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

Good morning, and welcome to the SSAB Q1 Presentation. I am Per Hillstrom, I'm responsible for Investor Relations at SSAB. And presenting today, we have Martin Lindqvist, President and CEO; and Leena Craelius, CFO. And if we have a look at the agenda, Martin will start here with an overview of the quarter and then Leena will go into the financial details and then Martin, at the end, with outlook and summary, and there will be good times also for questions. So by that, please, Martin.

Thank you, Per, and once again, good morning, and welcome to this Q1 presentation of 2023. Some highlights. We saw continued good result in Special Steels and Americas and I will come back to that. We also saw a recovery on the European market, where we had a weak second half, and I would say also apparent, demand-wise, weak fourth quarter. And we used that recovery, we were quick to adopt and adjusted production, started up the blast furnaces -- blast furnace we had down for maintenance -- planned maintenance in Raahe, and that was successfully started up in Q1, so we could take advantage of that recovery. During the quarter, we saw, in all divisions, I would say, high and stable production. And if you compare the production volumes, we were in Q4 impacted by planned maintenance. We continue to improve our safety performance. As you know, one of our targets -- important target is to become the safest steel company in the world. We are not there yet. But when we measure lost time injury frequency per million working hours, including contractors, we are down at 0.92, which is an improvement compared to last year. And we continue to strengthen our balance sheet. Typically, we don't generate so much net cash flow in Q1 because we build some working capital, but we had a net cash flow of almost SEK 2.2 billion in the quarter. And then one have to remember that we, yesterday, paid out a dividend of approximately SEK 9 billion. So -- but the balance sheet continues to be in a decent shape. If we move into the divisions and start with Special Steels, as said, earnings on good level. Underlying demand continues to be strong. And as we said on the Capital Markets Day, we have been improving volumes and taking market shares. We have had a volume increase the last 10 years of approximately 6% per year, and that will continue. It can differ a bit between quarters, but Q1 quite okay. And remember that Q4 was impacted by the yearly maintenance. And we also saw shipments recovery compared to Q4. And all in all, we made an EBIT margin of almost 25% in Special Steels. If we move into Americas, earnings continues on very good levels. We saw spot prices starting to move down a bit in Q4, and we saw, on the market, price recovery during Q1 and prices moving up slightly, still on high levels into Q2. We had generally stable and good demand -- strong demand, and we had maintenance in end of Q3 and Q4, beginning of Q4 in Americas. But we had good shipments 476,000 tonnes in the quarter, which is in line with the second quarter last year. Europe, as I said, we saw a weaker market versus 1 year ago, but sequentially a stronger market, a stronger apparent demand in Q1 compared to Q4. And we saw lower apparent demand, especially during the last part of Q4, and we saw some restocking also in the supply chain in the beginning of Q1. We had strong and stable production and Raahe had actually production record for a month in March. So that was good. And we increased shipments with 17% compared to Q4 last year. We also saw that the spot prices turned around new year and started to move up, and we are guiding for slightly higher prices into Q2. Tibnor also recovery versus Q4 and I would say, stable underlying demand with the exception of the construction market, which is still very weak. And the big difference in profitability compared to Q4 is that we had higher negative revaluations in Q4 than in Q1, but we also saw a recovery in profitability. And Ruukki Construction, weak market as expected in Q1, and we saw a more pronounced downturn versus Q4 than we normally see, but that's due to the weaker-than-normal construction market. We made a zero result, minus SEK 9 million, and we saw -- started to see the positive effects from the cost saving programs we are running in Ruukki Construction, and that will be more visible in the coming quarters. On our Capital Markets Day and during the beginning of Q2 or end of Q1, we launched a new product family. We call it SSAB Zero. It is a steel produced with zero emissions in operations, so Scope 1 and Scope 2, that is third-party verified. We use -- we base that on recycled steel or recycled scrap, using fossil-free electricity, biocarbon and biogas. And we have that material now available on the market and are aiming for 40,000 tonnes this year. We have orders from leading companies like Volvo Group, Epiroc and Peab and more will soon come. So it has been received very well on the market. And this is the first step, I would say, on our step-wise transformation to a fossil-free production system where we have the Zero Steel available on the market right now. The next big step will be Oxelosund, the conversion of Oxelosund. It is going to be ready 2026, we will take the formal decision, the RFE, during the first half of this year. And when we do that transformation in Oxelosund, replacing the current blast furnaces and coke oven battery with an electric arc furnace, we will be able to take away 1.5 million tonnes of our own carbon dioxide emissions. And Oxelosund will be using either HYBRIT sponge iron or scrap or a combination of that. The next big step -- the step is planned to be 2028 when we will have the first mini mill up and running either in Lulea or Raahe, and at the same time, at that site, close the current coal-based system. In order to have that up and running 2028, we need to take a formal decision during 2024. And the first mini mill will reduce our own carbon dioxide emissions with roughly 4 million tonnes per year. And then 2030, we have -- we are planning to have the second mini mill up and running. And in order to do that, we need to take the formal decision during 2026. And that will take away another 4 million tonnes of carbon dioxide emissions from SSAB per year. So -- and that is the stepwise plan we have discussed and talked about. And this is just a reminder. So with that...

