Good morning, and welcome to SSAB's first quarter results presentation. My name is Maria Långberg, and I am responsible for corporate communications at SSAB. Today, we will listen to a presentation by our CEO, Martin Lindqvist, and CFO, Håkan Folin. After the presentation, there will be time for questions and answers. You can ask questions here in the room as well as over the phone, and we will also have a possibility to submit questions via the web. By that, I hand over to Martin.
Thank you. Good morning. Start with some highlights. We, for the first quarter 2014, turned back to positive operating profit. We had an EBIT of 26 million SEK for the quarter, an improvement both versus Q1 last year and Q4 last year. The main areas of improvement was higher volumes in EMEA and higher prices in Americas, and I will come back to that. We had a negative operating cash flow, and the reason for that was us building up accounts receivable during the quarter. We increased accounts receivables with approximately 800 million SEK during the first quarter. We continue to have a positive outlook for the US steel market, and we see some small signs, as we talked about when we released the Q4 report, some small signs of improvements from very low levels in Europe.
But I would say mainly, Europe being where Europe is, and no short-term improvement in Asia of any size is expected going forward, but I will come back to that as well. The sales for the group was approximately SEK 9 billion, and the EBITDA per ton, approximately SEK 500 per ton then. And as you see, the first operating profit in one and a half year. If we take a look at the key segments, then look at them sequentially, Q1 over Q4. Heavy transport, we saw somewhat stronger demand in Europe for heavy equipment in Q1, I would say especially for trailers. Stable demand situation for heavy equipment in U.S., and demand for rail cars, which is an important segment for us in North America, continue to be strong. Automotive, fairly good demand in EMEA, especially in Germany.
Continued okay demand in North America, even though one or two of the big producers in North America had problems to ship cars due to the severe winter weather, but the underlying demand, fairly stable and quite okay. Construction machinery, some positive signals from customers in Europe, from yellow goods, agriculture and forestry. I'd say some small positive signs from low levels. Mining, continue to be slow in North and South America. Uncertain demand, of course, in Russia, due to obvious reasons, and some positive signals from China, and also some small positive signals from very low levels in Australia. Energy continues to be fairly okay and stable, and especially wind tower activity has increased during Q1. In Europe, though, from the energy segments, we get some mixed signals.
Service centers, buying, I would say, in line with the real consumption. And when we look at the inventories among service centers and through the value chain, we haven't seen any restocking, and there is no major room for destocking either. So I would say that the inventories are in balance or slightly below balance. If you look forward, we still have the same view. We will see no major changes. We will see continued improvement in North America in many segments, gradual improvement. And in Europe, not getting worse, some segments getting slightly better, but from very low levels. Market environment, global steel production increased during the first quarter with 2%. In the European Union or EU 28, it increased by 7%.
In North America, only by 1%, and a lot of the, all of the North American steel producers were affected by the extreme weather conditions. And production in China increased by 2%. The market prices or the spot prices in Europe for strip steel declined somewhat during Q1, while plate prices were fairly stable in Europe. In North America, the spot prices of plate increased, and we were, as you know, leading a number of plate price increases during the latter part of Q4 and Q1. And in China, prices for both strip and plate fell slightly during the first quarter. We saw some degree of smaller restocking in Europe during the beginning of the quarters, but that said, inventories in the supply chain in balance and no big room for restocking or destocking during Q2.
In North America, inventory levels decreased somewhat within the distribution system during the quarter, and as said, they are in balance or slightly below balance then. If you take EMEA, they had an EBIT of SEK 58 million. We increased shipments. We were producing in EMEA at the capacity utilization of roughly 80%. We have taken down the break-even point in both the strip system and the plate system. We saw demand from several segments increasing, and my conclusion is that our shipments increased more than the underlying market demand. So we have been taking in Q1 market shares. Prices increased by 3% for standard steel, and that was only a mix effect. We were selling due to the warmer winter, more pre-lacquered and more galvanized.
So, I would say contract prices more or less unchanged, and for high-strength steel, they fell by 1% compared to Q4 in local currencies. High-strength steel accounted for 41%, 2 percentage points lower than the same quarter last year. America's shipments increased by 8% versus Q4, and here we had an EBIT of $126 million. We had problems with the weather. We had problems to get hold on rail cars. We had higher scrap prices than normal. We had higher electricity costs than normal due to the weather situation. Demand from automotive and construction machinery strengthened during the quarter, and the prices of standard steels were up 7% during the quarter, and for high-strength steel, prices were up 3% compared to Q4.
