Good morning and welcome to this Q3 presentation from SSAB. My name is Per Hilstrom. I'm Head of Investor Relations. And with us here today is Martin Lindqvist, our President and CEO and also CFO, Hakan Folie. If we turn to the next slide, we have the agenda.
And Martin will start here with some comments on Q3 mainly. Hakan will then come in with the financials. And then Matti comes back again with the summary and the outlook. And at the end, we will open up for questions. So by that, we can move to the next slide.
And please Martin, the floor is yours.
Thank you very much, Per and good morning. If you move to the next slide, this is a slide showing the order intake in SSAB Europe and I use this to show the volatility the last five quarters where we saw a slowdown during last summer and fairly low order intake per month in the second half of last year. And then we had to call it a short lived recovery, but we saw order intake picking up in the beginning of 2020. But then into Q2 we had very, very low order intake especially in April May. We had almost non existing order intake.
And then we have seen a gradual pickup especially during the latter part of the third quarter. And I will come back to that. But we have seen order intake not only in Europe but also in the other steel divisions picking up from very low levels during the latter part of Q3 into Q4. But we also say in the report that the outlook look is of course a bit or I would say uncertain due to the COVID outbreak and potential lockdowns, but we will come back to that. Next slide please.
So if
we look at the quarter all in all on group levels, group level shipments remained at low levels and we had low capacity utilization as well in our mills and we had one of the blast furnaces in raw idle that costed us impacted us with close to SEK 700,000,000 Hakan will come back to that. We also adjusted production volumes, especially in Oksuthe Sur and to lower demand. So we ended up with an EBIT of minus SEK 9 $73,000,000 which is of course a huge drop from Q3 last year, but we managed to keep a positive operating cash flow and supported by release of working capital. Next slide please. And the way we decided we managed the downturn was I would say extensive cost savings.
And if you take Q3 standalone, we had the fixed cost being SEK 600,000,000 lower than Q3 2019. And if you combine Q2 and Q3 for comparable units, it was SEK 1,400,000,000 lower fixed costs. In total it was even lower because we had building systems in Rokke Construction in Q3 last year, but not Q3 this year. But we have pulled all the levers. We have had short term work.
We have used our time banks. We have avoided summer seasonal workers. We have reduced external services. We have conducted our maintenance to large extent with own personnel instead of having contractors. So we have had a lot of different actions that were planned both for Q2 and Q3 that we executed and that's the reason why we have had such good development on fixed costs.
On top of that, we have not changed anything with our strategy. We continue to develop our own channels to the market, stock sales, Tivnoy, Rokki Construction, SSAB Services, continue to improve the product mix. We have seen the growth also globally in high strength steels. We have seen it in Latin America and Asia. And we've also continued and I will come back to that with the ambition of being the 1st steel company in the world producing fossil free steel.
Some of these cost savings will continue into Q4. They will not be as big because we expect to see higher activity levels in Q4 compared to Q3. We also pretty early on had committed credit lines at a comfortable level and Hakan will come back to that. So we had end of September cash and committed credit lines of SEK 20,000,000,000 amounting to more than 30% of sales. We felt that we could go through this period with this decent balance sheet.
I wouldn't say strong balance sheet, but a decent balance sheet and liquid assets and committed credit lines. We have done now with the small exception of of Hemelin all the maintenance in Q3. Usually we spread them out a bit more over the year. So we are positioned to ramp up when demand improves. Next slide please.
We have been of course very, very cautious about the COVID-nineteen impact on our operation and especially in our industry when you have this big maintenance stops you need to take a lot of actions and precautions in order to avoid any outbreaks of COVID-nineteen. And we handled that together with very good cooperation with suppliers and entrepreneurs. So we were not affected during the maintenance stops. We have also taken several other measures to safeguard the health and safety of our own personnel. We try to work from home whenever and where possible.
We follow all the regulations and recommendations in each country where we are. We have travel restrictions. We are very restrictive on face to face meetings. And we have also contingency plans and different groups for critical operations, so we can continue to run operation. And we also pretty early on focused on securing the supply chain.
And so far we have only had minor disturbances during the 1st 9 months in this supply chain due to the COVID-nineteen outbreak. Next slide please. If we then look at the overall map on the divisions and we'll be going to each division separately. We saw Q3 over Q3 in all three steel divisions that the result was going down and the biggest difference is of course in Americas where we have almost SEK1 1,000,000,000 in lower result. But and I will come back to that.
