Good morning, and welcome to this presentation on the SSAB Q1 report. My name is Per Hillstrom. I'm Head of Investor Relations at SSAB. And with us today is Martin Lindqvist, President and CEO and Hakan Follin, CFO. And we have the agenda today.
We will start with Martin Talk you through the Q1, strong quarter. And then secondly, Hakan comes in and gives a bit more details on the financials. And then Martin comes back with the outlook and a summary. And after that, we will open up for questions. But we will come back to that and the instructions.
So by that, please, Martin, start.
Thank you, Per, and good morning, everyone. If we start with Q1, it was a very exciting quarter for SSAB where we took a number of Fairly big steps towards our ambition to become a fossil free steel company and also towards the ambition of Creating the most efficient fossil free value chain together with our partners LKB and Wattenberg. We came out and described the deepened partnership we have with the Volvo Group, Well, we will start to supply them with material fossil free steel already this year for prototyping of their And products, we also came out and with the decision where to put the demonstration plant, the first The full scale production plant for hybrid sponge iron, which will be in yellow water. Q2 is also very exciting because now in our pilot plant up in Ljulje, we will start to produce Fossil free sponge iron using hydrogen to reduce the oxide out of the iron oxide. So That journey continues, and we continue to lead that development.
If you look at other highlights, So we saw during the Q1 good recovery, strong recovery. We saw better prices, higher volumes. And we also saw during the quarter Very stable production and good performance internal performance, good cost control during the quarter. We had an operating result of SEK 1,400,000,000 higher than Q4 2020. And we saw record quarterly earnings both for Special Steels and Tivnor.
Internally, we continue to focus On the ambition to become the safest steel company in the world, we are not there yet, but we are taking steps in the right direction. If we measure lost time injury frequency, Moving 12%. We were at the end of Q1 this year at 2.9%. And if we look at year to date this year, we are Well below 2. Of course, a big part of Q1 and the internal work was All the actions to limit the spread of COVID-nineteen and safeguard the health and safety of our personnel.
I think given the circumstances, we were successful and production and other critical operation have been running according This is, as you all know, far from over and these actions continue into the 2nd quarter. This is order intake, monthly order intake in SSAB Europe, and this is a good See of how the market has looked. And we have seen a recovery since, I would say, second half of 2020 with good order intake all through the period of Q4 and into Q1. And that's why we also Expect to know that Q2 will also be a strong quarter volume wise. If we look at the KPIs For Q1, as said, market recovery strengthened.
We saw better prices, higher volumes and EBIT of SEK1.9 billion or almost SEK2 1,000,000,000 in Q1. We had a net cash flow of SEK1.2 billion, which I think is good given that we were building up working capital, Especially AR during the quarter, and we managed to continue to reduce our net debt according to our internal plans. If we look at the divisions before we deep dive into them, we see that all divisions improved compared to Q1 2020 and had good development compared to a year ago. If we look at special steels, We see strong demand in most markets, I would say all markets. We had shipments at record levels in Q1, up 23% compared to Q1 202027 percent compared to Q4.
We saw an EBIT of 904, Almost 18% EBIT margin or 17.7%. That was due to higher volumes and better prices, Stable productions, and it was partly contracted by higher raw material costs, but also good cost developments. I would say that all the internal KPIs in Special Steels were at good levels. So a very strong quarter from Special Steels.
If we
look at Europe, We saw shipments up somewhat compared to Q1 2020 and Q4 2020. We saw automotive coming back and strong shipments to automotive in the Q1. We saw an EBIT of SEK758 1,000,000 better prices, higher volumes, better capacity utilization, good cost control, Good safety performance, decent production stability. And of course, the prices were partly even here contracted by higher raw material Cost during the quarter, but Hakan will come back to that and the outlook for raw material into Q2. If we look at Americas, we saw during the quarter Improving market conditions, good demand.
We had shipments in Q1 affected by 2 things. We had some weather related issues, especially in Montpelier. But we also, as we talked about last time we met, we went into To the New Year with fairly low slab inventory. So we had lower shipments compared to Q1 2020 And also compared to Q4 2020. We saw an EBIT of SEK268,000,000 higher prices, It's partly mitigated by higher raw material cost, and we also saw here a very good cost control or lower fixed cost compared to previous quarters.
Tiburon, record earnings, I think a very strong internal performance. We saw, of course, that market recovery strengthened during the quarter. Revenue was up, But we also saw the effects not only of better margins and higher volumes, but also the full effect of the cost saving and restructuring program Timor has been running. So they are on a very good level now. And as I said, the internal performance was nothing to complain about during Q1.
Rokke Construction, a positive result given that Q1 is typically the weakest quarter due to the product mix and the weather. We saw if we compare comparable revenues that they were higher than Q1 2020. At the graph, It looks like the revenue was high, but in Q1 2020, building system was still a part of Rokke Construction. But comparable revenue Was up 10%. We saw better volumes in roofing and envelopes, our 2 business units and Decent market for being a 1st quarter.
So with that, Wolfgang, I hand over to you and comments regarding financials.
Thank you very much, Martin, and good morning, everyone on the line. So I will give you some more details of the figures. We'll look at the EBIT bridges, the balance sheet and also the raw material side. Starting with an overview, we had better prices Which improved our results. In terms of sales, as Martin said, we were almost at SEK 20,000,000,000, which was 2nd highest quarter in this 3 year comparison period.
