SSAB AB (publ) (SSABA) Earnings Call Transcript & Summary

Good morning, and welcome to this presentation of the SSAB Year-End Report. I am Per Hillström, Head of Investor Relations, and today's presenters are Martin Lindqvist, President and CEO; and CFO, Håkan Folin. And we can go to the agenda here. We will -- Martin will start with a summary of the very eventful year, one must say. And then Håkan comes back with the financials. And at the end, Martin has some closing remarks and the outlook. After that, we will open up for Q&A, but we will come back to that with the instructions. So by that, Martin, please start the presentation.

Thank you, Per. I will start with this picture. We have looked into this opportunity and evaluated it over the last couple of months. And we have now concluded the discussions because we, from an SSAB perspective, see limited possibilities to integrate this into our strategies and therefore, concluded the discussions with Tata Steel. As Per mentioned, 2020 was a very, call it, volatile year with a decent start in Q1 and then a very tough second and third quarter. And we had to take down production. We had to idle a blast furnace or 2 blast furnaces. We took -- we moved summer stops, and we also took production outages. Looking back at it, I think our flexibility in the system has served us well because when the market started to recover in Q4 or recovered in Q4, we were quite fast to adopt to that and get up production quickly and run it on a stable level, get the blast furnace up and running. During this very volatile year, we have also been able to save fixed costs of more than SEK 1.6 billion compared to the full year of 2019. And we also ended the year and Q4 with, I would say, very decent cash flow, a net cash flow of SEK 2.9 billion, and we continue to reduce our net debt. We have also focused a lot, of course, to safeguard the health and safety for our employees and our personnel. We have tried to minimize the impact internally of COVID-19 at our production sites and in critical operations and have so far at least avoided any big outbreaks. And these measures will, of course, continue into 2021. We have also managed to continue to improve the safety performance, and we measure that, among other things, in lost time injury frequency. And we had a very good development in 2019, and that development continued into 2020. We reduced the lost time injury frequency from per million working hours from 4.2 to 3.7. Our ambition and target is, of course, to be at 0 and be also leading globally in this KPI. We are not there yet, but we are definitely moving in the right direction. If we look then at Q4, we saw better capacity utilization and higher shipments. And as said, market recovering from very low levels in Q2 and Q3 into Q4 or during Q4. We started up, as already said, the blast furnace in Raahe, and that went well. We had also very good and stable production in Oxelösund, and I will come back to Specials Steels. And we had an EBIT of SEK 557 million, quite a big increase compared to Q4. But of course, for the full year, we made on EBIT level a small loss. If you look at the operating profit and loss per division, all divisions and the daughter companies, Tibnor and Ruukki Construction performed better than the fourth quarter 2019, and I will come back to the divisions and talk about demand and stability. But we saw also that the demand over this volatile year for our niche products in Automotive, Special Steels and so on held up to better than the average steel demand over the year. If we start then with Special Steels. Even here, we saw a recovery compared to Q3, volume-wise. And then, of course, also a strong recovery compared to Q4 last year. Better capacity utilization, higher volumes, we had no maintenance stop in Q4. All that was moved to Q3, where we had the maintenance, the yearly maintenance stopped in Oxelösund, but we also stood still, I think, for 7 weeks with a maintenance stop of 4 weeks, but we took out production due to lower demand. For the full year, shipments decreased from 1.2 million tonnes to 1.1 tonnes. But I think what is more important is the EBITDA margin that improved from 11.3% 2019 to 13.2%, which I think is quite okay in a year like this. The division was able to reduce their fixed costs by around SEK 480 million versus 2019, and we saw over the year when we were producing very good and stable production performance. Moving over to Europe, where we saw a big effect of the volatility in Q2 and Q3 and also a recovery in Q4. The Q4 EBIT was not much to talk about, but it at least went from negative to positive. We saw better capacity utilization, higher volumes. We were running during Q4 both blast furnaces in Raahe, but we saw lower steel prices sequentially, and that had a negative impact. For the full year, Automotive decreased to -- with 8%, and that is advanced high-strength steel. And the total automotive market decreased with 20% roughly in Europe. So I think the advanced high-strength steels held up better than the average automotive market. We had 38% of the volumes in SSAB Europe being premium share. We also managed to take market shares on our home markets. But overall, for the full year, we had a loss on EBIT level of SEK 1.1 billion. Europe, they saved -- of the SEK 1.6 billion -- or a bit more than SEK 1.6 billion, SEK 620 million was saved in fixed costs in 2020 compared to 2019, which I think is a good achievement for that division. Moving over to another volatile market and during 2020, what we explained is in Americas. We saw that negative impact of COVID-19 on demand in Q2 and Q3, and then we started to see a recovery in Q4. And the volumes in Q4 were actually quite good. We had an EBIT in Q4 of SEK 45 million, and the reason was better capacity utilization and as said, higher volumes. We also had no maintenance in Q4 2020, which we had in Q4 2019, but we were also negatively affected in Q4 on lower steel prices and higher scrap costs. But at the end, we managed to get just above breakeven on EBIT level for Q4. For the full year, compared to the previous year, we lost a lot on EBIT, and we had significantly lower margins. SSAB Americas managed to reduce fixed costs compared to 2019 with SEK 270 million, and we kept the premium share on a stable level, and we also managed to increase our market share on the North American plate market during 2020. If you look into the daughter companies, Tibnor, they also experienced the volatility that we have seen in Europe. They had a better EBIT in Q4, SEK 48 million compared to minus SEK 39 million last year. That was due to higher volumes. But I would also say, to a large extent, due to cost savings from the ongoing restructuring program. That program is fully implemented, and we will see full year effects of that during 2021. For the full year, EBIT improved from SEK 30 million to SEK 96 million and also here, we see the positive effects from the restructuring program that was finalized end of Q2. The only division that didn't experience so much volatility was Ruukki Construction, where we saw a stable construction market in 2020. So comparable revenue, if we exclude the Building System that was divested in Q2 2020, were on a stable level. We -- they managed or we managed to improve the EBIT and the margins, and we had better volumes compared to Q4 last year in especially Roofing. So we managed to increase the EBIT from SEK 283 million last year to SEK 314 million. Now when we have divested the Building System, the part that is still left in Ruukki Construction, the product business is part of SSAB's core business. And I foresee further positive development in this division going forward. They are doing a solid job. So with that, Håkan over to some financials.

