Good morning, and welcome to this presentation of the SSAB Q3 Report. My name is Per Hillstrom. I'm Head of Investor Relations at SSAB. And with us today here is our President and CEO, Martin Lindqvist and also our CFO, Hakan Follin. We have a bit of a hybrid setup today.
Martin has a bit of a cold, so he's not here with us in the room, but he will participate over the phone. And again, as usual, Martin will start with the overview of the quarter, and then Hakan will go into the financial details and then Martin at the end with the outlook and the summary. And then of course, it will be good ample time to ask questions at the end, but we'll come back to that. So by that, Martin, we can now see your first slide here, another Good quarter for SSAB. So please, now you can start with your presentation.
Thank you, Per, and good morning. And I once again apologize for not being able to be in the room, but I have quite a cold. So I guess it's better for me to call in than To be in the room, even though I look forward to meet you all for the first time in 1.5 years. But if we start with that picture, I would summarize Q3 And use the word solid internal performance in a strong market. And these are some of the KPIs.
And If we start with safety, we are moving in the right direction. This is long term injury frequency Per million working hours, and we are at now rolling 12 at 1.9, which is a huge Much better than we have seen previous year. And if we take it year to date, it's even better. If we then move over to Specialty Steels, We could see that we during the Q3, even though we had an outage, we could we continue to grow the special steel volumes. And this is the best Q3 deliveries we have ever seen for the quench and tamper.
We also continue to improve the mix in Europe. Year to date, the premium mix is 43% of the premium share. And if we take Q3 stand alone, it was 45%. And this is also an important part of our strategy to shift the mix towards Less volatile and more profitable products. And it all ended up in record high earnings of an with an operating profit of SEK 5,800,000,000 for the Q3.
If we take the next slide, Per. Another, I would say, remarkable event during the Q3 was that we drove the first Fossil free plates in OXILOSUN ever during the Q3. And we didn't only roll fossil free plates, but we also Ship them to one of our customers, Volvo Group, and they during the quarter also came out with a You called that the load carrier from mining and quarry, which is made completely out of the fossil free steel. So this is One very important event on our journey to become the 1st process steel company in the world. And we have now proven that the technique works.
And according to Volvo, the quality of the steel is as good as the steel we usually produce. We have also, during the quarter, signed a number of strategic partnerships. And on this picture, we have Mercedes. It is an important partnership with Daimler Group. I think in the future, we do as fossil free steam from SSAB.
You could then take the next slide, Terje. If we look at the divisions, I would say that all divisions were Performing very well and meeting record levels in profitability. The reason why special steel is a bit lower than Q2 is, of course, that Q3 is a quarter with planned maintenance outages. But even taking that into account today, the SEK 1,000,000,000 in EBIT. Europe, SEK 2.5 billion, clearly the best quarter ever.
And SSAB Americas, almost SEK 1,900,000,000 in the quarter. Even Tidmor and LUKI Construction did very good profits and record profits and of course, much better than previous third quarters in the history. If we take the next slide and move into divisions. I'll start with specialties. I would characterize the quarter with a strong underlying demand, of course, affected By the maintenance outage in August, then typically, we'll also see a seasonal slowdown both in July partly in July, but definitely in August.
Shipments of 348 tons, which is, as I said, a record for the 3rd quarter, It's 34% higher than the Q3 last year. And then EBIT and operating profit of just north of SEK 1,000,000,000 Equivalent to 17% EBIT margin, which was, of course, due to better prices, higher volumes, but also Very stable production. And as we have discussed before, now since beginning of Q3, Mobile, the Plant in Mobile is also part of Special Steel. So that mainly has moved from Americas to Special Steel from 1st of July. If we move over to SSAB Europe, strong market conditions during the quarter, of course, Here as well, somewhat of a seasonal slowdown, end of July August.
High share of premium, EBIT of SEK 2,500,000,000 which is 23 percent EBIT margin, which is, of course, a record level. So the effects of higher prices, higher volumes, capacity utilization. And also here, we had Planned maintenance stops during the Q3, which we typically have. And you can also see on the lower Right part of the slide. We'll try to describe the development for automotive and advanced high steel Strategy we have within automotive, and we are more resilient compared to the general automotive market.
So We see clearly that the advanced high strength steel part is structurally growing better than the market or less volatile than The average automotive market. Then next slide please to Americas. We were during the Q3 in Control the order intake, which we typically are when prices are moving up. So we don't want to sell out It's too early, and I think the Americas organization handled that in very good way. We saw good demand during the quarter, higher shipments, Both compared to previous Q3 last year, but compared to many 3rd quarters in history.