Shipments of more than 1,800,000 tonnes, 3% higher than in Q1 last year and 3% higher than in Q4, which was actually on a very high level. And we also had the, call it, the right shipments. We had Very high shipments from special steel and also automotive within SSAB Europe on a very high level. And you can actually see that in the graph down to the left in terms of EBITDA margin where we had the margin of close to 15%, which was the highest margin in this 3 year comparison period. And naturally, that also results in an high EBITDA per tonne delivered steel of close to SEK1600 per tonne.
If we then look at the development between the quarters and we start with looking year over year, we had an improvement of more than SEK1.6 billion from Q1 last year to Q1 this year. Very strong increase in price coming from prices, SEK1.6 billion. This is mainly SSAB Europe and Americas. We also had an improvement coming from volumes. And here, it's the main EBIT impact is coming from the higher volumes in I should steal because that is where we are earning the most money per tonne we are selling.
This was partly offset then by variable COGS with clearly higher raw material cost. That was actually higher than the SEK 430 we see here in the graph. But we were running production in a stable way. And then we usually have better variable COGS as well. Then we had a few other smaller positive items.
We managed to keep control of the cost, SEK 100,000,000 betters and positive FX. We were running production at a higher utilization level, SEK70 1,000,000. So all in all, stable production is helping the result. But to shorten that, we have better margins, we have somewhat better volumes And also stable production with control of the cost situation. So yielding in total more than SEK 1,600,000,000.
If we instead look sequentially, the figures are obviously different, but the components are actually to a very much large extent the same. Here we improved SEK1.4 billion, and it's coming from higher prices in Europe and Americas, offset them by higher raw material cost. It's coming from higher volumes from special steel. These are the bigger items. Then we have slightly higher fixed Cost.
And one should remember that in Q4, we still had a lot of temporary layoffs, short term working hours, etcetera. We are now running production and overall at a very high activity level, slightly negative FX, but better capacity utilization with increased Stable production and also increased production, resulting in SEK 1,400,000,000 positive. We managed and despite that we were building working capital, we managed to have a positive net cash flow of SEK 1,200,000,000 in Q1, operating cash flow SEK 1,400,000,000 And we were building working capital and especially on the accounts receivable side given the increased sales and higher prices. We had quite low Investments during Q1, only SEK211,000,000 on maintenance and then SEK 100,000,000 on strategic. That will creep up then in the coming quarters.
And we are still guiding for the same amount for the full year, SEK 3,000,000,000 to SEK 3,500,000,000. I'll come back to that shortly. The balance sheet then. We have a well balanced maturity profile. And this headline, it's a bit boring, but we've actually had the same headline now for quite a while, but it's been on this level for a while as well.
Loan portfolio, 5.6 years, So quite long duration. In terms of liquid assets, we did a lot of actions A bit more than 1 year ago in Q1 2020 when COVID was starting to spread, we were up at more than 30% liquid assets over sales. Now we have reduced that down to a bit more than 20%. For the maturities in 2021, it's mainly referring to short term commercial papers. We continued in Q1 to reduce our net debt.
We are now down at SEK8.9 billion. Kvaerner, it was 12.7 percent a year ago, and we're down at the net gearing level of 15%. And given the development we see now and the outlook will come back to, Our expectation is that we will continue to reduce net debt for the remainder of the year. So what do we need the cash flow then that we are generating? We're expecting here for these items, taxes, interest And investment that will be around SEK 5,000,000,000.
We have a range of SEK 4,800,000,000 to SEK 5,300,000,000 CapEx at ZZ, SEK 3,000,000,000 to SEK 3,500,000,000, Clearly higher than last year. We are now we have started the Oksneson conversion then into EAF based production. And we also restarted the capacity expansion of Tempur products in the Mobile facility. Interest paid will be roughly on the same level as last year, no major difference. Taxes paid will definitely increase given that we expect higher profitability overall for this year compared to last year, but around SEK 5,000,000,000 in total for these items.
If we then move over and finally from my side and look at raw material, We have and we are definitely seeing higher prices for iron ore. Our own purchase prices were 40% higher in Q1 versus Q4. And this will have an impact of our result in Q2. Already in Q1, we had an impact of the higher prices that we were paying in Q4 versus Q3, but this has continued now into Q1. And we have also actually seen that the spot prices for iron ore have so far into April, which is Almost the full of April now.
We have seen spot prices increase in April as well. So this will clearly have an impact. On the coking coal side, those have increased as well, but definitely not as much as iron ore. And for us, they're up 11% of our purchase prices than in Q1 versus Q4. But so far in April, contrary then to iron ore, coal prices have stabilized.
In the U. S, for our North American business, we're using scrap, as most of you are well aware of. And scrap prices On the spot market, they increased in Q1. Our own purchase prices were 36% higher in Q1 versus Q4. And here, we turn the scrap around faster than we do for iron ore and coking coal.
So part of this we've already seen in the P and L. We have seen somewhat lower spot prices on scrap in April. And with that, Martin, back to you in the outlook and summary.
Thank you, Hakan. And starting with this picture and looking over the segments, I think it was a while ago Since we saw all this much green on this picture, so we see strong demand in most of the segments and most of the markets. Heavy transport, heavy truck production at a high level, of course, shortage of semiconductors. We see the same in automotive. Railcars still on muted level.
Construction machinery, good trend in the main markets. Material handling and mining being strong. Energy, a bit twofolded. Low activity in oil and gas, of course, but good activity within wind power and transmissions. Construction, seasonally, we will see an improvement versus Q1, which we typically see.
