Gränges’ interim report January–September 2020

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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).

Adjusted for items affecting comparability, see Note 5 for further information.

Comments by Gränges’ CEO Johan Menckel:

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.

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

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 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.

For additional information, please contact:
Johan Dufvenmark, VP Group Treasury & Investor Relations
Telephone +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.

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