And I said, the weather didn't only affect our shipments, it also affected our costs. APAC lost SEK 12 million on EBIT level. Shipments increased compared to Q4, but were 14% lower than in Q1 2013. Somewhat higher demand in Q1 from most segments compared to the very low demand we saw in Q4. We still suffer from very low demand from the, for us, important Chinese lifting industry. Prices in local currencies is more or less unchanged or slightly down compared to Q4. Tibnor shipments slightly higher than Q4 and Q1 2013, and we saw heavy plate, especially steel and strip products, having small positive development compared to Q1 2013 and Q4 2013. With that, Håkan?
Thank you, Martin, and good morning, everyone. I will go through some more details on the figures and also talk about financing and liquidity situation. Sales for the quarter was SEK 9.2 billion. That's up 4% compared to Q1 last year. The increase was due to high volumes. All in all, volumes were up 7% in Q1 this year compared to last year. However, we had lower prices with 1%, and we also had negative FX with 2%, so that gave a total of 4% sales increase. Slightly positive operating profit of SEK 26 million. That's SEK 162 million better than Q1 last year, and SEK 308 million better than Q4. And I will get back and show bridges, both comparing Q1 last year and Q4 last year.
Operating cash flow minus 275, 800 million increase in accounts receivable were the main reason why we had a negative operating cash flow, despite the positive earnings. We did actually, during the quarter, reduce inventory by approximately SEK 200 million. Here are some detailed figures. What I would like to point out here is, as mentioned, we had a negative operating cash flow of SEK 275 million. We actually, in Q1 last year, had a fairly weak cash flow as well of SEK 85 million, but we did end up, last year on SEK 2 billion in operating cash flow.
We saw the same pattern last year as in Q1, as in this quarter, that sales slowed down in the end of Q4, and then we had an increase in sales in the beginning of the year, and we built up accounts receivables. Now, looking at the change in the operating profit from Q1 this year versus the previous quarter than Q4. We had a profit, or rather, a loss, in Q4 of SEK 282 million. In the first quarter this year, the improvement was primarily due to prices and volume. And prices is mainly in Americas. It's slightly actually in EMEA and in APAC, but it's mainly in Americas.
While on the other hand, the volume improvement is primarily in EMEA, and you can say volumes and the impact it has on the underabsorption, then in total, SEK 180 million. EMEA's volumes were up 11% in Q1 versus Q4. Then we had a pretty negative impact from the variable cost of goods sold, and this is primarily, or rather, only due to Americas. And as Martin mentioned, the higher scrap costs, also the weather impacted higher electricity cost, and we also had some production disturbances during the first quarter due to the extreme weather. And scrap prices now in U.S. are on a significantly higher level than they were, for example, in September last year. And then we had a positive impact of other. Here we have, for example, some fixed cost, and we have Tibnor there as well.
So all in all, an improvement of a little bit more than SEK 300 million, and the short summary is that better prices in Americas, better volumes in EMEA, somewhat offset, but higher cost in Americas. If we then compare year-over-year instead, the picture looks a bit different. Here we have a negative impact from prices with SEK 60 million, and while actually Americas is still positive, both EMEA and APAC are negative here on prices. Volumes then on a group level, up 7%, in EMEA, up 14%, and that gives you both the SEK 140 million for volumes, but also the SEK 80 million for improvement for underabsorption. So clearly comparing Q1 this year to Q1 last year, we've gained a lot from having better volumes.
We also have lower variable costs, and here, this is also EMEA, while Americas actually are slightly higher. But in EMEA, some raw material prices impacted better and also production efficiencies. And then we have some negative on others for same reason as the previous page. And all in all, that gives the improvement of SEK 162 million. Some more words about the cash flow. Full year last year, we had a positive cash flow of SEK 700 million, and hence we reduced the net debt last year with that amount. Now, in the first quarter, we had a net cash flow close to minus SEK 300 million, which also then made our net debt increase by this amount during the first quarter. I will now spend some time talking about our financing and liquidity situation.