Thank you, Martin. And then we will take a deep dive into the financials. So please, Leena, start your presentation.

Thank you, Per. Familiar slides, and let me start with the shipments. Q1, as already Martin also showed in previous slides, was a good quarter with shipment volumes increasing in all the divisions. Outcome, 1,737 kilotonnes increase compared to Q4, 235 kilotonnes, which is 15% higher shipment volume compared to Q4. If we compare to Q1, increase was not as big. It was around 70 kilotonnes and 4% higher during this year. And then if we look at the revenue development, we can see that from Q4 to Q1, revenue did not increase as much as it did with shipments, which is then indicating that the average prices were lower during Q1 compared to Q4. Also, when we are reflecting the revenue development from Q1 last year to this year, we can see that it's not increasing as much as it is with the shipment volumes, indicating also that the average price was lower this year compared to last year. Then the EBITDA graphs on the bottom of the graph -- of the slide, illustrating that, yes, EBIT improved during Q1 compared to Q4, and this is not driven by the increasing prices, but it is actually related to the higher activity level that also Martin mentioned. Let's dive into more details with the EBIT bridges. Let's start with the comparison to last year, Q4. EBIT level of 3.8% this year, improving to the level of 4.7%. As you can see also in this graph, the prices were lower. It was lower in all the steel divisions compared to Q4. Volumes, 15% higher, contributing SEK 1 billion positive to the EBIT. And the variable cost here, it is actually mainly related to inventory valuation and capitalized fixed cost. Raw material, all in all, was relatively flat compared to these quarters. In U.S., scrap prices were going actually up from Q4 level. PCI was also increasing, iron ore on stable level and as well as coking coal. Fixed cost lower during Q1. Q4, we were having higher portion of repair and maintenance cost. We had the blast furnace repair and also annual maintenance in Oxelosund taking place Q4. And as already mentioned, the activity level was higher during Q1 compared to Q4 and the positive impact of this capacity utilization almost SEK 700 million. And if we then compare Q1 result to last year, we can see that the prices are lower than last year in all the divisions. And variable cost, we can see that this is significantly higher compared to last year. During Q1 last year, we were not impacted with the peaking raw material prices. The peak took place during Q2 and Q3 last year. So comparison thus is having a significant difference with the variable cost base. Fixed cost being SEK 750 million higher, and this is now half related to personnel-related costs and then half related to the materials and services being on a higher level. We have recruited more people to transformation operations, and we have also acquired entities by Tibnor and Ruukki Construction during last year. So those are the drivers behind the higher FTE. And of course, we have higher costs also related now to the transformation projects that we have ongoing. And the capacity utilization, less positive impact in this comparison. But last year, we were having challenges in Raahe with blast furnace and also furnace in Montpelier. If we then continue to cash flow, already Martin showed in the slides, we had a solid performance during Q1 with the cash flow. Lower EBITDA compared to last year. This is now in comparison to the last year Q1 performance, but also less impact with the working capital. As I said, during Q1, we are paying out big raw material invoices. We are doing winter stocking during Q4 and those invoices we are paying out during Q1. So that is the main driver behind this. Related to other, SEK 480 million, that is due to these CO2 emission allowances that we were purchasing during Q1. Last year, we were actually swapping forwards with the positive impact. Financial items, SEK 104 million positive. That is related to high level of cash and higher interest compared to last year. And then the acquisition of shares and operation during Q1, that is related to Ruukki Construction buying 70% of the shares of Designtak in Sweden. All these is making our financial position even stronger compared to Q4. Last year, we were at the year-end on a level of SEK 14.3 billion. At the end of Q1, we are on the level of SEK 15.6 billion. We launched new financial targets and the net debt to equity ratio at the end of Q1 is slightly exceeding the given new target, which was plus/minus 20%. But as I said, after payout of dividend, around SEK 9 billion, this ratio will actually be on a level of SEK 11 billion. Raw material view, already discussed briefly. Iron ore has been fluctuating during '22. But when we compare Q1 to last year level, it was on a fairly similar level and no big deviation compared to Q4. Coking coal, on the other hand, we can see here the significant increase during '22, and we are still consuming these rather high-cost coking coals from our inventory. And to remind that, yes, we still have the PCI inventory with high prices. And we continue to consume that as well during this year. If we summarize the average raw material cost of Nordic mills, we were fairly stable quarter-on-quarter, and we don't see a big increase either during Q2. U.S. scrap prices, in the bridge, we already mentioned that the scrap cost was lower than last year during this first quarter of this year. But then when we compare to Q4, it was slightly higher. Prices increased during Q1, but then again, they started to level out at the end of the first quarter. Cash need of the business, we have revised this graph and figures here, but we didn't see a need to update this figure. We are still having the plan to have the CapEx need, maintenance and strategic investments on a level of SEK 5 billion, Oxelosund conversion being the biggest strategic project ongoing. And together with taxes, we estimate that it is still on the same level as previously illustrated on a level of SEK 10 billion, SEK 11 billion for this year. So no changes to this plan. Maintenance cost, and this table is illustrating the big annual planned maintenances. As you can see and already said today, the Q1, we didn't have any big annual maintenances ongoing, nor will we have during Q2. What we have done, we have actually updated Q3 plans slightly. We have pushed forward some of the annual maintenance plans from Q3 to Q4 in Special Steel division and Americas. But on the total annual level, we are having exactly the same cost as we had previously. So this is merely a timing difference.

