Okay, good morning, everyone, and welcome to SSAB's conference call for the third quarter. My name is Andreas Koch, Head of Investor Relations, and here in Stockholm, we have Martin Lindqvist and Håkan Folin, that will present the report. After the presentation, we will open up the floor for questions over the phone as well as on the web. So Martin Lindqvist, please
Thank you, Andreas. Good morning, and welcome to this third quarter report. To start with, and these are all pro forma figures, we had sales of just above SEK 15 billion, SEK 1.2 billion better than compared to pro forma last year. We had an EBITDA of almost SEK 1.25 billion, and that is an EBITDA margin of 8.3%, and an EBIT of SEK 409 million, compared to -SEK 521 million for the third quarter last year. The improvement compared to last year is mainly due to increased prices in Americas, lower costs in Europe, but also to better yield and better cost position in our North American operation.
If we look forward, I would say that the signals we see are fairly mixed, but if we look at the underlying demand, it's fairly stable. It's fairly stable in North America on decent levels, and it's fairly stable in Europe on low levels. When we look at special steel, also, that demand for special steel is expected to be flat going forward. Fairly good in U.S., in Europe, fairly low and slow, but no big changes compared to what we have seen previously. As said, sales of SEK 15 billion, an EBIT of SEK 409, and we typically measure EBITDA per ton, and we are, in Q3, at least approaching 800 SEK per ton, and as said, with an EBIT margin of just above 8%.
This is a picture showing the three first quarters, the sales, and the EBITDA contribution. SSAB Europe is the biggest division when it comes to sales, 36%, followed by SSAB Americas and SSAB Special Steels. When it comes to EBITDA, SSAB Americas is with 33% of the EBITDA, the biggest contributor, then followed by SSAB Europe, and then SSAB Special Steels. When we look at the key segments we focus on, and how it looked during Q3, I would say overall, fairly stable and in line with our internal expectations. Heavy transport remained strong in the U.S., mainly driven by the development in the rail car business. We saw a fairly good demand in Q3 for trailers. Automotive, fairly okay, and fairly stable.
Construction machinery, we saw some small signs of pickup in the lifting segment in the U.S. from very low levels. Yellow goods, a bit more uncertain during the quarter. Mining, no major changes during the quarter, and energy continued on a stable and good level. Construction material, well, we have a seasonal pickup every year in Q3, and we saw that in Q3 as well. And the service centers were buying on, call it, fairly normal levels, even though the high import has made that the inventories at the end of Q3, beginning of Q4, were slightly higher than normal. If we look into Q4, we continue to see fairly stable underlying demand, with two exceptions. Construction material, well, we see that Q3 is the strongest season of the year, and it typically goes down a bit towards the end of the year, and we expect that to happen.
Service centers, well, apparent consumption, given slightly higher inventory levels than normal, also going down, and we typically see also a year-end effect. So we are expecting lower volumes from US service centers. Some words about the market environment, and World Steel Association just released their latest forecast or report. They have seen that, or they expect or estimate, that the production increased globally with 2%, the first nine months of the year. Fairly evenly spread. Production in EU increased by 3%, and then 2% in North America, and also 2% in China. Market prices in Europe for both strip and plate products recovered slightly during the third quarter. And in North America, prices continued up during Q3, but at the end of Q3, beginning of Q4, the prices flattened out.
In China, both strip and plate prices continued to show a negative trend, and inventory levels in Europe are on a balanced level and slightly higher than normal, as said, in North America. Going into the divisions, SSAB Special Steels had an EBIT of -61%. We had the usual summer outage in Oxelösund, and here we have, this is a volume issue in SSAB Special Steels, in combination with the outage in Oxelösund. Shipments were slightly higher compared to Q3 last year, but of course, lower than versus Q2, and that's due to the outage and the seasonal effect. Stable demand on a low level, I would say, in all segments. We had slightly higher prices in Q3 versus Q2, but that was purely a mix effect.
