Good morning, and welcome to SSAB's second quarter results presentation. Today, we will listen to a presentation by our CEO, Martin Lindqvist, and CFO, Håkan Folin, who will give some more details around the financials. After the presentation, there will be, as always, time for questions and answers. By that, I hand over to you, Martin.
Thank you, Maria. Good morning, and welcome to this Q2 presentation. But I will, though, start with some words about the Ruukki acquisition. And, as you know, last week, we got the okay with some remedies or concessions from the European Commission, and we have that decision. We had to commit to divest some assets within Nordic distribution, and also some small assets within our Finnish construction business. And, yesterday, when the acceptance period for Ruukki shareholders expired, we got 95% of the shares. So, we will, though, have the final result at the end of July, and we expect to close 28 or 29th of July.
We will also apply for a secondary listing in Helsinki, and we expect the trading for the SSAB shares in Helsinki to start at the very last day of July. So formally, the deal is not closed, but practically, everything is in place. Some highlights about Q2. We had an EBIT of SEK 260 million, which is, of course, an improvement compared to Q1 this year and Q2 last year. The big differences or the main deviations is higher prices in Americas and lower costs within EMEA. We also had a negative impact of the outage in Mobile, the planned outage.
As you know, we moved the outage a bit, so it was mainly within the second quarter, and I would say the majority of the SEK 150 million negative impact of that outage were affecting second quarter. We had a positive operating cash flow of a bit more than SEK 500 million , and we have and we had no major changes in the outlook. We expect continued positive outlook for the U.S. plate market. We expect underlying demand in Europe not getting worse with some positive signs, but of course, there will be a seasonal weakness as always in Q3, but overall, a stable demand. We don't expect any short-term improvements in our segments in Asia.
Håkan will come back to sales in a bit, but the EBITDA per ton, which is an important measurement, was a bit more than SEK 700 per ton or $100 dollar per ton, which is approaching or at least moving in the right direction and approaching decent levels. We take a look at our key segments. As said, no big changes compared to when we released the Q1 report or the Q4 report. Heavy transport being fairly okay, and even a good demand in EMEA for heavy trucks. Automotive, stable demand in EMEA, and automotive market in U.S. being very strong. Construction machinery, unchanged demand in EMEA. Some signs of a pickup in the yellow goods market in North America or NAFTA.
Lifting has showed some growth in the U.S. as well, so clearly moving in the right direction. But in China and Asia, still a weak demand. Mining, nothing really has happened. Continued slow demand in all regions, I would say, or for mining-related segments. Energy continue to be stable and strong in U.S., and service centers have been fairly strong in Q2, and we expect them to continue to be strong into Q3 as well, but no big movements there either. If we take a look at the market environment, World Steel Association estimated that the production of steel during the first six months of this year increased by 3%. The increase in EU-28 was 4%, North America 2%, and China 3%.
Market prices during the first two months of the quarter in Europe were fairly stable, but we saw them declining somewhat, and then we talk about spot prices in I would say during June. In North America, we have seen increasing plate prices, and we expect the price increases due to the already announced price increases to continue to strengthen into and during Q3. And the China strip prices increased somewhat during the quarter, but market prices for plate continued on the negative trend that we have seen now for a couple of quarters. The good news is that the inventory levels, where we see them, seems to be in balance, so we don't expect any restocking, massive restocking or massive destocking. So we expect apparent and real consumption to be pretty much in line. Some words about the business areas.
In EMEA, shipments decreased with 12% compared to Q1, but were at the same level as the second quarter, 2013. Demand from service centers declined slightly during the quarter, but most other segments were stable or slightly positive. In local currencies, prices of both high-strength steels and standard steel were unchanged during the quarter, and the high-strength steels volumes amounted for 45% of the total shipments within that business area. In Americas, shipments increased with 4% compared to Q1, and by 10% compared to Q2 last year. Demand from automotive service and service center segments during the quarter were strengthened, and other segments were stable on a high level. Prices for standard steel were up with 5% in local currency during the quarter, and with 1% for high-strength steel.
