken any decisions regarding the blast furnaces and that will of course remains to be seen what happens with the market, but we haven't communicated anything or taken any decisions. So we stick with our for the time being flexibility measures and the mixed improvement. And I mean, the only thing we know is that the business cycle goes up and down and the important part is to come out in relative terms better and better during each downturn and use the measures we have introduced and the measures we have.

Okay, sorry. I thought I was part of the plan maintenance in Q4.

The maintenance in the plate mill.

In the plate mill, yeah. Not in the blast furnace. Okay, got it. And then in the US, I think last time, when we discussed, you said you expected some maybe some positive inflection in Q4. Now with more visibility to year end, do you still think that is possible before year end? And who can comment a little bit? I mean, plate metal spread have continued to drift lower. Which particular end market has been that weak or is it more a question of more supply coming in to the market? And just for the sequential bridge into Q4, you have the alleviation of the maintenance outage from Montpellier. Do you think that's going to be enough to offset the spread compression into Q4?

But what we are guiding for in US for Q4 is higher volumes and the obvious reason for that is that we don't have the maintenance outage and we are guiding for a bit lower prices. So I don't know when what will happen in Q1 but we have a certain visibility or decent visibility into Q4 and that's what we are guiding for. And then we will see what happens in going into 2025. But I said, I mean, the big swing factor is, of course, the Steel Service Center segment, they are even more important to call it in the US market or more important player than in the European market. So it is also about the swings in apparent demand. And when they realize that we fairly low inventory levels, when they think that prices are starting to go in a different direction, they will act accordingly.

Okay. Perfect. Well, thank you. And Martin, all the best for what comes next.

Thank you.

We are now going to proceed with our next question. And the questions come from the line of Tom Zhang from Barclays. Please ask your question.

Yes. Hi, morning. Thanks for taking our questions. Two from me. So actually, just touching on that, Martin, you mentioned the sort of service centers. I see in the end market outlook, you downgraded them kind of from neutral to neutral flash a week. I, to be honest, already thought the buying from service centers was already very soft. So question one is how much weaker did it really get and did it improve at all after this kind of China stimulus, particularly the move up? in iron ore and cooking coal.

So I wouldn't say it's weaker than what we see now, but it is already weak and we expect it to continue to be weak slash maybe neutral. So they are, if not sitting on their hands, but at least consuming from hand to mouth and have been taking down inventories. We see that in the statistics. We expect them to continue to be hesitant in Q4 or until we see a different direction of steel prices. We are not saying that it will weaken, but we say it's a weak market, apparently.

Yeah, maybe I was reading too much into it. Just in your presentations, you obviously have this outlook slide and it's gone from neutral to neutral slash weak. So I was just curious if things got any worse.

Maybe I was a bit, my explanation wasn't that good then, but I apologize for that.

No, no, no, no, no problem. Tom remembered also that the yellow for Q3, that was an estimate. I think the market has probably been a bit weaker now in Q3. So that could also explain some of the... So we're actually saying that we were wrong, yeah. Slightly wrong.

No, no, that's fine. Okay. And then, sorry, just the other question was on mix. I think you guys talked a bit about the Europe mix. But if I look in the release on the third page, it sort of says there's 0% impact from product mix at group level versus both Q2 and versus last year. So I think you talked about European mix being better. Was mix worse in the other divisions that sort of offset that? And how do you expect mix in general to kind of change into Q4?

That's very rough calculation. What we have in the table, I would say that it was neutral in that analysis. But for sure, we have seen the improvement and the automotive volumes have been really, really strong and performing really well. So that's a proof of the good mix improvement. So the table and the calculation is on very rough level. So maybe not to make conclusions based on directly from that.

And it's always hard also to draw a conclusion of a single quarter. But what we strongly believe is that we will continue over time to see a better and richer mix over time. Then it can go up and down a bit between quarters. But if you look at it in the history and also in the projections going forward, we will continue to grow the mix of advanced high-strength steels and Q&T.

Got it. But into Q4, that sort of reversal in the auto mix, feels likely in Europe. Is that right?

Sorry. Yeah, automotive into Q4. Yeah, it will be probably weaker market. Yes.

Yeah. Okay. Fair enough. Thank you and best of luck, Martin.