In Q3 last year, we did not have any maintenance outage in Americas. But we also see that Ruki Construction and Tibnor have a slightly better profitability than they had in Q3 last year. So if we then move over to Special Steels, I would say that and here we compare with Q4 2019 where we had the yearly maintenance stop. And I think that the operating result held up fairly well for a maintenance quarter. And on top of the maintenance that typically takes 4 weeks.
We took a couple of other weeks to stand still in Oxitosun due to the market. So of course we were impacted by the weak market. Shipments were impacted. The maintenance cost or the cost of it was SEK 250,000,000. But we have had better performance than previous maintenance quarters.
And we have had low rolling production, but we have had very stable production in Oksilu Sund when we were running the production. So we are now I would say on a different level when it comes to production stability. We also saw in all divisions positive effects of cost savings in OXXO Lesson or Special Steels. It was €100,000,000 lower fixed costs compared to Q3 2019. And we continue to take actions to reduce market volatility.
I mean typically stock sales much more stable and more profitable than OEM sales and we try to continue to grow in markets outside Europe and U. S. And we saw also during the Q3 according to our in line with our strategy that the service business and the aftermarket business was much less affected than sales to OEM as an example. So I would say quite okay for given the market conditions and a big maintenance quarter for Special Steels.
If you
move on to the next slide. In SSAB Europe, we clearly saw weak market conditions and you saw the first picture I showed with the order intake, very low shipments, but they recovered somewhat in September. Here we had planned maintenance of SEK 250,000,000 and we had a positive effect from cost savings in Q3 of SEK 300,000,000 compared to Q3 last year. And as said, a large part of the quarter we had 1 of 2 blast furnaces in Rohe, Eidel then we restarted that one according to plan mid September and it's now up and running. Next slide please.
Also in Americas, we had weak market conditions. We had sales margins impacted by low demand. We also saw that plate prices during the quarter was stable on a low level. At the same time, scrap started to move up because of the increased demand in strip and especially within Automotive. So we were in a bit of a squeeze when it came to margins over scrap in Q3.
We had a planned maintenance in Montpelier and that the cost of that was SEK170,000,000 but we also had the positive effects from cost savings of fixed cost of SEK 150,000,000 versus Q3. And if you should compare, you should really compare Q3 with Q4 last year when we had the maintenance outage in Mobile. In Q3 last year we had no maintenance outage. Next slide please. Tibloar definitely impacted by lower economic activity.
Sales were down 20% compared to Q3 2019. We still managed in Tibnoor to increase the result and that was due to the ongoing restructuring program and some additional cost measures that offset the weak margins the weak market. So overall earnings were slightly better than Q3 2019, but the internal work was much better because we managed to deal with the sales decrease of 20%. Next slide please. And then Rokke Construction continue to increase the operating profit.
And the core business in Rokke Construction and the core business for SSAB in Rokke Construction is what we call the project business with or product business both roofing and components and that they have clearly improved margins over time. As you might remember we sold the building system part during Q2. So now we just have the product business left. And if you take away that from Q3 2019 the Building Systems business I would say that revenue were stable compared to Q3 over Q3 and I would say good or decent underlying demand and continued increase in operating profit. Next slide, please.
And then I leave the floor to you, Hakan, to go through the financials.
Thank you very much, Martin. Please move on to next slide. First, I'll give you a short summary of the quarter. Sales were down 23% compared to last year, largely impacted by shipments, which were down 9%. Also prices were down 7% and the rest coming from currency and from mix.
On EBITDA, we had a slightly, slightly negative EBITDA and EBITDA margin and then also we got a slightly negative EBITDA per tonne delivered steel. Next slide, please. If we look at what has happened between Q3 last year and Q3 this year, we see a drop in profitability of close to SEK 1,300,000,000. A very large portion of that is coming from price as much as SEK 1,800,000,000. This is mainly coming from SSAB Americas, also somewhat from SSAB Europe.
On the other hand, we see that for special steel prices have been, and as they should be at least as well, significantly more stable. We also have lower volumes. This is Americas and Special Steels, not Europe actually, impacted with close to SEK 400,000,000. Then we have a positive impact on the variable cost of goods sold, especially raw material. And here it's iron ore and coking coal that's impacting positively.
And as Martin mentioned before, we continue to have significantly lower fixed cost or processing cost in SG and A this year compared to last year, same period, SEK 600,000,000 this quarter. It was SEK 800,000,000 Q2 over Q2. Somewhat negative on FX, almost €200,000,000 mainly driven by the stronger Swedish krona. And then a quite large portion negative impact coming from unabsorption close to SEK 600,000,000. This is mainly then because we had the maintenance outages in SSAB Special Steels and in SSAB Americas and in general low capacity utilization and then around 100 positive in others.