SSAB Europe, an EBIT of SEK 61 million, compared to SEK -280 million last year. The improvement compared to last year is higher volumes and lower costs. 5% higher shipments compared to the same quarter last year, and lower shipments compared to Q2 due to the outages. And I said, relatively stable underlying demand. SSAB Americas, EBIT of SEK 558 million, and an EBITDA margin of 18.5%. And that is, of course, due to higher prices and improved productivity in our North American mills. Shipments increased compared to Q3, and also compared to Q2 last year. And prices, as an average in our production, came up with 2% compared to Q2 2014. Tibnor, we saw also here improved gross margins.
We had an EBIT of SEK 36 million compared to SEK 4 million last year, and that was mainly due to higher gross margins. Shipments decreased slightly compared to the same quarter last year. We saw a fairly good development in Sweden and Denmark, and Finland and Baltics were a bit slower than last year. In Ruukki Construction, we had an EBIT of SEK 72 million, compared to SEK 128 million last year. The lower result was mainly due to some one-offs, and also the weakening of the Russian ruble. If you put that back, we had the same EBIT level as last year. Yeah, I think that was my start, Håkan?
Good morning. I will present some more details on the figures, and I will also get into the financing and the liquidity situation. The figures Martin presented was pro forma, as if we had owned Ruukki for the whole period, and actually even going back to end of 2012. I will present more figures on the actual result, which means that we consolidate Ruukki from twenty-ninth of July. Also, Martin and myself will most of the time present the figures excluding items affecting comparability, but I will get back to some details on what these items are. So the actual figures then for the quarter is that we had sales of SEK 13.3 billion, which was an increase with 53% compared to the same quarter last year.
Naturally, the increase was mainly due to that we consolidate Ruukki for two months. That was 41 percentage points. We had also higher volumes, so that helped with 8 percentage points. We had higher prices and also FX, which helped with 6. And then on the negative side, we had slightly worse mix, negative 2%. But all in all, an increase with over 50%. The main message for the quarter is the strong EBITDA improvement. As you can see, we had last year, in third quarter, an EBITDA of basically zero, and we had this quarter an EBITDA of SEK 1,246 million. Also, on an EBIT level, we have a very strong improvement compared to last year, where we last year had -SEK 600 million, and we now are slightly above SEK 500 million.
I will show you now where the improvement is coming from. Ruukki is contributing for the two months where we consolidate them with SEK 171 million. We had higher volumes, SEK 120 million. Then a big impact here compared to last year is the better prices, which helps with SEK 500 million, and that's mainly due to the higher plate prices in North America. We have lower variable COGS as well, SEK 230 million, which is, to a large extent, due to the reduced raw material prices of iron ore and coking coal. Then we have some others totaling SEK 90 million, where we have FX included there, we have Tibnor ex- included there. All in all, then, going from -SEK 600 million up to SEK 510 million.
If we looked at it sequentially instead, it's a little bit of a different picture. We start then with an EBIT at SEK 267 million for second quarter this year, and Ruukki is contributing here as well, of course, with SEK 171 million. Then we have a negative impact on the volume side, and this is mainly due to that we are selling less of the high-margin products, the ones we now have in the division called Special Steels. So we get a fairly big negative volume impact, SEK 230 million. We see better prices also comparing to Q2, and that's North America again, but it's also actually we see better prices for other product groups as well.
We have lower variable COGS, which is, again, partly due to the raw material, but it's also because we had an outage in Mobile during the second quarter. When we are up and running fully, then we get the better lower variable COGS as well. The big negative part, which is included in other, is especially under absorption cost. Since we have outages during the summer in our Swedish mills, we get higher under absorption than we had during the second quarter. But all in all, we see a sequential improvement with roughly SEK 250 million. Getting into some more detailed figures here. We have a number of items which are affecting comparability. For this quarter, we have acquisition cost of almost SEK 100.
That's mainly advisory costs. And then we have something which is SEK 144 million of non-recurring depreciation and amortization on surplus values. We have not yet made the final purchase price allocation for the acquisition of Ruukki. We have a total surplus value of SEK 6.4 billion, which we will allocate from goodwill, and then to other asset classes. What we've done so far is for the inventory finished goods, and for the order book included in Ruukki as of the transaction date, these we have valued at market prices, and we have started to depreciate them. So that's the SEK 144 million. In total then, on EBIT, it's approximately SEK 250 million, which is the impact.
