Good morning, everybody, and very welcome to SSAB. We are going to present to you the results for the first quarter of 2012. As you know, it's not only we who are sitting here in Stockholm. We have also an audience following us on the webcast. After the presentations of our CEO and our CFO, there will, of course, be time for questions and answers. We have plenty of time, so we'd appreciate if you put your questions one at a time, and we will, you can be sure that we will answer all questions. Once again, very welcome, everybody. Now I leave the floor to our CEO, Martin Lindqvist.
Thank you, Elena. Good morning, and once again, welcome to this presentation of Q1. To start with some highlights, we had an EBIT in Q1 of SEK 479 million , and we had a, I would say, fairly decent cash flow of SEK 1.9 billion , where SSAB EMEA accounted for SEK 1.2 billion of that. And this is mainly out of working capital and inventories and stocks. Demand improved in the period, partly due, as we said when we released the Q4 report of replenishment of stocks among customers. As you remember, we saw a quite massive destocking during Q4, and we said that in Q1, we will probably or hopefully see that the real demand and apparent demand will meet each other.
SSAB EMEA's contract prices or price contracts for Q1 were on a lower level compared to Q4. We took the Q1 contracts during November and December when prices were going down, so we knew that would happen. The cost efficiency program we talked about last time is within SSAB EMEA proceeding and running according to plan. The commissioning of new quenching capacity is ongoing and proceeds well, also that according to plan, and I will touch that a bit in a few slides. Sales just above or slightly above SEK 11 billion, with an EBIT of SEK 479 million for the first quarter. EBITDA per ton just below SEK 1,000 per ton, and at the same level as we saw in Q1 2011.
If we take a look at our main segments or the important segments where we are active, start with heavy transport. I would say that the truck market remains good, I would say in all the regions, and you all saw the reports from some of the truck producers, coming this week and last week. Railcar is a bit important sub-segment for us, especially in North America, and we have Railcar builders asking for more material in North America. Barges is another important sub-segment for us in North America within heavy transport, and we have, I would say, to that sub-segment, also a solid order book. Automotive, light vehicle sales in European Union came down with almost 8% during the first quarter compared to first quarter last year.
So, so that is not as good as one year ago. Overall, the automotive demand in China, in Asia, is still on good levels. However, we expect going forward or in the future, increased competition from Asian producers, but still a fairly good market. Construction equipment demand remains good, both in EMEA and in Americas. We saw a slowdown in the Chinese lifting industry in Q4 and beginning of Q1, and I will touch that when we come into the business area, because we saw lower volumes in Q1 due to destocking among Chinese lifting OEMs.
We also see a trend, a clear trend, that Chinese OEMs are moving into the European market, and I visited Intermat, the big construction equipment fair in Paris one or two weeks ago, and one of the biggest stands at that fair was XCMG, a Chinese producer of construction equipment. So they are clearly now moving outside China, clearly moving outside Asia, not only into Latin America and Africa, but also to other places in the world. Mining, I would say, fairly strong in all regions, with maybe one exception, and that is energy coal mining in North America. Slowed down a bit during Q1, and that is, of course, a combination of a very mild winter in North America and lower, lower gas prices in North America as well.
But apart from that, I would say the mining sector, as we see it, develops fairly well. Energy, also an important segment. Several segments remains on a decent level. Wind tower demand is still steady, but we haven't seen any extension of the production tax credit yet, so this could be, we could see a slowdown here after the presidential election in North America or going into 2013. So we have to see, wait and see if they will extend those production tax credits. Service centers, I guess this is the third quarter when we say that, the order placement remains cautious and that they continue to be cautious when they place orders. Everyone is trying to determine the correct price level in North America among steel service centers.