But in some way, this SEK1.3 billion is coming from weaker sales margin, somewhat lower volumes, higher unabsorption mitigated to some extent and by significantly lower cost. If we take the next picture then, then we instead compare this quarter we just passed with the 2nd quarter. And then the difference is around SEK 700,000,000 Again, we have quite a big portion coming from price SEK 600,000,000 and also this time it's mainly Americas to some extent Europe. We have somewhat improved volumes. This is in SSAB Europe where we have the hardest stop in Q2 especially for Automotive Business and also Heavy Transport and from very low levels that have somewhat improved during Q3 then.
So small positive impact on volume, also quite small on variable cost. On the fixed cost side, we have a positive impact of a bit more than SEK 300,000,000. That's mainly because of the seasonal impact we typically have in the Nordics during the summertime. Also here, we have negative on FX, a bit less than compared to the previous comparison, SEK 70 million, but then a big portion of unabsorption. And here it's mainly it's to a small extent Americas given the outage there in Montpelier, but it's to a very large extent SSAV Special Steels where we both had the maintenance outage.
And then as Martin said before, we also at the same time as we had the maintenance outage, we also stood still for a few more weeks in order to adjust production to the demand situation. We were producing more in Q2, building some inventory and then we could stand still longer even Q3. But all in all then, a drop of around SEK 700,000,000 Next slide, please. Cash flow in the quarter was positive, supported by the release of working capital. We were releasing around SEK 700,000,000 in Q3.
And as I said, we were building a bit of inventory ahead of these maintenance stop and some of that was then being reversed during Q3. We also had a slight positive net cash flow of SEK 27,000,000, which was more or less in line with what we had in Q2 as well. Next slide, please. And on the balance sheet side, given that we had more or less 0 net cash flow it was quite stable development on the debt side. Net debt slightly below SEK 13,000,000,000 roughly in line with Q2, somewhat higher than the same period last year.
Same thing goes for the gearing then, it's 22% now, stable compared to Q2, somewhat up compared to 1 year ago. On the loan portfolio side, we have an average duration of 5 years clearly lower than last year. That's mainly because we have been taking up commercial paper this year which with shorter maturity that we did not have before And these commercial paper are part of the liquid asset and committed credit lines then of SEK 20,000,000,000. That amount is roughly the same, but given that sales have gone down, the relation then to sales is now 31%. So as you remember, we did this late in Q1 in order to make sure that we could secure significant liquidity regardless of how this COVID-nineteen situation would develop and we are now sitting on a comfortable level here.
If you look at the graph then on the right hand side of this picture, you see the quite big amount of cash and backup facilities of SEK 20,000,000,000 and you also see the maturities we have for the coming years wherein one quarter plus 2 years then the remaining of 2020, 2021 2022, we have less than SEK 9,000,000,000 then in maturities. And for 2020, the vast majority of this is in Commercial Papers. That's all I plan to say about the balance sheet given there is no dramatic changes. So if we move on then to the next slide, we see the cash needs of the business where we are at the same level as we said last time between SEK2.7 billion to SEK3.2 billion, significantly lower than last year then, partly because of slightly lower investment, but mainly because of lower taxes paid. On the investment side, we are at the same level as we have talked about a few quarters now between SEK 2,000,000,000 and SEK 2,500,000,000 for the full year.
We have postponed some of the project capacity expansion in Mobile, start of the OXXUS and conversion. We are not postponing the R and C investments. We are making sure we are investing as needed in the operations to be able to continue to run them in a good and stable way. If we move on again please. On the raw material side, we have seen for the iron ore and coking coal, we have seen them gone in different directions during the quarter where iron ore prices, the spot prices have been moving upwards and also our purchase prices have been moving upwards.
They were 8% higher in Swedish krona in Q3 versus Q2 and 17% higher in dollar. Coke and coal on the other hand then went in the other direction and they were lower by as much as more than 30% then in Swedish kroner, US26 dollars compared to the previous quarter. So if we add this together and think about the P and L impact for Q4, it's going to be fairly unchanged on the raw material side given that we have iron ore going in one direction and we have coking coal going in the other direction. Next slide please. And then if we look at the U.
S. Operations and how the scrap prices have developed, our average purchase price of scrap was fairly stable but slightly lower in Q3 compared to Q2 4%. But what we saw on the spot market was that scraps prices, they increased in September and then they stabilized in October. So even though on average our purchase prices were slightly lower, the last month buying then has been a bit higher, which we'll see somewhat in Q4 as well. Okay.
