SSAB Oxelösund 30 Plannja 32 SSAB Hardtech 34 Tibnor 36 Dickson PSC 37 SSAB Finance 38 Other Companies

Annual Report 1998

Steel is the leading construction material in the world. The only competitor to steel is even better steel. SSAB is consolidating its position in the commercial steels sector as a manufacturer of specialty steels, giving customers added value through strength, formability or abrasion-resistance. Table of contents

1 Shareholders’ meeting 2 Operations 4 Comments by the Chief Executive Officer 6 Development through co-operation 8 SSAB and the environment 12 The SSAB share

Report of the Directors 14 Group review 24 SSAB Tunnplåt 27 SSAB Oxelösund 30 Plannja 32 SSAB HardTech 34 Tibnor 36 Dickson PSC 37 SSAB Finance 38 Other companies

Consolidated and parent company accounts 39 Consolidated profit and loss account 40 Consolidated balance sheet 41 Consolidated funds statement 42 Parent company’s profit and loss account 43 Parent company’s balance sheet 44 Parent company’s funds statement 45 Notes 59 Disposition of profit 60 Auditors’ report 61 Group management, staff, and auditors 62 Board of Directors 64 Addresses

SSAB Svenskt Stål AB (publ) Registration number 556016–3429

Joe Brig Art AB, Gothenburg. Foto: Hans Wretling, Bo Björkdahl, Dag Sundberg. Print: Graphium Västra Aros, Västerås 1999. Translation: L.L. Legal Language Services AB. Shareholders’ meeting Nominating committee The Annual General Meeting of the Shareholders will Leif Gustafsson, Chairman of the Board of Directors be held in Luleå on Friday, April 23, 1999, at 1:00 p.m. Carl-Erik Feinsilber, member of the Board of Directors To be entitled to participate in the Annual General of SSAB and Industrivärden Meeting of the Shareholders, shareholders must be included in the printout of the share register that is Björn Franzon, Vice President, Fourth AP-Fund made on April 13, 1999 and must notify SSAB of their The nominating committee presents proposals to the intention to participate in the meeting not later then shareholders’ meeting concerning, inter alia, the elec- 12:00 noon on April 20, 1999. tion of members of the Board of Directors and remune- ration to the Board of Directors. Nominee registered shares Shareholders whose shares are registered in the name of a nominee must register their shares in their own names Dividends in order to be entitled to participate in the shareholders’ April 28, 1999 is proposed as the record date for the meeting. In order that the shares might be re-registered right to receive dividends. Payment of dividends is anti- in time, shareholders should request temporary owner- cipated to be effected through VPC on May 5, 1999. registration (voting registration) in sufficient time prior The Board of Directors and the President propose to April 13, 1999. that the shareholders’ meeting resolve upon the payment of a dividend for 1998 in the amount of SEK 4.50 Notice per share. Notice in respect of participation at the shareholders’ meeting shall be made by letter, telefax, or telephone to: Financial information SSAB Svenskt Stål AB Corporate Control SSAB intends to submit the following information for Box 26208, SE-100 40 STOCKHOLM the operating year 1999: Telephone: +46 8 45 45 700 Report for the first quarter, April 23, 1999. Telefax: +46 8 45 45 705 Half-year report, August 17, 1999. The name, personal identification number (company Report for the first three quarters, October 27, 1999. number), address, and telephone number of the share- Results for 1999, February 2000. holder must be provided in the notice. Shareholders who wish to participate in the sharehol- Annual report, March 2000. ders’ meeting must provide notice of such not later than April 20, 1999 at 12:00 noon, at which time the notice period expires.

1 Operations

1994 1995 1996 1997 1998 Sales (SEK millions) 15,116 18,611 17,162 17,474 17,835 Profit after financial items (SEK millions) 2,145 3,832 2,091 1,906 1,424

Investments in plants and facilities (SEK millions) 568 1,069 1,311 2,145 2,035 Cash flow (SEK millions) 1,351 1,891 1,368 –254 – 615 Net debt (SEK millions) –1,027 –2,754 –3,687 –2,929 1,644

Capital employed (SEK millions) 10,929 12,994 13,740 14,121 12,864 Total assets (SEK millions) 14,866 17,245 17,587 18,211 17,126

Return on capital employed before taxes (%) 22 33 16 14 11 Return on equity after taxes (%) 20 28 13 11 8 Equity ratio (%) 58 64 68 70 58

Dividend per share (SEK): 1998 proposal 2.50 4.00 4.00 4.50 4.50 Profit per share (SEK) 12.20 21.30 11.60 10.40 8.20

Average number of employees 9,517 9,778 9,705 9,630 9,661 Production of crude steel (thousands of tonnes) 3,296 3,256 3,405 3,349 3,390 Definitions are set forth in note 20. Data per share has been recalculated as a consequence of the split at 4:1 which was carried out in 1995.

The Group is pursuing a deliberate niche strategy desig- wholly-owned sales companies. nated to consolidate the position as one of the leading The production flow and deliveries in the steel opera- manufacturers of high-strength sheet and quenched tions are illustrated by the figure below. steels within the plate area. This niche orientation and The trading and processing operations constitute an close co-operation with customers has given the Group important sales channel for the steel operation’s range a position as a specialist steels supplier within the com- of products, particularly on the Swedish market. In mercial steel sector. 1998, approximately 380,000 tonnes of the steel opera- The sheet operations are conducted within SSAB tion’s products were sold through the processing and Tunnplåt and the plate operations within SSAB trading operations. Oxelösund. Exports sales take place primarily through The Group’s finance operations are conducted by SSAB Finans, which is an independent profit centre within the parent company, and by the Irish subsidiary, Ore Coronet Finance. Crude steel 242 kt Coal Metallurgy Luleå Coking plant Hot-rolled steel sheet 995 kt Hot Strip Mill Borlänge Ore Cold-rolled steel sheet 486 kt Metal-coated steel sheet 349 kt Coal Organic-coated steel sheet 181 kt Cold-rolled Metal-coated Organic-coated

Hot Plate Mill Metallurgy Oxelösund Heavy plate 369 kt Coking plant Slabs 210 kt

2 Share of the Group’s Share of the Group’s value added value added profit after financial items profit after financial items capital employed capital employed

SSAB Tunnplåt SSAB Oxelösund SSAB Tunnplåt manufactures hot-rolled, cold-rolled, SSAB Oxelösund manufactures plate. The majority con- metal- and organic-coated sheet, with an emphasis on sists of quenched steels, i.e. high-strength, structural steel, high-strength sheet. The sheet’s main areas of use are and abrasion-resistant steel. These are used, inter alia, in within the engineering and construction industries. construction machinery, mining equipment, and bridges.

Plannja SSAB HardTech Plannja organic-coats and profiles steel and aluminium SSAB HardTech manufactures press-hardened safety building sheet, and manufactures wall systems and sys- components for the automotive industry. The product tems for rainwater runoff. range includes side impact beams, bumpers, and components for the car’s safety cage.

Dickson PSC Tibnor Dickson PSC prefinishes sheet by slitting and cutting to The trading company, Tibnor, conducts a large portion size. Sales are conducted through Tibnor and SSAB of steel trading in Sweden. Metals, building products, Tunnplåt. tools, machinery, and other industrial and building supplies supplement the product range.

SSAB Finance Coronet Finance SSAB Finance manages the Group’s investments of liquid Coronet Finance manages the Group’s investments of funds on the Swedish money market as well as foreign liquid funds on the international money markets and exchange dealings and borrowing. attends to the financing requirements of primarily the Group’s foreign subsidiaries.

President Group Management

SSAB Finance Group Staffs

Steel Operation Processing Trading

SSAB Tunnplåt Dickson PSC Tibnor

SSAB Oxelösund Plannja

Foreign SSAB HardTech sales companies

3 Comments by the Chief Executive Officer

A shifting year for steel high-strength sheet more than doubled. 1998 was characterised by a strong first half and a weak We forecast continued good growth possibilities for second half of the year. The crisis in Asia led to signifi- these speciality products. Therefore, the strategy for the cant decreases in steel consumption in Japan and South steel operations remains firm. Growth will, in the future, Korea, which resulted in a significant change in the glo- take place primary within our niche areas. At the same bal trading flows of steel. time, with the help of our trading and processing compa- For the Western European steel industry, this meant nies Tibnor, Plannja, and Dickson, we will maintain a both decreased exports to Asia as well as increased steel strong position on our home market – Scandinavia – imports from Asia and Eastern Europe. In combination where we are competitive in the entire product range. with a continued high utilisation of capacity in the Western European steel industry, the changed trading Three strategic investment projects completed flows created an increase in the supply of steel in In order to create the conditions for continued growth in Western Europe. our niche areas, in the beginning of the 1990s we deci- During the first half of the year, it was possible for ded to invest a total of SEK 3,500 million in three strate- this increase in supply to be absorbed through continued gic projects: General Plan OX2000, Development Plan increases in steel consumption, and steel prises in Domex 2000, and the construction of a new production Western Europe could be gradually increased. However, facility for SSAB HardTech in the United States. steel consumption reached a peak at the end of the first The operations during the past year were, to a large half of the year following an upswing phase which lasted degree, characterised by the start-up and breaking-in of just under a year and a half – one of the shortest in a number of large facilities included in these three pro- modern times. However, steel consumption had, by then, jects. We commenced rolling in our new four-high rol- reached a record level. ling mill in Oxelösund at the end of March and in our After the summer, the effect of the increased supply in new rougher for the strip mill in Borlänge in October. steel was noticeable in Western Europe. Delivery times, Production at SSAB HardTech’s U.S. production facility which had been long during the first half of the year, started in two stages during the autumn. decreased rapidly and steel prices fell under heavy pres- The work entailed in the investment projects resulted sure. Thus, during the second half of the year, prices fell in a strain on the entire organisation and was not entire- for, primarily, hot and cold-rolled sheet of lower grades. ly painless. During the first three quarters, we experien- The effect on our speciality products – high-strength ced a number of interruptions in production in our steel sheet and quenched steels in the plate sector was, howe- operations which resulted, at times, in limitations on our ver, limited. Falling steel prices resulted, however, in our delivery capacity and larger increases in our processing earning capacity gradually decreasing during the second costs than planned. half of the year. The start-up of the facilities is now largely complete. At the end of 1998, we ran our new four high rolling Continued niche orientation mill at an annual rate of over 500,000 tonnes, thereby at SSAB is one of the mid-sized steel companies in Western a pace slightly more than 25% higher than in 1998. The Europe. We have chosen to develop our steel operations start-up of the rougher proceeded faster than we had through a strong niche orientation, i.e. by identifying a anticipated and, in SSAB HardTech's U.S. production few smaller sub-markets where we can achieve a domi- facilities, series deliveries started as planned during the nant position. autumn. In the plate sector, we have achieved such a position for our quenched steels where we today have a global Added value for our customers market share of almost 20%. Within the sheet sector, we Following the completion of our three strategic invest- are one of the largest producers of high-strength steel in ment projects, we now possess the fundamental facilities Western Europe. necessary for continued growth in our niche areas. The growth of our speciality products has been Calculated at today's price levels, we have created the strong. During the most recent five year period, sales of conditions for increased sales of our speciality products quenched steels increased by over 70% and deliveries of by approximately SEK 3,500 million per year.

4 Such increases in sales can only be achieved by continuing to create added value for our customers. By utili- sing our quenched steels or our high-strength sheet, our customers will be able to improve their products and their profitability. This creation of added value is a process which often takes place in close co-operation between the customer and our specialists. Two examples of how we work and how we will continue to work are described in a separate section in this annual report. We wish to share with the customer the added value which is created in order to ensure continued sound profitability in our operations.

Consolidation in 1999 1999 will be a tough year for steel. Steel consumption production in this single expanded furnace which is cur- in Western Europe is still high even if it decreased rently being run in two blast furnaces. This project, somewhat after the market reached a peak at the end of totalling SEK 850 million, is being carried out in two the first half of last year. However, an all too large sup- stages. During 1999, we will complete the raw material ply continues to press prices which, in the beginning of handling for the furnace and next year the actual repla- 1999, were just over 10% lower than the average prices cement of the furnace will take place. during 1998. In order to strengthen our cash flow, which has been The balance on the market has, in fact, gradually negative the past two years during the intensive invest- improved as a consequence of the cut-backs in produc- ment phase, we are extremely selective in our invest- tion which were carried out by Western European steel ments at the same time as we are taking special measures producers. However, our earnings capacity at the begin- in order to decrease our inventories. This will enable us ning of 1999 is significantly lower than last year. once again to achieve a positive cash flow. We are, therefore, in terms of markets, concentrating With this concentration on the market and on costs on trying to continue to increase the volumes in our spe- and cash flow, we will meet the challenges of a tougher ciality products and on regaining the sales of more stan- market in 1999 and also lay the groundwork for our dard products, especially on our home market, which we continued expansion of SSAB as a manufacturer of spe- were forced to give up as a consequence of interruptions ciality steels in the commercial steels sector. in production in 1998. A necessary prerequisite in order for us to be able to achieve this is that we maintain the production stability which we have now achieved, at the same time as we continue the fine-tuning of our new facilities. In our internal work, we will also concentrate on our processing costs and our cash flow. With this focus and the measures which we have taken on the cost side, we Torsten Sandin will, through savings, be able to make-up for wage infla- tion and the effects of cost increases due to increased volumes, so that processing costs will not increase in 1999 in absolute numbers. One measure which will provide a significant cost reduction effect in the long run is our decision to modernise and expand our large blast furnace in Luleå and thereby, largely, double the volume in the furnace. We will thereby be able to run our entire Luleå hot metal

5 Development through co-operation

Marketing and development often go hand in hand Tunnplåt’s ultra high-strength steel, Docol 1400 DP. when it comes to the leading products, high-strength The strength requirements have been met and surpassed sheet and quenched steels within the plate operations. and the bracket weighs only half as much as the old New improved steels are often tested in especially one. In this case, the change over to high-strength sheet demanding applications employed by various custo- resulted in both improved functionality and, for the mers. Following the tests, the steel is then marketed and automobile manufacturer Volvo, the added benefit of a used in ordinary production, both by the customer who weight decrease. participated in the tests and other customers. In addition, customers place their own demands Light dumper bodies in HARDOX regarding new product qualities and/or new areas of Dumper bodies are specially constructed platforms on use. This often leads to the start-up of a joint develop- trucks for demanding use, such as transportation of ment project together with the customer. Within the stone and soil. Group, both application engineers as well as develop- Heinrich Carnehl Fahrzeugbau manufactures approx- ment and production personnel are engaged. The follo- imately 550 dumper bodies per year in its plants in wing two examples illustrate how co-operation can take Wittstock and Pattensen in Germany. The company place and the results it provides. employs 120 persons and has a turnover of approximately SEK 275 million. In order to increase the value for Brackets for tow eyes made of high-strength sheet its customers, Carnehl wished to decrease the weight of Bendiro, with production units in Mariestad and its dumper bodies. At the same time they wanted to Falkenberg, manufactures roll-formed and stamped lower their production costs and retaining the bodies’ components from sheet for, among other sectors, the load capacity, strength, and life cycle. They therefore automotive industry. Bendiro employees 125 persons contacted Mats Haglund who is an application engineer and has a turnover of SEK 135 million. One of the com- at SSAB Oxelösund, and a joint development project ponents which Bendiro manufactures is the bracket for was commenced. a tow eye on the Volvo S80 model. In its original form, Traditionally, dumper bodies are constructed in a the bracket was produced by another manufacturer in rigid design for which Carnehl previously used a pure an ordinary steel. construction steel. In the dumper body which was deve- The tow eye is used, in addition to towing, also as a loped together with SSAB Oxelösund’s technical custo- transport safety device in sea transportation. The North mer services, the high-strength of HARDOX plate was Sea storms soon revealed that the old brackets were not used to make the body more flexible and elastic. It the- able to handle the stress. Bendiro was then retained by reby became more durable and could effectively with- Volvo to produce a new bracket which could handle the stand blows and shock energy. demands placed on it. Contact was therefore taken with The excellent bendability of the HARDOX plate Kennet Olsson who is responsible for Impact 2000, made possible a softer and rounder design. This, toget- SSAB Tunnplåt’s high-strength sheet project for the her with the sheet’s higher resistance to wear, resulted in automotive industry. This was the beginning of a several a significant extension of the life span of the body. month long intensive project between Bendiro, SSAB Carnehl’s new dumper body is therefore now manu- Tunnplåt, and tool and machine manufacturers. factured from SSAB Oxelösund’s abrasion-resistant steel Bendiro’s designers described the bracket and its HARDOX 450. Through the use of the HARDOX pla- function as well as the special strength requirements. tes’s combination of hardness and toughness, the life SSAB Tunnplåt’s strength and design specialists thereaf- span of the body was doubled. The weight decrease ter produced proposals for suitable high-strength sheet achieved also made possible an increase in load capacity and carried out finite element analyses on various of slightly more than 5%. design solutions. In this way, a new bracket was develo- In order to improve the total strength of the design ped step by step. The last phase of the work was carried and to provide a greater resistance against sudden incre- out by the machine and tool manufacturers who adap- ases in stress, the chassis frame was also changed. It is ted Bendiro’s production equipment to the new material now constructed in SSAB Tunnplåt’s high-strength steel and design requirements. Domex 690 or in SSAB Oxelösund’s high-strength con- The new bracket is manufactured from SSAB struction steel WELDOX 700, instead of the previous use of an ordinary steel. These improved qualities provide significant added 6 value for the users of the dumper bodies. For the manufacturer, Carnehl, there is also the added advantage that the new dumper body can be manufactured at lower Jan-Olof Gustavsson, Kennet Olsson, The brackets for the tow eye on the Volvo S80 are Bendiro SSAB Tunnplåt manufactured from SSAB Tunnplåt’s ultra high-strength steel, Docol 1400 DP. The co-operation between Bendiro and SSAB Tunnplåt in the development of the new bracket yielded both higher strength and lower weight.

Horst Spangenberg, Mats Haglund, Carnehl’s new dumper body is manufactured in SSAB Carnehl SSAB Oxelösund Oxelösund’s abraison resistant steel HARDOX 450. The co-operation between Carnehl and SSAB Oxelösund resulted in a dumper body with a life span twice that of the previous one and increased load capacity.

