Interim report January-March 2018

Improved performance contributed to higher profit in the quarter

First quarter 2018

• Sales volume increased by 0.3 per cent to 95.0 ktonnes (94.8) and net sales was SEK 3,071 million (2,892).
• Adjusted operating profit increased by 18.7 per cent to SEK 282 million (237), which corresponds to an adjusted operating margin of 9.2 per cent (8.2).
• Profit for the period increased to SEK 167 million (157) 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 2.21 (2.08).
• Cash flow before financing activities increased to SEK 192 million (75) and includes capital expenditure of SEK –123 million (–45).
• Net debt increased to SEK 2,353 million at 31 March 2018 (SEK 2,292 million at 31 December 2017), corresponding to 1.8 times adjusted EBITDA1 (1.8 times at 31 December 2017).

Gränges CEO Johan Menckel comment the report:

Gränges has had a good start in 2018. Adjusted operating profit increased to SEK 282 million, while sales volume remained stable at 95 ktonnes. Improved productivity in Europe, good metal management and price increases in North America contributed to the higher profit. Exchange rate fluctuations have affected the adjusted operating profit negatively by SEK 19 million during the quarter.

In Asia, sales volume increased by 1.4 per cent in the first quarter, which was a better development than the general market. In China, sales volume was higher as a result of good development for commercial vehicles. In Europe, sales of heat exchanger materials increased by 2.2 per cent in the first quarter, driven by strong demand from our global customers in the region. In the Americas, sales were slightly lower during the first quarter due to temporary production disturbance in one of the rolling mills in Huntingdon. Demand in the US is still very strong and has increased further after the US introduced import duties on a number of rolled aluminium products from China. Gränges’ reported sales volume of automotive heat exchanger materials imported to the US from Sweden and China is slightly lower than previous year. This is fully attributable to a change of distribution model for Gränges products in the US effective as of January 2018.

Outlook
The automotive heat exchanger 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 during the year. In the second quarter, growth is expected to be 5 per cent, according to IHS.

For our automotive heat exchanger materials we are anticipating a lower growth rate than IHS’ forecasts in all our regions during second 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. We also note that the uncertainty in the global aluminium market has increased as a consequence of the US sanctions against Rusal and the recently imposed import tariffs on certain rolled aluminium products from China. The effects for Gränges are, however, limited. In total, we expect the group’s sales volume in the second quarter of 2018 to be in line with the second quarter last year.

As we look further ahead into 2018, we will continue to work actively with innovation and customer offerings, which includes increased focus on product development for electric vehicles where we see a good growth potential. Sustainability is another important area, as well as ensuring that we have both capacity and capability to meet future demand. We are currently working actively to establish new capacity in the United States by expanding the production facility in Huntingdon, but are also reviewing the capacity needs in Asia and Europe. We evaluate a number of options to grow our business and is determined to continue that path with good, sustainable profitability.

Johan Menckel, CEO Gränges

Webcasted telephone conference
CEO Johan Menckel and CFO Oskar Hellström will present Gränges’ interim report for January–March 2018 at a webcasted conference call at 10.00 CEST, Thursday 26 April, 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 
pernilla.grennfelt@granges.com 
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 26 April 2018 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 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.