Next slide, please. On the planned maintenance outages in 2020, we have revised the forecast now down to SEK 800. We have Q3 was a very maintenance heavy quarter where we did most of the maintenance for the year. We have some left in SSF Europe, but the majority was actually performed now in Q3. We lowered the forecast somewhat.
And I want to point out here, it's not because we have done less maintenance, but it's because we have both renegotiated contracts with our external suppliers, but also because we have done more of the work ourselves than we were planning to do given that we have had available capacity to do so. So the forecast now for this year is SEK 800 versus SEK 1,100,000 last year and versus the previous forecast of SEK 900,000,000. Okay. Next slide please.
Thank you, Hakan. And if we move another slide. During the quarter, SSABIS climate goals were approved by the science based targets initiative and we have committed as a company to reduce our greenhouse gas mainly CO2 emissions by 35% by 2,032 and that is based on 2018 figures. And this includes both Scope 1 and Scope 2. And these are in line with the objective of keeping global warming well below 2%.
And the objective is scientifically based and in line with the Paris agreement. And we have also stated that we aim to be the 1st offer the market fossil free steel in 2026. And on that note, if you move to the next slide, one important event for SSAB during Q3 was of course the inauguration of the pilot plant for fossil free steelmaking up in Ljulu. And this is a world unique pilot plant for fossil free steel producing where we will produce sponge iron by using hydrogen instead of coal to reduce the oxide out of the iron oxide. We are now starting it up.
We are running it with natural gas to do performance tests, but also to get comparable production results. And the idea is then to move over to 100% hydrogen during the beginning of 2021. We have also got some more funding from the Swedish Energy Agency in order to start the do the pre start of establishing a demonstration plant. And for us demonstration plant is a full scale production plant and we have the ambition to have that up and running 2026 in line with when we have rebuilt Oksila's zone. So we can have the first site globally producing fossil free steel with using this hydrogen based or used sponge iron and melt that in electric arc furnaces in Oxidos.
So this is an important project and this is I would say the most important business development project we are running within SSAB. Next slide please. This is the outlook for the main customer segments. And as you can see slightly less red dots compared to last time. If we look at heavy transport, we see some recovery of heavy truck production.
Automotive, we see some recovery in production. Construction machinery, still low production levels in main markets, especially for lifting, but some improvements compared to Q3. Material handling and mining continue at fairly stable levels, not fantastic, but stable levels. Energy, the red first red dot we see low activity in oil and gas and but we see more stability when it comes to wind power and transmission towers. Construction, fairly stable underlying demand.
We expect to see of course the usual seasonal slowdown moving from Q3 to Q4. And then the service centers, we expect them they have been very cautious. We expect them to continue to be cautious. But if you look at the inventories in the supply chain and especially the inventories among steel service centers in North America, they are definitely on the low side, but we still keep that dot red. So not a great market outlook for the segments, but sequentially not getting worse rather improving in many segments.
Next slide please. So if we then try to sum that up and take an outlook for SSAB, in Q4 we expect steel demand to recover somewhat following 2 weak quarters. However, and this is something I stress, the increased spread of COVID-nineteen makes it hard to fully predict and makes it hard for us to understand where this actually will end up. But underlying we see sequential improvements with that call it caveat or whatever you call it of any potential lock downs due to COVID-nineteen. Then of course we as always expect to see a normal seasonal slowdown towards the end of Q4.
So when we look at shipments, we expect shipments in all 3 steel divisions to increase somewhat versus Q3. And when it comes to pricing in Q4, they are for Europe expected to be somewhat lower and that is because of the typical the typical weaker product mix we have in Q4 with less color coated. So product by product we expect prices to move in a slightly positive direction, but overall slightly lower prices. And then for Special Steels and Americas we expect relatively stable prices in Q4. Next slide please.
So if we sum it up, Q3 was affected by lower demand and planned maintenance outages and that affected earnings in Q3. We did a lot of internal efforts and tried to influence what we could influence ourselves meaning cost savings and reduction of working capital and reduced fixed cost with SEK 600,000,000 compared to Q3 2019. And as said a couple of times now SEK 1,500,000,000 year to date. We saw demand. And as you saw in the first slide I showed, the demand picking up at the end of Q3, especially in Europe and the underlying activity level is expected to continue to improve slightly into Q4.
And we continue to try to run operation in a flexible and responsible way, but also continue to focus on developing the special steel business, the service and aftermarket business and of course last but not least the transition to fossil free steelmaking. With that Per, I'm ready with the presentation. So I guess we open up for questions.