7 SSAB and the environment

Protection of the environment is one of the most per cent of the quantity of iron and steel scrap important issues facing society. It is the Group’s goal which is used in steel manufacturing in Sweden. to maintain a leading position in the steel industry as As a result of a high degree of automation and well as in the environmental compatibility of its pro- computer-controlled processes, a high level of preci- ducts and processes. These goals are summarised in sion has been obtained in production. The use of the Group’s environmental policy. The policy empha- materials and energy is thereby made more efficient sises, among other things, a continuing improvement at the same time as it has been possible to fulfil in the environmental qualities of steel products and long-standing demands for reduced emissions into the use of resource-efficient manufacturing processes the environment. which are also technically and commercially viable. The Group employs clear and measurable environ- The products mental goals. The environmental work is conducted Society is developing towards more resource-efficient in an open and objective manner. Investments for an production and use of materials. This coincides well improved environment normally account for with the Group’s strategy to develop and manufactu- 10–15% of the Group’s total capital expenditures. re stronger and more resistant steel types. The investments being made in the plate opera- Steel – a recyclable material tions are providing the market with access to increa- Steel plays a significant role in the global economy singly durable and strong steels. The life-span of pro- and is one of the cornerstones in the development of ducts is increasing and downtimes for the replace- our modern society. ment of worn parts are being reduced. In addition, Steel can be reused an infinite number of times bridges and cranes, for example, can be manufactu- without its main constituent, iron, losing any of its red from thinner steel. original qualities. Scrap steel can thus be melted Similarly, the investments being made within the down an unlimited number of times and used in the sheet operations are making it possible to manufac- production of new steel products. Accordingly, steel ture products while consuming less in materials and possesses the fundamental qualities required by a with maintained or improved functions. For the recycling society. automotive industry, the ULSAB project has demon- There exist highly-developed systems for the col- strated that car bodies can be made up to 25% ligh- lection and recycling of scrap steel. Currently, ter using the new steels. This reduces the automobi- approximately 40% of the world’s steel production is les’ fuel consumption which results in an improve- based on such re-cycled scrap steel. Approximately ment in the environment. the same percentage applies to the steel production in Informing customers and other interested parties Sweden. regarding the environmental quality of the steel is becoming an ever more important part of marketing. The manufacturing process In 1997, work was begun to produce environmental The steel manufacturing takes place in modern product specifications for the Group’s products. This plants using efficient processes. The manufacturing work continued in 1998, and additional products is iron ore-based, which is a pre-condition for the have been furnished with environmental product spe- manufacture of the Group’s high-strength products. cifications. The specification provides the customer A chemical reduction must take place in order to with an opportunity to evaluate the steel from an extract hot metal. Coke is used as the reduction environmental perspective and to utilise life-cycle agent and carbon dioxide is therefore formed during analyses in order to find the product or design which the process. There are no commercially feasible is least detrimental to the environment during the life alternative means of reduction. of the product. When the hot metal is converted to steel it must be cooled, as a stage in the process. Scrap metal is Transportation used in the cooling which thus results in an efficient Transportation of raw materials and finished pro- use of energy and natural resources. Metallurgy in ducts affects the environment. During the year, a the steel operations currently consumes just over 35 policy was established regarding transportation ope-

8 Processed by-products from steel production have several areas of use. For example, blast furnace slag which has been air cooled is an excellent road construction material. The by-product, Merit 5000, gives cement unique and significantly improved qualities and is used in, among other products, roofing tiles. Reduced iron oxide is used in the igniting mixture in matches, and is used together with other metal oxides in the manufacture of ferrite magnets. rations within SSAB Tunnplåt. The policy points out, products. In those cases in which disposal or inter- among other things, the importance of using means mediate storage of by-products must take place, this of transport involving low energy consumption, that is done in an approved and supervised manner. For the means of transport should depend on the distan- many years, SSAB Merox has worked to increase the ce involved, and that transportation capacity should degree of recycling and processing of by-products. be utilised. Processed by-products are sold on a competitive mar- The steel operation’s transportation is already ket in which the functionality of the material is the adapted to a large degree to result in a low environ- central focus. These products are used within, among mental impact. The transportation of the raw materi- others, the electronics industry, as road construction al take place almost exclusively by rail or boat. and ground stabilisation materials, as well as in paint Approximately 85% of the deliveries of finished steel pigments and cement raw materials. products to customers are made by rail or boat. The extensive transportation of steel slabs from the steel Active environmental work mills in Luleå and Oxelösund to the hot rolling strip The environmental conditions for the Group’s steel mill in Borlänge takes place exclusively by rail. The operations are subject to public scrutiny. possibility to utilise return capacity is exploited to Consultations with, among others, public authorities the greatest possible degree. and persons living in the vicinity of operations are a regular feature when determining which environmen- By-products tal conditions should apply to steel production. The overriding goal with the by-products’ activities is Recurrent reviews and new permits have gradually to minimise the quantities that are discarded and to resulted in the steel industry being subject to strict seek commercial uses for the by-products for re-use environmental conditions which, in many cases, are or recycling. The steel production generates 1.9 milli- more stringent than those which apply to foreign on tonnes of by-products annually, of which approxi- competitors. Emissions are monitored through a mately 90% are recycled or processed into various large number of measurements. The results are

9 public and are submitted to the relevant authorities Group, as well as within the steel industry in general. for their supervision. The Group applies many significant portions of Co-operation with interested parties takes place, the established environmental guidelines systems among other things, through meetings with represen- EMAS and ISO 14000. The current environmental tatives of municipalities, County Administrative guidelines system will be supplemented in order to Boards, and the Swedish National Environmental meet the requirements for EMAS and 1SO 14001 Protection Agency. The Group is represented in registration in the year 2000. various air and water protection associations and The Group has a comprehensive network in order also participates in the Agenda 21 work. In order to to follow research and development within the envi- study the environmental effects and changes in the ronmental area and participates actively in several areas surrounding the steel facilities, various types of projects regarding industry-specific research within studies are conducted regarding, inter alia, air and the Swedish Ironmasters’ Association and with water quality. Swedish institutes and universities. In addition, the The Group carries out active environmental work Group has an extensive contact network with other with the aim of developing and securing the opera- companies in the industry, both in Sweden and abroad. tions in order to minimise the effect on the surroun- Comparisons with other steel manufacturers show ding environment. The work covers emissions into that the environmental work is at a high level from the air and water, savings of energy and raw materi- an international perspective. als, the handling of by-products and chemicals, risk analyses, preparedness for environmental accidents, Material and energy balance etc. Within the Group, there are effective systems for During the year, 3.4 million tonnes of crude steel the sorting at source of, among other things, paper, were produced which were processed to 3.0 million plastics, batteries, fluorescent tubes, corrugated card- tonnes of finished products. The following figure board, waste oil, and oil filters. In many cases, the illustrates the material and energy balance for the processes and the products are developed based on a manufacture of 1,000 kilograms of finished products. life cycle perspective. The managers of the respective subsidiaries are Environmental events during 1998 responsible for ensuring compliance with the Group’s During the year, waste heat was collected within the environmental policy. At the steel plants, there are steel operations corresponding to the energy content special environmental protection departments char- of almost 210,000 cubic meters of fuel oil annually. ged with monitoring, auditing, and giving advice on This waste heat is converted to distance heating and environmental matters. There is an environmental electricity. Distance heating accounts for more than council for the co-ordination of such work within the 90% of the energy requirements in the distance hea-

Particles SO2 NOX CO2 0.42 0.41 0.54 1,050 (0.55) kg (0.54) kg (0.52) kg (1,080) kg

Iron raw materials 1,600 kg Material and energy balance Steel 1,000 kg Alloying elements and slag-formers 135 kg Coal 680 kg in the steel operation 1998 (per produced tonne of Waste products for recycling 650 kg Waste products to disposal 80 kg finished product) Energy (oil, electricity and LPG) 930 kWh Energy for electr. end heat product. 750 kWh Suspended Oxygenconsuming Oil and solids substances grease 0.072 0.059 0.0127 (0.054) kg (0.059) kg (0.008) kg

10 ting network within the Luleå and Oxelösund muni- ral new environmental permits. In Oxelösund, a per- cipalities, and approximately 10% in the Borlänge mit was received for the construction of a new barge municipality. dock, and in Borlänge a permit was obtained for a Emissions from operations remain at a low level. temporary increase in production of pickled hot-rol- The figures set forth on the opposite page illustrates led-sheet. the emission of particles and sulphur dioxide into the In addition, the Group obtained a permit from the air, as well as oil and grease into the water. Environmental Protection Licensing Board for incre- During the year, several changes in the operations ased steel production in Luleå. The decision is sub- were made which resulted in a decreased impact on ject to new conditions for the operation. The condi- the environment. In Luleå, the construction was tions are, in the main, deemed capable of being fulfil- commenced of a new facility for the handling of raw led, but some of them will be the subject of an appeal. material for the blast furnaces. The facility will be The steel operations applies a total of more than placed into operation in the middle of 1999. 170 conditions for its business. These are of various Together with the ongoing conversion of the equip- natures and set forth, among other things, values for ment for the repouring of molten hot metal, these guidelines, limits, and goals, or requirements for sup- investments will, among other things, result in decre- plementary studies. ased emissions of dust. In Borlänge, a new facility is being built for the recycling of chlorhydric acid and Permits within the steel operations in respect of per- the extraction of iron oxide. The facility will be mitted annual production volumes are summarised in brought into operation in 1999 and will increase self- the table below: sufficiency in chlorhydric acid for the impregnation of hot-rolled sheet, increased recovery of iron oxide, Emissions from the operations are, in most cases, sig- and reduced emissions into the surrounding environ- nificantly lower than the limits set by the public aut- ment. horities. In one case, however, disruptions occurred In Oxelösund, the processing of water and sedi- which resulted in a limit being exceeded during the mentation has improved in conjunction with the year. Measures were taken which resulted in the entry into operation of the new four-high rolling emission in this case being, at the end of the year, mill. Continued reinvestments in the coke plant’s by- approximately 35% below the limit. product plant have, among other things, resulted in Group companies were not involved in any envi- significantly lower levels of emissions of sulphur ronmentally-related disputes during the year. The dioxide. Group possesses liability insurance which covers During the year, the steel operations received seve- damage to third parties and environmental damage insurance, as required by law. Permited annual production volumes SSAB SSAB In thousand tonnes Oxelösund Tunnplåt Taxes and fees Coke 530 800 Hot metal 1,700 2,300 The total energy and environmental tax burden Crude steel 1,900 2,500 during the year amounted to SEK 69 million. If the Hot-rolled plate / sheet 820 2,800 operations were taxed in the same manner as other Cold-rolled sheet 1,200 steel works within the EU, the tax burden would be Hot-dip galvanized sheet 300 * approximately SEK 50 million lower. Aluminium-zinc coated sheet 250 Organic-coated sheet 250 * During 1998 a temporary permit was granted for an additional 20,000 tonnes.

Particles Sulphur dioxide Oil and grease

Kg/t Kg/t Kg/t 1.40 1.40 0.014 1.20 1.20 0.012 1.00 1.00 0.010 0.80 0.80 0.008 0.60 0.60 0.006 0.40 0.40 0.004 0.20 0.20 0.002 0 0 0 94 95 96 97 98 94 95 96 97 98 94 95 96 97 98

11 The SSAB share

Redemption of shares Share Price SEK In June, a redemption of shares was carried out. During 170 the spring shareholders were invited to redeem every 160 150 eighth share at a price which was just over 25% higher 140 than the stock market price. Following the application 130 120 period, the redemption price was fixed at SEK 208 per 110 share. In total, 15.9 million shares were notified for 100 redemption, corresponding to 99.3% of the maximum 90 80 number of shares which could have been redeemed. 70 Accordingly, in total shares were redeemed for SEK 60 50 3,305 million. 40 There was lively trading in the redemption rights 30 during the application period. 44% of the outstanding 20 10 redemption rights were traded at prices between SEK 0 5.00 and SEK 6.50. 1989 1990 1991 19921993 1994 19951996 1997 1998 Lowest / highest General index of Affärsvärlden

Share capital Number of shares traded per month Following the redemption, the share capital amounts to Million SEK 2,803 million divided into 112.1 million shares 14 13 with a nominal value of SEK 25 each. 81.9 million sha- 12 res are class A shares and 30.2 million shares are class B 11 shares. All shares are non-restricted. Each class A share 10 9 entitles the holder to one vote and each class B share 8 entitles the holder to one-tenth of one vote. 7 6 5 Dividend 4 The proposed dividend amounts to SEK 4.50 per share, 3 2 corresponding to slightly more than 50% of the profit 1 0 after tax. Since 1989, the dividend has thus correspon- 1994 1995 1996 1997 1998 ded, on average, to 31% of the profit after tax, which is A-shares B-shares well in accordance with the Group’s dividend policy.

SSAB on the stock exchange Since 1989, the shares have been listed on the A-list of Optionsmäklarna has issued put and call options. the Stockholm Stock Exchange, and since 1994, listed among the most actively traded stocks. A trading unit Shareholding structure consists of 200 shares. At the end of the year, Robur aktiefonder was the lar- During the year, shares were traded at a value of SEK gest shareholder in terms of capital, followed by 8,400 million. Trading in SSAB shares took place on all Industrivärden, the Fourth AP Fund, and SPP. Since exchange days at an average value of SEK 35 million 1994, Industriväden has been the largest shareholder in per exchange day. Almost 60% of the outstanding sha- terms of voting capital. Foreign ownership has declined res during the year were traded, which was just under from 21% to 13%, while both Robur aktiefonder and 1% of the total turnover on the Stockholm Stock Industrivärden have increased their shareholdings. Exchange A-list. The trading per month during the past The number of shareholders declined somewhat five years is set forth in the diagram below. The lowest during the year and, at year end, was 34,800 (38,700). trading price for the share during the year was SEK 65 Of these, 32,600 shareholders own 1,000 shares or less. and the highest price was SEK 172. At the end of the The ten largest institutional owners own just under year, the SSAB’s exchange value amounted to slightly 60% of the shares. more than SEK 8,600 million. Since the spring of 1994,

12 Changes in the number of shares and share capital since 1989 Analyses Change in Number Change in share Share capital During the year, the following Year no. of shares of shares capital (SEK m) (SEK m) banks and investment brokers, 1989 Conversion +1,500,000 26,500,000 +150 2,650 among others, published analyses 1994 Conversion + 5,500,000 32,000,000 +550 3,200 of SSAB: 1995 Split 4:1 + 96,000,000 128,000,000 0 3,200 1998 Redemption – 15,891,199 112,108,801 – 397 2,803 Alfred Berg Aragon Data per share 1994 1995 1996 1997 1998 Aros Trading price, class A Dec. 31, SEK 81.25 68.00 113.50 130.00 77.50 Carnegie Profit, SEK 12.20 21.30 11.60 10.40 8.20 1 CI Nordic P/ E ratio 6.7 3.2 9.8 12.5 9.5 Den Danske Bank Equity, SEK 67.25 85.75 93.50 100.00 88.70 2 Den Norske Bank Dividend, SEK 2.50 4.00 4.00 4.50 4.50 3 Deutsche Morgan Grenfell Yield, % 3.1 5.9 3.5 3.5 5.8 1) Data per share have been recalculated as a consequence of the split at 4:1 which was carried out in 1995. Dresdner Kleinwort Benson 1) Calculated on an average number of shares, 119.7 million. Enskilda Securities 2) The redemption in 1998 reduced equity per share by SEK 14.80. 3) Pursuant to the proposal by the Board of Directors. H. Lundén Fondkommission Hagströmer & Qviberg Largest shareholders Handelsbanken Share in % of: capital votes HSBC Robur aktiefonder 13.8 11.1 Matteus Industrivärden 10.8 13.5 Merrill Lynch Fourth AP Fund 7.2 7.5 MeritaNordbanken SPP 4.8 3.0 Paribas Skandia 4.4 4.4 Salomon Smith Barney LKAB 4.3 5.7 Société General AMF Pension 3.5 2.8 Swedbank Handelsbanken fonder 3.4 3.5 WASA 2.2 2.1 Warburg Dillon Read AMF Försäkring 2.1 1.8 Foreign shareholders 12.6 12.8 Other shareholders 30.9 31.8 Total 100.0 100.0

Distribution of shares Shareholding Number % of all shareholders % of share capital 1–500 29,002 83.3 7.6 501–1,000 3,617 10.4 2.5 1,001–5,000 1,729 5.0 3.1 5,001–10,000 160 0.5 1.1 10,001–50,000 171 0.4 3.6 50,001–100,000 44 0.1 2.9 100,001– 103 0.3 79.2 Total 34,826 100.0 100.0 The tables illustrating the largest shareholders and the distribution of shares are based upon information obtained from VPC on December 31, 1998.