Okay. Thank you, Leena. And now we will listen to Martin again with the outlook and also closing with the summary. Please, Martin.

Thank you, Per. So if we take a look at the segments and illustrated here with the usual segments, I would say that Heavy Transport continues to be strong. We see good demand for heavy trucks in Europe. We see stable demand on a high level from railcars in the U.S., so definitely green. Automotive, Construction Machinery and Material Handling, more stable or neutral with stable demand for the coming quarter. Energy, good demand, especially from wind power and other renewables and especially in North America. And then, of course, the weakest segment, Construction where we see the European market and especially the Nordic market being impacted by inflation, higher interest rates, et cetera. And we will see some seasonal improvement in Q2 versus Q1, which we typically see when the winter season ends, but on a much lower level than we usually see on this market. And then Service Centers, I would say, neutral. We saw restocking in Europe in the beginning of Q1 and inventories are, in Europe, on a fairly low normal level. On the other hand, we continue to see low inventory levels among steel service centers in the U.S. So all in all, neutral or fairly stable. If we then look at our guidance, we expect the European demand to be stable in Q2. The heavy plate market in North America is expected to continue on a good level, high-strength steels, good in several markets, several segments. We see an uncertainty regarding the second half of the year against a background of higher interest rates and high inflation. But when we guide for Q2 sequentially over Q1, we expect somewhat higher shipments from Special Steels and Europe and stable shipments from Americas. When we look at prices, we see stable prices in Special Steels, higher prices in Europe and somewhat higher prices in SSAB Americas. So to sum it up, strong quarter. I'm particularly happy with the successful ramp-up of production after the previous quarter and the maintenance outage we had with one of the blast furnaces. We continue to see a good trend in safety. We are not where we would like to be yet, but we are slowly and steadily getting there. We continue to generate good cash flow, given the seasonality we typically have in the cash flow generation with a slightly weaker Q1 than in the coming quarter. We closed the quarter with a strong financial position, and we see a decent outlook for Q2, and we continue to lead the green transition. And one point or proof for that is, of course, the launch of SSAB Zero that is based on recycled steel and no Scope 1 or 2 fossil carbon emissions. So with that, Per?

