Ad hoc announcement pursuant to Art. 53 LR
Swiss Steel Group achieved solid results in a challenging environment
CEO Frank Koch comments: “Swiss Steel Group faced multiple challenges in 2022, ranging from skyrocketing energy prices to interrupted supply chains due to the volatile geopolitical environment and the shortfall from our operations in Ugine following the severe accident in early 2022. I am pleased that despite these challenges we succeeded in securing a solid result of EUR 217 million in adjusted EBITDA. This is thanks to our foresightedness, our flexibility and the exceptional commitment of our employees.
The past year has shown the necessity to stick to our strategy program SSG 2025. We are shaping the transformation of our Group in order to create value, to ensure resilience, increase performance and lay the foundation for further organic growth. In September last year we set the cornerstones for building a fully integrated Group with the debut of our new Engineering Steel, Stainless Steel and Tool Steel Divisions. In January 2023 we started rebranding all our entities under one strong name: Swiss Steel Group. Our new organizational setup leads to a more active steering of our Group and a more effective focus on customer requests and innovation. According to the recent communication about the divestment of several entities in Eastern Europe, we have also just begun to structurally reorganize our Group and to secure a solid foundation for increased performance.
We will continue our efforts in sustainable steel production. Based on our already low carbon emissions, our commitment to the Science Based Targets initiative (SBTi) and our decarbonization roadmaps, we have set ourselves ambitious goals of reducing our carbon footprint by 42 % within the next decade and of finally reaching our net zero target no later than 2040, given the framework conditions are appropriately ensured. Thanks to our unique expertise in electric arc furnace technology and highest operating standards, we are well positioned for our future target: to become the leading player for Green Steel.”
1) Earnings per share are based on the result of the Group after deduction of the portions attributable to non-controlling interests
2) As of December 31, 2022 and as of December 31, 2021
Lucerne, March 8, 2023 – Swiss Steel Group, a world leader in special long steel, today reported a – 11 % decrease in sales volumes for 2022 to 1,663 kilotons, down from 1,863 kilotons in 2021. Revenue of EUR 4,051.4 million was 27 % higher compared to EUR 3,192.8 million in the prior year. Adjusted EBITDA came to EUR 217.0 million, versus EUR 191.6 million in 2021. Net debt amounted to EUR 848.2 million, an increase of EUR 127.7 million from EUR 720.5 million recorded at the end of 2021.
Business performance in 2022
After the post COVID-19 market recovery throughout our main customer industries in 2021, Swiss Steel Group’s business environment in 2022 was impacted by distortions in the global economic recovery due to the war in Ukraine, ongoing supply chain issues amplified by lockdowns in China and increasing energy prices in Europe. This development negatively affected demand from two of our main customer segments, the automotive industry and the mechanical and plant engineering sector.
In addition, operations of Swiss Steel Group were adversely impacted by the stoppage of the steel mill in Ugine following a crane collapse in early January 2022, with a severe negative effect on the Group’s full-year profitability and cash flow. Melt shop production ramped up to approximately 65 % capacity in June, but only reached full capacity again in the first quarter of 2023.
Furthermore, the elevated price levels for raw materials and energy throughout 2022 put pressure on the Group’s operational performance. Swiss Steel Group responded to these developments by adjusting production volumes to energy availability and costs and lower market demand with regular production adaptations at most European sites. Moreover, as a result, price increases had to be passed on to our markets through energy surcharges. These efforts led our Group to an adjusted EBITDA of EUR 217.0 million, despite the lower sales volume overall. For the full-year 2022, the Group achieved a positive Group result of EUR 9.4 million, below the previous year (2021: EUR 50.3 million).
Our key financial figures for 2022 were effected by global market uncertainties. The volatility in demand resulted in – 10.7 % lower sales volumes of 1,663 kilotons across all product groups versus 1,863 kilotons in the previous year. Following the implementation of an energy surcharge combined with high raw material prices, the average sales price rose sharply by 42.1 % to EUR 2,438 per ton in 2022, leading to revenue of EUR 4,051.4 million, up 26.9 % on the prior year (2021: EUR 3,192.8 million).
The increase in revenue was spread across all product groups. By region, revenue increased in all our sales markets with the strongest gains in the American market at 48.9 %, supported by a friendly environment for production cost and products.
Free cash flow for the year was negative at EUR – 53.7 million due to the significant increase in net working capital, driven in particular by a higher inventory valuation per ton on the back of the sharp rise in energy prices. Inventory volumes in tons decreased.
Net debt, comprising current and non-current financial liabilities less cash and cash equivalents, came to EUR 848.2 million, an increase compared to December 31, 2021 (EUR 720.5 million).
Business performance in the fourth quarter of 2022
In the fourth quarter of 2022, Swiss Steel Group faced reduced demands in almost all markets combined with general restraints given obvious macroeconomic uncertainties such as rising inflation, high energy costs and ongoing supply chain challenges. The Group reacted by adapting production volumes and exercising strict cost control, which led to lower inventories throughout the value chain and lower shipments.
At 362 kilotons, – 14.8 % less steel was sold in the fourth quarter of 2022 compared to the same quarter of the previous year. The average sales price per ton of steel was EUR 2,654 per ton in the fourth quarter of 2022, continuing its upward trend versus EUR 1,972 per ton in the same period of the previous year. This is still mainly due to the increase in raw material and energy prices, where the widespread use of surcharge mechanisms led to higher selling prices.
Despite a lower sales volume, revenue in the fourth quarter increased by 14.7 % to EUR 960.0 million compared to EUR 837.1 million in the same quarter in the previous year, driven by higher average sales prices. At EUR 36.5 million, adjusted EBITDA was only slightly below the prior-year quarter (Q4 2021: EUR 39.9 million). Free cash flow (cash flow from operating activities less cash flow from investing activities) in the fourth quarter of 2022 was EUR 68.2 million (Q4 2021: EUR – 53.8 million).
Outlook for fiscal year 2023
We observe a weaker start into 2023 compared to the previous year. An economic slowdown in the fourth quarter of 2022 and the beginning of 2023 led to a lower yet acceptable order backlog and shorter lead times, enabling us to react faster and more flexibly on market opportunities. While an anticipated drop in energy prices is expected to improve our cash flow due to lower working capital, it will lead to lower revenue and margins. On this basis, we forecast an adjusted EBITDA in a range between EUR 160 and 200 million.
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