Cheers. We are now going to proceed with our next question. The questions come from the line of Johannes Grunsellis from D&B. Please ask a question.

Yes. Hello, everyone. A couple of questions from me. I'm going to start with the Oxelösund linked question and your latest thoughts on the green steel premiums. I think, Martin, you have said earlier that you have talked about like 300 euro per ton green steel premium. Is that still a relevant number? And I mean, how should we think about in the initial phase when Uxvetsund EAF is producing, should we apply a sort of a significant premium on those volumes? That's my first question.

No, but the volumes we sell today, which is mainly SSAB0, the steel produced in Americas with using biogas, biocarbon and fossil fuel electricity, I think we are up to close to 100,000 tons now since we started that, we still apply that premium. When it comes to call it hybrid steel or fossil free steel, we are still using the small plant we have up in Luleå, so I would say fairly limited volumes, but also applying a premium on that. How that will look over time is of course hard to tell in the long run. My hope and belief is that we will see more and more production of call it greener steel and then it will adjust. But it will be a combination of a lot of things. What will be the cost for emissions and cost avoidance and so on for end users. So far, we are still applying that premium and sell volumes. I think it's up to 100,000 tons so far. How that will look end of 2026 or end of 2028, I think it's hard to say, but we see a huge interest and we see a growing demand and we are constantly announcing new partnerships and and new applications and and new call it segments with a huge interest and we see that among other things in construction we see it in heavy transport but we see it also quite substantially within automotive so remains to be seen you on this but so far so good if you if i would conclude it yes then on on lulio i mean you give us the very rough

idea of the investment, you know, size, total capex, what have you. But after you have received the environmental permit, you will go more into a sort of a different phase in the project. Would you say you will be happy to share more details on the project? and essential financial details and data and what have you externally then?

Yeah, that's the plan. Then exactly. Okay. I mean, it will probably, I guess, be during a capital market state or something. But yes, that's the plan. Okay. To open up more and make it easier to call it understand or describe.

Yeah, I also wonder about the networking capital release you typically have in the fourth quarter. If you could give us some some idea what to expect during cash flows in the fourth quarter this time.

I think the fourth quarter will be really challenging this year. The inventories will not go down as heavily as they did last year. Of course, Martin gave the outlook for the top line. Working capital development, I would say, fairly in line with the performance in Q3. But also, you saw that we plan to spend quite substantial amount of CAPEX during Q4. I would say that there are some challenges with the cash flow generation. But of course, we focus with the networking capital. We do as much as possible. We have reduced the production pace to keep the inventories in control. Yes, we still focus in the cash generation and rather look the sort of the overtime performance than focusing only one quarter, but it will be tough.

There are still possibilities, so then how it affects certain quarter is always hard to tell, but Last year was a bit special because we entered into the year due to the crisis, the war in Ukraine and so on with quite substantial stocks. And that was a safety measure, especially for PCI coal and coking coal, where we had to find new suppliers and test out new material. And that those volumes are now called it sweated out. So there's still possibilities to become more capital efficient. And over time, we should be that.

Okay, understood. Martin, thanks a lot, and from my behalf as well, good luck with the career outside SSAB now.

Thank you, Johannes.

Thank you. We're now going to proceed with our next question. And the questions come from the line of Bastian Sinagovic from Deutsche Bank. Please ask your question.

Hi, good morning all. I've got a couple of questions left. I'm just going to start off with special steel, and I'm just curious about gross margins. obviously guiding for lower prices and lower costs as well. So do you think you can keep gross margin stable in the fourth quarter? Maybe a bit of color here would be great. That's my first question.

I think over time you should expect special steels margins to be more stable than for standard products. That's has been the case and it's as I said a combination of a mix and pricing management. So if anything more stable than maybe in the history but but it's constant over time call it struggling and development process with new and more advanced grades in order to reduce weight or increase payload I mean the usual usual stuff so more stability will they be stable forever well it's still The steel industry is still a volatile business as we all know, but the volatility should definitely be lower in these, call it more advanced products or niche products. So more stable than for standard products for sure. But how that exactly will play out in a single quarter is of course dependent on a lot of other things.

