Quarterly Report • Apr 5, 2011
Quarterly Report
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| Net asset value | March 31, 2011 | Dec. 31, 2010 | Dec. 31, 2009 | ||
|---|---|---|---|---|---|
| Equities portfolio, SEK billion | 70.7 | 71.1 | 53.5 | ||
| Interest-bearing net debt, SEK billion | -15.8 | -13.4 | -10.8 | ||
| Net asset value, SEK billion | 54.9 | 57.7 | 42.8 | ||
| Net asset value per share, SEK | 142 | 149 | 111 | ||
| Net asset value per share after full conversion, SEK | 137 | 144 | – | ||
| Total return | 3 months | 1 year | 5 years | 10 years | 15 years |
| Class A shares (yearly average) | 2% | 31% | 5% | 8% | 15% |
| Class C shares (yearly average) | -5% | 26% | 5% | 8% | 15% |
| Benchmark index (SIXRX) | -1% | 16% | 5% | 8% | 11% |
| Excess return for Class C shares, percentage points | -4% | 10% | 0% | 0% | 4% |
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.
We wound up the year 2010 with positive expectations for the world economy in 2011. Three months into the year, the basic scenario remains, even though the recent turn of events primarily in North Africa and Japan – but also in southern Europe – is creating uncertainty, which is evidencing itself in a wait-and-see stance in the world's stock markets. One of the more central concerns now will be the price of oil going forward, which will be of decisive significance for continued favorable economic development.
For Industrivärden, the year started out with the issuance of a new convertible loan of EUR 550 M, corresponding to approximately SEK 5 billion. Owing to swift and well-timed action, along with our strong credit rating, we were able to issue the convertible loan with favorable conversion and interest terms. Together with the convertible loan of approximately SEK 5 billion that we issued in January 2010, we have thus created additional investment scope of approximately SEK 10 billion during the past year. In this way we have created a long-term financing solution at very favorable terms. The capital injection will be invested in line with our tried-and-tested investment philosophy, which enables good growth in value for the shareholders.
From the owner and board perspectives, appointing the board of directors and executive management for each of the portfolio companies is perhaps the most important task of all. It is therefore gratifying to note that three new CEOs have been named for some of our portfolio companies: Volvo, Sandvik and SSAB. Recruitment of these individuals was preceded by thorough and well-structured selection processes that looked at internal as well as external candidates. The result is three company leaders with very good prospects to lead the future development of their respective companies. In addition, we welcome the recommendation by Ericsson's nominating committee of Leif Johansson as chairman of Ericsson, which is a very important company in Industrivärden's portfolio.
During the first quarter, as in 2010, we took advantage of opportunities to strengthen our ownership positions in a few of our portfolio companies – businesses that we know well. I'm referring mainly to purchases of shares on Volvo, Handelsbanken and Sandvik. In all we invested SEK 3.4 billion during the period – purchases that we believe will contribute to greater shareholder value in the future. Our short-term trading generated a profit of SEK 18 M, while Industrivärden's management costs amounted to SEK 26 M. We began short-term trading in 2003, and since then this activity has generated nearly a billion kronor in excess returns.
At the end of the quarter, net asset value amounted to SEK 54.9 billion, or SEK 142 per share – a decrease of 5%, compared with a drop of 1% for the total return index. During the first quarter, stocks in energy and consumer goods companies performed better than for stocks in industrial products companies, for example, where Industrivärden has relatively high exposure.
The total return was 2% for the Class A shares and -5% for the Class C shares. During the last 12 months, our Class A shares have grown by 31% and our Class C shares by 26%, compared with 16% for the total return index.
Industrivärden will be holding its Annual General Meeting on May 5 at the Grand Hotel in Stockholm. For you as a shareholder, this would be a good opportunity to get a current picture of the company's performance. I hope to see you there!
Anders Nyrén
Net asset value on March 31, 2011, was SEK 54.9 billion, a decrease of SEK 2.8 billion for the year to date. Net asset value per share decreased by SEK 7 per share, or 5%, to SEK 142 per share. During the same period, the total return index (SIXRX) decreased by 1%. Net asset value on 31 March 2010 was SEK 47.5 billion. During the past year net asset value, including reinvested dividends, has increased by 18%, compared with 16% for the total return index (SIXRX).