Thank you, Martin. And then we will prepare now for the question and answers. Before we start, I'd just like to remind you that if you have more than one question, please state them one at a time. It will make the process much easier. So by that, I will ask the operator, please, to present the instructions for the Q&A session. So please, operator.

[Operator Instructions] The first question is from Gresser Tristan with BNP Paribas.

I have 2. The first one is on special steel. Back in Q4, you flagged some potential softening and now you had really strong results in Q1 and guide for ASP resilience. So trying to understand a little bit what has changed over recent months. And looking ahead, how much visibility do you have, meaning, can current pricing levels that look pretty much elevated can be defended further out during the year based on your current assessment of future supply and demand? That's my first question.

I mean, of course, the growth in Special Steels differs a bit between quarters. But what we see and what we have seen is a strong underlying demand. And as said, we have been growing the volumes with 6%, 7% per annum in average the last 10 years, and we expect that to continue. And as we, also during the Capital Markets Day, we launched new growth targets for those type of products. So underlying demand is strong and we expect it over time to continue to be strong, and then it can vary between different quarters and, of course, between different years. Prices, well, you should expect them to be or call it, margins to, over time, be more stable than for standard products. So I mean this is the core of SSABs strategy to continue to grow within Special Steels and especially for abrasive-resistant steel within Q&T and specialty products.

All right. That's helpful. And maybe my second question then on capital allocation. Back in Q4, you announced your intention to do a buyback program. You got the AGM approval but you didn't announce a program today. So why is that, given you have very strong balance sheet even after the dividend payment? Has anything changed? Or are you still looking to announce a program coming out for the year?

No, nothing has changed. As you said, I mean, we got the mandate from AGM. I think it was 1.5 week ago or a week ago, we paid out the dividend yesterday. So let's come back to that topic. But now we have the mandate that we asked for, and then we'll come back. So nothing has changed, no.

The next question is from Mr. Gabriel Alain with Morgan Stanley.

So Martin, you have laid out clear budgets to build out the mini mills and invest in HYBRIT, which are must-haves to produce your green steel. Are there any nice-to-have investments that you think will help you or help give you some competitive edge with respect to raw materials? Are there any [ materials ] that you think in investing in DRI or any scrap collection companies?

No. But -- I mean, as said, we are -- we have a step-wise strategic plan or a directional decision to do this. And I -- as I described during my presentation -- part of the presentation, we have the upcoming decision now for the conversion of Oxelosund. I'm very pleased with the development in HYBRIT and, as we have discussed before, the patents that are filed and the R&D work that has been going on. And we have learned a lot and have very good ideas that we are now patenting. So that's very promising for the future. I'm also very happy and proud about SSAB Zero, the possibility to be first on the market with steel produced without any Scope 1 and 2 emissions. And I'm also very pleased with the big interest from the market and also that we have established now a premium for these kind of products. So we continue with our plans and are moving on. But as also described quite in detail during the Capital Markets Day, we are very confident when it comes to our own ability and the cooperation within HYBRIT. But there are, of course, some external factors that needs to be in place. We are still struggling with power supply and effect distribution in Lulea as one example. We are not -- we don't know exactly when we will get electricity in Oxelosund. So it is ongoing work. And then how -- what we will need to do in investments for the future, of course, we should not do nice-to-have investments we should do must-have investments. And we will have a completely new and state-of-the-art production system in the Nordic mills after the conversion, and then we'll take it from there.

And as an extension of this question, are you not worried that you're falling behind on scrap collection or security basically because many of your competitors are already buying scrap collection companies, but you have not? Is that an important aspect or an important part of your green transition that you might have overlooked or are you comfortable with your security there?