Okay so in other words so I totally understand it's more stable over time but you say it's basically still hard to say more or less how gross margins will move into Q4 and whether you will see a gross compression after basically after all or whether you'll be indeed able to keep it more stable so no no real color on Q4 at this point.

Oh but the color we give is the guidance with volumes and prices and then of course as Lena mentioned the raw material costs so from that you can draw conclusions of course but Over time, much more stable than for standard products. Then, of course, you never know. It will be dependent on apparent demand. It will be dependent on production stability and a lot of other things. But over time, definitely much more stable. So that's the whole idea behind our strategy to move more and more into, call it niche products or advanced high strength steel products. where we have a unique selling point with the best quality in the world, strong market positions, good segments, customers that are seeing the benefits of buying a steel that is more expensive per ton but allows them to do less welding, less bending and buy in total lower volumes of steel because they can use thinner gauges in their applications. Okay.

Okay. Sounds good. Then my next question is on the S and I guess if we look at price pay prices now, which have dropped into the eight hundreds. I mean, just if we work these price. the deltas, basically, through your numbers, I basically get to numbers which get me very close to break even for the US business. Now, I wonder, am I wrong here? The current spot prices, and I guess you're still selling a lot of material probably on a more contracted basis with a slightly longer leg, which is hopefully a big advantage for you. But if you don't get spot prices, would these put you somewhere close to break even for Americas?

First of all, you're right. We have a lag effect. You can't just put in the spot prices in the P&L. There is a lag effect. And then there is, of course, also a mix effect and a contractual effect. So, I mean, still prices are coming high. down from fairly or very, I would say, high levels. So, where that will take us in Q4, I have an idea, but we haven't said that publicly. So, I'm sorry to say, but you have to do the math.

Okay, no problem. So, fair enough. And then, yeah, just last one on CapEx and sorry to keep bugging you here, Lina, but But the first question is, how much of the 10 billion budget for Auxilus Sunnt have you spent or will you have spent by the end of 2024? And then again, coming back on 2025, we're getting very close. I know you're pushing back, but could you maybe at least give us maybe a floor or even a range for the overall budget to have like a rough idea on what we have to work with, like in a scenario where maybe the permit doesn't come there's still going to be infrastructure work, there's still going to be maybe some leftovers for Auxilusund, so that could at least give us a floor and then we know the number could be higher, but at least if we had a floor that would be quite helpful already, but yeah those would be my two questions.

Well it depends how you sort of put it in different buckets. With the EAF construction we have still some four billion left to spend for after this year, And this year, I think in case of Oxelösund, it's around 1.7 billion. That is the plan to be spent. And then this preparation that already took place before this year, there we have some 1.2 billion. There is still money to be spent. And as I said, we will give the guidance for 2025 during Q4. So there we will also give more detailed figures for Åksele Sund. So be patient.

I remember that Åksele Sund is running until the end of 26. So there is still basically two years to build there as well.

And the 4 billion, which is left after 2024, you mentioned, is this including the 4 billion for the power line, which was running sort of separate?

It's excluding the power line. And I think if you should maybe not expect 4 billion for the power line, that's probably on the high side.

Okay. Got you. Okay, sounds good. Great. No, thanks so much for that. And to Martin also from my side, all the best for your for the next phase of your career and stay well.

Thank you.

We are now going to proceed with our next question. And the questions come from the line of Andrew Jones from EBS. Please ask a question.

Just a couple of questions for me. First of all, it's on the US plate market. Obviously, new course plate volumes in their results were still very weak. So Brandenburg is still a long way off full capacity. And clearly, you seem to be getting close to breakeven in that division. And you're obviously a big player in that market. I'm wondering if we are getting close to a floor, given obviously you're struggling to make money in this market. you know, if we don't see that demand impulse come through into next year, what is the, you know, what, what can you see happening on the supply side? I mean, other high cost assets that potentially, you know, we're waiting on to drop out to, to, to help the market, you know, are you still confident about the line coming through? That's the first question. Then I have a second one. Maybe if you answer that first.