During the first quarter of 2011 the value of the equities portfolio, adjusted for purchases and sales, decreased by SEK 3.8 billion to SEK 70.7 billion. The total return for the portfolio during the same period was -4%, compared with -1% for the total return index (SIXRX). The value of the equities portfolio on March 31, 2010, was SEK 58.6 billion. During the past year, the value of the portfolio has increased by 15% adjusted for purchases and sales, compared with 16% for the total return index (SIXRX).
| March 31, 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 |
| Sandvik | 142,580,752 | 12.0 | 12.0 | 24 | 16,981 | 44 | 18,150 | 47 |
| Handelsbanken A | 70,200,796 | 11.3 | 11.5 | 21 | 14,531 | 38 | 14,015 | 36 |
| Volvo A | 103,283,784 | 5.0 | 12.6 | 17 | 11,819 | 30 | 10,713 | 28 |
| Volvo B | 3,569,243 | |||||||
| SCA A | 45,100,000 | 10.0 | 29.7 | 10 | 7,171 | 18 | 7,487 | 19 |
| SCA B | 25,700,000 | |||||||
| Ericsson A | 77,680,600 | 2.4 | 13.8 | 9 | 6,156 | 16 | 5,748 | 15 |
| SSAB A | 56,105,972 | 17.6 | 22.6 | 8 | 5,674 | 15 | 6,347 | 17 |
| SSAB B | 754,985 | |||||||
| Skanska A | 15,091,940 | 7.6 | 27.8 | 6 | 4,268 | 11 | 4,280 | 11 |
| Skanska B | 17,019,386 | |||||||
| Indutrade | 14,727,800 | 36.8 | 36.8 | 4 | 3,056 | 8 | 3,417 | 9 |
| Höganäs B | 4,408,046 | 12.6 | 10.0 | 1 | 1,034 | 3 | 934 | 2 |
| Equities portfolio | 100 | 70,690 | 183 | 71,092 | 184 | |||
| Interest-bearing net debt | 15,793 | -41 | 13,401 | -35 | ||||
| Net asset value | 54,897 | 142 | 57,691 | 149 | ||||
| Debt-equity ratio | 22% | 19% | ||||||
| Net asset value after full conversion | 137 | 144 | ||||||
| Debt-equity ratio after full conversion | 10% | 13% |
Market value pertains to Industrivärden's share of the respective portfolio companies' total market capitalization.
Interest-bearing net debt totaled SEK 15.8 billion at March 31, 2011. The debt-equity ratio was 22%, and the equity ratio was 73% (75%). After full conversion of outstanding convertible loans, corresponding to SEK 8.4 billion, the debt-equity ratio amounts to 10%.
The convertible loans are hedged, entailing that translation effects do not affect net asset value.
At the end of the quarter, interest-bearing liabilities had an average, fixed interest term of approximately 4 years and carried an average interest rate of 3.5%.
In January 2011 Industrivärden issued six-year convertible bonds worth EUR 550 M, which was approved by an Extraordinary General Meeting on February 9, 2011. The conversion price is SEK 162.00/share at a fixed euro exchange rate of SEK 8.8803, representing a premium of 35% and an annual coupon of 1.875%. The dilutive effect on Industrivärden's stock is limited and corresponds upon full conversion to approximately 8% of the capital and 1% of the votes.
Industrivärden's ownership has contributed to competitive growth in value for the portfolio companies and Industrivärden's stock has been a good long-term investment that has delivered a higher total return than the return index.
During the first quarter of 2011, the shareholdings in Ericsson, Handelsbanken and Skanska generated higher returns than the return index. Overall, the total return for the equities portfolio was -4%, compared with -1% for the return index.
During the last five-year period, Indutrade, Volvo, Höganäs and Sandvik have generated higher returns than the return index, while Handelsbanken and Skanska have been level with the 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.–March 2011 |
Average annual total return, % |
||||
|---|---|---|---|---|---|
| Portfolio companies | SEK billion | % | Five years March '06–March '11 |
Ten years March '01–March '11 |
|
| Ericsson | 0.4 | 7 | -9 | -8 | |
| Handelsbanken | 0.1 | 1 | 5 | 8 | |
| Skanska | 0.0 | 0 | 6 | 9 | |
| Volvo | -0.4 | -4 | 14 | 18 | |
| SCA | -0.3 | -4 | 1 | 7 | |
| Sandvik | -1.7 | -9 | 9 | 17 | |
| Indutrade | -0.4 | -11 | 20 | - | |
| Höganäs | -0.1 | -11 | 10 | 8 | |
| SSAB | -0.7 | -12 | 0 | 19 | |
| Equities portfolio | -3.1 | -4 | |||
| Index (SIXRX) | -1 | 5 | 8 | ||
| Industrivärden C | -5 | 5 | 8 |
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 quarter of 2011, stocks were purchased for SEK 4,482 M and sold for SEK 1,123 M. Large net purchases were in Volvo, for SEK 1,542 M, Handelsbanken, for SEK 1,057 M, Sandvik, for SEK 501 M, and Höganäs, for SEK 199 M.