As you probably know, we sell roughly 50% of the volumes of standard steels via service centers, so we are a bit less exposed to the service center segment compared to other big plate producers in North America, but this is still an important segment for us. Inventories came up slightly at the end of February, but they are still on fairly normal level, I would say. So we can't see any massive overstocking within the service center sector in North America. We step into the business areas. EMEA had an EBIT of SEK -124 million for the first quarter. Shipments were 11% lower compared to Q1 2011, but 12% higher than Q4.
Niche products accounted for 44% in EMEA, and overall, I would say, once again, that we are well on our way to reach our target of 50% of the shipments being niche products at the latest, 2015. We saw prices for both, niche steel and standard steel decreasing with, five percent during the quarter compared to the previous quarter. And we have started to produce, quenched steel and Hardox material in our new facility up in Borlänge, QL7, during the quarter. We also started up the large, blast furnace in Oxelösund in the beginning of, March or mid-March. We are now planning to idle the small blast furnace in Oxelösund, beginning of May or early May. We also had, in March, a gas pipe breakdown in Oxelösund.
Cost us a 10-day production outage, and we lost in that outage, unplanned outage, a bit more than 10,000 tons due to that. Americas, a strong result, EBIT of SEK 670 million, an EBIT margin of 15%. And if you take the PPA accounting into this, we had an EBIT margin of 10%. Shipments in line with the Q1 last year, and 7% higher than Q4. Niche products accounted for 31%, compared to 27% one year ago, of shipments. Local prices for niche and standard steel came up during the quarter somewhat, and the new quenching line in Mobile is now being commissioned during beginning of Q2. APAC, an EBIT of SEK 65 million and an EBIT margin of 11%.
As I've said before, you should expect us to have EBIT margin in this business area between 10%-15%. Shipments were 30% lower versus Q1 last year, and 25% lower versus Q4 last year. As said, this was due to destocking among customers and mainly within the lifting segments. They are ramping up, and we expect more normal levels going forward. Local prices for niche steel increased by 2% during the quarter, and the finishing line that we have built in Kunshan is now ramping up. We have produced and delivered plates from that finishing line. We have started also up the new R&D center, and my last picture will be an example of an application from that R&D center.
Tibnor, an EBIT of SEK 105 million and an EBIT margin of 6%. Shipments 6% lower than the first quarter last year, but 8% higher than Q4 last year. Lower prices and lower volumes affected sales negatively compared to Q1 last year, and we had an operating cash flow in that business of SEK 95 million for the quarter. Take a more broader look, global steel production increased with 1% and amounted to 377 million tons in Q1, so in line with what we saw Q1 last year. We saw and we see a continued recovery in the North American steel market, but no surprise, the macroeconomic outlook in Europe remains uncertain. Demand in Q1 was, as said, impacted by some replenishment of inventories among customers, following a pronounced destocking during Q4.
The strongest segments for us remains material handling, large construction equipment, and the North American energy sector. And spot prices in general turned up during Q1 and after a downturn in Q4. So by that, I hand over the floor to Marco.
Thank you. Good morning as well. To start with a couple highlights when it comes to Q1 results. The sales were about the same as last year, same period, and operating result, SEK 479 million . Just like Martin mentioned, operating cash flow was very good, and our effort to continue optimizing the working capital has given results, and it amounted to SEK 1.9 billion , which gives us a net gearing level of 57%, decreased by 3 percentage points compared to year-end last year. Here you can see some key figures, and if we just compare the operating profit, SEK 479 million, with last year, same period, here you can see the major items that affected the result.
Prices had a positive impact of SEK 270 million, and we had some volume decrease that affected SEK -140 million. And then we had under absorption due to the fact that we actually produced less this year compared to last year, and this is mainly from EMEA business area, had a negative impact of SEK 200 million. And then other, others are mainly less sales of byproducts, and we end up with SEK 479 million. Operating cash flow, working capital was a major impact in EMEA, and totally, we actually had a positive effect of SEK 950 million from working capital, the operating cash flow. And that ended up SEK 1.9 billion. The net cash flow was almost from SEK 1.5 billion.