The maintenance outage, as said, affected the second quarter, and the majority, or if not all of it, of the SEK 150 million, were taken in the second quarter. APAC shipments fell compared to Q1 and Q2 last year. Demand continued on the same level as we saw at the beginning of the year, a fairly low level. Prices were 4% lower during the second quarter compared to the first quarter. Tibnor, moving in line with the Swedish and the Nordic market. Shipments somewhat higher than in Q1, but lower compared to second quarter last year. Steel products, we saw some positive development compared to one year ago, and the results that was better last year included a capital gain, or we sold a property last year of SEK 57 million. So, the EBIT, underlying EBIT, was slightly better or in line with last year. With that, Håkan, some words about financials.
Thank you, Martin, and good morning, everyone. I will present some more details on the figures, some on our financing and liquidity situation. I will also go through the result development between the quarters, and finally, some words on the raw material prices. We had sales of SEK 9.3 billion during the quarter. This was up 5% compared to same quarter last year, and this was volume contribution were 5%, prices were down 1%, but FX contributed up 1%. But mainly, you can say it's driven by the volumes. We had an EBITDA of a bit over SEK 800 million, and an EBIT, as mentioned, of SEK 260 million, which is an improvement of SEK 375 million than compared to last year.
We had an operating cash flow during the quarter of SEK 528 million. On this slide, you have some more details on the key figures. One item I would like to point out here is the net profit, which was positive with SEK 135 million, and this was the first time since Q2 2012 we had a positive net profit. Then coming to the, excuse me, coming to the bridges then between the quarters. The improvement. I will first go through the result between Q1 and Q2, where we had an improvement of SEK 234 million. We see an increase in prices of almost SEK 100 million, and that's coming then from the plate price increases that has been realized in the North American business.
We see a drop in volumes of SEK 130, and that's driven by the EMEA volumes. We see a very positive impact on the variable COGS, which is driven by declining raw material prices, but also by strong production performance in the mills. We had another item here, which is containing some FX, some under absorption, we have Tibnor in there, and also fixed costs, in total, negative then with SEK 76, which brings us to the SEK 260. When we look then at the year-over-year, the chart looks a bit different. We have a slight improvement in prices, and here we have a big improvement in the U.S. in prices, offset by a negative development in Europe. We have a positive development on volumes of SEK 70 million, driven by the North American business.
And also here, we have a big positive item on the variable COGS for the same reason then as between the Q1 and Q2. Other is basically zero here, and it's same components as on the last page, and some positives on the FX side, and negative then on the real estate divestment last year, as Martin mentioned. On the cash flow, a few items I would like to point out. The operating cash flow we mentioned before. Then you can see we had some higher financing items than we have had before. This is driven by that we have increased our gross debt because we want to be ready to take over the Ruukki debt when the transaction closes. So this leads us to a higher financial net than financial cash cost.
Despite this, we did have a positive net cash flow of a little bit more than SEK 200 million during the quarter. Now, some words on our financing and liquidity situation. The net debt was basically unchanged between Q2 and Q1. It increased with SEK 50 million, and it's now on SEK 15.2 billion. However, the net gearing decreased by two percentage points during the quarter, driven then by an increase in our equity. We have a very high liquidity preparedness at the moment. It's over 40%, and the reason for this is the same as I pointed out in the cash flow part, is that we have built up an increased liquidity so that we will be able to take over the Ruukki debt upon closing. Our commercial papers are now close to SEK 1 billion.
They were SEK 600 million at the end of Q1, so we have increased them by approximately SEK 400 million during the quarter. On our loan portfolio, we have an average term of four point three years, with an average interest reset term of one point three years. What we have done in terms of financing during the quarter is, especially the Euro bond we issued, which is a five-year bond, and we issued SEK 350 million with a fixed interest rate. This is how our maturity situation looks at the end of the quarter, where, as mentioned before, we have a lot of cash and backup facilities.
A fairly even maturity for the coming three years, or this year and the coming two years, a little bit higher in 2017, and then as a consequence of the Euro bond and also the SEK bond in Q1, we have a bit more than SEK 4 billion maturing in 2019. What we have maturing now in 2014 is mainly the Swedish bond, which matures in November. As mentioned, we have a duration of four point three years. We were a bit above five in the middle of 2012, but then, as we didn't do any major financing activities in 2013, since we had the ongoing discussions with Ruukki, we saw a decline during a number of quarters in the maturity.
But then, over the last two quarters, we have reversed that trend, and we are now at four point three years, which, to us, is a very comfortable level. Our interest rate has, which is the line there, has gone up slightly during the last few quarters, but we are at the moment on 3% on average interest rate. Finally, then, on the raw material prices. During the second quarter, we signed a new contract with LKAB. It's a yearly contract, but with a quarterly price component. And during Q2, our purchase prices for iron ore was 10% lower in Swedish krona than Q1, and 15% lower than Q2 last year. And we normally say that roughly, it takes one quarter for the iron ore that we buy to hit the P&L.
