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Gränges — Interim / Quarterly Report 2020
Oct 22, 2020
3055_10-q_2020-10-22_09f044b2-a04a-4e35-8872-91e9b5ef9620.pdf
Interim / Quarterly Report
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INTERIM REPORT JANUARY–SEPTEMBER 2020
Strong operating profit and cash flow supported by improved market conditions
Third quarter 2020
- Sales volume increased by 1.1 per cent to 86.7 ktonnes (85.8). Net sales decreased to SEK 2,575 million (2,998).
- Adjusted operating profit increased to SEK 203 million (190) and adjusted operating profit per tonne increased to 2.3 kSEK (2.2).
- Profit for the period amounted to SEK 124 million (198) and includes items affecting comparability of SEK –26 million (–).
- Basic and diluted earnings per share amounted to SEK 1.64 (2.62).
- Cash flow before financing activities increased to SEK 348 million (155) and includes capital expenditure of SEK 61 million (409). Adjusted cash flow before financing activities was SEK 380 million (442).
January–September 2020
- Sales volume decreased by 8.2 per cent to 247.4 ktonnes (269.5). Net sales decreased to SEK 7,858 million (9,295).
- Adjusted operating profit was SEK 455 million (721) and adjusted operating profit per tonne was 1.8 kSEK (2.7).
- Profit for the period amounted to SEK 257 million (553) and includes items affecting comparability of SEK –37 million (–).
- Basic and diluted earnings per share amounted to SEK 3.40 (7.32).
- Cash flow before financing activities increased to SEK 695 million (–216) and includes capital expenditure of SEK 352 million (1,368). Adjusted cash flow before financing activities was SEK 948 million (857), representing a cash conversion of 208 per cent.
- Net debt decreased to SEK 2,812 million at 30 September 2020 (SEK 3,465 million at 31 December 2019), corresponding to 2.5 times adjusted EBITDA1 (2.6 times at 31 December 2019).
| Financial summary | Q3 | Jan–Sep | 12 months rolling |
Full year | |||||
|---|---|---|---|---|---|---|---|---|---|
| SEK million | 2020 | 2019 | 2020 | 2019 | Oct 2019 – Sep 2020 |
2019 | |||
| Sales volume, ktonnes | 86.7 | 85.8 | 1.1% | 247.4 | 269.5 | –8.2% | 325.2 | 347.3 | –6.4% |
| Net sales | 2,575 | 2,998 | –14.1% | 7,858 | 9,295 | –15.5% | 10,541 | 11,978 | –12.0% |
| Adjusted operating profit 1 | 203 | 190 | 7.1% | 455 | 721 | –36.9% | 599 | 866 | –30.8% |
| Adjusted operating margin, % | 7.9 | 6.3 | 1.6 ppt | 5.8 | 7.8 | –2.0 ppt | 5.7 | 7.2 | –1.5 ppt |
| Adjusted operating profit per tonne, kSEK | 2.3 | 2.2 | 0.1 | 1.8 | 2.7 | –0.8 | 1.8 | 2.5 | –0.7 |
| Operating profit | 177 | 190 | –6.6% | 417 | 721 | –42.1% | 532 | 836 | –36.4% |
| Operating margin, % | 6.9 | 6.3 | 0.6 ppt | 5.3 | 7.8 | –2.4 ppt | 5.0 | 7.0 | –1.9 ppt |
| Profit for the period | 124 | 198 | –37.6% | 257 | 553 | –53.5% | 304 | 600 | –49.3% |
| Earnings per share basic, SEK | 1.64 | 2.62 | –0.99 | 3.40 | 7.32 | –3.92 | 4.03 | 7.95 | –3.92 |
| Earnings per share diluted, SEK | 1.64 | 2.62 | –0.99 | 3.40 | 7.32 | –3.92 | 4.03 | 7.95 | –3.92 |
| Cash flow before financing activities | 348 | 155 | 124.7% | 695 | –216 | n/a | 763 | –148 | n/a |
| Equity to assets, % | – | – | – | 43.7 | 40.7 | 3.0 ppt | 43.72 | 41.2 | 2.6 ppt |
| Net debt | – | – | – | 2,812 | 3,606 | –794 | 2,8122 | 3,465 | –653 |
| Return on capital employed, % | – | – | – | – | – | – | 7.7 | 11.7 | –4.0 ppt |
Adjusted for items affecting comparability, see Note 5 for further information.
COMMENTS BY THE CEO
Important milestones for growth initiatives reached in the quarter
IMPROVED MARKET CONDITIONS
We experienced clear signs of market recovery in the third quarter of 2020 although the COVID-19 pandemic continued to impact the markets in which Gränges operates. The sales volume in the third quarter reached 86.7 ktonnes, up 1 per cent compared with the same period last year and 23 per cent compared to the sales volume in the second quarter. The adjusted operating profit increased to SEK 203 million mainly explained by the higher sales volume and effects from cost reduction initiatives. The cash generation continued to be strong in the third quarter and the cash flow before financing, adjusted for expansion investments and acquisitions, amounted to SEK 380 million. As a consequence of this, net debt was reduced to SEK 2.8 billion, corresponding to 2.5 times EBITDA, at the end of the third quarter.
Market conditions in the third quarter were particularly strong for the HVAC & Other business, where a generally high market activity was further amplified by the long and warm summer season. The strong demand together with gains in market share contributed to a 15 per cent increase in sales volume compared with last year. For the automotive business we experienced a sequential recovery in the third quarter with a lower year over year decline than in the second quarter. The signs of recovery were strongest in Asia, with China as the main driver, and Americas, where sales to Automotive customers declined by only 5 per cent and 12 per cent respectively year over year despite reductions of inventory at customer level. The European automotive market remained challenging also in the third quarter with a sales volume decline of 27 per cent, although there was increased market activity in the end of the quarter.
As a consequence of the increased market demand in Americas, the Salisbury facility which was temporary closed in April, was re-opened during the third quarter. Further, we have also decided to complete the expansion of the Newport facility that was put on hold as a consequence of COVID-19.
NEW POWDER METALLURGY BUSINESS ESTABLISHED
In September we announced the establishment of the new business unit Gränges Powder Metallurgy, with focus on advanced aluminium powder and spray forming technology. The business unit is based on Gränges' acquisition of the remaining 49 per cent of the shares in Getek GmbH and of Dispal®. The strategic acquisition adds new capabilities and gives access to the fast-growing market for additive manufacturing powder materials for use in industrial 3D printing. The new business unit will enable us to expand our offering of advanced aluminium materials within current and new customer segments and contribute to further strengthen Gränges' platform for profitable growth.