Then we have on financial items, we are paying a transaction tax, which is a Finnish standard tax on acquisition of shares, 1.6%, and we also have other financing expenses, mainly bridge financing. These two items are SEK 229 million in total. So impact on profit and loss after financial items is -SEK 483 million. At the Capital Markets Day, we guided for SEK 325 million, and that was the combined of the acquisition cost, the transaction tax, and the other financial expenses. And if you add them up together, they are actually now SEK 328 million. So this is what has impact in the actual result.
If we turn and then look at pro forma, in the pro forma, we have put all the surplus value on goodwill, so the depreciation you saw on the previous page is not included here. We have impacting EBIT of SEK 186. That's the same acquisition cost as you saw on the previous page, but it's also adding then the Ruukki acquisition cost into this. The financial items there on SEK 229, well, they are the same as you had in the actual result. Okay, looking then at the cash flow. We had a positive operating cash flow of SEK 77 for the quarter. It was positive, but it was still rather much weaker than what we saw in Q3 last year.
The main reason for this is the increase in working capital, where we have a negative impact on cash flow on SEK 585. This is, to a large extent, due to lower accounts payable, which we see as a temporary effect, and we expect to reverse during Q4, but also because we have higher sales in North America with higher accounts receivable, and also we have increased inventory in Montpelier ahead of the Q4 outage. We also see that this year, as we combine with Ruukki, we have higher maintenance expenditures during this quarter, since we have the summer outages, both in the Swedish mills and also in the Finnish mills. Turning now to the financing and the liquidity situation. The big change during the quarter was that we incorporated the net debt of Ruukki.
So, in total, the net debt have increased with SEK 8.1 billion since the end of the year, and it's now at close to SEK 23 billion. Out of Ruukki's total debt, we took over almost all of it. We repaid SEK 54 million, but the rest of it, SSAB we have assumed, and we have done this without any financial covenants. The net gearing now is at 53%. It was at 55% at the end of the year, so it has decreased slightly, and we have a very strong liquidity preparedness. It's now 24% of rolling 12 months sales. On the loan portfolio, the average term is 3.7 years, and we have an interest term of 1.4 years.
This is a debt maturity profile, where you see that we have a fairly even spread for 2014, 2015, slightly lower 2016, and slightly higher in 2017. What we have maturing now in 2014 is, especially one Swedish bond and one, Finnish bond, or, euro-denominated bond. But on the other hand, we have significant amount of cash and backup facilities, so we foresee that the bonds that needs to be repaid during the end of the year, we will repay them then with our existing cash. The interest rate is unchanged, basically, since we took over Ruukki's debt, it's slightly lower than 3%. The duration is, however, slightly lower as well. The reason for the lower duration is two reasons. One is that, well, since Q2, we are one quarter later, and we haven't done any refinancing.
And the other reason is that, Ruukki had more, financing in commercial paper than SSAB did previously. So we're down now at 3.7. On the other hand, when we repay these bonds during Q4, we expect that, we will reverse this trend as well. Finally, then, on the raw material side, we have seen year-over-year, clearly lower prices for iron ore and for coal. For iron ore, it was 8% lower than Q2, but 26% lower than Q3 last year. Now, as a combined company, we will have dual sourcing of iron ore. We will buy from LKAB, but, Ruukki has previously been buying from Severstal, and that's something we will continue with in the combined company. The main part of the pricing will still be set on a quarterly level.
For coking coal, it's been fairly flat now the last few quarters, but if we compare to one year back, it is down with 16%.... And also here, we will have a broader supplier base in the new company. All the SSAB used to buy from Australia and the U.S., we are now also buying from Canada and Russia. And then finally, scrap, which actually is showing a fairly different pattern than iron ore and coking coal. While iron ore and coking coal year-over-year are down quite significantly, scrap is basically unchanged since end of Q2 last year. And actually, it's fairly unchanged also since end of Q2. So we haven't really seen the same trend for scrap that we have seen for the other raw materials. Okay. Back to you, Martin.