You might wonder what is the SEK 31 million in divestments, and I don't know if you saw, but we sold a minor business within Plannja during the quarter, and that's the result or impact of that. It was a non-core business within Plannja panel business. Net debt decreased during quarter by SEK 1.8 billion to SEK 16.7 billion. The net gearing, as I mentioned, 57%. We still have very high liquidity preparedness, and actually during the past weeks, we have prolonged our backup facilities, and one of the backup facilities that was about to mature in spring next year, we have prolonged but also downsized that to a more suitable level for SSAB.
The average term in our loan portfolio is five point three years, and if you only to take the long-term debt, the average term is five point one. If just compare those 5.3% with a year, and we have 5.1%, and three months has passed, so we have increased the term during quarter as well. Here you can see the debt maturity profile, and 2012 maturities is basically commercial papers. That's amounts about SEK 900 million. Then we don't have any maturities until 2014. And the debt cost and duration, you see the 5.3% in Q1 EBITDA, and the average cost for our debt portfolio is about 2.5%. Couple words about the raw materials.
Iron ore prices for Q1 went down about 12%, but due to the inventories, it didn't give any major impact in Q1, but this impact will come in Q2. We haven't settled any prices for Q2 yet. That negotiation is ongoing, and we will get back to you when we have settled the prices as well. Coal we buy, as you might know, about 40% is coming from North America and 60% from Australia. Due to the winter inventories, we haven't received any deliveries during Q1, although we have settled about 75% of those annual contracts with American coal suppliers, and the price went down about 30% compared to last year's contract. But that will not give any impact in Q2 either, due to the inventories we have.
So from Q3 and forward, we will get that impact. And in North America, we buy scrap on continuously basis to our mini mills, and prices have moved quite, quite a lot sideways, actually. It's slightly decreased compared to year-end or last quarter, but, but, last week's, the prices has, has been quite a lot sideways. Back to you, Martin.
Thank you. So, as said, the recovery in Americas continued and is expected to continue. In Europe, the market, due to the financial situation, the macroeconomic outlook, the market remains uncertain, whereas the outlook for, as we see it, SSAB APAC, is, stable. European price contracts for Q2 will be on somewhat higher levels than in Q1. We will see the impact, as Marco mentioned, of lower iron ore costs or prices in Q2 and the impact of lower coking coal prices in Q3. The startup of the blast furnace in Oxelösund, the large one, was done in early March, and we are planning to idle the small one in the beginning of May, early May.
The SEK 800 million efficiency program that we launched the beginning of Q1 is proceeding according to plan, and we will continue to deliver on that one. So to sum it up, a healthy cash flow of SEK 1.9 billion and a continued decrease of our net gearing. Strongest segments, as said, material handling, large construction equipment, and energy sector in North America. Demand growth in the quarter, partly driven by restocking or replenishment of stocks, I would say, because we are not seeing the same effects we saw one year ago with the fairly big destocking, so this is more normal replenishment of stocks. The recovery overall is expected to continue. Quenching capacity in Borlänge, ramping up, soon be ramping up in Mobile, in QL6.
Overall, the investment program is running according to plan, and gives us a very solid and interesting platform going forward. Last, but not least, this is one of three projects with the dumper bodies we have done in our R&D center in Kunshan. We have quite a few more of them in the pipeline to work with customers. I think this is interesting because this shows the benefits, of course, for the customer, but also for the customer's customer. In this example, we, with our steel and our design, managed to decrease the weight of the dumper body with 50%, and roughly double the life length. So instead of using 6 ton, we were able to produce a dumper body like this with only 3 tons of steel.