13 REPORT OF THE DIRECTORS Group review

International review United States, steel imports increased to their highest According to the International Iron and Steel Institute level to date, slightly more than 31 million tonnes. (IISI), world steel consumption decreased by 1% from China has experienced an extremely rapid increase in the record level in 1997. Steel consumption was thereby consumption during the entire 1990s. During the last 690 million tonnes, which is the second highest level ten year period, steel consumption has more than doub- ever recorded. led. China’s share of the world market during the same Development has been decidedly different on various period increased from 9 just over 16%. markets. Steel consumption increased 5% in Western Also in the United States, steel consumption has Europe, 4% in the United States, and 10% in China. increased considerably during the 1990s. Following the On all three of these markets, steel consumption rea- recession year of 1991, steel consumption has increased ched its highest level ever. On most Asian markets, by more than 50%. however, steel consumption decreased considerably – by In the former Soviet Union, steel consumption decre- 15% in Japan and by almost 35% in South Korea. ased significantly at the end of the 1980s. This market The decrease in steel consumption in Asia resulted in has decreased its share of the world market from 20 to a large change in the global trading flow in steel. 4%. Consumption during the year remained at a low Exports to Asia from Western and Eastern European level. steel producers decreased at the same time as exports World production decreased by 2% and amounted to from Asian steel producers, primarily to the United 775 million tonnes of crude steel. Since 1990, produc- States and Western Europe, increased. Western Europe, tion in the former Soviet Republics has decreased by which for some time has been a major net exporter, just over 50%, while production in developing countri- became a net importer of steel in 1998 and, in the es continues to increase. Steel consumption Millions of tonnes 1997 1998 Change in % The European market EU-15 130 136 +5 Demand for steel, which continued to be strong during Other European countries 34 35 +3 the first half of the year, peaked at around the end of Former Soviet Republics 30 30 0 the first half of the year and thereafter weakened during North America 128 134 +5 the autumn. The upswing in the economy which started Japan 82 70 –15 China 104 114 +10 in the spring of 1997 was thereby short-lived, but South Korea 38 25 –34 nonetheless led to higher levels of steel consumption in Other Asian countries 82 76 –7 Western Europe in 1998 than ever before. Other countries 71 70 –1 The changed trading flow in steel led to a sharply Total 699 690 –1 increased supply which, at the beginning of the year, Source: IISI could be absorbed by an increase in demand. At the end

Crude steel production Steel consumption Steel consumption ■ Western Europe ■ North America in the USA in Western Europe ■ Eastern Europe incl. Sovjet ■ Asia ■ Other countries Mt Mt Mt 700 175 175 600 150 150 500 125 125 400 100 100 300 75 75 200 50 50 100 25 25 0 0 0 50 60 70 80 90 98 70 75 80 85 90 95 70 75 80 85 90 95

14 of the second quarter, however, increases in supply cau- during the second quarter. At the end of the second sed pressure on steel prices which resulted in gradual quarter, however, prices for steel in Western Europe price decreases on most steel products during the generally became subject to pressure and it has been second half of the year. necessary to accept price decreases on primarily hot and Utilisation of capacity in the Western European steel cold rolled sheet. However, prices for quenched steels industry continued to be at high levels during the first within the plate operations have been stable during the half of the year. At the end of the year, however, the second half of the year. steel companies decreased their production in order to In Swedish kronor, the Group’s steel prices at the end achieve balance on the market. The decreases in pro- of the year were 7% lower than at the end of the second duction resulted in the utilisation of capacity in the steel quarter and were thereby back to approximately the industry within the EU only amounting to just under same level as at the end of 1997. The price trend in 80% during the last two months of the year. However, Swedish kronor is set forth in the diagram below. the high utilisation of capacity during the first half of The price trends resulted in the Group’s steel prices in the year resulted in crude steel production being almost Swedish kronor being on an average 9% higher than 1% higher than 1997. during 1997. Approximately 3 percentage points of the increase is a consequence of the weaker Swedish krona. The Swedish market A number of minor disruptions in the sheet opera- The trends in Sweden were similar to those of Western tions, as well as low levels of production during the Europe in general. Steel production is estimated to have start-up and breaking in of the new four-high rolling increased by 7%. mill, led to decreased delivery volumes during the first The market for sheet is estimated to have increased three quarters of the year. During the last quarter, low by almost 10%, to approximately 1,900,000 tonnes, Sales per operating area and the plate market by just over 10%, to approximate- SEK millions 1997 % 1998 % Steel operations 11,414 60 11,594 60 ly 220,000 tonnes. Processing operations 1,116 6 1,155 6 Deliveries to the Swedish market by the Group’s steel Trading operations 6,328 34 6,545 34 operations decreased by 4%, among other things as a Group adjustments –1,384 – –1,459 – consequence of limited supplies of plate. The market Total 17,474 100 17, 835 100 shares for sheet and plate thereby dropped to slightly over 40%. numbers of orders received resulted in a decrease in the Sales production of sheet. This resulted in deliveries by the It was possible to increase prices on the group’s steel steel operations decreasing during the year by 8%, and products during the first and, in certain cases, also amounting to 2,381,000 (2,602,000) tonnes.

Steel consumption Steel consumption Price trend in Sweden in Sweden Index 100 = 1988 quarter 1 Moving 12 months

kt kt Index 3,500 3,500 140 3,000 3,000 130 2,500 2,500 120 2,000 2,000 110 1,500 1,500 100 1,000 1,000 90 500 500 80 0 0 70 70 75 80 85 90 95 94·95·96·97·98· 94·95·96·97·98·

15 Sales per geographic region ces contributed by 4 percentage points while lower SEK millions 1997 % 1998 % volumes contributed with a decrease of 2 percentage Sweden 8,746 50 8,910 50 points. Denmark 1,476 8 1,509 9 Finland 710 4 763 4 Cost structure and cost trends Norway 696 4 668 4 Costs in the operations increased to SEK 16,813 Germany 1,320 8 1,289 7 (16,170) million. Of this, approximately SEK 4,000 Great Britain 1,020 6 1,098 6 million related to the purchase of products for resale Italy 722 4 784 4 which are not produced by Group companies. These are Benelux countries 605 3 652 4 Other EU countries 705 4 735 4 primarily sold by the Group’s trading company Tibnor. North America 820 5 674 4 The remaining costs of approximately SEK 12,800 Other regions 654 4 753 4 million consist of manufacturing costs, depreciation, Total 17,474 100 17,835 100 and costs for raw materials and energy. Manufacturing costs consist primarily of costs for personnel and ser- For the trading operations, which are dependent on vices. These costs are, to a great extent, related to the Swedish market, demand was relatively stable but wages. weakened somewhat for, among other products, long Productivity in the steel operations was affected products during the second half of the year. The delive- negatively by a number of minor disruptions in the ry volumes for steel and metals were, however, 4% hig- sheet operations and to the start-up of the new four- her than in 1997 and, in total, sales in the trading ope- high rolling mill. The number of man hours per tonne rations increased by 3%. remained unchanged however at 3.5. Sales per operating area are set forth in the table The extensive investment operations as well as the below. disruptions in the steel productions resulted in increased costs, especially for services purchased. This contributed An increased prioritisation of the domestic market to an increase in manufacturing costs by 5%. A number resulted in a decrease in the steel operations’ exports of projects have been started up during the year in order sales and, measured in volume, this was slightly more to reduce these costs. than 60 (65)% of sales. However, for the Group as a Depreciation increased to SEK 880 (789) million as a whole, the share of exports remained unchanged at consequence of the current major investment program- 50%, as is evident from the following table showing mes in the steel operations and in SSAB HardTech. sales per geographic region. In the manufacture of sheet and plate, approximately one half of the costs are related to raw materials. In total, the Group’s sales increased by 2%. Higher pri- Agreements in respect of prices and deliveries for iron

Cost structure Sales Crude steel production

SEK m kt Depreciation 5% Purchased 17,500 3,500 products 24% 15,000 3,000 Raw material 28% 12,500 2,500 10,000 2,000 7,500 1,500 5,000 1,000 Energy 5% Manufacturing 2,500 500 costs 38% 0 0 94 95 96 97 98 94 95 96 97 98

16 ore and coal are entered into on an annual basis at the beginning of the year. Alloys, however, are mostly pur- SEK millions 1997 1998 chased on a quarterly basis. Raw materials are priced Sales 17,474 17,835 on the world market and the prices, which are primarily Costs – 15,006 – 15,648 quoted in USD, are greatly dependent on the state of the Depreciation – 789 – 880 steel market. Coal and iron ore are the dominant raw Affiliated companies 84 48 materials. Calculated in USD, the price of coal decrea- Operating profit 1,763 1,355 sed while the price of iron ore increased. However, a Financial items 143 69 Profit 1,906 1,424 weaker Swedish krona resulted in an increase in the costs of iron ore and coal by 8%. The costs for alloys The year 2000 were largely unchanged. During the past two years, comprehensive work has The Group’s cost structure is illustrated by the adja- been carried out in identifying and implementing cent diagram. necessary changes in the Group’s administrative information systems and production control systems in Energy order to ensure the functioning of these systems at the Coal is a raw material in iron ore-based steel produc- turn of the millennium. This work is expected to be tion. Coal is an essential reduction agent in order to complete in all significant respects at the end of June remove oxygen from the iron ore. Coal is also the basis for most of the energy, approximately 85%, provided Changes in operating profit for the steel operations. Steel operations SEK millions Energy is otherwise provided by electricity, oil, and – Improved margins + 400 LPG. In total, the steel operations in 1998 consumed – Decreased volumes – 350 1,380 GWh of electric power as well as 1,400 GWh of Trading and processing operations – Weakened margins – 175 oil and LPG. Through the utilisation of the energy-rich – Increased volumes +75 gases which arise during steel production, electricity is Increased processing costs – 275 produced by the half-owned energy company, Lulekraft, Increased depreciation – 91 and in the OK3 power station in Oxelösund. During the Non-recurring items – 48 year, these facilities produced 650 (600) GWh of electri- Miscellaneous + 56 city which was used in the steel operations. Change in operating profit – 408 In total, energy costs (excluding coal) increased to 1999. The total cost for necessary programming is esti- SEK 746 (692) million. Included in the costs are various mated to amount to just under SEK 30 million, of taxes amounting to SEK 69 (54) million. which slightly more than SEK 10 million affected the year’s earnings.

Steel production Profit after financial items Currency flows Moving 12 months EUR =Currencies within the Euro-block

Sheet Plate Inflows Outflows SEK m kt SEK m 4,000 3,500 3,500 3,000 3,000 3,000 2,000 2,500 2,500 1,000 2,000 2,000 0 1,500 1,500 1,000 1,000 1,000 2,000 500 500 3,000 0 0 4,000 94 95 96 97 98 94·95·96·97·98· USD EUR DKK GBP NOK Others

17 The Euro Profitability and equity ratio Prior to the introduction of the Euro, a review was car- The decline in profit resulted in a decrease in the return ried out of its effects on the Group’s operations. Price on capital employed before taxes to 11 (14) % and on transparency on the steel market is already significant, the shareholders’ equity after taxes to 8 (11) %. Return and the Euro’s introduction is therefore not expected to on operating capital was 12 (18)%. result in any significant increase in this. The prepara- Following the redemption of shares, the equity ratio tions have therefore been concentrated on adapting sys- dropped to 58 (70)%. tems and routines for handling the new currency. Dividends Profits The Group’s dividend policy provides that dividends shall be adapted to the average profit level over an eco- The operating profit was SEK 408 million lower than in nomic cycle and that dividends, on a long-term basis, 1997 and amounted to SEK 1,355 (1,763) million. As is shall constitute one third of profit after taxes. apparent from the table below, improved margins in the It is proposed that the dividend remain unchanged at steel operations and increased volumes in the trading SEK 4.50 per share, resulting in a total dividend of SEK operations contributed by SEK 475 million, while 504 million. decreased volumes in the steel operations, weakened margins in the trading operations, and increased proces- Foreign exchange sing costs and depreciation lowered profits by just Sales in export markets occur primarily in local currenci- under SEK 900 million. es. Therefore, export sales create inflows of mainly West Operating profit includes non-recurring items total- European currencies and US dollars. ling SEK 20 (68) million. In addition, the operating pro- Purchases of raw materials, primarily iron ore and fit includes an allocation in the amount of SEK 34 (94) coal, occur in US dollars. Other currency outflows are a million to the Group’s profit sharing system. result of major investments which partially occur in Return on the Group’s liquid funds increased to 5.9 foreign currencies, primarily DEM. (4.5) %. Despite the higher return, net financial items In total, this means that the Group has a net inflow of dropped to SEK 69 (143) million as a consequence of all currencies except USD. The net inflow of foreign cur- the redemption of shares in the amount of SEK 3,305 rencies increased to SEK 3,600 million, of which approx- million which was carried out at the end of the second imately 30% consists of currencies within the Euro quarter. block. The Group’s most significant currency flows are The profit after financial items decreased therefore by set forth in the adjacent diagram. SEK 482 million to SEK 1,424 (1,906) million. The Group’s currency risks are managed by SSAB

Investments in plants Liquid assets Cash flow and depreciation Depreciation SEK m SEK m SEK m 2,000 4,000 2,000 1,750 3,500 1,500 1,500 3,000 1,000 1,250 2,500 500 1,000 2,000 0 750 1,500 –500 500 1,000 –1,000 250 500 –1,500 0 0 –2,000 94 95 96 97 98 94 95 96 97 98 94 95 96 97 98

18 Finance, the Group’s internal bank. The subsidiaries ments relate to the installation of a new rougher at the hedge their contracted currency flows with this internal rolling line in Borlänge and a new coal injection facility bank. To the extent that these flows cannot be offset for the metallurgy in Luleå. against other currency flows, SSAB Finance covers the The Development Plan Domex 2000 will create the currency risks, primarily through forward contracts. conditions for continued expansion within the area of Since the order stock for the steel operations normally high-strength sheet. The conditions for the production only corresponds to approximately seven weeks produc- of thinner high-strength sheet are being improved at the tion, this means that changes in currency rates affect the same time as the total production capacity is increased profit relatively quickly. Changes in exchange rates bet- by 25%. An expanded dimensions programme is also ween 1997 and 1998 resulted in a positive effect on pro- creating opportunities to further strengthen the position fit of approximately SEK 100 million. on the domestic market for all sheet products. The development plan for SSAB HardTech involves Taxes investments totalling SEK 500 million and comprises, Taxes for the year in the amount of SEK 427 (536) mil- among other things, the construction of a new produc- lion consist of corporate income taxes of SEK 274 (359) tion unit in the United States. The unit is being con- million, deferred taxes on transfers to untaxed reserves structed in Mason, Michigan close to the automotive for the year in the amount of SEK 142 (157) million, industry in Detroit. and a share in taxes for affiliated companies in the The new production unit will make it possible to amount of SEK 11 (20) million. The effective tax rate satisfy an increasing demand for safety components. for the Group was 30.0 (28.1) %. The advantages of the press-hardening technology with narrower tolerances, dimension stability, and weight Investments reduction can continue to be developed in close co-ope- The investment operations were dominated by the three ration with automobile manufacturers in both Europe pending strategic investment projects: General Plan OX and the United States. 2000 in the plate operations, Development Plan Domex In the beginning of the year, a decision was taken to 2000 within the sheet operations, and the construction modernise and expand the large blast furnace in Luleå of a production unit for safety components for automo- in order to allow for increased hot metal production to biles within SSAB HardTech. be run in a single blast furnace following the upgrade. The smaller blast furnace in Luleå can thereafter be General Plan OX 2000 comprises investments totalling taken out of operation which will make possible signifi- SEK 1,650 million including a new four-high rolling Funds statement mill and a finishing line for plate in thin dimensions as SEK millions 1997 1998 the largest projects. Cash flow from operations + 2,204 + 2,020 These investments are aimed at creating conditions Change in working capital – 437 – 614 for continued expansion within the area of quenched Investment activities – 2,021 – 2,021 steels. The capacity in the four-high rolling mill is being Cash flow – 254 – 615 increased by approximately 60%. In addition, it will be Financing activities – 359 – 2,212 possible to roll thinner dimensions of plate and impro- Changes in liquid assets – 613 – 2,827 vements will be obtained in surfaces, smoothness, and thickness tolerances. cant improvements in efficiency. The project, which Development Plan Domex 2000 comprises invest- includes investments totalling SEK 850 million, also ments totalling SEK 1,280 million. The largest invest- includes a new raw material handling.

Net debt Accounts receivable Inventories

% of sales % of sales SEK m SEK m % SEK m % 4,000 4,000 40 4,000 40 3,000 3,500 35 3,500 35 2,000 3,000 30 3,000 30 1,000 2,500 25 2,500 25 0 2,000 20 2,000 20 –1,000 1,500 15 1,500 15 –2,000 1,000 10 1,000 10 –3,000 500 5 500 5 –4,000 0 0 0 0 94 95 96 97 98 94 95 96 97 98 94 95 96 97 98

19 Sales, profit / loss and return on capital employed Sales Operating Profit / loss after Return on profit / loss financial items capital employed, % SEK millions 1997 1998 1997 1998 1997 1998 1997 1998 Subsidiaries SSAB Tunnplåt 8,559 8,754 876 776 832 722 20 15 SSAB Oxelösund 4,172 4,057 364 272 292 178 12 8 Plannja 1,010 1,038 71 61 66 55 25 19 SSAB HardTech 343 364 107 87 99 71 36 17 Dickson PSC 106 117 24 20 25 20 25 21 Tibnor 6,328 6,545 332 166 316 152 23 12 Miscellaneous 554 515 10 1 69 66 – –

Parent company SSAB Finans – – –11 –10 84 74 – – Other parent company units* – – –47 –74 87 30 – – Affiliated companies – – 43 29 43 29 – –

Group adjustment – 3,598 – 3,555 –6 27 –7 27 – – Total 17,474 17,835 1,763 1,355 1,906 1,424 14 11 * excluding dividends from subsidiaries and affiliated companies. The profit in other parent company units is primarily comprised of administrative costs and a positive figure for financial items.

Among investments decided during the year, there is relation to the Group’s sales, to 14 (15) %. also a new steel harbour in Oxelösund at a cost of SEK Inventory volumes of slabs and sheets in the steel 165 million. The harbour will be placed into operation operations increased during the second half of the year. after the summer of 1999 and will make possible signi- Balance sheet ficant improvements in efficiency through the co-ordi- SEK millions 1997 1998 nation of the Group’s sheet and plate deliveries via Assets Oxelösund. Fixed assets 7,858 9,018 In total, decisions for new investments were taken Inventories 3,260 3,905 amounting to SEK 1,636 (848) million. Net investment Accounts receivable 2,580 2,531 Other assets 621 607 Cash flow Liquid assets 3,892 1,065 SEK millions 1997 1998 Total assets 18,211 17,126 SSAB Tunnplåt + 52 – 354 SSAB Oxelösund – 738 – 302 Equity and liabilities Plannja + 37 + 35 Equity 12,821 9,941 SSAB HardTech + 6 – 230 Minority shares 175 159 Dickson PSC + 21 + 5 Deferred tax and other provisions 1,699 1,851 Tibnor + 81 – 33 Long-term liabilities 511 1,289 Other subsidiaries + 52 + 131 Current liabilities 3,005 3,886 Parent company* + 235 + 133 Total equity and liabilities 18,211 17,126 Total – 254 – 615 * excluding investments in shares in subsidiaries. In relation to sales, inventories were 22 (19)%. payments amounted to SEK 2,021 (2,021) million, of The increase in inventory resulted in an increase in which SEK 1,109 (1,381) million related to the three operating capital by SEK 614 (437) million. Together strategic projects and the blast furnace project. Total with the continued high net investment payments this remaining payments in these projects amount to just resulted in a negative cash flow of SEK –615 (–254) under SEK 1,200 million. million. Interest-bearing liabilities at year end were SEK 1,644 (–2,929) million greater than interest-bearing Financing and liquidity assets. Accounts receivable decreased as a consequence of Cash flow in the various operations is set forth in the decreased sales at the end of the year, and amounted, in following table.