ACQUISITION OF ALUMINIUM KONIN
In November 2019 we announced the acquisition of Aluminium Konin. The acquisition will strengthen the product offering and presence in Europe and contribute with strong positions in new attractive niche markets. Aluminium Konin will also add new capabilities and capacity to expand the offering for future transportation solutions, such as electric vehicles. During the third quarter we received clearance from competition authorities and agreed with the seller on a new structure for the payment of the purchase price, where a part of the payment will be made in Gränges shares. The transaction is expected to be completed in
the fourth quarter and we look forward to finalizing this strategic acquisition. Following the completion of the transaction we intend to undertake a new share issue, with preferential rights for existing shareholders, to finance the acquisition and future growth investments in line with our strategy.
Cont. on next page
Third quarter 2020
- Sales volume 86.7 ktonnes
- Net sales SEK 2,575 million
- Adjusted operating profit SEK 203 million
Cont. from previous page
OUTLOOK
It remains difficult to provide reliable forecasting of underlying market demand, although the market uncertainty following the COVID-19 pandemic has been reduced. The research firm IHS currently assumes a continued recovery of the global light vehicle production with a sequential growth of 9 per cent from the third to the fourth quarter and a year over year decline in the fourth quarter of 3 per cent. For the fourth quarter Gränges currently expects an organic increase in sales volume by low single digits compared with last year. This includes a stable development for the Automotive and a mid-single digit growth for the HVAC & Other business.
As we look further ahead, we will continue to work actively with innovation, efficiency improvements, and develop our sustainable customer offering even more. During the autumn we have further developed our growth strategy and going forward we will focus our efforts on four primary areas: Electrified transportation, Thermal management, New rolled products niches and New materials technology. With a strong commitment to constantly improve and develop, Gränges is well positioned to deliver sustainable and profitable growth throughout the economic cycle.
Johan Menckel, CEO
Applications from the Dispal® business, which is included in Gränges' new business area Powder Metallurgy.
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 3.5 per cent in the third quarter of 2020, compared to the corresponding quarter in 2019. In Asia, light vehicle production decreased by 1.4 per cent during the third quarter. This includes an increase of 10.6 per cent in China while production in other Asian markets declined by 14.7 per cent. In the fourth quarter of 2020, a decrease of 4.3 per cent is expected in Asia. In Europe, light vehicle production declined by 7.7 per cent in the third quarter, and a decrease of 1.1 per cent is expected for the fourth quarter of 2020. Light vehicle production in the Americas declined by 3.4 per cent in the third quarter, and an increase of 0.6 per cent is anticipated in the fourth quarter of 2020. For the full year 2020, IHS forecasts a decrease in global light vehicle production of 17.9 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 16.1 per cent in the third quarter of 2020 compared to the corresponding quarter 2019. The full year 2020 outlook is currently uncertain as US shipments of HVAC units are expected to be impacted by COVID-19.
SALES DEVELOPMENT
Gränges' sales volume in the third quarter of 2020 increased by 1.1 per cent to 86.7 ktonnes (85.8) compared to the same quarter previous year. Net sales amounted to SEK 2,575 million (2,998). The decrease in net sales was primarily driven by a decreased aluminium price. Changes in foreign exchange rates had a net negative effect of SEK 232 million.
For the Automotive business, sales volume decreased to 34.9 ktonnes (40.6) and net sales was SEK 1,143 million (1,508) during the third quarter 2020. For the HVAC & Other business, sales volume increased to 51.8 ktonnes (45.2) and net sales amounted to SEK 1,432 million (1,491).
During January-September 2020, Gränges' sales volume decreased by 8.2 per cent to 247.4 ktonnes (269.5) compared to the corresponding period previous year. Net sales amounted to SEK 7,858 million (9,295). The net effect of changes in foreign exchange rates was negative and amounted to SEK 55 million.
During January-September 2020 sales volume for the Automotive business decreased to 100.5 ktonnes (131.8) and net sales to SEK 3,452 million (4,773). For the HVAC & Other business, sales volume increased to 146.9 ktonnes (137.7) while net sales amounted to SEK 4,407 million (4,523).
Light vehicle production1
| Year-on-year growth, % | Q3 2020 | Q4 2020 | Full year 2020 |
|---|---|---|---|
| Region | |||
| Asia | –1.4 | –4.3 | –14.1 |
| Europe | –7.7 | –1.1 | –22.6 |
| Americas | –3.4 | 0.6 | –22.0 |
| Global | –3.5 | –2.7 | –17.9 |
Gränges' sales volume
| Sales volume, ktonnes | Jul–Sep 2020 |
Jul–Sep 2019 |
|
|---|---|---|---|
| Region | |||
| Asia Automotive | 16.8 | 17.7 | –5.0% |
| Europe Automotive | 10.3 | 14.1 | –26.8% |
| Americas Automotive | 7.8 | 8.8 | –11.5% |
| Total Automotive | 34.9 | 40.6 | –14.0% |
| Americas HVAC & Other | 51.8 | 45.2 | 14.7% |
| Total | 86.7 | 85.8 | 1.1% |
¹ Source: IHS, 16 October 2020. Source: AHRI, 9 October 2020.
ASIA
In the third quarter of 2020, sales volume in Asia decreased by 5.0 per cent to 16.8 ktonnes (17.7). The decrease was driven by the slowdown in light vehicle production due to COVID-19 as well as inventory reductions at several of Gränges' customers. However, signs of a market recovery were seen across most Asian markets, especially in China.
During January–September 2020, sales volume in Asia declined to 48.5 ktonnes (58.6), which represents a decrease of 17.2 per cent compared to previous year.
EUROPE
In the third quarter of 2020, sales volume in Europe decreased by 26.8 per cent to 10.3 ktonnes (14.1). The decline was driven by a continued significant slowdown of light vehicle production due to COVID-19 and inventory reductions at several of Gränges' customers. However, market activity increased at the end of the third quarter.
During January–September 2020, sales volume in Europe reached 32.6 ktonnes (46.7), which represents a decrease of 30.2 per cent compared to previous year.
AMERICAS
In the third quarter of 2020, sales volume in the Americas increased by 10.4 per cent to 59.6 ktonnes (54.0). Of this, 51.8 ktonnes (45.2) relates to the HVAC & Other business while 7.8 ktonnes (8.8) relates to the Automotive business. For the HVAC & Other business, the long and warm summer season as well as market share gains contributed to the 14.7 per cent increase in sales volume. In the Automotive business, sales volume decreased by 11.5 per cent driven by the slowdown in light vehicle production due to COVID-19 as well as inventory reductions at several of Gränges' automotive customers. However, visible signs of a market recovery were seen in the third quarter.
During January–September 2020, sales volume in Americas increased to 166.3 ktonnes (164.1) compared to previous year. 146.9 ktonnes (137.7) relates to the HVAC & Other business while 19.3 ktonnes (26.5) relates to the Automotive business.