And then service centers, They are both in Europe and in U. S. Having low inventory levels. So we should expect to see also In Q2, some restocking in the supply chain. So overall, a strong to healthy market outlook for Q2.
If we then look at our guidance and look at the volume and pricing outlook, We say that for special steels, we will see somewhat lower shipments. And the reason for that is not related to the market, but we had record shipments in Q1. And we should not maybe expect that in Q2 because we have also lowered due to the very strong demand, lowered inventories in our sales stocks are somewhat lower volumes in special steels. But in Europe and America, sequentially somewhat higher. In Special Steels, we expect the realized prices to be somewhat higher and in Europe and Americas, significantly higher.
So all in all, The demand we see or what we see is we expect demand to be very strong in Q2, driven both by underlying demand and customer restocking and demand for high strength steel is also estimated to be very strong. And prices will be partly, as said, contracted by higher raw material costs into Q2, but overall, a decent outlook. So to sum it up, Q1, strong demand, stable production, record earnings from Special Steels and Tibnor, good cost Control, good safety performance. We have a positive outlook for Q2. We generated positive net cash flow Despite building up especially AR during the quarter, and we expect to continue to generate positive cash flow and as Hakan said, Continue to reduce the net debt.
As said in the beginning, very important quarter for SSAB strategically with our Development, our leading position in fossil free steelmaking, the strategic comparison with AB Volvo, Shipments for fossil free steel for concept vehicles already this year. A demonstration plant now decided where to build it, 1,300,000 tons Of fossil free sponge iron, which will be the feedstock for fossil free steel and the feedstock for the conversion in oxalosund. And during Q2, now in May, we will move over in the pilot plant to use hydrogen to reduce the oxide out of the iron So we will see the first volumes during Q2 of fossil free spondshiron and then fossil free steel. So with that, Per, I think we open up for questions.
Yes. Thank you. Thank you, gentlemen, for the presentation. And before we jump into the Questions, just as usual, a reminder, you're perfectly fine to ask more than one question, but please state them 1 at a time to make this process model. So by that, we'll ask then please the operator to present the instructions.
Thank Our first question comes from Alain Gabriel from Morgan Stanley.
I have two questions from my side. I'll Start with the first one. On capital allocation, you have set an objective of a net debt to equity ratio not exceeding 35%. We are at 15% today, and it's coming down very quickly on spot prices. What will you be prioritizing with the excess cash?
Are you willing to tolerate a near net cash Position at the end of the year? Or will you be flexing your dividend policy? I think that's the first one.
To answer that one, which a very good question, of course. But I mean, our focus is to continue to generate strong cash flow. And then what we at the end do with the balance sheet, so to say, is more Question for owners and AGM. But I expect us to continue to reduce net debt. So that's what we are planning for and aiming for.
Okay. And the second question is on working capital. So assuming today's pricing environment prevails, how much more working capital will you need to invest in during the remainder of the year?
I mean, during the Q2, you should expect that we will continue to build some working capital given that prices Our own prices, as we just guided for, will be higher in Q2 than they were in Q1. So we will continue to build working capital in Q2, yes. And then for the rest of the year, if prices would let's just assume that prices flatten out during Q2, then we should not need to build any more working capital during the rest of the year. But that remains among where prices had in Q3 and Q4.
Understood.
Thank you. Our next question comes from Jacob Bryant from Goldman Sachs. Please go ahead.
Good morning and thanks My first question is just on the restocking comments and your broader market comments. Obviously, we know that inventories are extremely low right now. But to what extent have customers been restocking Through the Q1, as it stands, how much further do you think that has to go? And added to that, What given the strong order intake, how much visibility does that give through the rest of the year?
But we haven't seen much of restocking during Q1. That has been underlying demand. And if you measure Inventories at service centers end of Q1, both in Europe and North America, they are very low. So we have not seen a Big element of restocking in Q1.
And in terms of The visibility that your current order intake provides for the rest of the year?
No, but we see a strong order intake, can see a strong order intake for Q2, and that's what we are guiding for. And then lead times are a bit longer. So there are discussions also Further on, but what we guide for is Q2.
Understood. Just the second question is just If we think over the last 6, 12 months, to what extent do you think your market share has changed in your key regions?
We have seen that we have continued to have good market share in North America. We have actually increased our market share gradually and structurally on the Nordic home market with a lot of good work with Intib Norden and Rokke Construction and SSAB Europe, but also some minor add on acquisitions. And if you look globally on Q and T, I think we have also strengthened Our market share. So my overall conclusions in the markets and the segments will be active. We have not during the Q1 Lost market share, I would say.
Rather on the margin, the opposite.
Great. Thank you.
Our next question comes from Sefra Rosenfeld from Exane BNP. Please go ahead.
Good morning. Two questions, please. First on Special Steel and then secondly on U. S. Plates, please.
On Special Steel, obviously, very good performance in the Q1 of strong volumes. Can you walk us through the market dynamics there? In the past, you've talked Customer upgrading, although there's been some concern that with already high prices for commodity grade products, upgrading could be a bit more difficult. What's the interest from customers in moving to premium products when the entire supply chain is already so expensive? And can you talk us through kind of how we're seeing both volumes And ultimately, the margin performance into Q2?
Thank
you. I think upgrading potential and interest for upgrading It's very strong. And especially with high raw material prices, productivity becomes so important for mining companies and others. So we don't see any Less interest in upgrading. We have also now a number of interesting and new products moving out in the market where we see A lot of interest within the hard ox grades and so on.