We have an EBIT of almost SEK 1,900,000,000, which is, of course, a record level and an EBIT margin of 31%, which It's really good, Steve. So a strong quarter for Americas as well. If we take the next slide and Start to look into Knoll, another strong quarter for Knoll, and they have really put the organization in place. They are finished with the structural cost efficiency program, and they are doing a very good job. They have saved more than SEK 200,000,000 on annual basis, and that, of course, is Contributing to the record profit.
Revenue was up with 75% versus Q3 last year, and we had an EBIT of North of €500,000,000 equivalent to an EBIT margin of 17% due to higher volumes, better prices and also when prices are moving up Some inventory gains. But overall, internal performance also in Timur was really good during the Q3. And then next slide, LUKI Construction, they continue in a steady pace to improve operating profit and how they run operations. They had a very solid performance. And nowadays, We fully or they fully focus on the product business, envelope and the roofing business.
The rest of the business we have sold. So this is Surely in our product business. Revenue increased with 27% compared to Q3 last year, and they had an EBIT of SEK 229,000,000 On the EBIT margin of 13%, which is good. So better volumes, they struggled, of course, with higher steel prices, but I think they handled it in a very Good way. I ended up with a good result during the quarter.
So with that, Hakan.
Thank you very much, Martin. And I will give you, as usual, some more details then on the Financials in a very special quarter like this one. As a summary picture, this shows To a large extent, why this was a really special quarter. If we start with sales over there, we reached a record level of sales with even more than SEK25 1,000,000,000 in sales. If we look at shipments, well, this is the one where we don't have record levels.
We were higher now in Q3 than Q3 last year, which was, of course, very different. But we were in line with Q3 'nineteen and 'eighteen. However, with the clearly improved mix level, as Martin discussed, we had record levels for special steel, which is The one we want to grow to improve the mix. And also within SSAB Europe, we are seeing very good development for our premium strategy there as well. So very same level of shipments, but clearly with a better mix than we've seen before.
On the EBITDA side, We had an EBITDA of SEK6.6 billion and an EBITDA margin of 26%, also this then a record quarter for us. But actually the one that really sticks out is down here, EBITDA per tonne delivered steel. Given that shipments were lower than previous quarters but profits were higher, Well, you do the math and we have a very strong EBITDA per ton delivered steel of around SEK 4,500 per ton. If we then look what has happened between the quarter and we start comparing Q3 this year with Q3 last year, well, It's almost opposite world. Q3 last year was, of course, very weak and Q3 this year has been very strong.
We have a total improvement going from Close to minus SEK1 billion to close to SEK6 billion EBITDA. So almost SEK7 billion in difference between the quarters. A very large improvement is coming from prices, SEK8,700,000,000 when we add it up between the divisions, where the biggest items are in Europe and in SSAB Americas. We also had better volumes. And this is mainly coming from special steel.
And of course, that's as we said before, that's where we want to see volume growth. Variable COGS Impacting negatively with SEK2.2 billion. We say here higher raw material, especially iron ore, and that's even actually around SEK2.6 billion. But Given that we were running operations with higher activity level, that also helps in terms of energy efficiency, yield levels, etcetera, So mitigating part of that raw material increase. Fixed costs are, of course, higher now in this quarter than they were a year ago.
We are Operations at a significantly higher activity level. We were doing a lot of scrambling last year in terms of saving cost. Internally, we have actually mainly during this year compared fixed cost with how it looked in 2019. And when we do that and we look at year to date fixed cost 21 versus 2019, we are actually clearly lower despite higher activity levels. So a lot of the savings we did last year, we have actually They were not just temporary.
We have managed to establish a lower cost level in the company. Some negative on FX. Better capacity utilization. We took some prolonged maintenance outage last year given the market situation and then some other. But All in all, it's of course very different situation now in Q3 versus last year.
We see it in better volumes and we see it especially on the margin and the utilization side. If we instead then compare Q3 now with Q2, we compare 2 really good quarters, we still have an improvement of around SEK 1,700,000,000. And also here, prices are impacting significantly, mainly again for Americas and for Europe. We have a negative impact on volume of close to SEK 800,000,000. This is because we have a seasonal slowdown in Europe and we had the plane maintenance outage in Europe.