We will use -- we plan to use a combination of scrap and fossil-free sponge iron. What is important for us is to go after scrap at the source. So first of all, we have a lot of internal scrap that we will use, and then we will use return flow from customers, and that will be virgin scrap, so to say, so off-cuts and so on. So as part of the strategic partnerships we are forming now with a number of -- increasing number of customers, that is a vital part of getting scrap at the source back to the mills. So that's our solution on that problem. Having said that, we are also -- in a small scale, we bought a company in Finland in Q4 that is working with scrap collections. We are testing out that market as well. But the main source will be to get scrap at the source back to the mills.

The next question is from O'Kane Dominic with JPMorgan.

I think your guidance for Q2 is very clear, higher shipments, higher or stable prices, lower raw material prices. So it's reasonable to assume we get some margin expansion. So I'm just trying to sort of look ahead to Q3, and I understand the guidance is slightly uncertain. But I assume your order books are open or opening for Q3. So is it reasonable to assume that we should be expecting at least stable margins as we look forward to Q3?

First of all, I think we said stable raw material into -- relatively stable. As you know, and we have discussed this many, many quarters, the visibility we have is the coming quarter. We have the order book, we have the order intake, we haven't opened up for Q3 yet. It's still early in the quarter. So the visibility for the second half is very, very limited, as always. And as we say in the report, we don't know, but we can see what is happening around us with high inflation, high interest rates. And that's why we say we are, would you call it, cautiously optimistic for the second half, but very limited visibility.

The next question is from Synagowitz Bastian with Deutsche Bank.

So my first question is also on the demand side in your order book. So I was wondering whether you could maybe give us a bit of color on your order book lengths in the Americas and then also in Europe. And then I'm wondering also whether there has been any change in the dynamics in some of your key end markets over the last couple of weeks. That is my first question.

No. No real changes the last couple of weeks. I mean, what we -- as we said during the presentation, what is weak and what we expect to continue to be weak is the construction market for pretty obvious reasons. Apart from that, I would say, stable underlying demand is what we see into Q2. And then we have these swings in apparent demand, which we saw in Q4, and we typically see in Q4 and then some restocking and better apparent demand into Q1. Then we have seen reports from some OEMs within especially Heavy Transport being fairly positive for this year as well. So I would say overall stable demand into Q2.

And then I think you talked about some cost savings, which you are working on in Ruukki Construction. Is there any way you could quantify this for us, please?

No, not really. I mean, Ruukki Construction is a fairly small division, but we are taking measures now in structural cost improvements, given the market situation. So -- and that is what we typically do. We do this -- we use time banks, we use short-term layoffs, but we also work with structural efficiency measures, and that's what we are doing. We saw some of it in Q2 -- early Q1, we will see more of it in Q2, but that is already implemented and ongoing.

Okay. Okay. Great. Then my last question is also coming back to the energy transition. So I guess we've seen some of your peers signing some agreements for power supply. And I guess to be leading the energy transition, you will also need to put in place, I guess, the hydrogen infrastructure pretty soon, whether you're going to do that or whether that's going to be done within HYBRIT. I guess you talked about some of the challenges on the electricity side. So what is the situation now in Oxelosund? And by when do you expect to have like a firm, I think, infrastructure agreement in place for the hydrogen site, which you obviously need to really convert Oxelosund as you're planning to?

The remaining question mark in Oxelosund is actually power transmission. We have the effect allocation, we have the environmental permit, we have gotten -- excuse me, for taking this in Swedish, but we have gotten the decision from Energimarknadsinspektionen, the authority responsible for this. That is appealed to the lower court, Mark- och miljooverdomstolen, they are working with it and will come with a decision this year or this fall, hopefully. And that decision can then be appealed to a higher court, Mark- och miljooverdomstolen, and then they need to decide if they take it up or if they just push it back and say that the decision in Mark- och miljooverdomstolen stays as it is. So we don't know when. We know that we will, with high certainty, get the power transmission or the cable -- the power line, but we don't know exactly when. But we still stick to the target of having the electric arc furnace up and running 2026, with the knowledge we have today.

And so just to be 100% clear, so the power transmission constraint at the moment, that is basically for the electric arc furnace, correct? So this is what you're referring to. Yes. And then how does it look like on -- I guess, on your feed for green hydrogen for the DRI plant? Is there any bottleneck as well? Or is that basically all pretty much cleared already?