Thank you, Håkan. So some words about the outlook then. Well, in North America, we expect good demand to continue, but we expect also to see a normal seasonal slowdown towards the end of the year. As you know, there is currently high import of plates and coiled plates into the North American market, but trade actions might change that situation. And from the sixteenth of December, there are import duties on coiled plates from Russia, and they are currently the biggest exporter of coiled plate into the North American market. We will have a maintenance outage in Montpelier during Q4, and it's ongoing and developing so far according to plan. And the actual cost for that outage is expected to be roughly $175 million during the fourth quarter.
In Europe, we expect stable demand on low level. There is, though, an uncertainty how the situation in Eastern Europe will impact the general industrial demand in the rest of Europe. In China, we see demand for steel continue on a fairly slow level. To sum it up and recap a bit from the Capital Markets Day, SSAB is a unique steel company with a specialized offering and strong market positions globally on quenched and tempered and advanced high-strength steel, and regionally in North America for standard plate and in the Nordic region for flat carbon steel. We have a clear plan for our Nordic Northern European strip business. We have now started with the synergy program that will deliver SEK 1.4 billion in hard cost synergies per year.
The combination of SSAB's and Ruukki is progressing well without any business disruption, and we see additional potential for cross-selling products produced in Raahe, sold to existing customer base globally and in North America, and vice versa. We see a recovering U.S. business. We did an extensive benchmarking last year to check out our cost position compared to peers, and we came out very well. Since then, we have launched a cost and effectiveness program that is now delivered, and that's why we see EBITDA margins on the levels we see. And when we look forward with all the investments we have done, we see that we have a very strong platform for continued growth within high-strength steel. So with that, I think we open up for questions.
Yes, we're starting maybe with the audience here in Stockholm. Maybe Johannes?
Hello, Johannes Grunselius. Yes, hi, Johannes Grunselius here, ABG, Stockholm. A question on the picture you showed, Håkan, about the sequential development. You say here to us that there was a reduction of SEK 230 million quarter-over-quarter because of lower volumes in high-margin products.
Can you give some color on that, please? And, do you expect this to be sort of mainly seasonally, or what do you expect going forward there?
It's the seasonal impact that we see in the usual European slowdown. It's not that we see it as a trend, it's a seasonal effect.
Which we typically see every year-
Yeah
in the third quarter, especially in August.
And then, you had excellent shipments for SSAB Europe, if I recall it correctly. Q3 shipments were up 5% or something year-over-year. Is it fair to say that you gained market share, or, or what, what do you think competition did?
It's impossible to answer. I mean, but it was not that, as you said, 5%, and maybe, I mean, what we have talked about is that the demand or the underlying or the apparent or the underlying consumption has flattened out. So I wouldn't say that they're taking market shares, no. To some extent, maybe, but still low, we are still operating on very low levels.
Finally, in the U.S., you're talking about prices stabilizing or flatten out, even a slight decrease, but we also know that you have these lagging effects. You raise prices, and then it takes you a few months before they gain traction. How should we see the average prices in the fourth quarter?
Well, we don't talk so much about that, and we don't give any price guidance. But when we look at the spot prices, they have leveled out, and there are some other odd things in the U.S. as well. I mean, you see scrap prices being fairly stable. They have not at all followed other raw material costs, which they typically over time do so. So, I mean, it's important, the prices, of course, but the most important part is how will the margins develop. And when we look at the underlying demand going forward, at least if you take away the year-end effect, we see continued good demand.
Okay, I think Christian had a question.
Thanks. Good morning, Christian Kopfer, Nordea Markets. Firstly, on Europe, you said that you saw some 1% slight price decrease on average for SSAB Europe. But if I just take the volumes, or the sales divided by the volumes, it seems like you had an average sales price increase of 5%. Is that because of mix in Europe, or what impact was that?
... I think that can be because of internal shipments as well to the distribution business.
So, there is nothing special in Europe which was temporary or in terms of-
No.
Mix or so?
No, not really. And 1% decrease, it's, it's fairly close to being flat.
Yeah, sure. But I just, if I look at the realized price, it was 5% up or so, quarter-on-quarter, but-
No, I think you should view it, the -1% we state in the report is what we see.
Okay. On the raw materials, you saw some 10% decline in the Swedish krona. Could you just give some color on what are the contract prices compared to the spot, the current spot prices? I mean, how much of the downward price point have you absorbed in your contracts?