Yes. Thank you, gentlemen. And before we start with the questions, I just want to remind you as always, if you have more than one question, please state them 1 at a time. It will make the process much smoother then. But with that, please, operator, give the instructions for the Q and A.
Our first question comes in from Alain Gabriel of Bernstein. Please go ahead. Good morning, gentlemen.
Just one question from my side is, you seem to have realized some impressive cost savings year to date, mainly from the fixed cost reductions. But looking at the profit bridges into 2021 and if we were to do the same exercise that you've done on Class 16, how much of those cost savings that you realize will eventually reverse into next
year? No. But what we have tried to do in a system that is typically very inflexible is to build in flexibility. So we can I mean fixed cost is of course fixed cost, but we can reduce manning, we can use time banks, we can do a lot of things? And this given what we expected to see into Q2 and Q3, we were really hitting I would say the brakes.
Some of it small part Tibnor where they have been running a structural cost program taking down costs with approximately SEK 200,000,000 on a yearly basis. Some of it is, of course, the majority is it, of course, call it flexibility measures. So you should expect some cost savings into Q4 and then we will as always try to increase productivity and reduce cost structurally over time. But this I would say you should not expect €800,000,000 or €600,000,000 This was I would say if not an exceptional effort, but very good effort from the organization.
If I may add one thing though that is fully structurally is the cost reduction program we've been running in Tibnoir, which is part of the savings you're seeing now and that's NOK 200,000,000 on a yearly basis. So that should fully follow into 2021.
Okay. Thank you. Great, clear. Our second question comes in from Seth Rosenfeld of Exane. You have the floor.
Good morning. Thank you for taking our questions. If I can ask a follow-up with regards to the Q4 guidance. I think your commentary on shipments increasing somewhat, I believe, with the language, it might be a bit confusing for those kinds of model. Can you please perhaps give us some range perhaps of outcomes you're expecting within that?
From a quantitative perspective, how should we think about that scale of what somewhat means, please?
What I try to choose and we typically don't show order intake figures, but I try to the first slide I show was increasing order intake into Q4 or end of Q3. So the underlying demand is improving. Then we have 2 things that are I mean one is not maybe that hard to predict that is the seasonal slowdown at the end of Q4. And as you know typically if the prices would have a negative trend into Q1 the seasonal slowdown will be bigger. And if prices have a positive trend into Q1, the seasonal slowdown will be much less.
And then on top of that, the big uncertainty of potential effects of the increased COVID-nineteen effects or if we will see any lockdowns or anything. So what we really so I would say that the visibility is less than it is usually going into Q4. And that is mainly due to potential effects of the COVID-nineteen outbreak. But underlying, we have seen a positive trend in order intake in all three steel divisions end of Q3 beginning of Q4 or so far into Q4. That's why we are a bit call it critical then and can't give a clear guidance because we don't know if there will be any lockdowns or if there will be no lockdowns or what will happen.
So that's the honest answer.
Thank you. I think that's clear and we can take a closer look at the order intake on that basis. If I can ask one follow-up please with regard to the price commentary as well on the guide. I think you commented that obviously Q4 in Europe is impacted by negative mix shift with lower paid sales. Assuming that we see continued strength in the spot steel market going through the next couple of months, would we then expect something of a snapback in price correlations into Q1?
Thank you.
No, but I mean we follow for standard products, we follow the market. And as I said, we don't see any we don't expect any lower prices if you compare product by product.
And I
mean, we expect we saw price increases last week in North America for plate and we expect we see that spot prices in Europe are at least not trending downwards, I would say the opposite. So and then relatively stable what is that? I mean that's plusminus5% or something. So you should expect us to behave with some lag due to contracts and so on, but you should expect us on both standard plate in America and standard steel in Europe to behave as the market.
Great. Thank you very much.
The next question comes in from Alan Spence of Jefferies. You are back.
Thanks and good morning. I've got two questions. The first one is a bit of a follow-up from the last question there. Just regarding those coated products, can you remind us the end markets that's being serviced? And then how strongly from a seasonality perspective that demand usually comes back in Q1 versus Q4?
No, I mean color coded is typically for the building industry and the biggest customer segment or the biggest customer is actually Ruki Construction and there we typically see compared to I mean we see a strong summer season and then a slower Q4 and then normally up here in the Nordics and even slower Q1 due to winter conditions. And then if we have a mild winter, the slowdown is less and if we have a strong winter or cold winter, you will typically see less buildings. But Rokke Construction is not the only customer, but it's typically the building segment, building related products.
