Quarterly Report • Oct 5, 2017
Quarterly Report
Open in ViewerOpens in native device viewer
January 1 – September 30, 2017
Annual average change as per September 30, 2017
| Total return | |||
|---|---|---|---|
| Net asset value* | Industrivärden C | Index (SIXRX) | |
| 9M:2017 | 18% | 25% | 12% |
| 1 year | 27% | 33% | 16% |
| 3 years | 16% | 22% | 13% |
| 5 years | 16% | 21% | 16% |
| 7 years | 11% | 16% | 12% |
| 10 years | 6% | 9% | 8% |
*Including reinvested dividend.
Distinct value creation in portfolio companies that have taken major change steps
Generally speaking the growth forecasts are favorable for the major economies, both this year and for 2018, although differences remain from region to region.
The recovery in Europe continues. The growth forecasts have strengthened, and the political risks have subsided somewhat. The uncertainty surrounding Brexit remains, however.
Growth in the U.S. economy is good, but the growth rate has been revised downwards. This is mainly due to expectations for further tightening in monetary policy and more modest stimuli than what were previously announced. Uncertainty surrounding the effects of Trump's policies is magnifying this sentiment.
In China, growth has stabilized at a slightly higher level. Several growth countries benefit from a weaker US dollar, which strengthened their competitiveness and stabilized the situation.
From a geopolitical perspective, there are number of hot spots, including the situation surrounding North Korea, which is creating uncertainty regionally as well as for the global economy.
All in all, a strong macroeconomic environment and continued favorable outlooks for companies have buttressed the favorable stock market growth, even though we have seen somewhat higher volatility since the half-year mark. From an overall perspective, low interest rates have set the stage for continued capital inflows to the stock market, which favors investments in equities.
In recent years several of our portfolio companies have carried out major changes designed to bolster their long-term competitiveness and enhance value creation. Against this background it is gratifying to see that several of these portfolio companies have had exceptional growth in value during the year. Sometimes it is necessary to take more sweeping actions, but perhaps what's most important is to work with continuous improvements.
One portfolio company that is going through an extensive change process is Volvo. As part of the company's stronger focus on organic growth and improved profitability, during the third quarter Volvo introduced new financial targets. Among these, the Volvo Group has set a new target for its operating margin, which shall exceed 10% measured over a business cycle.
I also want to mention something about our two "new" portfolio companies, Essity and SCA. In recent years the former SCA has performed very well, which has been reflected in its strong growth in value. The split of SCA into a hygiene and health company and a forest products company increase the scope for action and opportunities for value creation. These standalone companies are now working with greater focus on generating continued favorable growth. We believe that both Essity and SCA have good opportunities to create enhanced value creation.
Finally, a few words about Ericsson. The company works in an industry with tough competition and rapid technological development. Ericsson is now working on the implementation of its focused business strategy and has intensified its work on cutting costs and increasing efficiency.
Net asset value on September 30, 2017, was SEK 95.9 billion, or SEK 220 per share, representing an increase of 18% during the year, including reinvested dividend. At the end of the period, the portfolio's value was SEK 106.7 billion and net debt was SEK 10.7 billion, corresponding to a debt-equities ratio of 10%. This means that the debt-equities ratio has decreased by two percentage points since year-end.
The total return for the Class A and Class C shares was 23% and 25%, respectively, compared with 12% for the total return index (SIXRX).
Stockholm, October 5, 2017
Helena Stjernholm CEO
Industrivärden conducts long-term asset management that creates value through active ownership. The long-term goal is to increase net asset value and thereby generate a return for Industrivärden's shareholders that exceeds the market's required rate of return. Taking into account the risk profile of the portfolio's investments, the shareholders are to be given a total return which over time is higher than the average for the Stockholm Stock Exchange.