So you can say that what we bought now in Q2, you will see in the P&L in Q3. For coke and coal, the prices were down slightly compared to Q1, 3%, but quite a lot if you compare with Q2 last year of 26%. Finally, then, on the raw, most important raw material for us is scrap, which is what we use in our North American business. We saw a gradual decline of the spot prices in the U.S. during the quarter, and they were down 8% versus the end of Q1. This is a very normal seasonal pattern. And if we look back one year and compare to end of Q2 last year, they were basically on the same level as last year. Okay, then back to you, Martin, on the outlook.
Thank you. Some words then about the outlook. We expect the improved or the demand development in North America to continue. As said, we have gradually been increasing steel prices, and we expect to see the... Or we will see the effects, some effects of that also in Q3. There is, of course, a big question mark when it comes to import. Import of plate products are on a high level in North America. It has not affected us yet, and we are fully booked for Q3, so we will not see any effects of that in Q3, but you never know going forward. We are not planning any maintenance stops in Q3 in North America.
In Europe, we, expect to see a seasonal weakening during July and August, as always, but, we expect the underlying demand situation to be fairly stable. We will, as said, have the annual maintenance outage in mainly Oxelösund and Borlänge, as always, and we expect the usual impact of that maintenance outage. In both North America, or NAFTA, and Europe, we see inventory levels being in balance. We don't, foresee any major inventory restocking or destocking, and we don't expect any short-term improvements in Asia. And in total, our shipments in Q3 should be fairly in line with Q2. Then a last, but not an unimportant slide. During the second quarter, we acquired 51% of G&G Mining Fabrication in Australia. They specialize on refurbishment, manufacturing, and design of buckets for the Western Australian mining industry.
This is an important investment for SSAB because we have not been very active in that region and in those segments, so this is an important bridgehead for SSAB and for our wear and parts service business. With that, I guess we open up for questions and comments.
Yes, and please state your name and company, and also one question at a time. And we can start with questions here in the room. Please go ahead.
Oskar Lindström from Danske Bank. A couple questions for both of you, actually. I'll start off with some for you, Martin. The weakness in China, you described this as being a weak market, but to what extent is it also due to sort of operational company-specific problems in your setup in China? And are you doing or planning to do something to change that operational setup?
We will change that operational setup. We will, in the new organization, have a global division taking care of niche products. That will be a change, of course. But I would say that, in Asia, and in particular China, we have been, of course, very active on the market and increasing the number of customers, but we are still too dependent on a couple of, or a handful of big OEMs. And they have not been buying material from us or niche material from us or anyone else. They have been producing lifting equipment with lower grade steel, smaller lifting equipment, and been using, for that kind of equipment, a good enough material.
What we have been very strong in is the big mobile cranes and the big CPTs, and the market for that has been, due to the construction market, very slow. So we have not been able to compensate fully for the loss of those volumes with small and mid-sized customers, even though we have increased the number of customers massively, but not been able to fully compensate.
Okay. If I may continue, the automotive demand that you said was very strong, and especially in the U.S. Well, in the U.S. To what extent do you fear that this is due to sort of temporary factors, like easy credit? Or do you think this is sort of a sustainable level of strong demand that we're seeing in America right now?
To be honest, I can't answer that question. What we see, though, is an increasing focus on the kind of steel we have. And we are very or fairly small and very focused within automotive. We only make advanced high-strength cold-rolled steel for safety components. And I expect that development and the interest of lightweighting and increased safety to continue, of course. Then, if the overall car production or demand for cars is fueled by something else, yeah, probably, I don't know. But we see a good continued demand for our types of steel. But that is only for side impact beams, crash boxes, and some parts of the seat, so we are in a tiny, tiny, tiny part of the car.
All right.
For us, it's roughly between 200,000-300,000 tons per year. So it's a very small part of the automotive market where we are active.
Okay. And a final question for you. In EMEA, we saw some sequential price mix improvement in Q1 versus Q4, I remember that you said, but, you know, price mix was still down year- on- year, if I remember correctly, for that division. And now in Q2, you note that, price mix was actually up slightly year on year. Did we also have a positive sequential number there or?