So It's a natural and traditional pattern that we see. Variable cost higher. You know the development within iron ore. That's the main impact we see there. And then on fixed costs, they're basically at the same level in Q3 as in Q2.
Usually, we see lower fixed costs in Q3 because We have these vacation reserves. This year, they are on the same level, mainly because we have had accruals for Performance related salaries, both in the Nordic system, but also in Americas where we have quite a large portion of the salaries being variable depending on production and market situation. FX, quite minor. Capacity utilization, again, it's the planned maintenance outages. Then we have some others.
But all in all, the improvement from Q2 to Q3 is mainly because we have better margins. We have a strong net cash flow also for this quarter. It's SEK 2,800,000,000 despite that we were actually building as much as SEK 2,700,000,000 in working capital. Why were we doing that? Well, because of the increased sales prices, we're building AR and we're also building inventory, especially on the price component side, given the iron ore development and lately actually also the Kokon coal development.
Year to date, we are at net cash flow of as much as SEK7 1,000,000,000. And of course, the net cash flow has Impact on our net debt. We are seeing a significant reduction in net debt. So far this year, we have actually if we compare to 1 year ago, We are down from close to SEK13 billion to almost down to SEK3 billion. So it's almost a SEK10 billion difference compared to a year ago.
And we are net gearing at only 5% now, 22% 1 year ago. In terms of our debt, well, for the coming plus 2 years, we have maturities of SEK 3,400,000,000. And course, you've seen the cash flow generation. So this is very much under control. This might stick out a bit.
Our duration of the loan portfolio has increased. The reason is that we have used the cash that we have generated to pay back short term debt, and therefore, the overall duration has increased. Our forecast for cash needs of the business is basically unchanged. It's around SEK5 1,000,000,000 for the year. We are saying that CapEx, SEK 3,000,000,000 to SEK 3,500,000,000 is what we have guided for throughout the year.
We can see now that with only 1 quarter left, it's more likely we'll be closer to the SEK3 1,000,000,000 than to the SEK3.5 billion. And otherwise, there's No changes. So around SEK 5,000,000,000 in cash needs. If we then move to the raw material side, here there has been quite If the previous picture was unchanged, here we have seen a lot of development. This is showing our purchase prices.
And for Iron ore, our purchase prices were 13% higher in Q3 versus Q2. But for those who follow the spot market, you know that the Sharp increase we have seen for an iron ore all of a sudden turned in Q3 and then dropped significantly, now reestablished somewhat. But still, it's On spot market, iron ore is much, much lower than it was a quarter ago. So our purchase prices are up. But for the coming quarters, If the situation is the same as it is right now, we will definitely see lower purchase prices for iron ore.
For coke and coal, on the other hand, they were not moving so much for a long time while iron ore was moving up. But now during the last quarter, spot prices have moved up a lot. Our own purchase prices were actually 34% higher in Swedish kroner versus Q2. So we have seen a huge increase. And if this continues, our increased In the U.
S, on the other hand, there we have seen a much more stable development. Our own purchase prices in Q3 was more or less time changed versus Q2. We saw a slight this is spot market. We saw a slight decrease in October, but all in all, not huge changes on the scrap market in the U. S.
Finally then for me, a few words about the maintenance outages remaining in 2021. Usually, we only show this picture maybe for the coming year, and then we have it in the appendix. But reason I brought it up now is that We have a change here because since we have moved the ownership of the mobile mill from Americas to special steel, We also have a change in split of the cost for this outage between Americas and Special Steel. And given that So far, the majority of the products produced in mobile is still standard plate. We also have the majority of the cost being with Americas.
But the cost for the outage as such in total is the same, but just a split between the divisions. And with that, Martin, back to you.
Thank you, Hakan.
And then now you have your first slide also, the outlook for the main customer segments.
Thank you, Per. And if we take a look at the outlook, I would say that Q4 underlying demand looks okay. If we take start with heavy transport and automotive, the question is, of course, what will the impact be From the shortage of semiconductors, that is we don't really know, but we see the underlying demand being Continue on good levels. If we look at Construction Machine and Material Handling, Very good demand, good level in main markets, strong demand from mining and so on. So moving on quite nicely into Q4.
Energy, we see modest improvement in oil and gas and good activity within wind power and transmission, which are 2 important segments for us. Construction also, good underlying demand. But as always, we will see seasonal slowdown depending on the winter weather in Q4. And then service centers. I would say fairly normal inventory levels in Europe and maybe on the low side in North America.