More information can be found on www.industrivarden.net.
| 9/30/2017 | 9M:2017 | |||||||
|---|---|---|---|---|---|---|---|---|
| Share of ownership, % |
Market value | Total return |
TR for the stock |
|||||
| Portfolio companies | No. of shares | Capital | Votes | Share of value, % |
SEK M SEK/share | SEK M | % | |
| Handelsbanken A | 194 923 948 | 10.0 | 10.2 | 22 | 23 956 | 55 | 258 | 1 |
| Volvo A | 142 154 571 | 6.7 | 21.8 | 21 | 22 247 | 51 | 7 589 | 50 |
| Sandvik | 147 584 257 | 11.8 | 11.8 | 19 | 20 736 | 48 | 4 511 | 27 |
| Essity A Essity B |
35 000 000 31 800 000 |
9.5 | 29.8 | 14 | 7 721 7 047 |
34 | 1 512 | 11 11 |
| ICA Gruppen | 20 625 000 | 10.3 | 10.3 | 6 | 6 313 | 15 | 807 | 14 |
| Skanska A Skanska B |
12 667 500 16 343 995 |
6.9 | 23.9 | 5 | 2 390 3 084 |
13 | -542 | -9 -9 |
| SCA A SCA B |
35 000 000 31 800 000 |
9.5 | 29.7 | 4 | 2 511 2 194 |
11 | 1 238 | 35 34 |
| SSAB A SSAB B |
63 105 972 54 633 318 |
11.4 | 18.2 | 4 | 2 476 1 766 |
10 | 487 | 13 12 |
| Ericsson A Ericsson B |
86 052 615 1 000 000 |
2.6 | 15.1 | 4 | 4 054 47 |
9 | -440 | -10 -11 |
| Other | 0 | 197 | 0 | 48 | ||||
| Equities portfolio | 100 | 106 740 | 245 | 15 468 | 16 | |||
| Interest-bearing net debt | -10 678 | -25 | Index: | 12 | ||||
| Adjustment regarding exchangeable bond | -182 | -0 | ||||||
| Net asset value | 95 881 | 220 | ||||||
| Debt-equities ratio | 10% |
The total return for Essity and SCA has been calculated as the respective company's share of the original company, SCA's, total return before the split (based on share of value at the time of division), and then based on the value development in each company. The split was carried out on June 9 and the first trading day in Essity was on June 15, 2017.
Net asset value on September 30, 2017, was SEK 95.9 billion, or SEK 220 per share, an increase during the first nine months of SEK 29 per share, corresponding to 15 % or by 18 % including reinvested dividend. The dividend payed out in 2017 amounted to SEK 5.25 per share. The total return index (SIXRX) increased by 12 % during the same period.
During the last five and ten-year period, net asset value grew by 16 % and 6 %, respectively, per year including reinvested dividend. The total return index (SIXRX) increased by 16 % and 8 %, respectively, during the same period.
During the first nine months 2017 the value of the equities portfolio increased by SEK 12.5 billion. On September 30, 2017 the equities portfolio amounted to SEK 106.7 billion, or SEK 245 per share. The shareholdings in Volvo, Sandvik, Essity and SCA made significant positive contributions to the equities portfolio's value performance.
During the last three-year period the shareholdings in Volvo, SCA, Sandvik and Essity have had higher total returns than the total return index (SIXRX) while the shareholdings in ICA Gruppen and Skanska have had a development in line with the total return index. The shareholdings in Handelsbanken, SSAB and Ericsson have had lower total returns than the total return index (SIXRX).
Investment activities
During the first nine months 2017 no purchases or sales were made in the portfolio companies.
On April 5, 2017 the Annual General Meeting of SCA decided to distribute all shares in Essity (formerly SCA Hygiene) to SCA's shareholders. The distribution to the shareholders was conducted in accordance with the Swedish "Lex Asea" rules, entailing that the distribution was exempt from taxation. One share of Class A in SCA carried entitlement to one share of Class A in Essity and one share of Class B in SCA carried entitlement to one share of Class B in Essity. The first day of trading was on June 15, 2017.
The Annual General Meeting on May 9, 2017 approved the Board of Directors' proposal of a dividend of SEK 5.25 per share (5.00). The total dividend payout amounted to SEK 2 285 M (2 162).
