Gränges´ Interim Report January-September 2019

24 Oct 2019 | GROUP RELEASE, Regulatory - MAR

Temporary production disturbances affected sales volume and operating profit

Third quarter 2019

  • Sales volume decreased by 8.1 per cent to 85.8 ktonnes (93.4). Temporary production disturbances in July and August in two of the US facilities resulted in lower sales volume of 6 ktonnes. Net sales decreased to SEK 2,998 million (3,322).
  • Adjusted operating profit was SEK 190 million (230) and adjusted operating profit per tonne amounted to 2.2 kSEK (2.5).
  • Profit for the period increased to SEK 198 million (158) and includes a positive tax effect of SEK 77 million (–) due to a lower tax rate in China1.
  • Basic and diluted earnings per share increased to SEK 2.62 (2.09).
  • Cash flow before financing activities increased to SEK 155 million (81) and includes capital expenditure of SEK 409 million (236). Of the total capital expenditure SEK 287 million relates to the expansion of the production facilities in the US and Sweden.

January-September 2019

  • Sales volume decreased by 6.3 per cent to 269.5 ktonnes (287.5). Net sales decreased to SEK 9,295 million (9,836).
  • Adjusted operating profit was SEK 721 million (813) and adjusted operating profit per tonne amounted to 2.7 kSEK (2.8).
  • Profit for the period increased to SEK 553 million (539).
  • Basic and diluted earnings per share increased to SEK 7.32 (7.14).
  • Cash flow before financing activities was SEK –216 million (398) and includes capital expenditure of SEK 1,368 million (524). Of the total capital expenditure SEK 980 million relates to expansion investments.
  • Net debt increased to SEK 3,606 million at 30 September 2019 (SEK 2,494 million at 31 December 2018),
    corresponding to 2.7 times adjusted EBITDA2 (1.8 times at 31 December 2018). Net debt at 30 September 2019 includes lease liabilities of SEK 253 million due to IFRS 16 Leases3.

1See Note 6 for further information on the tax effect.
2Adjusted for items affecting comparability, see Note 5 for further information.
3See Note 1 for further information on IFRS 16 Leases.

Comments by Gränges’ CEO Johan Menckel:

Continued soft market conditions
The weak market conditions that we experienced in the first half of the year continued in the third quarter. Lower market demand in combination with temporary production disturbances in our plants in the US in July and August resulted in a sales volume decline of 8 per cent to 85.8 ktonnes. The adjusted operating profit declined by SEK 40 million to SEK 190 million and included costs for the US expansion projects of SEK 22 million. Exchange rate fluctuations had a positive impact on adjusted operating profit of SEK 24 million during the quarter. The cash generation continued to be strong also in the third quarter. Cash flow before financing adjusted for expansion investments and acquisitions increased to SEK 442 million, which represents a cash conversion of over 200 per cent.

During the third quarter market conditions were especially challenging in Asia and Europe, where the sales volume to automotive customers declined by 15 and 7 per cent respectively. This was driven by a continued significant slowdown of the light vehicle production in combination with further destocking in the supply chain. In Americas, the automotive sales volume increased by 8 per cent in the quarter. With regards to the HVAC & Other business, the market demand in Americas remained stable in the quarter. Sales volume however decreased by 8 per cent compared with last year primarily due to temporary production disturbances in the Huntingdon and Salisbury plants.

The efficiency improvements that we have made in Gränges over the last couple of years have made the business more resilient and the ability to handle changes in market demand has been improved. In the third quarter additional cost efficiency measures have been implemented. This includes a reinforced general savings program, capacity adjustments, and improved organizational efficiency in Europe.

Important milestone for the us expansion
In September an important milestone was reached in the expansion project in Huntingdon when the first coil was successfully rolled in the new rolling mill. All new equipment is now operational, and we will gradually ramp up available capacity and sales volume over the coming quarters. In Newport the upgrade of the rolling mills is progressing well, and we expect to have the second mill completed during the fourth quarter. When this is completed we will begin with customer trials and product validations. The expansion of the Huntingdon and Newport facilities will further strengthen our position in the North American market and serve as an important platform for growth.

The global automotive market is expected to continue to be soft for the rest of 2019. The research firm IHS estimates a decline of 3 per cent for global light vehicle production in the fourth quarter, resulting in an expected 5 per cent decline for the full year. For the fourth quarter Gränges expects a sales volume decline by mid to high single digits. For automotive materials we foresee a mid to high single-digit reduction driven by the lower expected light vehicle production and continued destocking in the supply chain, primarily in Europe. In Americas we expect a mid to high single-digit decline for the HVAC & Other business in the fourth quarter as inventory levels at many customers are high and end-market uncertainty is increasing.

We will continue to work actively with innovation, efficiency improvements, as well as 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. With a strong commitment to constantly improve and develop, Gränges is well positioned to deliver sustainable and profitable growth throughout the economic cycle.

Johan Menckel, CEO

Webcasted telephone conference
CEO Johan Menckel and CFO Oskar Hellström will present Gränges’ interim report for January–September 2019 at a webcasted conference call at 10.00 CEST, Thursday 24 October, 2019.

The webcast is available on 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:
Johan Dufvenmark, VP Group Treasury & Investor Relations
Telephone +46 (0) 705 97 43 75

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 24 October, 2019 at 07.30 CEST.

About Gränges
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