OPERATING PROFIT
Adjusted operating profit for the third quarter of 2020 increased to SEK 203 million (190), corresponding to adjusted operating profit per tonne of 2.3 kSEK (2.2). Adjusted operating margin increased to 7.9 per cent (6.3). Positive effects from the increased sales volume, higher average conversion price and cost savings were partly offset by less optimal metal management and higher depreciation related to the completed expansion projects in the US. Operating profit includes government grants of SEK 10 million related to financial support in connection with COVID-19. Net changes in foreign exchange rates had a negative impact of SEK 5 million in the quarter.
Operating profit for the third quarter of 2020 amounted to SEK 177 million (190) and includes items affecting comparability of SEK –26 million (–). Items affecting comparability in the quarter refers to restructuring costs related to the organizational changes in the Swedish operations and costs for the ongoing acquisition of Aluminium Konin. For further information see Note 5.
During the period January–September 2020, adjusted operating profit amounted to SEK 455 million (721), while adjusted operating profit per tonne was 1.8 kSEK (2.7). Adjusted operating margin reached 5.8 per cent (7.8). The net effect of changes in foreign exchange rates was positive and amounted to SEK 44 million in the period.
Operating profit during January–September 2020 amounted to SEK 417 million (721) and includes items affecting comparability of SEK –37 million (–). 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 third quarter of 2020 amounted to SEK 154 million (154). Finance income and costs was SEK –24 million (–36) and includes interest expenses and financing costs of SEK 25 million and interest income of SEK 1 million. Income tax for the third quarter of 2020 was SEK –30 million (44) which corresponds to an effective tax rate of 19 per cent. Income tax in the third quarter 2019 was positively impacted by a released provision and retroactive adjustment of income tax in China. The profit for the period was SEK 124 million (198) during the third quarter of 2020 and diluted earnings per share amounted to SEK 1.64 (2.62).
During the period January–September 2020 profit before taxes amounted to SEK 323 million (608). In the period, finance income and costs was SEK –95 million (–115) and includes interest expenses of SEK 102 million and interest income of SEK 7 million. Income tax for the period January–September 2020 was SEK –66 million (–55) which corresponds to an effective tax rate of 21 per cent (9). The profit for the period was SEK 257 million (553) and diluted earnings per share was SEK 3.40 (7.32).
CASH FLOW
Cash flow from operating activities amounted to SEK 426 million (564) in the third quarter of 2020. This was driven by working capital reductions following a continued high focus on working capital control and a positive effect from increased accounts payable due to improved payment terms with suppliers. Cash flow from investing activities amounted to SEK –78 million (–409) in the quarter. Of this, SEK 61 million relates to capital expenditure and SEK 17 million to a negative effect from realized currency hedges connected to the ongoing acquisition of Aluminium Konin. Of the total capital expenditure, SEK 45 million refers to investments to maintain and improve efficiency in current production facilities and SEK 15 million refers 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 380 million (442).
Cash flow from financing activities was SEK –391 million (21) in the third quarter of 2020 and includes new loans of SEK 670 million and repayment of loans of SEK –1,041 million. Net financing from commercial papers was SEK –70 million in the quarter.
During January–September 2020, cash flow from operating activities was SEK 1,096 million (1,152). Cash flow from investing activities amounted to SEK –401 million (–1,368) in the period. Of this, SEK 352 million relates to capital expenditure and SEK 49 million to a negative effect from realized currency hedges connected to the acquisition of Aluminium Konin. Of the total capital expenditure, SEK 148 million refers to investments to maintain and improve efficiency in current production facilities and SEK 204 million refers to investments related to the expansion of the production facilities in the US and Sweden. During January–September 2020 cash flow before financing adjusted for expansion investments and acquisitions amounted to SEK 948 million (857).
Cash flow from financing activities was SEK –478 million (509) and includes new loans of SEK 2,589 million and repayment of loans of SEK –2,963 million.
Cash and cash equivalents amounted to SEK 923 million at 30 September 2020 (SEK 747 million 31 December 2019).
FINANCIAL POSITION
Gränges' total assets amounted to SEK 10,155 million at 30 September 2020 (SEK 10,480 million at 31 December 2019). The equity to assets ratio was 43.7 per cent at 30 September 2020 (41.2 per cent at 31 December 2019).
Consolidated net debt including pension and lease liabilities was SEK 2,812 million at 30 September 2020 (SEK 3,465 million at 31 December 2019), corresponding to 2.5 times adjusted EBITDA (2.6 times at 31 December 2019).
EMPLOYEES
The average number of employees was 1,629 (1,813) in the third quarter of 2020 and 1,623 (1,812) during the period January–September 2020. Implemented temporary layoffs and reduced working hours have decreased average number of employees as of the second quarter of 2020.
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 period January–September 2020, net sales in the parent company was SEK 132 million (141) and the result for the period was SEK –45 million (–47).
SIGNIFICANT EVENTS DURING THE PERIOD Gränges' acquisition of Aluminium Konin approved by the EU Commission
In September, Gränges' acquisition of the Polish flat rolled aluminium producer Aluminium Konin was approved by the EU Commission. The acquisition is thereby approved by all relevant competition authorities.
Gränges completes acquisition of GETEK GmbH and creates the new business unit Gränges Powder Metallurgy
In September, Gränges signed an agreement to acquire the remaining 49 per cent of the shares in GETEK GmbH as well as the business Dispal® for EUR 8.5 million from Erbslöh Aluminium GmbH.
On 1 October the acquisition of GETEK GmbH was closed, and in connection with that the name of the company was changed to Gränges Powder Metallurgy GmbH. The acquired business constitutes a new business unit within Gränges, focusing on advanced aluminium powder and spray forming technology. The new business unit creates opportunities for growth in new materials technology in the fast-growing market for powder materials and additive manufacturing, also known as industrial 3D printing. The acquisition of the Dispal® business will be completed on 1 January 2021.
Gränges improves efficiency and adapts European operations
As part of improving efficiency and adapting Gränges Europe's operations to current market conditions, a decision was made in August on organizational changes in the Swedish operations. In connection with the reorganization, a notice of redundancy was announced that will affect 75 positions in total, whereof 50 positions within the blue-collar organization and 25 within the white-collar organization in Sweden.
Gränges has initiated cooperation with Alcoa to reduce climate impact
In July, Gränges reached an agreement with Alcoa to source ECOLUMTM rolling slabs, part of Alcoa's SUSTANATM line of lowcarbon products, which are produced at hydroelectric-powered aluminium smelters and guarantee no more than 4.0 tonnes CO2 e per tonne aluminium, including emissions from bauxite mining and alumina refining, which gives a significantly lower carbon footprint than the industry average. The cooperation reinforces Gränges' climate strategy and focus to collaborate along the value chain to reduce climate impact.
