Half Year Report 1998

8/14/1998 12:06 PM EST

Sales increased by 9%, primarily as a result of increased prices.
Profit after financial items increased by SEK 188 million to SEK 1,266 (1,078)
million.
15.9 million shares were redeemed, for a total of SEK 3,305 million, during
the second quarter.

Consolidated profit and loss account (unaudited)

1997 1998 1997 July 97-
SEK millions Jan-June Jan-June Full Year June 98
Sales 8,965 9,743 17,474 18,252
Cost of goods sold -7,244 -7,743 -14,264 -14,763
Gross profit 1,721 2,000 3,210 3,489
Selling and administrative -823 -867 -1,663 -1,707
expenses
Other net operating 77 4 132 59
revenues and expenses
Affiliated companies 44 40 84 80
Operating profit 1,019 1,177 1,763 1,921
Financial items 59 89 143 173
Profit after financial 1,078 1,266 1,906 2,094
items
Tax -298 -350 -536 -588
Minority shares -19 -16 -34 -31
Profit after tax 761 900 1,336 1,475

Return on capital employed
before tax (%) - - 14 15
Return on equity after tax - - 11 12
(%)
Earnings per share (SEK) *) 5.90 7.10 10.40 11.50
Equity per share (SEK) *) 95.60 87.80 100.00 87.80
Equity ratio (%) 69 60 70 60
Shares at end of the period 128.00 112.11 128.00 112.11
(million) *)
*)The calculation does not include the 16 million C shares that was issued in
June and that will be redeemed during the autumn.

The Market

Steel consumption in both Western Europe and the United States appears to have
levelled out at a high level. Lower steel consumption in Asia has, however,
entailed a significant change in the flow of trade which, among other things,
resulted in a decline in net exports of steel from Western Europe. In
combination with a continued high capacity utilisation within the Western
European steel industry, this has resulted in pressure on prices, primarily
those for hot-rolled sheet.

During the second quarter, prices for the Group's steel products in local
currencies were largely unchanged compared with the first quarter. A changed
product mix resulted, however, in prices in Swedish kronor being 5% higher
than during the first quarter. Accordingly, during the first half of the year,
prices were 14% higher than during the first half of the preceding year.

Orders received by the steel operations from Swedish customers have been at
approximately the same level as during the autumn of 1997. Deliveries to
Swedish customers were thus 6% higher than during the first half of 1997.

Volumes in our trading operation, which is dependent on the Swedish market,
have been at the same level as during the autumn of 1997 and thus 8% higher
than during the first half of the preceding year.

Production and Deliveries

Since the end of March, all heavy plate production takes place at the new
four-high rolling mill in Oxelösund. The start-up of the new mill took longer

than planned and resulted in production being just over 20% lower than during
the first half of the preceding year. On the other hand, the production of
sheet was 4% higher than during the preceding year, notwithstanding a number
of minor disruptions.

During the second quarter, crude steel production amounted to approximately
1,000,000 tonnes, and plate and sheet production amounted to approximately
600,000 tonnes. These figures are, respectively, 7% higher and 8% lower than
during the second quarter of 1997. As a consequence of lower production,
deliveries from the steel operations were 7% lower than during the second
quarter of the preceding year.

Sales and Profit

Sales increased by 9% to SEK 9,743 (8,965) million. 8 percentage points of the
increase were due to higher prices, whilst higher volumes contributed with 1
percentage point.

Prices for iron ore and coal are quoted in U.S. dollars. In the agreements
which were entered into for 1998, prices for iron ore increased while those
for coal fell. As a consequence of a higher dollar rate of exchange, the total
cost for ore and coal in Swedish kronor will, however, increase by just over
9%. Processing costs were 5% higher than during the first half of 1997.

Operating profit improved by SEK 158 million to SEK 1,177 (1,019) million. As
is evident from the table below, improved margins in the steel operations and
increased volumes in the trading and processing operations contributed with
SEK 550 million, while increased processing costs negatively affected the
result by SEK 120 million. In addition, the operating profit for the preceding
year included non-recurring items (capital gains) which affected the profit by
slightly more than SEK 50 million.