Thank you, Martin. And as usual, I will go through some more details on the financials, cash flow, balance sheet, bridges and also raw material. But I will start with an overview and a bit of a historical comparison. Sales in Q4 this year were roughly on the same level or almost exactly on the same level as in Q4 last year. However, shipments were up significantly, almost by 20% compared to Q4 '19. Also, EBITDA -- with the lower sales, EBITDA margin improved quite a lot, and we had higher -- more than 8% in EBITDA margin, which was actually the best margin we have had since Q2 2019. And that also resulted then in a clear improvement in EBITDA per tonne delivered steel of around SEK 800 per tonne. If we look at what happened between Q4 last year and Q4 this year, we have an improvement of around SEK 1.7 billion in profitability. However, in this bridge, then, you can see we start with a negative development on prices. They decreased in all steel division, but especially in SSAB Europe and in SSAB Americas. That was somewhat compensated by volumes, plus SEK 600 million, and we had better volumes now in Q4 '20 than in Q4 '19 in all steel divisions. As you might remember, Q4 '19 was plagued by destocking and very low activity on the market. We also had a big positive impact from variable COGS, SEK 1.5 billion, lower raw material impacting quite a lot. But then also the fact that we were running production at the high and at the stable level that supports also the variable COGS in terms of fuel efficiency, energy consumption, scrapping and all of that. And we did not have large maintenance outages this quarter. We improved fixed cost also in Q4, SEK 200 million or a bit more compared to Q4 last year, which I think shows that -- and this was despite them being on a significantly higher activity level. So I think it shows that some of the cost savings we have seen this year have not only been temporary adjustments, but actually, cost savings that will stick also for a longer time, not least and what Martin talked about before the restructuring program in Tibnor. FX, somewhat negative, but quite -- not that much, SEK 80 million. And then unabsorption, positive by SEK 820 million. So we were running production at a significantly higher level this quarter than Q4 last year. Then we have quite a big amount negative on other. The largest portion of that is that in Q4 last year, we were receiving some insurance compensation for previous production issues we've had and those we were not getting the same on this quarter. But all in all, an improvement of SEK 1.7 billion. If we move then to comparing sequentially and look at Q3 and Q4, we also see a quite big improvement here of around SEK 1.5 billion, slightly lower on prices, but that differed between divisions where positive development in Americas, but a more negative development in Europe, partly driven by seasonality. Clear improvement on volumes in all steel divisions. We saw much better volumes now in Q4 than in Q3, as Martin described then before the volatility during this year. Better on the variable COGS by around SEK 600 million, which again comes from running operations at a more stable level, but also from raw material. But here, raw material is actually a bit less than half. We have clearly higher fixed cost in Q4 than in Q3. For those of you that follow us for a while, you know that we usually have that because we have seasonally low cost in the third quarter, that's roughly between SEK 300 million and SEK 350 million. So we had a bit higher cost in Q4, driven then by the significantly higher activity level in Q4. FX, slightly positive and then unabsorption, positive by as much as SEK 1 billion. And we did move the planned maintenance outages. We had quite a lot of them in Q3. We had originally planned for both Americas and Special Steel and part of Europe to be in Q4, but we moved all Americas and all Special Steels and most of Europe to be in Q3, where we knew that demand would be slow, and then we were hoping that demand would return in Q4 in which it apparently did. And then we were ready to ramp up production and increase our shipments to customers. So all in all, an improvement then with around SEK 1.5 billion sequentially. If we look at the cash flow then, and we start with looking at Q4, we had an operating cash flow and a net cash flow at fairly same level, but around SEK 2.9 billion. So very strong cash flow in the last quarter of the year, driven by, of course, a decent EBITDA of SEK 1.4 billion, but also by a quite big change in working capital of SEK 2 billion, where -- especially coming from the inventory side. If we take the full year and we look at net cash flow, we had a net cash flow of SEK 2.2 billion, which I think then given the extremely tough year we've had, it's been -- it's a quite decent cash flow for the year. In terms of investment, if we add up the maintenance expenditure of SEK 1.6 billion and the strategic CapEx of SEK 0.6 billion, we ended up at SEK 2.2 billion, which is in the range we guided for between SEK 2 billion and SEK 2.5 billion. As you remember, originally, for the year, we said SEK 3 billion, but then when COVID-19 started hitting, we said we will be a bit more selective and postpone some investments, and we will be between SEK 2 billion and SEK 2.5 billion. If I then move over to the balance sheet. We have a well-balanced maturity profile. We have a quite long duration on our loan portfolio. We have a very high amount of liquid assets and committed credit lines which we took up during March when COVID started spreading. We took a number of extra measures to make sure that we were on the safe side, and we definitely have been on the safe side. We now have 33% of liquid asset and credit lines compared to sales, which is a very high amount. And that will reduce now that things seem to have come down, at least for the time being, we will reduce those in the coming few months. But we did that as a precautionary measure. And what we are maturing in 2021 is, to a large extent, commercial paper. And as we are generating our own cash flow, we will also reduce the amount of outstanding commercial papers. If we then take a bit longer perspective and look at our net debt development over the years, and we start at the end of 2014, and 2014 was the year where we acquired Ruukki or merged with Ruukki. At that time, we had a net debt of almost SEK 25 billion and a net gearing of 56%. Then we have -- year-over-year, we have gradually reduced net debt. You can see there's a bit of a hiccup there between '18 and '19, but that's driven by the implementation of IFRS 16, which impacted by around SEK 2 billion. But then we lowered net debt again this year, then by around 2 -- close to SEK 2 billion. So now we are at net debt level of around SEK 10 billion or slightly above, SEK 10.3 billion, and we are at a net gearing of 19%. So all in all, we have a fairly solid balance sheet position at the moment. In terms of cash needs of the business, and cash need, we define here as Capex, interest paid and taxes paid. They were quite low last year, below SEK 3 billion, and we're expecting them to increase next year to around SEK 5 billion, partly driven then because we will increase CapEx. We have already restarted the expansion of quenched and tempered capacity in Mobile. We will also start the spending of the Oxelösund conversion. We have already started the work, and we've done quite a lot of work also in 2020, but we'll start more of the CapEx spending during 2021. And therefore, overall, we'll see higher Capex. Interest paid will be roughly stable. Taxes, then we say here, they will normalize. That obviously depends on the profitability level. For illustration purpose here, we have put in the taxes paid in 2019, but that will develop as we move on. But we will have an increased need in terms of cash with around SEK 2 billion next year. On the raw materials side, we have seen a rather dramatic development during Q4, especially for iron ore, and as we show on the next slide for scrap. For our own purchase prices, they were 6% higher in Swedish krona and 9% the U.S. dollar in Q4 versus Q3. So not a dramatic development, as you can see on the graph. However, we saw spot prices for iron ore increase rapidly in the second half of December and also in January and are now at a very, very high level. This will impact us partly in Q1, especially for the Luleå operations where we don't have almost no iron ore stockage, but we basically get deliveries on a daily basis. So there, we will see the impact also in Q1 of this sharp increase, the last month or so. Coking coal, on the other hand, was actually slightly lower, our own purchase prices in Q4 versus Q3. And if you go back a year, 1.5 years, you can see in the graph that the coking coal purchases have actually -- or prices, sorry, have actually decreased quite a lot. And I mentioned that scrap in the U.S., we've seen quite a dramatic development. And this you can see in the graph, where December and January scrap prices increased significantly. Our own purchase prices on average in Q4 were 14% higher than in Q3, but then we will see further increase then in -- or we have seen a further increase then for our January buy. And for scrap, we have a shorter turnaround time compared to coking coal and iron ore. So this will impact our cost in Q1, but we will also see higher prices, as Martin will come back to shortly. Finally then from my side, a few words about our planned major maintenance outages in 2021. All in all, we expect that the cost will be around SEK 1.2 billion, which is higher than what we saw in 2020, where they were SEK 800 million. And there are 2 reasons for this: one is that in 2020, they were unusually low because of the low production levels we had in Q3, especially, we were able to do more of the planned maintenance with our own people; and the second reason is that next year, in the U.S., we will have an outage in Mobile, where we have the Q&T lines, and then we also always get a slightly higher cost than when we do it in Montpelier, where we don't have the Q&T lines. But all in all, around SEK 1.2 billion for the year. And with that, back to you, Martin.