So the net debt now is at SEK 15.1 billion, and we had an increase in net gearing by one percentage point, so we're now at 56%. We have very strong liquidity preparedness. If we look at it versus rolling sales in 12 months, we have 28%, so we have a very strong liquidity preparedness if we would need it. Commercial paper increased somewhat during the quarter, now at SEK 600 million. And for the first time in a fairly long time, we actually increased our duration of our loan portfolio from 4.1 to 4.2 years now at the end of Q1. As we talked about last time, we haven't been-- we were not active at all in the bank or capital market during 2013 due to the ongoing discussions with Ruukki.
But since the announcement, we have been fairly active, and during Q1, we issued a Swedish bond of SEK 1.5 billion. After Q1 closing, we also issued a Euro bond of EUR 350 million. All in all, we're right now, we have quite a large portion of cash on our balance sheet, and we have done this because we want to make sure that when we combine with Ruukki, we are able on day one to take over their debt as we need. But this will, of course, impact our financial items during the coming quarters. The debt maturity hasn't changed all that much since last time. Here, of course, the Euro bond is not included.
What has changed is the bar you see for 2019, which is, the five-year, SEK bond, which we took during Q1. But otherwise, we have, the remaining to mature during 2014, approximately SEK 2 billion, slightly more 2015 and 2016, and then in 2017, we have a larger chunk then. But we also have cash and backup facilities of close to SEK 10 billion Swedish kroner. As mentioned on this page, we have had, since now almost 2 years, slightly declining, maturity length of our portfolio, although still, I would say, on a comfortable level, over 4. But now, we did increase this during Q1, due to, especially due to the SEK bond then. And our ambition is to continue to work and, try to keep this on a level clearly above 4.
Our interest rate is, I would say, still on a very attractive level, on 3 percentage points, and the Swedish bond and also the Euro bond are at slightly higher levels, so we might, we will probably see a slight uptick in that, in the next quarter. Finally, from my point, some words on raw material prices. For iron ore, our prices were 7% lower than they were in Q4. On the other hand, they were actually 3% higher than they were in Q1 last year. We have not yet signed a new price contract with LKAB, the one we had expired at the end of Q1. We are, of course, still getting the volumes from them, but we are in the negotiation on signing a new contract.
For coking coal, which we buy then both from Australia and from the US, our price was, six percent lower than in Q4, and actually 29% lower than in Q1 last year. Coking coal has, over the last few years, been on a downward sliding trend. Scrap prices, as I mentioned before, they did increase, during Q4, especially during December. They also started to go up in January, but then they've gone down, somewhat in February, March, and actually ended up 6% lower at the end of Q1 than at the end of Q4, but still on a fairly high level, and, we expect them to not continue to go up, at least.
... Okay, that's all on the figures for now. Thank you. So the outlook then, looking forward for SSAB. We expect continued recovery in North America for standard plate. The previously announced price increases will gradually have further impact during Q2, and yesterday, we announced another price increase for standard plate from the end of Q2. There was, at the end of March and beginning of April, fairly high import volumes of standard plates into the North American market. That gives, of course, a bit of uncertainty looking forward, where that will end up over the quarter. But we are expecting to run Q2, with the exception of the outage in Mobile, at full levels. The maintenance stop in Mobile was moved a bit, and the reason for that was to be able to ship material to our customers.
So we were first expecting the outage to be half of it in March and half of it in April. We had to move it due to closing down Mobile for three days due to the weather, and also problems getting hold on rail cars. So we moved it, so the majority of that outage has been done in beginning of April. In Europe, we see some small signs of improvement, or the summary is it's not getting worse, but it's coming from low levels. Asia, no short-term improvement that will affect us massively in any direction, is in the short term expected. And the shipments for Q2 will be fairly in line with the shipments in Q1. This is, I think, an interesting picture.
This is an advertisement from Dongfeng, and the trailer market or the dumper market in China, which we have started to serve, is an important market. There are close to 400,000 dumpers being produced in China every year. This is one example, and why, the reason why I show this, is a customer development example, and this is actually how they market this. They market it with fuel savings per year and increased payload, and they claim to their customers that the increased profit per year will be a bit more than RMB 77,000.
We have been serving them with prototypes, and now they are starting to market these kind of dumper bodies that we have seen in Europe for a long time, and that we start to see to a large extent in North America and Latin America. And now this is out on the market from Dongfeng, and the interest seems to be very good. Before we open up for questions, some words about milestones before closing the deal of acquiring Rautaruukki. We got an approval from our AGM to issue bonds and pay issue shares and pay for shares in Ruukki at our AGM, the ninth of April.
