By Marta Frackowiak
STOCKHOLM (Reuters) -Swedish steelmaker SSAB announced a 2.5 billion crown ($224 million) share buyback program on Wednesday as it posted a smaller than expected drop in third-quarter operating profit, sending its stock price up 6% in early trade.
A seasonal slowdown in European steel markets was more pronounced than usual in the third quarter and demand in the region is expected to remain subdued in the final three months of the year, the company said.
SSAB, the first major European steel maker to report third-quarter results, said operating profit fell by 34% to 4.37 billion Swedish crowns in the July to September quarter, beating the average 3.73 billion crowns expected by analysts, according to LSEG data.
"We had somewhat lower earnings ... but I would claim that given the circumstances and the headwinds we experienced, especially on the European market, we had a good profitability," CEO Martin Lindqvist told a conference call.
SSAB said its board had decided on the share buyback program due to strong cash flows and a solid balance sheet.
European steel markets were weak and prices in the fourth quarter were expected to be "significantly lower", while North America saw more stable demand albeit with "lower" prices, the company said.
Shipments in SSAB's Special Steels division were expected to be stable in the fourth quarter although prices were expected to be "somewhat lower".
The stronger than expected third-quarter earnings would likely lead analysts to raise their expectations for SSAB's earnings in 2023 and 2024, JP Morgan said in a note to clients.
The company earlier this year announced cost cuts of some 500 million crowns, with around 200 million of this seen as "structural" cuts.
"Measures include temporary and permanent layoffs, use of working hours banks, a restrictive approach to recruitment and other fixed costs," Lindqvist said in a statement.
($1 = 11.1386 Swedish crowns)