The management cost during the first nine months 2017 amounted to SEK 82 M (86), which on a yearly basis corresponded to 0.10 % of the equities portfolio's value on September 30, 2017.
| 9/30/2017 | 12/31/2016 | ||||
|---|---|---|---|---|---|
| SEK bn | SEK/share | SEK bn | SEK/share | ||
| Equities portfolio | 106.7 | 245 | 94.2 | 218 | |
| Interest-bearing net debt | -10.7 | -25 | -11.5 | -27 | |
| Adjustment exchangeable | -0.2 | -0 | - | - | |
| Net asset value | 95.9 | 220 | 82.8 | 191 |
| Annual average total return, % | |
|---|---|
| 3 years | |
| Volvo | 29 |
| SCA* | 28 |
| Sandvik | 23 |
| Essity* | 20 |
| ICA Gruppen | 13 |
| Skanska | 12 |
| Handelsbanken | 8 |
| SSAB | -6 |
| Ericsson | -16 |
| Total return index (SIXRX) | 12 |
*For calculation methodology see table at page 3.
Interest-bearing net debt amounted to SEK 10.7 billion on September 30, 2017. The debt-equities ratio was 10 %, and the equity ratio was 89 % (85). The debt-equities ratio is calculated as interest-bearing net debt in relation to the market value of the equities portfolio.
On September 30, 2017, interest-bearing liabilities had an average capital duration of approximately 2 years and carried an average interest rate of approximately 0.2 %. Current unutilized committed bank loans that can be used for refinancing needs amounts to SEK 2 billion.
No part of Industrivärden's borrowings is conditional on any covenants. Standard & Poor's credit ranking on Industrivärden's is A/Stable/A-1.
In 2014 a SEK 4.4 billion exchangeable bond was issued based on ICA Gruppen's stock. The bond matures in 2019 and was issued at a premium of approximately 38 % to ICA Gruppen's, share price at the time and carries no interest. The strike price amounted to SEK 293.86 per share as per September 30, 2017. In the event of a potential future exchange, there is a possibility to pay either with shares or with cash equivalents.
The six-year convertible bond worth EUR 550 M that was issued in January 2011 matured on February 27, 2017, whereby approximately 9 % of the convertible bond, corresponding to 50.9 MEUR, was converted to 2 868 606 new Class C shares.
The market prices for Industrivärden's Class A and C shares were SEK 217.40 and SEK 206.30 on September 30, 2017. At year-end 2016 the corresponding market prices were SEK 180.20 and SEK 169.80.
The total return for Industrivärden's Class A and C shares during the first nine months 2017 were 23 % and 25 %, respectively, compared with 12 % for the total return index (SIXRX). The total returns for Industrivärden's shares over longer periods of time are shown in the table on page 1.
At the 2011 Annual General Meeting, a share conversion clause was added to the Articles of Association. Shareholders have the right at any time to request conversion of Class A shares to Class C shares. During the first nine months 2017, 1 025 shares were converted.
| Credit facility, |
Utilized amount, |
||
|---|---|---|---|
| SEK M | SEK M | Maturity | |
| Exchangeable bond | 4 331 | 2019 | |
| MTN-program | 8 000 | 3 317 | 2018-2021 |
| Commercial paper | 2 000 | 2 000 | 2017 |
| Pension debt | 120 | ||
| Other short-term borrowing | 1 233 | 2017 | |
| Total borrowing | 11 001 | ||
| Less: | |||
| Interest-bearing receivables | 323 | ||
| Interest-bearing net debt | 10 678 |
| Capital, | Votes, | |||
|---|---|---|---|---|
| Share class | No. of shares | No. of votes | % | % |
| A (1 vote) | 268 184 405 | 268 184 405 | 61.6 | 94.1 |
| C (1/10 vote) | 167 025 472 | 16 702 547 | 38.4 | 5.9 |
| Total | 435 209 877 | 284 886 952 | 100.0 | 100.0 |
Year-end report 2017: February 8, 2018 Interim report January–March: April 9, 2018 Annual General Meeting: April 17, 2018 in Stockholm Interim report January–June: July 5, 2018 Interim report January–September: October 5, 2018
Sverker Sivall, Head of Corporate Communication and Sustainability, Phone: +46-8-666 64 19 E-mail: [email protected] Martin Hamner, CFO, Helena Stjernholm, CEO
AB Industrivärden (publ) Box 5403, SE-114 84 Stockholm, Sweden Registered office: Stockholm Reg. no.: 556043-4200 Switchboard: +46-8-666 64 00 [email protected] www.industrivarden.net
INDUC:SS, Bloomberg INDUc.ST, Reuters INDU C, NASDAQ OMX
This information is information that AB Industrivärden is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency by the Head of Corporate Communication and Sustainability stated above, at 10:00 a.m. CET on October 5, 2017.