During the first quarter of 2011, additional purchases were made of Volvo stock for SEK 1,542 M, bringing Industrivärden's ownership in Volvo to 12.6% of the votes and 5.0% of the capital.
Following purchases of shares in Höganäs totaling SEK 199 M during the first quarter of 2011, corresponding to 2.0% of the votes, Industrivärden's ownership amounts to 10.0% of the votes and 12.6% of the capital.
During the first quarter of 2011, Industrivärden's shortterm trading generated a profit of SEK 18 M (47). Management costs amounted to SEK 26 M (21). Management costs amounted to 0.15% 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 an extensive network. Our portfolio companies are leaders in their respective segments and generally 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 longterm growth plans, evaluating potential growth investments, and monitoring the companies' capital structures.
Following is a general description of Industrivärden's investment cases along with strategic decisions and activities.
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 and mining industries.
www.sandvik.com
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 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. www.indutrade.com
Market leader in growing niche of metal powders, used primarily for component manufacturing in the automotive industry.
Greater activity in emerging geographic regions.
Focus on collaboration with customers for development of new components.
www.hoganas.com
The 2011 Annual General Meeting will be held on Thursday, May 5 at 2 p.m. at the Grand Hotel (Vinterträdgården room) in Stockholm. The Board of Directors proposes a dividend of SEK 4.00 (3.00) per share and May 10, 2011, as the record date. Dividends are expected to be sent out via Euroclear Sweden on May 13, 2011.
The Nominating Committee recommends the re-election of Boel Flodgren, Hans Larsson, Fredrik Lundberg, Sverker Martin-Löf and Anders Nyrén, and new election of Christian Caspar and Stuart Graham. Olof Faxander, Finn Johnsson and Lennart Nilsson have declined re-election. Christian Caspar (born 1951, B.Sc. Econ.) has served for more than 30 years in a number of leading positions for McKinsey & Company and is a board member of Stena among others. Stuart Graham (born 1946, B.S. Econ.) is a board member of PPL Corporation, Skanska and others. He is a former CEO of Skanska.
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 March 31, 2011, would have affected market value by approximately +/– SEK 700 M.
No transactions have taken place between Industrivärden and related parties that have materially affected the Company's position or result of operations for the first quarter of 2011.
Stockholm, April 5, 2011
Anders Nyrén, President and CEO
An Extraordinary General Meeting on February 9, 2011, resolved to approve the Board's decision of January 11, 2011, that the convertible loan floated by the Company in the nominal amount of EUR 550,000,000 shall carry entitlement to conversion to Class C shares in the Company.
Industrivärden's 2010 Annual Report was published on February 25, 2011, and is available on the Company's website and can be ordered from the Company.
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 10 a.m. on April 5, 2011.
Annual General Meeting 2011: May 5, at the Grand Hotel (Vinterträdgården room) in Stockholm Interim report January–June: July 5 Interim report January–September: October 5
| 2011 | 2010 | 2010 | |
|---|---|---|---|
| SEK M | Jan.–March | Jan.–March | Jan.–Dec. |
| Income statement | |||
| Dividend income from stocks | 632 | 53 | 1,379 |
| Change in value of stocks, etc. | -4,019 | 4,107 | 13,991 |
| Other income and expenses* | -8 | 26 | 22 |
| Operating income | -3,395 | 4,186 | 15,392 |
| Financial items | -145 | -129 | -522 |
| Income after financial items | -3,540 | 4,057 | 14,870 |
| Tax | – | – | – |
| Net income for the period | -3,540 | 4,057 | 14,870 |
| Earnings per share, SEK | -9.16 | 10.50 | 38.50 |
| Earnings per share after full conversion, SEK | -7.04 | 10.36 | 37.11 |