No. That process is also ongoing, started in the HYBRIT development company for the first plant called demonstration plant up in Gallivare. So that work is also ongoing. It takes a bit of time in Sweden. That's the process we have chosen to have for some strange reasons, but it takes some time in Sweden, and we are in that process and in line with the plans we have or the plans are adopted to that process.

And what is the time frame until when you would have to have approval to really make your time line? Is there like a time frame by when you obviously just need to get this in place to be able to work on the rest of the infrastructure, do the construction work, et cetera?

No. But what we have said from HYBRIT is that we will have that plant up and running during 2026, and that plan still stays.

Okay. Okay. So basically probably you would still have time until like probably 2024, if needed, to probably still do and finish all of the construction work on time, I suppose.

The next question is from Brauneiser Rochus with Kepler.

Rochus Brauneiser from Kepler. Martin, just 2 questions. The one is on your guidance. I think your preference to the market environment demand has been improving when it comes to some restocking activity, season is on your side in Q2, prices are recovering. So in that sense, you could argue that the guidance for the second quarter still contains quite a bit of cautiousness when it comes to the potential earnings improvement. Maybe you can share a bit more color? Maybe I'm misreading that, but maybe you can share a bit of color, what would be the main obstacles you see for improving -- for any improvement in earnings? That's the first question. And the second question is on your outlook remarks where you talked about the uncertainty for the second half. Is there anything beyond the kind of high-level factors you mentioned, interest rates, et cetera, which points you to some cautiousness? Are you getting any signals from specific industries, except construction, which we know that there is a bit more discomfort or any worry that demand activity might slow down in the second half? That's it from my side.

You confused me there for a short time, taking 2 questions at the same time, but I will try to answer them. Q2, we are not guiding for result. We are guiding for volumes and prices and what we see in the order book and in the order intake, and then we'll let you draw the conclusions from that. And I think the guidance we give is what we see in the order intake and in the order book and where we are very confident as we usually are when it comes to the coming quarter. The second half is, as said, the visibility is very low. Why are we then saying like we say, because, I mean, you never know. And I think it's better to be a bit more cautious. And hope for the best, of course, but plan for not the worst, but plan for something that is not as good. What we know or think we know -- we don't know, but what we think we know is that the construction industry will not bump back during the second half. Then I mean it's always hard to predict, especially Q3, because we have the vacation period in the Nordics in July and then we have the vacation period in rest of Europe in August, and I've been in this industry now for 25 years, and know that it's always hard to predict, and then you better be a bit cautious. So I mean no alarming signals from any segments or anything like that, just being cautious and be prepared because we have seen now 2 years in a row with strong performance on the market, strong earnings. We continue to see that. So nothing more than that.

Okay. I think that's clear. On the first part of my question, I know that you don't guide earnings here, right? But when you're saying raw mats are flat to maybe a bit down here and there and prices are stable to slightly up, then it points to rather some margin expansion than contraction and volumes are also seen slightly up. So this points to some improvement. And when you look at the spot prices in the market, they are not doing badly. We have seen a significant rebound in the prices. So is there anything I'm missing in terms of cautious pricing wording because the price recovery actually was not marginal? It is priced substantially when I look at the [ December ] loss. Maybe anything you can add?

But I mean, first of all, we have a combination of quarterly contracts, annual contracts and semiannual contracts. And we will see the price increases in the quarterly contracts. Then we are not, I mean, [ 200% ] selling on -- I mean, the correlation between our prices for standard products and spot prices are quite high, but it's not one. So we have a different pricing structure to many aspects. And then, of course, the niche products and especially the special steel products, they are priced in a different way, so they don't follow spot prices. They are typically or at least the margins are typically much more stable over time. So I mean we are guiding for what we are seeing in the order book and in the order intake. And then we see that spot prices started to move up in Europe, we're increasing quarterly -- prices in quarterly contracts in SSAB Europe. In Americas, the price drop stopped during Q1. We have introduced 2 price increases and the market has followed. So that's why we're also guiding for -- on the quarterly contracts or the open contracts, higher prices in Q2. And then for Special Steels, they have a different pricing model that we guide for stable prices. And that's what we guide for, and that's what we see in our order book.

The next question is from Jones Andrew with UBS.