And that is, of course, extremely beneficial for, for the end user, the, the owner of the truck or the driver of the truck. It gives, that person or, or that company possibilities to increase payload or decrease fuel consumption or a combination of that. But, I think this is, this example is interesting in another aspect as well. I mean, for the producer of the dumper body, this, of course, is also extremely interesting. I have a number of KPIs here, a number of components. If you compare the old design with, with normal steel, we were able to take down the number of components from 100 to 27, in this example. And laser cutting, instead of laser cutting 330 m, we were able to do it with a laser cutting of 150 m.
Bending is also an operation you need to do in a dumper body like this. Instead of doing 185 bends for the old design, you can do this design with only 25 bends. And the weld length decreased from 295 m to 85 m. So this is clearly an example where we see, or both our direct customer, the OEM or the producer of the dumper body, and also the end user, sees a lot of benefits. We have been doing this and been working like this in Europe for many, many years. We are now doing it in North America since a couple of years, since 2007. We're also working like this in Latin America, and as I said, in Asia and in China.
We see a lot of possibilities in growing parts of the world by bringing our steel and our knowledge to the market. So this is just one example. And by that, I guess it's time for questions.
Yes, and we would, of course, appreciate if you can say your organization and your name, and also if you put one question at a time, would be very good, because it's easier for us to answer them. So please, who would like to start?
Thanks. Good morning. Christian Kopfer from Nordea Markets. A few questions. Firstly, I think you mentioned that you have seen some wait-and-see behavior on several of your customers. Regarding the rollout of the new QT, how do you see that progressing in regarding this wait-and-see behavior, and?
Well, when we look into going forward, I would say very much in line with what we planned for. So we see a strong interest for the new products and the new quenching lines coming on stream. So I'm not worried.
Okay. So regarding the situation you see right now, when do you expect that to be fully ramped up?
But as we have said many times, it takes some time to ramp up capacity like that. But we are today producing and delivering Hardox material out of Q7, according to plan. We haven't commissioned the Q6 yet. We are doing that more or less as we speak, but we will do that during Q2, and then we will gradually ramp that up as well. So this is not I mean, black or white. I mean, we will gradually ramp it up, and we have plans for that. And so far, we haven't seen anything that makes us believe that we are not going to fulfill those plans.
On the finishing line in China, do you see mainly effects on working capital there or do you?
The main,
See also effects on margins?
No, the big effect is, of course, increased service and reduced lead times to our customers. I mean, if you order a plate today, without the new logistical setup and the new finishing line, you probably have to wait in China up to six months before you have the plate in your yard. So the main, I mean, possibilities for us as a company is reduced lead times and increased service. But then for us as a company, this is also ability. I mean, gives us the opportunity to reduce our working capital. We instead of shipping finished plates, we will ship the mother plates and then customize them at the facility.
Fine. But the EBIT margin, so to speak, guidance that you have of 10%-15%, that will probably remain?
It's a broad range, so it's, we'll see about it.
Finally for me, on the cost efficiency program, did you take any cost of that in Q1?
I mean, we will take that gradually. We didn't do any provisions or minor costs, maybe, but we will take that gradually, and these are not big costs. So we will probably report them separately, but you shouldn't expect any massive costs for that.
Thank you.
Okay, next one, please.
Yes. Good morning, it's Julian Beer from SEB Ens kilda. Can I first ask on the utilization side, what was your furnace and rolling mill utilization in Sweden like in the quarter versus the previous quarter?
In the Swedish operations, the crude production was about, utilization ratio was about 80%, 80%+ something. In rolling mill, it's a little bit lower, about 75%. That's increased compared to Q4, but decreased compared to a year ago, the same period. Then we actually were running up almost flat in Sweden.
If I think back to Q4, am I correct in remembering that you're about 70% utilization in Q4?
That's correct.
Okay. It's been very useful to see you now give us in the bridge the under absorption impact in the earnings. What was the effect of that on a quarterly sequential basis?
Yeah, of course, due to the fact that production increased, so it's a positive impact as well. But we haven't quantified that in money.
Okay, but if we look at those percentages, both on year-on-year, can we use your-
Yeah, you can use the same. Yeah.