We also have I mean, special steel is a variety of different Products, we see very strong demand for what we call in special steels, specialty products where we have even, I mean, the best margin. So We have not seen any signs of reduced interest to upgrade, I would say quite the opposite. And then Q1 was very strong and it was in many aspects a record quarter for special steel. But that was a combination of good demand, good Cost control and also, which is very important, stable production and ability to get out of volumes.
Thank you. For Special Steels into Q2, how can we think about the margin progression? Obviously, that's going to be lagging the more commodity grade and spot oriented businesses. But any sense on the further upside there?
Margins and prices on special steels are over time much more stable or less volatile than standard steels. But as we guide for, we will see somewhat higher prices and counteracted partly by higher raw material costs. But You should expect over time a much more stable margin and price development for Special Steels than Standard Products and that's both up and down.
Thank you. Sorry. And just one last question on the U. S. Your closest to Nucor is making quite a bit of noise, but U.
S. Wind energy is being growth for them going forward, especially Biden's infrastructure bill. Can you talk through your current exposure to U. S. Win and any opportunity to make sure that you don't lose share As Nucor is growing new capacity, it's targeting when?
But we have had a good market share in North America Over time and also in Q1. And if there will be in the future infrastructure bill or Spend or focus on infrastructure, I think that will, of course, be for us very positive. So yes, Good market share development, strong market share in North America and very positive outlook. That's what we see right now.
Excellent. Thank you. Thank you. Our next question comes from Alan Spence from Jefferies. Please go ahead.
Good morning. Thanks for showing that order intake graph again. If I combine it with the 3Q 2020 presentation, it looks like March 2021 was the highest monthly total since June 2019 when the data began. But can you just give us a rough sense of how Q1 or March orders would have compared against the 2018 performance?
I don't remember actually from the top of my head in terms of Hey, Tim, what we can say about Q1 order intake for SSAB Europe, it's been I would say the order intake has been as high as we have wanted it to be because We also have some allocation restrictions, and we don't take orders into way out in time. So The idea with showing that graph was more to show that it's been a very good recovery since a tough year last year, and that recovery continued into Q1. We are more or less fully booked already now for Q2. If we would have had more allocations, we could have sold more.
Okay. Thanks. And for Americas, are you able to perhaps quantify the impact from weather? And then also How are those slab inventories sliding into Q2?
Slab inventories are still on the low side. We expect somewhat higher volumes in Q2 than in Q1, but we still have a little too low slab inventory. The weather related impact was especially in the Montpellier mill. You can see that also in the production data and that we had some Lower production in Montpellier than we previously had. And to make it simple, you can say maybe we lost around 1 week of production due to the weather related issues.
Thanks. And just last one for me. Just in Europe on product mix, how are you seeing demand for the coated products come back as we enter spring? I
would say a fairly normal pattern and we see good demand for painted products as well. So call it a normal seasonal pattern on a high level.
Okay. Thanks, guys.
Thank you.
Thank you. Our next question comes from Carsten Reik from Credit Suisse. Please go ahead.
Thank you very much. Good morning, everybody. First question on the inventory. The inventory increase was rather muted given the increase in steel and raw material prices in my view. I think you hinted already on the Q2 catch up.
But is there I believe is this coming too far, not only the inventory Increase from the steel prices itself, but you need to restock at some point as well. Could we see actually Higher inventories here due to the volume impact. That's the first question.
We are sitting on a bit too low inventories, especially on special steel side in their stock locations, also somewhat on Europe. So No. Ideally, we would like to fill up those inventories a little bit. If the demand continues at this level, there is, of course, the trade off for us To choose between filling the inventories up for long term or actually delivering to our customers who want the material now. So you should not expect a huge Increase in inventory volumes, no.
Okay. Perfect. The second question I have is on the Customer side, given the increase in fee prices we have seen so far, do you get any pushback from the customers on those high prices? Or do they accept Without any money?
We don't get any major pushbacks. The pushback we get is rather related to volumes.
Interesting.
Okay. That were the 2 questions from my side. Thank you very much.
Thank you.
Thank you. Our next question comes from Anssi Kurneyemi from SEB. Please go ahead.
Thanks guys for taking my questions. 2 of them. First one is on the price realization. I mean, that was the key driver driving Q1 earnings up. Could you talk a little bit about the timing of price realization?
What should we expect when we enter into Q1? We saw a big delta in Q1, but should we expect even larger delta when we enter into Q2? How does it work? Thanks.
We do have a lag in prices. It varies a bit between divisions and also it varies a bit depending on how long order intake Order book we have. But you should expect for especially special steel and for Americas that they will have significantly higher prices in the second quarter compared Q1 sorry, Americas and Europe. And then somewhat higher for Special Steel. And as I said before, both prices and margin are much more stable for Special Steel down for the more, call it, more standard divisions than Europe and Americas.
So You will see significantly higher prices in Q2 for Europe and Americas.
But you don't want to kind of indicate will it be higher compared to Q1 development or slower?
What we said is that we will see Significantly higher, which means actually more than 10% higher for both of those divisions.
Okay. Then just
a small question on Tipenor. I mean, record margins, regard to profits, to which extent it was due to higher selling prices? And to which extent the restructuring And a better operational performance? Thanks.
It's a combination, higher prices that gives also inventory gains. But I would say The program they have been running with lowering structurally costs with a bit more than SEK 200,000,000 on a yearly basis is now, I mean, being seen we started to see it in Q4, but that is in place. And so it's a combination. But the underlying performance was really good due to that program and other measures. And then as I said, they have been also taking market shares On the Nordic market, which was also planned for and done a lot of actions to do that.