The change in the operating profit between the first half of 1998 and the
first half of 1997 (SEK million)
Steel operations
- Improved margins +450
- Lower delivery volumes -50
Trading and processing
operations
- Weakened margins -75
- Increased volumes +100
Increased processing -120
costs
Non-recurring items in -50
1997
Miscellaneous -97
Improved operating +158
profit


Return on the Group's liquid assets increased to 6.0 (4.4)%. The higher return
resulted in an improvement in net financial items to SEK 89 (59) million.

Taken together, this resulted in an improvement in profit after financial
items of SEK 188 million to SEK 1,266 (1,078) million.

The operating profit for the second quarter amounted to SEK 552 million, which
was SEK 73 million lower than during the first quarter. The decline was
primarily due to lower delivery volumes from the steel operations.

Capital expenditures

During the first half of the year, decisions were taken to carry out
investments totalling SEK 1,493 (683) million. Of these, SEK 850 million
relate to the decision to modernise and expand the large blast furnace in
Luleå such that, following the conversion, it will be possible to achieve an
increase in hot metal production using only one blast furnace, instead of the
present two blast furnaces.


In addition, two large projects are underway in the steel operations:
Development Plan Domex 2000 and General Plan OX 2000 which, together, comprise
investments of approximately SEK 3 billion. Through both of these projects,
the conditions are being created for continued expansion within the niche
products, high-strength hot-rolled sheet, and quenched steels within the plate
operations.

Running in of the new four-high rolling mill in Oxelösund is underway and the
new rougher in Borlänge will be placed into operation during the third
quarter.

Within SSAB HardTech, the construction of a new production facility in North
America is in its final stages. Production at the new facility will commence
at the end of August/beginning of September. This project involves total
investments of SEK 500 million.

Capital expenditures during the first half of the year were SEK 861 (1,021)
million. Approximately SEK 500 million relates to the four projects mentioned
above. In total, remaining expenditures on these projects up to and including
the year 2000 amount to just under SEK 1.8 billion.

Redemption of shares

During the second quarter, shareholders were invited to redeem every eighth
share for SEK 208. In total, 15.9 million shares were redeemed. The redemption
amount totalling SEK 3,305 million was disbursed on June 25.

In order to facilitate a speedy disbursement of the redemption amount to the
shareholders, 16 million class C shares were issued on June 8. These shares
were subscribed for by Handelsbanken at their nominal value, totalling SEK 400
million. The class C shares do not entitle the holder to dividends, and their
share of the company's assets is limited to the nominal value of the shares.
Following a judicial examination, the shares will be redeemed at their nominal
value. This is anticipated to take place before the end of the year.

Following the redemption, the number of shares will amount to 81.9 million
class A shares and 30.2 million class B shares.

Since the redemption procedure was carried out at the end of the second
quarter, the earnings ratios and earnings per share in the report were only
marginally affected by the changed capital structure. On a pro forma
calculation, assuming that the redemption had taken place at the beginning of
the relevant period, these key ratios would have been as follows:

Pro Reported
forma
Return on capital employed before tax (rolling 16 15
12-months), %
Return on equity after tax (rolling 12- 14 12
months), %
Earnings per share (January-June 1998), SEK 7.40 7.10
Earnings per share (rolling 12-months), SEK 12.00 11.50

Financing and Liquidity

Accounts receivable have largely been unchanged during the quarter, while
inventories have increased somewhat. An improved profit and lower capital
expenditures have resulted in the cash flow improving to 206 (-26) million.

During the second quarter, an MTN (Medium Term Note) programme totalling SEK
1,500 million was introduced for long-term financing. At the same time, the
limit for the Group's Swedish commercial paper programme was increased to SEK
1,500 million. At the end of the half year, borrowing within the two
programmes amounted to just over SEK 1,350 million.

The positive cash flow, borrowing, the issuance of class C shares, the
redemption programme, and the payment of dividends have together resulted in a

reduction of liquid assets by SEK 1,901 since the start of the year, to SEK
1,991 million. At the end of the half year, interest-bearing liabilities were
approximately SEK 350 million greater than the interest-bearing assets.