No, but if we look at US, why we were close to breakeven in Q3 was of course because we have this semi-annual outage with the cost of 450 million and of course that also gives a lot of lower volumes. So that's one explanation of course, or the main explanation. Then when we look at the US plate market, we are quite positive over time with this inflation reduction act, with the infrastructure bill and all the needs that is coming in North America or in US. We also see that over time import, you need to remember that the US plate market is structurally undersupplied and we see also over time import coming down. So of course what measures will be taken in the future will of course be dependent on who takes the seat in the White House. But we also typically see, which is a bit strange maybe for a European to understand that, we see also wait and see mode, an election year. which we typically don't see at least in the Nordics because that doesn't affect any markets, but we typically see that in an election year, especially when we're getting close to the election and until the new president has taken the office. So overall, we are still positive, very positive to the US plate market and we typically have a better capacity utilization than many competitors because of our cost position and our quality position. So you should expect us to come out better over time than our competitors producing US plate. And if the market, of course, as always, the market dynamics works exactly like you said, if the If the market gets tough, you typically see the high cost producers taking down capacity. But I would claim that in Montpellier, we have the best cost position of all the producers in North America and the best quality and the number one in the Jacobson survey. So I'm over time very positive and optimistic for the US plate business we have.

Excellent. And just a follow up to, I mean, you touched on it, the US elections obviously coming up. I think there's probably a lot of moving parts potentially for SAB in a Trump win scenario. Obviously, I guess if there are any tariffs in position to your domestic assets would benefit, I guess, you know, people talk about the risk to some of the IRA spending, which might be quite plate intensive in a Trump win scenario, I guess, was also maybe some knock on effects to your European or special steel businesses, if he's going around slapping tariffs on other markets. Can you just talk us through net-net how you see that scenario? I mean, is it beneficial for SSAB? Is it sort of more neutral? How do you see the moving parts in that outcome?

First of all, the majority of the QT volumes we sell in North America, we are producing in Mobile Alabama, where we have invested quite a lot in QT capacity and so on. So it's not 100%, but to a very large extent, we produce it and source it locally for the North American and to some extent also for the Latin American market. What will happen with different possibilities or the difference between the Democrats staying in the White House or the Republicans coming in? Hard to say for me, I don't have that knowledge, but I think that Regardless of who becomes the next president, we will continue to work hard to make sure that we as a, call it, a relevant plate producer in US with the strongest market share, we'll continue to do good. And I think that if you look at the US market and regardless, if you call it inflation reduction act or on-shoring, whatever you call it, there are there are a lot of needs for infrastructure for renewable energy, wind towers and so on, a lot of projects in the pipeline that are typically projects that will consume heavy plate. So coming back to our starting point with a strong market position, the best cost position and received by the customers also the best quality on the market, we should be in relative terms, regardless, quite okay.

Okay, that's clear. Thank you. And yeah, good luck with the next phase of your career.

Thank you.

Thank you.

We are now going to proceed with our next question. And the questions come from the line of Patrick Mann from Bank of America. Please ask your question.

Good morning, Martin. I'll get it out of the way up front. So all the best for the future. And it's always been a pleasure to interact with you. So, yeah, thank you very much from my side. I just wanted to ask more of a sort of strategic or philosophical question, I think. I mean, given the pressure that European steel companies are under, I think we've seen a few of your peers starting to look as though the decarbonization plans are sort of either unrealistic or unaffordable. I mean, how is your, and obviously SSAB is in a different position with your geographic location, with the access to the raw materials, with the net cash balance sheet. I mean, do you feel as though you are in a better position overall, given how the market has changed? Or do you think sort of the deteriorating European macro overweighs that? I suppose we're just trying to get a sense of how you think SSAB comes out of this period of pressure to decarbonize? Whether you think it's getting better or worse at the margin? Thanks very much.

