Swedish Steel AB stock gains on EBITDA beat

Investing.com -- Swedish Steel AB shares rose 2.2% following the company’s latest financial results, which showed that adjusted EBITDA surpassed market expectations. The EBITDA for the company was reported at SEK 1.57 billion, which was 12% higher than the Visible Alpha consensus, buoyed by strong performances in Europe and the Americas.

The company’s revenues dipped slightly by 3% quarter-on-quarter to SEK 23.6 billion, which still came in above both consensus and UBS estimates. Despite the revenue decline, the company managed to achieve a net income of SEK 487 million, which, while representing a 54% decrease from the previous quarter and a 74% drop year-on-year (YoY), was still 65% above consensus expectations.

Operating cash flow exhibited significant growth, tripling from the previous quarter but still showing a 20% YoY decline, reaching SEK 5.37 billion. This was primarily due to a considerable release of working capital amounting to SEK 3.6 billion, leading to a free cash flow of SEK 2.3 billion, a remarkable increase from the previous quarter and significantly above UBS’s expectation of a SEK 1.4 billion deficit.

Capital expenditures for the period were reported at SEK 3.0 billion, aligning with UBS estimates. Looking ahead, Swedish Steel AB anticipates greater shipment volumes in Europe, exceeding 10% for the first quarter, following maintenance shutdowns in the fourth quarter.

Although realized pricing is expected to drop by 5-10%, this is in line with UBS’s forecast of a 5% decrease. The company also projects over a 10% increase in Special Steel shipments for the first quarter, with a modest 0-5% decline in realized pricing, which is consistent with UBS’s -5% prediction.

In the Americas, shipments are expected to rise by 0-5%, with a 0-5% decrease in realized pricing, a more optimistic outlook compared to UBS’s anticipation of a 12% decline. Raw material costs for Special Steels and SSAB Europe are projected to remain stable, while a 0-5% increase is expected for the Americas.

The company also revised its full-year capital expenditure forecast to approximately SEK 10.0 billion, a significant increase from the previous estimate of SEK 6.3 billion but still below UBS’s projection of SEK 15.0 billion, due to escalated investments in the new mini-mill in Luleå.

UBS commented on the results, stating, "The main surprise vs our numbers was the lower than expected capex guide, as we had assumed a flatter investment profile."

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