Results for 2008
The quarter (Unless otherwise stated, the report relates to the continuing operations, i.e. excluding the tubular business) *) • Sales increased by 7% to SEK 13,063 (12,204) million, of which SSAB North America accounted for SEK 4,483 (3,597) million • Operating profit was SEK 979 (2,574) million, of which SSAB North America contributed SEK 789 (840) million. Excluding non-recurring items, the operating profit was SEK 1,477 (2,526) million • Profit after financial items was SEK 841 (2,093) million and, excluding non-recurring items, SEK 1,339 (2,296) million • Profit after tax was SEK 833 (1,512) million, entailing earnings per share of SEK 2.66 (4.60) • The cash flow from current operations for the entire operations amounted to SEK 1,366 (1,344) million • Due to changes in the SEK/USD exhange rate, the net debt/equity ratio during the quarter increased to 48% The full year (Unless otherwise stated, the report relates to the continuing operations, i.e. excluding the tubular business) *) • Sales increased by 34% to SEK 54,329 (40,441) million, of which SSAB North America accounted for SEK 16,745 (6,107) million • Operating profit was SEK 9,516 (7,923) million, of which SSAB North America contributed SEK 2,951 (1,383) million. Excluding non-recurring items, the operating profit was SEK 9,900 (8,396) million • Profit after financial items was SEK 8,953 (6,964) million and, excluding non-recurring items, SEK 9,191 (7,949) million • Profit after tax was SEK 6,508 (5,035) million, an increase of 29%, entailing earnings per share of SEK 19.90 (16.63) • The cash flow from current operations for the entire operations amounted to SEK 5,387 (3,574) million, an improvement of 51% • The return on capital employed for the most recent twelve-month period was 17 (18)% and the return on equity was 22 (22)% • A dividend is proposed of SEK 4.00 (5.00) per share, equal to SEK 1,296 (1,620) million. *) The discontinued operations have been removed from the income statements and are reported solely as Profit after tax for discontinued operations. The balance sheet includes the discontinued operations until the divestment on June 12, 2008. The results for the discontinued operations have been affected by interest expenses corresponding to the net purchase price received in conjunction with the sale. SSAB North America is included in the Group commencing July 18, 2007.
The fourth quarter of 2008 was significantly weaker than the same quarter of last year. SSAB's operating profit excluding non-recurring items fell by 42% compared with the same period of last year, to SEK 1,477 million. Demand fell sharply within all customer segments and in all geographic markets. As a consequence, in December we decided on a savings program with the aim of achieving annual savings of SEK 1 billion, with full effect commencing 2010.
Notwithstanding the weak market trend in the United States, our North American division was the only division which approached last year's profit during the quarter. This was possible thanks to the sharp fall in scrap metal prices, a flexible cost base and a stronger USD.
Profit for the full year of 2008 was very strong, the highest ever in the Company's history, with an operating profit of SEK 9,516 million. We increased the share of niche products to 33% of our deliveries.
Due to the sharp slowdown in demand for steel as a consequence of the financial crisis, the prospects for the first quarter of 2009 are extremely weak. Prices are falling and production volumes are expected to be low. During January, the degree of utilization of our production lines was significantly below normal and no clear signs of recovery from this level can be discerned at present. The demand situation that we are now witnessing is partly due to the liquidation of abnormally large inventories throughout the entire production chain out to end customers, and this liquidation must be completed before demand for steel increases again. In the current market conditions, SSAB will demonstrate a slightly negative result for the first quarter of 2009.
Project planning is continuing with respect to SSAB's ongoing investment program of SEK 5.3 billion, at the same time as firm orders regarding parts of the program have been put on hold. The target of completing the investment program by 2012 remains in place.
In response to the new market conditions, a number of measures have been taken, such as the ongoing cost savings program, an increased focus on cash flow, and efforts to increase sales. These measures, together with SSAB's niche strategy and the close cooperation with our customers, make the Company well positioned to handle the difficult market situation and we are well prepared for the day when market conditions improve. For example, it should be mentioned that the number of development programs carried out with our customers in order to increase the use of high-strength steels has reached a record level.
In the slightly longer term, my assessment is that the steel market will develop positively as soon as activities to develop infrastructure, housing and transport once again pick up steam throughout the world. Demand for our niche products will continue to benefit from increased demands resulting from environmental awareness and energy efficiency.
Olof Faxander, President and CEO