Okay. That's all from me. Thank you very much.
Thanks, Anse.
Thank you. Our next question comes from Patrick Mann From Bank of America. Please go ahead.
Hi, good day guys. Thank you very much for the call. I had a follow-up From the previous question, I think just around prices and how we should think about that coming through into Q2, It might be helpful if we can get an idea of the how much of your sales are on contract and over what What kind of period those contracts would be? So that would be my first question, if you could give us more detail around that.
That also varies a bit by division. If we start with Americas, It's a fair amount that is on quarterly contracts, and therefore, we naturally have a lag on those. And we also have a fair amount which is on spot prices. But even with spot prices, you also get the lag because the orders we take now, we don't deliver now. There are a few months or at least 1 or 2 months lead time.
So even on spot orders, you will see a lead time. So To simplify it, you could say that it is almost a quarter lag between spot prices and realized prices for us. If you take Europe there, we also have on top of the quarterly contract and some spot prices, we also have some half year and a very small amount yearly contracts. So the half year contracts or the yearly ones are obviously not renegotiated now, but the quarterly ones will be. But also for Europe, you can say it's To simplify it a bit, it's almost 1 quarter lag.
For Special Steel, it's a bit different because and more difficult maybe for you to assess because there You don't have spot prices in the same way. And again, repeating myself a bit, but they are not moving as fast as they are moving for Europe you report for Americas. But also for Special Steel, there is a quite big amount that is still quarterly prices for Special Steel, roughly half or something like that.
Thank you. That's really helpful. And then the second question I had was, in the market where you've got Like at the moment, it is just so tight and it's you obviously can't satisfy all your customer orders. Can you help us understand a little bit how do you manage or how much flexibility do you have between kind of special And I suppose the more commodity grade steels in your kind of dual plants. And how do you choose how to allocate your production And the raw materials.
Do you know what I mean? Is there a mix impact
in the past
markets, yes?
We have some flexibility, of course. I mean, but we are trying to max out now special steels and special steel products And because that's our most important segment, so we try to do as much as possible within that segment. So that's what we are trying to do. And then of course, we also try to honor volumes to, call it, long term customers.
Okay. Thank you very much. That's all. Thanks.
Thank you. Our next question comes from our Chris Bauermeister from Kepler Cheuvreux. Please go ahead.
Yes. Hi. Morning all. Yes, most questions are being well answered, but maybe a A brief follow-up on the comments you made on restocking. As you said, you're not really seeing restocking taking place in For Wei, even though you mentioned that in your outlook statement, is maybe can you give us a sense Would you think about supply elasticity going forward?
Would you see there's a better ability for clients and service centers to restock? What's your view on the supply dynamics worldwide outside of China? Maybe that's the first question. Then I have a small follow-up.
I mean, we do it exactly as you do. We look at the inventory levels in the supply chain and realize that we are on low levels. And that Usually means, of course, that we need to see some restocking to come up to more, call it, normalized level given the sales volumes. So that's It's our only reflection. We expect to see some restocking in Q2.
I mean, today, they are buying from hand to mouth and still Fairly low inventory level. So then at some point of time, it needs to be restocking in the supply chain. But we haven't seen that in Q1 to any large extent at all.
And obviously, we are writing about it in the report that there is demand For restocking, but I would say so far there has not been supply enough for restocking. So even if probably some of our Customers and service center have wanted to do some restocking. It's just not been possible for them yet at least to restock.
Yes. I think this is exactly what I was trying to point to. How do you think will be that Demand for restocking be satisfied, would you expect there is still a bit of a headroom among the European Production base? Or do you think that at some point in time, there will be more supply Coming up worldwide because global price levels are that high now?
I guess. So I know that some of our competitors have had weather related problems and so on in Q1. So we might see higher supply. But As said, I mean, our visibility is into Q2. And as Hakan said, we have a very good order book For Q2.
So we will not see that in SSAB in Q2.
Right. And then briefly on your margin evolution at Specialty is I think pretty impressive how margin has gone up. Can you help me a little bit to understand the dynamics Of the margin per ton improvement quarter on quarter, was that more of a fixed cost absorption story? Or is it That the pricing components has done well despite the fact that you're flagging that the prices aren't necessarily moving so much compared to the other 2 divisions?
It's a combination of a lot of things. But as Hakan pointed out, we have seen very good production levels. We have also We have also structurally worked with production stability, yield development. So we saw very good production stability, Good demand, good cost efficiency, good yields, good sequence length. So It was in many aspects a strong quarter.
And then you see margins like this. So it's a combination of a lot of things.
And I would also add actually mix within Special Steel. Even though we only present Special Steel as 1 division and as kind of a lump sum of volumes, there's, of course, also mix differences within Special Steels. And they have been working quite a lot. We're trying to improve their relative mix. And I think that has been successful.
And there are a couple of product groups with very impressive margins that we are focusing on.
Okay. That helps a lot. And yes, well done. Thanks.
Thank you.
Our next question comes from Christophe Schren from Handels Sven, please go ahead.
Firstly, if you can Comment on the growth rate for shipments in material handling during Q1 and perhaps also the visibility out there. I would assume That it's going to improve quite a lot in coming quarters. We're looking at order intakes for mining suppliers recently. That's first one.
Materielhalli was actually one of the few segments that were really stable also last here, but it has continued on a good level. So for Special Steel, it's actually been other segments that have been coming back more like heavy transport and construction machinery. But overall, the demand from material handling is good. And as Martin said, they are also looking With the high prices for, for example, iron ore but also other raw materials, we do expect material handling to stay on a High level with an increased focus on productivity and efficiency.