This interim report has not been reviewed by the Company's auditors.
| 2017 | 2016 | 2017 | 2016 | 2016 | |
|---|---|---|---|---|---|
| SEK M | Jul.-Sep. | Jul.-Sep. | Jan.-Sep. | Jan.-Sep. | Jan.-Dec. |
| INCOME STATEMENT | |||||
| Dividend income from stocks | 0 | 0 | 2 786 | 3 078 | 3 078 |
| Change in value of stocks, etc. | 1 551 | 7 098 | 12 475 | 7 106 | 13 687 |
| Management cost | -27 | -26 | -82 | -86 | -112 |
| Operating income | 1 524 | 7 072 | 15 179 | 10 098 | 16 653 |
| Financial items | -5 | -52 | -75 | -153 | -202 |
| Income after financial items | 1 519 | 7 020 | 15 104 | 9 945 | 16 451 |
| Tax | - | - | - | - | - |
| Net income for the period | 1 519 | 7 020 | 15 104 | 9 945 | 16 451 |
| Earnings per share, SEK | 3.49 | 16.23 | 34.73 | 23.00 | 38.05 |
| Earnings per share after dilution, SEK | 3.49 | 15.43 | 34.73 | 21.31 | 34.93 |
| STATEMENT OF COMPREHENSIVE INCOME | |||||
| Comprehensive income for the period | 1 519 | 7 020 | 15 104 | 9 945 | 16 441 |
| BALANCE SHEET as per end of period | |||||
| Equities | 106 740 | 87 771 | 94 250 | ||
| Other non-current assets | 12 106 752 |
312 88 083 |
214 94 464 |
||
| Total non-current assets | |||||
| Cash and cash equivalents | 0 | 931 | 823 | ||
| Other current assets | 332 | 56 | 337 | ||
| Total current assets | 332 | 987 | 1 160 | ||
| Total assets | 107 084 | 89 070 | 95 624 | ||
| Shareholders' equity | 95 431 | 75 633 | 82 129 | ||
| Non-current interest-bearing liabilities | 7 268 | 6 843 | 7 382 | ||
| Non-current non interest-bearing liabilities* | 503 | 500 | 414 | ||
| Total non-current liabilities | 7 771 | 7 343 | 7 796 | ||
| Current interest-bearing liabilities | 3 733 | 5 855 | 5 425 | ||
| Other liabilities | 149 | 239 | 274 | ||
| Total current liabilities | 3 882 | 6 094 | 5 699 | ||
| Total shareholders' equity and liabilities | 107 084 | 89 070 | 95 624 | ||
| CASH FLOW | |||||
| Cash flow from operating activities | 2 633 | 2 922 | 2 854 | ||
| Cash flow from investing activities | 0 | 856 | 834 | ||
| Cash flow from financing activities** | -3 456 | -2 852 | -2 870 | ||
| Cash flow for the period | -823 | 926 | 818 | ||
| Cash and cash equivalents at end of period | 0 | 931 | 823 |
* Of which, the option component of the exhangeable bond, totaling SEK 429 M, which at the time of issue amounted to a total of SEK 335 M.