Well, do you mean absorbed in the contract, or do you mean realized in the P&L?
Realized then, in Q2.
Ah, in Q2.
Q3, sorry.
Normally, we say it takes about a quarter for us to... From when we actually buy it until we see it in the P&L. It's a little bit less than a quarter because we have pulled down the inventories a bit, but in general, it's close to a quarter from when we buy it until we see it in the P&L.
Okay. So you will enjoy continuously lower then raw material cost in Q4, I guess?
That sounds like a reasonable conclusion.
And looking at, you expect prices to be fairly stable quarter on quarter. Could you, Martin, could you maybe say something about that? Because we have seen, as once again, raw material prices have come down quite dramatically. And how could you keep prices quite stable in that environment?
Well, what we see when we look at prices, we look at our contract prices. We don't sell big volumes or in Europe, not for any volumes at all on spot prices. But of course, spot prices have started to come down. But when we talk about prices, we talk about our contract prices, and how that will develop into the future is too early to say.
Then finally, for me, on Americas, you said that you see some import duties coming on December 16th or so, I reckon. How much of SSAB Americas is coiled plate, approximately?
Well, coil plates and plate is more or less the same. I mean, you cut the coils up to plates, and we have the possibility to either do discrete plates or coil plates. And we, I mean, we choose that depending on market. But for hot rolled products from Russia, there will be an import duty from the 16th of December. And one big part of the increased import volumes for coil plates, or the increase compared to one year ago, comes from a very large extent from Russia.
Okay, thank you.
Do you have any additional questions here? Yes, Ola, please.
Ola Södermalm, Swedbank. Is it possible to quantify the maintenance stops costs in Europe and Special Steels?
We haven't done that fully yet. We, we know the old figures from SSAB, but now when we have Ruukki as well, we, I don't have the exact figure on the top of my head.
But you guesstimate?
Uh, no.
Just to follow up on the demand in Europe, can we expect a normal seasonal pattern between Q4 and Q3?
Yes, I would say so, and especially in Europe and the Nordic region with Christmas and New Year. I would say that we will see a normal seasonal pattern, yes.
A pickup in volumes compared to Q3 and Q4, or is it flat volumes, on effect?
Compared to Q3, normally, as we said, we normally see a pickup in volumes in Q4 compared to Q3. Then, as Martin said, we also, as of last year, it was a very long and fairly slow the last two weeks of the year. And given how the holidays are at the moment, it's fairly probable that that's going to be the same pattern this year as well, that we see a slow end of December.
But that will also depend on what price trend you see into Q1, so that could also be. But the normal seasonal slowdown? How much that will impact. But as said, the underlying demand, we see stable, so, so it will be a seasonal effect.
But so far, you have seen a seasonal pickup in September and October.
Yeah.
compared to the summer?
Yes.
Okay, thank you.
Okay, let's take a couple of questions over the phone. So, operator?
A reminder to press zero-one to ask a question. Our first question comes from Mr. Oskar Lindström from Danske Bank. Please go ahead.
Yes, two questions, actually. You mentioned, when you, in the presentation, that you had, in addition to higher prices in Americas, there had also been better prices for other materials. What are these? And then, you know, if, is it something significant?
We have higher prices in Q3 for the Special Steels division compared to Q2, which is a combinational price mix as well.
Right. Is that something that you view as a trend, or is it more as a seasonal or a one-off-
I would say the same-
-consequence?
. The same as the answer on the lower volume. I would say that the prices is more of a trend than a mix effect, rather than something we expect going forward.
Okay. I mean, the very good result that you had here in the third quarter certainly surprised most of us analysts on the positive side. Were you surprised by this strong result? And, if so, what was unexpected for you?
This was, I would say pretty much or very much in line with our expectations.
... Right. So this was nothing that you feel was sort of impacted by any specific market conditions which, you know, were abnormal during the quarter? I'm thinking, for example, of low raw material costs or a situation like that.
The effect of the raw material cost, because we have that lag, was in line with expectations. The development on the North American market and the price realization was also. I mean, we knew that beforehand, and also the efficiency program. So I would say no. Then, of course, there are always some pluses and minuses, and of course, during the quarter, the combination with Ruukki also, we didn't maybe have full control over the development in Ruukki. I mean, we have just had it for two months, but I would say overall, no, no big surprises.