Fairly stable sequentially.
Stable underlying prices, Q2 to Q1.
Håkan, some questions for you. Will you publish any sort of more detailed pro forma consolidated accounts for you and Ruukki? And if so, when?
We will, and especially we will, present numbers according to the new setup with the new, with the five divisions. We will plan to do that before we release our Q3 report, so a few weeks before that, we plan to do that.
Right. And finally, the net financials that were. You highlighted that they would be higher, but they were quite a bit higher here now in the second quarter. Is that sort of a level that we should expect them to be at in absolute terms going forward, or was it more of a special quarter due to the transaction?
No, I would say that's more a level you should expect in going forward.
All right.
I mean, given, given now that we will combine and be a bigger company, we will have a larger total gross debt, so hence, higher financial net.
Okay. Thank you.
Questions here?
Good morning, it's Julian Beer from SEB. Firstly, a question to the team. You've announced cost synergies of SEK 1.4 billion, which came out of studies done prior to official merger. Would you expect to be reviewing that figure at post-merger, and what scope could there be for coming back with a different number?
So far, we are still convinced. We have gone through it, of course, since we announced the deal, and we know that we will be able to deliver that.
Are you setting up any teams to investigate scope for further synergies?
Not setting up. We have already set that up, so.
Okay. But when would you expect that team to report its findings?
To me or to you?
I guess to me is probably more important.
Probably never, but to me, they have already reported.
Okay. All right. Well, for the benefit of people listening, he has a smile on his face. You've reported a 12% rise in Americas' ordinary plate since Q3 2013, if we add up the sequential moves. I think the announced contract hikes since September 2013 total 20% or more. How much of that 20% do you expect to be reflected in the second half results?
Well, we should see the announced price increases gradually coming through, and as you know, some of them are effective from first of July, some of them are effective from a lot earlier than that, and some of them from June. So we should see them gradually coming through.
Okay, so there's no reason why you wouldn't fully reflect the contract increase?
No.
Great. On the announced remedies, the divestments to be made, who do you expect to be the potential bidders for those kind of assets?
Well, we need to close this deal first and then start the process, but, I would expect, it would be some interest for those assets. But that question is too early put.
Okay. And what sort of time frame would you expect for those divestments to be made?
We are planning to do that before year-end.
Great. And then finally, from me, have you, at this stage, identified any activities in the combined company which you'd classify as non-core, potentially divestment, in addition to the remedies?
As said, we need to close the deal first and then start to communicate what we think are core and non-core.
Thank you very much.
There's still some days to go before we close the deal formally.
Additional questions?
Yes, it's Johannes Grunselius, ABG here. Question on shipments. You are stating that you expect flat shipments in Q3 versus Q2 for the group. Could you be a bit more precise there and talk about EMEA, please, and Americas?
We say we are expecting Americas will be a bit... If you do the math, you can probably figure it out, that we had an outage in Americas in the beginning of the year, and we said we're planning to run full, so that would imply Americas should be up a little bit. And EMEA, we will have an outage now in Q3, we will be somewhat down in EMEA. What we have done in EMEA, actually, is we have built some inventories in EMEA so that we are to limit the impact as much as possible. On the other hand, you always have the seasonal slowdown during the summer period, so it's not just the outage itself, but it's the seasonality as well.
Yeah, because what, what I'm thinking of is that if you look at 13 and 12, there was sort of very noteworthy declines quarter-over-quarter in shipments, but, but you're suggesting that it will be less pronounced this year, then?
Yes.
Yeah. You're also stating in the report that you expect flat or slightly lower prices in Europe in Q3 versus Q2. Can you sort of talk about that magnitude? If we talk about if prices will fall, what do you see there?
The, uh-
Or is it more emphasis on stable prices?
I would say stable to slightly lower prices, and that is according to the market in Europe and all the quarterly contracts, so I mean, I can't be more specific than that. It's not a big decrease, but on the other hand, we are expecting, then, with lower raw material prices, some margin expansion for the third quarter.
Then just a final question, and that is on your production of finished product, which is down, I guess, 2% sequentially. The first question is, I mean, that must have been a profit impact on profits, right? And if you can elaborate on the magnitude of that, and how come you took down production of finished steel quarter-over-quarter?
It was mainly due to the outage in North America.
I was thinking about production in Sweden. Okay, those were up 2%. Sorry about that. Sorry. Thanks.