| Statement of comprehensive income | |||
| Income for the period | -3,540 | 4,057 | 14,870 |
| Change in hedging reserve | 37 | -7 | 72 |
| Comprehensive income for the period | -3,503 | 4,050 | 14,942 |
| Balance sheet as per end of period | |||
| Equities | 70,690 | 58,632 | 71,092 |
| Other non-current assets | 209 | 220 | 207 |
| Total non-current assets | 70,899 | 58,852 | 71,299 |
| Short-term equity investments | 216 | 145 | 176 |
| Cash and cash equivalents | 906 | 1,252 | 0 |
| Other current assets | 136 | 1,634 | 72 |
| Total current assets | 1,258 | 3,031 | 248 |
| Total assets | 72,157 | 61,883 | 71,547 |
| Shareholders' equity | 52,824 | 46,594 | 56,327 |
| Non-current interest-bearing liabilities | 14,496 | 11,966 | 11,123 |
| Non-current noninterest-bearing liabilities** | 2,162 | 778 | 1,344 |
| Total non-current liabilities | 16,658 | 12,744 | 12,467 |
| Current interest-bearing liabilities | 2,399 | 2,143 | 2,458 |
| Other liabilities | 276 | 402 | 295 |
| Total current liabilities | 2,675 | 2,545 | 2,753 |
| Total shareholders' equity and liabilities | 72,157 | 61,883 | 71,547 |
| Cash flow | |||
| Cash flow from operating activities | 410 | -89 | 827 |
| Cash flow from investing activities | -3.359 | -715 | -2,547 |
| Cash flow from financing activities*** | 3.835 | 2,138 | 1,810 |
| Cash flow for the period | 886 | 1,334 | 90 |
| Exchange rate difference in cash and cash equivalents | 20 | -82 | -90 |
| Cash and cash equivalents at end of period | 906 | 1,252 | 0 |
* Including short-term trading and management costs.
** Of which, the option portion of the convertible loans, totaling SEK 2,149 M (752), which at the time of issue amounted to a combined total of SEK 982 (383) M.
*** Of which, dividend of SEK 1,159 M paid to the shareholders in 2010.
| 2011 | 2010 | 2010 | ||
|---|---|---|---|---|
| SEK M | Jan.–March | Jan.–March | Jan.–Dec. | |
| Changes in shareholders' equity | ||||
| Opening shareholders' equity as per balance sheet | 56,327 | 42,544 | 42,544 | |
| Comprehensive income for the period | -3,503 | 4,050 | 14,942 | |
| Dividend | - | - | -1,159 | |
| Closing shareholders' equity as per balance sheet | 52,824 | 46,594 | 56,327 | |
| Key data as per end of period | ||||
| Net asset value per share, SEK | 142 | 123 | 149 | |
| Net asset value per share after full conversion, SEK | 137 | 121 | 144 | |
| Share price (Class A), SEK | 123 | 97 | 120 | |
| Share price (Class C), SEK | 112 | 92 | 118 | |
| Number of shares (thousands)* | 386,271 | 386,271 | 386,271 | |
| Interest-bearing net debt at end of period | ||||
| Interest-bearing assets | 1,102 | 2,957 | 180 | |
| Non-current interest-bearing liabilities** | 14,496 | 11,966 | 11,123 | |
| Current interest-bearing liabilities | 2,399 | 2,143 | 2,458 | |
| Interest-bearing net debt | 15,793 | 11,152 | 13,401 |
* Number of shares upon full conversion (thousands), 460,688.
** Of which, convertible loans SEK 8,412 M (4,423).
| 2011 | 2010 | 2010 | |
|---|---|---|---|
| SEK M | Jan.–March | Jan.–March | Jan.–Dec. |
| Income statement | |||
| Operating income | -2,749 | 2,752 | 11,614 |
| Income after financial items | -2,820 | 2,635 | 11,141 |
| Income for the period | -2,820 | 2,635 | 11,141 |
| Statement of comprehensive income | |||
| Income for the period | -2,820 | 2,635 | 10,901 |
| Change in hedging reserve | - | -7 | 30 |
| Comprehensive income for the period | -2,820 | 2,628 | 10,931 |
| Balance sheet as per end of period | |||
| Non-current assets | 54,554 | 47,951 | 52,022 |
| Current assets | 455 | 3,024 | 972 |
| Total assets | 55,009 | 50,975 | 52,994 |
| Shareholders' equity | 41,099 | 36,394 | 43,919 |
| Non-current liabilities | 11,446 | 11,733 | 6,367 |
| Current liabilities | 2,464 | 2,848 | 2,708 |
| Total shareholders' equity and liabilities | 55,009 | 50,975 | 52,994 |
Long-term industrial developer of listed Nordic companies
AB Industrivärden (publ) Reg. no. 556043-4200
Box 5403 SE-114 84 Stockholm, Sweden Phone +46-8-666 64 00 [email protected]
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