Thank you, Håkan. So as said many times now, 2020 was a very turbulent year and a very volatile year. And I wouldn't call it a lost year, but a difficult year. And looking into our strategic targets and the focus areas, you could say that we didn't -- we were not able to perform on the trend line in order to reach the targets we had previously set up for 2022. But on the other hand, we saw also that within these areas, the focused areas and the strategic target areas, it held up better than the overall steel market. But I think it's fair to assume that we -- given the volatility in the markets in 2020, we move now our strategic targets or the ambition to reach the targets from 2022 to 2023. So in that aspect, we did not stay on the trend line. We think we have a good possibility or a very good possibility to reach them in 2023. And these targets are unchanged. We will have shipments in Special Steels of 1.6 million tonnes. We will continue to grow SSAB services. And SSAB services, of course, as everyone else was affected by the COVID situation in many places and lower demand and shutdowns among customers, but still held up surprisingly well or quite well given the circumstances. We expect them to continue to move positively, and we are aiming for a sales of SEK 4.5 billion in 2023. The premium share in Americas, we will continue to grow that, and we are aiming for 39% in 2023. Also for the premium share in SSAB Europe, from 38% in 2020, which was a slight decrease of 1 percentage point compared to 2019, but we see the possibilities to reach the target of 46% in 2023. Automotive, as said, held up better for advanced high-strength steels than the general automotive market are much better. We see possibilities to reach the goal of 800,000 tonnes in 2023; and premium products, 900,000 tonnes in 2023. The market share at the end of the second half of the year developed positively, but we ended up for the full year at 37%, obviously, a bit from the target of 40% to 45%, but we see good possibilities to reach the target. And that is an over time target, but to reach that in 2023. So not a lost year, the strategic areas held up better than general steel market, but we were not on the trend line. And that's why we then move the targets from 2022 to 2023. We are firmly on track for a more sustainable SSAB. We are moving forward, and Håkan talked about Oxelösund, where we are now investing to be completely fossil-free in 2026 and start to deliver steels from Oxelösund in fossil-free steel in 2026. We have the overarching goal to be fossil-free in 2045. We inaugurated or started up the world's unique HYBRIT pilot plant in Luleå in August 2020. We were running it during 2020 for performance tests on natural gas, and we are now starting to produce sponge iron on using hydrogen to take out the oxide of the iron oxide. So that will be done during the beginning of this year. We also had a new updated sustainability strategy in 2020, and we were actually also approved by the science-based targets initiative during 2020, as what I know at least the first -- or one of very few, if not the first steel company globally. When we then look into the markets in Q1 and compared to Q4, it looks okay. If we take heavy transport, we see healthy demand, heavy truck production at high level, maybe still a bit low on railcars in the U.S. In Automotive, we see a strong market or we expect a continued strong market with recovery in production and underlying structural growth within advanced high-strength steels. Construction machinery also decent with production levels recovering in main markets. Material Handling, the mining sector continues to -- on a good level, we see a strong demand from that segment. Energy, overall, quite okay, low activity in oil and gas, but good activity within wind power and transmission. And then construction, stable underlying demand. But of course, as we always see during the first quarter, a seasonal slowdown. And especially now in the Nordics, where we have for the first time in a number of years, a real winter with snow and cold temperatures. And then the important swing factors, service centers, we saw that the inventories in the service centers or in the supply chain were on low levels end of Q4. So we expect to see restocking in both Europe and U.S. So overall, with the brasklapp, in Swedish, of the effects of stronger second wave or third wave of COVID-19, we see a quite decent outlook for Q1. If we then put this in SSAB terms, we see that for Q1, demand for steel is expected to be good, driven by both underlying demand and by customers and steel service centers restocking. As said, still uncertainty as how the COVID-19 will affect demand midterm. We expect global demand for high-strength steels and especially quenched and tempered and temper to be good. And when we look at prices, we expect prices to increase in special steels and in SSAB Europe and SSAB Americas to increase significantly. And we will see, as Håkan mentioned, also higher costs for raw material in Q4. And if we look at the volume outlook, we expect better volumes in special steels in Europe and slightly lower volumes in Americas due to 2 reasons: very good volumes in Q4, and then we entered into Q1 with a low -- slightly lower slab balance. But overall, decent volumes, decent prices, decent demand, what you can see right now at least. If we then sum it up, I think we -- internally, all the organization showed good flexibility to manage a very volatile 2020 with almost nonexisting demand or production in Q2 and then recovery in Q4. We saw a strong cash flow in Q4 and for the full year, and we continue to reduce the net debt, and you should expect us to continue to reduce net debt and generate cash -- positive cash flow. We managed to reduce fixed cost with more than SEK 1.6 billion, and all divisions contributed. And we had a successful, I would say, ramp-up of production in Q4 when the market recovered, and we were able also to start the blast furnace in a very good way in end of Q3. We expect good demand into Q1. And as said in the beginning, we have concluded the discussions with Tata Steel. And we remain firm on the target to be first in fossil-free steel, and that will be delivered in large volumes from Oxelösund beginning of 2026. So with that, Per, I guess we open up for questions and comments, and hopefully, also some good advice.