Thank you. And the second one is regarding Special Steels. You referenced some better performance compared to prior quarters that took a lot of maintenance. What's actually been implemented that drove that better performance?
No, I would say and a couple of quarters is not a trend maybe, but we have I dare to say much more and now I really need to say knock on wood much more stable production. I think we have changed a lot of practices. We've changed the site. We have a fantastic site manager in Oksul Essun, the fantastic team there. So I would say it's production stability.
When we look at all the KPIs, I mean they are moving and have moved in the right direction. I think myself that one important KPI that typically shows if you are running the company in a decent way or not is one of many KPIs, it's safety and we are now at very good levels. So I must admit that every KPI we look at they have improved and they have stabilized on so far at least on much better levels including production stability. And we have had quarters in the past where we have had big negative hits on poor production performance. And as Hakan said, even though we have been a bit call it not cautious, but yeah, maybe cautious when it comes to some of these strategic investments.
We have not taken down any maintenance CapEx because we know that we can't afford to do any mistakes when it comes to production stability because the positive effects and the negative effects of production stability is so big.
Okay. Very helpful. Thank you very much.
We continue with Victor Thorsten of DNB Markets. Please go ahead.
Yes. Good morning, Joakim and Martin. Thanks for taking my questions. I would just like to ask you a bit on your order books because I know that in Q2, you guided for relatively flat prices in Americas. That obviously now decreased a bit, which to my mind indicates that maybe order books wasn't full for the quarters.
Could we expect a similar dynamic going into Q4 that the prices we're seeing on the squeal now actually flows into Q4? Or how should we think about that?
Your observation is absolutely right. We were more positive on the price development in North America than what we actually in the end what the result was. So that's correct. If we look at Q4 now for Americas, we are guiding them for relatively flat prices. They were going down in the beginning of Q3 coming up then in the end of Q3.
And spot prices have continued up so far in Q4. So that's what we are why we are guiding them for flat prices in Q4 versus Q3. And I would say and I would knock on wood as Martin did before, this time we are when we were guiding last time around, we had made some price increases. We hadn't really seen the price started moving. This time we have made some price increases.
And when we look at how the spot market has developed, we have also seen that the spot market has started to move upward for plate. So that's why we are now a bit more confident that we will see more or less flat prices in North America.
Okay. But could we then say increased prices or are you already booked for Q4 so to speak at flat prices?
We're not fully booked for Q4 yet. I wouldn't dare saying that we could see increased prices given what happened last quarter. So I would say relatively flat.
Okay. No, no, that's fair. That's fair. And on the same discussion for Europe, what at least what I am hearing is that Q4 is basically already fully booked and that most filmmakers are settling for Q1 now. Does that mean that the prices we are seeing now will flow wholly into Q1?
Or how should we think about that?
I would say that that's more or less correct. Yes. We are to a large extent booked for Q4. So the price the recent price increases that are being seen on spot market, they will not impact us in Q4. And then as Martin said, even though we are guiding for slightly lower prices in Europe, if we compare product by product, we will see somewhat higher prices.
But when we do an average then, on average, it will be slightly lower.
Okay. That's helpful. And then also on Rohe, I think we've talked about around €200,000,000 in negative impact from idling it for a whole quarter. Is that sort of the positive impact quarter over quarter we should think about going to Q4?
Yeah, I think that's fairly reasonable assumption, yes.
Okay. Brilliant. And maybe finally on my side, the demonstration plant that you will perhaps soon start working on for hybrid, Should we expect another pre feasibility study ahead of that? And will you update us on the potential OpEx cost for hybrid in that?
Yes. We will update you of the OpEx cost in that. We are now in the process of having I don't know the English word, but in Swedish Samrod where to place it and see where we can get electricity, where we can get it's not completely uncomplicated. I mean it's quite a big type of equipment and a big building. So we need to have these permits and we are working with that now together with authorities and other stakeholders.
So we are in that process. But we have decided that we will build 1, but exactly where and exactly how is still under negotiations.
Okay. And just finally on the timeline for that update on hope rates, when in time could we expect that do you think?
I don't exactly know that. But the ambition is to have the demonstration plant run ready 2026, but that will be of course dependent on the process of getting permits and getting power supply. But we will come back in due course.
Okay. Fantastic. Thanks a lot. Thanks.
Before we continue, ladies and gentlemen, just a quick reminder that as we are on a time constraint, if you could please politely remember to limit yourself to one question per opportunity. The next question comes in from Carsten Rieke of Credit Suisse. Please go ahead.