SIGNIFICANT EVENTS AFTER THE PERIOD
Gränges and Boryszew have agreed on a new structure regarding the payment of the purchase price for Aluminium Konin
In October, Gränges and Boryszew S.A., the seller of Aluminium Konin, signed an agreement on a new structure regarding the payment of the purchase price for the acquisition of Aluminium Konin:
- A part of the purchase price payment will consist of a non-cash issue of shares in Gränges AB to the seller, Boryszew S.A.. The non-cash issue will amount to about 10 per cent of the Enterprise Value (approximately SEK 2.2 billion or PLN 938 million on a cash and debt free basis), corresponding to about SEK 200 million. The price per share and the number of shares will be determined on market terms.
- Boryszew has committed to subscribe for its share of Gränges' planned rights issue and to retain the shares for at least 6 months after the completion of the transaction.
Gränges' intended rights issue of approximately SEK 2 billion will be reduced by the size of the non-cash issue.
Gränges announced that third quarter sales volume and operating profit were expected to be above market expectations
In October, Gränges communicated that the third quarter sales volume and operating profit were exptected to be above market expectations. The operating profit in the third quarter has been positively impacted by stronger market demand and increased effects from cost reduction initiatives.
No other 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 9,833 at 30 September 2020, according to Euroclear.
Largest shareholders in Gränges at 30 September 2020¹
| Number of | Share of capital | |
|---|---|---|
| Shareholder | shares | and votes % |
| Fourth Sw. National Pension Fund | 7,233,994 | 9.6 |
| AFA Insurance | 6,866,585 | 9.1 |
| Handelsbanken Funds | 5,679,595 | 7.5 |
| Swedbank Robur Funds | 4,809,903 | 6.4 |
| Franklin Templeton | 3,567,641 | 4.7 |
| Dimensional Fund Advisors | 3,188,034 | 4.2 |
| Allianz Global Investors | 2,866,950 | 3.8 |
| Paradice Investment Management | 2,606,605 | 3.5 |
| Columbia Threadneedle | 1,944,590 | 2.6 |
| Fidelity Investments (FMR) | 1,908,851 | 2.5 |
| Total 10 largest shareholders | 40,672,748 | 53.9 |
| Other | 34,844,638 | 46.1 |
| Total | 75,517,386 | 100.0 |
¹ Source: Modular Finance.
OTHER
Nomination Committee appointed
The Nomination Committee for Gränges' Annual General Meeting 2021 has been appointed. The committee consists of representatives from Gränges' three largest shareholders as of 31 August 2020 and the Chairman of the Board, Fredrik Arp. The Fourth Swedish National Pension Fund (AP4) is represented by Jannis Kitsakis, AFA Insurance by Anders Algotsson and Handelsbanken Funds by Niklas Johansson. The Chairman of the Nomination Committee is Jannis Kitsakis.
Annual General Meeting 2021
Gränges' 2021 Annual General Meeting will be held on Thursday 6 May 2021 at 16.00 CEST at Näringslivets Hus, Stockholm. Shareholders who wish to have a matter considered at the Annual General Meeting should normally submit such requests seven weeks before the meeting at the latest.
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 32–35 in Gränges' 2019 annual report.
A new business risk during 2020 is the spread of COVID-19. Gränges considers that the risk management described in the annual report 2019 essentially covers the market risks that may arise as a result of the coronavirus. Regarding the risk for in creased sick leave and difficulties in managing the Group effectively in the event of key employees being ill, contingency plans have been established and remote access to business-critical systems have been secured.
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, 22 October 2020
Johan Menckel Chief Executive Officer
REVIEW REPORT
Gränges AB, corporate identity number 556001-6122
Introduction
We have reviewed the condensed interim report for Gränges AB as at September 30, 2020 and for the nine months period then ended. The Board of Directors and the Managing Director are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.
Scope of review
We conducted our review in accordance with the International Standard on Review Engagements, ISRE 2410. Review of Interim Financial Statements Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act regarding the Group, and in accordance with the Swedish Annual Accounts Act regarding the Parent Company.
Stockholm, 22 October 2020 Ernst & Young AB
Erik Sandström Authorized Public Accountant
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 22 October, 2020 at 07.30 CEST.
Webcasted telephone conference
CEO Johan Menckel and CFO Oskar Hellström will present Gränges' interim report for January–September 2020 at a webcasted conference call at 10.00 CEST, Thursday 22 October, 2020.
The webcast is available on www.granges.com/investors. To participate in the conference call, please call +46 8 5664 2651 (Sweden), +44 3333 000 804 (United Kingdom) or +1 631 913 1422 (United States). PIN code: 69788601#. Please call a few minutes before the conference call starts. The presentation will be in English.
Financial calendar
28 January, 2021 Year-end Report 2020 22 April, 2021 Interim Report January–March 2021 6 May, 2021 Annual General Meeting 2021 16 July, 2021 Half-year Report 2021
CONSOLIDATED INCOME STATEMENT (CONDENSED)
| SEK million | Note | Jul–Sep 2020 |
Jul–Sep 2019 |
Jan–Sep 2020 |
Jan–Sep 2019 |
Jan–Dec 2019 |
|---|---|---|---|---|---|---|
| Net sales | 2 | 2,575 | 2,998 | 7,858 | 9,295 | 11,978 |
| Cost of materials | –1,561 | –1,918 | –4,796 | –5,911 | –7,620 | |
| Payroll and other operating expenses | –682 | –776 | –2,203 | –2,327 | –3,031 | |
| Depreciation, amortization and impairment charges | –129 | –115 | –404 | –336 | –461 | |
| Items affecting comparability | 5 | –26 | – | –37 | – | –30 |
| Operating profit | 177 | 190 | 417 | 721 | 836 | |
| Profit or loss from joint ventures | 4 | 1 | 1 | 1 | 1 | 1 |
| Finance income and costs | –24 | –36 | –95 | –115 | –152 | |
| Profit before tax | 154 | 154 | 323 | 608 | 686 | |
| Income tax | 6 | –30 | 44 | –66 | –55 | –86 |
| Profit for the period | 124 | 198 | 257 | 553 | 600 | |
| Profit for the period attributable to | ||||||
| – owners of the parent | 124 | 198 | 257 | 553 | 600 | |
| – non-controlling interests | – | – | – | – | – | |
| Earnings per share | ||||||
| Earnings per share basic, SEK | 1.64 | 2.62 | 3.40 | 7.32 | 7.95 | |
| Earnings per share diluted, SEK | 1.64 | 2.62 | 3.40 | 7.32 | 7.95 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (CONDENSED)
| SEK million | Jul–Sep 2020 |
Jul–Sep 2019 |
Jan–Sep 2020 |
Jan–Sep 2019 |
Jan–Dec 2019 |