Just one on your general track record. I mean, you seem to beat consensus in most quarters we go into now. Just from a big picture perspective, I'm wondering what you think that analysts are missing when we come into your results? Because also over the last couple of years, it has been a very, very consistent trend of not just small beats of consensus, quite often, you've absolutely smashed the earnings forecast. So I'm wondering, structurally, what may have changed in SSAB, I mean, compared to, say, the sort of lean years of 2019 and '20, aside from obviously the uplifted market prices that we cannot model? What sort of magnitude of structural EBITDA gains do you think that SSAB has made over the last several years, whether it be in cost efficiencies or improved premiums on products or whatever it is? And if we look at medium-term consensus, which is around sort of SEK 11 billion, I wonder how you think about that, how fair is that? Do you think that's fair? Or do you think that you are too conservative? And if so, in potentially in what areas?

First of all, we are not always beating consensus. I think we missed consensus a bit in Q4, if I don't remember wrong. Then secondly, there are, every quarter, some analysts that are more or less smack-on where we come up. So consensus is, of course, in some ways, maybe a bit of a strange figure. But coming back to the other part of your question, I think we are -- what we are focusing on is to -- we call it, put the company in order. And I tried to explain a bit about it, maybe not in a very pedagogic way, during the Capital Markets Day, what we are aiming for. So we're mainly aiming for 4 areas of structural improvements. I would say the most important part is the product mix and moving as much of volumes from standard products into premium products or special products. And I showed the difference in the margins, but also the difference in volatility. So every kilo we can move from black coils outside Scandinavia, as one example, into something else, improves a lot. Then secondly, we run this SSAB One program, the continuous improvements, where we have the target of having an improvement of SEK 1 billion per year, and a big part of that are structural efficiency measures like yield improvements, like cost efficiency, like changing sequence length and so on. So we are gradually independent on market situation, trying to work with structural improvements that will give us a much better resilience in the downturn because, I mean, on the peak of the cycle, whenever that is, everyone is making a lot of money, and we are not valued on those performance levels. But if we can lift the bottom of the cycle, the profitability, that is worth much, much more, and we call that, internally, lifting low point profits or increasing stability. So that's what we are working within 4 areas. And as I showed on the Capital Markets Day, and this is my opinion, and I've done calculation on it, we have structurally, since 2015, lifted the profitability structurally with a bit more than SEK 5 billion per year, and that work is far from over, and that's what we are going to continue to focus on with the most -- one of the most important or the most important part being the mix shift. And that's why I keep on coming back to the volume growth in special steel that is so important. So that's -- and we have worked the same way with the balance sheet. So we have said that let's try to do our utmost regardless of business cycle to put the company in a good situation. And for me, this is relative game. So we should, of course, be beating competition on the top of the cycle, but even more importantly on the bottom of the cycle. So that's the focus we run internally.

That just makes a lot of sense. And then just one more on HYBRIT. I'm wondering what the -- what you see as the sort of potential hold-up to getting that project moving forward. We sort of haven't really heard a huge amounts about it, it wasn't a big focus in the Capital Markets Day. I mean what's the time line for HYBRIT to actually get into production? And what are we likely to see in terms of news flow over the next year on that project?

No. But as I said, we expect to take the decision now during the first half of '23, with the conversion in Oxelosund. We have, as we said on the Capital Markets Day, we have done quite a lot of investments so far. But the formal last big decision is the electric arc furnace, and that will be hopefully taken or will be taken out during the first half of the year. Then we continue to work hard and very focused and, to be honest, sometimes struggle a bit with electricity, power supply and also effect allocation, especially in Lulea. We are -- it's moving a bit faster in Finland in Oxelosund. As we have discussed, we are not in a wait-and-see mode, but this is being processed now by the lower court, Mark- och miljooverdomstolen, and we expect some decision here within the coming 6 months, which is in line with the time plan. So still a lot of -- not a lot, but a few unknowns that we are working very hard with and together with the political system, together with the authorities, we do that both in Northern Sweden and in Northern Finland. And if anything, it moves a bit quicker in Northern Finland than it does in Northern Sweden.

