Quarterly Report • Oct 5, 2011
Quarterly Report
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"We now have roughly 15% of the votes in Volvo, which clearly illustrates our ambitions as a long-term active owner in a quality company with considerable value potential.", comments CEO Anders Nyrén.
| Net asset value | Sept. 30, 2011 | June 30, 2011 | Dec. 31, 2010 |
|---|---|---|---|
| Equities portfolio, SEK billion | 52.2 | 67.9 | 71.1 |
| Interest-bearing net debt, SEK billion | -17.2 | -15.9 | -13.4 |
| Net asset value, SEK billion | 35.0 | 52.0 | 57.7 |
| Net asset value per share, SEK | 91 | 135 | 149 |
| Net asset value per share after full conversion, SEK | 95 | 132 | 144 |
| Total return | 9 months | 5 years | 10 years | 15 years |
|---|---|---|---|---|
| Class A shares (yearly average) | -34% | -3% | 6% | 10% |
| Class C shares (yearly average) | -36% | -3% | 6% | 10% |
| Benchmark index (SIXRX) | -20% | 1% | 7% | 9% |
| Comparative return for Class C shares, percentage points | -16% | -4% | -1% | 1% |
Industrivärden is one of the Nordic region's largest holding companies, with ownership in a concentrated selection of listed Nordic companies with good development potential. The goal is to generate high growth in net asset value over time.
As I noted in the half-year report, the past quarter was overshadowed by the financial crisis in the euro zone – a crisis that is growing increasingly serious in lack of European political leadership that deal with the problems that have arisen. At the time of this report's release there are signs that this insight is finally taking root. This is important, since what happens in Europe will have consequences for the entire global economy. It should be kept in mind, however, that the world economy is projected to grow by 3.6% this year, despite the sharp downward adjustments of growth in the U.S. and Europe.
At the same time, I want to take this opportunity to note that the performance of our portfolio companies continues to be stable, even though there are signs of a slowing in the rate of growth, which is illustrated by falling commodity prices, among other things. The companies have the preparedness to parry a possibly adverse development.
During the third quarter we invested a further SEK 1.3 billion in Volvo, bringing our total investment in 2011 to
approximately SEK 2.9 billion. We now have roughly 15% of the votes in Volvo, which clearly illustrates our ambitions as a long-term active owner in a quality company with considerable value potential.
In addition to our investment in Volvo, we have mainly increased our holding in Handelsbanken, by SEK 1.1 billion, and in Sandvik, by SEK 0.7 billion. During the first nine months of the year, we have made net purchases of stocks for SEK 4.7 billion, of which SEK 1.2 billion during the third quarter.
The net purchases during the year have been financed by the latter of the two convertible loans that we issued in 2010 and 2011 at favorable terms. In addition to the convertible loans, Industrivärden's total financing is made up of bank loans and MTN/commercial paper programs. The loans are not coupled to any covenants, and have an average duration of approximately 3.5 years. The dividends we received during the spring from our portfolio companies were together more than four times greater than our annual interest expense.
Net asset value decreased as a result of the sharp drop in value in the stock market in August, to SEK 35.0 billion. This corresponds to a decrease of 37% during the first nine months of the year including reinvested dividends. The total return index decreased by 20% during the same period. The total return for the Class A and C shares was -34% and -36%, respectively.
Short-term trading generated a profit of SEK 98 M (98), which exceeded our costs of SEK 76 M (67) during the nine-month period.
Anders Nyrén
Net asset value on September 30, 2011, was SEK 35.0 billion, a decrease of SEK 22.7 billion for the year to date. Net asset value per share decreased by SEK 58 to SEK 91, or by 37% including reinvested dividends. During the same period, the total return index (SIXRX) decreased by 20%.