Great. Iron ore, are you now planning to move to a quarterly contract pricing basis?
We are in the middle of the process. So as I said, I mean, we haven't closed any deals yet.
Okay, that's great. And then my last question is, niche product price trend. In the past, I think you've said that that is, less volatile normally than the standard product price trend, but here in the first quarter, we've seen everything down 5%. Is that just a consequence of longer-term contracts being repriced into the new year, or have you actually seen a greater volatility in the niche product pricing?
Not really. This is a combination of, I mean, in a separate quarter, you could see differences, but this is also a combination of advanced high-strength steel and QT. So and it's also a combination of quarterly contracts and half-year contracts. So I mean, no major differences. Niche products are still much more stable than standard steels.
Okay. And the sort of niche coming out of Borlänge, will that be more traditional quenched in terms of pricing as you've seen it coming out?
It'll be the same product. I mean, we are creating our global production system, so we are producing, as we speak, Hardox 450 is one example, in Oxelösund, in the quenching lines there, in the quenching line in, in Borlänge, and in QL5 in, in Mobile, with the same properties and everything. So, I mean, the same products. We have also, during the quarter, started to produce Weldox products in QL5 in, in North America with exactly the same products. And that's why it takes a bit of a time to ramp up and to secure that we are more than 100% sure that the properties are exactly the same. So it will be exactly the same products.
Okay. There's been reports that in the U.S., there are increasing imports of many grades of steel, including plate from countries like Mexico. Now, you're saying that demand is increasing. In that environment, can you expect to improve earnings above the Q1 level in Americas going forward?
What we have seen during Q1 is an increased import to North America, for sure. And we have been running our mills at good levels, as we usually do, due to quality and efficiency and due to a very good cost position as well. So, I mean, from time to time, you see imports going up and going down, but we have clearly seen imports in Q1, yes.
My question is, how will you benefit from improving demand in the States if imports are increasing?
I mean, what we are doing, and what I tried to show at the last pitch, is working together with end users, showing them the possibilities of using our steels and keep a very good and high quality going forward. I think that is the trick for SSAB, and that's what we are 100% focused on doing.
So, market share on the high end?
Yeah, definitely.
Thanks a lot.
Thank you very much. Any more questions? Otherwise, I'll turn to the,
One more.
Sorry.
Yes, Ola Södermark, Swedbank. About the question about the same theme as Julian here. The price trend in the U.S., how do you see it developing in Q2 versus Q1?
Go ahead.
We've seen prices increasing due to those announcements we've done. So in different grades, we have announced in different phases, increases. So I would say that we see a little bit increasing trend in North America in some of our products. Most of the products already got their increase in Q1, and some of those announcements will affect in the end of Q2.
Okay, but you don't see any decreases in prices for some?
On commercial plate, on spot market, you've seen a slightly downward trend, and it depends how that's going to continue and develop for those spot market plates that we sell, that might give an impact as well, but, but we haven't seen that yet.
Okay. And, yes, the question on the operating cash flow, it was very strong, and if I'm not wrong, it was very strong in Q4 as well.
Yes.
Do you have further potential to squeeze out some more good cash flow?
It's not about squeezing out cash flow. It's about changing the way of running business, the business. Then, of course, you shouldn't expect us to generate SEK 2 billion each and every quarter, but I mean, we see further potential, yes.
Okay, thank you.
Okay, then I turn to those of you following us on the web. Please go ahead. No calling?
Also teleconference.
Yes, that's what I did. Do we have anyone following us from the teleconference? Please go ahead. Good morning. Do we have anyone, following us on the telephone conference? In that case, please go ahead.
Ladies and gentlemen, if you have a question for the speakers, please press zero one on your telephone keypad, and you'll enter a queue.
As far as I can see, there are three persons who have announced that they want to put questions. Could you please go ahead?