Okay, additional questions from people here in the room? Yes.
Rutger Smith, I represent myself. Some five years ago, when I listened to you or possibly your predecessor, a lot of hope was pinned on the high steel, high-strength steel, the niche products. I don't remember any percentage that was the goal, but I was in the view that perhaps certainly a majority or perhaps as much as 70%, now, five years later, should be niche products. Second quarter, it was 35%. Obviously, the better qualities of these niche products do not command the better price that you ask for them. What has happened, or rather, what has not happened? I mean, the things are not what I expected them to be.
Maybe you were had somewhat higher expectations than I had, because the target was 50% of the volumes being niche products, 2015. What has happened is, I mean, slower and lower demand, and I would say especially, and not only from mining, but I mean, the big takers of these kind of products, where the prices and the margins are, as you say, much better compared to ordinary product, is yellow goods, heavy transport, lifting segments that are dependent on construction activities, civil engineering, mining, and so on.
And we have seen a very slow development, I would say, the last one and a half to two years of that. We expect those to come back and we expect them to gradually become better, but from very low levels, and that is what has happened for those kind of products.
What is the percentage of niche products in Ruukki?
They measure it in a different way, so I can't really answer that. They measure it as a percentage of sales, and they also define niche products in a different way. For SSAB, niche product have, in the old SSAB, have been according to yield strength or Brinell. So we have measured it according to strength, and I can't really give you a figure if you would put it into volumes with our definition. But lower, I would say, but I don't know the exact figure, if it's 20%, 25%, 30%, I don't know that.
Okay. So let's take some questions from the phone. Operator, please.
Thank you. If you'd like to ask a question, please press zero one on your telephone keypad. Our first question comes from Mr. Steven Benson from Goldman Sachs. Please go ahead.
Hi there. Thanks for taking the questions. The first one is, a few weeks back, you mentioned preliminary plans to study adding capacity in the U.S. Martin, I was hoping you could help us understand the strategic thinking behind this, like, why now? Is it that you see structurally higher plate demand over the next five to 10 years, or are you seeing some of your competitors retreat, and what type of capacity would this be? Is this Q&T or is this standard plate that you... I realize it's all just preliminary, but, or a study at this stage, but just help us understand the strategic thinking behind it.
The thinking is that we see a strong demand for standard plate, and this is debottlenecking, so it's typically a very cost-effective way of increasing capacity, and it is within standard plate. And the reason for that is, in discussions with our customers, they see a strong demand and an increasing demand for the coming years, and they have come to us and asked: "Is there any possibility that you could look into some kind of bottleneck, debottlenecking?" And then we said, "Let's look into it." And we have internally found an idea to do that. And now we started an external study to validate and look into that. And then, at the end of the day, this is a very preliminary study.
We will, of course, think about the market and discuss further with our customers and see if it makes sense, to do that. But, preliminary, it, at least makes so much sense that we started this study.
Okay. And the market size at the moment is, say, 10 million tons-11 million tons in North America. Do you think that's gonna be structurally higher going forward? Is that what your customers are saying or, you know, versus the last five, six years or?
I can't have any prediction about the total market, but when we discuss with major customers in U.S., they have a very positive outlook for the coming years, yes.
Okay. And just the Q&T market, you mentioned in the presentation that you are seeing some pickup in yellow goods demand. What is the current situation for Q&T? Has the destocking in Q&T in the U.S. market finished?
Yes, probably, or at least coming to an end. So, when we talk about positive signs, we still do that from very low levels. And as mentioned earlier, here in the room, we are not on the levels where we want to be or where we expected to be, but the good news, at least internally, is that it's not getting worse. It's from low levels, showing some positive signs.
Okay. And just a last question. You're flagging the some potential for price increases in the third quarter, but you do mention imports are already at a high level. I guess, you know, when we look at the charts, the price differential versus imports is already quite high. Further price increases are, you know, only going to exaggerate that. Are we missing something about the Asian imports that are coming in? Are those prices going up, or do you think they're going to go up? Or how sustainable are these price increases that could come through in the second half in North America, or a re you opening the door here for the imports to come flooding in?
No, what I was saying was that we will certainly or probably, or most certainly, see the already announced price increases coming through. And some of the price increases we announced were valid from late Q2, and some of them, or one or two of them, from first of July, and we expect them to come through in Q3. And what I also said was that import is always an issue, and as you rightly point out, we have high import volumes. But I said also that for Q3, we are already booked out, so that effect, when and if it comes, will be seen then in Q4 and onwards or earliest Q4 and onwards.
