Third quarter 2017
- Sales volume increased to 93.0 ktonnes (62.8). Organic growth was 4.8 per cent. Net sales were SEK 2,728 million (1,859). Sales volume for the business acquired in 2016 increased to 48.9 ktonnes (21.8).
- Adjusted operating profit increased by 25.1 per cent to SEK 227 million (181), which corresponds to an adjusted operating margin of 8.3 per cent (9.7). The business acquired in 2016 is included with SEK 70 million (50).
- Profit for the period decreased to SEK 151 million (189). Third quarter last year includes a release of a tax provision of SEK 139 million.
- Diluted earnings per share decreased to SEK 2.00 (2.52).
- Cash flow before financing activities increased to SEK 148 million (-2,285).
January – September 2017
- Sales volume increased to 286.5 ktonnes (154.4). Organic growth was 5.9 per cent. Net sales were SEK 8,701 million (4,662). Sales volume for the business acquired in 2016 increased to 144.7 ktonnes (21.8).
- Adjusted operating profit increased by 46.1 per cent to SEK 754 million (516), corresponding to an adjusted operating margin of 8.7 per cent (11.1). The business acquired in 2016 is included with SEK 232 million (50).
- Profit for the period increased to SEK 500 million (397).
- Diluted earnings per share rose to SEK 6.62 (5.30).
- Cash flow before financing activities increased to SEK 530 million (-2,150).
- Net debt decreased to SEK 2,280 million at 30 September 2017 (SEK 2,722 million at 31 December 2016), corresponding to 1.7 times adjusted EBITDA (2.1 times at 31 December 2016).
Comments by Gränges’ CEO Johan Menckel:
We have seen continued strong demand in all regions in the third quarter. Sales volume increased by 48 per cent to 93 ktonnes and the adjusted operating profit improved to SEK 227 million. Exchange rate fluctuations, primarily a weaker dollar, had a negative impact on earnings of SEK 2 million in the quarter.
A strong market in China helped sales in Asia increase by 9 per cent in the third quarter. The increase is explained by good volumes, both to local and global customers, and is partly related to early deliveries of some orders for the fourth quarter. Sales to commercial vehicles in China have also been strong. In Europe sales volume rose by just over 3 per cent in the third quarter. In the Americas, sales volume continued to increase, but is still limited by the fact that the US plants currently produce close to maximum capacity. Sales of heat exchanger materials to automotive customers in the Americas were 11 per cent higher than in the third quarter last year.
Investment in new capacity
In September, we decided to take the next step in our strategic growth plan for North America. This includes an expansion of the Huntingdon facility to meet increased demand within the current product portfolio. In total, the investment amounts to USD 110 million over two years. When it comes to multi-layer aluminium products for brazed heat exchangers, we plan to enter into a joint venture with Japanese Mitsubishi Aluminum in North America.
Next generation materials to drive future growth
We have also taken an important step in terms of next generation heat exchanger materials. The investment in German GETEK, which manufactures aluminium billets utilizing advanced spray forming technology, means that we can address a larger market with innovative materials within Active Brazing. It is expected to be an important product category for Gränges in coming years.
The market for heat exchangers to the automotive industry is expected to grow in 2017. The market research firm IHS estimates that production of light vehicles will be unchanged in the fourth quarter compared to last year, which would sum up growth for the full year to 2 per cent.
Overall, Gränges expects a somewhat lower growth rate than the market in the fourth quarter due to lower sales volume of automotive heat exchanger materials in Asia and the Americas. In Europe, we expect a growth rate in line with the market. The US operations Gränges acquired in 2016 is expected to continue to grow in the fourth quarter. The impact of changes in foreign exchange rates on operating profit is expected to be negative in the fourth quarter compared to last year.
When looking into 2018, we foresee a positive development in all our regions. We will continue to focus on innovation and customer offering, sustainability and ensuring that we have both the capacity and capability of our facilities to meet future demand. That includes increased focus on product development for electrical vehicles, where we see a very good growth potential. We are determined to continue to grow with a sustainable profitability in the coming years.
Webcasted telephone conference
CEO Johan Menckel and CFO Oskar Hellström will present Gränges’ interim report for January–September 2017 at a webcasted conference call at CEST 10.00, Thursday 26 October, 2017.
The webcast can be viewed on www.granges.com/investors. To participate in the telephone conference, please call +46 856 642 661 (Sweden), +44 203 194 0544 (UK) or +1 855 269 2604 (USA). Please call a few minutes before the telephone conference starts. The presentation will be in English.
For additional information, please contact:
SVP Communications and Investor Relations
Telephone +46 (0) 702 90 99 55
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 26 October 2017 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; brazed heat exchangers. 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 some 1,600 employees and net sales of more than SEK 10 billion. The share is listed on Nasdaq Stockholm. More information on Gränges is available at granges.com.