Yes. And we'll see how they take out volumes in Q4. But overall, I would say a decent outlook for Q4 as well. And Then we'll see, as always, second half of December, how the volumes goes out and if customers take stop Production stops due to lack of semiconductors and so on. But for us, the majority of Q4 is already in the order book.
And if we look at the outlook, how we describe it, we expect the demand for steel to be good. And as said, question mark regarding the semiconductor shortage and the seasonal slowdown. We see also The global demand for high strength steels and QT is structurally growing. And when we compare Q4 versus Q3, we say in Specialties, we will have stable shipments and higher prices. In Europe, we will have higher shipments and somewhat higher prices.
And in Americas, we will have significantly lower shipments due to the outage Hakan mentioned, but significantly higher prices in Q4. So to sum it up before we open up for questions, I would say that the market is what the market is, but we have seen also during the Q3 very solid internal performance in a strong market, which is very positive. We've also seen that we are despite the market, we are Able to continue to move the product mix short term and long term in our favor. We had record earnings and continued strong cash flow generation. And we have seen also during this quarter a significant reduction in net debt, and I expect us to continue to And I expect us to continue to generate strong cash flows going forward as well.
And last but not least, one of many What events, of course, during the Q3 was that we rolled the 1st fossil paste in Oxyloson. We shifted to Bolbo, We have now proven that we have developed the technique. It works. And we have proven that we can supply customers with a fossil free Value change. So all in all, I would say a good quarter with good profitability, good cash flow generation And a solid internal performance.
With that, Per, I hand back to you.
Thank you, Martin and Hakan. And now we will be ready for some questions. As usual, If you have several questions, please state them 1 at a time. We also urge you to be maybe a bit brief in the first round. There will be time for a second round of questions as well from the phone lines.
But we can maybe start here in the room and see if there is any opening Questions from here? No, I guess not. Then we will Please ask the operator to present the instructions for the Q and A. Thank you.
Thank The first question comes from Alan Gabriel from Morgan Stanley. Please go ahead. Your line is open.
Yes, good morning, gentlemen. I have 2 questions, and I'll ask them 1 at a time. The first one is for Hakan. Looking forward into Q4 and 22, what are the big changes to your cost base that we need to look out for, especially electricity, natural gas prices and other raw materials that have been increasing in cost quite considerably? Would you be able to quantify the increase in energy costs or at least give us the ingredients to calculate it ourselves going forward?
Thank you. That's the first one.
And I don't take iron ore then and coking coal or scrap since you didn't mention them and we saw them before. But For electricity, which has moved especially in Europe, not that much in Americas then. But In the Nordics, we are hedging our electricity costs. So you will not see any major difference in the P and L for electricity cost for Q4. We are roughly hedged to around 90%.
So that's not going to have a significant impact. Also for other energy types like natural gas, for example, that has already increased quite a lot. And we have had higher costs for natural gas in our P and L already now, 2021 versus 2020. But it's not going to be if we compare only Q4 versus Q3. That will be slightly higher, but not a significant impact either.
Thank you. That's very clear. And for 2022, You haven't mentioned on the electricity costs?
There we are not hedged as much. But still we have a quite high hedging grade. So Let's say roughly around 75%, 80%. So also there, it's not going to be a huge impact. And I mean, of course, as you know, for our production in the Nordics where we are blast furnace based, But since we are hedged to, let's say, SEK 75,000,000, we don't expect that to be a major issue in 2022 either.
Thank you. And the second question is for Maarten.
First, I
hope you feel better soon. My question is, you will be at close or At net cash position by year end, besides the potential dividend that you could announce at the full year results, are you interested in stepping up your bolt on acquisitions? And if so, Would you consider any blast furnaces in Europe where you can replicate your successes at HyPeds there? Thank you.
No. We will continue to do these smaller and midsized bolt on acquisitions, but that is what we are going to do. So no major acquisitions or no blast furnace
The next question comes from Jack O'Brien from Goldman Sachs. Please go ahead. Your line is open.
Hi, good morning. Thank you for taking the question. Clearly, you're seeing fantastic cash flow and you have a very strong balance sheet. Is that or might that encourage you to bring forward your green plans, which are obviously gaining some traction? You talked about some of the positives you're seeing with the relationships there.