Yes. Thank you, Martin and Håkan. We will be ready now to start the Q&A session. [Operator Instructions] So please, operator, present the instructions.

[Operator Instructions] Our first question comes from Alain Gabriel from Morgan Stanley.

I have 2 questions. I'll start with the first one, which is around capital allocation. So your earnings are inflecting quite strongly. You have called off the IJmuiden acquisition, which signals good discipline. But you've also not paid a dividend in spite of the reduction in net debt. Your balance sheet is likely to be in a much better place, if spot prices persist. So how do you plan to balance, balance sheet strength versus cash returns versus M&A going forward? That's my first question.

No. But I mean, we have a clear dividend policy. And even though we were making some money, not a lot of money, but some money in Q4 overall for the full year, we were negative. We had negative results. So I mean, the proposal from the Board of 0 in dividend for the AGM is in line with our financial targets. So that's what we are planning. The only thing we are planning for is to continue to generate positive cash flow, and then it's up -- I mean, the dividend is up to every AGM or EGM.

Okay. That's the first question. Second question is, if we may go back to Slide 16, the water flow chart. And if we roll back into Q1, other than prices, costs and volumes, which we can have our own assumptions there, are there any other moving parts that we should be thinking about in that wonderful chart into Q1?

I mean, of course, currency is one moving part that is hard to predict as always. And then you have -- I mean, this -- where this pandemic will move in Q1. So -- and I don't know, Håkan, if you want to...

No, not really. I mean we typically have between Q3 and Q4. We have within SSAB Europe, for example, a worse mix because we sell less color-coated and galvanized material, but we don't have that same between Q4 and Q1. So no, I think you mentioned, obviously, how we run production, and then we guided on the shipments and the raw material costs.

Any comment on unabsorption, for instance, which was a big item in Q4?

What we can say is that production in Q4 was running actually really well, and I think that's one reason. If we look at -- and of course, we do, we look at your estimates, and we can see that we came out slightly better, and that was especially for Europe. And I would say that in Europe, Q4 production was running really well, and it was actually running fairly well in Special Steel and really well in America. So unabsorption was quite low when production was running well in Q4. I mean we have no plans or intention to chase that for Q1, of course, but we don't know the outcome as of yet, for sure. But we will not have, by definition, a better absorption in Q1. No, we were running almost as we could...

