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Gränges Earnings Release 2019
3055_10-k_2020-01-30_2737ae3d-6181-440a-9b89-2f74fa446c09.pdf
Earnings Release
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YEAR-END REPORT JANUARY-DECEMBER 2019
Strong growth platform established - weaker fourth quarter concluded the year
Fourth quarter 2019
- Sales volume decreased by 10.9 per cent to 77.9 ktonnes (87.4). Net sales decreased to SEK 2,682 million (3,074).
- Adjusted operating profit was SEK 144 million (191) and adjusted operating profit per tonne was 1.9 kSEK (2.2).
- Profit for the period decreased to SEK 47 million (149) and includes items affecting comparability of SEK –30 million (–).
- Basic and diluted earnings per share decreased to SEK 0.63 (1.97).
- Cash flow before financing activities decreased to SEK 68 million (133) and includes capital expenditure of SEK 221 million (319). Adjusted cash flow before financing activities was SEK 191 million (316), representing a cash conversion of 132 per cent.
- Gränges has signed an agreement to acquire the Polish flat rolled aluminium producer Aluminium Konin. The transaction is subject to regulatory approval from relevant competition authorities and closing is expected in the second quarter of 2020.
- The Board of Directors proposes a dividend of SEK 3.40 (3.20) per share, corresponding to 43 per cent (35) of profit for the year.
January-December 2019
- Sales volume decreased by 7.4 per cent to 347.3 ktonnes (375.0). Net sales decreased to SEK 11,978 million (12,910).
- Adjusted operating profit was SEK 866 million (1,005) and adjusted operating profit per tonne was 2.5 kSEK (2.7).
- Profit for the period decreased to SEK 600 million (688) and includes items affecting comparability of SEK –30 million (–64).
- Basic and diluted earnings per share decreased to SEK 7.95 (9.11).
- Cash flow before financing activities was SEK –148 million (531) and includes capital expenditure of SEK 1,590 million (843) of which SEK 1,103 million refers to expansion investments. Adjusted cash flow before financing activities was SEK 1,048 million (977), corresponding to a cash conversion of 121 per cent.
- Net debt increased to SEK 3,465 million at 31 December 2019 (SEK 2,494 million at 31 December 2018), corresponding to 2.6 times adjusted EBITDA (1.8 times at 31 December 2018). Net debt at 31 December 2019 includes lease liabilities of SEK 259 million due to IFRS 16 Leases1 .
| Financial summary | Q4 | Jan–Dec | ||||||
|---|---|---|---|---|---|---|---|---|
| SEK million | 2019 | 2018 | 2019 | 2018 | ||||
| Sales volume, ktonnes | 77.9 | 87.4 | –10.9% | 347.3 | 375.0 | –7.4% | ||
| Net sales | 2,682 | 3,074 | –12.7% | 11,978 | 12,910 | –7.2% | ||
| Adjusted operating profit | 144 | 191 | –24.5% | 866 | 1,005 | –13.8% | ||
| Adjusted operating margin, % | 5.4 | 6.2 | –0.8 ppt | 7.2 | 7.8 | –0.6 ppt | ||
| Adjusted operating profit per tonne, kSEK | 1.9 | 2.2 | –0.3 | 2.5 | 2.7 | –0.2 | ||
| Operating profit | 115 | 191 | –40.1% | 836 | 940 | –11.1% | ||
| Operating margin, % | 4.3 | 6.2 | –1.9 ppt | 7.0 | 7.3 | –0.3 ppt | ||
| Profit for the period | 47 | 149 | –68.1% | 600 | 688 | –12.8% | ||
| Earnings per share basic, SEK | 0.63 | 1.97 | –1.34 | 7.95 | 9.11 | –1.16 | ||
| Earnings per share diluted, SEK | 0.63 | 1.97 | –1.34 | 7.95 | 9.11 | –1.16 | ||
| Cash flow before financing activities | 68 | 133 | –49.1% | –148 | 531 | n/a | ||
| Equity to assets, % | – | – | – | 41.2 | 44.2 | –3.0 ppt | ||
| Net debt | – | – | – | 3,465 | 2,494 | 971 | ||
| Return on capital employed, % | – | – | – | 11.7 | 16.5 | –4.8 ppt | ||
| 1 See Note 1 for further information on IFRS 16 Leases. |
COMMENTS BY THE CEO
Important actions taken creating a solid foundation for growth
CONTINUED SOFT MARKET CONDITIONS
The fourth quarter concluded a challenging year for Gränges where the weak market conditions experienced in the first three quarters of the year continued. Lower end-market demand in combination with continued destocking in Europe and Americas resulted in a sales volume decline of 11 per cent to 77.9 ktonnes. The adjusted operating profit declined by SEK 47 million to SEK 144 million and included costs for the US expansion projects of SEK 12 million. Additional efficiency measures, including a general savings program and capacity adjustments, helped to reduce the cost base in the quarter. Exchange rate fluctuations had a positive impact on adjusted operating profit of SEK 20 million. The cash generation continued to be strong also in the fourth quarter. Cash flow before financing adjusted for expansion investments and acquisitions amounted to SEK 191 million, which represents a cash conversion of above 130 per cent.
During the fourth quarter market conditions were especially challenging in Europe and Americas, where the sales volume to automotive customers declined by 25 and 19 per cent respectively. This was driven by a continued significant slowdown of the light vehicle production in combination with further destocking in the supply chain. In Asia, the automotive sales volume increased by 2 per cent in the quarter. With regards to the HVAC & Other business in Americas, sales volume decreased with 11 per cent in the quarter primarily due to significant destocking activities at customer level.
EXECUTING ON OUR GROWTH STRATEGY
In the fourth quarter we announced the acquisition of Aluminium Konin, which will strengthen our product offering and presence in Europe and contribute with strong positions in new attractive niche markets. Aluminium Konin will add new capabilities and capacity to expand our offering for future transportation solutions, such as electric vehicles. In conjunction with the transaction we intend to undertake a rights issue, with preferential rights for existing shareholders, to a total amount of approximately SEK 2 billion, to finance the acquisition and future growth investments. During the year the expansion of the Huntingdon facility in the US was also completed and we have re-opened the production facility in Newport to enter the US light gauge foil market. In Europe we are running an investment program to increase efficiency and capacity in our Finspång facility. The acquisition of Aluminium Konin and the expansion projects will once fully finalized add new capabilities and increase the total annual capacity with 220 ktonnes to 640 ktonnes. The actions we have taken in 2019 positions Gränges very well and creates a strong platform for continued profitable growth.
STRONG CASH GENERATION FINANCING GROWTH
Despite challenging market conditions, 2019 has been a productive and successful year in many ways with strong focus on expansion, combined with cost reductions and efficiency improvements in all regions. We also continued to implement Gränges' sustainability framework and we raised our ambition further by launching clear long-term sustainability targets. For the full year 2019 sales volume decreased by 7 per cent to 347 ktonnes and the adjusted operating profit decreased to SEK 866 million. On the positive side, cash generation was very strong in the year with a cash conversion of 121 per cent and adjusted cash flow before financing of SEK 1,048 million. This means that the expansion investments of in total SEK 1,103 million were financed with cash generated in the
operations and that we ended the year with a net debt equivalent to 2.6 times EBITDA. In view of the financial results, and our outlook into account, the Board of Directors proposes that the dividend for 2019 will be increased by 6 per cent to 3.40 SEK per share.