Okay. And if I may just... You mentioned the synergy target of SEK 1.4 billion. This is still, we should still count in SEK 1.4 billion given the current production levels?
Yes.
Yes. All right. Wonderful. Thank you.
Our next question comes from Mr. Bastian Synagowitz from Deutsche Bank. Please go ahead.
Yes, good morning, gentlemen. I have a few questions for Håkan on the cash flow, actually. So, I think the cash flow overall was relatively, I think, weak besides the strong earnings level. And as you mentioned, this was partially driven by the working capital rebuild. But then I saw that also the maintenance expenditures were around, I think, SEK 440 million. And my question here, was this only due to the inclusion of the Finnish facilities? I'm just surprised that this was almost three times last year's level, even though you shifted the U.S. maintenance into the fourth quarter. So could you please explain why that is, and whether this has been just a one-off phenomenon, and maybe give us some kind of guidance for this on an annualized basis?
Maybe I'll stop here before continuing with my second question.
It was not only because of the addition of the Finnish operations, it was partly because of that. What I probably should have mentioned as well is that last year we had extremely low CapEx. We had for the full year, including strategic CapEx, SEK 800 million, and what we have said is for all SSAB, we said on a maintenance level, we should be between SEK 1 billion to SEK 1.2 billion. So, there were two effects, basically, adding the Ruukki part, but also last year was abnormally low, I would say.
Okay, so the SEK 1 billion-SEK 1.2 billion, I think that was CapEx, but then the SEK 440 million I'm referring to has been shown in the operational cost other than the CapEx line?
We have-
Just to confirm.
We have two CapEx line. One is the maintenance CapEx, the replacement and compliance part, and that's that that's the line that was clearly increased compared to last year. Then we have another line called strategic CapEx, and the way we look upon this, that maintenance CapEx we need to do to continue to run our business. That's why we're including in the operating cash flow, while strategic CapEx, well, that's optional, so that's why we have it below the operating cash flow.
Got it. So basically, the SEK 440 now, which you show in the operating cash flow, is effectively maintenance CapEx, just-
Yeah, correct.
Yeah. Got it. Okay, and so that's going to be 1.2 then. Then my second question would be, again, basically to follow up on that. So according to my understanding, roughly SEK 300 million out of the SEK 450 million items affecting comparability were cash effective, from probably just stripping out the depreciation here. Or the, I think the write-downs which you took. Could you help us to understand whether there are any other items to consider and strip out of your cash flow? So what I'm trying to do here is to reconcile how a normalized cash flow in this quarter would have looked like. So any guidance on that would be great.
No items I can think of from the top of my head, but as said, we had some temporary effects of accounts payable, and we also had some increased sales in the U.S. and inventory buildup in the U.S. ahead of the maintenance outage that's now ongoing in Montpelier.
Mm-hmm. So, the only items, stripping out here to normalize it, would be the SEK 300 million of Items Affecting Comparability plus SEK 600 million working capital, and so that would get us to roughly a normalized cash flow for this quarter?
Yeah.
Correct?
Yeah, that sounds reasonable.
Yeah. Okay, perfect. Then those were my questions. Thanks for your help.
Okay. Any more questions for the firm?
Yes, I have another question from Mr. Jean Deviu from Exane. Please go ahead.
Yeah, hi, Jean Baptiste Deviu from Exane BNP Paribas. Question on the US. Given the above average inventories you mentioned and the seasonally lower demand in Q4, is there—I mean, how would you rate the risk of destocking in the U.S. going forward?
As said, I mean, we see slightly higher volumes in service centers, so they typically destock towards the end of the year.
Okay, so you would expect nothing more, I would say more pronounced than what we saw last year? Is that a good way to look at it?
I don't remember exactly how we saw the inventory levels in the service center segment one year ago. But, as said, we have, at the end of Q3, beginning of Q4, we saw higher inventories than normal. So that would mean everything else equal, then destocking among service centers.
