Gränges' Q3 interim report 2023: Strong profitability and record cash flow

Third quarter 2023

• Sales volume decreased by 4.1 percent to 114.9 ktonnes (119.8) and net sales decreased to SEK 5,575 million (6,172).
• Adjusted operating profit increased to SEK 439 million (319) and included energy cost compensation of SEK 22 million.
• Adjusted operating profit per tonne increased to 3.8 kSEK (2.7).
• Operating profit was SEK 479 million (243).
• Profit for the period increased to SEK 332 million (135).
• Diluted earnings per share increased to SEK 3.12 (1.27).
• Adjusted cash flow before financing activities was SEK 1,067 million (441).
• Total carbon emissions intensity (scope 1+2+3) decreased to 8.0 tonnes CO2e/tonne (9.6).
• The share of sourced recycled aluminium increased to 44.5 percent (31.1).

 
January – September 2023

• Sales volume decreased by 3.7 percent to 355.5 ktonnes (369.0) and net sales decreased to SEK 17,551 million (19,126).
• Adjusted operating profit increased to SEK 1,290 million (997).
• Adjusted operating profit per tonne increased to 3.6 kSEK (2.7).
• Operating profit was SEK 1,330 million (983).
• Profit for the period increased to SEK 902 million (649).
• Diluted earnings per share increased to SEK 8.47 (6.10).
• Adjusted cash flow before financing activities was SEK 2,133 million (-60).
• Financial net debt was SEK 2,916 million on September 30, 2023 (SEK 3,882 million on December 31, 2022), corresponding to 1.3 times adjusted EBITDA (1.9 times on December 31, 2022).
• Total carbon emissions intensity (scope 1+2+3) decreased to 8.5 tonnes CO2e/tonne (8.9).
• The share of sourced recycled aluminium increased to 41.1 percent (32.5).

Comments by Gränges’ CEO Jörgen Rosengren: New strategy delivering
In the third quarter, Automotive remained stable in all Regions, even if not quite up to last year’s very strong level in Asia. Demand from other customer groups was affected by high downstream inventory and weaker end-customer markets than last year in both Americas and Europe. As before, we worked hard to flexibly adjust sales to the demand situation. In summary, our sales volume decreased by 4 percent.

Despite this, Gränges achieved an outstanding result. We successfully offset cost increases with price adjustmensts and productivity improvements as the main drivers, not the least due to our new recycling and casting center in Huntingdon. Energy cost compensation in Europe also contributed. Adjusted operating profit increased by almost 40 percent to SEK 439 million, our best-ever result after the record in the second quarter of this year. We are very proud of delivering such profitability despite adverse market conditions.

It's also good to see our record cash flow, which is a direct result of our diligent work on inventory reduction and increased recycling. An insurance compensation further contributed. The strong profit and cash flow significantly reduced our net debt and strengthened our balance sheet, with financial leverage now comfortably inside our target range.

Navigate plan for sustainable growth delivering
After a little more than a year with our Navigate strategy, the first step ”Restore” has started to deliver strong results. Our focus is to finalize, optimize and utilize recent years’ investment programs, aiming to restore profitability to a healthy level. The excellent results recently show that this strategy is working as planned. 

Work also continued on step two and three of our strategy, called “Build” and “Invest”, with a strong focus on sustainability. In the third quarter, we again delivered high recycling and low emissions. In October, we reached our goal to have all production sites certified by the Aluminium Stewardship Initiative. Our strategy is fueled by our strong customer partnerships, as witnessed for instance by our bi-annual Technical Seminar in Shanghai where 400 participants gathered to discuss how to accelerate our industry towards net-zero. Investment in sustainable growth continued in all three Regions.

Stable short-term outlook
Market demand is weaker than last year, but remains hard to predict, especially concerning the timing of downstream inventory reduction. We will take advantage of this for longer-than-usual fourth-quarter maintenance stops. Softer demand also puts pressure on market pricing. However, our ambition to increase market share and protect margins remains unchanged. All in all, we expect sales volume in the fourth quarter roughly in line with the same quarter 2022.

I am very proud of the way our committed teams in all three Regions are executing our Navigate plan for sustainable growth. I would like to take this opportunity to thank everyone for outstanding efforts. The results speak for themselves.
 
Jörgen Rosengren, CEO and President
 
Webcasted presentation
CEO Jörgen Rosengren and CFO Oskar Hellström will present Gränges’ Q3 interim report 2023 at a webcasted conference call Thursday October 26, 2023 at 10.00 CEST.

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.