Gränges’ year-end report January–December 2022

26 Jan 2023 | GROUP RELEASE, Regulatory - MAR

A stable fourth quarter concluded a record year

Fourth quarter 2022

  • Sales volume decreased by 1.8 per cent to 110.3 ktonnes (112.3) and net sales increased to SEK 5,366 million (4,857).
  • Adjusted operating profit increased to SEK 153 million (139) and adjusted operating profit per tonne amounted to 1.4 kSEK (1.2).
  • Operating profit amounted to SEK 153 million (–21) and includes no items affecting comparability (–159).
  • Profit for the period increased to SEK 51 million (–23).
  • Diluted earnings per share increased to SEK 0.48 (–0.21).
  • Cash flow before financing activities adjusted for expansion investments and acquisitions was SEK 679 million (463).
  • Revolving credit facility and term loans refinanced with sustainability-linked structure.
  • Total carbon emissions intensity (scope 1+2+3) decreased to 8.8 tonnes CO2e/tonne (9.3).
  • The share of sourced recycled aluminium increased to 33.5 per cent (32.9).
  • Dual Aluminium Stewardship Initiative sustainability certifications achieved for Gränges Americas, ensuring responsible sourcing and production across the supply chain.

January–December 2022

  • Sales volume decreased by 2.0 per cent to 479.3 ktonnes (488.9) and net sales increased to SEK 24,492 million (18,130).
  • Adjusted operating profit increased to SEK 1,150 million (1,008) and adjusted operating profit per tonne amounted to 2.4 kSEK (2.1).
  • Operating profit was SEK 1,136 million (833) and includes items affecting comparability of SEK –14 million (–175).
  • Profit for the period increased to SEK 700 million (595).
  • Diluted earnings per share increased to SEK 6.59 (5.58).
  • Cash flow before financing activities adjusted for expansion investments and acquisitions was SEK 618 million (607).
  • Financial net debt increased to SEK 3,882 million at 31 December 2022 (SEK 3,059 million at 31 December 2021), corresponding to 1.9 times adjusted EBITDA (1.8 times at 31 December 2021).
  • Total carbon emissions intensity (scope 1+2+3) decreased to 8.9 tonnes CO2e/tonne (9.3), and is down 22 per cent compared with baseline 2017.
  • The share of sourced recycled aluminium increased to 32.7 per cent (28.5).
  • The Board of Directors proposes a dividend of SEK 2.50 (2.25) per share, corresponding to 38 per cent (40) of the profit for the year.

Comments by Gränges’ CEO Jörgen Rosengren:
A year of challenge and achievement
Stable sales volume despite very tough European market
The fourth quarter saw continued strong demand in North America. Demand in Asia was very strong, recovering from the first half year. Demand in Europe stayed strong in automotive. In other European sectors, the energy crisis combined with continued high downstream inventory levels reduced demand and market pricing significantly. In total, global demand was about the same as in the fourth quarter of 2021.

Our sales volume was up slightly in North America, despite constraints in production capacity. In Eurasia, our sales volume followed demand—down sharply in Europe and up sharply in Asia. Our global sales volume decreased slightly in the fourth quarter. 2022 full-year sales volume declined about 2 per cent relative to 2021.
Improved profit despite lower volumes and volatile environment
The demand and mix volatility in 2022 put pressure on our operations. We also faced a complete lock-down of our Shanghai plant and an unfortunate fire in Konin, while executing large expansion projects in Americas and Europe, all in the same year. We met this with flexibility and productivity, especially in Shanghai during the lockdown.

The volatility coincided with other challenges for Gränges. Supply constraints, unprecedented cost increases in energy and other input costs, and the highest inflation and interest rates in decades put pressure on our profitability. The aluminium price reaching record levels burdened our cash flow.

We tackled these challenges one by one. Most importantly, we managed to more than off-set all cost increases. This was not by chance but the result of systematic and focused work in close partnership with our customers on cost mitigation.
Focusing on capital efficiency and successfully renewing our main credit facilities ensured stable financial leverage and financial security.

Taken together, we grew our profit despite these challenges. In fact, our adjusted operating profit increased by 14 per cent and our profit for the year by 18 per cent to all-time-high levels.
Work started toward long-term sustainable growth
In 2022, Gränges launched the Navigate plan and set more ambitious targets for sustainable growth. The plan builds on the global megatrends toward regionalization of supply chains, electrification and demand for more sustainable solutions, and provides direction and purpose for the entire organization. We are well positioned to benefit from these trends due to our investment and expansion in recent years.

First, we intend to restore profitability by finalizing our ongoing expansion program, utilize it fully, and optimize its performance. Key projects are being completed in 2022–2023, such as new recycling and casting centres in Huntingdon and Konin, expanded capacity in Newport, and automation in Finspång. Second, we intend to build a world-leading aluminium technology company by continuous improvement, green sourcing and recycling, and innovation. An important focus area is safety, where we intensified our work towards industry-leading safety performance. Third, we intend to invest in sustainable growth.
Moving forward with battery components
We see a very strong interest from world-leading battery manufacturers and automotive OEMs in our electrification solutions and battery components. During the year, we started production and sales of battery cathode foil in China. We intend to launch it in Europe in 2023 and in North America in 2024. To support the strong demand, we are accelerating capacity build-up. We have also secured contracts for battery casing and battery cooling systems. Although ramp-up times are generally long, securing this business is an important part of our long- term plan for sustainable growth.
Continued improvement and higher ambition in sustainability
Our relentless focus on sustainability led to our lowest-ever carbon footprint and our highest-ever recycling volumes. Total recycled volume increased to 3.6x our baseline 2017 level. The development was supported by a strong focus on decarbonization and continued investment in recycling.

All Gränges facilities in the US, Sweden and China are now certified by the Aluminium Stewardship Initiative (ASI), which ensures responsible sourcing and production across the entire supply chain. The renewed EcoVadis Platinum rating puts Gränges among the leading 1 per cent of the ranked companies.

Our progress motivates us to raise the ambition level. In 2022, we committed to climate neutrality by 2040 and joining the Science Based targets Initiative. We also launched Gränges Endure, a sustainable product brand which will help our customers on their decarbonization journey, and announced a further recycling investment in Gränges Americas.
Sequential recovery expected in the first quarter of 2023
The outlook for 2023 is uncertain. We expect customer focus in the beginning of 2023 to shift from securing supply to managing inventories. The exception is automotive, where backlogs, easing supply chains and a recovery in China may help production levels. On the other hand, there is a clear threat of a recession. On balance, we expect sales volume in the first quarter of 2023 to improve around 10 per cent relative to the fourth quarter of 2022. Our ambition, as before, is to fully offset year-on-year cost increases with price increases.
Best-ever year gives confidence for the future
In 2022, we achieved all-time-high financial and sustainability results despite severe challenges. We also worked systematically to execute our Navigate plan for sustainable growth. Our approach in 2023 will be the same: to stay focused on the long term while meeting any short-term challenges with flexibility. I have every confidence that this will lead to continued increased performance.

I’d like to thank the global Gränges team for your outstanding efforts in 2022.
Jörgen Rosengren, President and CEO

Webcasted presentation
CEO Jörgen Rosengren and CFO Oskar Hellström will present Gränges’ year-end report for the period January–December 2022 at a webcasted conference call at 10.00 CEST, Thursday 26 January 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.