Cont. on next page
Fourth quarter 2019
- Sales volume 77.9 ktonnes
- Net sales SEK 2,682 million
- Adjusted operating profit SEK 144 million
OUTLOOK
The global automotive market is expected to be relatively stable in 2020 compared with 2019, but for the first quarter the research firm IHS estimates a decline of 5 per cent in global light vehicle production. For the first quarter Gränges expects a decrease in sales volume by low single digits compared with last year. This includes a low double digit decline for Automotive materials, driven by lower light vehicle production and continued destocking, and a mid to high single digit growth for the HVAC and Other business, as new production capacity is being ramped up in Americas. The change in mix between the Automotive and the HVAC and Other business is expected to have a negative impact on profitability in the first quarter. Potential further consequences of the outbreak of coronavirus in China pose a downside risk to this outlook.
As we look into 2020, we will continue to work actively with innovation, efficiency improvements, and develop our sustainable customer offering even more, which includes an increased focus on product development for electric vehicles. Demand for advanced heat exchanger materials for electric vehicles is expected to increase significantly in the coming years, as more car manufacturers choose liquid cooling solutions for batteries. With a strong commitment to constantly improve and develop, Gränges is well positioned to deliver sustainable and profitable growth throughout economic cycles.
Johan Menckel, CEO
The production facility in Konin, Poland.
MARKET DEVELOPMENT
Gränges is a leading global supplier of rolled aluminium products for heat exchanger applications and other niche markets. About half of the Group's sales volume refers to sales to the automotive industry, while HVAC and other niche markets account for about one quarter each.
Light vehicle production is an important macro driver of Gränges' sales of heat exchanger materials to the automotive industry. An increasing share of hybrid vehicles, electric vehicles and advanced features such as autonomous driving is also positive for the demand of heat exchanger materials. According to the international research firm IHS¹, global light vehicle production decreased by 5.3 per cent in the fourth quarter of 2019, compared to the corresponding quarter in 2018. In Asia, light vehicle production decreased by 3.5 per cent during the fourth quarter. This includes an increase of 1.7 per cent in China while production in other Asian markets declined by 9.9 per cent. In the first quarter of 2020, a decrease of 8.4 per cent is expected in Asia. In Europe, light vehicle production declined by 6.2 per cent in the fourth quarter, and a decrease of 5.6 per cent is expected for the first quarter of 2020. Light vehicle production in the Americas decreased by 7.8 per cent in the fourth quarter, whereas an increase of 3.8 per cent is anticipated in the first quarter of 2020. For the full year 2020, IHS forecasts a decrease in global light vehicle production of 0.2 per cent.
With regards to sales to the HVAC industry, Americas is Gränges' most important market and US shipments of HVAC units is a key driver of Gränges' sales. The growth in this market is partly driven by energy efficiency requirements as well as construction of new
houses and buildings. According to the North American trade association AHRI2, US shipments of HVAC units increased by 2 per cent in the fourth quarter of 2019 compared to the corresponding quarter 2018. For the full year 2020, US shipments of HVAC units are expected to remain stable.
SALES DEVELOPMENT
Gränges' sales volume in the fourth quarter of 2019 decreased by 10.9 per cent to 77.9 ktonnes (87.4) compared to the same quarter previous year. Net sales amounted to SEK 2,682 million (3,074). The negative effect from lower sales volume and a decreased aluminium price was partly offset by a net positive effect from changes in foreign exchange rates of SEK 118 million.
For the Automotive business, sales volume decreased to 38.8 ktonnes (43.7) and net sales was SEK 1,437 million (1,644) during the fourth quarter 2019. For the HVAC & Other business, sales volume decreased to 39.1 ktonnes (43.8) and net sales amounted to SEK 1,245 million (1,430).
During the full year 2019, Gränges' sales volume decreased by 7.4 per cent to 347.3 ktonnes (375.0) compared to the corresponding period previous year. Net sales was SEK 11,978 million (12,910). The net effect of changes in foreign exchange rates was positive and amounted to SEK 812 million.
In 2019 sales volume for the Automotive business decreased to 170.6 ktonnes (186.1) and net sales amounted to SEK 6,210 million (6,891). For the HVAC & Other business, sales volume decreased to 176.7 ktonnes (188.8) and net sales was SEK 5,768 million (6,019).
Light vehicle production1
| Year-on-year growth, % | Q4 2019 | Q1 2020 | Full year 2019 |
|---|---|---|---|
| Region | |||
| Asia | –3.5 | –8.4 | –6.3 |
| Europe | –6.2 | –5.6 | –4.3 |
| Americas | –7.8 | 3.8 | –3.9 |
| Global | –5.3 | –5.1 | –5.8 |
Gränges' sales volume
| Sales volume, ktonnes | Oct–Dec 2019 |
Oct–Dec 2018 |
|
|---|---|---|---|
| Region | |||
| Asia Automotive | 20.4 | 19.9 | 2.2% |
| Europe Automotive | 11.5 | 15.3 | –24.6% |
| Americas Automotive | 6.9 | 8.5 | –18.7% |
| Total Automotive | 38.8 | 43.7 | –11.2% |
| Americas HVAC & Other | 39.1 | 43.8 | –10.6% |
| Total | 77.9 | 87.4 | –10.9% |
¹ Source: IHS, 13 December 2019.
2 Source: AHRI, 10 January 2020.
ASIA
In the fourth quarter of 2019, sales volume in Asia increased by 2.2 per cent to 20.4 ktonnes (19.9). The increase was primarily driven by higher sales to automotive customers in China. Sales to other Asian markets decreased in the quarter. During the full year 2019, sales volume in Asia decreased to 79.0 ktonnes (86.2), which represents a decrease of 8.4 per cent compared to previous year.
EUROPE
In the fourth quarter of 2019, sales volume in Europe decreased by 24.6 per cent to 11.5 ktonnes (15.3). The decline was driven by significantly lower automotive market demand and continued destocking in the supply chain. In 2019, sales volume in Europe reached 58.3 ktonnes (65.4), which represents a decrease of 11.0 per cent compared to previous year.
AMERICAS
In the fourth quarter of 2019, sales volume in the Americas decreased by 12.0 per cent to 46.0 ktonnes (52.2). Of this, 39.1 ktonnes (43.8) relates to the HVAC & Other business while 6.9 ktonnes (8.5) relates to the Automotive business. The decrease in sales volume for the HVAC & Other business was mainly due to significant customer destocking activities before the end of the year. During the full year 2019, sales volume in Americas decreased to 210.1 ktonnes (223.3) compared to previous year. 176.7 ktonnes (188.8) relates to the HVAC & Other business while 33.4 tonnes (34.5) relates to the Automotive business.
OPERATING PROFIT
Adjusted operating profit for the fourth quarter of 2019 was SEK 144 million (191), corresponding to adjusted operating profit per tonne of 1.9 kSEK (2.2). Adjusted operating margin was 5.4 per cent (6.2). The decreased operating profit was mainly due to lower sales volume and less efficient metal management. Additional efficiency measures, including a general savings program and capacity adjustments, helped to reduce the cost base in the quarter. Costs related to the US expansion projects amounted to SEK 12 million in the quarter. Net changes in foreign exchange rates had a positive impact of SEK 20 million in the quarter.
Operating profit for the fourth quarter of 2019 amounted to SEK 115 million (191) and includes items affecting comparability of SEK –30 million (–). Items affecting comparability includes costs for merger and acquisition activities in Poland and restructuring costs related to manning reductions mainly in the Swedish operations. For further information see Note 5.
During the full year 2019, adjusted operating profit was SEK 866 million (1,005), while adjusted operating profit per tonne amounted to 2.5 kSEK (2.7). Adjusted operating margin reached 7.2 per cent (7.8). The net effect of changes in foreign exchange rates was positive and amounted to SEK 110 million in the period.
Operating profit during the full year 2019 was SEK 836 million (940) and includes items affecting comparability of SEK –30 million (–64). For further information see Note 5.