During the first nine months 2011, the value of the equities portfolio, adjusted for purchases and sales, decreased by SEK 23.6 billion to SEK 52.2 billion. The total return for the portfolio during the same period was -30%, compared with -20% for the total return index (SIXRX).
| September 30, 2011 | December 31, 2010 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Portfolio | Ownership in company | Share of port | Market value | Market value | |||||
| companies | No. of shares | Capital, % | Votes, % | folio value, % | SEK M | SEK/share | SEK M | SEK/share | |
| Handelsbanken A | 69,810,927 | 11.2 | 11.4 | 23 | 12,294 | 32 | 14,015 | 36 | |
| Sandvik | 144,577,252 | 12.2 | 12.2 | 22 | 11,566 | 30 | 18,150 | 47 | |
| Volvo A | 118,586,118 | 5.8 | 14.7 | 16 | 8,438 | 22 | 10,713 | 28 | |
| Volvo B | 4,182,739 | ||||||||
| SCA A | 43,100,000 | 10.0 | 29.1 | 11 | 5,920 | 15 | 7,487 | 19 | |
| SCA B | 27,700,000 | ||||||||
| Ericsson B | 77,680,600 | 2.4 | 13.8 | 10 | 5,046 | 13 | 5,748 | 15 | |
| SSAB A | 56,105,972 | 17.6 | 22.6 | 6 | 2,924 | 8 | 6,347 | 17 | |
| SSAB B | 754,985 | ||||||||
| Skanska A | 12,659,940 | 7.0 | 23.9 | 5 | 2,825 | 7 | 4,280 | 11 | |
| Skanska B | 16,797,306 | ||||||||
| Indutrade | 14,727,800 | 36.8 | 36.8 | 5 | 2,423 | 6 | 3,417 | 9 | |
| Höganäs B | 4,408,046 | 12.6 | 10.0 | 2 | 813 | 2 | 934 | 2 | |
| Equities portfolio | 100 | 52,249 | 135 | 71,092 | 184 | ||||
| Interest-bearing net debt | 17,221 | -44 | 13,401 | -35 | |||||
| Net asset value | 35,028 | 91 | 57,691 | 149 | |||||
| Debt-equity ratio | 33% | 19% | |||||||
| Net asset value after full conversion | 95 | 144 | |||||||
| Debt-equity ratio after full conversion | 16% | 13% |
Market value pertains to Industrivärden's share of the respective portfolio companies' total market capitalization.
Interest-bearing net debt totaled SEK 17.2 billion at September 30, 2011. The debt-equity ratio was 33%, and the equity ratio was 66% (78%). After full conversion of outstanding convertible loans, corresponding to SEK 8.8 billion, the debt-equity ratio was 16%.
The convertible loans are hedged, entailing that translation effects do not affect net asset value.
At the end of September, interest-bearing liabilities had an average duration of approximately 3.5 years and carried an average interest rate of 3.5%.
None of the Group's borrowings are dependent on a certain credit rating or actual debt-equity ratio.
In January 2011 Industrivärden issued six-year convertible bonds worth EUR 550 M. The conversion price is SEK 162/share at a fixed euro exchange rate of SEK 8.8803, representing a premium of 35% and an annual coupon of 1.875%.
Industrivärden's ownership has contributed to competitive growth in value for the portfolio companies. Industrivärden's stock has been a good long-term investment that has delivered a higher total return than the return index.
During the first nine months 2011, the shareholdings in Ericsson, Handelsbanken and SCA generated better returns than the return index. Overall, the total return for the equities portfolio was -30%, compared with -20% for the return index.
During the last five-year period, Indutrade, Höganäs, Handelsbanken, Sandvik and Skanska have generated higher returns than the return index.
For the ten-year period, all of the portfolio companies except Ericsson have delivered total returns in excess of or level with the return index.
