Interim report January – March 2018: Record production and continued strong demand

April 26, 2018

LKAB’s beginning of the fiscal year 2018 was stable with an improved underlying profit and cash flow as well as a continued increase of the production volume – which reached a new record level. The underlying operating profit increased by MSEK 437 on a year-on-year comparison.

LKAB is reporting a strong first quarter as a result of stable production together with market conditions that continues to be favourable. Net sales amounted to MSEK 6,227 (5,512) and the underlying profit improved by MSEK 437, amounting to MSEK 2,357 (1,920). The cost of provisions for the urban transformations increased to MSEK 795 (231), mainly as a result of the remeasurement of earlier provisions. As a result, operating profit amounted to MSEK 1,561 (1,689) – a decrease compared with the same period last year, but an increase of 17 percent compared with previous quarter. Operating cash flow was strengthened and totalled MSEK 1,770 (1,571).

The average level of the global spot price for iron ore was USD 74/tonne for the first quarter, USD 8/tonne higher than in the previous quarter. During the same period last year, the spot price was USD 86/tonne. The market continues to put a premium on high quality iron ore products and the premium for pellet sales remained at a high level.

High demand for iron ore pellets

Production continued to increase, amounting to 7.3 (7.2) Mt for the quarter – which is a record level for an individual quarter. Deliveries increased compared with the same period during the previous year, amounting to 6.8 (6.6) Mt. LKAB’s strategy to maximize pellet production remains in place and 84 percent of the quarter’s total deliveries consisted of pellets.

LKAB’s customers are continuing to demand more iron ore pellets than contracted. It therefore remains key that volumes are increased, both in the short and the long term. Continuous improvement efforts in the day-to-day operations are continuing. Profitability and productivity within the framework of existing structures are also essential for future development.

“We are in a situation where we are planning for the next generation of mining, upgrading and logistics – one which is capable of delivering higher volumes of quality products to the steel industry while using fewer resources and having less environmental impact,” says Jan Moström, LKAB’s President and CEO. 

Increased focus on the future

As part of the work on shaping tomorrow’s LKAB, Pierre Heeroma was appointed as Senior Vice President for Prospecting, Strategy and Business Development during the quarter. He will take office on 1 May 2018.

During the quarter, a preliminary study was completed and HYBRIT was given a green light to continue with a pilot facility for fossil-free steel in Luleå and the Swedish orefields. The initiative is being run as a joint venture between LKAB, SSAB and Vattenfall, and in the longer term could reduce Sweden’s total carbon dioxide emissions by 10 percent and Finland’s by seven percent.

“LKAB has substantial opportunities to contribute to more sustainable development in a wider perspective too. The aim is to improve efficiency in the next generation LKAB by 40–50 percent and to have zero-carbon operations by 2045,” concludes Jan Moström.

LKAB is an international high-tech minerals group that mines and upgrades the unique iron ore of northern Sweden for the global steel market. Sustainability is core to our business and our ambition is to be one of the industry’s most innovative, resource-efficientand responsible companies. The group had sales of more than SEK 23 billion in 2017 and employs about 4,100 people in 13 countries. Other group business include industrial minerals, drilling systems, rail transport, rockwork services and property management.