Quarterly sales volume per region
Quarterly adjusted operating profit
PROFIT FOR THE PERIOD AND EARNINGS PER SHARE
Profit before tax for the fourth quarter of 2019 amounted to SEK 78 million (162). Finance income and costs was SEK –37 million (–30) and includes interest expenses and financing costs of SEK 38 million and interest income of SEK 2 million. Interest expenses and financing costs in the fourth quarter of 2019 includes interest expenses on lease liabilities of SEK 3 million (–) due to the implementation of IFRS 16 (for further information see Note 1).
Income tax for the fourth quarter of 2019 amounted to SEK –31 million (–13) and includes withholding tax of SEK –17 million (–26) on a dividend from the Chinese subsidiary to Gränges AB. Excluding the withholding tax the effective tax rate was 18 per cent in the quarter. The effective tax rate in the fourth quarter of 2018 was 26 per cent if excluding withholding tax on dividend and the positive effect from a released tax provision. The profit for the period was SEK 47 million (149) during the fourth quarter of 2019 and diluted earnings per share amounted to SEK 0.63 (1.97).
During the full year 2019 profit before taxes amounted to SEK 686 million (849). Finance income and costs was SEK –152 million (–113) and includes interest expenses of SEK 160 million and interest income of SEK 7 million. Interest expenses and financing cost in the period includes interest expenses on lease liabilities of SEK 12 million (–) due to the implementation of IFRS 16 (for further information see Note 1). Income tax for the year was SEK –86 million (–161). Excluding the positive effect of SEK 54 million (55) relating to a release of a provision for income tax in China and the cost for withholding tax on dividend of SEK 17 million (26), the effective tax rate was 18 per cent (22). The reduced effective tax rate in 2019 is due to a lower corporate income tax rate in China due to preliminary high-tech enterprise classification, see note 6 for further information. The profit for the period amounted to SEK 600 million (688) and diluted earnings per share was SEK 7.95 (9.11).
CASH FLOW
Cash flow from operating activities amounted to SEK 289 million (450) in the fourth quarter of 2019 and was positively impacted by decreased working capital driven by lower receivables. Cash flow from investing activities amounted to SEK –221 million (–316) in the quarter and fully relates to capital expenditure. Of the total capital expenditure, SEK 98 million refer to investments to maintain and improve efficiency in current production facilities and SEK 123 million refer to investments related to the expansion of the production facilities in the US and Sweden. Cash flow before financing adjusted for expansion investments and acquisitions amounted to SEK 191 million (316).
Cash flow from financing activities was SEK –69 million (–339) in the fourth quarter of 2019 and includes new loans of SEK 1,586
million and repayment of loans of SEK –1,619 million. Net financing from commercial papers was neutral in the quarter.
During the full year 2019, cash flow from operating activities increased to SEK 1,441 million (1,351). Cash flow from investing activities amounted to SEK –1,590 million (–819) and fully relates to capital expenditure. Of this, SEK 393 million refer to maintenance investments, SEK 1,103 million relates to expansion investments, and SEK 93 million relates to the acquisition of utilities infrastructure in Finspång, Sweden.
During the year cash flow before financing activities adjusted for expansion investments and acquisitions increased to SEK 1,048 million (977). Cash flow from financing activities was SEK 440 million (–825) and includes a dividend payment of SEK –242 million, new loans of SEK 5,546 million and repayment of loans of SEK –4,727 million.
Cash and cash equivalents amounted to SEK 747 million at 31 December 2019 (SEK 457 million at 31 December 2018).
FINANCIAL POSITION
Gränges' total assets amounted to SEK 10,480 million at 31 December 2019 (SEK 8,773 million at 31 December 2018). The equity to assets ratio was 41.2 per cent at 31 December 2019 (44.2 per cent at 31 December 2018).
Consolidated net debt including pension and lease liabilities was SEK 3,465 million at 31 December 2019 (SEK 2,494 million at 31 December 2018). The increase in net debt is mainly due to investments related to the expansion of the production facilities in the US and Sweden. At 31 December 2019, the Group's net debt corresponded to 2.6 times adjusted EBITDA (1.8 times at 31 December 2018).
EMPLOYEES
The average number of employees was 1,781 (1,777) in the fourth quarter of 2019 and 1,805 (1,699) during the full year 2019. The increase in number of employees for the full year is mainly related to the expansion of the US production facilities. The decrease in number of employees in fourth quarter compared to the full year 2019 is due to temporary capacity adjustments.
PARENT COMPANY
Gränges AB is the parent company of the Gränges Group. The operations include Group Management and Group functions such as finance, treasury, legal and communications. For the full year 2019, net sales in the parent company was SEK 187 million (203) and the result for the period was SEK 335 million (560). The net profit includes dividend from the Chinese subsidiary of SEK 335 million (517). Income tax includes withholding tax of SEK –17 million (–26) relating to the dividend.
SIGNIFICANT EVENTS DURING THE PERIOD
Gränges has signed an agreement to acquire Aluminium Konin
In November, Gränges signed an agreement to acquire the Polish flat rolled aluminium producer Aluminium Konin. The acquisition strengthens Gränges' product offering and presence in Europe, adds new capability and capacity to expand Gränges' offering for future transportation solutions, such as electric vehicles, and contributes to a stronger position in growing markets. The acquired business will be a wholly owned subsidiary of Gränges AB.
The transaction is subject to regulatory approval by the relevant competition authorities and closing is expected in the second quarter of 2020. In conjunction with the transaction, Gränges intends to undertake a new share issue with preferential rights for existing shareholders to a total amount of approximately SEK 2 billion. The transaction is not conditional upon the rights issue, which is proposed to maintain Gränges' financial strength and to partly be used for future growth investments in line with Gränges' strategy.
Efficiency improvements in Europe
As part of Gränges' efficiency improvement work aiming to strengthen customer offer, cost-effectiveness and long-term competitiveness in the region, organizational changes were carried out in the Swedish operations. For further information see Note 5.
Interim SVP Communication for Gränges AB appointed
Camilla Weiner was appointed as Interim SVP Communication at Gränges AB. Camilla Weiner is a member of the Group Management team since 1 November 2019, and reports to the CEO, Johan Menckel.
SIGNIFICANT EVENTS AFTER THE PERIOD
No significant events have occurred after the period.
THE SHARE
The share capital in Gränges amounts to SEK 101 million split on 75,517,386 shares, each with a quota value of SEK 1.339775. Gränges has only one class of shares.
OWNERSHIP STRUCTURE
The number of shareholders in Gränges was 8,371 at 31 December 2019, according to Euroclear.
Largest shareholders in Gränges at 31 December 2019¹
| Number of | Share of capital | |
|---|---|---|
| Shareholder | shares | and votes % |
| Fourth Sw. National Pension Fund | 7,155,679 | 9.5 |
| AFA Insurance | 6,892,585 | 9.1 |
| Swedbank Robur Funds | 4,950,360 | 6.6 |
| Franklin Templeton | 3,845,833 | 5.1 |
| Handelsbanken Funds | 3,728,041 | 4.9 |
| Dimensional Fund Advisors | 3,234,948 | 4.3 |
| Paradice Investment Management | 3,164,438 | 4.2 |
| Allianz Global Investors | 2,645,597 | 3.5 |
| Unionen | 1,850,000 | 2.4 |
| Fidelity Investments (FMR) | 1,741,031 | 2.3 |
| Total 10 largest shareholders | 39,208,512 | 51.9 |
| Other | 36,308,874 | 48.1 |
| Total | 75,517,386 | 100.0 |
¹ Source: Modular Finance.
OTHER Annual General Meeting 2020
The Annual General Meeting 2020 in Gränges AB will take place on Thursday 7 May 2020, at 4 p.m. CEST at IVA Conference Centre (Wallenbergsalen), Grev Turegatan 16 in Stockholm. Registration begins at 3 p.m CEST.
