Interim report January-March 2019
Stable operating profit in softening market conditions
First quarter 2019
- Sales volume decreased by 4.4 per cent to 90.8 ktonnes (95.0). Net sales rose to SEK 3,109 million (3,071).
- Adjusted operating profit was SEK 275 million (282), while adjusted operating profit per tonne amounted to 3.0 kSEK (3.0).
- Profit for the period increased to SEK 184 million (167).
- Basic and diluted earnings per share increased to SEK 2.44 (2.21).
- Cash flow before financing activities decreased to SEK –173 million (192) and includes capital expenditure of SEK –451 million (–123). Of the total capital expenditure SEK 339 million relates to the expansion of the US production facilities.
- Net debt increased to SEK 3,057 million at 31 March 2019 (SEK 2,494 million at 31 December 2018), corresponding to 2.2 times adjusted EBITDA* (1.8 times at 31 December 2018). Net debt at 31 March 2019 includes leasing liabilities of SEK 269 million due to IFRS 16 Leases**.
* Adjusted for items affecting comparability, see Note 5 for further information.
** See Note 1 for further information on IFRS 16 Leases.
Comments by Gränges’ CEO Johan Menckel:
The softer market conditions that we experienced in the end of 2018 continued in the beginning of this year. The lower market demand resulted in a sales volume decline of 4 per cent to 90.8 ktonnes in the first quarter 2019. The adjusted operating profit remained fairly stable and amounted to SEK 275 million in the quarter. The result includes costs for the US expansion projects of SEK 17 million, whereas a refund of US 232 tariffs had a positive impact of SEK 9 million. Exchange rate fluctuations had a positive impact on adjusted operating profit of SEK 44 million during the quarter.
During the first quarter market conditions were especially challenging in Asia, where the sales volume to automotive customers declined by 13 per cent. This was driven by a significant slowdown of the light vehicle production in China in combination with destocking in the supply chain. In Europe and Americas, the automotive sales volume declined by 4 and 2 per cent respectively in the quarter. With regards to the HVAC & Other business, the market demand in Americas continued to be strong in the quarter. Sales volume however decreased by 1 per cent compared with 2018 due to production capacity limitations which are partly a result of the ongoing expansion projects.
Ensuring a sustainable business
How we plan and run our business today has a profound impact on the future and we believe that the demand for sustainable products will increase going forward. To secure Gränges’ long-term competitiveness and growth, we recently launched a set of ambitious and clear long-term sustainability targets which demonstrate our commitment to sustainability and our strong focus on integrating sustainability into everything we do. Our products promote a circular approach and enable customers and end-users to achieve significant savings in energy consumption and greenhouse gas emissions. We are also convinced that sustainability measures can increase our financial top and bottom-line with an increased demand for sustainable offerings.
The global automotive market is expected to continue to slow down in the second quarter of 2019. The research firm IHS estimates that light vehicle production will decrease by 3 per cent globally in the second quarter but return to growth in the second half of the year, resulting in a stable outlook for the full year. For the second quarter Gränges expects a decline in sales volume by mid-single digits. For automotive materials we foresee a mid to high-single digit reduction driven by decreasing light vehicle production and continued destocking in the supply chain, primarily in Asia but also partly in Europe. In Americas we expect a stable development for the HVAC & Other business in the second quarter.
As we look further into the year, we will continue to work actively with innovation and a more sustainable customer offering, which includes an increased focus on product development for electric vehicles. Demand for advanced heat exchanger materials for electric vehicles is expected to increase significantly in the coming years, as more car manufacturers choose liquid cooling solutions for batteries. In the US the demand for HVAC and other products continues to be strong. The expansion of the facility in Huntingdon is expected to be finalized in mid-2019 and the capacity at the facility in Newport will gradually be resumed during the second half of the year. Altogether, we are determined to continue to grow with sustainable profitability in the coming years.
Johan Menckel, CEO
Webcasted telephone conference
CEO Johan Menckel and CFO Oskar Hellström will present Gränges’ interim report for January–March 2019 at a webcasted conference call at 10.00 CEST, Friday 26 April, 2019.
The webcast is available on www.granges.com/investors. To participate in the conference call, please call +46 8 5199 9355 (Sweden), +44 203 194 0550 (UK) or +1 855 269 2605 (USA). Please call a few minutes before the conference call starts. The presentation will be in English.
For additional information, please contact:
Oskar Hellström, CFO
Telephone +46 8 459 59 00
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 Friday 26 April, 2019 at 07.30 CEST.
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 420,000 metric tonnes. Gränges has around 1,800 employees and net sales of SEK 13 billion. The share is listed on Nasdaq Stockholm. More information on Gränges is available at www.granges.com.