Report for the first three quarters 2001

10/25/2001 7:02 AM EST

Report for the first three quarters of 2001

· Profit for the first three quarters, excluding non-recurring
items, was largely unchanged and amounted to SEK 790 (816) million.

· Profit for the third quarter amounted to SEK 82 (-142) million.
Excluding non-recurring items, profit increased by almost SEK 100
million, mainly because metallurgy operations in Luleå continued
throughout the summer.

· Cash flow for the first three quarters was positive and
amounted to SEK 237
(-514) million.

Consolidated Profit and Loss Account
2000 2001 2000 2001 2000 Oct 00-
SEK millions Q 3 Q 3 Q 1-3 Q 1-3 Full Sep 01
year
Sales 4,161 4,535 14,010 15,111 19,271 20,372
Cost of goods sold -3,851 -4,142 - -12,934 - -17,192
11,842 16,100
Gross profit 310 393 2,168 2,177 3,171 3,180
Selling and -421 -394 -1,322 -1,357 -1,830 -1,865
administrative
expenses
Other operating 5 135 608 155 601 148
revenues and
expenses*
Affiliated 3 -5 12 9 20 17
companies
Operating profit -103 129 1,466 984 1,962 1,480
Financial items -39 -47 -75 -116 -92 -133
Profit after -142 82 1,391 868 1,870 1,347
financial items
Tax 39 -30 -396 -266 -517 -387
Minority shares -5 -12 -39 -20 -42 -23
Profit after tax -108 40 956 582 1,311 937

Return on capital - - - - 15 11
employed before tax
(%)
Return on equity - - - - 14 10
after tax (%)
Earnings per share -1.00 0.40 8.70 5.80 12.00 9.20
(SEK)
Equity per share 91.10 96.40 91.10 96.40 94.80 96.40
(SEK)
Equity ratio (%) 51 51 51 51 50 51
Number of shares at 105.03 100.90 105.03 100.90 102.54 100.90
end of the period
(million)
Average number of 107.75 100.90 110.37 101.12 108.84 101.91
shares (million)
*) The profit from the sale of Tibnor's industrial supplies group for
SEK 135 million is included as "Other operating revenues" in the third
quarter. The effect on the profit of surplus funds from SPP was included
in last year's results in the amount of SEK 625 million for the second
quarter and SEK 636 million for the full year.

The Market

Steel consumption in Western Europe has declined somewhat during the
year. On the other hand, consumption in the US fell sharply as early as
the second half of last year and has since then remained at the same
level. In September, though, steel consumption further declined in the
US. However, in its autumn forecast, IISI still anticipates that global
steel consumption this year will increase somewhat as a consequence of
continued strong growth in China.

The inflow of orders for the Group's sheet products declined
significantly towards the end of last year, which resulted in lower
volumes during the first quarter. However, as a consequence of an
increased inflow of orders, the rate of delivery and production could
once again be increased during the second and third quarters. Demand for
quenched steels and ordinary plate has been strong. However, a certain
weakening was noted in respect of both sheet and plate products at the
end of the third quarter.

Consumption by Swedish customers within, primarily, the telecom and
heavy vehicle sectors, declined at the beginning of the year and has
subsequently remained at this lower level. Accordingly, the steel
operation's deliveries to the Swedish market have been 10% lower than
last year.

During the third quarter, it was possible to carry out minor price
increases in local currencies in respect of hot-rolled sheet, whilst it
was necessary to accept minor price reductions in respect of cold-rolled
and metal-coated sheet. For both quenched steels and ordinary plate,
prices in local currencies have remained at the same level as at the end
of the second quarter.

In total, the Group's steel prices in local currencies are approximately
unchanged compared with the second quarter. However, as a result of a
weaker Swedish krona and an improved product mix, prices in Swedish
krona were 4% higher.

Thus far this year, prices in the steel operations in Swedish krona have
been 5% higher than last year.

Production and Deliveries

The new blast furnace in Luleå has been operated this year without a
summer break. The Group's crude steel production during the third
quarter thus amounted to 781 thousand tonnes, which was 235 thousand
tonnes higher than last year when an extended summer stop in conjunction
with the construction of the new blast furnace entailed a loss in
production of 80 thousand tonnes. In total, crude steel production this
year has been just over 15% higher than last year and amounted to 2,771
(2,398) thousand tonnes.

Production in the hot rolling strip mill was stable and at a high level
during the quarter, whilst the four-high rolling mill was affected by a
breakdown and stood still for just over two weeks in conjunction with
the start-up after the summer break. Nevertheless, sheet production
increased by 50 thousand tonnes to 587 (537) thousand tonnes and, thus
far this year, has amounted to 2,182 (2,124) thousand tonnes.