We presented the document or the prospectus to Rautaruukki's shareholders on the eleventh of April and the acceptance period started the fourteenth of April. As you know, the transaction is subject to regulatory competition approvals in the European Union. We have started the pre-notification period, and we have filed for approval in other jurisdictions, and I think that's Turkey and Ukraine. And we will close the transaction as shortly after the approval from the competition authorities, and the best guess is still that this will be closed during the summer, as we have said before. So no new updates, but the process is running in all aspects so far, according to plan. So with that, Maria, I guess we open up for questions.
Yes. So let's start with questions here in the room. So please go ahead, Julian. Yeah, microphone.
Thank you very much. Julian Beer from SEB. Can I start with the exciting developments in the Americas plate market? I think I'm correct in remembering you've announced $130 per short ton of price hike since mid-September last year. And I'm told that you've also put in another hike of $40 per ton, announced late on Wednesday night. How does that sit with your observations on increased imports of plate into the States? And how does it sit also with the apparent situation that you and other domestic producers have got quite long lead times appearing?
I mean, one of the reasons that we do this is, of course, the lead times. We are now booking in beginning of Q3, so we have a fairly strong order book, and we see not a massive change, but we see continued gradual improvement of the underlying demand. And still, even though we haven't collected all the price increases because it will come gradually then, and I mean, we have, I think it was four or five times, summing up to SEK 230. And given the contracts and so on, we haven't seen it all in the P&L yet. But I mean, we see that the market is gradually improving, and we are still not on, call it, normal or historical levels of margin over scrap.
... Okay, so are you concerned at all that increasing the domestic prices could actually encourage an increase in these import volumes?
Of course, everything else equal, increased prices will attract more import volumes, that's for sure. But this is a delicate balance of demand in other parts of the world, and so on. But as said, during the presentation, we saw increased import levels at the end of Q1 and beginning of Q2, and that is, of course, a question mark. Where will that go? But still, we have in SSAB strong order book and good order intake, so it's a balance.
I guess we also saw the import price levels rising as well.
Yeah.
Finally for me then, you're looking at flat volumes Q1 versus Q4, but you seem to be implying improved volumes in Americas with a recovery from the winter weather. Could you just explain why you're expecting, therefore, lower volumes from EMEA?
We expect volumes in line with Q1. I mean, in Americas, we have the bigger part of the outage in Q2. We lost some volumes due to the weather. On the other hand, we have the bigger effects of the outage in Q2. So overall, approximately the same levels.
Okay, thank you very much.
No big changes.
Another question here, please.
Hi, good morning, Oscar Lindström from Danske Bank. I'd like to ask some questions regarding the price mix improvement in EMEA, which you mentioned, I think, was 3% sequentially during the quarter. And first of all, do you see that you still have a lot of sort of low margin volumes in the Q1 deliveries, and that there's sort of further positive mix impact to be expected going forward?
I mean, the big change, I mean, we still are on, I mean, even compared to a year ago, on low volumes of niche products, and especially Q&T. And the reason for that is the lower demand from lifting, from construction equipment, and from mining. So that will be, as always, the big effect when they start to recover. So, that will be an effect. The effect we saw in Q1 was not within niche, it was within standard steel. And prices for, if you take, a painted strip product, is higher than in hot-rolled coil. And we had in Sweden, compared to U.S., a much milder winter than normal, and that helped us to keep up volumes for pre-painted material to a large extent.
The underlying price were fairly flat, and the spot price development during Q1 was slightly down. So this was purely a mix effect between, call it then, hot-rolled, cold-rolled, galvanized, and pre-painted.
So, a follow-up on that. Should we expect that sort of mix effect to then reverse now, that we-
Now, the typical-
are into the spring, summer season?
The typical mix effect you see is that we, during the summer, have more volumes of painted material compared to... I mean, the toughest quarters for painted is always Q4 and Q1. We had a somewhat milder winter than normal, and then we had a small effect of a bit more painted material. But the mixed effects, as always, that will help the profitability. The mix effect is niche and standard, I mean, increasing the niche part. We were running at 80% capacity utilization in Q1, which is fairly low. We were having 40% in EMEA, 41% or something, niche products, which is two percentage point lower than one year ago.
So the mix effect that will be of any significance is when demand from the important segments that typically take quench and temper starts to increase.