So yes, interested to see whether you might look to convert some of your other plants more quickly given that traction there? To give you an answer on that question, we will clearly have a balance sheet, so it's possible But the problem is that that decision is not fully in our hands. We need both Environmental permits, and I think that is maybe the easy part to in converting. But then we need electricity and power supply. And We are now focusing on the 1st nil in Oksila on 1st January, 2026, up and running full production only for sulphur steel.
We think that, that is more than possible, and we are aiming for that. But I mean, we don't have full control of the power supply. And that can typically to get Power line in place can typically take a number of years. So the planning time is quite long, and you need to do a lot of work together with not those stakeholders in order to get that in place. But if the market continues To develop in the direction we see right now when we have all reasons to believe that, we will, of course, look into the possibility to be Somewhat quickly than 2,045, which is the target we have today to be completely for secondly 2,045.
But that will be dependent on a lot of things. And I will say power supply will be one very important part of it. And just one follow-up, if I may. Looking at the cost of carbon, which has clearly been increasing in Europe, As I understand it, you've got a roughly DKK 200,000,000 cost for CO2 in 2022. Perhaps you could just talk through the latest there based on sort of deficit and inventory of certificates and so on.
Do you want to take that, Hakan?
Well, there's no real latest update for the coming year. We will have cost for it. But actually, the rights we have already purchased, but now they're sitting on inventory and then we remove them to the income statement. So There's no change in even though the cost as such on the spot market has increased, the cost for us for the coming year, it will be a few SEK 100,000,000, but not much more than that. And then we'll see long term, like you said, there are discussions about what EU will do in terms of reducing the free allocations, etcetera.
But But for the short term, we don't see any difference for us.
We have been buying emission rights for a couple of number of years. Thank you.
Thank you. The next question comes from Alan Stern from Jefferies. Please go ahead. Your line is open.
Hi, good morning guys. I've got 2 and I'll just take them one at a time. The first one is on the In terms of development in plate prices there, do you have a view that might be able to regain premium to HRC? Or do you think the discounts
I mean, over time, plate has always had a premium compared to HRC, and that's We haven't seen. I think it's the last 3, 4 quarters. If that will normalize or not, I think it's a good question, and I can't really answer But over time, there has always been a premium for plate. But as we said, that plate prices are as they are on very high levels as well. So I don't have the visibility if and when that will change.
That's fine. Okay. And then my second one is just around automotive. Can you perhaps quantify how much shipments to OEMs have been deferred or lower versus the indications?
Can you take that, Hakan?
I don't have that from the top of my head actually. And it hasn't been, I would say, it's been some impact now in Q3, but we also had some delays that we've been catching up. It probably will be Higher impact for Q4, but I don't have the figure in my head actually.
Okay. That's fine. Thanks guys.
Thank you. The next question comes from Carsten Rieke from Credit Suisse. Please go ahead. Your line is open.
Thank you very much. Two questions also from my side. The first one, Hakan, it's on the iron ore. You mentioned already that it's very likely to see the iron ore prices rolling over. But looking at this from a coking coal perspective as well, because we have Counter movement here.
Do you expect that your raw material impact in the European operations will be Net positive for the P and L or net negative or neutral?
It varies a bit actually by site. As you know, we have in Ljulio, we don't have any inventory of iron ore. So in Ljulio, for that production, we expect that iron ore cost in the P and L will actually be lower in Q4 than in Q3. For the other sites, Rohe and So it takes a bit longer before we get that impact. That might come to if prices remain as they are.
We will have lower iron ore cost then maybe towards the end of the quarter rather and maybe even beginning of Q1 next year. But also for coking coal, as we saw, there was a huge increase in our purchase Prices for Q3, but that also has a delay before we see it in the P and L. So it I would say it Again, depends on how they develop, but not a huge difference actually Q4 versus Q3.
Okay, perfect. Thank you. The second question I have is more on the value added share, which I like to actually increase quite a bit compared to what we have seen last year. The question is how do you want to make sure that the high level or a high share of value added products Stays at this level once the market is cooling. Is there enough customer relationship Or already built?
Or is there a chance that we actually drop back to levels below 40%? Thank you.
No, I think we are not where we would like to be. We have the ambition to have the strategic target of 50% Of the volumes being premium. And of course, it varies between quarter. But over time, we see The possibility to reach that, of course, and we see also structural growth. So trick for us in order to reduce Volatility and increased profitability is to keep the total volumes on a fairly the same level and then Moving more to grow special steels, move more into premium in Europe and in North America.