Okay. Okay, thank you very much.
A question, please.
Our next question comes from Mr. Carsten Riek from UBS. Please go ahead.
Thank you very much. First question from my side, on the high-strength steel and the new organizational structure. Do we see all high-strength steels in the specialty steel division, or will some remain in EMEA and Americas? And if so, why is that?
What we have, in the new organization, we will have, call it, the Advanced High-Strength Steel and the Q&T in one division, because that is clearly a global business. Then we have some other, call it more normal, grades of high strength steel will be seen in Europe and in Americas division. So w hat we regard as niche products, parts of it will be seen in all three divisions. But the global business or the Advanced High-Strength Steel, call it, above 700 MPa, and the Q&T will be seen in the Special Steels division because that is a global business.
We are not able to bridge actually from the current niche product definition to the new one?
Yeah, we haven't exactly decided how to bridge that and how to. We will come back to that and talk about it during the Capital Markets Day.
Okay, perfect. Second question I have is, you've seen a significant price increase, and here I come back to the question we have heard already. In Europe, but since first quarter, we have actually seen that steel prices in Europe collapsed. And just recently, we have seen some EUR 2 per ton price uptick, but nothing much. Could that actually hurt your second half profitability, especially in the EMEA? Because you just have seen slight improvement there, but with the steel prices falling, it might actually be still very, very difficult for the second half. What do you think?
We have not yet seen any collapsing steel prices in Europe, so I-
I just look at the spot prices, and I know that you guys always get it in later, but usually you get it in. So therefore, just a question whether the order intake already suggests that there is actually more pressure.
Uh, no.
Okay. Third question, Tibnor. Seems to be still not out of the woods, with 1.5% EBITDA margin, it's still very, very low. What is the issue here, and how could you overcome it?
Well, the issue is the demand on the Nordic steel market. I mean, they are moving in line with the market, I would say. Unfortunately, we need to see a better market then, for better volumes.
Okay, yeah. Good. I'll leave it like this. Fourth and last question. You had a positive tax effect in the current quarter of, I think, SEK 63 million. Can we expect something like this going forward, or was it simply one-off?
The tax effects, we have positive tax, and that is due to where we make money and where we lose money, and the different tax rate in different countries. This quarter, yes, we did have a positive tax effect, but, I would say you cannot calculate that it's going to be on this level with this result. It really depends on where we make the money.
Oh, okay, let me rephrase it. Your normal tax rate, should it be applied for the rest of the year, or should we actually do that differently?
Our normal tax rate, I would say you should view it around, you know, what the Swedish tax rate is, around 20%, something like that. But once again, it depends a lot on where we make money, where, in which countries we make and in which countries we lose money.
Okay. Thank you.
Thank you. So let's have the next question, please.
Our next question comes from Jean-Baptiste Lefief from Exane BNP.
Hi there, Jean-Baptiste Lefief from Exane. The first question I had was on the differences between the plate prices and the sheet prices, be it in the U.S. or in Europe. If we look at the two regions, the plate prices have been a lot stronger than the sheet prices. I was wondering whether you had any explanation behind that.
Yeah. A year ago, we saw a big difference between strip and plate prices, and we saw, as we talked about then, very low margins over scrap for standard plate in North America. Now they are on, if not normal, but normalized levels in North America. And we said at that time that we don't expect those margins to be on such a low level. But on the other hand, at that time, we saw better margins over scrap or over raw material costs in North America. So plate prices have always been, over time, higher than strip prices in North America. What we see right now is more kind of normal margins over scrap. Spot prices plate compared to scrap in the magnitude of close to $500, $500 ± something.
Okay, thanks. And in Europe?
We didn't see that a year or a half a year ago, what we were, as we talked about then, expecting it to normalize, to start to normalize, and that is what we have seen.
And would you say that the trend in Europe, because the plate prices are more or less flat, year to date, while the strip prices have come down. Here, same kind of explanation, margin over raw materials?
There is a different dynamics for standard plate in Europe compared to U.S. So I don't know the... We are not big in the ordinary plate market in Europe at all. We are not serving that market, so I'm not an expert. But for U.S., and in U.S., it's mainly all the big producers have a different production setup with the Electric Arc Furnace mills, and in Europe, you have only the blast furnace mills. So there's a different dynamics.