You mentioned that, you mentioned that you are now taking orders for Q3 delivery, I think, in the response to the earlier question.
In Americas.
In Americas.
For standard plate, yes.
And, and-
Beginning of Q3, yeah.
And what's your sort of level of forward vision in EMEA? And can you sort of give guidance a little bit on how you expect the mix to develop there?
As said, I mean, we are not expecting any massive help from the market. And when I show the sequential development of the for us important segments, the clear conclusion is we can't see that it's getting worse. If it's getting much better, no, we can't see that either. Some positive signs, but still remember from low levels. And that's what we saw in Q1, and that's what we expect for the time or period we can foresee.
All right. Thank you very much.
Thank you. We have another question here?
Ola Södermark, Swedbank. You mentioned that you had lower iron ore pricing in Q1. Are we going to see them affecting the P&L in Q2 then, as normal?
There is a lag of roughly a quarter, yes.
The indication for next quarter, that they are negotiating. I mean, it's quarterly contract, I assume, so-
We are still, as Håkan said, negotiating, and we haven't so far at least reached any, signed any deal, and this is not, this is fairly typical. Sometimes we do it in advance of Q2, and sometimes we do it late Q2 and even beginning of Q3. So this is nothing different compared to previous years. And we have no indications whatsoever that we would like to share. We are still negotiating.
But you are going to continue on quarterly?
We haven't decided that yet, but given the volatility last year, we decided to go on quarterly price contracts, and my guess would be that the volatility will continue. So but we haven't decided that.
Okay, thank you.
Okay, so let's go ahead and take a couple of questions from the phone.
Yes, ladies and gentlemen, if you have a question for the speakers, please press zero one on your telephone keypad. The first question over there, over the phone is from Mr. Carsten Rick from UBS. You can now begin, sir.
Thank you very much. I have a few questions. Let's start with Americas. Could you quantify the EBIT loss you had in Americas due to the harsh weather conditions? That's the first one. The second one is more on Europe, 'cause you mentioned that, there was no major restocking amongst the traders, but what about the mills? I believe with you, specifically, we could see that you actually took down inventories, but it's not with all the mills. Do you have a broader picture here? 'Cause I at least have the feeling that given the, obviously, expectations of an improving market, we have also seen quite a bit of increase in Europe, European production, between 6%-7% in the first quarter, which is quite substantially.
Okay, given my memory, then I start with the second question. I mean, as you-- as we said, we were taking down inventories in Q1 as well. You're correct. I mean, according to World Steel Association, the production in Europe or EU 28 increased with 6%-7%. When we look, yeah. So I don't have a very close or insight in other steel companies in that aspect. But when we look on our customers and in the supply chain we serve, we can't see any massive stocks or any overstocks or any major restocking taking place during Q1.
My conclusion is at least that what we see with our customers and in our part, the supply chain we serve, so to say, is that apparent and real demand will be in balance for Q2.
Okay, perfect.
And then, sorry, but could you please repeat the first question?
Um, the-
Okay. I mean, we haven't quantified that, but it's a combination of lower volumes, because it was not only steel companies and SSAB that had problems with delivering and getting hold on railway wagons and such to deliver, but also end users had problems. So their, call it, apparent demand was lower than during Q1. Then we had effects. I call it higher than usual effects on scrap prices due to the winter, but also electricity prices. Then, as said, we had to close the mill in Mobile for two or three days due to winter storms, and they had, for the first time in almost 30 years, ice storms in Mobile, and they had no possibility to take away the snow.
They had to wait for the sun. So the governor went out and closed down factories and so on. So that affected us as well. But we haven't in EBIT effect, quantified that, but it's a combination of a lot of things.
Okay, fair enough. Maybe one question to the increase of fixed costs you mentioned, for the group. I think it was a number of around SEK 200 million.
Yeah.
for the first quarter. Could we see actually going forward as volumes recover more of those... I wouldn't call them almost fixed costs, almost very heavy costs, to reappear, that you actually have higher maintenance costs, that you have to get people back, in higher working hours and so on and so forth. Or do we expect it's a one-off?
This is the... When we talked about 800 program, there was a flexibility part of 300. And as you rightly point out, fixed costs for us are not really fixed costs. I mean, maintenance is part of that, and that is the flexibility part. Of course, when we run on higher volumes, we will have higher maintenance costs, but the structural cost savings of SEK 500 million, they will- they are there, and they will be there. When you compare to Q1, we did the last year, we did for, for the Swedish, full Swedish workforce, including me then, we reduced during the first 5 months, we reduced the salaries with 10%, and that was a one-off. So until May this year, we will have that. Compared to Q1, we had artificially low then, call it, wages in Sweden.