We have a question from Mr. Alexander Vilov from Carnegie. Please go ahead.
It seems that we have some sort of technical problem.
Hello?
Yes, hello.
Yes.
Good morning.
My question is, first question on mixing in your niche products. Is the same thing about how QT versus high strength steels developed in Q1 versus Q4?
There's no major differences between those two quarters.
Okay, and the second question regarding, you said that you plan to idle the small blast furnace in Oxelösund as of May. What kind of other effects do you expect from that coming into the summer?
Well, when we close that blast furnace, if we do that early May, we will keep it closed until at least over the summer stop. And we will see, I guess, a smaller effect than we saw in Q1 when we started a big blast furnace in beginning or mid March. Early March. I don't know the exact figures, how that will impact, but we continue to see some under absorption in that respect.
All right. I also noticed on the performance there at the end of the quarter. You said that you were going to get back to the sort of effects from that. But could you say anything with regards to deliveries and so on in Q1? Were there any major effects from that?
No, due to lead times, I mean, the effects on deliveries will come in Q2 and Q3, due to lead times. But we handled all the costs related to repairs and everything in Q1. But the effect on deliveries will come after Q1, and that's why we said, I mean, that we will come back to that. But roughly, we lost a bit more than 10,000 tons.
Okay, thank you.
Thank you very much. Next question, please.
Our next question comes from Mr. Alessandro Abate from JP Morgan. Please go ahead.
Good morning to everyone. Just one question in your outlook. You're saying that in Europe, the market remains uncertain. Can you just give a little more color? I mean, something related to the prices, to the restocking, to the level of inventory. I would appreciate a little more detail about it. Thank you.
What we are saying is, I mean, the macroeconomic situation has, is, I mean, what it is, and that makes it, makes it uncertain. As we see it, we haven't seen, i f we talk about underlying demand, I would say we have seen it fairly stable, during Q1 and, and during, compared with Q4. We are not expecting any major changes, going into Q2 either. So, that's what we are saying. I mean, we have no clear idea where this will go with the macroeconomic situation in Europe but.
Are you seeing some kind of potential weakness for price going forward? Or just related to, kind of, wait and see until it keeps the demand relatively stable with a potential release short term?
No, I mean, we have to wait and see, but spot prices in Europe are, I mean, following the macroeconomic trends, so to say, to a large extent, and we don't really know. We just wait and see. We have no clear idea where spot prices will go in three months or six months.
Thank you.
Thank you. Next question, please.
Our next question comes from Mr. Bastian Synagowitz from Deutsche Bank. Please go ahead.
Yes, good morning, gentlemen. I've got two questions. First, first of all, coming back on the selling of your quenching capacity, in particular, could you give us some idea on the timing on when you expect to be able to achieve the qualities which you actually, actually need? Would that be already in the fourth quarter of this year? And then coming back on the utilization rate in Romania, which you mentioned is right now around 80%-85%. Has there been an improvement towards the end of the first quarter? Do you expect this to remain stable in the second quarter? And, where will the utilization go when once you idle the small blast furnace? Thank you.
To start with the first question, as said, I mean, we are today producing Hardox material in QL7. So, and so, we have qualified that, those products in or a part of that product range in QL7. And as I said, I mean, this is quite a tough job to do. I mean, as I said, we want to be more than 100% sure that we have the same properties and in all over the plate, but also in plate after plate, before we brand them and qualify them as our branded products. We have done that now in QL7, and we are working with the branding, also the Weldox products in QL7.
In QL5, we have branded the Hardox products and produce and sell Hardox products with the same distinctive properties in North America. But we've also branded and started producing Weldox products. When we ramp up QL6, we will of course start that process as well. So, I mean, we are following the plans we made when we decided to do these investments. So, and we will, as I see it right now, continue to follow these plans and gradually ramp up the facilities with branded products. And then the second question was about?