20 produce speciality products with the same efficiency as For long-term financing, an MTN (Medium Term Note) ordinary steel. programme was introduced during the year totalling In the manufacture of steel, various types of by-pro- SEK 1,500 million. At the same time, the Group’s ducts are produced. Extensive development work is Swedish Commercial Paper Programme was increased being carried out in order to re-use these by-products in to SEK 1,500 million. The Swedish Commercial Paper a profitable manner. Programme is placed by Standard & Poor in a rating To an ever greater extent, research and development category of K-1. In addition, there is a Euro takes place primarily in co-operation with steel users. In Commercial Paper Programme in the amount of USD addition, the Group utilises resources at universities and 100 million. Borrowing within these programmes research institutes as well as industry organisations. amounted to SEK 1,830 million at year end. With regard to strengthening the position of steel as The liquid assets are invested both on the Swedish as opposed to competing materials, the Group also co-ope- well as the international money market. At year end, rates with other steel companies. This is currently investments amounted to SEK 685 (3,436) million. taking place in, among other areas, a rapidly increasing number of projects within EU research. Of the project Research and development proposals which were initiated within the Group, most The Group’s research and development operations are have been accepted following tough competition from based on the needs of the market and focus on impro- other steel manufacturers’ and research institutes’ pro- ving the competitiveness of its customers. Most of the posals. Another example of this type of co-operation is resources are invested in developing new products and ULSAB, where over thirty sheet manufacturers from all improving the characteristics of existing steel and offe- over the world have demonstrated the possibilities for ring customers qualified technical support. Within the steel in achieving an automobile body where the weight steel operations, significant investments are also being is reduced by 25%. The Group will also be participa- made in rendering more efficient processes for the ting in the next development phase of this project. manufacture of steel. The goal, in terms of product and The development efforts have resulted in the fact that quality, is to be one of the leading steel companies. high-strength steel products constitute approximately The costs for the R&D operations amount to just 35% of the deliveries as compared with 15 - 20% for under SEK 100 million, corresponding to 0.8% of sales the leading competitors in Western Europe. in the steel operations. A study conducted by IISI shows The goal-oriented development work has resulted in that these costs, in relation to sales, are of the same size products with positive growth potential. Within the as those of other Western European steel companies, area of high-strength steel, hot-rolled cold-forming but that at SSAB a larger share is invested in product steels, as well as quenched, abrasion-resistant steels, and development and customer support. structural steels are well established, but these steels are Modern steel is often characterised by demonstrating continually being developed for new areas of applica- good qualities concurrently in several areas such as tion, with improved qualities. Cold-rolled steel and strength, formability, high abrasion, weldability, and metal-coated sheet are also being developed with higher corrosion resistance. The desire of steel users to intro- strength levels for new applications. During the year, duce new technology and automate their manufacturing orders were received, from among others, the automoti- methods requires that the steel which is used possesses ve industry for such products. small variations in its qualities. In this respect, the The use of the Group’s steel products is supported by Group’s steel fulfils the great demands placed on it. A providing customers with access to various types of contributing factor is that the steel is manufactured in software aides which have been developed within the iron ore-based processes. A study, conducted by IISI, Group. During the year, WeldCalc, DoSelect, Prelaq shows that the Group’s steel products possess low impu- School, and a handbook for abrasion-resistant steel, rity contents as compared with its competitors. among others, were introduced. These services, which The recent major investments in the steel operations are somewhat unique, are well sought after. are, to a significant extent, a result of the market’s Within the Group’s processing companies, products demand for improved steel. The new facilities render are being developed for the construction and automoti- possible the manufacture of thinner and stronger sheets ve industries. Methodical development work within the and plates with narrower tolerances. Customers can use construction area has resulted in a leading position for this steels in order to produce products with improved the Group in roof, walls, and water drainage products. performance, lower weight, and at a reduced cost. For vehicle components, the press-hardening technology Manufacturing throughout the steel operations is car- has been developed in order to render possible additio- ried out with well-tested processes. In addition to fur- nal weight reduction for both existing and new applica- ther improvements in the performance of the processes, tions. A focus has been made on press-hardened steel the development work is primarily focused on manufac- strips for bumpers and has resulted in orders from seve- turing the Group’s speciality products with a high ral automobile manufacturers. degree of efficiency and quality. The aim is to be able to

21 Royal Technical College’s materials programme will be situated in Borlänge. This, in combination with industry stipends to students from, among other places, Bergslagen, means that the number of applicants from locations traditionally involved in steel work will in all probability increase. In this way, the future supply of skilled personnel will be facilitated. The market’s demands for improved quality, delivery security, and customer adaptation are increasing steadi- Registered number of employees on 31 December ly. Therefore, it is of utmost importance to find organi- 1997 1998 Change in % sational solutions in which employees’ commitment and SSAB Tunnplåt 4,500 4,404 -2 sense of responsibility can be utilised. During the year, SSAB Oxelösund 2,497 2,524 +1 work in developing personnel and the organisation has Plannja 392 390 -1 continued. In SSAB Tunnplåt, for example, approxima- SSAB HardTech 221 242 +10 tely 250 employees have discussed the future operations Dickson PSC 138 161 +16 and organisation in groups with participants from Tibnor 1,669 1,730 +4 Miscellaneous 125 133 +6 various departments. The experience is positive and Total 9,542 9,584 0 many excellent suggestions for development efforts and improvements have been received. Personnel Innovation work creates new roles for both managers The number of employees at the end of the year was and co-workers and has generated a comprehensive 9,584 (9,542). The increase at SSAB HardTech is a con- need for skills development. The development of leaders sequence of the establishment in the United States. and leadership groups is an area which has been priori- The average number of employees was 9,661 (9,630), tised. As a consequence of a decreased number of first- of whom 674 (589) were employed outside Sweden. line managers, and an increased delegation of responsi- During the past few years, recruitment has been bility and authority to work teams, education regarding modest. However, a number of younger, well-educated group development and problem solving in groups has persons have been brought into the Group each year. been significant. This has been done in order to acquire skills and to In order to assess how efforts to develop new wor- counteract an overly unbalanced age distribution. The king models, etc., are perceived, opinion surveys are latter reason applies not least to administrative person- carried out in certain subsidiaries. Aspects such as satis- nel. The age structure for white collar and blue collar faction, pride, and commitment have received good sco- employees is set forth in the adjacent diagram. res. Similarly, there is a great interest in participating in Most of the new employees with a recent university the development of the operations. education have completed a student engineering pro- In order to facilitate skills development, adult educa- gramme. tion at the high school level which is carried out on The large number of employees due for retirement in employees’ free time has been introduced on a test basis coming years means that valuable skills must be repla- within several units. The company bears the costs of ced. In order to meet future recruitment needs for well- text books and course fees and contributes a certain educated employees, co-operation with universities and amount when the participants has completed the studies high schools is continuously being developed. with satisfactory results. To date, the experience has Commencing in 1999, the two first years at the been positive.

Personnel expenses Number of accidents Age structure per million working hours

% of sales White collar Blue collar

SEK m % 40 Age 3,500 35 35 61– 3,000 30 30 51–60 2,500 25 25 41–50 2,000 20 20 31–40 1,500 15 15 21–30 1,000 10 10 0–20 500 5 5 0 0 0 94 95 96 97 98 94 95 96 97 98 2000 10000 1000 2000 No.

22 The Group continually invests in safer production ducts. The prices for the speciality products, high- routines. In conjunction with new and replacement strength sheet, and quenched steels, however, demon- investments, the working environment is further impro- strate a significantly greater stability than other more ved. In combination with education, information, and a standard products. In January, the Group’s steel prices continuous commitment to working environment issues, in Swedish kronor were 8% lower than during the this has resulted in the fact that the number of accidents fourth quarter, and were thereby just over 10% lower during recent years has remained at a low level. than the average prices for 1998. The decreased supply All employees of the Group participate in a profit- from Western European steel companies has, however, sharing system. The system was commenced in 1994 resulted in a significantly improved balance on the mar- and in 1998 gave an employee who worked full time a ket. profit share of approximately SEK 3,300. Even prices for raw materials for the steel industry The share of female white collar employees was 24 (iron ore, coal, scrap, and alloys) are under heavy pres- (24) % and blue collar female employees was 11 (11)%. sure which will lead to probably significant price reduc- Turnover in personnel continued to be low and tions. These price reductions, however, are not expected amounted to 6 (4) %. Absenteeism as a consequence of to be able to compensate for the effect of lower steel illness amounted to 3 (2) % for white collar employees prices and therefore the margins in the steel operations and 7 (6) % for blue collar employees. As a result of the are expected to decrease in 1999. low turnover in personnel many employees have wor- During 1998, disruptions in production in the steel ked a large portion of their professional lives within the operations curtailed deliveries from time to time. The company. The average employment time is slightly more investments which have now been completed in the steel than 20 years. operations will create the conditions for stable opera- In the heavy processing segments within the steel tions and thereby improve productivity as well as cont- operations (coking plants, blast furnaces, steel mills, inued growth in the area of high-strength sheet and and rolling mills) continuous operations are necessary quenched steels in 1999. in order to maintain high utilisation of capacity. Work at these facilities is conducted in shifts. Approximately Sensitivity analysis 40% of the employees in the steel operations work in The Group’s profit is significantly affected by the deve- some form of shift, primarily so-called 5-shifts. lopment of prices and volumes within the steel opera- Shift work is not as common within the processing tions, volumes and margins within the processing and and trading operations (approximately 10% work in trading operations, and cost trends for salaries and raw shifts). materials, as well as by changes in currency rates. The total cost for salaries and payroll taxes and levies Changes in these quantities are often very large. amounted to SEK 3,655 (3,562) million, which corres- During 1998, steel prices increased, for example, by ponds to 20 (20) % of sales. The Group will, in the almost 10%, while in 1996 they decreased by 15%. The future, benefit from the pension insurance company approximate effect in 1999 of changes in the above-sta- SPP’s over-consolidation, which will reduce future pen- ted factors on profit after financial items and on ear- sion costs. nings per share is set forth in the table below.

Forecast for 1999 Steel prices in Western Europe continued to be under pressure prior to the first quarter of 1999. Thus, it was necessary to accept price reductions on most steel pro-

Sensitivity analysis

Profit Effect on Change effect, SEK earnings per in % millions share, SEK Prices, Steel operations 10 1,000 6.40 Volume, Steel operations 5 200 1.30 Volume, Trading operations 10 125 0.80 Margins, Trading operations 2%-pts 125 0.80 Wage and salary costs 2 70 0.45 Prices, raw materials 10 450 2.90 SEK index 10 350 2.25

23 SSAB Tunnplåt

Curt Johansson, President SSAB Tunnplåt SSAB Tunnplåt is the largest manufacturer of steel sheet in the Nordic region and one of the leading companies in Europe within the area of high-strength products. Following the completion of the investment programme, production capacity amounts to approximately 2.8 million tonnes per year. The coking plant, blast furnaces, and steel plant with continuous casting lines for the manufacture of slabs are located in Luleå and rolling mills for the production of sheet and facilities for coating and subsequent treat- ment are situated in Borlänge. In the coking plant, coal is converted into blast furnace coke which, along with iron ore, comprise the raw Key ratios materials for the manufacture of steel. The metallurgy SEK millions 1996 1997 1998 unit is completely based on iron ore in the form of pel- Sales 8,146 8,559 8,754 lets from LKAB. The ore possesses low impurity quanti- Profit 945 832 722 ties which is an important prerequisite for end products Capital expenditures 517 673 1,108 of high and uniform quality. Capital employed 4,053 4,681 5,584 All steel for sheet manufacturing is cast into slabs Return on cap. empl. (%) 23 20 15 Number of employees 4,623 4,621 4,560 which are then shipped by rail for sheet production in See note 20 for definitions Borlänge. Just over 10% of the steel is delivered in fluid form to Inexa Profil in Luleå, which contributes to the Share of the Group’s high-capacity utilisation of the blast furnaces and steel mill. value profit after capital added financial items employed The metallurgy capacity in Luleå is not sufficient to 49% 51% 43 % supply all sheet manufacturing needs. The remaining slab required (approximately 30%) is therefore purchased from the affiliate SSAB Oxelösund. Profit after financial items Cash flow The slab is hot-rolled to sheet in Borlänge. During the year, approximately half of the sheet is further pro- SEK m SEK m cessed by cold-rolling and about 50% is subsequently 1,750 1,250 coated with a layer of zinc or an aluminium-zinc alloy. 1,500 1,000 Approximately 190 thousand tonnes of the metal-coa- 1,250 750 1,000 500 ted sheet is organic-coated in Borlänge or Finspång. Just 750 250 over 30% of the total sheet volume comprised of high- 500 0 strength qualities. 250 –250 The product range includes sheet in the thickness 0 –500 range 0.10–16 mm with a maximum width of 1,600 94 95 96 97 98 94 95 96 97 98 mm. The products are marketed under the trade names Domex, Docol, Dogal, Dobal, Aluzink, and Prelaq. SSAB Tunnplåt’s strategy is based both on increasing the share of high-strength hot- and cold- rolled sheet and maintaining a commanding position for all sheet products on the domestic market. Sheet with higher strength can be used by customers to replace existing steel with a steel which is lighter but performs the same functions. High-strength sheet is used, among other things, in the automotive industry and by crane manufacturers. Especially within the high-

24 strength hot-rolled sheet area, SSAB Tunnplåt is one of the leading manufacturers in Europe. The main competitors are Thyssen Krupp Stahl and Usinor. Ordinary sheet is used primarily within the engineering, construction, and automotive industries.

Competitors within these segments consist of most wes- High-strength sheet is used in applications in which high tern European steel companies. strength in combination with low weight is required. The The subsidiaries, SSAB Dobel Coated Steel in high-strength steels are used in, among other areas, the auto- England, SSAB Prelaq in Holland, SSAB Sino Staal in motive industry and by crane manufactures. SSAB Tunnplåt manufactures sheet in thicknesses from 0.10 mm to 16 mm in Denmark, and SSAB Teräs-Taive in Finland, have pro- widths upp to 1,600 mm. The production line includes both cessing lines for organic-coated and metal-coated sheet. hot and cold-rolled as well as metal and organic-coated sheet. The subsidiary SSAB Swedish Steel in Italy manufactu- Just over 30% of the sheet is high-strength sheet. res mainly high-strength, hot-rolled sheet. The affiliated company, European Electrical Steels (EES), is one of the largest producers of electro-plate in together, this meant that average prices (measured in Europe with production units in Newport, South Wales Swedish kronor) were 9% higher than in 1997. and in Surahammar, Sweden. Deliveries were approximately 5% lower than in 1997. The share of exports decreased somewhat to 61 The market (62)%. The largest export markets, Germany, Denmark, Sheet is the largest product group within the commerci- Italy, Great Britain, the United States, and Norway al steel sector and constitutes just over half of the accounted for an unchanged 70% of exports. Scandinavian market for commercial steel. The price Deliveries of the leading products, high-strength hot- situation for sheet is relatively similar on the larger mar- and cold-rolled sheets, increased by 3% and accounted kets in Europe. for approximately 32% of deliveries during the year. Demand for sheet was strong during the first half of the year on both domestic and export markets, but pea- Production ked at the end of the first half of the year. Consumption Production within metallurgy was at a high, stable level of sheet in Sweden is estimated to have increased to Change approximately 1,900,000 tonnes. In the rest of Western Kt 1996 1997 1998 1997/98 Europe, consumption increased somewhat to approxi- Coke 715 717 717 0 % mately 80 million tonnes. Crude steel 2,013 1,849 1,935 +5% The price of ordinary sheet was under pressure at the Hot-rolled 1,043 1,060 1,009 –5% end of the second quarter and declined during the third Cold-rolled 525 505 495 –2% and fourth quarters. The price for high-strength sheet Metal-coated 363 367 363 –1% was however less affected by the general decline. Taken Organic-coated 171 182 193 +6%

25 within the area of high-strength sheet. The new rougher was installed during the summer holidays and final assembly was carried out during the autumn. Test rolling started in October, somewhat earlier than planned. The fine tuning of the various functions has proceeded better than anticipated. The coal injection facility was brought into production at the start of the year at the same time as the new oxygen plant which AGA has built beside the metallurgy unit in Luleå. A fifteen year supply agreement has been signed with AGA. In total, these investments (Development Plan Domex 2000) will result in a significant improvement in the conditions for the production of thinner dimensions of high-strength steel, while at the same time the total production capacity is being increased by 25%. At the beginning of the year, a decision was taken to modernise and expand the large blast furnace in Luleå so that, after the expansion, it will be possible to achieve an increase in hot metal production using only one blast furnace instead of the present two blast furnaces. This will mean a considerable increase in efficiency. The measures, which also include a new raw material processing facility, will be completed during the summer of 2000 and involve total expenditures of SEK 850 million.

Product and process development During the year, demonstration car bodies from the during the greater part of the year. Towards the end of ULSAB (Ultra Light Steel Auto Body) project, in which the year, however, the rate of production was reduced SSAB Tunnplåt is participating together with some thir- since profitability in external slab transactions declined, ty steel companies, have been shown to automotive rendering such transactions unfeasible, at the same time manufacturers and the general public, among other as demand for sheet declined. In total, however, crude things, in conjunction with automotive trade fairs. The steel production increased by approximately 5% to project has demonstrated that it is entirely possible, 1,935,000 tonnes. Deliveries of crude steel to Inexa using high-strength steel and modern welding technolo- Profil increased somewhat and amounted to 242,000 gy, to manufacture safer and lighter automobiles. The (225,000) tonnes. demonstration car bodies are approximately 25% ligh- Production in the hot strip mill amounted to ter than corresponding conventional reference car bodi- 2,146,000 tonnes, a decrease of just under 3%. The es and, from a safety perspective, have a significant reduction was due both to minor disruptions, which improvement in torsional rigidity of approximately were partly due to the major investment projects, and to 80%. It is estimated that it will be possible to produce a decrease in the pace of production towards the end of the car bodies at a cost which is somewhat lower than the year as a result of the decrease in demand. that for conventional car bodies. Within the metallurgy area, work has been concen- Profit trated on the creation of an even and stable production Profit declined by SEK 110 million to SEK 722 million. process in order to facilitate further improvements in The decline in profit was primarily due to lower volu- quality Effective time control of production is of prima- mes. The profit includes non-recurring items totalling ry importance and, therefore, production development SEK 20 (–36) million. has been aimed at measures for improving time control. Development of sheet products is aimed primarily at Capital expenditures achieving new high-strength sheet qualities and new In 1996, a decision was taken to invest SEK 1,280 milli- applications for high-strength sheet. A moulding manu- on in, inter alia, a new rougher in the hot rolling strip al was produced during the year in order to help custo- mill in Borlänge and a coal injection facility at the mers best utilise the advantages of the modern high- metallurgy unit in Luleå. Through these investments, strength steels. the opportunity is provided for continued expansion

26 SSAB Oxelösund

Dan Johansson, President SSAB Oxelösund SSAB Oxelösund is the world’s leading manufacturer of quenched steels. Quenched steels refers to plate with extra-high strength and good weldability, in combination with high abrasion-resistance and good formability. The main products within quenched steels are abrasion- resistant steels, HARDOX, and construction steels, WELDOX. Manufacturing in Oxelösund is carried out in an integrated process from iron ore to finished plate. The plants include a coking plant, blast furnaces, a steel mill, and continuous casting lines for the manufacture of slabs, as well as a rolling mill for the production of plate in the thicknesses 4 - 155 mm and widths of up to Key ratios 3,500 mm. The metallurgy is iron ore based and the ore SEK millions 1996 1997 1998 supply consists of pellets from LKAB. Sales 3,664 4,172 4,057 Slab production capacity is approximately 1.6 milli- Profit 202 292 178 on tonnes. Slightly less than one-half of the slabs are Capital expenditures 636 1,072 593 further processed into plate. During the year, just over Capital employed 2,530 3,228 3,726 200,000 tonnes were sold to customers outside the Return on cap. empl. (%) 11 12 8 Number of employees 2,487 2,422 2,439 Group and the remainder was delivered to SSAB See note 20 for definitions Tunnplåt. Plate production has been focused on quenched Share of the Group’s steels. The quenched steels are used in applications where abrasion-resistance, toughness, and high-strength value profit after capital added financial items employed in combination with low weight provide advantages as 25% 13% 29% compared with conventional steel. Construction machinery, mining equipment, and large construction projects such as bridges are examples of such applications. Profit after financial items Cash flow Competitors within the quenched steels sector are primarily Thyssen Krupp Stahl and Dillingen, in Europe, SEK m SEK m and Lukens, in North America. 700 750 The ordinary steels are traditionally used in the ship- 600 500 building industry and in the general engineering indus- 500 250 400 0 try. Competitors within this sector are most large wes- 300 –250 tern European steel companies. 200 –500 More than 90% of the by-products of steel manufac- 100 –750 turing are recycled for use within the Group or sold 0 –1,000 through the subsidiary SSAB Merox. Sales of by-pro- 94 95 96 97 98 94 95 96 97 98 ducts span a broad area and cover, among other areas, road construction materials, raw materials for the electronics industry, and paint pigments.

