UPDATE 2-Steelmaker SSAB warns Q4 profits close to zero

* SSAB says weak demand, production shortfalls hit Q4

* Says Europe demand weakened faster than anticipated

* Production problems contributed to decline in earnings

* Orders for Q1 delivery have improved significantly

* Shares fall 3.8 percent

(Adds analyst comment, details, shares)

By Mia Shanley and Victoria Klesty

STOCKHOLM, Dec 23 (BestGrowthStock) – Swedish specialty steelmaker
SSAB (SSABa.ST: ) said on Thursday its fourth quarter operating
profit would land near zero as lower shipments and production
problems ate into earnings while European demand looked weak.

Shares in SSAB, which has been struggling to cover higher
raw material costs in full with price increases, slid almost 4
percent as analysts focused on the soft European outlook. Other
steelmakers shrugged off the warning.

According to I/B/E/S estimates, analysts had been expecting
an average 603 million crowns ($60.5 million) profit for the
fourth quarter, above a 430 million crowns result in the same
quarter a year ago and after a 289 million profit in the
previous quarter.

“It is also an effect from the Swedish crown — 40 to 50
percent of SSAB’s cost base is in Swedish crowns and the crown
has appreciated. So they are struggling now to get their margins
back,” Carsten Riek, an analyst at Morgan Stanley, said.

The Swedish crown (EURSEK=: ) (SEK=: ) has strengthened against
the euro on the back of record economic growth and rising
interest rates in the Nordic country. It has been trading at the
highest level against the euro in 4 years.

“They need to push through the price increases they get from
higher raw material costs and the Swedish crown itself,” Riek
said.

With 1.2 billion crowns in operating profits already
reported for the first three quarters so far this year, SSAB
will fall far short of I/B/E/S estimates for a 1.6 billion crown
result for the full year.

“Towards the end of the fourth quarter, demand in Europe
weakened at a faster rate than SSAB had anticipated in the
company’s third quarter report,” SSAB said in a statement.

Its profit warning follows a theme of leaner times for
steelmakers around the world after they benefited from an upturn
in demand during the global recovery.

A disruption in production at one of SSAB’s blast furnaces
in Sweden contributed to the decline in earnings though
production is expected to return to full operation in another
few weeks.

Because of the weak market outlook in the fourth quarter,
SSAB brought forward part of a maintenance outage at a U.S.
plant that had been previously scheduled for the first quarter
of 2011, a factor that further weighed on earnings.

However, there were some hints of improvement.

SSAB said incoming orders for delivery during the first
quarter had improved significantly compared with orders received
for delivery in the current quarter.

“The order book for SSAB Americas is such that we anticipate
full production during the first quarter of 2011, while the
picture remains somewhat weaker in Europe,” the company said.

“It is of course negative with a profit-warning, but I think
that this is not that terrible given two one-off factors and
then they are positive about the outlook in the first quarter,”
said an analyst.
($1=6.844 Swedish Crown)
(Reporting by Mia Shanley; Additional reporting by Elinor
Schang; Editing by Hans Peters)

UPDATE 2-Steelmaker SSAB warns Q4 profits close to zero