All right. And then the second question, just on the incident you had in Loulo with the roof during the quarter. I think you commented when it was back up But you didn't expect it to affect shipments because of inventory. Was that the case? And was there any sort of earnings impact to talk about here Thank you,
Arnd. We did lose some production of slabs in Ljubljie, but we could manage that by Inventory and also by using slabs from Rauht, Boling. So in terms of shipments, no real impact. In terms of production, We lost some production in Loulio maybe. I think it was in the end 2015 or up to 20,000 tonnes.
So Not a major result impact, no, but slightly.
Our next question comes from Christian Kopra from Nordea. Please go ahead. The Nylon is now open.
Okay. Thanks, operator. Firstly, on question on the steel market. Just wondering a little bit With these extremely strong price that we're seeing on the screens, what kind of risk do you see? What keeps you awake at night?
Is it Primarily weakening demand or is it increased imports into Europe or increased supply perhaps?
But if you have a hard time sleeping, you should not be in this business, Christian, as you know. No, so nothing really of course, there are always risks. And the market is obviously a bit different compared to very different compared to a year ago. I think what is important to realize That this pandemic is not over yet and we are still I mean, the world is still struggling with it. And that is, of course, one unknown that we need to handle.
We have been successful so far of keeping the disease out to a decent a good extent given the circumstances That were mills, but that is of course a big question mark. What will where will this go and when will this eventually be over? That is one big question, Oskia.
Yes. But you're not so afraid of a lot of volume coming in from Other plates in South South Europe?
What we see right now is a strong demand in, I would say, many other regions than Europe, in Asia, North America and so on. So Of course, there will always be trade flows over time, but that's we are used to that. That's what we are living with, so Sure.
On Special Steels, obviously, exceptional margin here in Q1. Just if I understood you correctly, if you said it, Martin or Hakan, I don't remember. But yes, I think you said You expect prices in special steels to go up in Q2, but you expect the raw materials to partly take out The impact from higher prices. I just wanted if that was a correct interpretation of your words.
Yes.
Okay. But so that means basically that if everything remains equal with the same volumes, okay, now you guide for slightly lower volumes. But I'm just trying to understand the underlying profitability of Specialty Steel. So you should be able to keep very high margins in the current climate.
Yes. And then as Hakan pointed out, I mean, a bit sloppy maybe, but we talk about special steel volumes. But there is a difference within special steels and there is Potential for further mix improvement over time as well, not maybe quarter over quarter, but there are some products there that are, Call it impressively profitable. And so there is still I mean, we are not ready with Special Steels, there is mix improvements. We are now also investing in volume and capabilities in mobile.
So You should expect special steels to be on a journey, not at the end state.
Yes. And finally, I know in Oksyleson, Is there a scenario where you would consider to take the final Small cluster and the stuff running again?
Not really, to be honest. I mean, we have enough slabs in Oxilacao to Support Oxalozond and also the slab need for Boraleg. So I would say that, that would be I mean, if we would start it wouldn't give so much to restart that blast furnace and that would mainly then, I guess, end up as Over time, hot rolled coils, which is not our preferred product. So you should not expect us to reignite the blast small blast furnace in Oksilsund.
Okay. Okay. Fine. And then finally for me on the I don't remember if you talk so much about it today, but the electric arc furnace in Oksylicent in 2026, right. So that is is the risk there still That the risk is primarily attached to getting the high voltage cable in the time?
Yes, okay. So how does it look Is that anything happening or just
I'm just looking on the margin better and better, but that's still the unknown. I mean, the thing that we can't influence fully ourselves, but it's moving in the right direction. So we are still confident that we will be up and running 2026.
Our next question comes from Oskar Lindstrom from Danske Bank.
Hi. Good morning, everyone. Two questions from my side. I'll take them 1 at a time. The first one is something that a couple of questions have been around here.
But I mean, on mix Change. I mean, given the strong demand, are you able to, on top of higher prices, to also sort of have a Positive mix change in coming quarters as you're able to sort of pick more attractive orders and So higher end product?
What we typically see, I mean, is the seasonal mix improvement in Europe, Of course, with more color coded and so on. But on top of that, we try to prioritize, call it, the most profitable mix as well When we are short of volumes on a total level?
So yes, we should expect a positive mix impact On top of the seasonal one in coming quarters?
Well, that I mean, you should expect the seasonal mix change and then Gradually, but that is a long more a long term work. But you should expect us over time to continue to improve our mix, yes.
All
right. My second question is a little bit on sort of Projects here and what you're going to do with the cash. I mean, you're now restarting the quenched and tempered project in Mobile. I mean, number 1, could you please remind us of the impact of that project and if anything has changed since when it was Launched? And what kind of pipeline do you have of other expansion projects that you could do I sort of start relatively quickly in these good market conditions.
The one thing that has changed for what we call the expansion of QL6 in North America is the timing Since we put that on hold last year in order to preserve cash, so the start up of it will be mid end next year instead then of 1 year earlier since we basically delayed it 1 year. And that will add close to 100,000 tons of new quenched and tempered capacity, mainly for the North and South American market. We, of course, and if you ask the divisions, they have 100 of ideas of new investments and interesting projects, etcetera. And We have increased our expected investment level from what we've done before. And I would say there's not lack of ideas.
