Continued good development during second quarter
Second quarter 2018
- Sales volume increased by 0.5 per cent to 99.1 ktonnes (98.7) and net sales rose to SEK 3,443 million (3,081).
- Adjusted operating profit increased by 3.9 per cent to SEK 301 million (290), which corresponds to an adjusted operating margin of 8.7 per cent (9.4). Costs for US anti-dumping duties (AD/CVD) on imports from China are included with SEK 27 million.
- Profit for the period increased to SEK 214 million (192).
- Diluted earnings per share increased to SEK 2.84 (2.55).
- Cash flow before financing activities decreased to SEK 125 million (307) and includes capital expenditure of SEK –166 million (–61) and an increase in working capital of SEK –135 million due to US sanctions against one of Gränges’ aluminium suppliers.
First half-year 2018
- Sales volume increased by 0.4 per cent to 194.2 ktonnes (193.5). Net sales rose to SEK 6,514 million (5,973).
- Adjusted operating profit increased by 10.6 per cent to SEK 583 million (527), which corresponds to an adjusted operating margin of 8.9 per cent (8.8). Costs for US anti-dumping duties (AD/CVD) on imports from China are included with SEK 27 million.
- Profit for the period increased to SEK 381 million (349) and includes SEK –64 million of items affecting comparability and profit from joint ventures of SEK 22 million.
- Diluted earnings per share increased to SEK 5.05 (4.63).
- Cash flow before financing activities decreased to SEK 318 million (382) and includes capital expenditure of SEK –289 million (–106) and an increase in working capital of SEK –135 million due to US sanctions against one of Gränges’ aluminium suppliers.
- Net debt increased to SEK 2,621 million at 30 June 2018 (SEK 2,292 million at 31 December 2017), corresponding to 2.0 times adjusted EBITDA1 (1.8 times at 31 December 2017).
Gränges CEO Johan Menckel comment the report:
Gränges has continued to develop well during the second quarter 2018. The sales volume was 99.1 ktonnes, which was slightly higher than last year and in line with expectations. Adjusted operating profit increased to SEK 301 million, and includes costs of SEK 27 million related to US anti-dumping and countervailing duties on imports of rolled aluminium from China. At the same time, we have continued to see positive effects of good metal management, improved productivity in Europe and price increases in North America. Exchange rate fluctuations have affected the adjusted operating profit positively by SEK 16 million during the second quarter 2018.
In Asia, sales volume increased by 0.9 per cent in the second quarter, which was a lower rate than the overall market. Sales to automotive customers in China rose by 4.4 per cent in the quarter. In the first half of 2018, Gränges has had a higher sales growth than the market in China and India. In Europe, sales of heat exchanger materials increased by 3.2 per cent in the second quarter, while sales of industrial products were lower. In the Americas, sales volume was on par with the second quarter last year. Demand in the US is still very strong and has increased further after import duties have been imposed on rolled aluminium products from China. Gränges’ reported sales volume of automotive heat exchanger materials imported to the US from Sweden and China is slightly higher than previous year.
In the first quarter of 2019 production will restart at our facility in Newport, Arkansas. The facility produced aluminium foil for consumer applications until 2015, and has subsequently been idle with a very limited business in surface treatment. The investment to upgrade existing rolling mills and equipment amounts to USD 26 million, and already from 2019 we expect a positive contribution to earnings.
The global automotive market is expected to continue to grow in 2018. Research firm IHS estimates that the production of light vehicles will increase by 2 per cent globally this year. In the third quarter, growth is expected to be 4 per cent, according to IHS.
Gränges expects a stable sales volume of automotive heat exchanger materials in all our regions in the third quarter. The number of housing starts in the US is expected to show continued good growth in the coming quarter, which is beneficial for our HVAC products where we forecast low single digit growth.
As we look further ahead into 2018, we will continue to work actively with innovation and sustainable customer offerings, which includes increased focus on product development for electric vehicles where we see a good growth potential. Another important area is to ensure that we have both capacity and capability to meet future demand. We are currently working actively to establish new capacity in the US by expanding the production facility in Huntingdon and restart the facility in Newport. In total, these initiatives will add some 60 ktonnes in new capacity in second half of 2019. We are also reviewing capacity needs in Asia and Europe. We evaluate a number of options to grow our business and are determined to continue that path with good, sustainable profitability.
Webcasted telephone conference
CEO Johan Menckel and CFO Oskar Hellström will present Gränges’ half-year report for January–June 2018 at a webcasted conference call at 10.00 CEST, Thursday 19 July, 2018.
The webcast is available on www.granges.com/investors. To participate in the conference call, please call +46 8 51999355 (Sweden), +44 203 1940550 (UK) or +1 8552692605 (USA). Please call a few minutes before the conference call starts. The presentation is in English.
For additional information, please contact:
Pernilla Grennfelt 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 19 July 2018 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 some 1,600 employees and net sales of more than SEK 11 billion. The share is listed on Nasdaq Stockholm. More information on Gränges is available at granges.com.