Gränges' half-year report 2023

Second quarter 2023

• Sales volume decreased by 1.7 per cent to 120.5 ktonnes (122.5) and net sales decreased to SEK 6,008 million (6,875).
• Adjusted operating profit increased to SEK 450 million (348).
• Adjusted operating profit per tonne increased to 3.7 kSEK (2.8).
• Operating profit was SEK 450 million (410).
• Profit for the period increased to SEK 316 million (274).
• Diluted earnings per share increased to SEK 2.97 (2.58).
• Cash flow before financing activities adjusted for expansion investments and acquisitions was SEK 779 million (722).
• Total carbon emissions intensity (scope 1+2+3) was 8.5 tonnes CO2e/tonne (8.0).
• The share of sourced recycled aluminium increased to 41.2 per cent (35.4).

First half-year 2023

• Sales volume decreased by 3.5 per cent to 240.6 ktonnes (249.2) and net sales decreased to SEK 11,976 million (12,955).
• Adjusted operating profit increased to SEK 851 million (678).
• Adjusted operating profit per tonne increased to 3.5 kSEK (2.7).
• Operating profit was SEK 851 million (740).
• Profit for the period increased to SEK 570 million (514).
• Diluted earnings per share increased to SEK 5.35 (4.83).
• Cash flow before financing activities adjusted for expansion investments and acquisitions was SEK 1,066 million (–502).
• Financial net debt was SEK 3,867 million at 30 June 2023 (SEK 3,882 million at 31 December 2022), corresponding to 1.8 times adjusted EBITDA (1.9 times at 31 December 2022).
• Total carbon emissions intensity (scope 1+2+3) was 8.8 tonnes CO2e/tonne (8.5).
• The share of sourced recycled aluminium increased to 39.4 per cent (33.2).

Comments by Gränges’ CEO Jörgen Rosengren:
Strong execution in first year of new strategy

Strong profit growth despite weaker demand
The general economic slow-down combined with high downstream inventory levels continued to put pressure on demand in most customer groups. The exception was Automotive, where we continued to see good demand in both in Gränges Americas and Gränges Eurasia. In Asia, we also saw a strong recovery from the second quarter 2022, which was impacted by the Covid-19 lockdown. In both business areas, we succeeded to partly offset demand fluctuations with flexibility in sales. As a net effect, sales volume decreased in Gränges Americas and increased in Gränges Eurasia. For Gränges as a whole, sales volume in the second quarter decreased slightly.

We also continued to offset cost and mix challenges with pricing and productivity improvements. Together with favourable currencies and positive timing effect from price surcharges, these actions increased the operating profit by almost 30 per cent to SEK 450 million. We are quite proud of this strong performance in a very challenging environment. It is also our best-ever quarterly result.

In addition, cash flow improved significantly in the second quarter thanks to a successful focus on reducing inventory levels.

Accelerating our Navigate plan
One year into our Navigate plan, it is time to review progress. To restore strong value creation, we have focused on finalizing investment projects, on capacity and utilization improvement, as well as on optimizing mix and margins. The results are evident in our strong margin improvement.

To build a world-leading aluminium technology company for the longer term requires action in several areas. We have reduced safety risks significantly. Our commercial teams are working across regions, securing new business in electrification and other areas. We achieved our best-ever recycling in the quarter thanks to new partnerships in both business areas and to our new recycling and casting centre in Huntingdon, now fully operational. We shifted to 100 per cent renewable electricity and launched our new solar panel investment at our Shanghai site. However, our total carbon emission intensity increased in the quarter because of our phase-out of low-carbon primary aluminium from Russia. We see this as a temporary setback in our otherwise very strong sustainability development. These and other actions show that a long-term focus can generate results also in the short term.

We also seek opportunities to invest in sustainable growth. We are making good progress in meeting the growing demand for battery components. This goes both for our capacity expansion projects and for new commercial contracts. The interest from leading global battery manufacturers and existing Tier 1 and OEM customers in electrification solutions remains very high. We are continuing investment in recycling and debottlenecking in Gränges Americas. Our joint venture in sustainable aluminium production in China is progressing as planned with the aim to come online during 2024.

High ambition level in uncertain market
Market uncertainty remains high globally. In the third quarter, we expect softer year-on-year demand in most markets but stable demand from automotive customers. We intend to continue to meet demand variation with flexibility and new business growth. In total, we expect sales volume in the third quarter 2023 to decline year-on-year by a mid-to-high single-digit percentage. The positive timing effects from surcharge clauses in customer contracts in the second quarter are not expected to recur in the third quarter. As a result of these and other effects, we expect operating profit per tonne in the third quarter to be weaker sequentially but stronger year-over-year.

Strong team fully committed to sustainable growth plan
In June, we had the first in-person Global Leadership Summit after four years of travel constraints. Our visit to our business unit in Konin and the joint work to sharpen our sustainable growth strategy created a lot of energy. It was very impressive to see the progress in Gränges Konin, the safety improvements, and the pride and engagement of all team members.

I’m now more confident than ever that the energized, focused, and strong global Gränges team will succeed with our strategy for sustainable growth.
 
Jörgen Rosengren
President and CEO

Webcasted presentation
CEO Jörgen Rosengren and CFO Oskar Hellström will present Gränges’ half-year report 2023 at a webcasted conference call at 10.00 CEST, Friday 14 July 2023.

Join the live webcast here. To participate in the Q&A following the presentation, please register here. Upon registration, phone numbers and a conference ID to access the call will be provided. Please dial in a few minutes before the start of the webcast. The presentation will be in English.