If we could turn on the switch for new production capacity today, which would be available tomorrow, we would be able to do that. But These projects are, of course, more long term. And therefore, we evaluate every individual project, and it needs to be Not just profitable in the extremely strong market we see right now, but also over a cycle.
So no there's not going to be a bunch of new projects announced Sort of the second half of this year from you guys or
Not because of that we have high steel prices at the moment. No. There might be that we New investment, but then it's because we think these are the ones that long term will continue to develop SSAB with more High end, high string steel products, that might come, but that will be regardless of the current high steel prices.
All right. Thank you.
Our next question comes from Bastian Synagowitz from Deutsche Bank. Please go ahead.
Yes. Good morning, gentlemen. Only two quick ones left from my side. So just firstly, on your maintenance schedule, which I saw you adjusted a little. I'm wondering whether you still see any scope to push out the maintenance even further to capture the very strong margin environment In the second half of this year and maybe in that context and in the context of your slab inventory being suboptimal, as you said earlier, have Fully mixed out your leeway to improve your output yields while feeding in scrap into your European system.
Those are my first questions.
In terms of maintenance, yes, we adjusted but only minor and that's more related that we know more than we knew before. So But we are looking at can we shorten a day here or a day there. But most of these for some for different reasons, we need to keep them at a certain length, and we need to do them at this time when we are planning to do them. So overall, you should not expect that we will be able to No. Skip the outage in special steel or anything like that.
They will be more or less according to the schedule that we presented in the report. And in terms of scrap in the blast furnaces, yes, we are definitely doing that. And to a large extent, that's also one reason why you can see very high crude steel production in special steel.
Okay, perfect. Then my second question is really more on the strategic side and just coming back on this Etchouk Greensteer project. So from what I understand, the second financing round for the project is done. And it was you said so far that you wouldn't be interested Had to participate. I just wanted to confirm again that you or any of the entities you're involved in did not participate in the 1st or second financing round.
And I guess what I would like to understand is just whether you would rule out a scenario similar to U. S. Steel in the U. S, which obviously took over and consolidated Big River Steel After the project had been developed off balance sheet?
No. But we have not participated in any financing round. And We have our ambition to lead this development, and we are investing and working together with Vattenfallen, LKAB and now Volvo and some other partners To do the create what we call a fossil free value chain all the way from the iron ore up in the mountain in the north Until finished products out with end users. So that's what we are aiming for, and that's our strategy and our ambition and our target to continue to lead that development. Then of course, it's positive that other companies get inspired with what we do.
So But apart from that, we have our own agenda and we will continue to work with that one.
Got it. Okay. So no change really from versus before? That's been very clear. Thanks so much, Martin.
Our next question comes from Alan Gabriel Morgan Stanley. Please go ahead.
Yes. I have two follow-up questions short, if I may. So on Tibnor, how much of these profits were driven by windfall gains? And how much Of these profits can be repeated again in Q2? That's the first one.
We don't specify that exactly how much was The windfall gains, but it was a significant amount of the result, yes. And can the and then if you look only into Q2, well, so far, we have seen prices increase also in Q2. And if that trend continues, you would see inventory windfall gains also in Q2 for Tiburon.
Okay. That's very clear. And the second question is on the cash needs. So the total figure you've guided for is SEK 5,000,000,000 On the midpoint, which is predicated on 2019 EBITDA levels. Is that correct?
And if so, how should we think about that level? Is it fair to say it's going to rise to SEK6 SEK500,000,000 if you take the Q1 EBITDA annualized?
It's fair to say that if the full year EBITDA is higher than in 2019, you should expect that the taxes Paid will be higher as well then. And to simplify it also, Alain, you can say that The higher the profit we have, the closer both the P and L tax and the cash tax will be to roughly 20%, which is then the average tax rate in our core markets.
Okay. Very clear. Thanks.
Thank you. Our next question comes from Christian Aderwal from Citigroup. Please go ahead.
Hi, thanks a lot for taking my question and apologies for my crockery voice. I'm suffering from the cold. You mentioned about adjusting the maintenance schedule for a company in Q1 going into the Q3 and the Q4. And then you've guided for Stronger order book for Q2 in Europe. So is it fair to assume that Gunga sort of strictly fair for you to have a better
Sorry, Christian, what's your question on the maintenance schedule for SSAB Europe, if we can shorten it or?
Yes. The question is that, okay, you've redeemed maintenance expenses for Q3 in the Europe and then you guided for a stronger order book. So is it fair to assume that the usual seasonality in the Q3 in the Europe is going to be lower this year?
If the maintenance will be lower this year in Europe compared to 2020?
Yes.
They will be according to the schedule that we presented. I don't Exactly how it was compared to 2020, but I think it's roughly on the same level on the top of my mind.
Yes, it's slightly higher.
Last year, it was slightly lower last year because then we were using a lot of our own personnel as we were not producing as much. And this year, we Producing more and then we need to take in some more external people. So slightly higher this year, but more or less Not a big
change. Understood. And then moving on to the Americas, I mean, the scrap prices have been going up. Would you be able to quantify the mix of the scrap input between the prime scrap and the shredded scrap There?
Yes. You can say it's a little bit on definitions, but the way we define it, prime is quite small. It's mostly in Alabama where we have the cutie lines. So The way we look at it, not more than 10%, 15% is mostly shredded. What you see on, For example, shredded Midwest is usually a good indication.
Okay, okay. Got it. That's all from my
side. Thank you.
Our next question comes from Andrew Jones from UBS. Please go ahead.