No, but as I tried to explain, I think this is much more than just decarbonization. It's about building a cost-effective system for the future and avoiding to invest over time the same amount of money in a system that was originally built in the 60s and keep that system with internal transports of 900 kilometers between the slab machines and the rolling mill. So building an effective system for the future is one important part. The other important part is to continue in our strategic direction to reduce the amount of more standardized products and have the ability to produce special steel products, advanced high-strength steels for automotive over time, but also thin and wide Q&T up to two meters, which we can't produce at all today. And that's where the market is heading. And then, of course, on top of that, avoiding future costs for carbon dioxide emissions. with the CBAM and ETS system in place in Europe. But when we look at the market and the interest from customers, you would then think, or we at least in the beginning thought that this would be mainly a European topic or European focus. Now we see customers from all over the world and from different segments very interested in this possibility to have, call it more environmental friendly products. Given the size of SSAB, the location where we are with the ability to source very high quality iron ore and have a fossil-free grid and so on, I'm still convinced that this is definitely the right way forward for SSAB. hopefully over time the rest of the industry will follow and start to reduce emissions because as you know the steel industry as such stands for seven to eight percent of the global carbon dioxide emissions and that is a problem whether we like it or not that we need to deal with in order to fight climate change and make sure that we leave something that our kids and grandkids can cope with or live in. So I'm not hesitant at all and as I said the alternative would have been then to continue to build blast furnaces and coke oven batteries and that's quite a big undertaking because If you build a new coke oven battery in Oksidesunda as an example, you have to live with that for at least 40 years. And the good thing is that these mini mills is nothing new to us either. I mean, we have been running mini mills now in US for quite a few years. So we know the technique, we know how to deal with it and we have been testing also in our US mills to run sponge iron and a combination of sponge iron and scrap. So I think we are very well prepared for this journey. And then, of course, the business cycle will go up and down, as always, and that will continue in the future as well. So, this is, I mean, the Luleå mill will be up and running Q4-2028, and also the Sund mill will be up and running Q4-2026. And I guess the business cycle will look slightly different than it looks today. Sure.

I mean, it kind of sounds like you're going to end up being the new core of Europe, right? And I suppose the following question there would be, Why do you think the US is so far ahead of Europe on this? Is it just energy costs and access to energy? And is that why? the US sector looks like it does versus Europe in your opinion?

First of all I would love to be SSAB being the nuclear of Europe because they are a very impressive company. When I started in the industry it was in US it was the big integrated guys and now that the industry has changed a lot and we see this highly cost efficient, highly automated, very flexible minimals in US and I think that is where Europe over time will And it's about cost efficiency, it's about flexibility, it's about lead times, it's about a lot of things. And for us on top of that, the ability to continue to shift the mix. And if you take the possibility to shift another million ton, from call it more standardized products into niche products or advanced high-strength steels, it makes a big difference. So I think we will see, and who am I to judge, but I think we'll see call it a similar development as we have seen in US with more minimals and more high-effective, flexible, high-quality producers in Europe as well. And SSAB will definitely be one of them, if not the leading one. Then if we end up as the nuclear of Europe, I don't really know, but that wouldn't be too bad.

Agreed. Thank you.

We are now going to take our next question. And the questions come from the land of Anders Akerblom from Nordea. Please ask your question.

Hi, good morning. Thank you for taking my questions. I hope I'm last in line. So not that many left, but just speaking of the weaker European market, obviously quite subdued, but I noticed that you mentioned that import volumes have been at high levels. So could you please elaborate a bit on this?

But I mean, what is it to say? We see now Chinese material going into Asia and other countries in Asia being pushed out and trying to find other markets around the world. We see, I mean, to call it the biggest consuming segments in Europe and also globally for flat carbon is actually construction and construction in Europe has been for a time now very weak if almost non-existing see some signs as I said in the renovation market that is maybe turning and then automotive overall automotive which is a bit subdued and so it is in that aspect called it the perfect storm then but then of course you typically see the steel industry start to screen for trade barriers and so on and I think it's important to remember that over time what serves us best as a company at least being fairly small but also very call it export oriented on top of our two important home markets in North America for plate and stripping in the Nordics is a combination of free and fair trade and of course if you don't have that combination because the fair trade is also a very important element then you see disruptions Then I would say in relative terms maybe better off because of our product mix and the uniqueness we have in many of our products. If you take the most advanced high-strength steels, martensitic grades for the automotive industry, we are quite unique and some of the products we are actually very unique, no one else is producing it. So it's all about continuing to stick to our strategy and move the mix and come up with more advanced products and better products. And the really, really uniqueness of SSAB, that sounds boring, but it is the inner cleanliness we have in our steels, which is, I would say, state of the art globally. And that's the whole thinking behind this strategy. So continue to move the product mix, continue to implement in a very rigid system flexibility measures and then in the future with the minimals have much more flexibility and continue to take this every day's fight to do things slightly better today than yesterday, a bit better this week than last week and so on and I think that's the Maybe it sounds a bit boring, but the recipe of continuing to develop a leading company. And in that aspect, we are far from done.