The total return for Industrivärden's stock for various time periods is shown in a table on the first page.
| Total return Jan.–Sept. 2011 |
Average annual total return, % |
|||
|---|---|---|---|---|
| Five years | Ten years | |||
| Portfolio companies | SEK billion | % | Sept.'06–Sept. '11 | Sept.'01–Sept.'11 |
| Ericsson | -0.6 | -10 | -10 | -6 |
| Handelsbanken | -2.3 | -14 | 3 | 7 |
| SCA | -1.3 | -18 | -2 | 5 |
| Skanska | -0.9 | -21 | 2 | 9 |
| Höganäs | -0.3 | -27 | 4 | 6 |
| Indutrade | -0.9 | -27 | 13 | - |
| Sandvik | -7.0 | -37 | 3 | 12 |
| Volvo | -5.0 | -39 | -1 | 15 |
| SSAB | -3.4 | -54 | -14 | 12 |
| Equities portfolio | -21.7 | -30 | ||
| Index (SIXRX) | -20 | 1 | 7 | |
| Industrivärden C | -36 | -3 | 6 |
The total return expressed in SEK billion pertains to the change in value during the period including dividend income for the respective portfolio companies. Indutrade was listed in October 2005.
During the first nine months 2011, stocks were purchased for SEK 10,683 M and sold for SEK 5,965 M, net 4,718 M. Large net purchases were in Volvo, for SEK 2,872 M, Handelsbanken, for SEK 1,095 M, Sandvik, for SEK 724 M, and Höganäs, for SEK 199 M.
During the first nine months 2011, Industrivärden's shortterm trading generated a profit of SEK 98 M (98). Management costs amounted to SEK 76 M (67). Management costs corresponded to 0.25% of managed assets, which is considerably lower than for most comparable investment alternatives.
With more than 60 years of active ownership, Industrivärden has a unique position in creating long-term value in listed Nordic companies. The ambition is to work in a structured manner and thereby actively contribute to growth in value of the portfolio companies. Operations rest on a foundation of significant owner influence, extensive experience, knowledgeable employees, a strong business model and a large network. Our portfolio companies are leaders in their respective segments and all have strong global positions.
Through Industrivärden, they have a professional and active owner, to the benefit of their as well as Industrivärden's long-term growth in value. Current overarching ownership matters include ensuring adherence to long-term growth plans, establish preparedness for a possibly weaker demand, and monitoring the companies' capital structures.
Following is a general description of Industrivärden's investment cases along with strategic options and activities in brief.
A well-developed universal banking operation and decentralized branch network with local customer responsibility contribute to high customer satisfaction and good profitability.
www.handelsbanken.com
Through a niche focus and strong R&D profile, Sandvik has established a world-leading position in materials technology with products primarily for the manufacturing, mining and construction industries. www.sandvik.com
Through innovative, customer-adapted product development and high quality, Volvo has a worldleading position in commercial transport solutions. www.volvogroup.com
The European leader in hygiene products – with a fast-growing line of personal care products – and in packaging products. Europe's largest private forest owner.
www.sca.com
The market's largest and most profitable supplier of mobile telecom infrastructure, with a leading position in telecom development.
www.ericsson.com
World-leading position in high strength steel sheet niche creates solid foundation for growth and sustained high profitability. www.ssab.com
Substantial turnkey know-how in construction combined with a process focus has created a leading construction services company with world-class value-creating project development. www.skanska.com
The combination of sales of high-tech industrial consumables, good organic growth and a highly refined model for acquisition-based growth has resulted in strong profitability growth. www.indutrade.com
Market leader in growing niche of metal powders, used primarily for component manufacturing in the automotive industry. www.hoganas.com
This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the EU, and the Swedish Annual Accounts Act. The Parent Company's financial statements have been prepared in accordance with RFR 2, Accounting for Legal Entities, and the Swedish Annual Accounts Act. New or revised IFRSs as well as IFRIC interpretations have not had any effect on the Group's or Parent Company's results of operations or financial position.
The dominant risk in Industrivärden's business is share price risk, i.e., the risk of a decrease in value caused by changes in share prices.