Hi, gents. I've got a couple of questions. First of all, on your Greensteel, the strategic cooperation With Volvo, I was wondering if you discussed anything regarding pricing and the potential premium for your green steel products as part of that Agreements and if you can give us some sort of steer as to what sort of green premiums might be expected with these sort of sales going forward. That's the first one. And then just secondly on If
I take the first one first then. I mean that's part of the cooperation as well try to figure out what the market is the end customers are willing to pay, what premium they are willing to pay For fossil free equipments, I would say. So that is part of the corporation.
But have you I mean, if you were making a sort of decent guess as to what customers are willing to pay based upon your Or the conversation, not just with Volvo, but with other customers who sound the
It's a combination of it. Without quantifying it, it will be a premium product. So but then also the combination is Amit, it's more interesting to talk about the margins. And that will also be dependent on the cost of emitting carbon dioxide. So it will be A premium product with a premium margin without quantifying.
You need to remember that we are starting now In Q2 to produce this fossil free steel at fairly low volumes. The big volumes will come 2026 and the market It will develop towards that as well. But what we have seen is a very big interest from different customer groups and different segments.
Okay. Okay, fair enough. And on just on the second question, I was going to ask. I mean, you've obviously You mentioned that you haven't seen a significant impact of restocking during Q1 and customers still sort of hand to mouth. Personally, I'm a bit surprised by that given the strength of the Pricing compared to what we see in the end markets.
And you've got auto, which is sort of kind of stuttering because of the semiconductor thing. Nonresidential construction is obviously Not back to previous levels. So it seems like in most end markets, it's we're not really back to sort of, say, 2018 Levels. I mean, where are you seeing that strength? If it's not in non resi or it's not And it also is kind of not really booming right now.
I mean, where is that incredible strength coming from to justify The tight market when all pretty much all European bus vans are switched on and as we and we still see prices Climbing every day. I mean, what do you put that down to?
We see strength in the markets in almost All segments. And I think also even if you take auto, and yes, they will be having maybe some semiconductor shortages, But they were starting from quite low inventory levels, which I mean, excuse me, during COVID last year, most customer segments, including service centers and distributors, they were reducing their inventories quite a lot because they no one knew where and how long this would last. And now what we are seeing is that it's not that they're restocking up to high inventory levels. It's more that customers are restocking up to still to fairly lower inventory levels. So we see it across most segments.
And then you're right that now most blast furnace in Europe are restarted again, but that actually happened quite a lot during Q1 as well. So all that Capacity has not been online yet either.
Okay. So you are saying that Although it's not restocking at service centers, there has been a certain amount of restocking at the customer end from a low level to a kind of Mediocre level, but it's the demand growth has been more kind of restocking than real demand from what you should be
No, I wouldn't say that. I say there is a demand for restocking, but the restocking has not really happened yet because there has not been supply in the market. So it might be that the restocking will happen now in Q2 and into Q3. But There is demand for restocking, but we haven't really seen it taking place yet, at least not among our customers. And We've been very careful to make sure that the volumes we have, we are distributing them or allocating them between the customers so we don't get the big restocking impact at certain customers.
Okay. Okay. Thank you.
Our next question comes from Luke Nelson from JPMorgan. Please go ahead.
Hey, apologies for the late question. Just on the market environment and just on safeguards, can you just Remind us again of the sort of critical path towards a decision. And then maybe if you have any views around the potential for it To be rolled. Obviously, WTO has come out last month and said sort of need to prove It continues suffering from the steel industry, which appears unlikely given the current profitability. Just be interested to your views and The likelihood that it may indeed be rolled, that's my first question.
Yes. Look, you were referring to the safeguard quotas in Europe, and that is coming up now for a possible extension mid this year?
Correct, yes.
Yes, okay.
I don't have any insights on that one actually.
What we can say is There is a lot of noise in the market that the safeguard quotas need to be taken away, and it's hurting the steel consuming industry in Europe. But What we are actually seeing is that they're not being filled up. I don't have the exact figure right now from top of my head, but in Q1 overall, it was actually Quite a low level that were being used. So it's a bit strange, the quite tough discussion that they need to be removed while they're on the other hand not being used.
Very clear. And just the last one for me. Just following up on the prior question on the Volvo agreement, not necessarily on the pricing dynamics, but maybe how you think The evolution of those contracts might move in terms of sort of annual or more of a reference To spot pricing or sort of volumes, how do you think that could potentially Evolved. Basically, will they be sort of a product or a customer where they end up being quite sticky in terms of Volumes to specific steel producers?
We are not there yet. I mean, we are now starting to produce the first batches of For sulfur steel in Q2 and at fairly low volumes, we will gradually ramp it up. That question is more valid from 2026 when we have big volumes seeing serial production. So let's come back to that. But I mean, for us, this is nothing strange.
I mean, SSAB is typically working together with customers and end users, developing new products, new steel grades, new ways of working. So this is, in that aspect, what we are used to and what is in our DNA.
Sorry, Philippe, can you jump? I meant on a sort of a 2026 to 2,030 time frame, do you ultimately think The product group for Green Steel will be sort of more of an annual contract basis similar to sort of Auto contracts that we see at the moment? Or would they be more variable sort of quarterly? Or is it
still just too early to tell?
I think it's too early to tell.
Sure. Thank you.
Thank you. There appears to be no further questions registered, so I will hand back to the speakers.
Okay. By that, we Thank you for all the questions. And then we are ready to close this Q1 call. So we thank you for the attention and wish you a pleasant day.
Thank you. Bye bye. Thank you very much.
Thank you.