But in all fairness, we have also, over the last couple of years, done quite a lot of changes in the production organization. So one should expect better and better production stability, and that's what we are seeing. So we have done structural changes in order to -- we had a couple of years -- a couple of years back, we had some problems with production stability, and that teaches us a lot, and we have done a lot of structural changes in order to mitigate that or try to mitigate that.

Our next question comes from Seth Rosenfeld from Exane.

Congrats on a very strong end to the year. If I can, I have a question with regards to the Tata deal more broadly and what it means for the strategy going forward. You already touched on earlier in your prepared remarks, some of the reasons why you chose to walk away from Tata. It might seem like some of those concerns might have been known before even starting due diligence. I just wonder if there's any general conclusion we can draw here with regards to how you might consider M&A going forward. For example, is there a general conclusion that SSAB has decided that buying more blast furnaces is inherently unattractive for decarbonization or incompatible with the strategy for decarbonization. Going forward, are you able to say if SSAB would look at other acquisitions on the blast furnace side? Or ultimately, is this a unique case for Tata IJmuiden? I'll start there.

But I think -- overall, I think we are onto something unique with fossil-free steelmaking in the HYBRIT project and also what we're doing now in Oxelösund. And I believe that, that will be one of the future, call it, niche products. And when we talk to customers and see the big interest, I'm getting more and more convinced. Then, of course, we should always look into possibilities and look into them and form our own opinion and draw conclusions from that in big and small, and we are always investing. Håkan mentioned, what we are investing in Oxelösund. So we are investing a lot in Mobile to increase acuity capacity. We're investing in Borlänge to increase the volumes of advanced high-strength martensitic cold-rolling steels. We're investing in Hämeenlinna to get up capacity and capability within galvanize. So we should always take a look in an educated -- form ourselves an educated view on different this when it's possible, and I think that's part of our responsibility, but then key to the strategy and see if does it fit it in or not and then draw our conclusions. So that's what I can say about it. So we have a clear strategy. We have a clear path where we want to move, and we are investing and evaluating opportunities according to that.

Okay. And if I can ask a more specific question with regards to the U.S. plate market. Can you give us a bit more color on current [ demand ] conditions? Are you seeing any inflection in energy demand or alternatively, with the new Biden administration, is there increased concern about structural demand from pipeline, for example? Obviously, we've seen a huge surge in plate prices at a time when our understanding is that demand is not phenomenal, but perhaps kind of piggybacking on strength in hot-rolled coil. Do you think that the plate price strength can continue if hot-rolled coil begins to inflect over the coming months?

In terms of demand, and you mentioned the energy segment, Seth, and for sure, oil and pipe will most likely be seen with the Keystone project, and not to be that supported by the new administration. On the other hand, another part of the energy segment, which is really important for us is the wind power, which also then generates transmission tower, and that segment will, most likely, on the other hand, be boosted by the new administration. So we think that, that will net-net not be negative, at least is our assumption as of now. And in terms of plate versus strip prices, that's obviously a difficult question to ask. We see a strong fundamental right now for plate. And we also see a very unusual situation where strip prices are clearly higher than plate. That doesn't happen very often on the U.S. market.

Our next question comes from Viktor Trollsten from DNB.

Yes. This is Viktor. I hope you can hear me?

We can, Viktor.

Brilliant. So just in terms of volumes, which was obviously very impressive in the quarter, are you thinking about the picture you showed on the order intake in Europe. During the last report, I think it was, which was easy to get excited about in terms of volumes for Q4? Then your guidance was a bit more conservative with somewhat better volumes and now shipments was actually up 20%. Could you just tell us a bit if anything changed during the quarter? And what was driving that good development versus your guidance?

But we're not -- I mean we're not -- we were not extremely explicit when it comes to volumes. But the recovery came in Q4, and it was slightly stronger than expected. And the order intake kept up. We saw on the market -- I mean, in society, we saw a lot of negative effects from COVID. But in the steel call it, consumption market, we did not see that, and we were a bit unsecured, how that would play out in Q4. From a steel perspective, it turned out slightly better than expected. In the society, the opposite. But from a steel consumption perspective, better than feared. And then as Håkan said, we also managed to ramp up production according to that increased demand in a decent way in Q4. And there is always a bit trick to start-up a blast furnace when you have idled it, and they are typically not built to be idle, that was successfully done by SSAB Europe. And as I said, production was running well, and we were still on short-term work and so on in different parts of the organization. But we were also both lucky and did a lot of work to keep our mills running and avoid big outbreaks of COVID-19. We didn't really know how that would hit the production and so on. Because, I mean, it is very hard or demanding at least to keep distance and when you have a big spread of COVID-19 in the society.

Okay, okay. That's clear. And just relating to that chart, I think you were around 350,000 tonnes by September. Can you tell us where you are for the moment? Or...

No, but we have had a decent order intake during Q4 and in the beginning of Q1.

Okay. And relating to that question, I think it sounds like order books in Europe are basically now full until mid-Q2? And could you tell us a bit about your lead times in Europe and the market now?

No. But when the market recovers, you need to be a bit, call it, tactical as well. I mean to -- I mean, when prices are moving up, typically, you see destocking as well. And then you need to try to figure out I mean how much you should fill up your order book or not? And if you take Americas, we have not yet opened up Q2 orders.

Okay. And just on a final note...

But I mean the order book, as it looks right now, is reflected then in what we say in the guidance, volume-wise, price-wise. That is based on what we see in order intake and the order book as we typically always do.

