Global actor with strong positions in growth market niches

Gränges is a global leader in aluminium engineering, manufacturing and innovation. The operations include development, production and marketing of advanced materials that increase the efficiency in the customers’ production processes as well as the performance of the end-product.

Gränges is one of the few genuinely large global players in rolled aluminium products with production, sales and customer-driven product development in three continents. Gränges has the potential to grow on all major markets and within several strong product categories.

Within the industry for rolled products for brazed heat exchangers Gränges has a clear market leading position, estimated at around 20 per cent globally. Gränges has production sites in Sweden, China and the US with a combined capacity of 420,000 tonnes.

Gränges has a strong platform for profitable and sustainable growth. Below you find the main reasons to invest in Gränges:

Gränges’ operations are global, with products that are used in markets that are in constant change, which is a result of a number of drivers tightly linked to global societal development. These drivers include improved living standards, reduced environmental impact, and increased cost efficiency.

As the leading global supplier of advanced aluminium materials for automotive heat exchangers and the stationary heat exchanger industry, the various drivers outlined above positively impact Gränges. The automotive industry accounts for 48 per cent of Gränges’ sales, while stationary heat exchangers accounts for approximately 25 per cent. As market leader in materials for brazed heat exchangers for the automotive industry, where brazed heat exchangers amount to almost 100 per cent of the market, Gränges is also well positioned for a similar, future conversion within the stationary heat exchanger industry.

Market descriptions

Automotive heat exchangers
Demand for automotive heat exchanger strips is closely tied to the global automotive industry as well as the number of heat exchangers installed per vehicle. A number of unique heat exchangers are developed for every new vehicle platform. This development is conducted in close co-operation with customers to ensure that the end-product has the required capacities. Advanced requirements for product performance, especially in terms of energy efficiency, mean that brazed aluminium heat exchangers are currently the standard in this industry.

Stationary heat exchangers
A large number of manufacturers, end-users and applications fragment the market for stationary heat exchangers. The market includes commercial and residential property, data centres, food and manufacturing industry. Together, these areas account for a considerable share of energy consumption in many countries. Demand for reduced energy use and limits to the amount of, and choice of, refrigerants is driving demand for smaller and lighter heat exchangers, and is speeding up the shift to brazed aluminium heat exchangers, which currently account for a small percentage of the total market.

Gränges has a leading position in the global market for rolled aluminium products for heat exchanger and other niche markets. The market share in the niche for material for brazed aluminium heat exchangers amounted to approximately 20 per cent in 2016.

Gränges has a strong presence in Asia, the market that is expected to grow fastest in the years ahead. Gränges established operations in China back in 1996, and has built up a leading position in the region since then. In 2016, 34 per cent of Gränges’ sales volume originated in Asia, of which the Chinese market amounted to around half.

Our customers are primarily larger, global companies. Geographical proximity to customers in their respective markets is necessary to meet customer demand and needs. Gränges has its own production capacity and a strong customer base in all major markets.

Gränges works closely with customers from product design to rolled product deliveries for full scale production. Gränges’ customer relationships are therefore typically long-term. Gränges’ R&I continually supports the development of new products and processes, which enables technical advances in a number of areas. Of Gränges’ customers, 85 per cent have been customers to the company for more than 10 years.

Many companies – large and small – are involved in rolling aluminium products, the majority of which offer large-scale manufacturing according to standardized specifications. However, few have the comprehensive competence required to produce the technologically advanced materials in which Gränges specialises. High quality is our main priority, which is a result of the experience, dedication and craftsmanship of our employees.

Gränges has a strong development and production competence primarily in the following four areas: the development of alloys, hot rolling of clad materials, thermo-mechanical processing and slitting. These competences combine to produce products with a high degree of added value. Manufacturing is undertaken after an order is received and according to customer requirements. Gränges has a dynamic portfolio of up to 3,000 products, which are adapted to specific customer needs.

Customers have exacting requirements in terms of product performance and metallurgical properties. The development of heat exchanger materials for a specific heat exchanger typically takes around two years. For many years, Gränges’ research and development has been conducted in close co-operation with customers, and the pace of innovation is rapid. During 2016 Gränges obtained 52 new patents. Gränges does not sell off-the-shelf solutions, but is a development partner providing tailor-made, technologically advanced materials and services.

Brazing is the pre-eminent technology within manufacturing of aluminium heat exchangers for the automotive industry. The use of this technology is also expected to increase for stationary heat exchangers in the coming years. This is a market in which Gränges has secured a leading position in North America through its acquisition of Noranda downstream.

Gränges’ production facilities in China, Sweden and the US have a total annual capacity of 420,000 tonnes, and are well invested. In the coming years, annual maintenance investment is expected to be lower than depreciation.

Gränges generates revenue through the sale of materials manufactured for specific products and customers. Prices are quoted per tonne, and are based on the added value that Gränges offers in terms of material properties and product complexity, as well as the price of our key raw material, aluminium. Under Gränges’ revenue model, the cost of our primary raw material, aluminium, is passed on to customers. Gränges’ performance is therefore not dependent on fluctuations in the price of aluminium. The Group’s income is based on the value that is added to products.

The foundation for today’s Gränges was laid in 1896 in Grängesberg, Sweden. Read more about Gränges history ›

Gränges’ many years of specialization in the development and manufacture of rolled products for brazed heat exchangers have built extensive knowledge about material characteristics and manufacturing processes at all levels of the organization. To this, the knowledge and experiences that the acquired business’ operations (Noranda) will bring within rolled materials for stationary heat exchanges and other niche markets, is added. New knowledge and experiences are spread between different parts of the organization systematically, with the aim of retaining the skills-related advantages that have seen Gränges become world leading in rolled aluminium products.

Gränges has a strong position in the value chain. The performance of the final product is to a large degree dependent on the material properties. Our high degree of specialization, product knowledge and stable manufacturing processes allow us to offer considerable added value, excellent quality, and a high degree of delivery precision.

Gränges success factors

 
 

 

Share price development and dividends

Gränges’ target is to pay a dividend of between 30–50 per cent of the profit for the year over time.

  2014 2015 2016
Dividend, SEK per share 1.50 2.00 2.40
Dividend yield, % 2.94 2.86 2.79
Dividend rate, % 35 39 36

 

 
The Gränges share development 2014-2016

 
 
Comment:

Since listing on the Nasdaq in Stockholm in October 10, 2014, the share price
has increased by around 100 per cent to the end of 2016.