Sweden-based steelmaker SSAB reported sales of SEK 8,730 million (US$1,305 million) with an operating loss of SEK 665 million (US$99.4 million) for the third quarter of 2012. Niche products accounted for 38% of steel shipments. Earnings were negatively affected by SEK 55 million (US$8.2 million) with respect to the company’s EMEA’s efficiency programs.

Comments by the CEO
Weak demand and destocking in the marketplace affected SSAB’s earnings for the third quarter as earlier communicated at mid September. In particular, within strip products in Europe, the trend was much weaker than expected. As a consequence, capacity utilization was just below 60% in the Swedish strip operations, in addition to the normal maintenance outages. The costs for the summer outage in the Swedish operations, amounting to approximately SEK 100 million, were incurred in the third quarter. As anticipated, the Americas and APAC business areas also experienced weaker development than in the preceding quarter. The rolling of plate in the U.S. and in Sweden had a capacity utilization of 85-90%.

The company is continuing with its efficiency program within EMEA with the aim of improving competitiveness and increasing flexibility, in order to better address fluctuations in the market. The implementation of this program has been accelerated and the activities will now be implemented during the first quarter of 2013. The positive effects on earnings will be realized gradually during 2013 and the full cost savings are expected to amount to SEK 800 million on an annual basis. As part of the program, 450 employees were given notice of redundancy after the end of the third quarter. The employees have shown great understanding for the prevailing situation. As previously announced some 160 white collar positions are removed and earnings in the third quarter were negatively affected by SEK 55 million with respect to the efficiency program.

Declining spot prices for iron ore have resulted in a renegotiation of its contract for iron ore pellets – effective for deliveries as from the fourth quarter – at a level which is 23% lower in USD than in the original contract. The impact of this on the company’s earnings will not be felt until the first quarter of next year.

SSAB does not anticipate any major change in demand during the fourth quarter and the pressure on prices for standard steels that was witnessed during the third quarter is expected to continue. On the other hand, the price for quenched steels is expected to be more stable.

Despite a tough market, SSAB is continuing to pursue an increasing number of development projects together with its customers. "It is this close technical cooperation with the customers, combined with a unique range in our product offering, which distinguishes SSAB from most other steel companies," said CEO Martin Lindqvist. "With the strategic investments now finalized, we are well-positioned to rapidly meet an increase in demand when the market recovers."