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Gränges AB: Gränges' Interim Report January-September 2019

Temporary production disturbances affected sales volume and operating

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 China[1].

· 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

· 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 EBITDA[2] (1.8 times at 31
December 2018). Net debt at 30 September 2019 includes lease
liabilities of SEK 253 million due to IFRS 16 Leases[3].

[1]See Note 6 for further information on the tax effect.
[2]Adjusted for items affecting comparability, see Note 5 for further

[3]See 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

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

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


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