Shareholders wishing to have a matter considered at the Annual General Meeting shall send a written request to the Board of Directors. In order for the matter to be included in the notice to the Annual General Meeting, the request must have been received by Gränges' Board of Directors by 19 March 2020 at the latest. The request should be submitted to the Board of Gränges AB and sent to Gränges' General Counsel Niclas Nelson, Gränges AB, Box 5505, SE-114 85 Stockholm, Sweden. Further information on the notification and the proposals of the Board of Directors and the Nomination Committee will be published on the company's website in connection with the notification. Notice to attend the Annual General Meeting is expected to be published 27 March, 2020.
Gränges' Annual Report for 2019, including sustainability report, is expected to be published on 19 March, 2020 on the company's website. A printed version of the Annual Report can be ordered at [email protected].
Dividend
The Board of Directors proposes a dividend of SEK 3.40 (3.20) per share for the 2019 fiscal year, in total SEK 257 million (242). The proposed dividend corresponds to 43 per cent (35) of the profit for the year 2019. The proposed record date for the dividend is Monday, 11 May, 2020. If the Annual General Meeting resolves in accordance with the proposal, the dividend is expected to be distributed through Euroclear Sweden AB on Thursday, 14 May, 2020.
RISKS AND UNCERTAINTY FACTORS
As a global group with operations in different parts of the world, Gränges is exposed to various risks and uncertainties such as raw material price risk, market risk, operational and legal risk, as well as financial risks related to foreign exchange rates, interest rates, liquidity and refinancing. Gränges' risk management process entails to identify, assess and reduce risks related to the Group's business and operations. More information about risk management is available on pages 44–47 in Gränges' 2018 annual report.
SEASONAL VARIATIONS
Gränges' end-customer markets consist primarily of the global automotive industry and the HVAC industry in North America. Gränges' sales of rolled aluminium products to the automotive industry is mainly correlated with the production of light vehicles. Demand on the HVAC market is driven by factors such as construction investments, new regulations for energy efficiency and climate impact, and it is usually higher during summer months as there is a higher demand for cooling systems then. Major annual maintenance work in Gränges' production facilities mainly occurs in the fourth quarter. Overall, seasonal factors mean that the fourth quarter usually is the weakest and the second quarter is the strongest.
Stockholm, 30 January 2020
Johan Menckel Chief Executive Officer
This year-end report has not been reviewed by the auditors of the company.
For additional information, please contact:
Johan Dufvenmark, VP Group Treasury & Investor Relations Email: [email protected] Tel: +46 705 97 43 75
The information in this report is such that Gränges must disclose pursuant to the EU Market Abuse Regulation and the Swedish Securities Market Act. The information was submitted for publication, through the agency of the contact person set out above, on Thursday 30 January, 2020 at 07.30 CET.
Webcasted telephone conference
CEO Johan Menckel and CFO Oskar Hellström will present Gränges' year-end report for January–December 2019 at a webcasted conference call at 10.00 CET, Thursday 30 January, 2020.
The webcast is available on www.granges.com/investors. To participate in the conference call, please call +46 8 566 426 51 (Sweden), +44 3333000804 (United Kingdom) or +1 6319131422 (United States). PIN code: 69788601#. Please call a few minutes before the conference call starts. The presentation will be in English.
Financial calendar
| 19 March, 2020 | Annual Report 2019 |
|---|---|
| 30 April, 2020 | Interim Report January–March 2020 |
| 7 May, 2020 | Annual General Meeting 2020 |
| 16 July, 2020 | Half-year Report 2020 |
| 22 October, 2020 | Interim Report January–September 2020 |
CONSOLIDATED INCOME STATEMENT (CONDENSED)
| SEK million | Note | Oct–Dec 2019 |
Oct–Dec 2018 |
Jan–Dec 2019 |
Jan–Dec 2018 |
|---|---|---|---|---|---|
| Net sales | 2 | 2,682 | 3,074 | 11,978 | 12,910 |
| Cost of materials | 5 | –1,709 | –1,982 | –7,620 | –8,6011 |
| Payroll and other operating expenses | –704 | –809 | –3,031 | –3,016 | |
| Depreciation, amortization and impairment charges | –125 | –92 | –461 | –353 | |
| Items affecting comparability | 5 | –30 | – | –30 | – |
| Operating profit | 1 | 115 | 191 | 836 | 940 |
| Profit or loss from joint ventures | 0 | 0 | 1 | 22 | |
| Finance income and costs | –37 | –30 | –152 | –113 | |
| Profit before tax | 78 | 162 | 686 | 849 | |
| Income tax | 6 | –31 | –13 | –86 | –161 |
| Profit for the period | 1 | 47 | 149 | 600 | 688 |
| Earnings per share | |||||
| Earnings per share basic, SEK | 0.63 | 1.97 | 7.95 | 9.11 | |
| Earnings per share diluted, SEK | 0.63 | 1.97 | 7.95 | 9.11 |
1 Includes items affecting comparability of SEK –64 million.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (CONDENSED)
| SEK million | Oct–Dec 2019 |
Oct–Dec 2018 |
Jan–Dec 2019 |
Jan–Dec 2018 |
|---|---|---|---|---|
| Profit for the period | 47 | 149 | 600 | 688 |
| Items not to be reclassified to profit/loss in subsequent periods | ||||
| Remeasurement of pensions after tax | –7 | –15 | –31 | –20 |
| Items to be reclassified to profit/loss in subsequent periods | ||||
| Change in hedging reserve after tax | 27 | 7 | 22 | –32 |
| Translation effects | –135 | 27 | 91 | 142 |
| Comprehensive income for the period attributable to owners of the parent | ||||
| company | –68 | 168 | 682 | 778 |
CONSOLIDATED BALANCE SHEET (CONDENSED)
| SEK million | Note | 31 Dec 2019 | 31 Dec 2018 |
|---|---|---|---|
| ASSETS | |||
| Intangible assets | 874 | 761 | |
| Property, plant and equipment | 1 | 5,101 | 3,651 |
| Deferred tax assets | 28 | 54 | |
| Investments in joint ventures | 12 | 10 | |
| Interest-bearing receivables | 2 | 2 | |
| Other non-current receivables | 3 | 8 | 11 |
| Non-current assets | 6,025 | 4,489 | |
| Inventories | 1,957 | 1,968 | |
| Receivables | 3 | 1,748 | 1,859 |
| Interest-bearing receivables | 3 | 3 | 0 |
| Cash and cash equivalents | 747 | 457 | |
| Current assets | 4,455 | 4,285 | |
| TOTAL ASSETS | 10,480 | 8,773 | |
| EQUITY AND LIABILITIES | |||
| Share capital | 101 | 101 | |
| Retained earnings | 4,213 | 3,772 | |
| Equity | 4,314 | 3,873 | |
| Interest-bearing liabilities | 1, 3 | 2,901 | 2,117 |
| Provisions and other non-current liabilities | 3 | 513 | 406 |
| Non-current liabilities | 3,414 | 2,522 | |
| Interest-bearing liabilities | 1, 3 | 953 | 515 |
| Provisions and other current liabilities | 3, 6 | 1,799 | 1,862 |
| Current liabilities | 2,752 | 2,378 | |
| TOTAL EQUITY AND LIABILITIES | 10,480 | 8,773 |
CONSOLIDATED CHANGES IN EQUITY (CONDENSED)
| SEK million | 31 Dec 2019 | 31 Dec 2018 |