The market SSAB Oxelösund’s sales of plate declined by 20% and amounted to just under 400,000 tonnes. Deliveries were restricted by low production during the start-up and breaking-in of the new four-high rolling mill. Of the deliveries, approximately 20% went to the Swedish market and the remaining 80% were exported, primari-

27 as compared with 1997. Quenched steels accounted for just over 70% of total plate sales.

Production Production in metallurgy during the first three quarters was higher than previously. Towards the end of the Quenched steels, i.e. the aberration restistant HARDOX steels and the extra high-strength structural WELDOX steels are used year, however, the rate of production was reduced since in applications with extreme demands for high-strength in profitability in external slab transactions declined which combination with good weldability or high abrasion resistance. made such transactions unfeasible. Slab production the- The quenced steels are sold throughout the world and used in, among other areas, construction and mining equipment. SSAB reby declined somewhat to 1,328,000 tonnes. Oxelösund manufactures heavy plate in thicknesses from 4 mm Change to 155 mm in widths up to 3,500 mm. Just over 70% of sales Kt 1996 1997 1998 1997/98 consist of quenced steels. Coke 438 430 430 0 % Steel slabs 1,286 1,395 1,328 –5% Plate 508 426 389 –9% ly within the European Union and to North America. The breaking-in of the new four-high rolling mill In order to increase sales of quenched steels, in recent took longer than planned and resulted in a reduction in years sales companies have been established in 17 coun- production of nearly 10% to 389,000 tonnes. Towards tries, primarily in eastern Europe and Asia. During the the end of the year, however, the rate of production in year, a quenched steel distributor in Vancouver was the new four-high rolling mill was at the same level as acquired, with operations in western Canada and the in the old one, i.e. equivalent to an annual rate of north-western United States. 500,000 tonnes. Demand for quenched steels was strong throughout the entire year. Demand for ordinary steels was good Profit during the first half of the year, but weakened during Improved margins could not compensate the lost pro- the rest of the year. It was possible to increase prices duction volumes. Taken together, this resulted in a decli- during the first half of the year, and it was possible to ne in profits of SEK 114 million to SEK 178 million. maintain prices for quenched steels at this level. Prices The profit includes non-recurring items totalling SEK 0 for ordinary steels were under pressure towards the end (40) million. of the year, but it was possible to sell available volumes at largely unchanged prices. Taken together, prices Capital expenditures (measured in Swedish kronor) were, on average, 15% In 1995, the decision was taken to invest SEK 1,650 higher than in 1997. million in order to create conditions for continued As a result of the breaking-in of the four-high rolling expansion within quenched steels – General Plan OX mill, the volume of quenched steels declined somewhat 2000. Test-rolling in the new four-high rolling mill star-

28 ted in November 1997, and since the end of March 1998 all production has taken place at this mill. A new finishing line for thinner dimensions of plate was ready during the summer, after which fine tuning and production have taken place simultaneously during the autumn. All in all, General Plan OX 2000 means that the conditions for the production of quenched steels are consi- of the HARDOX steels. derably improved by making it possible to roll thinner The directly quenched WELDOX steels combine high sheet, and through rolling with improved surfaces, flat- strength with excellent weldability. The steels are ness, and thickness tolerance. In addition, capacity in making inroads on the market and are being used in, the four-high rolling mill has been increased by 60% to among other things, major steel construction projects. approximately 800,000 tonnes. The quenched and tempered WELDOX steels are During the year, a decision was taken to construct a used for demanding applications where the need for low new steel harbour at a cost of SEK 165 million. The weight is often decisive, for example, in cranes and harbour will be brought into operation after the sum- vehicles. Development is being focused on a gradual mer of 1999 and will enable co-ordination of the improvement of strength and toughness. Group’s sheet and plate deliveries via Oxelösund. In order to satisfy increasing demands for light weight steel structures, e.g. for manufacturers of mobile Development cranes and concrete transport vehicles, improved met- Product development resources are concentrated on hods for rolling and hardening of thinner dimensions of quenched steels, of which the principal products are plate are being developed. The development and pro- abrasion-resistant steels, HARDOX, and high-strength duction possibilities within these areas are further structural steels, WELDOX. improved by the new four-high rolling mill. The use of quenched steels provides a number of Efforts are increasingly being devoted to applications advantages for the user, including lighter weight structu- engineering and technical customer service. In a training res and reduced downtimes for replacement of worn centre in Oxelösund, customers are given an opportuni- parts. ty to test and become acquainted with the properties The HARDOX steels combine abrasion-resistance and potentials of quenched steels. with toughness and are easy to weld and cut. The steels are, therefore, used both as pure abrasion-resistant steels, for example, in the mining and cement industries, and as combined abrasion-resistant and structural steels. Great resources are being committed to further developing the user-friendliness and abrasion-resistance

29 Plannja

Mikael Nyquist, President Plannja Processing is of great strategic importance for the Group’s possibility to maintain its strong domestic market position within the sheet sector. Through many years of considered efforts in product and market development accompanied by strategic acquisitions, Plannja has become one of the leading European producers of processed steel and aluminium building sheet. Plannja’s operations are conducted within the parent company with production in Luleå, and in the subsidiaries Plannja Siba in Järnforsen and Plannja A/S in Aalborg. The feed stock for these operations is princi- pally metalised sheet which is painted and profiled. Plannja’s annual consumption of sheet amounts to Key ratios just over 70,000 tonnes. Most of the material is suppli- SEK millions 1996 1997 1998 ed by SSAB Tunnplåt. Sales 940 1,010 1,038 Plannja’s marketing and sales are aimed at both the Profit 30 66 55 contractor and consumer markets. In addition, painted Capital expenditures 33 29 28 sheet is marketed to the sheet metal working industry. Capital employed 321 309 338 The product range consists of flat and profiled buil- Return on cap. empl. (%) 15 25 19 Number of employees 398 391 386 ding sheet, sheet roofing tiles, and wall panels. The See note 20 for definitions products are used as supporting structures and as roofing and cladding for both residential and industrial Share of the Group’s premises. Plannja’s market share in the contractor and consu- value profit after capital added financial items employed mer market in Sweden is slightly higher than 30%. 4% 4% 3% Competitors include Haironville, Gasell, and Lindab Profile. Sales in Norway, Germany, and the UK take place Profit after financial items Cash flow through sales subsidiaries and, in other markets, through retailers. SEK m SEK m Plannja Siba manufactures and markets a complete 70 50 system for rainwater runoff made of organic-coated, 60 40 50 30 galvanised sheet. The Danish subsidiary Plannja A/S 40 20 manufactures and markets a complete range of building 30 10 sheet for the Danish and northern German markets. 20 0 10 -10 The market 0 -20 Demand for construction plate products on both the 94 95 96 97 98 94 95 96 97 98 industrial and renovation markets in Sweden remained at the 1997 level. Export volumes, which in previous years included a number of large projects, declined but were offset by a continued positive volume trend in Denmark and Poland. In total, sales increased by 3% to SEK 1,038 million. Foreign sales accounted for an unchanged 50% of total sales.

Profit

30 Profit declined by SEK 11 million to SEK 55 million, primarily as a result of weaker margins.

Capital expenditures During the year, investments were carried out to increase machinery and production flow efficiency in most of Construction materials in metal- or organic-coated profiled the production lines. sheet are used both as supporting structures as well roofing and facing products for residental and industrial premises Development as well as offices and schools, etc. The facing product, Plannja Prewall, the beam system, Plannja Combideck and Plannja For a long time Plannja has carried out extensive deve- Siba’s water run-off products are examples of Plannja’s focus lopment in the areas of profiled building sheet and sheet on complete and fully-planned systems solutions for both roofing tiles. The development of new products is being large and small construction projects. carried out both for the construction as well as the consumer markets, and the use of high-strength sheet is increasing. The development of a wall system product of the sandwich type started at the beginning of the 1990s. During the year, this product received a new and improved fire safety rating. At the same time, the load-bearing capacity of the wall has been improved by slightly more than 20%. Light-weight construction techniques for multi-family homes is another prioritised area in which Plannja is co- ordinating an international development project within ECSC, the European Coal and Steel Community, with representatives from universities and the steel industry. Within the project, wall system products are being developed which consist of profiled construction sheet, insulation and plaster-board sheets, thus creating the basis for industrial housing construction based on sheet technology.

31 SSAB HardTech

Thord Jonsson, President SSAB HardTech SSAB Hard Tech develops, manufactures, and markets safety components for the automotive industry. The operations are based on the technology of hardening boron steel in combination with formpressing. The boron steel is delivered by SSAB Tunnplåt. The press- hardening technology makes possible narrower tolerances, improved dimension stability, and weight reduction and can, therefore, provide safer, lighter, and more cost- efficient solutions as compared with existing alternative methods. The operations are conducted in two production facilities, in Luleå and in Mason, Michigan. The facility in Mason was completed and placed into operation in the Key ratios autumn of 1998, and supplies the North American mar- SEK millions 1996 1997 1998 ket with side impact beams. The facility in Luleå is a Sales 338 343 364 production facility for bumpers as well as side impact Profit 94 99 71 beams for the European and Asian markets. In addi- Capital expenditures 51 160 254 tion, processing and tool technology are being develo- Capital employed 288 379 621 ped in Luleå. Return on cap. empl. (%) 42 36 17 Number of employees 192 225 249 The focus on the automotive industry started during See note 20 for definitions the second half of the 1980s. The commercial break- through for the press-hardening technology was achie- Share of the Group’s ved with an agreement with Ford for deliveries of side impact beams for Ford Mondeo, the first real world car. value profit after capital added financial items employed These deliveries started in 1993 in both Europe and the 4% 5% 5% United States. The product range has thereafter been gradually expanded to also include bumpers and components for Profit after financial items Cash flow the car’s safety cage.

SEK m SEK m The market 175 100 The demand for low fuel consumption has meant that 150 50 125 0 most automobile manufacturers have been investing in 100 50 ways to reduce the weight of the car. This, in combina- 75 100 tion with high safety requirements and new impact 50 150 norms, provides competitive advantages for SSAB 25 200 HardTech’s press-hardened products. 0 250 Benteler is the market leader for side impact beams. 94 95 96 97 98 94 95 96 97 98 In 1997, Thyssen introduced a cold moulding steel with which they gained orders for simple side impact beams. Deliveries of safety components increased by 13% during the year. The export share was approximately 90%. Deliveries of bumpers and side impact beams for the Ford Focus, which was introduced during the year, accounted for most of the increase in deliveries. Marketing efforts have increased in the United States in conjunction with the establishment there. Agreements regarding future deliveries have been entered into with General Motors and for additional Ford models.

Profit 32 Profit declined by SEK 28 million to SEK 71 million. The decline in profit was primarily a consequence of weaker margins.

Capital expenditures During the autumn of 1996, a decision was taken regarding the establishment of a production unit in the Low weight for lower fuel comsumption and greater demands United States. The plan involved investments totalling for safety are key concepts in the automotive industry. SEK 500 million. The unit is located in Mason, Through its pre-hardening technology, SSAB HardTech has Michigan, in close proximity to the large automobile participated in the development of safe, light and extremely cost efficient side impact beams, bumper rails and compo- manufacturers in Detroit. The construction of the plant nents for the automobile’s safety cage. for the new production unit commenced in 1997 and the machinery was assembled during the spring and summer of 1998. Production started as planned in two stages during the autumn of 1998. The new production unit means that an increased demand for safety components can be met. The advantages of press-hardening technology with narrower tolerances and weight reductions can also continue to be developed in close co-operation with automobile manufacturers in both Europe and the United States.

Development The press-hardening technology is gradually being developed, both with respect to process and tool technology and newer, improved applications. The development of applications is conducted in close co-operation with several automobile manufacturers. Through such co-operation, SSAB HardTech’s designers are brought in at an early phase in the development of new car models. Thus, optimal use can be made of the advantages of press-hardening technology in the design of safety components. Development is focused both on bumper rails, which are integrated into the body of the car, and side-impact beams where several functions are built in. The development work sometimes leads to unique design solutions. During the year, a patent was obtained for, among other things, a bumper rail with an integrated impact box. 33 Tibnor

Sven Bergman, President Tibnor Tibnor is the leading trading company in the Swedish steel market and constitutes an important sales channel for the steel operations’ product range. 85% of the company is owned by SSAB and 15% by Avesta Sheffield. In addition to supply through steel trading companies, the supply of steel to the Swedish market takes place through Swedish and foreign steel mills. Other participants in the market include various steel service centres with cutting and slitting lines together with companies specialised within certain product segments. Tibnor is one of the largest trading companies in the Nordic region focused on customers within the enginee- Key ratios ring, construction, and processing industries. SEK millions 1996 1997 1998 Competitors in Sweden include Trelleborg-owned Sales 6,623 6,328 6,545 Bröderna Edstrand, and a number of smaller and often Profit 295 316 152 specialised companies which primarily conduct opera- Capital expenditures 65 196 131 tions in local markets. Tibnor’s nationwide sales, ware- Capital employed 1,477 1,487 1,666 house, and distribution functions make it an important Return on cap. empl. (%) 22 23 12 Number of employees 1,768 1,714 1,748 partner in the supply of material and supplies to indus- See note 20 for definitions try. By offering a wide range of products and services Tibnor, with its business system, is increasingly beco- Share of the Group’s ming an integral part of the customers’ production flows. value profit after capital added financial items employed Approximately 65% of Tibnor’s total sales are steel- 16 % 11% 13 % based and cover a range of commercial steels, special steels, tube and pipe, and stainless steel. The remaining portion consists of non-ferrous metals, building pro- Profit after financial items Cash flow ducts and tools, machinery, and other industrial and building supplies. The steel and metal products are SEK m SEK m increasingly delivered in a pre-treated and adapted form 600 600 in order to be placed directly into the customer’s pro- 500 500 400 400 duction. 300 300 Tibnor’s traditional core business lies within the areas 200 200 of steel and stainless steel, in which a complete range of 100 100 products is offered to industry. The most important cus- 0 0 tomer groups are found within the engineering, con- –100 struction, and processing industries. A significant por- 94 95 96 97 98 94 95 96 97 98 tion of the customer companies are suppliers to Swedish export industries. Within the area of special steels, Tibnor has established itself in the other Nordic countries with its own subsidiaries. In the Metals business area, a specialisation has taken place in trading in metals for industrial use. In addition to Sweden, Tibnor has significant operations in this area in Denmark and Finland, and is the Nordic region’s largest distributor of raw materials and semi-finished goods of aluminium, copper, brass, and zinc. Tibnor offers the construction industry a range of

34 steel-based construction products, concentrated on site preparation, foundation, and structure. Tibnor is one of Sweden’s leading suppliers of reinforcement steels and possesses four facilities for the manufacturing of inser- tion-ready re-bar products. Tibnor’s Industrial Supplies group is focused on the With the market’s broadest selection of commercial steels, sale of tools, industrial and building supplies, as well as special steels, tubing and stainless steel and with a nation- machinery. From three regional warehouses and wide logistics system, Tibnor has become a natural link in its through the industrial supply group’s shops, local customer’s production chains. The steel is delivered blasted, pre-painted, cut, sheared or slitted in order to be capable of manufacturing and construction companies are offered being placed directly in the customer’s production process. a product range spanning approximately 30,000 pro- Metals, construction materials, tools, machinery and other ducts. The industrial supplies group often enjoys a pro- construction supplies are included in the production range. minent position in its local markets.

The market year. The demand by the engineering industry continued to The increase in volume resulted in Tibnor’s sales be strong while demand by the processing and construc- increasing by 3% to SEK 6,545 million. tion sectors was weak. Demand from the construction sector increased from a low level. In total, delivery volu- Profit Sales Change Higher volumes could not compensate for weaker mar- SEK millions 1996 1997 1998 1997/98 gins and, as a result, the profit declined by SEK 164 Steel 1,389 1,381 1,500 +9% million to SEK 152 million. Profit includes items of a Sheet 1,585 1,534 1,661 +8% non-recurring nature totalling SEK 0 (55) million. Component steel 604 646 655 +1% Stainless steel 624 475 439 –8% Metals 909 884 832 –6% Capital expenditures Construction 326 293 276 –6% A new information system was installed during the year. Industrial supplies 1,186 1,115 1,182 +6% The new R/3-system is totally integrated and replaces Total 6,623 6,328 6,545 +3% several older systems and makes possible more efficient and improved customer service. The system’s financial mes for steel and metals increased by 4%. functions were placed in operation at the beginning of It was possible to increase prices somewhat during the year, while other functions including orders, stock the first half of the year for most products within the processing, and purchasing commenced at the end of steel and metals product range, but prices were subject September/beginning of October. In total, the invest- to pressure after the summer. The price of stainless steel ment in the new information system amounts to materials continued to be low throughout the entire approximately SEK 100 million.