Compared with last year, deliveries in the steel operations have
increased during the third quarter by 8% to 588 thousand tonnes. Thus
far this year, deliveries have been largely unchanged compared with last
year and amounted to 2,056 thousand tonnes.

The customer base for high strength sheet products has continued to
expand, at the same time as demand from existing customers, especially
within the heavy vehicle sector, has declined. However, deliveries of
both extra and ultra high strength products, as well as high strength
sheet in general increased during the third quarter by just over 15%
compared with last year. In total, deliveries of extra and ultra high
strength steel thus far this year have increased by 3% and deliveries of
high strength sheet generally by 1%.

Deliveries of quenched steels were 7% lower than during the third
quarter of last year and, thus far this year, have been 6% lower than
last year. Last year, it was possible to maintain a high pace of
delivery by reducing existing inventories. The new quenching line in
Oxelösund was brought into operation as planned at the beginning of
August and has produced 3 thousand tonnes during the quarter.

Volumes of building-related products in the trading operations which are
dependant on the Swedish market have continued to be higher than last
year, while deliveries of sheet products remained approximately 10%
lower. Accordingly, total deliveries thus far this year have been
largely unchanged compared with last year.

Sales and Profits

Sales during the third quarter increased by 9% to SEK 4,535 (4,161)
million. The industrial supplies group were sold on 1 September.
Excluding that business, sales thus far this year have increased by 9%
to 14,225 (13,063) million. Of the increase, 6 percentage points are
attributable to higher prices and 3 percentage points are due to higher
volumes.

Iron ore and coal are purchased through annual agreements and prices are
quoted in USD. The year's iron ore and coal agreements resulted in price
increases in USD of 2% and 13% respectively. The agreements for last
year were hedged at a level of 8.70. This year's agreements have not
been hedged and the strengthened dollar rate, together with the price
increases, have resulted in significantly higher raw materials costs
than last year. Costs for iron ore thus far this year have been 19%
higher than last year, while coal costs have been 16% higher. In all,
total raw material costs have been 14% higher than last year.

Processing costs thus far this year have increased by 5% compared with
last year. Of the increase, 1 percentage point consists of the expanded
operations of SAAB HardTech, and an additional 1 percent relates to
additional staffing for the new quenching line in Oxelösund and for the
year-round operation of the blast furnace in Luleå.

Operating profit for the third quarter, improved by SEK 104 million to
SEK 51 (-53) million, excluding non-recurring items of SEK 78 (-50)
million. Volume increases in both the steel operations and the trading
and processing operations contributed positively, while weaker margins
in the trading and processing operations and increased processing costs
and depreciation had a negative effect on profits.

Thus, operating profit excluding non-recurring items increased slightly
during the first three quarters of the year to SEK 906 (891) million. A
weaker Swedish krona has improved margins in the steel operations and
thus also profits by approx. SEK 300 million. Operating profit including
non-recurring items amounted to SEK 984 (1,466) million. The profit
analysis is set forth in the table below.

Change in operating profit between
the first three quarters of 2001 and
of 2000 (SEK millions)
Steel operations
- improved margins +30
- increased volumes +280
Trading and processing
operations
- weaker margins -120
- increased volumes +125
Increased processing costs -200
Increased depreciation -36
Non-recurring items -497
Other -64
Change in operating profit -482



An increase in net debts resulted in a deterioration in financial items
to SEK -116 (-75) million. Thus, profit after financial items amounted
to SEK 868 (1,391) million. Excluding non-recurring items, profit after
financial items was SEK 790 (816) million. Earnings per share amounted
to SEK 5.80 (8.70). Excluding non-recurring items, earnings per share
amounted to SEK 5.10 (5.40).

Non-recurring items

The sale of Tibnor's industrial supplies group to Ahlsell was completed
on 1 September following approval from the Swedish Competition
Authority.

Sales by the industrial supplies group last year amounted to just over
SEK 1,300 million, with a profit after financial items of SEK 36
million. The transaction gave rise to a pre-tax capital gain of just
over SEK 135 million. In addition, the transaction positively affected
liquidity by just under SEK 430 million, of which just over SEK 380
million was included in cash flow for the third quarter and the
remaining amount, just under SEK 50 million, will be included in cash
flow for the fourth quarter.

SSAB Tunnplåt has been delivering liquid crude steel to Inexa Profil in
Luleå pursuant to a fifteen year agreement. In the middle of September,
the Board of Directors of Inexa Profil filed a petition for bankruptcy.
Net claims against the bankruptcy estate amount to SEK 57 million. The
operating profit for the quarter has been affected by a write down of
this entire claim.

Non-recurring items last year consisted of revenues relating to SPP's
surplus funds, amounting to SEK 625 million, and energy tax expenses for
the years 1995-1999 amounting to SEK 50 million.

Thus, in total, non-recurring items amounting to SEK 78 (-50) million
are included in the results for the third quarter, and SEK 78 (575)
million for the first three quarters.