Okay, understood. Then on the prices there, given the import pressure you mentioned, and also the scrap prices, which one could expect will come down, to match the trend in annual prices. I mean, would you expect some pricing pressure in the U.S. going forward, maybe as of the Q4?
It's hard to say where the prices, spot prices, will go. It all depends on, on import volumes, of course, and also, as you said, I mean, over time, the trend has been, or the correlation between scrap prices and, and, fines prices have been fairly strong. So, so we should, over time, expect, to see that correlation as well. And that will of course, if scrap prices comes down, prices will, come down. So, so the most important part is to look at the, the margin. And right now, we are at, call it, fairly normal margins, over time, which was, on a very low level one year ago, and we started to talk about that, that we expected to see normalized margins.
That is what we see right now, and what we have seen, the development towards that, is what we have seen during, since the end of Q4 last year, I would say.
Okay, understood. Thanks. Just one last question about the U.S. Given what you mentioned about the Russian imports, do you have a fair assumption of what, in terms of total imports or local apparent demand, the share of Russia?
As said, I mean, if you compare coiled plate, the increase compared to one year ago is mainly or only Russian cold plates.
Okay. Okay, thank you for that. Then I had, yeah, one last question about Russia-Ukraine, but more on your European operations. Can you please remind us of what is your exposure in terms of sales and EBITDA? And is that mainly the construction business, which is affected by what's happening right now, or is there also an impact on your, I would say, more normal plate business, or ship business in Europe?
It's to the biggest extent it is, of course, our exposure is within the construction business, and that is a local business, where we buy steel locally and produce and sell locally. So that is a local or a regional business, to that extent. And that's why I said the effect we have seen in the P&L so far is one or two one-offs, and that we took in the result, and then the weakening of the Russian ruble. On top of that, of course, we sell strip and plate to Russia, not any big volumes. So that will not make it or break it. But when we look forward, we see a big potential for our type of steels, for the advanced high-strength steels and the Q&T in Russia.
That will, of course, that potential, call it, development or increased volumes will not happen during these circumstances.
Okay. In terms of your shares or EBIT exposure there, do you have a number?
I don't have the number on the top of my head, but it's a fairly big part or a decent part within construction. But for the steel operation, it's much more limited.
Okay, understood. Thanks.
Okay. Any more questions in the audience?
Yeah.
Or in the, over the phone?
Sorry, we got a question from Miss Cedar Ekblom from Bank of America. Please go ahead.
Thanks very much. Two quick questions, gentlemen. Firstly, can you tell us what synergies you have captured, of the SEK 1.4 billion at the end of Q3? And, secondly, when you were asked at your Capital Markets Day about the outlook for margins in your European steel business, you sounded a little bit more cautious than you do today, talking about the potential for prices to correct in Europe. Now, obviously, you're talking about prices being flatter in Q4, but you're going to see some cost relief, of lower iron ore in Q4. So I just wanted to check, has anything changed in terms of your outlook for margins in the European steel business?
Are you still very cautious into 2015, or do you actually think that there is a little bit of supply discipline in the European market at the moment, which is allowing you to expect prices flat into Q4, despite the fact that you realize you will have lower raw material costs? Now, I'll cut-
We have not changed, we have not changed our view at all. And what we see is, we talk about contract prices, and there is a lag between contract prices and spot prices. So we have not changed our view at all. And at the end of the day, I mean, it's important with prices, of course, but it is the margin. So we see lower raw material prices also in Q4, and on contract prices, fairly stable prices. How that will look into Q1 is much too early to say. When we talk about the synergies, well, we have started. We have said that we will do it within three years. We have started a lot of the projects, and that will gradually be seen.
In Q3, I would say it's extremely marginal, the effects we have seen. They are even not visible in the P&L.
Okay. And then, sorry, just one, follow-up question on, on the margin side. Can you give us some color in terms of how negotiations are proceeding going into Q1? Obviously, not in terms of pricing, I get you can't comment on that. But do you get the sense that customers are pushing back less this time around than, say, Q2, Q3 of last year, when margins in Europe were close to zero? You know, do you see an improved market backdrop for steel companies to retain some of the cost benefit that we've seen in iron ore? Or is this margin expansion story that we've seen simply a blip, and because the industry is oversupplied, we're going back to zero margins next year?...