Then the second question I had was, on the price versus cost trends in Q3. So I guess you would benefit from lower, iron prices, notably in Q3. You said that you would expect the EMEA prices to be flat to slightly down. Would you still expect to be able to capture, part of that raw materials benefit, in Q3? I.e., should we see EBITDA per ton in EMEA up versus Q2?
Well, if we are right, then with stable or slightly lower prices and raw material, we already to a large extent know, then we should see a margin expansion. On the other hand, if we are wrong and we right now, even though we haven't seen it in our contracts, experience, as some previous person said, collapsing steel prices, well, then it's an issue of course. But what we see right now, we are expecting stable to slightly lower steel prices, and that would then imply better or a margin expansion, everything else equal in Q3.
Okay, thanks. I had a last question on the sensitivity to the Swedish krona. Swedish krona has depreciated versus the U.S. dollar, notably, I mean, across Q2 and in July so far this year. Could you please just remind us of the sensitivity there, and what kind of positive impact does it have?
Well, first of all, we are, SSAB are, of course, extremely sensitive to that, with a lot of costs in Swedish krona and a lot of sales in euro. And we have seen that the last years, and we have not fully seen the effect yet of the weakening Swedish krona due to hedges and so on. But when we combine with Ruukki, we will have a much, much more balanced currency exposure, because they have, of course, a lot, all of their costs or a lot of their costs in euros. So the sensitivity will be lower, yeah, reduced.
Okay. Okay, so I mean, we should not expect the company to benefit too much from the lower Swedish krona versus USD, let's say from H2 onwards?
You should expect some effects, but yes.
Okay. Understood. Thank you.
We have a few more questions over the phone, so let's have the next one, please.
Our next question comes from James Gurry from Credit Suisse. Please go ahead.
Hi, guys. Thanks for taking my question. Just got two quick ones. At the end of the last quarter, you mentioned that you were taking or you were nearly fully booked at least in the U.S. for Q3. How are you looking at the moment going or looking ahead of Q3 into Q4? Have you started taking orders for that? And just also, I understand perhaps just tell us if there is going to be a Capital Markets Day later in or coming up in the few months ahead, and perhaps how quickly you expect to realize the redundancies that you've outlined so far in terms of the merger planning.
To take them then. We are now booking in Q4 in Americas. As said, we are fully booked in Q3, so we are booking in Q4. We are planning a capital markets day, the first of October here in Stockholm with site visits, so you're all, of course, very much welcome. Then when it comes to redundancies and synergies, we have. When we announced this deal, we said that we will be, would be able to harvest the synergies within three years. And we have gone through that in much more detail during this pre-integration phase, and we are convinced that we will be able to harvest the synergies within three years. And of course, part of the synergies is redundancies, and that will also be taken care of during that period then.
Do you think the redundancies will come up front or evenly spread over the three years?
We will go a bit more into detail during the capital markets day, say, the first of October. We need, as said, to formally close the deal first and then start to work according to the new organization. So we will give you some more light on that issue during the capital markets day.
Okay, thanks.
Thank you. So we have two more questions by phone, so let's have the next one, please.
Our next question comes from miss Cedar Ekblom from Bank of America. Please go ahead.
Thanks very much. Two questions from me, James. Firstly, can you please provide some more color on what's going on in mining? It's a key end market for you. Are you seeing any tick up in interest there? And then secondly, can you please comment on the outlook for scrap prices in the Americas into Q3? Thank you.
Well, the answer on those two questions are not much. No, we don't see any movements within mining, unfortunately. We see the demand from that segment being stable, but on a low level. When we look at scrap prices. So, we don't expect during the coming quarter, at least, any major shift in underlying demand from the important mining segment. When it comes to scrap prices, well, it's hard to say, but it depends on weather and a lot, but we are not expecting any big moves in scrap prices either for the third quarter. What we have seen so far, the first 23 days or so of the second quarter is fairly stable scrap prices.
Okay. Thank you.
Thank you. So then we take the final question by phone.
Our last question comes from Mr. Bastian Sinagowitz from Deutsche Bank. Please go ahead.