Capital Expenditures

During the year, decisions have been taken regarding new capital
expenditures totalling SEK 530 (620) million. Of this amount, SEK 175
million relates to a decision to invest in additional capacity for the
formatting of high-strength sheet. The production in the new cutter
lines will commence at the beginning of next year.

A second quenching line has been built in Oxelösund. The quenching line
provides the possibility to expand the product range within quenched
steels and increase quenching capacity by approximately 50%. The
production in the quenching line started as planned at the beginning of
August. The investment amounted to just over SEK 550 million.

Last year, a decision was taken regarding a significant environmental
investment at the coking plant in Luleå, at which a cover will be
installed in order to collect particulates from the coking process. In
addition, a decision was taken regarding a fifth press-hardening line at
SSAB HardTech's plant in Luleå and a third press-hardening line at the
plant in the United States. It is estimated that these three major
investments, totalling SEK 250 million, will be brought into operation
at the beginning of 2002.

Capital expenditures declined to SEK 686 (1,501) million.

Financing and Liquidity

Working capital since the beginning of the year has increased by approx.
SEK 800 million. Increased inventories accounted for SEK 450 million and
increased receivables for SEK 390 million. Increased raw material prices
account for approx. SEK 300 million of the increase in inventories,
while the increased receivables are a consequence of increased sales. In
addition, cash flow has been positively affected by just over SEK 380
million from the sale of the industrial supplies group.

In total, cash flow in the business operations thus far this year has
improved by SEK 751 million to SEK 237 (-514) million. Including the
effect of the SPP funds, total cash flow amounted to SEK 143 (-367)
million.

Notwithstanding the positive cash flow, the repurchase of shares at the
beginning of the year for SEK 150 million and the payment of dividends
of SEK 504 million resulted in an increase in net debts by SEK 547
million since the beginning of the year to SEK 3,632 million. Liquid
assets at the end of September amounted to SEK 221 (825) million, of
which SEK 96 (134) million were in the parent company.

There is a Medium Term Note programme for long-term borrowing, while
short-term borrowing primarily takes place within a commercial paper
programme. Borrowing possibilities within each of these programmes
amount to SEK 2,000 million. At the end of September, borrowing within
these programmes amounted to SEK 3,526 million.

Reduction in Share Capital

During the first quarter, 1.6 million shares (0.8 million class A shares
and 0.8 million class B shares) were repurchased for SEK 150 million.
Thus, a total of 11.2 million shares, equivalent to 10% of the total
number of outstanding shares, have been repurchased for SEK 974 million
since the repurchase programme began last year. The Annual General
Meeting resolved in April that the share capital be reduced without a
repayment in respect of the repurchased shares. Share capital has
therefore during the third quarter been reduced by SEK 280 million and
presently amounts to SEK 2,522 million, consisting of 74.5 million class
A shares and 26.5 million class B shares.

Prospects for the Remainder of the Year

At the end of the third quarter, activity on the market declined and the
inflow of orders for sheet was somewhat lower. In order to maintain the
high pace of deliveries within the sheet area which was achieved during
the second and third quarters, a few transactions of a spot-trading
nature have been conducted outside ordinary markets for delivery during
the fourth quarter.

Prices for most sheet products and ordinary plate are under pressure.
However, in the agreements signed for deliveries during the fourth
quarter, prices in local currencies have been largely unchanged in
conjunction with sales on ordinary markets. It is possible to find
examples of both minor price increases and minor price reductions.

A certain weakening in activity has also been noted on the Swedish
market. The pace of deliveries from the trading operations which are
dependent on the Swedish market might thus decline somewhat during the
fourth quarter.

Sensitivity Analysis

Change during Effect on Effect on
the fourth Profit, Earnings per
quarter, % SEK millions Share, SEK

Prices - steel 5 150 1.10
operations
Volumes - steel 5 60 0.45
operations
Volumes - trading 5 15 0.10
operations
Margin - trading 2%-pts 35 0.25
operations
SEK Index 5 40 0.30
The sensitivity analysis describes the manner in which changes in the
stated factors during the remainder of the year, compared with the first
three quarters, will affect profit for the year before tax and earnings
per share.

Stockholm, 25 October 2001

Anders Ullberg

Review Report

We have generally reviewed this interim report in accordance with the
recommendation issued by the Swedish Institute of Authorised Public
Accountants.

A general review is significantly more restricted than an audit.

Nothing has arisen which in any way indicates that the interim report
fails to comply with the requirement of the Securities Exchange Act and
the Annual Reports Act.

Stockholm, 25 October 2001

Göran Tidström Åke Danielsson
Authorised Public Accountant Authorised Public Accountant


A year-end report for 2001 will be published
on 13 February 2002.


SSAB Svenskt Stål AB (publ)
Company No. 556016-3429