35 Dickson PSC

Björn Ringborg, President Dickson PSC Dickson Plåt Service Centre pre-finishes sheet and supplies the Swedish engineering industry with slit strips and sized blanks which can be directly used in the customer’s production. Deliveries of pre-finished sheet with short lead times also decrease customers’ needs for warehouse facilities. Approximately 25% of the Swedish sheet market consists of pre-finished sheet. Dickson PSC is the largest producer in Sweden within this area, with a market share of slightly more than 50%. Dickson PSC, therefore, is highly significant to the Group’s development of the sheet business in Sweden. Production facilities comprising cutting and slitting Key ratios equipment are located in Borlänge and Gothenburg. SEK millions 1996 1997 1998 Dickson’s role is to be an efficient contract manufactu- Sales 97 106 117 rer of pre-finished sheet, while Tibnor and SSAB Profit 20 25 20 Capital expenditures 3511 Capital employed 100 100 96 Return on cap. empl. (%) 20 25 21 Number of employees 123 133 143 See note 20 for definitions

Share of the Group’s

value profit after capital added financial items employed 1% 1% 1%

Profit after financial items Cash flow

SEK m SEK m 35 35 30 30 25 25 20 20 Tunnplåt handle the marketing, sales, and material sup- 15 15 plied. 10 10 5 5 The market 0 0 Demand for pre-finished sheet continued to improve 94 95 96 97 98 94 95 96 97 98 during 1998. In total, deliveries increased by 6% to just over 240,000 tonnes.

Profit Profit declined by SEK 5 million to SEK 20 million. Profit includes non-recurring items totalling SEK 0 (9) million.

36 SSAB Finance

Göran Fritzell, General Manager SSAB Finans SSAB Finance is an independent profit centre within the parent company with responsibility for the management of currency flows, borrowing, and financing of subsidiaries, as well as for the investment of the Group’s liquid funds on the Swedish money market. The objective is to achieve the highest possible return on the liquid assets within the defined guidelines for interest and credit risks. In addition, the Group’s currency flows are offset to the greatest extent possible and remaining currency risks are dealt with in accordance with adopted guidelines. SSAB Finance borrows, on market terms and conditions, the parent company’s liquid assets. SSAB Finance acts as an internal bank for the Group vis-á-vis the sub- Key ratios sidiaries. Borrowing and hedging of currency transac- SEK millions 1996 1997 1998 tions by the subsidiaries are dealt with by SSAB Profit 166 84 74 Finance, on market terms and conditions. Number of employees 999 The Group’s currency risks arise mainly in the com- See note 20 for definitions mercial money flows. The subsidiaries hedge their cur- Share of the Group’s rency risks with SSAB Finance which, in turn, covers the currency risks mainly by means of forward value profit after capital added financial items employed exchange contracts. With the introduction of the Euro, 0% 5% 2% currency risk management will be simplified. During the year, preparations have taken place for handling the future flows in the new currency. Profit after financial items As a result of the redemption of shares for SEK 3,305 million, a need for borrowing arose in the Group. SEK m Accordingly, in the spring of 1998, a Medium Term 175 Note (MTN) programme totalling SEK 1,500 million 150 was introduced. Within the framework of the MTN 125 programme, there are possibilities created for open bor- 100 75 rowing in Swedish kronor with a term until maturity of 50 1 to 10 years. In addition, the existing Swedish com- 25 mercial paper programme was increased to SEK 1,500 0 million and there is an already existing USD 100 million 94 95 96 97 98 Euro Commercial Paper Programme. At year end, borrowing under the MTN programme amounted to SEK 970 million and under the commercial paper programme to SEK 860 million. Investment volumes declined sharply at the end of the first half of the year following the execution of the Swedish money market instruments were successful. The return redemption and at year end amounted to SEK 124 on the investment portfolio improved to 6.3 (4.2)%, which (2,871) million. The rate of return on financial invest- was 1.4 percentage points better than the index for treasury ments depends on interest rates and risk level chosen. bills and 2.7 percentage points better than investments on the Changes in the risk profile in order to protect the value call loan market. of the portfolio in the event of interest rate movements Nothwithstanding the higher return, a lower investment are effected, inter alia, through the use of interest futu- volume during the second half of the year resulted in profit res. declining by SEK 10 million to SEK 74 million. International interest rates fell during the year, and Swedish interest rates followed suit. Positions taken in

37 Other companies

Profit / ownership share Norsk Stål Tynnplater SEK millions 1996 1997 1998 Holding % Norsk Stål Tynnplater is Norway’s largest sheet service Coronet Finance 59 56 57 100 centre with a market share of approximately 70%. European Electrical Steels 187 151 70 25 There are 72 employees. Norsk Stål 44 69 57 50 Norsk Stål Tynnplater is 50% owned by SSAB and Norsk Stål Tynnplater 15 16 2 50 Lulekraft 000 50 50% by British Steel. Oxelösunds Hamn 972 50 Demand for processed sheet on the Norwegian market was strong during the greater part of the year, but weakened towards the end of the year. Sales increased Coronet Finance somewhat to SEK 458 (415) million, but weaker mar- Part of the Group’s liquid assets is invested in the inter- gins resulted in a decline in profit to SEK 2 (16) million. national capital market. These investments are made by the Irish subsidiary Coronet Finance which conducts Lulekraft active portfolio management. Coronet Finance also Lulekraft operates a combined heat and power plant in accommodates financing requirements of inter alia Luleå and is 50% owned by SSAB and 50% by the foreign subsidiaries. municipality of Luleå. The combined heat and power The average investment and lending volume amoun- plant extracts heat from energy-rich off-gases from ted to approximately SEK 1,250 (1,100) million. Profit SSAB Tunnplåt’s slab manufacturing operation and pro- improved somewhat to SEK 57 (56) million. duced approximately 724 GWh of district heat and 503 GWh of electricity. The district heat is sold to Luleå European Electrical Steels Energi, which distributes it to approximately 20,000 European Electrical Steels (EES) was formed in 1990 by households in the municipality of Luleå. The electricity a merger of SSAB’s and British Steel’s operations within is sold to SSAB Tunnplåt. There are 32 employees. the electrical steel sector. The company is one of the lar- Sales was largely unchanged and amounted to SEK 248 gest producers of electrical steels in Europe. EES is (241) million. Profit amounted to SEK 0 (0) million. owned by British Steel (75%) and SSAB Tunnplåt (25%). Production facilities are located in Newport in Oxelösunds Hamn south Wales and in Surahammar. Some further proces- The port operations in Oxelösund are some of the lar- sing takes place in the United States and Canada. There gest in Sweden. The harbour has excellent draught con- are 895 employees. ditions and plays an important role in the Group’s Weaker demand led to lower volumes. Sales declined extensive imports of raw materials. to SEK 2,104 (2,229) million and profit decreased to Oxelösunds Hamn is 50% owned by SSAB SEK 70 (151) million, due to both lower volumes and Oxelösund and 50% by the municipality of Oxelösund. weaker margins. There are 222 employees. Sales increased somewhat to SEK 175 (171) million. Norsk Stål Profit declined to SEK 2 (7) million. Norsk Stål is Norway’s largest steel wholesaler with a market share of just over 35%. There are 310 employees. Norsk Stål is 50% owned by SSAB and 50% by British Steel. Demand for steel in Norway was strong during the greater part of the year, but weakened in the autumn. Sales increased to SEK 1,568 (1,434) million, but weaker margins resulted in a decline in profit to SEK 57 (69) million.

38 Consolidated profit and loss account

SEK millions 1997 1998 Sales (Note 1) 17,474 17,835 Cost of goods sold (Note 2) – 14,264 – 14,798 Gross profit 3,210 3,037

Selling expenses (Note 2) – 1,489 – 1,535 Administrative expenses (Note 2) – 174 – 192 Other operating revenues 376 285 Other operating expenses (Note 2) – 244 – 288

Shares in earnings of affiliated companies (Note 3) 84 48 Operating profit 1,763 1,355

Financial items (Note 4) 143 69 Profit after financial items 1,906 1,424

Tax (Note 5) – 536 – 427 Minority shares in earnings – 34 –15 Net profit for the year 1,336 982

Return on capital employed before tax (Note 20) 14% 11% Return on equity after tax (Note 20) 11% 8% Equity ratio (Note 20) 70% 58%

39 Consolidated balance sheet

SEK millions 1997 1998 ASSETS Fixed assets Intangible assets (Note 6) 96 98 Tangible assets (Note 7) 7,312 8,466 Financial assets (Note 8) 450 454 Total fixed assets 7,858 9,018

Current assets (Note 3) Inventories, etc. (Not 9) 3,260 3,905 Accounts receivable 2,580 2,531 Prepaid expenses and accrued income (Note 10) 410 335 Other short-term receivables (Note 5) 211 272 Short-term investments 3,436 685 Cash and bank accounts 456 380 Total current assets 10,353 8,108

Total assets 18,211 17,126

EQUITY AND LIABILITIES Equity (Note 11) Restricted equity Share capital 3,200 2,803 Restricted reserves 2,487 2,857 Unrestricted equity Unrestricted reserves 5,798 3,299 Net profit for the year 1,336 982 Total equity 12,821 9,941

Minority shares 175 159

Provisions Provisions for pensions 140 150 Deferred taxes 1 545 1 688 Other provisions 14 13 Total provisions 1,699 1,851

Long-term liabilities (Note 13) 511 1,289

Current liabilities (Note 3) Liabilities to credit institutions 401 1,300 Accounts payable 1,516 1,385 Accrued expenses and prepaid revenues (Note 14) 829 929 Other current liabilities (Note 5) 259 272 Total current liabilities 3,005 3,886

Total equity and liabilities 18,211 17,126

Pledged assets (Note 18) 255 197 Contingent liabilities (Note 19) 88 100

40 Consolidated funds statement

SEK millions 1997 1998 BUSINESS OPERATIONS Profit Sales 17,474 17,835 Other operating revenues 376 285 Operating expenses (excl. depreciation) – 15,381 – 15,933 Financial items + 143 +69 Tax – 359 – 274 Other items – 49 +38 + 2,204 + 2,020

Working capital Inventories (+ decrease) – 147 – 640 Accounts receivable (+ decrease) – 323 +65 Accounts payable (+ increase) + 28 – 133 Other current receivables (+ decrease) – 86 –26 Other current liabilities (+ increase) + 91 + 120 – 437 – 614

INVESTMENT OPERATIONS Investments in plants and facilities – 2,145 – 2,035 Acquisition of new operations – 3 –12 Sale of companies + 7 0 Sale of plants + 120 +26 – 2,021 – 2,021

CASH FLOW – 254 – 615

FINANCING OPERATIONS Dividends to shareholders – 512 – 576 Redemption of shares – – 3 305 Changes in long-term loans (+ increase) – 303 + 779 Changes in short-term loans (+ increase) – 241 + 880 Tax liabilities (+increase) + 31 –67 Financial investments (+decrease) + 613 0 Other long term receivables (+decrease) + 13 +1 Other financing (+increase) + 40 +76 + 359 – 2,212

CHANGE IN LIQUID ASSETS – 613 – 2,827

LIQUID ASSETS Balance on 1 January + 4,505 + 3,892 Change in liquid assets – 613 – 2,827 Balance on 31 December + 3,892 + 1,065

Non-utilised bank credit + 1,001 + 970 Disposable liquid assets + 4,893 + 2,035

41 Parent company’s profit and loss account

SEK millions 1997 1998 Gross profit 0 0

Administrative expenses (Note 2) – 65 –95 Other operating revenues 7 11 Operating profit –58 –84

Dividends from subsidiaries (Note 4) 676 943 Financial items (Note 4) 249 211 Profit after financial items 867 1,070

Periodization reserve – 37 –27 Capital based tax equalization reserve 16 16 Profit before tax 846 1,059

Tax (Note 5) – 42 –30 Net profit for the year 804 1,029

42 Parent company’s balance sheet

SEK millions 1997 1998 ASSETS Fixed assets Tangible assets (Note 7) 4 9 Financial assets (Note 8) 3,942 4,216 Total fixed assets 3,946 4,225

Current assets (Note 3) Receivables from subsidiaries 2,164 3,473 Prepaid expenses and accrued revenues (Note 10) 106 3 Other receivables (Note 5) 15 1 Short-term investments 2,871 124 Cash and bank accounts 218 178 Total current assets 5,374 3,779

Total assets 9,320 8,004

EQUITY AND LIABILITIES Equity (Note 11) Restricted equity Share capital, 112.1 million shares, nominal value SEK 25 3,200 2,803 Premium reserve – 20 Legal reserve 640 640 Unrestricted equity Profit brought forward 3,092 392 Net profit for the year 804 1,029 Total equity 7,736 4,884

Untaxed reserves (Note 12) 380 391

Provisions Provisions for pensions 8 10 Total provisions 8 10

Long-term liabilities Liabilities to subsidiaries 50 50 Other long-term liabilities (Note 13) 378 1,162 Total long-term liabilities 428 1,212

Current liabilities (Note 3) Liabilities to subsidiaries 410 241 Liabilities to credit institutions 327 1,207 Accrued expenses and prepaid revenues (Note 14) 11 45 Other current liabilities (Note 5) 20 14 Total current liabilities 768 1,507

Total equity and liabilities 9,320 8,004

Pledged assets (Note 18) 56 30 Contingent liabilities (Note 19) 170 182

43 Parent company’s funds statement

SEK millions 1997 1998 BUSINESS OPERATIONS Profit Other operating revenues + 7 +11 Operating expenses (excl. depreciation) – 65 –94 Financial items (excl. dividends from subsidiaries) + 249 + 211 Tax –42 –30 + 149 +98

Working capital Current receivables (+ decrease) – 1 +1 Current liabilities (+ increase) – 5 +39 Commercial intra-Group transactions + 92 0 +86 +40

INVESTMENT OPERATIONS Investments in plants och facilities 0 –5 Investments in shares in subsidiaries – 260 – 258 – 260 – 263

CASH FLOW –25 – 125

FINANCING OPERATIONS Dividends to shareholders – 512 – 576 Dividends from subsidiaries + 676 + 943 Redemption of shares – – 3,305 Changes in long-term loans (+increase) – 297 + 786 Changes in short-term loans (+increase) – 220 + 867 Financial investments (+decrease) + 613 0 Other long-term receivables (+decrease) 0 0 Financial intra-Group transactions – 874 – 1,495 Other financing (+increase) + 27 + 118 – 587 – 2,662

CHANGE IN LIQUID ASSETS – 612 – 2,787

LIQUID ASSETS Balance on 1 January + 3,701 + 3,089 Change in liquid assets – 612 – 2,787 Balance on 31 December + 3,089 + 302

Non-utilised bank credit + 891 + 884 Disposable liquid assets + 3,980 + 1,186

44 Notes

Accounting and Valuation Principles

The annual report has been prepared in loans are reported at the rate applicable as accordance with the Swedish Annual per the balance sheet date. Any exchange dif- Accounts Act and the recommendations and ferences are set off against the translation dif- policy statements of the Swedish Financial ferences which arise in conjunction with recal- Accounting Standards Council. The accoun- culation of these subsidiaries’ balance sheets ting and valuation principles are unchanged to Swedish kronor. as compared with the preceding year. Inventories Consolidation principles Inventories are valued in accordance with the The consolidated accounts have been prepa- lower of cost and market value principle. Raw red in accordance with the purchase method. materials and products in the trading opera- The consolidated accounts include SSAB tions are thereby valued at the lower of the Svenskt Stål AB and the companies in which acquisition and replacement costs, while the parent company directly or indirectly owns manufactured goods are valued at the lower more than 50% of the voting capital or where of the manufacturing cost and the sales value the parent company otherwise exercises a after deduction of sales and administrative controlling influence. Affiliated companies of expenses. The necessary provisions are made which SSAB owns between 20 and 50% of for obsolescence. the voting capital are reported in accordance with the equity method. Fixed assets Goodwill and surplus value in fixed assets Fixed assets are reported after deductions for are depreciated in accordance with the princi- accumulated depreciation according to plan. ples set forth below under "Fixed Assets". Depreciation according to plan is based on The profit and loss accounts of foreign the acquisition cost and estimated economic subsidiaries are translated into Swedish kro- life of the assets. nor at the average exchange rates for the Tangible fixed assets are classified for year. Balance sheets are translated into depreciation purposes into six groups on the Swedish kronor at the year-end exchange basis of economic life according to the follo- rates. The differences are reported directly as wing table. equity. Through new technology, the economic life Intra-Group profits in subsidiaries’ invento- of blast furnaces has increased, resulting in a ries are eliminated in the consolidated depreciation of the blast furnaces commen- accounts. cing in 1995 over 10–12 years as opposed to In the Consolidated Funds Statement, the the previous term of 7 years. purchase price of acquired and sold operations is reported under the heading "acquisi- Economic tions/sales of operations/shares". The assets Group Examples of items life, years and liabilities held in the acquired/sold com- 1 Vehicles, computers, and panies at the time of the acquisition/sale are, relinings of blast furnaces therefore, not included in the change in wor- up to and including 1994 3–7 king capital reported in the funds statement. 2 Office equipment, light machinery, and relinings of Receivables and liabilities in blast furnaces commencing foreign currencies in 1995 8–12 Receivables and liabilities in foreign currenci- 3 Steel furnaces and manu- es are valued at the year-end rates. In cases facturing equipment 13–17 where exchange rates have been hedged 4 Rolling mills, cranes, and heavy machinery 18–22 through forward contracts, the forward rate is applied in the valuation. 5 Blast furnaces, coking ovens, and turbines 23–25 Loans which were incurred in order to 6 Buildings and land hedge net assets in foreign subsidiaries are reported by the parent company at acquisi- improvements 20–50 tion cost. In the consolidated accounts, these

45 NOTES

Intangible fixed assets are classified in the Appropriations and deferred taxes same manner in two groups where goodwill is Tax legislation in Sweden and in certain other calculated to have an economic life of 5 countries permits consolidation by allocation years, and other intangible fixed assets 3-5 to untaxed reserves. In this way, individual years. companies can, to some extent, dispose of reported profits without being subject to Leased fixed assets immediate taxation. The costs for fixed assets which are leased In the parent company, changes in untaxed instead of owned are primarily reported as reserves that have been made during the year lease costs (operational leases). Where the are reported as appropriations in the Profit leasing agreements contain terms and condi- and Loss Account. The cumulative value of tions pursuant to which the Group benefits such allocations is reported in the Parent from the economic advantages and incurs the company’s Balance Sheet under the item economic risks which are associated with ’Untaxed Reserves’. ownership of the property (financial leases), In the consolidated accounts, however, they are reported under ’fixed assets’ in the appropriations and untaxed reserves are not balance sheet. This does not apply, however, reported. Instead, these are broken down into to the leasing of passenger cars and office shareholders’ equity and deferred taxes with machinery of a lesser value. the application of the tax rate relevant in each country. The changes for the year of the cal- Sales culated deferred tax in the appropriations are Sales are reported after deduction of value- reported in the consolidated profit and loss added taxes, rebates, returns, and freight. account as deferred tax costs. The deferred taxes in untaxed reserves are reported in the Pricing between Group companies consolidated balance sheet as an appropria- The prices of goods and services delivered tion. between companies in the Group are set at A deferred tax claim is only reported as an market levels. Deliveries of slabs from SSAB asset when, and to the extent, it is probable Oxelösund to SSAB Tunnplåt, however, are that sufficient taxable surpluses will be availa- set at the estimated cost price. ble.