|---|---|---|
| Opening balance | 3,873 | 3,322 |
| Profit for the period | 600 | 688 |
| Other comprehensive income for the period | 82 | 90 |
| Total comprehensive income for the period | 682 | 778 |
| Dividend | –242 | –227 |
| Total transactions with owners | –242 | –227 |
| Closing balance | 4,314 | 3,873 |
CONSOLIDATED STATEMENT OF CASH FLOWS
| SEK million | Note | Oct–Dec 2019 |
Oct–Dec 2018 |
Jan–Dec 2019 |
Jan–Dec 2018 |
|---|---|---|---|---|---|
| Operating profit | 115 | 191 | 836 | 940 | |
| Depreciation, amortization and impairment charges | 125 | 92 | 461 | 353 | |
| Other non-cash items | 5 | – | – | – | 64 |
| Change in working capital etc. | 84 | 220 | 236 | 98 | |
| Income taxes paid | –34 | –54 | –92 | –105 | |
| Cash flow from operating activities | 289 | 450 | 1,441 | 1,351 | |
| Acquisitions | – | – | – | 24 | |
| Investments in property, plant, equipment and intangible assets | –221 | –319 | –1,590 | –843 | |
| Other capital transactions | – | 3 | – | 0 | |
| Cash flow from investing activities | –221 | –316 | –1,590 | –819 | |
| Cash flow before financing activities | 68 | 133 | –148 | 531 | |
| Dividend | – | – | –242 | –227 | |
| Interest paid and received | –36 | –25 | –137 | –98 | |
| New loans | 1,586 | 568 | 5,546 | 3,078 | |
| Repayment of loans | –1,619 | –883 | –4,727 | –3,579 | |
| Cash flow from financing activities | –69 | –339 | 440 | –825 | |
| Cash flow for the period | –1 | –206 | 292 | –294 | |
| Cash and cash equivalents at beginning of period | 775 | 658 | 457 | 742 | |
| Cash flow for the period | –1 | –206 | 292 | –294 | |
| Exchange rate differences in cash and cash equivalents | –27 | 5 | –2 | 9 | |
| Cash and cash equivalents at end of period | 747 | 457 | 747 | 457 |
PARENT COMPANY INCOME STATEMENT (CONDENSED)
| SEK million | Oct–Dec 2019 |
Oct–Dec 2018 |
Jan–Dec 2019 |
Jan–Dec 2018 |
|---|---|---|---|---|
| Net sales | 46 | 61 | 187 | 203 |
| Payroll and other operating expenses | –67 | –60 | –256 | –257 |
| Depreciation, amortization and impairment charges | –5 | –6 | –20 | –26 |
| Operating profit/loss | –26 | –5 | –88 | –80 |
| Dividends from subsidiaries | 335 | 517 | 335 | 517 |
| Finance income and costs | 2 | 0 | 7 | 18 |
| Profit/loss after financial items | 310 | 511 | 254 | 455 |
| Appropriations | 97 | 158 | 97 | 158 |
| Income tax | –25 | –64 | –16 | –53 |
| Profit/loss for the period | 382 | 605 | 335 | 560 |
PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME (CONDENSED)
| SEK million | Oct–Dec 2019 |
Oct–Dec 2018 |
Jan–Dec 2019 |
Jan–Dec 2018 |
|---|---|---|---|---|
| Profit for the period | 382 | 605 | 335 | 560 |
| Items to be reclassified to profit/loss in subsequent periods | ||||
| Change in hedging reserve after tax | –1 | – | –1 | – |
| Comprehensive income for the period attributable to owners of the parent | ||||
| company | 381 | 605 | 334 | 560 |
PARENT COMPANY BALANCE SHEET (CONDENSED)
| SEK million | 31 Dec 2019 | 31 Dec 2018 |
|---|---|---|
| ASSETS | ||
| Intangible assets | 40 | 7 |
| Property, plant and equipment | 192 | 206 |
| Shares in Group companies | 1,160 | 1,160 |
| Receivables from Group companies | 2,102 | 2,674 |
| Other non-current receivables | 3 | 8 |
| Non-current assets | 3,497 | 4,054 |
| Receivables from Group companies | 164 | 161 |
| Other receivables | 47 | 75 |
| Cash and cash equivalents | 190 | 120 |
| Current assets | 402 | 356 |
| TOTAL ASSETS | 3,899 | 4,411 |
| EQUITY AND LIABILITIES | ||
| Restricted equity | 111 | 108 |
| Non-restricted equity | 1,589 | 1,498 |
| Equity | 1,699 | 1,606 |
| Untaxed reserves | 30 | 37 |
| Interest-bearing liabilities | 1,065 | 2,117 |
| Provisions and other non-current liabilities | 32 | 27 |
| Non-current liabilities | 1,097 | 2,144 |
| Liabilities to Group companies | 75 | 29 |
| Interest-bearing liabilities | 901 | 450 |
| Provisions and other current liabilities | 96 | 144 |
| Current liabilities | 1,072 | 622 |
| TOTAL EQUITY AND LIABILITIES | 3,899 | 4,411 |
NOTES
NOTE 1 ACCOUNTING PRINCIPLES
The Gränges Group applies International Financial Reporting Standards (IFRS) as endorsed by the EU. The accounting principles adopted are consistent with those described in the Annual Report for Gränges AB (publ) 2018, with exception for new and updated standards and interpretations described below. This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. The Parent Company applies the Swedish Annual Accounts Act and RFR 2 Reporting for Legal Entities. From 2019 the parent company applies RFR 2 IFRS 16 item 1 and continues to recognize leases in the income statement on a straight-line basis over the lease term.
The interim information on pages 2–15 is an integrated part of these financial statements.
IFRS 16 Leases
From the financial year beginning 1 January 2019, Gränges applies IFRS 16 Leases. The new standard is adopted based on the modified retrospective transition method and mainly impacts the reporting of equipment, vehicles, office premises, warehouses and land areas that are not owned by Gränges. As a consequence, the implementation of IFRS 16 positively impacts the operating margin due to the elimination of operation leasing expenses which are partly compensated by depreciation of the right-of-use assets. In addition, the finance costs will increase due to the recognition of interest expenses on the lease liabilities. At initial application as of 1 January 2019, opening balances for right-of-use assets and lease liabilities were recognized by SEK 270 million each.
The effects from the implementation of IFRS 16 Leases in the income statement, balance sheet and cash flow are presented below.
| SEK million | Oct–Dec 2019 |
Jan–Dec 2019 |
|---|---|---|
| Consolidated income statement | ||
| Payroll and other operating expenses | 16 | 59 |
| Depreciation, amortization and impairment charges | –14 | –52 |
| Operating profit | 2 | 7 |
| Finance income and costs | –3 | –12 |
| Profit before tax | –1 | –5 |
| Income tax | 0 | 1 |
| Profit for the period | –1 | –4 |
| SEK million | 31 Dec 2019 |
|---|---|
| Consolidated balance sheet | |
| Property, plant and equipment | 255 |
| Non-current assets | 255 |
| Retained earnings | –4 |
| Equity | –4 |
| Interest-bearing liabilities | 207 |
| Non-current liabilities | 207 |
| Interest-bearing liabilities | 52 |
| Current liabilities | 52 |
| SEK million | Oct–Dec 2019 |
Jan–Dec 2019 |
|---|---|---|
| Consolidated statement of cash flows | ||
| Operating profit | 2 | 7 |
| Depreciation, amortization and impairment charges | 14 | 52 |
| Cash flow from operating activities | 16 | 59 |
| Interest paid and received | –3 | –12 |
| Repayments of loans | –13 | –47 |
| Cash flow from financing activities | –16 | –59 |
| Cash flow for the period | – | – |
IFRIC 23 Uncertainty over income tax treatments
The interpretation is effective from 1 January 2019 and is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12. The interpretation has not had an impact on the Group's financial statements.