So it can vary between quarters. But The ambition is to reach 50%, and I think we have a very good chance to reach that.
Perfect. Thank you very much.
Thank you. The next question comes from Anssi Kaviniani from SEB. Please go ahead. Your line is open.
Hi, guys. It's Anssen from S&P. Thanks for taking my questions. So I have 2 of them. I will take them 1 by 1.
First of all, Q4 demand You highlight the uncertainty in Europe, but then again, you indicate that the deliveries will increase in Q4 versus Q3 in the region. So how should we read the situation? Do you think that the kind of uncertainty in the market will be more visible In Q1? Or is this kind of only you being a little bit more cautious on the market outlook?
No, but as said, I think we have a fairly decent visibility in the order book, and that's why we say this. But then you never know Of course, we don't have visibility into I mean, the possibilities for automotive and heavy transport to get semiconductors and if they take outages or not due to that. So that's what we are talking about. But if you look at our order book, it's, I would say, Fairly okay. We're okay for Q4.
But then it depends on what will happen, especially, I would say, the second half of December due to other reasons. But when we look at the underlying demand in our order book, it looks good.
Okay. Thanks. And that was basically the second question. In the appendix, you once again highlighted SSAB Europe monthly order intake. And It seems that September is clearly down from previous year.
So kind of my question is That is this due to the fact that the underlying demand is weaker compared to last year? Or is it due to the fact that the kind of Your order book is in a much more higher level and thus you're not taking as many orders as last year? Or kind of how should we read the situation?
The order book for SSAB Europe for Q4 is in quite good shape.
And kind of the reason for order intake decline in September? Kind of Could you elaborate a bit on that?
It's not any big deals. I mean, we have also Some delays. We have had very good order intake. So it's a combination of managing the order book, I would say. That's the main reason.
And then a single month, no, we have the order book we would like to For Q4 in SSAB, that's the clear answer. Then there were some pluses and minuses. But we have the order book we want to have for Q4.
I was just going to add, Anssi, that you should also think about last In September, we basically almost went into September with an empty order book, which meant that we were chasing all the orders we could get to fill up the order books. Now we enter September with a clearly different situation and with a quite strong order book for Europe. And therefore, the delta between Q3 this year and last In terms of or September this year and last year should not be seen as that the market is much weaker. It's more a matter of the size of the order book entering the month.
That's very clear. Thank you. That's all for me.
Thank you. The next question Comes from Luke Nelson from JPMorgan. Please go ahead. Your line is open.
Hi, good morning. Thanks for taking My first one, sort of a bit of a follow-up to the prior questions just on lead times and If you have any visibility at all heading into Q1 2022, I know you don't guide that far forward, but if you have any sort of qualitative comments on potentially how volume shipments could be looking Q1 versus Q4, assuming your assumptions around autos Hold for this upcoming quarter? That's my first question.
As you pointed out, we don't typically have that visibility. What we see is The structural growth for high strength steel is continuing into next year. That's what we see.
Okay. And then on
in terms of the moving parts For cash needs into 2022, could you maybe just give some qualitative comments around CapEx specifically, I think before you guided to around the €3,000,000,000 level next year, so off the top of my head. But Maybe some comments or thoughts around how that could be moving year on year. Okay.
We guided for roughly SEK3.5 billion next year, we have said. Given that we will probably come out a bit lower this year, I would say, And we are really one reason we're coming at low risk, we're not spending that much money yet on the conversion in Uxulistan. So A larger portion of that will probably be transferred into next year. So there could be slightly higher CapEx need for next year. On the other hand, given that we're at a much lower net debt and also gross debt, we should see lower interest cost for next year.
Okay. Very clear. And final question for me. Just on again, on a prior question, talking about Green steel conversion. And I think you explicitly mentioned in the release again around potentially fast tracking.
And I know I take on board your comments around Permitting and there are other things you need to have in place to fast track. But taking that all in context, I think In the Q2, you explicitly mentioned Valea as a site that could be Has that potentially changed? Or given the change in shareholding with one of your major shareholders in Finland, Does that potentially bring forward the opportunity at roll as well? I'm just trying to get a sense if the how you're thinking about The different sites in Europe being converted has changed relative to that. Lili, a comment in Q2.
I would say not at all Relative to that. The plans have not changed. So we want to become a fossil So a free steel company, we are looking to opportunities when it's rather when we can do that. And we are encouraged by the interest and The demand from the markets, we have not changed our plans, no.
Very clear. Thank you.