Short-term investments Short-term investments include bonds and other interest-bearing instruments (portfolio management). Short-term investments are valued at their year-end market value. Unrealised gains and losses are reported as a net amount under financial items. Valuation at market value has resulted in short-term investments being valued at SEK 2 (5) million higher than if valuation had been made at the lower of cost and market value.

46 NOTES

SALES 1 Group SEK millions 1997 1998 Hot-rolled sheet 3,170 3,312 Cold-rolled and metal-coated sheet 3,288 3,383 Organic-coated and profiled sheet 2,409 2,481 Heavy plate 2,762 2,557 Trading operations 4,610 4,634 Crude steel and slabs 555 813 Vehicle components 343 364 By-products 292 282 Other 45 9 Total 17,474 17,835

Sales broken down per geographic market and operating area are set forth in the Group review on page 15 and 16.

OPERATING EXPENSES 2 Cost categories Group Parent company SEK millions 1997 1998 1997 1998 Input materials 4,523 4,769 – – Purchased products in the trading operation 3,864 3,960 – – Energy 692 746 – – Personnel 3,562 3,655 30 51 Services 1,457 1,593 11 14 Depreciation/Write-down 789 880 1 1 Other 1,283 1,210 23 29 Total 16,170 16,813 65 95

Operating expenses have been reduced by the following state subsidies: State subsidies Group Parent company SEK millions 1997 1998 1997 1998 Employment-stimulating subsidies 1 1 – – Freight subsidies 16 14 – – Total 17 15 – – Continuation of note 2 on next page.

47 NOTES

OPERATING EXPENSES, CONTINUATION 2 Directors, Presidents and Other Wages, other compensation and social security costs Executive Vice Presidents employees SEK millions 1997 1998 1997 1998 Parent company* 8 10 9 9 Subsidiaries in Sweden 16 16 2,207 2,257 Subsidiaries outside Sweden Denmark 6 5 58 61 Finland 2 3 21 24 France 1 1 4 5 Italien 2 2 17 17 Netherlands 0 0 5 6 Norway 2 2 12 13 UK 3 3 23 25 Germany 2 2 15 16 USA 2 2 15 28 Other countries 3 3 13 21 Total wages and salaries 47 49 2,399 2,482 Social security costs 19 38 1, 003 1,052 (of which, pension expenses) (8) (27) (138) (134) Profit shares 1 0 93 34 Total 67 87 3,495 3,568 * Applies only to personnel employed and active within the Parent company. Personnel in certain major subsidiaries are formally employed in the Parent company, but are listed in terms of number (Note 16) and expense in the subsidiaries. Total wages and salaries include profit-based salaries to Presidents and Executive Vice Presidents with SEK 2 (2) million, related to the Parent company.

Terms of employment for senior Group management

Chairman of the Board Director’s fee SEK 0.3 (0.3) million. President and Chief Executive Officer Leif Gustafsson retired with a pension on 30 June 1998. Total compensation from Group companies amounted to SEK 2.4 (3.6) million. The company is responsible for supplementing the pension during the first three years so that it is equivalent to full salary, less any SSAB directors' fees paid during this three-year period. Following the three-year period, a lifetime pension is payable which will amount to slightly less than 40% of the pension-qualifying salary. This obligation is covered by insurance. Torsten Sandin became President and CEO in April of 1998. Total compensation from Group companies during the year amounted to SEK 3.4 million, of which SEK 0.7 million constituted a profit-based salary component which will be paid in 1999. In addition to this, Torsten Sandin also has the benefit of a cost-free residence. The earliest retirement age is 60. At such time, the pension will be 60% of the pension-qualifying salary until the age of 65, and thereafter approximately 40%. On dismissal by the company, the period of notice is 12 months. A severance payment equivalent to 12 months’ salary is payable in addition to this. Other Group Management Retirement ages vary between 60 and 62 years. On dismissal by the company, the period of notice is 12 months. A severance payment equivalent to 12–24 months’ salary is payable in addition to this. Pension obligations and similar benefits The Group participates in the ITP plan which is insured by SPP. In all material respects, obligations not covered by the ITP plan set forth above are covered by separate insurance policies.

48 NOTES

AFFILIATED COMPANIES 3 Share in earnings and share of equity Share in earnings Share of equity SEK millions 1997 1998 1997 1998 European Electrical Steels Ltd 38 18 248 253 Lulekraft AB 0 0 10 10 Norsk Stål A/S 35 28 93 92 Norsk Stål Tynnplater A/S 8 1 29 26 Oxelösunds Hamn AB 3 1 45 45 Total 84 48 425 426

Receivables from affiliated companies Group Parent company SEK millions 1997 1998 1997 1998 Are included in: Accounts receivable 96 84 – – Pre-paid expenses and accrued revenues 82 74 – – Total 178 158 – –

Liabilities to affiliated companies Group Parent company SEK millions 1997 1998 1997 1998 Are included in: Accounts payable 47 27 – – Other current liabilities 13 – 13 – Total 60 27 13 –

49 NOTES

FINANCIAL ITEMS 4 Group Parent company SEK millions 1997 1998 1997 1998 Dividends from subsidiaries – – 676 943 Dividends from affiliated companies – – 20 24 Profit from other securities and claims which are fixed assets Dividends 0 0 0 0 Interest income from subsidiaries – – 52 33 Other interest income 4 0 4 0 Capital gains on sales 5 0 – – Exchange rate differences 1 0 – – Other interest income and similar income Interest income from subsidiaries – – 76 122 Other interest income 187 169 157 113 Capital gains on sales 0 2 – – Recovered depreciated investments 7 1 7 – Exchange rate differences 20 4 17 8 Total financial income 224 176 1,009 1,243

Interest expenses and similar expenses Interest expenses to subsidiaries – – – 13 – 14 Other interest expenses – 70 – 95 – 55 – 75 Estimated financial expenses on pension liabilities – 5 – 5 0 0 Other – 6 – 7 – 16 0 Total financial expenses – 81 – 107 – 84 – 89

Financial items 143 69 925 1,154

TAXES 5 Tax costs Group Parent company SEK millions 1997 1998 1997 1998 Swedish corporate income taxes 322 239 42 30 Foreign corporate income taxes 37 35 – – Deferred taxes 157 142 – – Share in taxes of affiliated companies 20 11 – – Total 536 427 42 30

Tax receivables Group Parent company SEK millions 1997 1998 1997 1998 Are included in: Other short-term receivables – 74 12 –

Tax liabilities Group Parent company SEK millions 1997 1998 1997 1998 Are included in: Other current liabilities 35 43 – 7

50 NOTES

INTANGIBLE ASSETS 6 Patents, Tenancy Total Group licences and rights and intangible SEK millions similar rights similar rights Goodwill assets Acquisition value, 1 January 70 17 161 248 Acquisitions 20 0 – 20 Increase through acquisition of companies – – 9 9 Sales and disposals – 20 – – – 20 Re-classifications 0 1 – 1 Translation differences 1 0 – 1 Acquisition value, 31 December 71 18 170 259 Accumulated depreciation, 1 January 41 15 96 152 Sales and disposal – 20 – – – 20 Re-classifications 1 1 – 2 Depreciation for the year 8 1 18 27 Translation differences 0 0 0 0 Accumulated depreciation, 31 December 30 17 114 161 Residual value according to plan 41 1 56 98

TANGIBLE FIXED ASSETS 7 Fixtures, Assets under fittings, construction, Total Group Buildings and tools, and advances to tangible SEK millions real property Machinery equipment suppliers assets Acquisition value, 1 January 2,312 8,879 756 2,300 14,247 Acquisitions 301 3,024 106 – 1,415 2,016 Increase through acquisition of companies 0 0 0 – 0 Sales and disposals – 12 – 218 – 39 – 2 – 271 Re-classifications 49 98 9 – 158 – 2 Translation differences 12 7 16 0 35 Acquisition value, 31 December 2,662 11,790 848 725 16,025 Accumulated depreciation, 1 January 970 5,514 451 0 6,935 Accumulated depreciation through acquisition of companies 0 0 0 – 0 Sales and disposals – 7 – 203 – 31 – – 241 Re-classifications – 1 – 3 2 – – 2 Depreciation for the year 91 676 86 – 853 Translation differences 8 3 10 – 21 Accumulated depreciation, 31 December 1,061 5,987 518 0 7,566 Accumulated revaluation, 1 January – – – – – Revaluation for the year 7 – – – 7 Accumulated revaluation, 31 December 7 – – – 7 Residual value according to plan 1,608 5,803 330 725 8,466

The item ”machinery” includes financial leasing agreements with SEK 6 (6) million in acquisition value and SEK 6 (6) million in residual value according to plan. The tax assessed value of real property in Sweden was SEK 2,544 (2,915) million, while the corresponding property’s residual value was 1,340 (1,185) million. Out of the revaluation for the year, SEK 7 (0) million, SEK 5 (0) million have been booked against a revaluation reserve in equity and SEK 2 (0) million against deferred tax. Continuation of note 7 on next page.

51 NOTES

TANGIBLE FIXED ASSETS, CONTINUED 7 Fixtures, Assets under fittings, construction, Total Parent company Buildings and tools, and advances to tangible SEK millions real property Machinery equipment suppliers assets Acquisition value, 1 January 3 1 5 9 Acquisitions 4 – 1 5 Sales and disposals – – – 1 – 1 Acquisition value, 31 December 7 1 5 13 Accumulated depreciation, 1 January 0 1 4 5 Sales and disposal – – – 1 – 1 Depreciation for the year 0 0 0 0 Accumulated depreciation, 31 December 0 1 3 4 Residual value according to plan 7 0 2 9 The tax assessed value of real property in Sweden was SEK 5 (3) million while the residual value of corresponding property was SEK 7 (3) million.

FINANCIAL FIXED ASSETS 8 Equity shares Other Other Total Group in affiliated shares and long-term financial SEK millions companies participations receivables assets Acquisition value, 1 January 158 6 19 183 Investments – 0 11 11 Sales/amortisations – 0 – 4 – 4 Re-classifications – – – 4 – 4 Acquisition value, 31 December 158 6 22 186 Equity shares after acquisitions 268 – – 268 Residual value according to plan 426 6 22 454

Shares in Other Receiv- Other Shares affiliated shares ables long- Total Parent company in sub- com- and parti- from sub- term re- financial SEK millions sidiaries panies cipations sidiaries ceivables assets Acquisition value, 1 January 3,461 51 3 427 0 3,942 Investments 258 – – 16 – 274 Sales / amortisations – – – – 0 0 Acquisition value, 31 December 3,719 51 3 443 0 4,216 Residual value according to plan 3,719 51 3 443 0 4,216 During 1998, the Parent company increased the share capital in Coronet Finance by SEK 258 million.

52 NOTES

FINANCIAL ASSETS, CONTINUED 8 Book value, Company Registered Holdings, SEK Shares and participations reg. number office number %** millions Parent company’s shares and participations in subsidiaries Swedish operating subsidiaries: Dickson Plåt Service Center AB 556122-2141 Borlänge 480,000 100 51 Plannja AB 556121-1417 Luleå 80,000 100 16 SSAB HardTech AB 556387-7330 Luleå 1,000 100 122 SSAB Oxelösund AB 556313-7933 Oxelösund 1,000 100 450 SSAB Tunnplåt AB 556313-7941 Borlänge 1,000 100 1,500 Tibnor AB 556004-4447 Stockholm 850,000 85 283 Foreign operating subsidiaries: Coronet Finance Ireland 1,294,300,002 100 1,292 Others* 4 Dormant subsidiaries 1 Total 3,719

Parent company’s shares in affiliated companies Lulekraft AB Luleå 100,000 50 10 Norsk Stål A/S Norway 31,750 50 29 Norsk Stål Tynnplater A/S Norway 13,250 50 12 Total 51

Subsidiaries’ shares and participations in affiliated companies European Electrical Steels Ltd Great Britain 42,666,800 25 253 Oxelösunds Hamn AB Oxelösund 50,000 50 45 Total 298

Equity shares in affiliated companies’ shareholders’ equity in excess of the book value in the parent company 77 Total Group shares in affiliated companies 426

Parent company’s other shares and participations Tenant-owned apartments 3 Total 3

Subsidiary's other shares and participations* 3

Total of Group's other shares and participations 6

* A complete specification of other shares and participations is available from SSAB’s Group Headquarters in Stockholm. ** The percentage figures indicate the equity share which, in all cases, corresponds to the share of the voting capital.

53 NOTES

INVENTORIES, ETC. 9 Group Parent company SEK millions 1997 1998 1997 1998 Raw materials, consumables and semi-finished goods 1,287 1,496 – – Work in progress 97 169 – – Stocks of finished goods 1,871 2,236 – – Work in progress on behalf of third parties 2 2 – – Advances to suppliers 3 2 – – Total 3,260 3,905 – –

PRE-PAID EXPENSES AND ACCRUED REVENUES 10 Group Parent company SEK millions 1997 1998 1997 1998 Non-invoiced goods and services delivered 81 89 – – Bonuses, discounts, licences and suchlike 38 41 – – Pre-paid rents 17 23 2 2 Accrued interest revenues 107 0 102 0 Other items 167 182 2 1 Total 410 335 106 3

EQUITY 11 Group Parent company SEK millions 1997 1998 1997 1998 Share capital At beginning of year 3,200 3,200 3,200 3,200 Redemption of shares – – 397 – – 397 At year-end 3,200 2,803 3,200 2,803 Premium reserve At beginning of year – – – – Redemption of shares – – – 20 At year-end – – – 20 Restricted equity / Legal reserve At beginning of year 2,061 2,487 640 640 Allocated to restricted equity – 20 – – Allocated to revaluation reserve – 5 – – Translation difference 25 6 – – Re-allocation between restricted and unrestricted equity 401 339 – – At year-end 2,487 2,857 640 640 Unrestricted equity At beginning of year 6,702 7,134 3,604 3,896 Redemption of shares – – 2,928 – – 2,928 Dividends – 512 – 576 – 512 – 576 Translation difference 9 8 – – Net profit for the year 1,336 982 804 1,029 Re-allocation between restricted and unrestricted equity – 401 – 339 – – At year-end 7,134 4,281 3,896 1,421

The Group’s restricted equity includes an equity share fund of SEK 267 (266) million and a revaluation reserve of SEK 5 (0) million. Out of revaluation of real property of SEK 7 (0) million, SEK 5 (0) million have been booked against a revaluation reserve and SEK 2 (0) million against deferred tax.

54 NOTES

UNTAXED RESERVES 12 Parent company SEK millions 1997 1998 Periodization reserve 331 358 Capital-based tax equalization reserve 49 33 Total 380 391

Untaxed reserves are split in the Group between equity and deferred taxes. Such a split is, however, not made in the Parent company, but deferred taxes on the untaxed reserves of the Parent company amounts to SEK 109 (106) million.

LONG-TERM LIABILITIES 13 Group Parent company SEK millions 1997 1998 1997 1998 Structure loans; 5%, maturity 2004–06 268 230 268 230 Mortgage loans 107 34 – – Foreign loans 355 62 335 – MTN-programme – 969 – 969 Financial leasing agreements 5 6 – – Other 23 49 0 0 Total 758 1,350 603 1,199 Less amortisation, 1998 and 1999* – 247 – 61 – 225 – 37 Total 511 1,289 378 1,162

Repayment of long-term liabilities SEK millions 1999 2000 2001 2002 2003 Later Group 61 167 196 45 743 138 Parent company 37 158 188 37 737 42

* Included under Current liabilities in item Liabilities to credit institutions.

ACCRUED EXPENSES AND PRE-PAID REVENUES 14 Group Parent company SEK millions 1997 1998 1997 1998 Accrued costs of personnel 619 596 4 19 Non-invoiced goods and services received 96 177 0 0 Accrued interest expenses 6 25 5 24 Accrued bonuses and discounts 14 18 – – Other items 94 113 2 2 Total 829 929 11 45

55 NOTES

NET DEBT 15 Group Parent company Mkr 1997 1998 1997 1998 Cash and bank accounts 456 380 305 178 Short-term investments 3,436 685 2,871 124 Long-term investments 0 0 0 – Receivables from subsidiaries – – 2,504 3,916 Other receivables 128 55 116 0 Interest-bearing assets 4,020 1,120 5,796 4,218 Short-term liabilities to credit institutions 400 1,300 327 1,207 Long-term liabilities 511 1,289 378 1,162 Provisions for pensions 140 150 8 10 Liabilities to subsidiaries – – 460 291 Other liabilities 40 25 14 32 Interest-bearing liabilities 1,091 2,764 1,187 2,702 Net debt –2,929 1,644 –4,609 –1,516

AVERAGE NUMBER OF EMPLOYEES 16 No. of employees Women, % 1997 1998 1997 1998 Parent company Sweden 27 27 41 41 Total Parent company 27 27 41 41

Subsidiaries Sweden 9,014 8,968 16 15 Denmark 175 185 23 23 Finland 99 98 21 20 Italy 41 47 28 32 Norway 38 41 25 22 UK 89 92 27 27 Germany 34 35 29 28 USA 42 74 12 21 Other countries <20 employees 71 94 31 25 Total subsidiaries 9,603 9,634 16 16 Total Group 9,630 9,661 16 16

The figures are based on a normal number of working hours per year in different production areas, with allowance for different shift forms. The breakdown by gender refers to the number of employees at the end of the year.