|---|---|---|---|---|---|
| Profit for the period | 124 | 198 | 257 | 553 | 600 |
| Items not to be reclassified to profit/loss in subsequent periods | |||||
| Remeasurement of pensions after tax | 1 | 0 | –18 | –23 | –31 |
| Items to be reclassified to profit/loss in subsequent periods | |||||
| Change in hedging reserve after tax | 0 | –10 | –32 | –5 | 22 |
| Translation effects | –56 | 117 | –78 | 226 | 91 |
| Comprehensive income for the period attributable | |||||
| to owners of the parent company | 68 | 305 | 128 | 750 | 682 |
CONSOLIDATED BALANCE SHEET (CONDENSED)
| SEK million | Note | 30 Sep 2020 | 30 Sep 2019 | 31 Dec 2019 |
|---|---|---|---|---|
| ASSETS | ||||
| Intangible assets | 822 | 897 | 874 | |
| Property, plant and equipment | 4,954 | 5,178 | 5,101 | |
| Deferred tax assets | 28 | 54 | 28 | |
| Investments in joint ventures | 4 | 13 | 12 | 12 |
| Interest-bearing receivables | 2 | 2 | 2 | |
| Other non-current receivables | 3 | 6 | 10 | 8 |
| Non-current assets | 5,825 | 6,153 | 6,025 | |
| Inventories | 1,606 | 1,948 | 1,957 | |
| Receivables | 3 | 1,770 | 1,887 | 1,748 |
| Interest-bearing receivables | 3 | 32 | – | 3 |
| Cash and cash equivalents | 923 | 775 | 747 | |
| Current assets | 4,330 | 4,609 | 4,455 | |
| TOTAL ASSETS | 10,155 | 10,762 | 10,480 | |
| EQUITY AND LIABILITIES | ||||
| Share capital | 101 | 101 | 101 | |
| Retained earnings | 4,341 | 4,281 | 4,213 | |
| Equity | 4,442 | 4,382 | 4,314 | |
| Interest-bearing liabilities | 3 | 2,332 | 2,785 | 2,901 |
| Provisions and other non-current liabilities | 3 | 573 | 495 | 513 |
| Non-current liabilities | 2,905 | 3,280 | 3,414 | |
| Interest-bearing liabilities | 3 | 1,045 | 1,233 | 953 |
| Provisions and other current liabilities | 3 | 1,763 | 1,867 | 1,799 |
| Current liabilities | 2,808 | 3,100 | 2,752 | |
| TOTAL EQUITY AND LIABILITIES | 10,155 | 10,762 | 10,480 |
CONSOLIDATED CHANGES IN EQUITY (CONDENSED)
| SEK million | 30 Sep 2020 | 30 Sep 2019 | 31 Dec 2019 |
|---|---|---|---|
| Opening balance | 4,314 | 3,873 | 3,873 |
| Profit for the period | 257 | 553 | 600 |
| Other comprehensive income for the period | –129 | 197 | 82 |
| Total comprehensive income for the period | 128 | 750 | 682 |
| Dividend | – | –242 | –242 |
| Total transactions with owners | – | –242 | –242 |
| Closing balance | 4,442 | 4,382 | 4,314 |
CONSOLIDATED STATEMENT OF CASH FLOWS
| SEK million | Note | Jul–Sep 2020 |
Jul–Sep 2019 |
Jan–Sep 2020 |
Jan–Sep 2019 |
Jan–Dec 2019 |
|---|---|---|---|---|---|---|
| Operating profit | 177 | 190 | 417 | 721 | 836 | |
| Depreciation, amortization and impairment charges | 129 | 115 | 404 | 336 | 461 | |
| Other non-cash items | 5 | 25 | – | 25 | – | – |
| Change in working capital etc. | 105 | 259 | 279 | 153 | 236 | |
| Income taxes paid | –10 | –1 | –29 | –58 | –92 | |
| Cash flow from operating activities | 426 | 564 | 1,096 | 1,152 | 1,441 | |
| Investments in property, plant, equipment and intangible assets | –61 | –409 | –352 | –1,368 | –1,590 | |
| Other capital transactions | –17 | – | –49 | – | – | |
| Cash flow from investing activities | –78 | –409 | –401 | –1,368 | –1,590 | |
| Cash flow before financing activities | 348 | 155 | 695 | –216 | –148 | |
| Dividend | – | – | – | –242 | –242 | |
| Interest paid and received | –20 | –41 | –105 | –101 | –137 | |
| New loans | 670 | 1,036 | 2,589 | 3,960 | 5,546 | |
| Repayment of loans | –1,041 | –974 | –2,963 | –3,108 | –4,727 | |
| Cash flow from financing activities | –391 | 21 | –478 | 509 | 440 | |
| Cash flow for the period | –43 | 176 | 217 | 293 | 292 | |
| Cash and cash equivalents at beginning of period | 987 | 581 | 747 | 457 | 457 | |
| Cash flow for the period | –43 | 176 | 217 | 293 | 292 | |
| Exchange rate differences in cash and cash equivalents | –21 | 17 | –41 | 25 | –2 | |
| Cash and cash equivalents at end of period | 923 | 775 | 923 | 775 | 747 |
PARENT COMPANY INCOME STATEMENT (CONDENSED)
| SEK million | Jul–Sep 2020 |
Jul–Sep 2019 |
Jan–Sep 2020 |
Jan–Sep 2019 |
Jan–Dec 2019 |
|---|---|---|---|---|---|
| Net sales | 41 | 43 | 132 | 141 | 187 |
| Payroll and other operating expenses | –47 | –55 | –172 | –189 | –256 |
| Depreciation, amortization and impairment charges | –5 | –5 | –16 | –14 | –20 |
| Operating profit/loss | –11 | –18 | –56 | –62 | –88 |
| Dividends from subsidiaries | – | – | – | – | 335 |
| Finance income and costs | –1 | 4 | 2 | 6 | 7 |
| Profit/loss after financial items | –12 | –14 | –54 | –56 | 254 |
| Appropriations | – | – | – | – | 97 |
| Income tax | 2 | 1 | 9 | 9 | –16 |
| Profit/loss for the period | –11 | –14 | –45 | –47 | 335 |
PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME (CONDENSED)
| SEK million | Jul–Sep 2020 |
Jul–Sep 2019 |
Jan–Sep 2020 |
Jan–Sep 2019 |
Jan–Dec 2019 |
|---|---|---|---|---|---|
| Profit for the period | –11 | –14 | –45 | –47 | 335 |
| Items to be reclassified to profit/loss in subsequent periods | |||||
| Change in hedging reserve after tax | -9 | – | –41 | – | –1 |
| Comprehensive income for the period attributable to owners of the parent | |||||
| company | –19 | –14 | –87 | –47 | 334 |
PARENT COMPANY BALANCE SHEET (CONDENSED)
| SEK million | 30 Sep 2020 | 30 Sep 2019 | 31 Dec 2019 |
|---|---|---|---|
| ASSETS | |||
| Intangible assets | 35 | 41 | 40 |
| Property, plant and equipment | 181 | 198 | 192 |
| Shares in Group companies | 1,160 | 1,160 | 1,160 |
| Receivables from Group companies | 1,905 | 2,053 | 2,102 |
| Other non-current receivables | 14 | 20 | 3 |
| Non-current assets | 3,295 | 3,472 | 3,497 |
| Receivables from Group companies | 173 | 102 | 164 |
| Other receivables | 86 | 50 | 47 |
| Cash and cash equivalents | 77 | 72 | 190 |
| Current assets | 336 | 224 | 402 |
| TOTAL ASSETS | 3,631 | 3,696 | 3,899 |
| EQUITY AND LIABILITIES | |||
| Restricted equity | 110 | 110 | 111 |
| Non-restricted equity | 1,503 | 1,207 | 1,589 |
| Equity | 1,613 | 1,318 | 1,699 |
| Untaxed reserves | 30 | 37 | 30 |
| Interest-bearing liabilities | 721 | 920 | 1,065 |
| Provisions and other non-current liabilities | 20 | 31 | 32 |
| Non-current liabilities | 742 | 951 | 1,097 |
| Liabilities to Group companies | 217 | 144 | 75 |
| Interest-bearing liabilities | 930 | 1,114 | 901 |
| Provisions and other current liabilities | 99 | 132 | 96 |
| Current liabilities | 1,246 | 1,389 | 1,072 |
| TOTAL EQUITY AND LIABILITIES | 3,631 | 3,696 | 3,899 |
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) 2019. 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. New standards, amendments and interpretations effective from 1 January 2020 or later have not had any material impact on this financial report.