Sensitivity Analysis

Change during Profit Effect on
second half effect, earnings per
year, % SEK millions share, SEK

Plate prices - Steel 5 250 1.60
operations
Volume - Steel 5 100 0.60
operations
Volume - Trading 10 60 0.40
operations
Margins - Trading 2 %-pts 60 0.40
operations
SEK index 10 150 1.00


Prospects for the Remainder of the Year

The scope of maintenance work within the steel operations during the summer
break has, as planned, been greater than normal.

The running in of the new four-high rolling mill has taken longer than planned
but will gradually provide increased heavy plate production. The start-up of
the new rougher in Borlänge may result in certain disruptions in production,
but should allow for increased sheet production towards the end of the year.

The redemption of shares and the new issue of class C shares have reduced
interest-bearing assets by just over SEK 2,900 million and, accordingly, will
have a negative effect on net interest income/expense commencing at end of the
second quarter.

The demand for steel in Sweden as well as in Western Europe is still strong
even if it appears to have levelled out. Prices in Western Europe have,
however, been under pressure as a result of an increased supply of steel. It
is difficult to estimate price trends during the second half of the year, and
they will continue to constitute the factor which primarily determines the
Group's profit trend.

Stockholm, August 14, 1998

Torsten Sandin

The interim report for the first three quarters will be published on October
27.


Consolidated Funds Statement (unaudited)

1997 1998 1997 July
97-
SEK millions Jan- Jan- Full June
June June Year 98
Cash flow from operations 1,206 1,462 2,204 2,460
Change in working capital -211 -395 -437 -621
Investing activities -1,021 -861 -2,021 -1,861
Cash flow -26 206 -254 -22
Financing activities -173 -2,107 -359 -2,293
Change in liquid assets -199 -1,901 -613 -2,315


Consolidated Balance Sheet (unaudited)

30 June31 Dec30 June
SEK millions 1997 1997 1998
Assets
Fixed assets 7,181 7,858 8,319
Inventories 2,937 3,260 3,367
Accounts receivable 2,866 2,580 2,973
Other assets 553 621 555
Liquid assets 4,306 3,892 1,991
Total assets 17,84318,211 17,205

Equity and liabilities
Equity 12,23212,821 10,242
Minority shares 161 175 157
Defered tax and other 1,569 1,699 1,764
provisions
Long-term liabilities 722 511 1,197
Current liabilities 3,159 3,005 3,845
Total equity and 17,84318,211 17,205
liabilities


Subsidiaries' Sales and Profit/Loss (unaudited)

Profit/loss Return on
Sales Operating after capital
profit/loss financial employed
items
1997 1998 1997 1998 1997 1998 1997 July
97-
SEK millions Jan- Jan- Jan- Jan- Jan- Jan- Full June
June June June June June June Year 98
Subsidiaries:
SSAB Tunnplåt 4,397 4,846 378 711 353 685 20 26
SSAB Oxelösund 2,308 2,363 333 244 303 197 12 10
Plannja 445 489 31 30 28 28 25 23
SSAB HardTech 168 183 54 55 49 49 36 31
Dickson PSC 55 59 18 9 19 10 25 18
Tibnor 3,181 3,450 190 155 181 150 23 21
Other 299 281 9 -1 36 27 - -
subsidiaries

Parent
Company:
SSAB Finance 0 0 6 -6 42 63 - -
Other Parent
Company units 0 0 -20 -36 48 41 - -
*
Affiliated - - 21 26 21 26 - -
companies

Group - -1,928 -2 -10 -2 -10 - -
adjustments 1,888
Total 8,965 9,743 1,018 1,177 1,078 1,266 14 15
*Excluding dividends from subsidiaries and affiliated companies. The profit in
other Parent Company units is primarily comprised of a positive figure for
financial items.


Profit per quarter

SEK 1/96 2/96 3/96 4/96 1/97 2/97 3/97 4/97 1/98 2/98
millions
Sales 4,701 4,580 3,573 4,309 4,325 4,640 3,788 4,721 4,929 4,814
Operating -3,786-3,856-3,374-3,739-3,710-3,892-3,464-3,940-4,114-4,070
expenses
Depre- -180 -182 -186 -202 -194 -194 -203 -198 -208 -214

ciation
Affiliated 16 18 20 27 16 28 19 21 18 22
companies
Financial 93 82 84 93 33 26 34 50 52 37
items
Profit 844 642 117 488 470 608 174 654 677 589
after
financial
items