Alleima interim report Q3 2022

Earnings in line with normal seasonality

Q3 2022 highlights

—    Order intake increased by 10% to SEK 3,869 million (3,512) year on year, corresponding to an organic growth of -10%, mainly due to weakened demand for low-refined products in the Industrial customer segment, and products for the Consumer segment.

—    Revenues increased by 34% to SEK 4,270 million (3,197), corresponding to an organic growth of 12%, driven by a positive year on year development in all three divisions, and the Oil and Gas segment in particular.

—    Operating profit (EBIT) amounted to SEK -26 million (295), corresponding to a margin of -0.6% (9.2), and included items affecting comparability of SEK -90 million (-18) and metal price effects of SEK -131 million (190).

—    Adjusted operating profit (EBIT), amounted to SEK 195 million (123), corresponding to a margin of 4.6% (3.8), supported by higher volumes and a favorable product mix, despite cost inflation in freight and energy.

—    Earnings per share was SEK -0.62 (1.06). Adjusted earnings per share was SEK 0.07 (0.53).

—    Cash flow from operating activities amounted to SEK -297 million (-263) due to increased net working capital.

—    Free operating cash flow decreased to SEK -323 million (-172) due to increased net working capital.

—    The Alleima shares commenced trading on Nasdaq Stockholm on August 31.

CEO’s comment

This has truly been an eventful quarter and I am pleased that we were successfully listed on Nasdaq Stockholm on August 31. We have met with many investors, and we hosted our first ever Capital Markets Day, the main focus of which was to inform the market on our strategy and the dynamics of our business. We also launched our new brand, which unleashed a lot of energy and engagement among our employees and customers.

The third quarter is small from a seasonal perspective, with lower order intake, revenues and margins compared to the other quarters, mainly due to the summer shutdowns and planned maintenance. During the quarter, we noted continued positive demand in many of our customer segments, such as Industrial Heating, Power Generation, Transportation and Medical. We also noted some good orders in the Hydrogen and Renewable segment. Order intake in the Oil and Gas business in the Tube division continued to grow organically compared to last year, with large orders received for OCTG in the quarter. There is a high level of activity in the sector, but project awards are being delayed due to cost inflation and resource restraints in some customer projects related to umbilicals.

The slowdown that was noted in the short-cycle business in the second quarter, which related to low-refined products for the Industrial segment in Europe in the Tube division, continued into the third quarter, and we are now also seeing demand being hampered for these products in North America and Asia. Parts of the Consumer segment, mainly relating to compressor valve steel in the Strip division and appliance wire in the Kanthal division, both used in white goods products, also slowed. Overall, this translated into a year on year organic order intake growth of -10%.

Our backlog is solid, and in the quarter, revenues increased organically by 12%, with growth noted in all three divisions, and with an improved adjusted EBIT margin of 4.6%, compared to the same period last year, sequentially lower in line with normal seasonality. We noted a negative cash flow in the third quarter, due to payments of raw material purchases made during the second quarter, when metal prices were high. This is expected to improve sequentially in the fourth quarter.

We are aiming for industry-leading sustainability, both measured by our offering and by our own operations. A step in reducing our emissions is to transition to fossil-free electricity, and we are currently running at 94%. Since the beginning of this year, the Kanthal site in Hosur, India, has been using 100% renewable electricity and the switch has enabled an annual reduction in CO2 emissions of approximately 850 tons. As our site in Mehsana, India, is already using fossil-free electricity, which means that our production in the country is now based on 100% renewable electricity.

We are operating in an uncertain environment, with global inflationary pressure and energy supply issues in Europe impacting our customers, and some parts of our short-cycle business will most likely remain subdued in the near-term. Looking ahead, I think that we are well positioned to grow our business and to execute on our strategy. Focus will be on growing within profitable and less cyclical segments. We view our diverse customer segment exposure as a strength, as our customers are in different parts of the business cycle. Our regional production footprint, being close to our customers in our main markets, is important as customers are now more focused on securing supply chains.

The energy sector is underinvested, and I believe that we will be able to leverage on the rebound in the oil and gas sector in the mid-term. Our application tubing business is strong in all regions, especially in the Chemical and Petrochemical customer segment. The transition from gas to electrical heating will continue and gain strength over time, supporting our Industrial Heating segment. I also believe we will continue to see good development in the Medical segment. All in all, we are well positioned for the future.

Göran Björkman, President and CEO

Conference call and webcast 12:00 CEST

A webcast and conference call will be hosted on October 17, 2022 at 12:00 pm CEST. More information and a presentation will be available at www.alleima.com/investors

Dial-in details for the conference call

—    Sweden: +46 (0) 8 5051 0031

—    UK: +44 (0) 207 107 06 13

—    US: +1 (1) 631 570 56 13

Link to webcast

—    Webcast

Sandviken, October 17, 2022

Alleima AB (publ)

Contact details

Emelie Alm, Head of Investor Relations
emelie.alm@alleima.com
Phone: +46 (0) 79 060 87 17

Yvonne Edenholm, Press and Media Relations Manager
yvonne.edenholm@alleima.com
Phone: +46 (0) 72 145 23 42

About Alleima
Alleima AB, formerly Sandvik Materials Technology, is a global manufacturer of high value-added products in advanced stainless steels and special alloys as well as solutions for industrial heating. Based on long-term customer partnerships and leading materials technology, we develop products for the most demanding applications and industries. Our offering includes products like seamless steel tubes for the energy, chemical and aerospace industry, precision strip steel for white goods compressor, air conditioners and knife applications, based on more than 900 active alloy recipes. It also includes ultra-fine wires for medical and micro-electronic devices, industrial electric heating technology and coated strip steel for fuel cell technology for cars, trucks, and hydrogen production. Our fully integrated value chain, from R&D to end-product, ensures industry-leading technology, quality, sustainability, and circularity. Alleima, with headquarter in Sandviken, Sweden and revenues of SEK 13.8 billion in 2021, has more than 5,500 employees and customers in approximately 90 countries. Alleima was listed on Nasdaq Stockholm on August 31, 2022 under the ticker ‘ALLEI’. Learn more at www.alleima.com

This information is information that Alleima AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 11.30 AM CEST on October 17, 2022.