The COVID-19 pandemic has increased the economic uncertainty and the impact on Gränges and measures taken are described in the comments by the CEO, and in the description of the financial development on pages 4–6. Government grants of SEK 10 million related to financial support in connection with COVID-19 have reduced personnel and other operating expenses during the third quarter 2020. Corresponding amount for the period January–September 2020 amounts to SEK 25 million. In addition Gränges has used the opportunity to defer payments of SEK 59 million for social security contributions, whereof SEK 46 million is due for payment during the fourth quarter 2020 and the remaining SEK 11 million during 2021. Apart from the company's updated risk assessment described on page 8, Gränges management asses that there are no additional significant uncertainties or judgements due to COVID-19 that have materially impacted the financial information in this interim report.
The interim information on pages 2–16 is an integrated part of these 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' net sales by geographical region and by market divided by type of revenue.
| SEK million | Jul–Sep 2020 |
Jul–Sep 2019 |
Jan–Sep 2020 |
Jan–Sep 2019 |
Jan–Dec 2019 |
|---|---|---|---|---|---|
| Net sales by region | |||||
| Asia | 526 | 617 | 1,599 | 2,021 | 2,736 |
| Europe | 327 | 532 | 1,101 | 1,633 | 2,074 |
| Americas | 1,717 | 1,845 | 5,146 | 5,626 | 7,150 |
| Total revenue from contracts with customers | 2,570 | 2,994 | 7,846 | 9,281 | 11,960 |
| Other revenue | 4 | 5 | 13 | 15 | 18 |
| Net sales | 2,575 | 2,998 | 7,858 | 9,295 | 11,978 |
| SEK million | Jul–Sep 2020 |
Jul–Sep 2019 |
Jan–Sep 2020 |
Jan–Sep 2019 |
Jan–Dec 2019 |
|---|---|---|---|---|---|
| Net sales by market | |||||
| Automotive | |||||
| Fabrication revenue | 544 | 709 | 1,653 | 2,272 | 2,925 |
| Raw material and other revenue | 595 | 794 | 1,786 | 2,486 | 3,267 |
| Total | 1,139 | 1,503 | 3,439 | 4,758 | 6,192 |
| HVAC & Other | |||||
| Fabrication revenue | 590 | 540 | 1,791 | 1,620 | 2,074 |
| Raw material and other revenue | 841 | 951 | 2,616 | 2,903 | 3,694 |
| Total | 1,432 | 1,491 | 4,407 | 4,523 | 5,768 |
| Total revenue from contracts with customers | 2,570 | 2,994 | 7,846 | 9,281 | 11,960 |
| Other revenue | 4 | 5 | 13 | 15 | 18 |
| Net sales | 2,575 | 2,998 | 7,858 | 9,295 | 11,978 |
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, aluminium futures and interest rate swaps) included in the balance sheet.
| SEK million | 30 Sep 2020 | 30 Sep 2019 | 31 Dec 2019 |
|---|---|---|---|
| Non-current assets | 1 | – | 3 |
| Current assets | 78 | 45 | 37 |
| Non-current liabilities | 1 | 84 | 38 |
| Current liabilities | 57 | 99 | 45 |
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 30 September 2020. Gränges' revolving credit facilities amounted to SEK 2,450 million, whereof SEK 315 million was utilized. Interest-bearing liabilities also include corporate bonds of SEK 600 million, issued under Gränges' MTN programme, and commercial papers of SEK 619 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 September 30, 2020, is subject to extension options and had an initial maximum tenor of 18 months and is finally due 27 May 2021.
| SEK million | Limit/Program amount |
< 1 | 1–2 | > 2 | Total |
|---|---|---|---|---|---|
| Term loans | |||||
| SEK | – | 200 | – | 200 | |
| USD | – | – | 1,351 | 1,351 | |
| Bonds in MTN programme | 3,000 | 300 | 300 | – | 600 |
| Commercial papers | 1,500 | 619 | – | – | 619 |
| Revolving Credit Facilities | 2,450 | – | 315 | – | 315 |
| Lease liabilities | 49 | 40 | 133 | 222 | |
| Other interest-bearing liabilities | 77 | –1 | –6 | 70 | |
| Total interest-bearing liabilities | 1,045 | 854 | 1,478 | 3,377 |
Interest-bearing liabilities are measured at amortized cost and the carrying amount as of 30 September 2020 was SEK 3,377 million (SEK 3,853 million as of 31 December 2019). The fair value of interest-bearing liabilities amounted to SEK 3,384 million as of 30 September 2020 (SEK 3,864 million as of 31 December 2019). 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 2019 Annual Report. During the period there have been no significant transactions with related parties.
NOTE 5 ITEMS AFFECTING COMPARABILITY
| SEK million | Financial statement line | Jul–Sep 2020 |
Jul–Sep 2019 |
Jan–Sep 2020 |
Jan–Sep 2019 |
Jan–Dec 2019 |
|---|---|---|---|---|---|---|
| Restructuring costs | Items affecting comparability | –25 | – | –25 | – | –14 |
| M&A costs | Items affecting comparability | –1 | – | –12 | – | –16 |
| Items affecting comparability | –26 | – | –37 | – | –30 |
As part of improving efficiency and adapting Gränges Europe's operations to current market conditions, a decision was made in August on organizational changes in the Swedish operations. In connection with the reorganization, a notice of redundancy was announced that will affect 75 positions in total, whereof 50 positions within the blue-collar organization and 25 within the white-collar organization in Sweden. The cost for the restructuring amounted to SEK 25 million for the third quarter 2020 and has not impacted Gränges´ cash flow.