Yeah. It was about capacity in EMEA, capacity utilization. And we kinda have about the same capacity utilization in Q2 as Q1. As Martin mentioned, we closed down the blast furnace in early March, and now we're gonna close down the smaller one in early May. So there's no major changes between those two. And was something else you asked about the capacity in.
Going forward, I mean, we will be.
Yeah.
Adapting to the market situation when it comes to how we run the capacity.
Oh, yeah, you also asked during quarter one how capitalization has been, if there's any change between the beginning of quarter and late quarter. Actually, we adjust our capacity utilization or projection on a day-to-day basis, depending what we have to produce and what we need to produce. So it goes up and down quite a lot. So the 80%+ that I said is average during the whole quarter.
Okay. Just to kind of go back to my first question. Of course, it is a very gradual process, if you want, but I mean, what is, I mean, at the time, when would that be finished? Will you have everything maybe up and running in Q4 or maybe in Q1 next year?
Of course, first of all, it depends on the market, but, but, I mean, we have installed now 300,000 tons of capacity in QL7 and 200,000 tons of capacity in QL6. And what we have said is that what we are aiming for is to meet the target of 50% of the volumes being niche products, 2015. And as I've said many times, I'm convinced that we will meet that target. So, so that is the ramp-up plan we have given externally. And we will meet that plan. I don't want to be more specific and telling you each and every week what exactly what kind of tons we will produce of certain grades in certain production lines.
It seems like the caller is disconnected. We take the next question from Mr. Gerrit from Morgan Stanley.
Yeah, two questions. First one being on your product mix. You achieved the high sales in niche products in Q1, both compared to last year and to the particular quarter. Is this a level you expect to remain at throughout the year, given that you see flat demand or stable demand?
I mean, those levels depend, I mean, differs a lot between quarters. It could be one boat going to China as one example, with 10,000 tons. If that one is delayed a couple of days, well, then that would differ between quarters. But I mean, what you should expect us to do is to deliver 50% of the volumes being niche 2015. And as I said, with the example I showed you about the dumper body, we see a lot of opportunities going forward in different segments, in different parts of the world. So I would say that, more or less, not regardless of business cycle, but we will continue to strive to reach those targets.
We see a lot of opportunities in different parts with these kind of products, and especially combined with the knowledge how to bend, how to weld, and everything. So I don't want to be more specific than that, but you should expect us to have 50% of the volumes being niche products, 2015.
Okay. Is there anything in this quarter that stands out as a particular acceleration for the increase, quarter on quarter or year on year to in niche, or is it just the,
No, not really. I mean, as I said, could differ between quarter to quarter, but, but I would say overall, according to our plan.
Okay. And second question then on Tibnor, where you reported fairly strong earnings and good margins this quarter. Is this a level you expect to remain at throughout the year, or is there anything here which could explain?
It depends on the market situation, but nothing, especially within Tibnor either. And as you know, in the history, we have been on EBIT margins around these levels, some tough quarters and some tough years below, and some good quarters and years above, but this is, I would say, fairly normal levels, o kay. But that could differ, of course, between, due to the business side.
Okay. All right, thank you very much.
Thank you very much. Next question, please.
Our next question is from Mr. Sampsa Karhunen from DNB. Please go ahead.
Yes, good morning, madame and monsieur. Very nicely start, congratulations for that. I have a couple of questions. First of all, regarding the EMEA region, I want to basically ask a couple of questions. The profitability on that part in that division, was that basically due to somewhat lower raw material costs coming out of your inventory? As far as I know, that the prices have not been increasing, or was it only due to the fact that the capacity utilization was going up?
The main reason was capacity utilization. Not only the under absorption, but also when you run mills at a lower level, there's other impact like yield, for example, which is coming lower. And now when we are increasing the capacity, that gives, of course, a positive impact as well. Production runs more stable. I mean, these mills are designed to run more than 70%, so to say, so yield and under absorption is the explanation.