56 NOTES

17 OPERATIONAL LEASES Operational leases with remaining terms of more than one year occur only to a very limited extent within the Group. Consequently, obligations in respect of the payment of leasing fees are in insignificant amounts.

PLEDGED ASSETS 18 Group Parent company SEK millions 1997 1998 1997 1998 For own long-term liabilities Real property mortgages 40 31 – – Floating charges 129 106 – – Total for own long-term liabilities 169 137 – –

Other pledged assets Real property mortgages 30 30 – – Pledged custodian accounts 56 30 56 30 Total other pledged assets 86 60 56 30 Total pledged assets 255 197 56 30

CONTINGENT LIABILITIES 19 Group Parent company SEK millions 1997 1998 1997 1998 Guarantees 28 43 0 13 Contingent liabilities on behalf of subsidiaries – – 112 113 Other contingent liabilities 60 57 58 56 Total contingent liabilities 88 100 170 182

The Group is involved in a very limited number of legal disputes concerning guarantees and complaints. In the result, consideration has been given to the anticipated outcome of these cases.

57 NOTES

20 DEFINITIONS Sales Cash flow Sales less deduction for value added tax, discounts, Internally generated funds including change in wor- returns, and freight. king capital less investments.

Equity Valued added Reported equity according to the Consolidated Sales and other operating revenues less cost of pur- Balance Sheet. chased goods and services.

Capital employed Earnings per share Total assets less non-interest-bearing operating liabi- Profit after taxes divided by average number of sha- lities and deferred taxes. res.

Operating capital P / E ratio Capital employed less interest-bearing assets. Share price at year-end divided by earnings per share. Liquid assets Cash and funds in bank, as well as short-term invest- Equity per share ments. Equity divided by number of shares.

Net debt Direct yield Interest-bearing liabilities less interest-bearing assets. Dividend divided by share price at year-end.

Return on equity after tax Profit after taxes as a percentage of average equity during the year. Definitions for subsidiary tables:

Return on operating capital Profit Operating profit before shares in affiliated companies Profit after financial income and expenses. as a percentage of average capital employed during the year. Capital expenditures Capital expenditures activated during the year. Return on capital employed before tax Operating profit before shares in affiliated companies Return on capital employed plus financial income as a percentage of average Return on average capital employed. capital employed during the year. Number of employees Equity ratio Average number of employees. Equity as a percentage of total assets.

58 Disposition of profit

Recommended Disposition of profit

The amount at the disposal of the Annual General Meeting is as follows:

profit brought forward 392 net profit for the year 1,029 SEK millions 1,421

The Board of Directors and the President recommend that the earnings be disposed of in the following manner:

dividend to the shareholders SEK 4.50 per share 504 to be carried forward 917 SEK millions 1,421

As reported in the Consolidated Balance Sheet, the Group’s disposable earnings amounted to SEK 4,281 (7,134) million.

Stockholm, 12 February 1999

Leif Gustafsson Tommy Andersson Anders G Carlberg

Dan Eriksson Per-Olof Eriksson Carl-Erik Feinsilber

Tony Hagström Björn Hall Owe Jansson

Sven-Åke Johansson Torsten Sandin President

Our Auditors’ report was submitted on 12 February 1999

Åke Danielsson Göran Tidström Authorized Public Accountants

59 Auditor’s report

To the general meeting of the shareholders of SSAB Svenskt Stål Aktiebolag (publ) Registered Number 556016-3429.

We have audited the Parent Company and the consolidated financial statements, the accounts and the administration of the Board of Directors and the President of SSAB Svenskt Stål Aktiebolag (publ) for 1998. These accounts and the administration of the Company are the responsibility of the Board of Directors and the President. Our responsibility is to express an opinion on the financial statements and the administration based on our audit.

We conducted our audit in accordance with Generally Accepted Auditing Standards in Sweden. Those Standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and their application by the Board of Directors and the President as well as evaluating the overall presentation of information in the financial statements. We examined significant decisions, actions taken and circumstances of the Company in order to be able to determine the possible liability to the Company of any Board member or the President or whether they have in some other way acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below.

In our opinion, the Parent Company and the consolidated financial statements have been prepared in accordance with the Annual Accounts Act and consequently we recommend

that the income statements and the balance sheets of the Parent Company and the Group be adopted, and

that the profit of the Parent Company be dealt with in accordance with the proposal in the Report of the Directors.

In our opinion, the Board members and the President have not committed any act or been guilty of any omission, which could give rise to any liability to the Company. We therefore recommend

that the members of the Board of Directors and the President be discharged from liability for the financial year.

Stockholm, 12 February 1999

Åke Danielsson Göran Tidström Authorised Public Accountants

60 Group management

Group management at the new rougher in Borlänge. From left to right, Anders Ullberg, Torsten Sandin, Dan Johansson, Åke Sander and Curt Johansson.

Torsten Sandin (1943), President and CEO Åke Sander (1938), Executive Vice President, Employed since 1969. Shareholding: 2,400 shares. Technology. Employed since 1965. Shareholding: 4,725 shares. Curt Johansson (1943), President SSAB Tunnplåt. Employed since 1994. Anders Ullberg (1946), Executive Vice President, Chief Financial Officer. Employed since 1984. Dan Johansson (1938), President SSAB Shareholding: 10,000 shares. Oxelösund. Employed since 1992. Shareholding: 3,200 shares. Holdings include shares owned by closely- associated persons. Group staffs

Control and Finance Anders Ullberg Legal Affairs Bo Legelius Public Affairs Ivar Ahlberg

Auditors Auditors Alternate Auditors

Åke Danielsson Ulla-Britt Larsson Authorized Public Accountant Authorized Public Accountant PricewaterhouseCoopers PricewaterhouseCoopers Göran Tidström Ingvar Pramhäll Authorized Public Accountant Authorized Public Accountant PricewaterhouseCoopers PricewaterhouseCoopers

61 Board of Directors

APPOINTED BY THE ANNUAL GENERAL MEETING

Leif Gustafsson Anders G Carlberg Per-Olof Eriksson Carl-Erik Feinsilber (1940) (1943) (1938) (1931) Chairman of the Board President of Axel Board Member since Deputy Chairman of since 1998. Johnson International. 1986. the Board. Board Member, Sveriges Board Member since Chairman of the Board Board Member since Industriförbund, 1986. of Svenska Kraftnät, 1994. Svedala, Elektrokoppar Chairman of the Board Thermia and Odlander Chairman of the Board Svenska, Custos, and of Munksjö. Board och Fredriksson o Co. of Inductus. Board Gränges. Member, inter alia, Board Member, Sandvik, Member, Bonnier and Shareholding: 2,400 Axel Johnson, Elkem, Svenska Handelsbanken, Industrivärden. shares. BPA, and Enator. SKF, Volvo, ASSA Shareholding: 2,000 Shareholding: 1,600 ABLOY, Skanska, Custos, shares. shares. PREEM Petroleum, Kungl. Tekniska Hög- skolan, Koninklijke Sphinx Gustavsberg, and Sveriges Industriförbund. Shareholding: 1,000 shares.

ELECTED BY THE EMPLOYEES

Holdings include shares owned by closely-associated persons.

Tommy Andersson Dan Eriksson Owe Jansson (1955) (1939) (1945) Steelworker, SSAB Engineer, SSAB Steelworker, SSAB Tunnplåt. Tunnplåt. Oxelösund. Employee representative Employee representative Employee representative since 1991. since 1997. since 1990.

62 HONORARY CHAIRMAN

Björn Wahlström has served as honorary chairman of the company since 1991.

Tony Hagström Björn Hall Sven-Åke Johansson Torsten Sandin (1936) (1942) (1939) (1943) Board Member since Board Member since Executive Vice President President and CEO of 1986. 1990. and member of group SSAB Svenskt Stål since Chairman of the Boards Board Member, inter management of Merita- 1998. of TeleOffice, Dataföre- alia, Mandamus Nordbanken. Board Chairman of the executive ningen i Sverige, and IT- Fastigheter, 7:e AP-fon- Member since 1986. council of the Swedish Forum. Board Member, den, and Ekman & Co. Chairman of the Board of Ironmasters’ Association. SAS and SAS Sverige AB. Shareholding: 800 sha- Nordisk Renting and Shareholding: 2,400 sha- Shareholding: 400 shares. Deputy Chairman of the res. res. Board of Kjessler & Mannerstråle. Chairman of the Board of Merita- Nordbanken’s subsidiaries Aleksia, Merita Fastig- heter, Nordbanken Fastig- heter, and Stämjärnet. Shareholding: 2,400 shares.

Alternates THE BOARD’S WORK PROCEDURES

There is a compensation on the basis of the committee within the amendments made to the Board of Directors Swedish Companies Act. which determines salari- The work of the es and the terms and Board of Directors and conditions of employ- its meetings thereby fol- ment for the President low a presentation plan and which issues guideli- for the purpose of ensu- nes for the salaries and ring that the needs of the the terms and conditions Board for information of employment for and to monitor the ope- Group management. Leif rations and the compa- Gustafsson, Anders G. ny's organisation are Carlberg, and Torsten continuously met. Sandin serve on the com- At at least one mee- mittee. ting of the Board of During the course of Directors each year, the the year, the Board of company's auditors Bo Jerräng Bert Johansson Kerstin Kjellin-Lage Directors held six mee- report their comments (1947) (1952) (1949) tings at which minutes from the audit carried Personnel administrator, Electrician, SSAB Inventory optimizer, were kept. out. SSAB Oxelösund. Tunnplåt. Tibnor. The Board of Employee representative Employee representative Employee representative Directors has formalised since 1998. since 1998. since 1993. its working procedures

63 Addresses

Group Headquarters Foreign Subsidiaries Finland SSAB Svenskt Stål SSAB Svenskt Stål Australia Box 26208 Fredriksgatan 63 A 11 S-100 40 STOCKHOLM SSAB Swedish Steel FI-00 100 HELSINGFORS 10 Phone: Int. +46 8 45 45 700 Suite 7, 134 Racecourse Road Phone: Int. +358 9 686 60 30 Fax: Int. +46 8 45 45 725 Ascot Fax. Int. +358 9 693 21 20 Visiting address: BRISBANE QLD 4007 SSAB Teräs-Taive Birger Jarlsgatan 58 Phone: Int. +61 7 3268 3722 Terästie 8 Fax: Int. +61 7 3268 3434 FI-54 100 JOUTSENO Swedish Companies Phone: Int. +358 5 610 55 00 Austria Dickson PSC Fax: Int. +358 5 610 56 00 Box 753 SSAB Swedish Steel S-781 27 BORLÄNGE Linke Bahnzeile 24 France Phone: Int. +46 243 763 00 AT-2483 EBREICHSDORF SSAB Swedish Steel Fax: Int. +46 243 126 52 Phone: Int. +43 2254 752 17 114, avenue Charles de Gaulle Fax. Int. +43 2254 752 174 Plannja FR-92522 NEUILLY SUR SEINE CEDEX S-971 88 LULEÅ Phone: Int. +33 1 5561 91 00 Phone: Int. +46 920 929 00 Canada Fax: Int. +33 1 5561 91 09 Fax: Int. +46 920 929 12 SSAB Swedish Steel Germany Plannja Siba 200–801 Belgrave Way Box 143 Annacis Island Plannja NEW WESTMINISTER, B.C. S-570 81 JÄRNFORSEN Lubecker Strasse 28 Canada V3M 5R8 Phone: Int. +46 495 175 00 DE-23843 BAD OLDESLOE Tel 0091-604-526 43 99 Fax: Int. +46 495 505 25 Phone: Int. +49 4531 1719 0 Telefax 0091-604-526 43 79 SSAB HardTech Fax: Int. +49 4531 1719 20 S-971 88 LULEÅ Czech Republic SSAB Swedish Steel Phone: Int. +46 920 928 00 Heinrichstrasse 169 Fax: Int. +46 920 547 76 SSAB Swedish Steel DE-40239 DÜSSELDORF Spartakovcu 3 SSAB Merox Phone: Int. +49 211 91250 CZ-708 15 OSTRAVA 4 Fax: Int. +49 211 9125 129 S-613 80 OXELÖSUND Phone: Int. +420 69 693 9487 Phone: Int. +46 155 254 400 Fax Int: +420 69 693 9486 SSAB Swedish Steel Fax: Int. +46 155 255 221 Immenhoferstrasse 19-21 SSAB Oxelösund Denmark DE-70180 STUTTGART Phone: Ing. +49 711 68 78 40 S-613 80 OXELÖSUND Plannja Fax: Int. +49 711 68 78 413 Phone: Int. +46 155 254 000 Mineralvej 6-8 Fax: Int. + 46 155 254 073 Postboks 727 Hong Kong SSAB Tunnplåt DK-9100 AALBORG Head Office: Phone: Int. +45 98 10 11 11 SSAB Swedish Steel S-781 84 BORLÄNGE Fax: Int. +45 98 10 10 01 Room 208, Stanhope House 734-738 Kings Road Phone: Int.+46 243 700 00 SSAB Sino Staal Fax: Int. +46 243 720 00 HONG KONG Postboks 242 Metallurgy: Phone: Int. +852 2564 07 82 DK-2605 BRÖNDBY S-971 88 LULEÅ Fax: Int. +852 2563 21 02 Phone: Int. +45 43 96 30 00 Phone: Int. +46 920 920 00 Fax: Int. +45 43 96 32 82 Fax: Int. +46 920 927 14 Hungary SSAB Svensk Stål SSAB Swedish Steel Trading Tibnor Mitchellsgade 9 Box 4260 Erdö U. 32 DK-1568 KÖPENHAMN V S-102 66 STOCKHOLM HU-9422 HARKA Phone: Int +45 33 13 20 01 Phone: Int. +46 8 702 40 00 Phone: Int. +36 99 510 510 Fax: Int. +45 33 13 38 78 Fax: Int. +46 8 702 23 55 Fax: Int. +36 99 510 511 Estonia SSAB Swedish Steel Eesti Lai 49 EE-10113 TALLINN Phone: Int +372 6 31 37 28 Fax: Int. +372 6 31 37 29

64 Italy Poland Turkey SSAB HARDOX Lamiere SSAB Swedish Steel SSAB Swedish Steel Interporto de Parma Ul. Bernardynska 17/44 Perdemsac Plaza, Bayar Caddesi IT-43010 LOC.BIANCONESE- PL-02904 WARSAW Gülbahar Sokak FONTEVIVO (PR) Phone: Int. +48 22 643 59 28 No:17 Kat:4/42 Phone: Int. +39 0521 618 823/24 Fax: Int. +48 22 643 59 28 Kozyatayi Fax: Int. +39 0521 618 816 TR-ISTANBUL Portugal Phone: Int. +90 216 445 59 54/55 SSAB Swedish Steel Fax: Int. +90 216 445 59 56 Via G. Di Vittorio No 6 SSAB Portugal-Comércio de Aco IT-250 16 GHEDI Sitio das Pratas UK Phone: Int. +39 030 905 88 11 Apartado 201 Fax: Int. +39 030 905 89 30 PT-2071 CARTAXO CODEX Plannja Phone: Int. +351 43 704 272/ 273 69 High Street Sales office: Fax: Int. +351 43 704 262 MAIDENHEAD, Berkshire SL6 1JX Via Marcantonio Colonna 46 Phone: Int. +44 1 628 637 313 IT-201 49 MILANO Singapore Fax: Int. +44 1 628 674 940 Phone: Int. +39 02 327 03 46 Fax: Int. +39 02 327 03 40 SSAB Swedish Steel SSAB Dobel Coated Steel 11 Joo Koon Crescent Unit 17 Japan SINGAPORE 629022 Narrowboat Way, Hurst Business Park Phone: Int. +65 863 16 22 BRIERLEY HILL, West Midlands DY5 1UF SSAB Swedish Steel Fax: Int.+65 863 06 22 Phone: Int. +44 1384 746 60 Kenchiku Kaikan 5 Fl Fax: Int +44 1384 775 75 5-26-20 Shiva, Minato-Ku Slovenia JP-TOKYO 108-0014 SSAB Swedish Steel Phone: Int. +81 3 3456 34 47 SSAB HARDOX Steel Trading De Salis Court, De Salis Drive Fax: Int. +81 3 3456 34 49 Blejska Dobrava 17A Hampton Lovett SI-BLEJSKA DOBRAVA DROITWICH, Worcestershire WR9 OQE The Netherlands Phone: Int. +386 6487 42 72 Phone: Int. +44 1905 79 57 94 Fax: Int.+ 386 6487 42 72 Fax: Int. +44 1905 79 47 36 SSAB Prelaq P.O. Box 2 South Africa USA NL-6640 AA BEUNINGEN Phone: Int. +31 24 679 07 00 SSAB Swedish Steel SSAB HARDOX Fax: Int. +31 24 679 07 07 Private Bag X1 Corporate Office Postnet Suite 107, East Rand 4700 Grand Avenue SSAB Swedish Steel ZA-BOKSBURG 1461, Guateng Province PITTSBURGH, PA 15225 P.O. Box 131 Phone: Int. +27 11 397 8677/78 Phone: Int. +1 412 269 32 31 NL-6640 AC BEUNINGEN Fax: Int. +27 11 397 8679 Fax: Int. +1 412 269 32 51 Phone: Int. +31 24 679 05 50 Fax: Int. +31 24 679 05 55 SSAB HardTech South Korea 200 Kipp Road Norway SSAB Swedish Steel MASON, MI 48854 Phone: Int. +1 517 244 88 00 Rm 661, Daeyong Bldg. 6F Fax: Int. +1 517 244 88 99 Plannja 44-1 Yoido-Dong Östensjöveien 9 Youngdeungpo-Gu SSAB Swedish Steel NO-0661 OSLO SEOUL 4700 Grand Avenue Phone: Int. +47 22 65 02 00 Phone: Int. +82 2 761 61 72 PITTSBURGH, PA 15225 Fax: Int. +47 22 65 98 80 Fax: Int. +82 2 761 61 73 Phone: Int. +1 412 269 21 20 SSAB Svensk Stål Fax: Int. +1 412 269 21 24 Postboks 1516 Vika Spain NO-0117 OSLO SSAB Swedish Steel Phone: Int. +47 22 83 56 00 C/Manuel Uribe 13-15 Fax: Int. +47 22 83 55 90 ES-28033 MADRID Phone: Int. +34 91 300 54 22 Fax: Int.+ 34 91 388 96 97 SSAB Swedish Steel AB, Box 26208, SE-100 40 Stockholm, Sweden Telephone int. +46 8-45 45 700. Telefax int. +46 8-45 45 725 Visiting address: Birger Jarlsgatan 58, Stockholm www.ssab.se