Yeah, I just want to see if there's a change in the tone in the industry, or if you feel there actually hasn't been a change on a structural basis?
It's a very good question, but to be honest, we have just started the discussions. It's much too early to answer that question. That will gradually be seen during Q4.
Okay.
Today, it's too early to answer that.
Okay, thank you.
Any more questions over the phone?
We have a question from Mr. Oskar Lindström from Danske Bank. Please go ahead.
Yes, I'd like to follow up on that, on that price question. In Americas and Europe, I mean, have you contracted Q1 deliveries already? And if so, what share of capacity or deliveries have you contracted so far?
Close to zero.
Roughly?
As we usually do, we mainly have quarterly prices or half-year prices, and they are more or less all of them renegotiated before going into Q1.
Right. So you haven't contracted any of the volumes yet for-
No.
-for Q1?
No.
Okay, so that's still my question.
Maybe some tons, but maybe marginal tons, but nothing more.
Okay. Sorry, just one question on the amortization of surplus values related to the Ruukki transaction. The level was SEK 144 million in Q3. Is that the level we should expect going forward? Or do we know already now that there will be an upward revision of that? And if so, when should we expect that to come into the numbers?
What we saw in Q3 was only depreciation and surplus on the inventory and order backlog, and that's the only part that we have finalized so far. That was only for two months, it was SEK 144. And with that part, we will actually finalize during October, and then we will not have any of inventory and order backlog to depreciate anymore. But instead, what we will do during the fourth quarter now is to finalize the purchase price allocation, and then we will put a value on other assets. For example, it can be properties, real estate, that we also will depreciate, but that will depreciate over a much, much longer time. These inventory and order backlog were, as they were turned, during basically during three months.
So, the only thing I can say, it's not gonna be 144, but what it is gonna be, that's not finalized yet, and it's too early to say.
Okay. So will you let us know ahead of the Q4 report, or is the Q4 report the time that we will know more details about this?
We will have to see when we are finalized with the work. It's, it's ongoing, but there's still quite a bit of way to go, so I think we'll have to get back on that question.
All right. Thanks.
Okay. Any more questions there?
We have one more question on the telephone from Ms. Nina Lasner from Alpha Value. Please go ahead.
Thank you. Could you give us an update on the asset divestment process following the combination of SSAB and Ruukki? Do you already have credible buyers lined up, and do you still expect to conclude the divestments before the end of the year?
I will give you a very boring answer. It's proceeding according to plan. So, I'm
No further detail to add?
No further details. We'll come back when it's finalized.
Okay, thank you.
Now we take a question here in the audience in Stockholm.
Johannes Grunselius, ABG. In the U.S., with the lower oil price, now with WTI trading at 40, sorry, $80 per barrel or something like that, slightly about. Is that impacting any of your addressable market whatsoever?
We haven't seen that yet. I mean, we see, as said, a very strong demand from the energy sector. I mean, rail cars, tank cars, pressure vessels, building, pipelines being built and so on. So no, not yet. And I'm not expecting in the short term or the midterm, any negative impact either.
Also, another question, which is more on the merger. You're saying now that there might be additional positive impacts from cross-selling. Can you give some color on that? And is this something that could be substantial, would you say?
But, I mean, one example that I think I mentioned during the Capital Markets Day, we have the possibility now to produce in Raahe a thick normalized plates that we have not been able to produce before, and that our customer base within the energy sector and the offshore sector in North America would like. And we have started that development. There were some other possibilities with the high strength tubes to automotive, abrasive-resistant tubes. We didn't have the possibility to produce tubes before. We have a small, very small tube factory in Borlänge for prototypes, but now we have the possibility to also produce these tube high-strength tubes. That is another example. There are some other examples as well.
Over time, yes, this will be an important part in of the combination, but it will take some time, yes. But, when it comes to normalized and thick normalized plates, we have started with trial deliveries and so on. Let us see if there are any web questions. No, it seems there will be no questions over the web. Operator, any more questions over the phone?
There are no more questions on the telephone.
Okay, then I think we conclude for today. Thank you very much for your attention, and if you have any further questions, please send them on to the IR team or anyone in the company, please. Thank you very much.
Thank you.