Positioning for a market in change

Iron ore prices developed relatively strongly in the first quarter of 2016.
However, the price level was lower than in the same period last year, which
meant that LKAB’s operating profit for the quarter totalled MSEK 171 (375). In
view of the expected continued oversupply of iron ore products, the recent
upturn in iron ore prices is judged to be temporary.
JANUARY – MARCH
•    Net sales totalled MSEK 3,768 (4,177)
•    Operating profit before urban transformation expenses was MSEK 171 (375)
•    Costs for urban transformation provisions totalled MSEK 335 (224)
•    Profit for the period was MSEK 333 (607)
•    Deliveries of iron ore totalled 6,3 (5,9) Mt
Iron ore prices developed relatively strongly in the first quarter of 2016.
However, the price level was lower than in the same period last year, which
meant that LKAB’s operating profit for the quarter totalled MSEK 171 (375). In
view of the expected continued oversupply of iron ore products, the recent
upturn in iron ore prices is judged to be temporary.
LKAB’s production volume continued to improve, amounting to 6.9 (6.2) Mt for the
quarter, partly due to an increased supply of crushed ore from the underground
mines and more stable processes in the processing plants. Deliveries reached 6.3
(5.9) Mt, with pellets accounting for 86 (87) percent.
Measures to reduce costs are ongoing. Compared with the same quarter in the
previous year, costs excluding provisions for urban transformation reduced by 10
percent. In the programme for reducing the number of employees by 400, around 90
percent of this has been achieved.
Within urban transformation the focus is on cost efficiency and compensation
models in order to ensure access to land in both the phase-out and development
areas. At the beginning of 2016 compensation principles for the acquisition of
properties were presented, and in Kiruna construction of the new City Hall is in
progress.
The situation remains challenging for LKAB, and work to introduce a new Group
structure in order to adapt the company to these market conditions and to shift
responsibility closer to production is well under way. As communicated
previously, in the second quarter LKAB plans to present a detailed action plan
aimed at reducing costs by at least MSEK 800 on an annual basis from the second
quarter of 2017.
Contact: Bo Krogvig, Acting Senior Vice President of Communications at LKAB,
Tel: 46 (0)8 429 34 45. E-mail:bo.krogvig@lkab.com
LKAB is an international high-tech minerals group that mines and upgrades the
unique iron ore of northern Sweden for the global steel market. Sustainability
is core to our business and our ambition is to be one of the industry’s most
innovative, resource-efficient and responsible companies. The group had sales of
more than SEK 16 billion in 2015 and employs about 4,000 people in 15 countries.
Other group business include industrial minerals, drilling systems, rail
transport, rockwork services and property management.