Thank you. The next question comes from Christian Agarwal from Citigroup. Please go ahead. Your line is open.
Hi. Thanks for taking my question. Most of the questions are already being asked. But if I can push HOKA a little bit on the CapEx, There is looking a bit of undershoot for this year CapEx. So is there any possibility for you to quantify Your revised guidance for 2021 CapEx, that's my first question.
I think we have to come back on that question. As said before, we have said around SEK3.5 billion. If we end up this year a bit lower than and a large portion of that is related to the commercial Nokselso, That will then spill on into next year. But we will get back to that after year end when we know the exact outcome for this year as well.
Sure. My second question is a bit of a follow-up from Carsten's question on raw material costs. You generally do that winter stocking for coking coal ahead of the winter. And given the higher prices or significantly higher prices, Has there been any kind of a rethink in terms of buying lower quantities for winter stocking for cooking coal?
We are doing it in the same way. The reason we do this winter stocking is that we cannot get these big boats up to Lulu and Rohe in the wintertime. We can get into Uxelsund, but not to Lulu and Rohe. So we're doing it exactly the same way. And one might speculate and say that we should buy lower and transport in different ways.
On the other hand, last time I checked at least, coking coal prices were still on the way up. And we have not a crystal ball how they will develop during the Wintertime. So no, we're doing it in exactly the same way.
Okay. Very clear. Thanks a lot.
Thank you. The next question comes from Hojus Van Heizer
It's Rojas Paunizer from Kepler. I have Two follow-up questions. The one is maybe back to your outlook commentary on auto. I think you're flagging Auto demand weakness more than in the previous quarters, even though I think the Q3 was already bad enough for the industry and probably a bit disappointing. Is the fact that you're flagging it, is this does it that you expect a further weakening Of the auto demand in Q4 versus the Q3 and at that stage, can you already give us a sense How you think the looming magnesium shortage could impact your customers' business?
That's the first question.
No. I mean, what we are saying is that we are The order book for Q4 is, to a very large extent, already there. So it's more about the ability to take what we are flagging for. There could be some Production stops due to shortage of the semiconductors, and then we will not be able to ship. That's maybe what we are flagging for us.
We don't see, I mean, any demand issues for Q4 because the order book is in fact is there already.
How do you think how can you share your thoughts on the magnesium side? I think with this production cuts in China, which Could mean that the volumes from there are significantly lower than normal. To what extent is that impacting your business? And Are you getting any signals from your auto clients that they are eventually impacted in due course?
Not for the coming quarter now, I would say. I don't know, Hakan, if you have any more updates than I have.
No. For us, this is short term. It's at least not an issue. We have secured the volumes we need. Long term, well, if this continues, then we'll see.
But short term, we don't see it as an issue. And we have not heard from our customers that this would be a reason for not for delaying orders or not booking orders, no.
And to what extent is that an issue for your metal production, your diesel authorization process? Can you switch Whenever it is needed to other materials like lime or calcium carbonate?
I don't know exactly. What we have checked is that we have Significant. We have all the material we need for the coming quarter or 2. So short term, it's definitely not going to be a problem. And procurement is Making sure there's not going to be a problem long term either.
Then in terms of switching to alternatives, I don't know.
Okay. And then finally, on the green steel development, I think you have a very clear path until 2026 to turn actual zone for Solvay. Are there what is your flexibility in the meantime? I think your clients are demanding CO2 reduced steel more and more. Do we have any flexibility to come up with some synthetic quantities of green steel with Steel with a reduced carbon footprint until you have more of the genuine product?
No. We have this So called pilot plant up in Lule that is producing 1 tonne per hour, and we will use that to produce fossil free steel. And then the next big step will be Well, we have the demonstration plant up in the Northern Sweden in Postponsch Iron beginning of 2026, end of 20 25, and then we will also have the Oksildesund revamped or electric arc furnaces in Oksildesund from 1st January. So The big step will come 2026 when we will be able to produce up to 1,500,000 tons of fossil free steel. But the journey towards that will be fairly small or smaller volumes to strategic partners.
Okay, understood. Thank you very much.
Thank you. The next question comes from Tristan Gresser from Exane BNP Paribas, please go ahead. Your line is open.
Yes, hi. Thank you for taking my questions. The first one on working capital. You had a record capital working capital build in Q3. Was there any one off And there may be some inventory build due to lower steel offtakes from the auto customers.