NOTE 2 REVENUE FROM CONTRACTS WITH CUSTOMERS
Gränges mainly sells aluminium rolled products for heat exchangers and selected niche applications in different geographical regions. Gränges' customers are in the automotive industry, the HVAC industry and niche markets such as transformers and food packaging. Revenue is generated through sale of material that is produced for a certain customer and application. Revenue is recognized at the point in time when control is transferred to the customer. The transaction price for Gränges' products is based on the added value Gränges offers in terms of material properties and production complexity (fabrication price), and the price of the raw material, aluminium. The fabrication price is to a large extent fixed while the aluminium price is variable and based on metal price clauses connected to the market price. The tables below show Gränges' sales by geographical region and by market divided by type of revenue.
| SEK million | Oct–Dec 2019 |
Oct–Dec 2018 |
Jan–Dec 2019 |
Jan–Dec 2018 |
|---|---|---|---|---|
| Sales by region | ||||
| Asia | 714 | 694 | 2,736 | 3,004 |
| Europe | 440 | 577 | 2,074 | 2,403 |
| Americas | 1,524 | 1,799 | 7,150 | 7,482 |
| Total revenue from contracts with customers | 2,679 | 3,069 | 11,960 | 12,889 |
| Other revenue | 3 | 5 | 18 | 21 |
| Net sales | 2,682 | 3,074 | 11,978 | 12,910 |
| SEK million | Oct–Dec 2019 |
Oct–Dec 2018 |
Jan–Dec 2019 |
Jan–Dec 2018 |
|---|---|---|---|---|
| Sales by market | ||||
| Automotive | ||||
| Fabrication revenue | 653 | 760 | 2,925 | 3,117 |
| Raw material and other revenue | 781 | 879 | 3,267 | 3,754 |
| Total | 1,434 | 1,639 | 6,192 | 6,870 |
| HVAC & Other | ||||
| Fabrication revenue | 455 | 498 | 2,074 | 1,907 |
| Raw material and other revenue | 790 | 932 | 3,694 | 4,111 |
| Total | 1,245 | 1,430 | 5,768 | 6,019 |
| Total revenue from contracts with customers | 2,679 | 3,069 | 11,960 | 12,889 |
| Other revenue | 3 | 5 | 18 | 21 |
| Net sales | 2,682 | 3,074 | 11,978 | 12,910 |
NOTE 3 FINANCIAL INSTRUMENTS
The Group's financial assets consist of loans, accounts receivable, cash and cash equivalents as well as derivatives. The Group's financial liabilities consist of borrowings and accounts payable as well as derivatives. The table below shows the fair value of the derivatives (currency forwards and aluminium futures) included in the balance sheet.
| SEK million | 31 Dec 2019 | 31 Dec 2018 |
|---|---|---|
| Non-current assets | 3 | 2 |
| Current assets | 37 | 76 |
| Non-current liabilities | 38 | 5 |
| Current liabilities | 45 | 71 |
All derivatives are measured at fair value and are classified according to level 2, i.e., all significant inputs required for measurement of the instruments are observable. Fair value of currency forward contracts is calculated by discounting the difference between the contracted forward rate and the forward rate that can be contracted on the balance sheet date for the remaining contract period. Aluminium futures are measured at observable quoted prices on LME (London Metal Exchange) and SHFE (Shanghai Futures Exchange) for similar assets and liabilities.
Gränges' interest-bearing liabilities mainly consist of financing from banks and institutions. The amount of outstanding term loans was USD 150 million and SEK 200 million as per 31 December 2019. Gränges' revolving credit facilities amounted to SEK 2,467 million, whereof USD 50 million was utilized. Interest-bearing liabilities also include corporate bonds of SEK 600 million, issued under Gränges MTN program, and commercial papers of SEK 900 million. The loan facilities are subject to covenants, which are Net Debt/EBITDA and Interest coverage ratio.
Gränges has entered into a bridge loan facility of SEK 2,300 million to finance the acquisition of Aluminium Konin. The loan, that was unutilized by December 31, 2019, is subject to extension options and has a maximum tenor of 18 months and is finally due on 27 May 2021.
| SEK million | Limit/Program amount |
< 1 | 1–2 | > 2 | Total |
|---|---|---|---|---|---|
| Term loans | |||||
| SEK | – | 200 | – | 200 | |
| USD | – | – | 1,400 | 1,400 | |
| Bonds in MTN program | 3,000 | – | 300 | 300 | 600 |
| Commercial papers | 1,500 | 900 | – | – | 900 |
| Revolving Credit Facilities | 2,467 | – | – | 467 | 467 |
| Lease liabilities | 52 | 52 | 155 | 259 | |
| Other interest-bearing liabilities | 2 | – | 27 | 28 | |
| Total interest-bearing liabilities | 953 | 552 | 2,348 | 3,853 |
Interest-bearing liabilities are measured at amortized cost and the carrying amount as of 31 December 2019 was SEK 3,853 million (SEK 2,632 million as of 31 December 2018). The fair value of interest-bearing liabilities amounted to SEK 3,864 million as of 31 December 2019 (SEK 2,641 million as of 31 December 2018). For other receivables and liabilities, which are short-term, the carrying amount is considered to reflect the fair value.
NOTE 4 RELATED PARTY TRANSACTIONS
No changes have been made to the group or parent company in relations or transactions with related parties, compared to what is described in the 2018 Annual Report. During the period there have been no significant transactions with related parties.
NOTE 5 ITEMS AFFECTING COMPARABILITY
| SEK million | Financial statement line | Oct–Dec 2019 |
Oct–Dec 2018 |
Jan–Dec 2019 |
Jan–Dec 2018 |
|---|---|---|---|---|---|
| M&A costs | Items affecting comparability | –16 | – | –16 | – |
| Restructuring costs | Items affecting comparability | –14 | – | –14 | – |
| Inventory effect due to changed | Cost of materials | ||||
| distribution model | – | – | – | –64 | |
| Items affecting comparability | –30 | – | –30 | –64 |
Items affecting comparability for 2019 includes mergers and acquisition costs for acquisition activities in Poland of SEK 16 million and restructuring costs of SEK 14 million related to manning reductions within Gränges, mainly related to the Swedish operation. Items affecting comparability for the full year 2018 relates to costs due to changed distribution model for import of heat exchanger materials to Gränges' customers in North America.
NOTE 6 TAX
Gränges' Chinese subsidiary has for tax purpose received a pre-qualification as a High and New-Technology Enterprise for the three-year period 2019 to 2021. The pre-qualification means that the company preliminary pays 15 per cent in corporate income tax instead of the ordinary tax of 25 per cent for the period. In order to finally obtain the lower tax rate, the company must meet special requirements established by the authorities in China for each one of the three years. Gränges currently considers it to be more likely than not that the special requirements will be met for the financial year 2019 and therefore applies a tax rate of 15 per cent for the Chinese operation for the full year 2019. During the third quarter 2019 a provision was dissolved related to tax in China with a positive impact on tax of SEK 54 million.
During the fourth quarter of 2019, Gränges AB, the Parent Company of the Group, received a dividend from its Chinese subsidiary. Tax related to the dividend amounted to SEK 17 million, which affected income tax and income taxes paid during the quarter.