During the fourth quarter 2019 Gränges announced the acquisition of Aluminium Konin, a Polish flat rolled aluminium producer. The transaction is expected to be closed during the fourth quarter 2020 and the costs for the ongoing acquisition of Aluminium Konin amount to SEK 1 million during the third quarter 2020 and to SEK 12 million for the period January–September 2020.
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 2020 and therefore applies a tax rate of 15 per cent for the Chinese operation.
NOTE 7 ACQUISITIONS
On 17 September 2020 it was announced that Gränges' would acquire the remaining 49 per cent of the shares in GETEK GmbH as well as the business Dispal®, including production assets, intellectual properties and trademark Dispal®, for EUR 8.5 million from Erbslöh Aluminium GmbH. The name of the company will be changed to Gränges Powder Metallurgy GmbH and the focus will be on advanced aluminium powder and spray forming technology. GETEK GmbH has been jointly owned by Gränges (51 per cent) and Erbslöh (49 per cent) since 2017 and classified as a joint operation. Gränges has recognized its direct right to jointly owned assets, liabilities, revenues and expenses in the financial statements since 2017. The acquisition of the remaining 49 per cent shares in GETEK GmbH was done 1 October and the Dispal business will be acquired 1 January 2021. The acquisition will be consolidated gradually from 1 October 2020.
| Preliminary purchase price allocation Gränges Powder Metallurgy | EUR million | SEK million |
|---|---|---|
| Non-current assets | 6.3 | 66 |
| Current assets, excluding cash | 2.0 | 21 |
| Cash | 0.1 | 1 |
| Non-current liabilities | 0.3 | 3 |
| Current liabilities | 1.0 | 11 |
| Net identifiable assets and liabilities | 6.9 | 73 |
| Goodwill | 6.2 | 61 |
| Purchase price | 8.5 | 89 |
| Investment in joint operation | 4.6 | 44 |
The purchase price allocation of Gränges Powder Metallurgy is still preliminary. No purchase price was paid per 30 September 2020. The acquisition has not led to any substantial transaction costs for Gränges. Goodwill is mainly justified by the advanced aluminium powder and spray forming technology.
CONSOLIDATED QUARTERLY DATA
| 2020 | 2019 | |||||||
|---|---|---|---|---|---|---|---|---|
| SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | 2018 Q4 |
| Sales volume, ktonnes | 86.7 | 70.8 | 89.9 | 77.9 | 85.8 | 92.9 | 90.8 | 87.4 |
| Income statement | ||||||||
| Net sales | 2,575 | 2,221 | 3,063 | 2,682 | 2,998 | 3,188 | 3,109 | 3,074 |
| Adjusted EBITDA1 | 332 | 182 | 345 | 269 | 305 | 370 | 382 | 283 |
| Adjusted operating profit1 | 203 | 42 | 210 | 144 | 190 | 257 | 275 | 191 |
| Operating profit | 177 | 37 | 204 | 115 | 190 | 257 | 275 | 191 |
| Profit for the period | 124 | 1 | 133 | 47 | 198 | 171 | 184 | 149 |
| Adjusted EBITDA margin, % | 12.9 | 8.2 | 11.3 | 10.0 | 10.2 | 11.6 | 12.3 | 9.2 |
| Adjusted operating margin, % | 7.9 | 1.9 | 6.9 | 5.4 | 6.3 | 8.1 | 8.8 | 6.2 |
| Adjusted operating profit per tonne, kSEK | 2.3 | 0.6 | 2.3 | 1.9 | 2.2 | 2.8 | 3.0 | 2.2 |
| Operating margin, % | 6.9 | 1.7 | 6.6 | 4.3 | 6.3 | 8.1 | 8.8 | 6.2 |
| Net margin, % | 4.8 | 0.0 | 4.3 | 1.8 | 6.6 | 5.4 | 5.9 | 4.8 |
| Balance sheet | ||||||||
| Non–current assets | 5,825 | 6,047 | 6,491 | 6,025 | 6,153 | 5,633 | 5,260 | 4,489 |
| Current assets | 4,330 | 4,156 | 5,121 | 4,455 | 4,609 | 4,508 | 4,516 | 4,285 |
| Equity | 4,442 | 4,374 | 4,663 | 4,314 | 4,382 | 4,077 | 4,227 | 3,873 |
| Non–current liabilities | 2,905 | 3,719 | 3,910 | 3,414 | 3,280 | 3,055 | 2,840 | 2,522 |
| Current liabilities | 2,808 | 2,109 | 3,038 | 2,752 | 3,100 | 3,009 | 2,709 | 2,378 |
| Cash flow | ||||||||
| Operating activities | 426 | 283 | 387 | 289 | 564 | 310 | 278 | 450 |
| Investing activities | –78 | –117 | –207 | –221 | –409 | –508 | –451 | –316 |
| Before financing activities | 348 | 166 | 181 | 68 | 155 | –198 | –173 | 133 |
| Financing activities | –391 | –312 | 225 | –69 | 21 | 302 | 185 | –339 |
| Cash flow for the period | –43 | –146 | 406 | –1 | 176 | 104 | 12 | –206 |
| Capital structure | ||||||||
| Net debt | 2,812 | 3,247 | 3,559 | 3,465 | 3,606 | 3,560 | 3,057 | 2,494 |
| Equity to assets, % | 43.7 | 42.9 | 40.2 | 41.2 | 40.7 | 40.2 | 43.2 | 44.2 |
| Data per share, SEK | ||||||||
| Earnings per share basic | 1.64 | 0.01 | 1.76 | 0.63 | 2.62 | 2.26 | 2.44 | 1.97 |
| Earnings per share diluted | 1.64 | 0.01 | 1.76 | 0.63 | 2.62 | 2.26 | 2.44 | 1.97 |
| Equity2 | 58.82 | 57.93 | 61.75 | 57.13 | 58.02 | 53.99 | 55.97 | 51.29 |
| Cash flow from operating activities2 | 5.64 | 3.75 | 5.13 | 3.83 | 7.47 | 4.11 | 3.68 | 5.95 |
| Share price at the end of the period | 80.15 | 73.75 | 49.20 | 98.95 | 100.50 | 106.40 | 95.70 | 80.50 |
| 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
| 2020 | 2019 | |||||||
|---|---|---|---|---|---|---|---|---|
| SEK million | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 |
| Sales volume by region, ktonnes | ||||||||