Thank you very much. Quickly, the first question I have is on the lower maintenance costs, you had almost SEK 100,000,000 lower maintenance costs and you thankfully already commented on it that already quite a portion was actually because you undertook the maintenance yourself. But could you just give us a little bit more feeling how much still has to catch up in 2021 out of the €100,000,000 you had at a lower level now. Is it fifty-fifty? Or is it somewhere less?
No, I wouldn't say there's anything to catch up actually, Karsten. I mean, we were doing what we were planning to do. We were not doing less work. But then we were there were two reasons why it was lower. We were we had renegotiated some of the contracts beforehand or renegotiate rather when we make the estimation we haven't even negotiated.
So given the situation we were in discussion with our suppliers how can we get the cost down given that we're in such a tough market. So that was one reason. And the other reason was that we were doing part of the work more by ourselves than using external suppliers. And if you look at the SEK 100,000,000 in total, yes, but if you look at it by division, it's quite small amount for each divisions and then it adds up to €100,000,000 So there is not that we have we are waiting with doing another 100,000,000 €1,000,000 next year, no.
Okay, good. Then maybe just a very quick follow-up on the net working capital because you had almost SEK700,000,000 net working capital release, which was quite sizable number for Q3. How much more is actually possible in the 4th?
Yeah. It's typically, Q4 is the quarter where we release working capital when we have this normal seasonal slowdown towards the end of the year. This year, as we have guided for, we are expecting some higher volumes in Q4. So from an AR side, we're not going to release as much as we normally do. On the other hand, we have been building inventories ahead of the maintenance stop, etcetera.
So it's not going to be a typical Q4 quarter in terms of working capital, I would say, but still it doesn't have to be very bad either or bad at all either.
Okay, good. That helps already. Thank you very much.
Thank you, Carsten.
Our next question comes in from Bastian Synagowitz of Deutsche Bank. Please go ahead.
Yes, good morning. I've got one follow-up on volumes, and I thought that the numbers for September order intake, which you have been showing for Europe here were pretty impressive. So firstly, which are the end markets driving this? And maybe also how has October been trending so far? From what you can see, are we heading for run rates similar to September?
And maybe in that context, you could also just remind us how long it takes for your orders to convert into shipments at this point?
If I answer the first part of the question, I guess it is, I mean, partly or to some extent the catch up as well. I mean, some of the big OEMs have been standing still in Q2 and part of Q3 and then it's a catch up. So I mean you shouldn't mix apparent demand with real demand. But what we see is that the underlying demand is also picking up. We have seen so far what is it, 2 weeks into October we have seen a similar trend.
Okay. Okay. And how long would it take for that to convert into shipments?
That normally depends on the size of the order book. The short order book we have the faster we can convert it, but and it also depends a bit by division. It's usually a bit faster actually in the Americas with the EAF based system than it is in the integrated system, but let's say on average maybe 2 months or so.
Okay, got it. Thank you. And then maybe secondly very quickly if I may. Could you guys give us an early update on the CapEx budget for next year? I think earlier you indicated we may be trending towards like rather slightly above the SEK3 billion average run rate.
Have you been sharpening that number a little bit?
No, not yet. But you're I mean, we were saying SEK3 billion for this year and then we lowered it then when we got into this COVID-nineteen situation to SEK2 billion to SEK2 billion. But given that we have postponed some major projects, I think it's fair to assume that it's going to be somewhat slightly above than SEK 3,000,000,000, yes.
Got it. Okay. Thank you.
Thank you, Bastian.
We continue this afternoon Luke Nelson from JPMorgan. Please go ahead with your question.
Hi, thanks for the call. My question is on just following up on your comments on under absorption specifically at Oxalescent. If it's possible to break out the additional under absorption costs for the month that it was idled outside of maintenance?
Yeah. Well, it was idled more or less 3 to 4 weeks depending a little bit on operations. But first, the maintenance outage was about 4 weeks and then we idled it for another 4 weeks. So the figure you have in the maintenance table for Special Steels, that's only related to the kind of planned maintenance outage and not the additional 4 weeks that we had on top of that. Those are additional non absorption costs.
And we haven't specified them clearly, but they are definitely substantial and impacting them, of course, the profitability of Special Steels.
Okay. Thank you. And then just a follow-up to Bastien's question on CapEx. Does that I know it's not going to be major, but does the CapEx budgets that you guide to, does that include or exclude your share of hybrid CapEx? Exclude your share of hybrid CapEx?
Excludes it includes the conversion that we will do in Oksyleson, but it does not include the CapEx part for hybrid, no.