CONSOLIDATED QUARTERLY DATA
| 2019 | 2018 | |||||||
|---|---|---|---|---|---|---|---|---|
| SEK million | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Sales volume, ktonnes | 77.9 | 85.8 | 92.9 | 90.8 | 87.4 | 93.4 | 99.1 | 95.0 |
| Income statement | ||||||||
| Net sales | 2,682 | 2,998 | 3,188 | 3,109 | 3,074 | 3,322 | 3,443 | 3,071 |
| Adjusted EBITDA1 | 269 | 305 | 370 | 382 | 283 | 320 | 390 | 364 |
| Adjusted operating profit1 | 144 | 190 | 257 | 275 | 191 | 230 | 301 | 282 |
| Operating profit | 115 | 190 | 257 | 275 | 191 | 230 | 301 | 217 |
| Profit for the period | 47 | 198 | 171 | 184 | 149 | 158 | 214 | 167 |
| Adjusted EBITDA margin, % | 10.0 | 10.2 | 11.6 | 12.3 | 9.2 | 9.6 | 11.3 | 11.8 |
| Adjusted operating margin, % | 5.4 | 6.3 | 8.1 | 8.8 | 6.2 | 6.9 | 8.7 | 9.2 |
| Adjusted operating profit per tonne, kSEK | 1.9 | 2.2 | 2.8 | 3.0 | 2.2 | 2.5 | 3.0 | 3.0 |
| Operating margin, % | 4.3 | 6.3 | 8.1 | 8.8 | 6.2 | 6.9 | 8.7 | 7.1 |
| Net margin, % | 1.8 | 6.6 | 5.4 | 5.9 | 4.8 | 4.7 | 6.2 | 5.4 |
| Balance sheet | ||||||||
| Non–current assets | 6,025 | 6,153 | 5,633 | 5,260 | 4,489 | 4,243 | 4,176 | 3,934 |
| Current assets | 4,455 | 4,609 | 4,508 | 4,516 | 4,285 | 4,639 | 4,823 | 4,596 |
| Equity | 4,314 | 4,382 | 4,077 | 4,227 | 3,873 | 3,705 | 3,665 | 3,601 |
| Non–current liabilities | 3,414 | 3,280 | 3,055 | 2,840 | 2,522 | 2,884 | 2,555 | 2,608 |
| Current liabilities | 2,752 | 3,100 | 3,009 | 2,709 | 2,378 | 2,293 | 2,780 | 2,321 |
| Cash flow | ||||||||
| Operating activities | 289 | 564 | 310 | 278 | 450 | 316 | 291 | 294 |
| Investing activities | –221 | –409 | –508 | –451 | –316 | –236 | –166 | –102 |
| Before financing activities | 68 | 155 | –198 | –173 | 133 | 81 | 125 | 192 |
| Financing activities | –69 | 21 | 302 | 185 | –339 | –41 | –173 | –272 |
| Cash flow for the period | –1 | 176 | 104 | 12 | –206 | 40 | –48 | –80 |
| Capital structure | ||||||||
| Net debt | 3,465 | 3,606 | 3,560 | 3,057 | 2,494 | 2,565 | 2,621 | 2,353 |
| Equity to assets, % | 41.2 | 40.7 | 40.2 | 43.2 | 44.2 | 41.7 | 40.7 | 42.2 |
| Data per share, SEK | ||||||||
| Earnings per share basic | 0.63 | 2.62 | 2.26 | 2.44 | 1.97 | 2.09 | 2.84 | 2.21 |
| Earnings per share diluted | 0.63 | 2.62 | 2.26 | 2.44 | 1.97 | 2.09 | 2.84 | 2.21 |
| Equity2 | 57.13 | 58.02 | 53.99 | 55.97 | 51.29 | 49.07 | 48.53 | 47.68 |
| Cash flow from operating activities2 | 3.83 | 7.47 | 4.11 | 3.68 | 5.95 | 4.19 | 3.85 | 3.89 |
| Share price at the end of the period | 98.95 | 100.50 | 106.40 | 95.70 | 80.50 | 106.00 | 117.30 | 97.95 |
| Weighted outstanding ordinary shares, | ||||||||
| basic in thousands | 75,517.4 | 75,517.4 | 75,517.4 | 75,517.4 | 75,517.4 | 75,517.4 | 75,517.4 | 75,517.4 |
| Weighted outstanding ordinary shares, | ||||||||
| diluted in thousands | 75,517.4 | 75,517.4 | 75,517.4 | 75,517.4 | 75,517.4 | 75,517.4 | 75,517.4 | 75,517.4 |
1 Adjusted for items affecting comparability, see Note 5 for further information.
2 Calculated on weighted outstanding ordinary shares, diluted.
CONSOLIDATED QUARTERLY DATA
| 2019 | 2018 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| SEK million | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |
| Sales volume by region, ktonnes | |||||||||
| Asia | 20.4 | 17.7 | 21.0 | 20.0 | 19.9 | 20.8 | 22.5 | 23.0 | |
| Europe | 11.5 | 14.1 | 16.1 | 16.5 | 15.3 | 15.1 | 17.8 | 17.2 | |
| Americas | 46.0 | 54.0 | 55.8 | 54.4 | 52.2 | 57.5 | 58.8 | 54.8 | |
| Total | 77.9 | 85.8 | 92.9 | 90.8 | 87.4 | 93.4 | 99.1 | 95.0 | |
| Net sales by region | |||||||||
| Asia | 714 | 617 | 717 | 687 | 694 | 732 | 813 | 765 | |
| Europe | 443 | 537 | 522 | 589 | 582 | 579 | 649 | 615 | |
| Americas | 1,524 | 1,845 | 1,949 | 1,832 | 1,799 | 2,011 | 1,981 | 1,692 | |
| Total | 2,682 | 2,998 | 3,188 | 3,109 | 3,074 | 3,322 | 3,443 | 3,071 | |
| Employees | |||||||||
| Average number of employees | 1,781 | 1,813 | 1,814 | 1,810 | 1,777 | 1,695 | 1,669 | 1,655 |
CONSOLIDATED 12-MONTHS ROLLING DATA
| SEK million | Jan 2019– Dec 2019 |
Oct 2018– Sep 2019 |
Jul 2018 – Jun 2019 |
Apr 2018 – Mar 2019 |
Jan 2018 – Dec 2018 |
Oct 2017 – Sep 2018 |
Jul 2017 – Jun 2018 |
Apr 2017 – Mar 2018 |
|---|---|---|---|---|---|---|---|---|
| Sales volume, ktonnes | 347.3 | 356.9 | 364.5 | 370.8 | 375.0 | 374.0 | 373.7 | 373.2 |
| Income statement | ||||||||
| Net sales | 11,978 | 12,370 | 12,693 | 12,947 | 12,910 | 12,570 | 11,976 | 11,614 |
| Adjusted EBITDA1 | 1,327 | 1,341 | 1,356 | 1,376 | 1,357 | 1,336 | 1,325 | 1,328 |
| Adjusted operating profit1 | 866 | 913 | 953 | 997 | 1,005 | 992 | 989 | 977 |
| Operating profit | 836 | 913 | 953 | 997 | 940 | 912 | 909 | 897 |
| Adjusted EBITDA margin, % | 11.1 | 10.8 | 10.7 | 10.6 | 10.5 | 10.6 | 11.1 | 11.4 |
| Adjusted operating margin, % | 7.2 | 7.4 | 7.5 | 7.7 | 7.8 | 7.9 | 8.3 | 8.4 |
| Adjusted operating profit per tonne, kSEK | 2.5 | 2.6 | 2.6 | 2.7 | 2.7 | 2.7 | 2.6 | 2.6 |
| Operating margin, % | 7.0 | 7.4 | 7.5 | 7.7 | 7.3 | 7.3 | 7.6 | 7.7 |
Capital structure and return indicators
| Capital employed | 7,411 | 7,109 | 6,769 | 6,432 | 6,098 | 5,902 | 5,744 | 5,639 |
|---|---|---|---|---|---|---|---|---|
| Return on capital employed, % | 11.7 | 12.8 | 14.1 | 15.5 | 16.5 | 16.8 | 17.2 | 17.3 |
| Equity | 4,175 | 4,053 | 3,909 | 3,814 | 3,633 | 3,480 | 3,339 | 3,225 |
| Return on equity, % | 14.4 | 17.3 | 16.9 | 18.5 | 18.9 | 19.9 | 20.5 | 20.5 |
| Net debt / Adjusted EBITDA | 2.6 | 2.7 | 2.6 | 2.2 | 1.8 | 1.9 | 2.0 | 1.8 |
1 Adjusted for items affecting comparability, see Note 5 for further information.
Alternative performance measures
Gränges makes use of the alternative performance measures Return on capital employed, Net debt, Equity to assets ratio and Cash conversion. Gränges believes that these performance measures are useful for readers of the financial reports as a complement to other performance measures when assessing the possibility of dividends, the implementation of strategic investments, and the Group's ability to meet financial commitments. Further, Gränges uses the alternative performance measures Adjusted operating profit, Adjusted operating profit per tonne and Adjusted EBITDA, which are measures that Gränges considers to be relevant for investors who want to understand the profit generation excluding items affecting comparability. For definitions of the measures, see page 19.