| Asia | 16.8 | 15.1 | 16.7 | 20.4 | 17.7 | 21.0 | 20.0 | 19.9 |
| Europe | 10.3 | 8.6 | 13.7 | 11.5 | 14.1 | 16.1 | 16.5 | 15.3 |
| Americas | 59.6 | 47.1 | 59.5 | 46.0 | 54.0 | 55.8 | 54.4 | 52.2 |
| Total | 86.7 | 70.8 | 89.9 | 77.9 | 85.8 | 92.9 | 90.8 | 87.4 |
| Net sales by region | ||||||||
| Asia | 526 | 486 | 587 | 714 | 617 | 717 | 687 | 694 |
| Europe | 331 | 310 | 473 | 443 | 537 | 522 | 589 | 582 |
| Americas | 1,717 | 1,425 | 2,004 | 1,524 | 1,845 | 1,949 | 1,832 | 1,799 |
| Total | 2,575 | 2,221 | 3,063 | 2,682 | 2,998 | 3,188 | 3,109 | 3,074 |
| Employees | ||||||||
| Average number of employees | 1,629 | 1,489 | 1,751 | 1,781 | 1,813 | 1,814 | 1,810 | 1,777 |
CONSOLIDATED 12-MONTHS ROLLING DATA
| SEK million | Oct 2019 – Sep 2020 |
Jul 2019 – Jun 2020 |
Apr 2019 – Mar 2019 |
Jan 2019 – Dec 2019 |
Oct 2018 – Sep 2019 |
Jul 2018 – Jun 2019 |
Apr 2018 – Mar 2019 |
Jan 2018 – Dec 2018 |
|---|---|---|---|---|---|---|---|---|
| Sales volume, ktonnes | 325.2 | 324.3 | 346.4 | 347.3 | 356.9 | 364.5 | 370.8 | 375.0 |
| Income statement | ||||||||
| Net sales | 10,541 | 10,964 | 11,932 | 11,978 | 12,370 | 12,693 | 12,947 | 12,910 |
| Adjusted EBITDA1 | 1,129 | 1,101 | 1,289 | 1,327 | 1,341 | 1,356 | 1,376 | 1,357 |
| Adjusted operating profit1 | 599 | 586 | 801 | 866 | 913 | 953 | 997 | 1,005 |
| Operating profit | 532 | 545 | 765 | 836 | 913 | 953 | 997 | 940 |
| Adjusted EBITDA margin, % | 10.7 | 10.0 | 10.8 | 11.1 | 10.8 | 10.7 | 10.6 | 10.5 |
| Adjusted operating margin, % | 5.7 | 5.3 | 6.7 | 7.2 | 7.4 | 7.5 | 7.7 | 7.8 |
| Adjusted operating profit per tonne, kSEK | 1.8 | 1.8 | 2.3 | 2.5 | 2.6 | 2.6 | 2.7 | 2.7 |
| Operating margin, % | 5.0 | 5.0 | 6.4 | 7.0 | 7.4 | 7.5 | 7.7 | 7.3 |
Capital structure and return indicators
| Capital employed | 7,773 | 7,849 | 7,782 | 7,411 | 7,109 | 6,769 | 6,432 | 6,098 |
|---|---|---|---|---|---|---|---|---|
| Return on capital employed, % | 7.7 | 7.5 | 10.3 | 11.7 | 12.8 | 14.1 | 15.5 | 16.5 |
| Equity | 4,435 | 4,362 | 4,333 | 4,175 | 4,053 | 3,909 | 3,814 | 3,633 |
| Return on equity, % | 6.9 | 8.7 | 12.7 | 14.4 | 17.3 | 16.9 | 18.5 | 18.9 |
| Net debt / Adjusted EBITDA | 2.5 | 2.9 | 2.8 | 2.6 | 2.7 | 2.6 | 2.2 | 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.
| Q3 | Jan – Sep | 12 months rolling |
Full year | |||
|---|---|---|---|---|---|---|
| Oct 2019 – | ||||||
| SEK million | 2020 | 2019 | 2020 | 2019 | Sep 2020 | 2019 |
| Adjusted operating profit | ||||||
| Operating profit | 177 | 190 | 417 | 721 | 532 | 836 |
| Items affecting comparability | 26 | – | 37 | – | 67 | 30 |
| Adjusted operating profit | 203 | 190 | 455 | 721 | 599 | 866 |
| Adjusted operating profit per tonne | ||||||
| Adjusted operating profit | 203 | 190 | 455 | 721 | 599 | 866 |
| Sales volume, ktonnes | 86.7 | 85.8 | 247.4 | 269.5 | 325.2 | 347.3 |
| Adjusted operating profit per tonne, kSEK | 2.3 | 2.2 | 1.8 | 2.7 | 1.8 | 2.5 |
| Adjusted EBITDA | ||||||
| Adjusted operating profit | 203 | 190 | 455 | 721 | 599 | 866 |
| Depreciation, amortization and impairment charges | 129 | 115 | 404 | 336 | 529 | 461 |
| Adjusted EBITDA | 332 | 305 | 859 | 1,058 | 1,129 | 1,327 |
| Return on capital employed | ||||||
| Total assets less cash and cash equivalents and interest–bearing | ||||||
| receivables, rolling 12 months average | – | – | – | – | 9,706 | 9,375 |
| Non-interest-bearing liabilities, rolling 12 months average | – | – | – | – | –2,311 | –2,311 |
| Pensions, rolling 12 months average | – | – | – | – | 378 | 348 |
| Capital employed | – | – | – | – | 7,773 | 7,411 |
| Adjusted operating profit | – | – | – | – | 599 | 866 |
| Return on capital employed, % | – | – | – | – | 7.7 | 11.7 |
| Net debt | ||||||
| Cash and cash equivalents and interest–bearing receivables | – | – | –957 | –777 | –9571 | –752 |
| Interest-bearing liabilities | – | – | 3,377 | 4,018 | 3,3771 | 3,853 |
| Pensions Net debt |
– – |
– – |
392 2,812 |
365 3,606 |
3921 2,8121 |
363 3,465 |
| Equity to assets Equity |
– | – | 4,442 | 4,382 | 4,4421 | 4,314 |
| Total assets | – | – | 10,155 | 10,762 | 10,1551 | 10,480 |
| Equity to assets, % | – | – | 43.7 | 40.7 | 43.71 | 41.2 |
| Adjusted cash flow before financing activities | ||||||
| Cash flow before financing activities | 348 | 155 | 695 | –216 | 763 | –148 |
| Cash flow from expansion investments | 15 | 287 | 204 | 980 | 327 | 1,103 |
| Cash flow from other non-maintenance investments | – | – | – | 93 | – | 93 |
| Cash flow from other capital transactions | 17 | – | 49 | – | 49 | – |
| Adjusted cash flow before financing activities | 380 | 442 | 948 | 857 | 1,139 | 1,048 |
| Cash conversion | ||||||
| Adjusted cash flow before financing activities | 380 | 442 | 948 | 857 | 1,139 | 1,048 |
| Adjusted operating profit | 203 | 190 | 455 | 721 | 599 | 866 |
| Cash conversion, % | 187 | 233 | 208 | 119 | 190 | 121 |
1 Closing balance at the end of the period.
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 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.