And also, what would you expect in Q4? I mean, given the development in prices, is really feasible in Q4?
There was not any real specific one offs in Q3. No, I wouldn't say that. It was higher inventory coming from higher prices and also higher AR coming from significantly higher prices out to the market. We have seen a large as you also could see in the graph when I showed the delta in terms of EBIT, we have seen huge price increases. We are still flagging for that within Americas, we'll continue to see price increases, but lower both in Europe and in Special Steel.
So It will not be the same working capital buildup in Q4, but there were no real one offs that will immediately lower it. But It will definitely be if any, it will be a lower working capital build up than it was in Q3.
All right. That's helpful. And my last question is on Tibner. Could you Quantify the inventory gains in Q3 to sort of for us to give a better sense of what Q4 did look like given the development in steel prices?
We normally haven't actually quantified those. We don't quantify actually when we talk about The result development, we don't quantify any of the components for each of the division. But I guess you can say that it was Given the price development, it was quite significant for Tibnor, and we would not expect the same development in Q4.
All right. Thank you.
Thank you. The next question comes from Bastian Synagowitz From Deutsche Bank. Please go ahead. Your line is open.
Hi, yes. Good morning all, and thanks for taking my questions. My first question is just on strategy and your metallic supply in the U. S. Market.
So we've obviously seen some further announcements here of Some players which are adding further electro dark furnace capacity and then one of your blast furnace peers also tapped into the scrap market with an acquisition, Basically taking some control of that market there. How are you thinking about the situation? Do you still see sufficient supply? The S market is obviously in principle still in excess of scrap supply in the net exported, but obviously there is massive growth in demand for scrap as well. So is an upward integration on scrap Something you may be thinking about as well.
That would be my first question.
No, you're completely right. We've seen our announcement of companies building out The strip production, and that will, of course, affect scrap availability. But U. S. Is a net exporter of scrap.
So of course, it can influence prices, but we think that we will get with the partnerships we have sufficient volumes of scrap. And we are not Thinking over contemplating doing any integration into the scrap market because it's a fairly fragmented market and The availability is there. So we don't see it as a huge problem and nothing that drives us to start to acquire scrap collectors or something like that.
Okay. Okay. Very clear. Thanks, Martin. And then just lastly, and more like a short term question, but obviously, you've been very successful with your mix Development in the European business and also for your company overall.
Just with regards to Europe, is Is there any major mix change we should be expecting with regards to the Q4?
You should expect that to continue to improve the mix. As I said, I mean, the target is to have 60% because we also have the very important Nordic home market. So it will be a balance between Premium Products and also keeping a good market decent market share in the Nordics and trying to find that, Call it optimal combination. But the ambition in the strategy the strategic target is 50% Of the volumes being premium, and we are getting there. And then it can differ between months and differ between quarter.
But Clearly, the underlying growth is that's what we're aiming for and what we will reach.
If you said short term Bastian for Q4, We have a seasonal impact in SSAB Europe where we sell less color coated material in Q4 to the construction industry than we do in some other quarters. So from that point of view, you get some a temporary seasonally quarterly worse mix in SSAB Europe than in Q3.
So you should rather compare to previous year than sequentially compared to previous quarter because you have this seasonal mix. But apart from that, you should expect it to continue to grow.
Okay. All right. Okay. Thanks so much.
Thank you. And your final question comes from Patrick Mahn from Bank of America. Please go ahead. Your line is open.
Good day. Thank you very much for the opportunity. I think most of my questions have been asked. I just wanted to follow-up a little bit more on Your capital allocation. So as one of the earlier analysts asked, strong balance sheet, deleveraging, How do you think about allocating between dividends and Reducing gross debt and also I think you've spoken already about your opportunities to accelerate the decarbonization.
So kind of I think we can park that one to the side. But just in terms of thinking about what to allocate to dividends and what to allocate towards reducing debt further? Thanks.
Well, first of all, there isn't much debt left of the SEK 3,300,000,000, SEK 3,400,000,000 we have is roughly SEK 2,000,000,000 is IFRS 16 related. So that gross debt, we can't really take away. But apart from that, I mean, let's come back and discuss that when we have the Q4 report. All right. Okay.
Thank you.
Thank you. We have no further questions. So I will pass back to the speakers for any closing comments.
Okay. Thank you. But by that, we can conclude today's conference. Thank you, gentlemen, and thank you for many good questions. And we wish you a nice day.
Thank you. Bye bye.
Thank you. Bye bye.