A 1% change in the share price of the holdings in the equities portfolio as per September 30, 2011, would have affected its market value by approximately +/– SEK 500 M.
During the first nine months of 2011, dividend income was received from associated companies.
In May 2011 Industrivärden exchanged 2,432,000 Class A shares in Skanska for 10% more Class B shares in Skanska from L E Lundbergföretagen.
Stockholm, October 5, 2011
Anders Nyrén, President and CEO
This interim report has not been reviewed by the Company's auditors.
For further information, please visit Industrivärden's website: www.industrivarden.net.
Anders Nyrén, President and CEO, tel. +46-8-666 64 00 Sverker Sivall, IRO, tel. +46-8-666 64 19 Carl-Olof By, Executive Vice President, tel. +46-8-666 64 00 Martin Hamner, CFO, tel. +46-8-666 64 00
Industrivärden's complete contact information can be found on page 12.
INDUC SS in Blomberg INDUc.ST in Reuters
The information provided in this interim report is such that AB Industrivärden (publ) is obligated to publish pursuant to the Securities Market Act and/or the Financial Instruments Trading Act. Submitted for publication at 08:00 a.m. on October 5, 2011.
Year-end report 2011: February 8 Interim report January–March: April 5 Annual General Meeting 2012: May 4, in Stockholm Interim report January–June: July 5 Interim report January–September: October 5
| 2011 | 2010 | 2011 | 2010 | 2010 | |
|---|---|---|---|---|---|
| SEK M | July–Sept. | July–Sept. | Jan.–Sept. | Jan.–Sept. | Jan.–Dec. |
| Income statement | |||||
| Dividend income from stocks | 0 | 0 | 2,403 | 1,379 | 1,379 |
| Change in value of stocks, etc. | -15,723 | 4,348 | -22,198 | 7,352 | 13,991 |
| Other income and expenses* | -20 | -25 | 21 | 32 | 22 |
| Operating income | -15,743 | 4,323 | -19,774 | 8,763 | 15,392 |
| Financial items | -152 | -131 | -439 | -392 | -522 |
| Income after financial items | -15,895 | 4,192 | -20,213 | 8,371 | 14,870 |
| Tax | – | – | – | – | – |
| Net income for the period | -15,895 | 4,192 | -20,213 | 8,371 | 14,870 |
| Earnings per share, SEK | -41.15 | 10.85 | -52.33 | 21.67 | 38.50 |
| Earnings per share after full conversion, SEK | -37.15 | 10.27 | -46.93 | 20.74 | 37.11 |
| Statement of comprehensive income | |||||
| Net income for the period | -15,895 | 4,192 | -20,213 | 8,371 | 14,870 |
| Change in hedging reserve | -34 | 30 | -5 | 28 | 72 |
| Comprehensive income for the period | -15,929 | 4,222 | -20,218 | 8,399 | 14,942 |
| Balance sheet as per end of period | |||||
| Equities | 52,249 | 63,462 | 71,092 | ||
| Other non-current assets | 47 | 210 | 207 | ||
| Total non-current assets | 52,296 | 63,672 | 71,299 | ||
| Short-term equity investments | 149 | 56 | 176 | ||
| Cash and cash equivalents | 0 | 0 | 0 | ||
| Other current assets | 161 | 33 | 72 | ||
| Total current assets | 310 | 89 | 248 | ||
| Total assets | 52,606 | 63,761 | 71,547 | ||
| Shareholders' equity | 34,564 | 49,784 | 56,327 | ||
| Non-current interest-bearing liabilities | 14,647 | 10,554 | 11,123 | ||
| Non-current noninterest-bearing liabilities** | 400 | 824 | 1,344 | ||
| Total non-current liabilities | 15,047 | 11,378 | 12,467 | ||
| Current interest-bearing liabilities | 2,574 421 |
2,238 | 2,458 | ||
| Other liabilities Total current liabilities |
2,995 | 361 2,599 |
295 2,753 |
||
| Total shareholders' equity and liabilities | 52,606 | 63,761 | 71,547 | ||
| Cash flow | |||||
| Cash flow from operating activities | 2,093 | 1,047 | 827 | ||
| Cash flow from investing activities | -4,718 | -2,144 | -2,547 | ||
| Cash flow from financing activities*** | 2,614 | 1,232 | 1,810 | ||
| Cash flow for the period | -11 | 135 | 90 | ||
| Exchange rate difference in cash and cash equivalents | 11 | -135 | -90 | ||
| Cash and cash equivalents at end of period | 0 | 0 | 0 |
* Including short-term trading and management costs.
