CEO's comments
We expected 2010 to become a volatile and demanding year for Scana, being a late cyclic company and having the effect of global activity downturn hit us gravely towards the end of 2010. We saw this development early and acted immediately. At the outset of 2010, we had removed a series of costs, including reducing the number of hands by 300 people, both temporarily and permanently.
In hindsight, these changes were very important. Combined with a strong focus on contributing to solve our customers’ challenges, we have, in spite of a negative operating profit in 2010, coped far better than most comparable companies. Our activity was as expected, but the pressure on prices in some of the market segments has been heavier than assumed. This applies especially to the traditional steel and industry market in Europe, plus competition exposed deliveries to the energy market. Even if Scana to a large extent is able to supply the quantities we would like to these markets, it has been very difficult to get paid sufficiently for the quality benefit we provide. This is due to overcapacity with the producers, making the competition in some market segments very strong.
When Scana succeeds with our changeovers, it is because everybody sees that change is necessary, but not at least because everyone wishes to keep the business running and the workplaces intact. This team spirit, combined with a very low absence due to illness, contributes to our competitive power and our results. I wish to thank all our employees for their great efforts through a demanding 2010 and for the way challenges are handled!
We now see that activity for Scana is picking up, but the order intake for 2010 in total has been too low. This will influence our profit in the company’s first half of 2011. We are nevertheless pleased to see the current upturn in the market and the marked increase in contracts towards the end of 2010 and in the beginning of 2011. We have carried out several structural measures to position ourselves for an activity increase. Our offices in Houston, Shanghai, Singapore, Houston and Rio de Janeiro bring us closer to our customers in important markets. The establishment of our own subsea company has rendered possible several larger, more complete deliveries from Scana to a market where we know we have a very strong competitive power. Also, we have invested to increase capacity, reduce unit costs and increase robustness in our steel companies. A strong focus on efficiency, lead-times and unit costs, in addition to a commitment to the future, makes for a strong foundation for good future results.
Scana is acknowledged as a supplier of high quality steel. The recent years we have gradually manufactured more complete products and systems. We are not competing in delivering a rod of steel with other steel works across the globe. Our competitive power lies in adding value for the customer when we turn high quality steel into more complete products in a way that few others can. This strategy makes us unique globally and is something that we are poised to reap the benefits of in the future. Our firm basis is a very strong knowledge and competence in materials technology.
In everything we do, we will focus on delivery precision and quality. Our customers will experience us as a very reliable supplier, thus strengthening our reputation and our competitive position. Our leaders shall closely follow up their own businesses and “be out there”, among our customers, to understand their needs and contribute to solve their challenges.
Scana is an environmental business and manufactures some of the purest and eco-friendly steel that can be obtained, steel that is utilized in our own products and by our customers.
Our starting point is scrap metal, which, through our processes, is turned into high-quality products. It is our goal to have the smallest possible impact on our environment, irrespective of where in the world the production takes place.
2011 will be a demanding year. A stronger Norwegian and Swedish Krone, compared to important currencies, present us with extra challenges. An improved order intake towards the end of 2010 and into 2011 will, however, yield return effects second half 2011. In the transition phase we now are in, small events could however manifest itself in our operation profit more clearly than before. An event, that in a period of strong economic expansion would hardly be visible, will in this situation be noticeable. But the markets that are most important to Scana show a gradual improvement, making us more optimistic about orders and profits in the coming years.
We are positioned for an exciting future!
Rolf Roverud
CEO