Okay. Just to kind of understand the capacity utilization in Q1, was it basically market-driven, or were you sending some slab products to the market over the Q1?
No, we were not. I mean, this was what we talked about last time. We saw, call it a massive, or at least a big destocking in Q4, and we said that we expect at least parent and real consumption to meet, meet each other. In last year, we saw, I would say, a big restocking effect. We haven't seen that. So this is more normal replenishment of stocks of the destocking in Q4.
Okay, thank you. Then, just regarding the U.S. operations, what is the contract that you have for the energy costs in the operations there, and have you seen a change in the energy price currently?
We are running electric arc furnaces in North America.
Right.
Electricity and scrap.
What is the contract term you have in the electricity prices in.
We have long-term contracts in North America, valid until, I think it's 2016 and 20-something. So, so we have long-term contracts, so we are not affected. That, I mean, my example was just that we potentially could see a shift here in, in North America due to shale gas and everything. So, so what we saw during Q1 was more the customer segment, so to say, energy, coal mining, that they reduced their output from the mines. And that was a combination, I would guess, of the mild winter we saw in North America this year, and also gas prices coming down from previously $8 to $2.
True. I was basically trying to capture the effect from some of the other players using natural gas that-
Well, you should probably ask someone else, because we are not using natural gas. We buy electricity in long-term contracts, so we use electricity and scrap. So I'm not an expert here.
Okay, but do you see that there is a risk in a change of the competitive position in that some of the players are using or see a decline in energy costs in their operations in the U.S.?
We haven't seen anything so far, but maybe, I don't know, going forward.
Thank you. Thank you.
Thank you. And the next question, please.
Our next question comes from Mr. Vincent Lepine from Barclays. Please go ahead.
Good morning, gentlemen. I just have two quick questions, please. Just to clarify, on the mix impact, you said in EMEA, that you had a positive, a positive impact on pricing. But if I look at the data you provide, which is just in niche products out to the total shipments, that was pretty stable at 48% or so in Q1 as it's Q4. So I was wondering if you could, going forward, maybe just throw a little more about the mix, so we can understand the better the, a nd see if the impact it has on the average pricing. And the second question had to do with the utilization rates that you mentioned in Europe. If I'm not mistaken, you said it was at 85% or so in Q1 on average.
But if I look at the production, that you had crude steel production in the first half of last year, you were significantly above in absolute terms, which would mean that in terms of the utilization rate, you were at 100, which, I don't think you were back then. So are you just talking about 85% based on the operations that were running, i.e., excluding the furnace that was idle? That was my two question, please.
Yeah. What does mix? Mix is referring to the different segments within the products that we are selling. And I hear your wishes to get more information and disclosure of understanding of that. When it comes to crude steel production, I said it's 80%+ in EMEA during Q1. And that's the whole EMEA crude steel production, including Oxelösund and Luleå.
Okay, but if I look at crude steel again in Q1 or Q2 last year, when you were running at about 960,000 tons per quarter, if you were at 80%+, in Q1 2012, then that would have been, that would have meant, sorry, that in H1 of last year, you would have been at 95%+.
That's correct. We had a very, very good utilization ratio in Q1 last year, and also Q2 last year.
Okay. All right, thank you.
Okay, thank you very much for all of you calling in. Do you have any additional questions here? No? Well, if not, y es, one.
Sorry, just one housekeeping item and one question. Were there any gains at all on sale of emission rights in the quarter?
No.
In terms of the summer shutdown plans, would you expect to have a normal summer shutdown in Sweden in terms of weeks down on the furnaces?
Yeah.
Okay, so,
With the exception of the small blast furnace in Oxelösund, but apart from that, yes, normal summer shutdown.
Is that four weeks for the furnaces and six weeks for the rolling mill?
I think, somewhat shorter. Normal.
Okay. Thanks a lot.
Okay. Thank you, all of you, for coming, and thank you for your.