| Q4 | Jan–Dec | |||
|---|---|---|---|---|
| SEK million | 2019 | 2018 | 2019 | 2018 |
| Adjusted operating profit | ||||
| Operating profit | 115 | 191 | 836 | 940 |
| Items affecting comparability | 30 | – | 30 | 64 |
| Adjusted operating profit | 144 | 191 | 866 | 1,005 |
| Adjusted operating profit per tonne | ||||
| Adjusted operating profit | 144 | 191 | 866 | 1,005 |
| Sales volume, ktonnes | 77.9 | 87.4 | 347.3 | 375.0 |
| Adjusted operating profit per tonne, kSEK | 1.9 | 2.2 | 2.5 | 2.7 |
| Adjusted EBITDA | ||||
| Adjusted operating profit | 144 | 191 | 866 | 1,005 |
| Depreciation, amortization and impairment charges | 125 | 92 | 461 | 353 |
| Adjusted EBITDA | 269 | 283 | 1,327 | 1,357 |
| Return on capital employed | ||||
| Total assets less cash and cash equivalents and interest–bearing | ||||
| receivables, rolling 12 months average | – | – | 9,375 | 7,999 |
| Non-interest-bearing liabilities, rolling 12 months average | – | – | –2,311 | –2,194 |
| Pensions, rolling 12 months average | – | – | 348 | 293 |
| Capital employed | – | – | 7,411 | 6,098 |
| Adjusted operating profit | – | – | 866 | 1,005 |
| Return on capital employed, % | – | – | 11.7 | 16.5 |
| Net debt | ||||
| Cash and cash equivalents and interest–bearing receivables | – | – | –752 | –459 |
| Interest-bearing liabilities | – | – | 3,853 | 2,632 |
| Pensions | – | – | 363 | 321 |
| Net debt | – | – | 3,465 | 2,494 |
| Equity to assets | ||||
| Equity | – | – | 4,314 | 3,873 |
| Total assets | – | – | 10,480 | 8,773 |
| Equity to assets, % | – | – | 41.2 | 44.2 |
| Adjusted cash flow before financing activities | ||||
| Cash flow before financing activities | 68 | 133 | –148 | 531 |
| Cash flow from expansion investments | 123 | 182 | 1,103 | 470 |
| Cash flow from other non-maintenance investments | – | – | 93 | – |
| Cash flow from acquisitions | – | – | – | –24 |
| Adjusted cash flow before financing activities | 191 | 316 | 1,048 | 977 |
| Cash conversion | ||||
| Adjusted cash flow before financing activities | 191 | 316 | 1,048 | 977 |
| Adjusted operating profit | 144 | 191 | 866 | 1,005 |
| Cash conversion, % | 132 | 165 | 121 | 97 |
Definitions
Adjusted EBITDA
Adjusted operating profit before depreciation and impairment charges. ### Adjusted cash flow before financing activities
Cash flow before financing activities excluding cash flow from non-maintenance investments and acquisitions.
Adjusted operating profit
Operating profit excluding items affecting comparability.
Adjusted operating profit per tonne
Adjusted operating profit divided by sales volume.
Average number of employees
The average number of employees converted to full-time positions.
Capital employed
Total assets less cash and cash equivalents and interest-bearing receivables, minus non-interest-bearing liabilities, excluding pensions.
Cash conversion
Adjusted cash flow before financing activities divided by adjusted operating profit.
Cash flow before financing activities
Cash flow from operating activities plus cash flow from investing activities.
Glossary
Alloy
Material composed of one metal with additions of other metals and/or elements.
Aluminium strip Rolled aluminium in coil form.
Brazing Joining of metals through melting and solidification.
Cladding A layer of metal bonded to a dissimilar metal or alloy.
Heat exchanger A device for transferring heat from one medium to another.
Earnings per share Profit for the period divided by the total number of shares.
Equity to Assets Equity divided by total assets.
Items affecting comparability Non-recurring income and expenses.
ktonnes
Volume expressed in thousands of metric tonnes.
Net debt
Cash and cash equivalents and interest-bearing receivables minus interest-bearing liabilities, including pensions.
Operating profit Profit before net financial items and tax.
Return on capital employed
Adjusted operating profit divided by average capital employed during the past 12-months period.
Return on equity
Profit for the period divided by average equity during the past 12-months period.
Sales volume Volumes sold in metric tonnes.
SEK Swedish Krona.
HVAC
Abbreviation for Heating, Ventilation and Air Conditioning systems including heat exchangers. Sometimes used to define the stationary heat exchanger market.
LME
London Metal Exchange.
Rolled aluminium Aluminium that has been hot and/or cold rolled to desired gauge.
SHFE Shanghai Futures Exchange.
Slab Input material to the rolling process that is produced by casting.
Head office
Gränges AB (publ) Box 5505 SE-114 85 Stockholm Sweden
Visiting address
Linnégatan 18 114 47 Stockholm
Tel: +46 8 459 59 00 www.granges.com Reg. no. 556001-6122
ABOUT GRÄNGES
Gränges is a leading global supplier of rolled aluminium products for heat exchanger applications and other niche markets. In materials for brazed heat exchangers Gränges is the global leader with a market share of approximately 20 per cent. The company develops, produces and markets advanced materials that enhance efficiency in the customer manufacturing process and the performance of the final products. The company's geographical markets are Europe, Asia and the Americas. Its production facilities are located in Sweden, China and the United States, and have a combined annual capacity of 460,000 metric tonnes. Gränges has around 1,800 employees and net sales of SEK 12 billion. The share is listed on Nasdaq Stockholm. More information on Gränges is available at www.granges.com.
VISION AND BUSINESS CONCEPT
Gränges' vision is to transform the world through innovative aluminium engineering. We support our customers with research and innovation, product development, and technical support throughout the product's life-cycle. The performance of the customers' final product in terms of efficiency and environmental impact depends largely on material properties and design, which are Gränges' core competences.
BUSINESS MODEL
Gränges' business model is based on long-term customer relationships. Revenue is generated through sale of material that is produced for a certain customer and application. Prices are expressed in metric tonnes and based on the added value that Gränges offers in terms of material properties and production complexity, and the price of the raw material; aluminium. The cost for the material is passed on to the customer.
STRATEGY
Gränges has a clear strategy for the coming years. By offering customized products with a high technical content, Gränges aims to grow above market rate. The ambition is to be the market leader in all geographical regions within rolled aluminium heat exchanger materials in 2020. That goal is based on four strategic pillars: drive growth through innovations, create value from sustainability, increase efficiency through continuous improvements, and grow presence through structural expansion.