Gränges’ half-year report 2022

2022-07-15 07:30:00

All-time-high result despite very challenging environment

Second quarter 2022

  • Sales volume decreased by 6.8 per cent to 122.5 ktonnes (131.4) and net sales increased to SEK 6,875 million (4,609).
  • Adjusted operating profit increased to SEK 374 million (309) and adjusted operating profit per tonne was 3.1 kSEK (2.4).
  • Profit for the period increased to SEK 295 million (226) and includes items affecting comparability of SEK 62 million (–).
  • Diluted earnings per share increased to SEK 2.78 (2.12).
  • Cash flow before financing activities adjusted for expansion investments and acquisitions was SEK 722 million (334).
  • Total carbon emissions intensity (scope 1+2+3) decreased to 7.9 tonnes CO2e/tonne (9.1).
  • The share of sourced aluminium scrap increased to 35.4 per cent (26.9).
  • Commitment to climate neutrality by 2040 and joining the Science-Based Target initiative.
  • Launch of new sustainable product brand: Gränges Endure.

First half-year 2022

  • Sales volume decreased by 3.4 per cent to 249.2 ktonnes (258.1) and net sales increased to SEK 12,955 million (8,651).
  • Adjusted operating profit increased to SEK 732 million (651) and adjusted operating profit per tonne was 2.9 kSEK (2.5).
  • Profit for the period increased to SEK 556 million (465) and includes items affecting comparability of SEK 62 million (–16).
  • Diluted earnings per share increased to SEK 5.23 (4.36).
  • Cash flow before financing activities adjusted for expansion investments and acquisitions was SEK –502 million (279).
  • Financial net debt[1] increased to SEK 4,396 million at 30 June 2022 (SEK 3,059 million at 31 December 2021), corresponding to 2.3 times adjusted EBITDA (1.8 times at 31 December 2021).
  • Total carbon emissions intensity (scope 1+2+3) decreased to 8.4 tonnes CO2e/tonne (9.5).
  • The share of sourced aluminium scrap increased to 33.2 per cent (26.3).

[1] Adjusted for lease liabilities, see alternative performance measures for further information.


Comments by Gränges’ CEO Jörgen Rosengren:

Continued improvement promising start to long-term plan

Safety is our first priority
Gränges is systematically working on improving workplace safety. However, we suffered two serious setbacks in the second quarter: a tragic fatal accident in our Salisbury facility, and a serious fire in the Konin plant. We clearly need to intensify our work to develop Gränges toward industry-leading safety performance and are taking action accordingly.

Solid result despite very challenging environment
In the second quarter, we saw strong demand in most end-customer markets, but also continued weakness in the automotive market. Despite the severe COVID-19-related lockdowns in China, the sales volume reached 93 per cent of sales volume in the second quarter last year.

Nevertheless, Gränges delivered a solid result. This did not happen by accident but was the result of systematic and focused efforts. The way our team in China succeeded to manufacture and ship products throughout the extended Shanghai lockdown was especially impressive. But equally important for the result was the work in all regions to offset the automotive weakness with sales to other segments, and increased costs with improved productivity and price increases.

As a result, Gränges recorded an adjusted operating profit of SEK 374 million, 21 per cent higher than last year, despite lower sales volume. In fact, the profit is our strongest one ever in a single quarter. The improvement is a very important step in the right direction.

Very strong sustainability performance and raised ambition level
We’re very proud of our sustainability performance in 2022 so far. Our relentless focus on reducing our environmental impact led to a 14 per cent reduction in the carbon emissions intensity in the quarter. This in turn depended on good progress toward creating a more circular value chain, as evidenced by a sharp increase in the share of recycled aluminium we source and use – from 27 per cent to 35 per cent. Recycling is now quite an important part of our business model, which we pursue in partnership with our customers and suppliers. We’re also excited about our new sustainable product brand Gränges Endure, which will help our customers on their decarbonization journeys.

It’s important that our strong performance does not lead to complacency. We will continue to improve against our ambitious 2025 targets. In addition, we have committed to climate neutrality in 2040, and underlined this by joining the Science-Based Targets initiative.

Uncertain short-term market outlook
The short-term market outlook remains uncertain. Price increases, increasing interest rates and increased inflation expectations are likely to influence consumer demand negatively. This would in turn impact most industries, including Gränges and our customers.

The recent fall in raw material and energy prices, are further signs of lower demand ahead, but are also positive for our cost position and cash flow. On the other hand, we have as of yet seen few concrete signs of sequentially weakening demand, and are therefore relatively optimistic going into the third quarter.

In this environment, we need to be prepared for a weaker consumer demand. We also need continued focus on flexibility, and on improving the factors we can influence directly, such as mix, price, productivity and fixed cost.

Long-term plan now in place
In the face of short-term uncertainty, a long-term plan gives focus, direction and a sense of purpose. During the quarter, Gränges announced the long-term Navigate plan for sustainable growth. It has three steps: to restore profitability, to build a world-leading aluminium technology company, and to invest in sustainable growth.

The plan aims to capitalize on our major investments in recent years, and to benefit from the regionalization of supply chains, the electric vehicle revolution and customer demands for more sustainable solutions. We aim for a return to 15 per cent return on capital and 10 per cent yearly profit growth as soon as possible.

We also aim to build an even stronger and more sustainable company for the future. More information about the Navigate plan is found on page 4.

Strong team, high ambition level
Like all companies, Gränges depends on the outside world, and currently the outside world is very uncertain. But Gränges can also rely on strong teams in all three regions. Those teams have themselves set and are committed to the ambitious Navigate targets for growth, profitability and sustainability. For the rest of 2022, our ambition is to keep our market share and to continue year-on-year margin and sustainability improvements.

Our performance so far shows that this is possible. I have strong confidence in our ability to deliver strong results also going forward, both short-term and long-term.

It gives me great pleasure to be able to again present an all-time-high financial result and good progress against our sustainability targets, thanks to the outstanding efforts of our global team.

Jörgen Rosengren, President and CEO


Webcasted telephone conference
CEO Jörgen Rosengren and CFO Oskar Hellström will present Gränges’ half-year report 2022 at a webcasted conference call at 10.00 CEST, Friday 15 July 2022.

The webcast is available on www.granges.com/investors. To participate in the conference call, please call +46 8 5664 2651 (Sweden), +44 3333 000 804 (United Kingdom) or +1 631 913 1422 (United States). PIN code: 6978 8601#. Please call a few minutes before the conference call starts. The presentation will be in English.

MFN