Due to that, we reduced the salaries with 10% and for the working force, the working time with 20%, we call that 89, and that was part of the flexibility cost-cutting program then. So that's why this appears when you compare it to Q1 last year, this quarter.
Okay, perfect. Thank you very much.
Okay, thank you. We can take the next question by phone, and please state one question at a time. It helps.
Helps my memory.
Our next question is from Mr. James Curry from Crédit Suisse. You can now begin, sir.
...Thanks very much, guys, for taking my question. Just on the merger with Rautaruukki, you seem quite open to extending the offer this early in the period. Can you just tell me exactly why that is? Is it from a shareholder acceptance point of view, or is it more from the regulatory point of view?
It's only from the regular point of view. So I mean, how it works formally is that the acceptance period will be. I mean, first of all, we need a go ahead from the regulatory approval, and then we need probably one or two weeks beyond that to get in all the shares. But we need that regulatory approval to start with.
Okay, so when do you think you might get started with the filing in the European Commission?
It depends. We are in the pre-notification period and having, as always done, in those cases, a dialogue with them and answering some questions and doing some preliminary filings. And when we feel that the timing is right, we will send in the formal filing, and then it will take a certain period of time until we get any formal approval.
Okay.
This is more a formal process than, that follows its own time schedule, so to say.
Yeah. Yeah. Okay, that's clear. Just on the volume guidance that you've given, did you have any opportunity to build inventory in the U.S. during Q1 that you'll be shipping in Q2?
To some extent, but I mean, we were not shipping, but we were not producing either. To some extent, yes, to a small extent, due to lack of trains and railway wagons. But on the other hand, I mean, closing Mobile affected us, and also, due to winters, yields and so on. So not to any major extent. To a small extent, yes.
All right. That's all the questions I have. Thanks very much.
Okay, next question, please.
Our next question is from Mr. Bastian Synagowitz from Deutsche Bank. You can now begin, sir.
Yes, good morning, and so again, thanks for taking my question. My first question is on, on your market share gain, the one you mentioned. Could you, could you just, let us know basically in which products, you've been taking market share, and what you think was the reason for, for this market share gain as well? Thank you.
I think we have taken some market shares, not any massive market shares, but we have, I mean, if you compare to Q4, we have increased volumes a little bit more than, than the, or a bit more than, than the underlying demands. I would say it's fairly evenly spread.
Okay, got it. Then again, on the S&P, one-off, one-off effect from the weather, which you said you can't quantify. The way I would look at it was, would basically be if you say, if you tell us that the utilization rate in the second quarter will be roughly stable, I guess more or less, at least the whole impact should be, or should have been roughly in line with the SEK 150 million you expect from the plant maintenance.
And then looking at how your margin will progress going forward, so if you had to assume that we can expect average ASPs on a like-for-like basis to pick up roughly $120 or even $130 per ton, considering the lag in the price increases you have already put out and the one you put out on Wednesday evening?
The one we put out on Wednesday evening will not be seen in Q2. That is from late June, and order intake then. There is a lag, but we have also increased prices, as Håkan pointed out, with 7% in Q1. So there is a lag effect. Not all of it is seen in Q1, but part of it is seen, yes. So you should not expect $130 per ton higher prices in Q2 compared to Q1.
So, what is the rough number? Which we would assume is it a little less than a hundred or even above?
No, it's less than 100.
Just less than 100.
Sir-
Then my last question is, again, on one-off items. You've clearly basically mentioned SEK 150. Could you map out any other one-off items related to maintenance and other things, which will still come also in the second half of the year?
I would say we will have an outage in the U.S. during the second half of the year. We have not decided exactly when and how, but, I mean, are these one-off costs or not? No, they are not, because we need a certain quarter they are one-offs, of course, but this is ordinary maintenance - scheduled maintenance that we need to do every 1.5 or second year. In Sweden, we do them every year, and we will have, in that aspect or respect, one-off cost during the summer as well in Q3, as we always have.
Nothing extraordinary, I would say, except that we will have two maintenance outage in the U.S. facilities, as at least what we plan right now in 2014.