I was thinking more specifically about the pilot project, about maybe 1.3 million tonne HYBRIT plant. I mean when are we expecting to see that start to move forward in terms of the actual construction phase?

That will be in due time before 2026 because then it will be up and running. Then we are 3 companies within the HYBRIT, and we have our own, I mean, decision-making processes, but you should expect that to follow the plan and some news coming out later this year.

The next question is from Kogge Maxime with ODDO.

So the first question is on actually the tight supply in Europe right now, given that 2 of the largest producers in Europe are meeting difficulties, I mean, because of planned and unplanned outages on the units to produce. And I was wondering if you would benefit from that in Q2 and perhaps in Q3, given that it's expected to last well into summer or if that was not really of that much help, given your focus on the Nordic region and on some categories of steel that are not necessarily the ones that are affected by these outages. So that's my first question.

But I mean, to give you a general comment on the European market, we have seen some changes. I mean there is -- I mean, first of all, we have seen capacity being taken away. We have also seen -- due to the invasion of Ukraine, we have seen Russian material being away from the market. We have seen effects of Azovstal being away or destroyed by the Russians. We also see now that the marginal cost for European steel producer when they need to buy emission rights is up to EUR200 per tonne. So we don't see this hunt for volumes that we would have maybe seen 5, 6, 7, 8 years ago due to that. So -- and then we see some of our colleagues having short-term, at least some difficulties. And of course, that affects the European market. And that's, I guess, why we have seen a part of your explanation why we have seen also increasing spot prices on the European market, and we see, so far, fairly limited import into Europe as well.

Okay. And the second question is on energy cost. It seems that in Q1, your energy cost, I mean natural gas and electricity, were already a lot lower than in Q4. And is now Q1 a good -- I mean, Q1 now a normalized quarter in that respect? Or should we expect energy -- lower energy prices to have further positive impact in Q2?

What we have seen the gas prices, they have stabilized. So they had a tremendous peak during '22. So they have stabilized, that we can see also in our figures. And I would say the similar development also with the electricity prices. I don't have a good outlook going forward, but we have seen that it has come down.

So there are -- there's further upside, but limited perhaps into Q2.

What do you mean, Maxime, if they -- if we expect lower energy prices in Q2?

I mean spot prices were lower in Q1 versus Q4, I mean, spot market prices, but that didn't really totally -- I mean that didn't totally affect your results at this stage. So I wondered if there was more to come on that front in the following quarters.

No, we don't see it -- at the moment, we don't see a big increase in energy prices for second quarter either.

[Operator Instructions] The next question is a follow-up from Gresser Tristan with BNP Paribas.

Just 2 quick ones. One on the carbon credits you bought in Q1. Can you tell us how much of the [ SEK 480 ] million that was? Can you give us maybe an update of your situation for the year and if we should expect further buying activity for the coming quarters? And the second one is a quick one on working capital moving into Q2. You have higher prices, higher volumes. Is it fair to assume another, let's say, meaningful investment in working capital?

So shall I take the emission allowance purchase? That's all related to the CO2 emissions. As you know, we have this hedging policy. We are, on regular basis, buying CO2 emission allowances for future need. And last year, we had lower production than planned. So we were pushing forward some of these forward contracts. So now we are buying them back. So it's merely related to that. Last year positive, and now we are compensating that push forward. So that was all related to that.

And then working capital, I mean, when volumes and prices are moving up slightly, you should, of course, expect us to have higher accounts receivables. I think finished goods are in pretty decent shape. You shouldn't expect any big movements. We still have -- on the coal side and especially for PCI, we still have high inventories that we need to sweat out during the rest of the year. So I wouldn't say that I foresee any abnormal movements compared to previous -- what we have seen previously in the balance sheet when it comes to working capital.

The next question is from [ Alex Peter ] with [ SM ].

[Foreign Language] I can take it in English. How much [ is the size ] in Oxelosund?

No, do you want me to answer in Swedish or English?

[Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

Yes. Operator, do we have any further questions?

[Operator Instructions] Gentlemen, there are no more questions registered from the conference call at this time.

Okay. Thank you. Thank you for all the good questions, and thank you, Martin and Leena. And this concludes today's conference, and we wish you a pleasant day.

Thank you.

Thank you.