No, I appreciate that answer. But kind of what I was, and you touched upon it, but of course, kind of with very weak, you know, certain end markets, key end markets. probably doing whatever they can to kind of support earnings. How should we think about kind of the structural premium to market prices that you've had? I mean, in the quarter, this was, I mean, quite, quite healthy, but kind of going forward, if I kind of read your comment, right, one should maybe not, in earnest, extrapolate the current uplift to market prices, given, you know, kind of the structural overcapacity in China and And, you know, especially with higher imports than to Europe to key and markets. Should we see this then trending down a bit more to its its previous average irrespective of, you know, mix effects and such?

No, but I think the big thing here is the mix effect and call it pricing management then that will give more stability. And when I talk about more stability, I'm comparing to standard steel prices because they will continue to be volatile and they will go up and they will go down and right now they have gone down. So you should expect better stability for our niche products. Will they always be absolutely stable, the margins? Of course not, but much better stability. less volatility, but on a higher level.

Yeah. Thank you.

I know that that doesn't answer your question, but.

Yeah, no, I hear you. Thank you. Looking to 2025, I was just wondering a bit on kind of continuing on the cost side and the trajectory there. I mean, I know that you haven't, it's quite poor insight into this at the moment. So anything you could say in terms of kind of the cost inflation emanating from or the potential cost inflation, I should maybe say emanating from the kind of ETS and the emission rights. What can you say in terms of this?

No, but I mean when it comes to emission rights, as Lena pointed out in her presentation, we are buying. This is a benchmark system, so with us running in the Swedish and the Finnish system, one of the most carbon dioxide effective blast furnace systems globally, we of course are in relative terms a bit better off compared to some other producers in Europe and elsewhere but we still we don't have free allowances to run our production so we need to buy emission rights but we have been doing that for a number of years so the only thing we know with the current policy in EU the free allowances will gradually over time go away or continue to shrink. But in relative terms, given what we have invested with the PCI and everything in our blast furnaces, the very quality effective setup, the very good raw material and so on, we are in relative terms, much more carbon dioxide effective than our European peers. But of course, it will be a cost and it will be an increasing cost if we stay with the current policy. And that seems to be the idea of the new commission for the coming five years.

But with your previously banked emission rights, anything you can say in terms of when this kind of is depleted and when you will be buying to cover 100% of your emissions, what would that kind of give on the call side?

Of course, the timing of that will be, of course, dependent on when, how fast you face out the free allowances. But it will be, I mean, if you look at today at the marginal cost for any European steel producer on marginal tones, you need to take that into account already today. And if you look at the current spot prices, I would say that they are under for a normal European steel producer, it should be under the marginal cost.

Yeah. Okay. And lastly, just on LKB, I know you've gotten several questions on this, but I just want to clarify. You say that this doesn't impact your green steel transformation ambitions, but still, I mean, as I had understood it, you still were planning on getting volumes from LILU after 2030. And I assume now that the, I mean, obviously the input must come from elsewhere. So how will you kind of work to counteract you know, that volume drop off after LKV's announcement.

But what they said, if I read it correctly yesterday, and I have no insight at all, but they are delaying or postponing or not focusing on Kiruna. We are not taking one kilo from Kiruna. We take all the volumes from the Malmberg system, the Southern system. If I read it correctly, they say... But that's at the moment, right?

I mean, you were still planning on getting volumes from there in 2030, but where am I mistaken?

Not from Kiruna, no, no.

Okay, okay.

So they had in practice, they have two systems, the Southern system, which is Yellevar, where we always took our volumes and there they said yesterday that no change in plan. And then the Kiruna system where we never, which is typically shipped out to other customers via Norvik. So two separate systems and we don't take one kilo from Kiruna. I will not in the future either.

Okay, perfect. Thank you, Martin, and also for me best of luck on your future endeavors. Thank you for taking my question.

Thank you.

Thank you. We have no further questions at this time. I'll now hand back to you for closing remarks.

Okay, thank you very much. Thank you also, Martin and Lena. A lot of good questions. Thank you to the audience.

Thank you very much.

And we wish you a nice day.