** Of which, dividends of SEK 2 285 (2 162) M paid to shareholders.
| 2017 | 2016 | 2016 | |
|---|---|---|---|
| SEK M | Jan.-Sep. | Jan.-Sep. | Jan.-Dec. |
| CHANGES IN SHAREHOLDERS' EQUITY | |||
| Opening shareholders' equity as per balance sheet | 82 129 | 67 850 | 67 850 |
| Conversion | 482 | - | - |
| Comprehensive income for the period | 15 104 | 9 945 | 16 441 |
| Dividend | -2 285 | -2 162 | -2 162 |
| Closing shareholders' equity as per balance sheet | 95 431 | 75 633 | 82 129 |
| INTEREST-BEARING NET DEBT at end of period | |||
| Cash and cash equivalents | 0 | 931 | 823 |
| Interest-bearing assets | 323 | 330 | 503 |
| Non-current interest-bearing liabilities | 7 268 | 6 843 | 7 382 |
| Current interest-bearing liabilities | 3 733 | 5 855 | 5 425 |
| Interest-bearing net debt | 10 678 | 11 437 | 11 481 |
| 2017 | 2016 | 2016 | |
|---|---|---|---|
| SEK M | Jan.-Sep. | Jan.-Sep. | Jan.-Dec. |
| INCOME STATEMENT | |||
| Operating income | 11 797 | 6 772 | 11 343 |
| Income after financial items | 11 776 | 6 711 | 11 259 |
| Income for the period | 11 776 | 6 711 | 11 259 |
| Comprehensive income for the period | 11 776 | 6 711 | 11 249 |
| BALANCE SHEET as per end of period | |||
| Non-current assets | 63 674 | 48 932 | 53 333 |
| Current assets | 511 | 1 260 | 1 284 |
| Total assets | 64 185 | 50 192 | 54 617 |
| Shareholders' equity | 53 304 | 38 793 | 43 330 |
| Non-current liabilities | 7 771 | 5 343 | 5 796 |
| Current liabilities | 3 110 | 6 056 | 5 491 |
| Total shareholders' equity and liabilities | 64 185 | 50 192 | 54 617 |
This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the EU, and the Swedish Annual Accounts Act. The Parent Company's financial statements have been prepared in accordance with RFR 2 – Accounting for Legal Entities, and the Swedish Annual Accounts Act. New or amended IFRSs and IFRIC interpretations have not had any effect on the Group's or Parent Company's earnings or financial position.
Revenue amounting to 16 120 M from received Essity shares have been reported in the income statement on the line Change in value of stocks, etc. The corresponding negative change in value of SCA shares have been reported on the same line.
The definitions for the alternative performance measures net asset value, debt-equities ratio, market value of the equities portfolio and interest-bearing net debt are provided in the 2016 Annual Report. The equity ratio is defined as equity in relation to total assets. These alternative performance measures are essential for the understanding and evaluation of an investment company's business.
In accordance with IFRS 13, financial instruments are measured at fair value according to a three level hierarchy. Classification is based on input data that is used in measuring the instruments. Instruments in Level 1 are valued according to quoted prices for identical instruments in an active market. Instruments in Level 2 are valued in a valuation model which uses input data that are directly or indirectly observable in the market. Instruments in Level 3 are valued using a valuation technique based on input data that are not observable in a market.
Responsibility for the measurement of fair value, which is based on documentation produced by the company's risk manager, rests with management. ISDA master agreements exist with the pertinent counterparties.
| 9/30/2017 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Assets | ||||
| Equities | 106 543 | - | 197 | 106 740 |
| Derivatives, etc. | - | 3 | - | 3 |
| Total assets | 106 543 | 3 | 197 | 106 743 |
| Level 1 | Level 2 | Level 3 | Total | |
| Liabilities | ||||
| Option component of | ||||
| exchangeable bond | - | -429 | - | -429 |
| Derivatives, etc. | - | -84 | - | -84 |
| Total liabilities | - | -513 | - | -513 |
No changes have been made between levels compared with the preceding year.
The dominant risk in Industrivärden's business is share price risk, i.e., the risk of a change in value caused by changes in share prices. A 1% change in the share price of the holdings in the equities portfolio as per September 30, 2017, would have affected its market value by approximately +/– SEK 1 100 M.
During the first nine months 2017, dividend income was received from associated companies.
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.