Yes, good morning, gentlemen. I've got two questions left, my first one is on product mix. Could you update us whether we will see any mix improvement in Q3 and Q4 compared to the second quarter? And then also, is your European business taking advantage of the currently very high U.S. plate price, i.e., is EMEA currently also shipping over into the U.S., which means domestic Q3 prices in Europe might be down, but then your average prices will have some support from possible trade arbitrage? Maybe I'll stop here before continuing with my second question.
We don't expect any major mix change. Of course, the third quarter is an important quarter for color-coated materials, so that kind of mix change, we typically always see. But apart from that, no, not any major shifts in mix. And when it comes to... Yes, we are shipping, as always, Q&T to North America, but standard plate is not an export market.
And to some extent, to a very small extent, and for thicker grades and to certain segments, we are from no volumes at all, shipping some small volumes to North America. But that is not Q&T, but some grades of normalized plate and some very thick gauges of ordinary plate. But for ordinary plate, producing it in Sweden, shipping it to U.S., does not make sense.
Okay, so no, no large-scale volumes for standard plate then?
Not any volumes that you would even recognize in the P&L.
Yeah. Okay, got it. And then my second question is to follow up again on your comments regarding the U.S. expansion. You said, you said the plant upgrade is, is very efficient, because it's basically just de-bottlenecking. Could you give us some sense for the CapEx requirements at this early stage? And, and what will be your ROI hurdle to go ahead with the project?
No, I can't really do that because we are into that preliminary investigation, and we will come back to do it. I mean, the reason why we went out with it, because when you start to ask consulting companies about projects like that, it will spread in the market. So we said, "Let's tell it ourselves then." And then we'll come back when we have gone through it and seen if this holds the investment cost, the ROI, and also, I mean, if it makes sense or not. But very preliminary, so far so good, but a lot of work still remains before we take the decision.
Mm-hmm. Okay. Well, I completely understand that you can't give any guidance on the CapEx side, but I guess at least on the return, you probably should have some minimum hurdle rate, which you think is required to actually go ahead with the project. And even that, although that one might turn out to be higher at the end, I guess you probably should have a minimum return target here. So I don't know. I guess you can probably give me, give us a bit more color.
We will only do this if it is very profitable over time, and the payback time is fairly short. Otherwise, we will not do it. But the expectation is to... That will be the case, otherwise, we wouldn't have started this preliminary study. But let's come back to that and let's see when we have done the investigation.
Okay, fair enough. Thank you.
Thank you. We have also received a question from the web. So, Linnea, can you please read the question for us?
Yes. We've received a few questions from a Jeff Largey from the U.K., representing, Macquarie. Can you share some words on the potential expansion at Montpelier? The preliminary study was due to be completed in July, so are there any early findings around the proposed expansion?
Probably. I haven't seen them yet, though I know that the preliminary study will be finished at the end of July or beginning of August, and we have not discussed it internally yet. So, the answer is no, we can't give any more, share any more light on that one.
Two more questions. The first one, can you quantify the EBIT impact from the typical Q3 maintenance outages in EMEA?
A very rough figure is SEK 250 million-SEK 300 million.
The final question: Did SSAB consider bidding for Severstal's Columbus, Mississippi mini-mill?
No.
Okay, thank you.
That's it. That's it. Any additional questions from the room here? Yeah.
Just one strategic question on your Australian business coming into the service and wear parts market. Everyone is trying to get into the service market. Aren't you, in some way, treading in on the territory of your clients if you take on that, the service market?
That is, of course, always a risk, but we have a network today. We call them Hardox wear part suppliers, and I think it's currently 130 companies. We own, fully own 10 or 15 of them. We partly own 10 or 15 of them, and then 100, call it, independent franchise companies that only work with these kind of repairing buckets, building buckets, and so on. And we have been active in this market since, I would say, mid-1980s or something, and been able to handle that. And what we're doing right now and have been doing for the last couple of years is expanding that business. We have turned it into an own business unit since one point five years ago, and, of course, there is always a risk that you start to compete with your customers.
But this is a very fragmented, small-scale business, where they, on site, companies typically build or repair buckets, so they are servicing one or two mines, so they are not directly competing with Caterpillar and Komatsu. They are instead servicing Caterpillar and Komatsu's customers. So, so far, it has not been a problem. We are aware of the problem, and we are, of course, looking into that before every acquisition or every new Hardox wear part agreement or when we find a new Hardox wear part supplier. But this is an existing business that is growing.
Okay, that seems to be the last question. So thank you, everybody, for coming and dialing in.
Thank you very much.