Yes. And just in terms of price guidance, because at least I have expected a quite different guidance last quarter in terms of prices, for example, Europe as prices started to increase so fast, but it guided quite conservatively for Q4 due to timing effects. And just how to think now into Q1 what prices will come through? I think looking at average prices for Q4 versus Q3, prices were up basically 25%. Is that the range we should look at? Or...

No, no. But as you mentioned, I mean, we have a lag effect from spot prices until they are seen in our P&L. But what we guide for and maybe we're not very specific, but the guidance we gave in Europe and Americas is significantly higher prices, but we also say that raw material costs will be higher in Q1 compared to Q4.

Yes, yes. Okay. And I guess finally, from mill, in terms of the Special Steel, their target now for 2023, can you tell us a bit about how that ramp-up will look like, just to get the feeling for how volumes could turn out for 2021, 2022 maybe?

But when we look at the underlying demand and see what we can also produce in our mills in Oxelösund in Raahe, Borlänge and Mobile, we think it is -- works quite well together. Then, of course, we have prolonged it for a year. And because we were not as I tried to say -- maybe this is not the right word, but we were not on the trend line for that growth in 2020. But having said that, Special Steel's volumes kept up fairly well compared to the general steel market. And we also managed to increase the margins or the EBITDA margin in a very difficult year 2020. And you need to remember that we were standing still this summer, including maintenance for 7 weeks and -- or even a bit more than 7 weeks and the maintenance took maybe 4 weeks. So there is -- production-wise, we have the possibility to reach the target of 1.6. And market-wise, we see good possibilities also to reach that by 2023.

We are running with the queue here. So maybe -- sorry, Viktor, but we need to move on to the next.

Our next question comes from Alan Spence from Jefferies.

I've got a couple of questions. I'll go one at a time. The first one is around Q1 volumes. Can you give us a bit of a sense of where you think your utilization rates might be for 3 steelmaking divisions?

I think we will be running at decent utilization rates in Q1. We have the order book for that.

Can you put a number to decent?

No. But decent is, yes, good levels.

Okay. A bit of a longer-term question. But the impacts from COVID, do you think kind of structurally changes the outlook for any of your end markets, either in a positive or a negative way?

Yes, I think it could change it in both ways, positive and negative, but I think we will see some changes. We see some changes in the pattern from customers, how they buy and how they decide to buy. And we are focusing a lot on, call it, IT-based tools for meeting customers. We have learned a lot this year, I mean, we have been restricted in traveling and so on. But we also see a huge interest, call it, mid-term or a bit longer term for fossil-free steel and a very big interest for what we are doing in Oxelösund. And so I think -- as I think I said before, I think that is also going to be a new, call, it a premium product or a niche product for SSAB. So I think if that is only or partly or not at all related to COVID 19, but of course, COVID-19 will mean changes for a lot of things, of course.

Okay. And then my last one is just a simple one. Can you just confirm that the idling costs did not spill into Q4?

Sorry, I didn't -- I'm sorry.

Did the idling cost did not impact Q4?

No.

No. No, we had no production idled in Q4.

The next question comes from [ Chris ] [indiscernible] from Handelsbanken.

Two. Firstly, just a follow-up on the previous question on M&A strategy going forward. In the past, you've talked about not growing overall volume, but then, of course, this discussion and your interest indicate differently. So just to be very clear, I mean, do you want to grow a lot through acquisitions? Or should we rather drill something of this magnitude in the future?

We have a clear strategy, and we will always look at possibilities when they present themselves. But we have clear target where we want to go with this company. And we are -- I think we have the possibility to lead the development of fossil-free steel, and that's where we are going to invest, and that's where we are investing. We will look at possibilities to broaden our product portfolio in that area, and that is asked by customers that wants to have -- us to have a broader in the future. Have broader possibilities to deliver steel with -- fossil-free steel. So as said, we are investing in our own facility in order to live up to that. But if we would see an opportunity to further increase the speed of this target to lead this development, we will definitely take a look.

Great. And then secondly, we're getting some signs of production disruptions in the car industry now on semiconductor shortage. Are you seeing any of this so far? Or is it more of a key [indiscernible].

Not yet. We don't. We see on the market that it's happening, and we are aware that it might impact us. It has not done that yet, but if it continues, then it will.

Our next question comes from Anssi Kiviniemi from SEB.

It's Anssi from SEB. On Q1 guidance, we're looking at prices going up significantly, and you also highlight the raw materials being up. Looking at the spread of margins, taking these 2 factors into account, should we still expect margins to go significantly up? Or how should we read your comments there?

You should not expect any margin contraction in Q1. But the margins should go up.

But not significantly, prices significantly, but not margins, no.

But margins should go up in Q1.

Okay. That's very clear. Second, on cost savings, now SEK 1.6 billion benefits from fixed costs in 2020, how much of this we should expect to come back in 2021? I mean in Q4, there was a fixed cost decrease of roughly SEK 200 million compared to previous years. So is this a good assumption? Or should we expect fixed cost to clearly increase in the coming quarters?

I think we have done some structural changes, not least in the cost program in Tibnor, but also in the other divisions, some of what we did was temporary, but somewhat we did was structural. So you should not expect the majority of the SEK 1.6 billion to remain there, given that a lot was temporary, but you should not either expect everything to flow back. So I think your assumption on Q4 is not a bad assumption, at least, maybe not all at level, but there will be definitely some of the cost savings that will stick in 2021 as well.

Our next question comes from Christian Kopfer from Nordea.

Just 2 short follow-ups from me then. First, just a little bit curious why you took away the order book that you have, please? Because I think it was very transparent to see. And I'm just a little bit curious what the negatives that you see with showing it continuously?