Okay. I suppose then the follow-up, is it possible to just remind us what the I suppose the cost of the mobile and Xelison projects that were postponed this year that were meant to be in the CapEx, sort of what we should expect to be put into 2021. And then also the sort of additional spend at hybrid?
For Oksila Surne Mobile, you can say in total around €700,000,000 And then for hybrid, so far we have the major part so far is this pilot plant, which is SEK 1,400,000,000 in total. We've been getting some support for that. And then we are, of course, sharing it then between the 3 owners. So our share has been around €300,000,000 for building this pilot plant.
Thanks a lot.
Thank you.
We continue next with Kevin Knutheschneider, Schieter Biederbachel of Handelsblatt. Please go ahead.
Hello. Thank you for taking my question. I just have one short question I want to ask. Your competitor, Thyssenkrupp, is selling its steel business and the 1st competitor has made an offer. Are you planning to engage in the bidding process?
I saw that. No, we are not engaging in any bidding process and I saw that in the news that Liberty Steel was bidding for Thyssenkrupp.
Thank you.
The next question comes in from Michael Bilotti. Please go ahead. The next question comes in from Michael Pilapathy. The floor is yours. I think unfortunately, we may have lost Michael.
If you would like to ask a question, there is And we have Bastian Synergiewits from Deutsche Bank once again. Please go ahead.
Yes. Sorry, me following up. Just briefly, so just one of your competitors just announced also plans to bring green steel volumes on the market, I think, to some extent this year and then in a larger volume size by 2022, 'twenty 3. Now when you say or when you talk about being the first with fossil free, do you think you just use a different definition with regards to the actual product?
I don't know because I don't know what definition they use. But what we are talking about is a complete fossil free value chain all the way from the iron ore is in the mountain and being brought up until we have delivered the steel to the end users. So not only taking away the carbon dioxide in the steel making by using hydrogen instead of coal, but also having a fossil free mining operation in LKB and fossil free transports. And we are that's our definition. Then is it completely fossil free?
There will be some carbon, of course, in it because otherwise it's not steel, but there will be no CO2 emissions.
And also remember, Bastian, that we have also fossil free electricity from Watten Farm.
That's a big, big difference. So according to our definition and I don't know the other company's definition, but according to our definition, everything needs to be fossil free including power generation.
Okay. Okay. That's very clear. And then even though I know that obviously that sort of the commercial sort of discussions may be still somewhat like undefined at this point. But I mean, what you're hearing from your customers, have you seen a larger receptiveness or maybe paying for the avoidance of CO2 in the product?
I remember before, I thought customers were maybe not that willing to proactively pay for it. But have you been seeing any change in that?
We see a constant or an increasing development and an increasing interest. We have obviously not started to discuss pricing because we are not producing it yet. But we are now discussing partnerships, the possibilities to do prototypes already during next year together with customers. So we see an increasing interest and it's building up from customers. It's building up from owners.
It's building up from a lot of different stakeholders. So we see an increasing interest and that's very positive.
Okay. Thank you. Then just very lastly on the just on Rooki, which I think performed really well. I mean, revenues down significantly yet your margins obviously were up and I think earnings stable almost and up in absolute numbers. So this effect has been also mostly driven by just lower input factor cost from steel?
And may that be somewhat reversing now that steel prices are actually on the way up again?
I would say not at all. I mean they have been doing a great job. And we have said we have been discussing Rokke many times. But this is for us what we have left in Rokke Construction is a core business. They are the biggest customer of for us of color coated steel.
They have been streamlining and fixing the operations. They have sold not only building systems, they have sold the Russian assets with the Russian company. They have been selling the assets in Romania, closing down and focused on core products in core markets. And then they have also done an acquisition of Piraeus Steel within roof safety. So they are building out the network and they're doing a great job.
So it's not about steel prices up and down. They have a target of a certain profitability level. And then we know that when we sell color coated via Rokke Construction, the long margins or the combined margins for SSAB is very attractive. So they have an agenda of having a certain profitability and then organic growth, volume growth.
Okay. Sounds good. Well done there. Okay. Thank you.
We have one final question in for Michael Bilotti, who I think we've lost earlier. Michael Bilotti, you have the floor. Please go ahead. Mr. Berlanti, are you there?
Can you hear us? Unfortunately, it seems we have lost Mr. Pilate once again. So with that, ladies and gentlemen, there are no further questions at this time. It is now my pleasure to return the floor to the speakers for their closing remarks.
Okay. Thank you. No, that concludes today's conference then. So we just say thank you for all the questions, and wish you a nice day.
Thank you very much.
Thank you. Bye bye.