** Of which, the option portion of the convertible loans, totaling SEK 394 M (814), which at the time of issue amounted to a combined total of SEK 982 M (383).
*** Of which, dividend of SEK 1,545 M paid to the shareholders in 2011 and dividend of SEK 1,159 M in 2010.
| 2011 | 2010 | 2010 | |
|---|---|---|---|
| SEK M | Jan.–Sept. | Jan.–Sept. | Jan.–Dec. |
| Changes in shareholders' equity | |||
| Opening shareholders' equity as per balance sheet | 56,327 | 42,544 | 42,544 |
| Comprehensive income for the period | -20,218 | 8,399 | 14,942 |
| Dividend | -1,545 | -1,159 | -1,159 |
| Closing shareholders' equity as per balance sheet | 34,564 | 49,784 | 56,327 |
| Key data as per end of year | |||
| Net asset value per share, SEK | 91 | 132 | 149 |
| Net asset value per share after full conversion, SEK | 95 | 128 | 144 |
| Share price (Class A), SEK | 76.60 | 98.10 | 120 |
| Share price (Class C), SEK | 72.70 | 95.00 | 118 |
| Number of shares (thousands)* | 386,271 | 386,271 | 386,271 |
| Interest-bearing net debt at end of period | |||
| Cash and cash equivalents | 0 | 0 | 0 |
| Interest-bearing assets | 0 | 185 | 180 |
| Non-current interest-bearing liabilities** | 14.647 | 10,554 | 11,123 |
| Current interest-bearing liabilities | 2.574 | 2,238 | 2,458 |
| Interest-bearing net debt | 17.221 | 12,607 | 13,401 |
* Number of shares upon full conversion (thousands), 460,688.
** Of which, convertible loans SEK 8,815 M (4,353).
| 2011 | 2010 | 2010 | |
|---|---|---|---|
| SEK M | Jan.–Sept. | Jan.–Sept. | Jan.–Dec. |
| Income statement | |||
| Operating income | -15,536 | 5,607 | 11,614 |
| Income after financial items | -15,747 | 5,253 | 11,141 |
| Net income for the period | -15,747 | 5,253 | 11,141 |
| Statement of comprehensive income | |||
| Net income for the period | -15,747 | 5,253 | 11,141 |
| Change in hedging reserve | - | 28 | 171 |
| Comprehensive income for the period | -15,747 | 5,281 | 11,312 |
| Balance sheet as per end of period | |||
| Non-current assets | 37,943 | 51,886 | 52,022 |
| Current assets | 1,825 | 173 | 972 |
| Total assets | 39,768 | 52,059 | 52,994 |
| Shareholders' equity | 26,627 | 37,888 | 43,919 |
| Non-current liabilities | 9,901 | 10,378 | 6,367 |
| Current liabilities | 3,240 | 3,793 | 2,708 |
| Total shareholders' equity and liabilities | 39,768 | 52,059 | 52,994 |
Long-term industrial developer of listed Nordic companies
AB Industrivärden (publ) Reg. no. 556043-4200
Box 5403 SE-114 84 Stockholm, Sweden Tel. +46-8-666 64 00 [email protected]
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