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Profitable growth Håkan Folin CFO
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Roadmap toward industry-leading profitability
Pre-2014
Ruukki merger
Synergies and cost savings of SEK >3bn
Rights issue
Extension of debt maturities
SEK 10bn reduction in net debt by year-end 2017
Growth in Special Steels
Growth in automotive and other premium steels
Growth in service and after market activities
Home market leadership
EBITDA margin > industry peers
Net gearing of <30%
Resume dividend payments at 50% of net profit
Developed the high-strength steel market and entered US plate
Consolidated Nordic home
market presence 2014–2016
Focus on cash-flow and strengthening balance sheet
Profitable growth in selected
market areas
Industry- leading
profitability
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Financial targets
* ArcelorMittal, AK Steel, Nucor, Salzgitter, Tata Steel Europe, ThyssenKrupp, US Steel
Profitability
SSAB aims for an industry-leading profitability measured
as EBITDA-margin among comparable peers*
The Group’s operations are cyclical. The objective is a long-term net debt/equity ratio of
30%
Capital Structure
Dividends are adapted to the average earnings level over a
business cycle and, in the long term, constitute ~50% of profit
after tax, taking into consideration the net debt/equity ratio
Dividends
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Profitability
SSAB aims for an industry-leading profitability measured as EBITDA-margin among comparable peers
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Strong trend in profitability improvement
►Significant improvement in earnings: − Synergies from Rautaruukki
− Cost savings
− Better mix
− Improved market conditions
►Breakdown in Oxelösund and margin pressure in SSAB Americas weighed on earnings in Q4 2016 and Q1 2017
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2,500
2012 2013 2014 2015 2016 2017*
*2017 refers to 2017 Q1 rolling 12 month
MSEK Operating profit, EBIT
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EBITDA-margin vs. peer group
Adjusted for major non-recurrring items
2015 2016
PUBLIC
-4.4%
2.0%
4.8%
5.4%
5.5%
6.4%
8.2%
11.1%
US Steel
Tata Steel Europe
AK Steel
ThysenKrupp
Salzgitter
SSAB
ArcelorMittal
Nucor
US Steel 3.3%
4.0%
5.5%
6.3%
7.9%
9.1%
12.1%
12.6%
US Steel
Tata Steel Europe
Salzgitter
ThyssenKrupp
AK Steel
SSAB
ArcelorMittal
Nucor
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2020 - Targets
Grow Special Steels 1.35 MTON
2016 Target
1.35
1.0
Enhance premium mix in SSE
Develop SSAB Services
Wearparts members
Leader North American plate
30%
Market share (over time)
Automotive premium 750 KTON
2016 Target
KTON
1 2 3 4 5
442
750 MTON
Share of Premium products
40%
PUBLIC
2016 Target
265
>500
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Industry-leading profitability
Growth in Special Steels
► Higher margin per tonne
► Higher revenue
► Higher margin per tonne
► Further improvement in revenue and earnings – less volatility
► Higher revenue
► Operating leverage from volume
► Product and channel upgrade lifts margin per tonne
Strategic focus P&L impact
Strengthen home market position – local producer close to customer
Growth in services
Mix improvement
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Mix improvement drives profitability – examples
Q&T
Automotive premium Tubular
Standard hot-rolled coil/plate
CTL/slit
Profitability(index)
100
120
140
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Operational leverage – cost structure
SSAB Special Steels
Variable Fixed
SSAB Europe
Variable Fixed
SSAB Americas
Variable Fixed
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Continuous improvements – cost efficiency
Monthly follow-up of KPIs
Continuous improvement in daily work
Improvement projects
Driven by the employees
Large number of efficiency actions across all divisions
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Capital Structure
The Group’s operations are cyclical
The objective is a long-term net debt/equity ratio of 30%
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0
10
20
30
40
50
60
2012 2013 2014 2015 2016 Q1/2017
0
5
10
15
20
25
30
Net interest bearing debt, SEKm Net gearing ratio, %
Stronger balance sheet
►Reduced net debt and lower gearing: − Lower interest cost
− Ability to invest for growth
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Net debt and gearing ratio % MSEK %
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Net debt reduction according to plan SEK 10 bn. between the end of Q1/16 and the end of 2017
SEK bn
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14
10.0
4.9
7.7
Target Remaining in 2017
2.3
2.8
Realized so far Rights issue (net) Net cash flow Q2/16-Q1/17
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Reduce working capital to sales
Key focus area in 2017 for all divisions
Large number of actions identified and being
implemented
2017
22%
23%
24%
25%
26%
27%
dec jan feb mar apr may jun jul aug sep oct nov dec jan feb mar
2016 2015
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R12 Working capital / R12 Sales
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Investments
► Installed capacity sufficient to reach growth targets for SSAB Special Steels
► Investments kept below depreciation: − SSAB and Ruukki merger
− Major strategic investments in 2010-2012
− Blast furnaces recently relined
►Areas for strategic capex 2017 and going forward: − Automotive premium
− Service expansion
0
500
1,000
1,500
2,000
2,500
3,000
2014 2015 2016 2017 andonwards
Strategic
Maintenance
MSEK
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Investments
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Cash flow trend
-0.7
2.2
3.9
1.1
0.5
2.8
2.3
3.1
2010 2011 2012 2013 2014 2015 2016 2017*
Refers to cash flow from current operations in SEK bn.
*2017 refers to 2017 Q1 rolling 12 month
►Strong potential to improve profitability
► Well-invested
►Reduction of working capital/sales
►Lower interest cost
►Tax rate ~20%
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Cash flow from current operations
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Dividends
►Dividends are adapted to the average earnings level over a business cycle and, in the long term, constitute ~50% of profit after tax, taking into consideration the net debt/equity ratio.
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Dividend
-3.00
-2.50
-2.00
-1.50
-1.00
-0.50
0.00
0.50
1.00
1.50
2012 2013 2014 2015 2016
Earnings per share Dividend per share
SEK
Target to resume dividend
Weak market conditions
Rights issue
Focus on net debt reduction
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Earnings and dividend per share
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Summary
►Top-line growth driven by high-strength steels
►Home market leadership, growth and mix improvement will support Group profitability
►Well-invested to achieve targets
►Several initiatives to improve operational performance
►Reduction of net debt according to plan
►Towards industry-leading profitability
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