So, how much will US and Europe be combined? So, the maintenance outage impact from US and Europe combined in the second half?
Let's come back to that when we finally have decided if and when we will take that outage in during the second half.
Okay. All right. Thank you.
Okay, and now we have one final question by phone.
Yes, and that will go to Mr. Sean Divey from Exane. You can now begin, sir.
... The first one is on the US. I was wondering how much have you been helped by the production issues of some of your US competitors in Q1? The prices improved locally. Do you see that mainly as a factor of disappointing locally or simply better demand?
I would say some of our competitors had production problems in Q1, so did we, due to the weather. So I would say, average, no difference compared to us and competition. Price increases, well, you know, prices or margins, I would say, have been on a very low level the last years, on a historically low levels. And what we expect and what we have been saying the last six months, is that we expect—it's not normalized, but a gradual normalization of margins over scrap. And of course, the reason for that, why that is possible, is slightly better and better underlying demand. So this is nothing strange. It's fairly natural, I would say.
We are still, when we measure it, even including the price increases, we are not on at least historically normal levels yet.
Okay, thanks. And then on the better business trends, and to be you alluded to the better demand for plates going forward. Do you see that as a reflection of the improving U.S. economy, or is there here a big impact of the lower activity in Q1 being pushed back to the second quarter?
I see that as a combination of the growing underlying demand and the better... driven by the better economy in the U.S. and NAFTA, I would say. But also, I mean, we are very much, and especially for standard plates, very much into the energy segment and the build-out of gas pipelines and pipelines and so on. So that is also, I mean, of course, fueling the economy, but also, I mean, the low energy prices. So it's a combination of these two.
Okay, understood. Thank you. Then I had one last question on the, on the offer, the exchange offer. I mean, Rautaruukki had a press release two days ago saying that, about 40% of the, of the shareholders had tendered so far, but this looks like it's mostly Solidium.
Yes.
How do you explain that there are very few shareholders other than Solidium that tendered so far?
With all respect, I mean, the offer period just started, and so far, just about 40%, which is, at least something. And as you say, it's Solidium, but we expect, during the period to come, the other shareholders also doing the same thing.
So you do not expect any issues in reaching the 90% threshold before May 12?
Well, as said, I mean, this is a formal process, and it will be driven very much by the formal process in European Union. And we will not finally close this until we have got the go-ahead from them. And then, as I said, it will probably take one or two weeks after that before we finally close the acceptance period. So, I mean, formally, we can't do this deal before we get the acceptance.
Okay, understood. Thank you.
Okay, and we have one additional question by phone. Please, go ahead.
Yes, and our last question will come from Mr. Samsa Kahunen from DMB. You can now begin, sir.
Good morning. Just a quick question, which I've been asking quite often, and I know that it is hard to answer, but do you think that it's possible that there is going to be any remedies, with the deal with, or the merger with Rautaruukki, taking into account the quite strong position that you have together in the Nordic distribution sector?
It's a good question, which is, for me, impossible to answer, and let's come back to that when we have seen what the European authorities think about that. I have no answer on that question for obvious reasons.
Yes, and just to continue, is that basically something that you might be—like when you're doing this education period with the European regulators, is these kind of things something that should be typically discussed in deals like this?
As said, impossible for me to understand. It's a hypothetical question, so, so let's come back to that.
Thank you.
Okay, any additional questions from the room here? Yes.
I'm not sure if this is a hypothetical question or not, but it is a-
Sure is, yeah.
Request on your very deep experience of the European steel industry. In the event that politicians decided to either boycott or raise tariffs on import of Russian steel to Europe and vice versa, negative impacts on imports from Europe to Russia, what do you think the overall impact would be on West European steel markets?
It's a very good question, and I thought a bit about it, and I would say there are two. Of course, Russia is a growing market, especially for us. Is it a big market today? No, it's not. On the other hand, we see Russian steel in Europe. We see Russian shipping, semi-finished products and slabs down into their facilities in Europe. So at the end, what will the balance be for the European steel industry? Not necessarily negative overall. What will the balance be for SSAB? Depends on what scenario we see, but with tariffs going both ways, not necessarily in the short term, negative. In the long term, of course, not good at all. So hopefully we will be able to, I mean, avoid that, but in the short term, not necessarily negative.
Thank you.
Thank you. So that seems to be the last question. So I would like to thank you all for coming today, and have a good day.