No. We could have shown that, and it looks -- the order intake has been, as I said, quite good, and that's why we give the guidance we gave.

I think, Christian, last time, we -- I think we only had it last time, and that was more to illustrate how big volatility in order intake we had and that we were seeing an improvement in order intake. But then -- so it was more a one-time last time than it was that we took it away this time.

Yes, but I think it increases their transparency. So if you don't see any negatives with adding it in, you could add a pack of it.

We can think about that.

Yes. We'll think about that.

Okay. And then a question on HYBRIT, if you can say something about its development? If you already answered it, sorry. I missed the first half of the conference call. But if you can say something how it has developed with -- I think you're using natural gas, like...

No, what we did, Christian, when we started up the production, we did the performance tests with natural gas together with the suppliers. And we -- because we wanted to have the equipment up and running. And then when we now move over to hydrogen, we want to do that with any -- without anyone else looking into how we do it and what we do. So we started up as according to plan, maybe a month late because we had due to COVID problems to get in people from -- that came from abroad to erect. So we were a month delayed or so. But now we are on plan and following the targets or the plans we have. And we are right now in discussions in the HYBRIT consortium, the final discussions of where to put the demonstration plant, which is, call it, more of a full-scale production plant. But we are aiming to have the first batches of fossil-free steel using hydrogen to reduce the oxide of the iron ore during the beginning of this year. And then we will also be able to start to work together with customers and look into prototypes with them, and that work is also ongoing according to plan. And creating a lot of interest among the customers we are discussing and working with.

Sounds good. And how relevant do you think the pilot plant will be when it comes to how much it will cost to produce the hydrogen free -- sorry, the carbon for free.

I think it will be very, very relevant. And this is a world unique plant, Christian, that is now ramping up. I think it will be very, very relevant. We will learn a lot how to run it. This is a completely new technique and to go from an idea to big industrial scale is a lot of uncertainties and a lot of risks. I think this is a very good way of scaling up. So I think it will be very, very important for us.

So do you think you will have some good -- very good cost analysis by the -- already by the end of this year? Or will you take into 2022?

Yes. No, I think we will have very good ideas. So very good knowledge about the costs during this year. Yes.

Our next question comes from Bastian Synagowitz from Deutsche Bank.

I just had 2 quick questions left. I just want to get back for a moment to your statements around the Tata transaction, please. Could you maybe just explain in a bit more detail why you stepped away from Tata? And what you were looking for which the assets were not able to offer. Because on a higher level, the location obvi does have access to wind power and basically next to what will probably be Continental Europe's hydrogen valley. So hence, it seems pretty well-located also in the decarbonization context, but it seems like that was not the conclusion you came back with. That is my first question.

No. But I agree. I mean IJmuiden is a fantastic facility in many aspects, but we couldn't really fit it into our strategy because of some uncertainties and some cost-related issues. But IJmuiden is a fantasticish -- fantastic facility with a broad product program, good cost efficiency and so on. So it was more us looking into it and see some challenges to fit into our overall plan. And that's why we took this decision.

And these -- so when you say cost-related, was this also just the sheer size of the transaction, which ultimately gets you away? Or...

No. It was more cost related to making that in line with our plans.

Okay. Understood. Okay. Then my second question is probably one for Håkan. I mean when we look at the working capital transaction -- development, not just last year, also over the last couple of years. I think you did a very good job. I mean you cut working capital again and also in the first quarter -- in last quarter, you kept it tight, obviously, despite volumes being very strong and prices picking up already towards the end of last year. Could you maybe give us any color in terms of the needs for any working capital rebuild you would expect in 2021? Or do you think you'll just be able to run along with this level also in the current environment?

I can start to answer that question. I think we, during 2020, in the volatile markets we saw, we did not end up when we measure net operating working capital over sales on the levels where we wanted to be. So I wouldn't say that we were releasing a lot of working capital, and that will hit us back in the future. We still have possibilities to become more effective. And that, of course, differs between divisions. We typically tie up more working capital in Special Steels and less so if you take America as an example. But in all divisions, there are possibilities. And we had planned for running a very -- or Håkan had planned for running together with the divisions a very structured program in 2020. Given the problems or the effects of the pandemic and everything else we had to change, we had to move that focus on those actions and those projects into hopefully than 2021, but we were not doing those actions in 2020. So I would say that we still have, as I see it, room for improvement. Then it will, of course, differ between different quarters. But overall, we have room for improvement. That's my clear view.

Our next question comes from [indiscernible] from Kepler Cheuvreux.

I have one on the scrap market outlook. I think you referenced to the strong surging scrap prices. How do you see the market this year? Are you expecting any tight -- particular tightness or difficulties to source material? I'm also referring to that in context with some discussions at the moment about China's future's scrap sourcing policy, as there are obviously some political discussions ongoing to limit the growth in the local crude steel production. And the second question is on your expectation regarding coking coal pricing. I think what you're seeing in the market today is an unprecedented differential between pricing in China versus the rest of the world for obvious reasons. Would you expect this to -- that the equilibrium is moving sooner or later to the lower end, so to the seaborne market? Or would you rather see upward pressure for coal prices from here? And then maybe, yes, last question is on what you said about the order books, I get -- I guess you have referred to them also technical considerations. What I'm interested in is how you think high level about the steel market in 2021 in terms of direction of steel pricing in a potential inflection point in the coming quarters?

