Interim report, January 1–March 31, 2009

Value development

- Net asset value on April 30, 2009, was SEK 80 per share, an increase of 30% since the start of the year. Net asset value on March 31, 2009, was SEK 60 per share.
- The value of the equities portfolio increased by SEK 5.2 billion to SEK 39.9 billion, or 15%, during the first four months of the year.
- The total return for the Class A shares was 29% for the first four months of the year.
- Earnings per share for the first quarter of the year were SEK -1.98 (-16.73) and amounted to SEK 18.43 as per April 30.

Long-term return

- During the last ten-year period, the annual total return for Industrivärden’s Class A shares has exceeded the return index by an average of 2 percentage points.

Current status

“As a responsible long-term owner we have participated in important decisions in our portfolio companies. A great deal of work has been dedicated to strengthening the companies’ financial flexibility. Moreover, the adaptation to new market conditions has resulted in painful decisions on operational cutbacks and employee layoffs by the companies. Our clear focus is the long-term potential for growth in the portfolio companies so that they can take advantage of opportunities that arise once the wheels begin to spin again,” comments Anders Nyrén, President and CEO of Industrivärden.


CEO’s message

The global recession that has ensued in the wake of the financial crisis triggered by the Lehman collapse bore full impact against the real economy during the first four months of the year, which the interim reports now coming out from our portfolio companies and other listed companies bear witness to. International bodies such as the OECD, the IMF and others are repeatedly coming out with downward adjustments of their growth outlook for 2009 and 2010 as its becomes clear how dramatic the GDP declines have been since early autumn 2008; it is the most dramatic slowdown in the world economy at any time since the Second World War. However, there are now signs that point – if not to a recovery – to a stabilization of the situation. As we now begin to see a spark of life in the market, it is taking place at a low level for broad parts of the manufacturing industry. In addition, the global market for financing and credits is slowly returning to a more normalized level. Despite this, there is a long way to go with respect to accessibility to financing at reasonable terms for most businesses.

As I have said previously, the strong stimulus measures that have been taken by governments around the world – together with the extensive monetary easing in the form of interest rate cuts and liquidity-enhancing measures in the banking systems that have been taken by the world’s central banks – will produce results. Against this background it is reasonable to assume that we are at the end of a period of decline. However, indications are strong that a global economic recovery to previous growth levels will take time. So it would be wise to plan for a more drawn-out scenario.

The year started out with continued declines in the world’s stock markets, above all for financial companies and traditional manufacturing industries. However, during the spring we have seen a slight uptick in pace with a stabilization of the macroeconomic situation and a steady improvement in earnings ability shown by U.S. banks. Since the low point in mid-January, NASDAQ OMX Stockholm has risen by 27% and the U.S. markets by 30%.

Through the end of April, Industrivärden’s net asset value including reinvested dividends has risen by SEK 7.1 billion, or 30%, compared with 20% for the total return index. The corresponding increase is 29% for Industrivärden’s Class A shares and 37% for the Class C shares.

We work as an active owner of a portfolio of well-positioned companies – several with leading positions in their respective niches. They all have very good future potential, even though we currently find ourselves in a very challenging period. How well a company succeeds at managing tumultuous changes in the market is a result of its structure when the conditions change as well as how well it adapts to the new conditions. As a responsible owner, through our board representation we have participated in making important decisions in our portfolio companies. A great deal of work has been dedicated to strengthening the companies’ financial flexibility. Unfortunately, the credit markets have worked poorly, which has led to significantly higher financing costs both within the banking system and in the bond markets.

Rebuilding a well-working credit market is therefore the most central challenge at the moment. A general bank guarantee with international coverage, like the one we had locally here in Sweden during the crisis in the 1990s, could be a possible solution. In a situation like this it would be wrong not to try measures that have been proven to work on a national level. The adaptation to new market conditions has also resulted in painful decisions on operational cutbacks and employee layoffs by the companies. Our overarching mission and clear focus is the long-term potential for growth in our portfolio companies so that they can take advantage of opportunities that arise once the wheels begin to spin again. This is to the benefit of the shareholders, employees and society in general.

Anders Nyrén