If I start with the first one on the scrap, in the U.S., we have -- you asked if we have -- expect to have difficult sources. We have not had that previously, and we don't expect that in 2021, either. Yes, there is this change in Chinese inventory -- sorry, import of scrap. As of yet, we have not seen that flow happening. And I think that will take a while. What we did see was, of course, the spike in prices in December and in January. It now seems to have stabilized a bit for February. One should remember, we usually have this seasonal effect as well, that scrap is higher in the winter months when it is a bit more difficult to collect. And then it typically lowers a bit when we get into spring time. So that was on the U.S. scrap market.

You can also say that what you typically see when the U.S. dollar is, we compare it to, I mean the currency in Turkey, is one good example, then you see a lot of scrap export, especially to Turkey. So it's also a bit dependent on fluctuations in currencies.

The second question, [indiscernible], if I remember correctly, was on coking coal and our expectations there. And as I showed on the graph, we have seen quite a big decrease in coking coal, and we see coking coal prices now significantly lower than iron ore, which is not usual. Importantly then you have this a bit unusual situation with China, not wanting to import coal from Australia. I would say it's very hard for us to give a good long-term prediction. I think both on coking coal and iron ore, things have developed different than most experts -- people that are much more experts than we are, and then prices have developed quite differently than they have assumed. So it's hard for us to have a good long-term view on coking coal. And then your last question was on our general view on the steel market for 2021, if I remember correctly.

And that's a very good question, I would call it a million-dollar question. I mean the visibility we have is within Q1 and what we see in the order book and in the order intake. And then it will be dependent on so many factors. And I would say that if you -- when you asked me 1 year ago, I couldn't foresee the effects at all of the pandemic, and I have a hard time understanding whether this will take us this year as well. But given the order book, given the order intake, we have a pretty good view of the first quarter. And what we see, the first half could be quite okay. Beyond that, it is -- we don't have the visibility at all.

[Operator Instructions] Our next question comes from Tom Zhang from Crédit Suisse.

Okay. I have just one question. Very quickly, just to clarify, on Slide 25, SSAB Services, the target still has a SEK 3 billion organic, SEK 1.5 billion acquisitions. Does that mean you're still looking to acquire SEK 1.5 billion in SSAB Services sales? Or is that just an old slide that hasn't quite been updated?

It's not an old slide, it's an updated slide with a new year. But we see possibilities, further possibilities. We bought Abraservice, that turned out, I would say, very well. Even during a difficult year of 2020, we are constantly looking at possibilities within services because the service and aftermarket within Special Steel is also very important. So no, this is not an old slide.

Our next question comes from [ Kevin ] from [indiscernible].

I have a question relating the opportunities you are looking in concerning M&A. Does that include [indiscernible]? Or can you rule that possibility out, given the time frame the management has set itself for a decision?

I mean as I said many times now, we have a clear game plan for SSAB, and we are focusing on the areas where we are focusing and that's my answer to that question. I mean we prioritize fossil-free steelmaking and all the possibilities we see for a company like SSAB.

Our next question comes from [ Patrick ] [indiscernible] from Bank of America.

I just wanted to ask a quick follow-up on Slide 20. On the tax assumption for 2021, I'm just trying to understand your 2019 level that you've used. Is that the absolute level of tax or your kind of tax charge as a percent of profit?

No, we used absolute level of taxes -- of cash tax that we had in 2019. So it's really illustrative purposes. I mean if we have even much stronger result then we might pay more in taxes. If we don't have a stronger result, then we'll pay less. So it's for illustrative purposes, and its absolute level.

Understood. And then I think that's -- [ Justin ] asked the question around working capital. I mean you guys had had 2 years of working capital release. And I understand you said you didn't push it through -- yes, you didn't push through your structural reductions in 2020. I mean more explicitly, should we expect a bold or a release or broadly stable in '21?

No. But as I said, we see possibilities over time to become more efficient when it comes to net operating working capital. And we have set up targets where we would like to be, and we are not there yet. And as I said, we were planning -- a year ago, we were planning to have run a program in that area during 2020. But given the development, we postponed it and we'll hopefully be able to run it during 2021. We see possibilities when it comes to net operating working capital over sales. And we work with continuous improvements, getting better and better every day. It's inventories, it's raw material stock. It's a lot. And we have done a lot over the years, but we are not ready. So over time, you should expect us to become more effective in that area. Then it will differ between quarters and maybe between years, but there is still room for improvements.

Our next question comes from [ Nick ] from [indiscernible].

I have 2 questions about the talks with Tata Steel. I will ask the first one first, and maybe there is time for the second one. The first question is, was the government in any way involved in these talks? And if not, could the government have done anything to make this deal more attractive to you?

No. But we discussed with Tata and we discussed internally and looked at figures and comparing those to our plans. And we were -- so that's what we were doing. And then we formed ourself an opinion and took a decision. It's a simple as that.

So there was no involvement of the governments?

I was not speaking to the government, no.

And maybe there is time for the second one. Do you think that there is a future for Tata Steel IJmuiden? Though it will need -- there are a lot of investment needed to get it ready for the future, you could say it's too dirty right now. Is there any other company out there you think that is in a sensible way would say yes to a takeover of Tata Steel IJmuiden?

I don't know that because that's not my business. But I think Tata Steel IJmuiden is a fantastic site, so very good cost position, very broad product program, probably the best integrated strip facility in Europe.

I will now hand back to the speakers for any other remarks.

Okay. Thank you, and thank you for all the questions. This is -- we can then conclude today's conference. Thank you, gentlemen, and thank you all listeners, and we wish you a nice day.

Thank you very much, everyone.

Thank you. Bye-bye.