Gränges’ year-end report January–December 2021

Fourth quarter 2021

• Sales volume increased by 8.7 per cent to 112.3 ktonnes (103.3) and net sales to SEK 4,857 million (3,149). Excluding Gränges Konin sales volume increased by 1.8 per cent to 90.3 ktonnes (88.7) and net sales was SEK 4,018 million (2,761).
• Adjusted operating profit decreased to SEK 139 million (193) and adjusted operating profit per tonne was 1.2 kSEK (1.9). Excluding Gränges Konin, adjusted operating profit was SEK 107 million (175).
• Profit for the period decreased to SEK –23 million (106) and includes items affecting comparability of SEK –159 million (–27).
• Diluted earnings per share decreased to SEK –0.21 (1.19).
• Cash flow before financing activities adjusted for expansion investments and acquisitions was SEK 463 million (232).
• EcoVadis Platinum sustainability rating achieved, ranking Gränges top 1 per cent in the industry.

January–December 2021

• Sales volume increased by 39.4 per cent to 488.9 ktonnes (350.6) and net sales to SEK 18,130 million (11,008). Excluding Gränges Konin sales volume increased by 18.0 per cent to 396.5 ktonnes (336.1) and net sales was SEK 15,146 million (10,620).
• Adjusted operating profit increased to SEK 1,008 million (648) and adjusted operating profit per tonne was 2.1 kSEK (1.8). Excluding Gränges Konin, adjusted operating profit increased to SEK 852 million (630).
• Profit for the period increased to SEK 595 million (363) and includes items affecting comparability of SEK –175 million (–64).
• Diluted earnings per share increased to SEK 5.58 (4.21).
• Cash flow before financing activities adjusted for expansion investments and acquisitions was SEK 607 million (1,180).
• Net debt increased to SEK 3,643 million at 31 December 2021 (SEK 3,292 million at 31 December 2020), corresponding to 2.2 times adjusted EBITDA[1] (2.2 times at 31 December 2020[2]).
• The Board of Directors proposes a dividend of SEK 2.25 (1.10) per share, corresponding to 40 per cent (32) of the profit for the year.

[1] Adjusted for items affecting comparability, see Note 5 for further information.
[2] Includes adjusted EBITDA for acquisitions as a part of Gränges Group for 12 months, see alternative performance measures on page 24 for further information.

Comments by Gränges’ CEO Jörgen Rosengren:

Tough ending to 2021 – aiming for recovery

Strong market in general but weak in automotive. Cost increases.
As expected, the demand from automotive customers remained low in the fourth quarter as a result of semiconductor shortages. Also, more extensive planned maintenance than normal impacted sales volume negatively. However, most other markets showed continued strong demand. As a result, sales volume in the fourth quarter grew by 2 per cent excluding Gränges Konin.

After the summer, Gränges saw a large and accelerating cost increase in freight, energy and alloying elements. The effect on our profit was limited at first. But as the trend continued into the fourth quarter, it affected our operating profit negatively with approximately SEK 100 million. Price increases only partially offset these costs. As a result, our adjusted operating profit in the fourth quarter was reduced to SEK 139 million (193).

2021: A year of recovery…
Volume in 2021 grew by almost 40 per cent to 489 ktonnes, a new all-time-high record. Adjusted operating profit rebounded to SEK 1,008 million (648), also a record, mainly driven by improved volume. We developed new ways of working together, both internally and with our suppliers and customers to create value despite the continuing pandemic. It was especially encouraging to see the very good cooperation with Gränges Konin during its first year in the Gränges family. And operational performance was good, although dramatic swings in demand and supply required hard work from all involved.

…and of investment for the future
During the year we also continued our very ambitious investment in capacity, operational improvement and future growth. The large expansion program in Konin is now nearing its completion, and both the new recycling and casting center and rolling mill are ramping up as planned. The automated logistics solution in Finspång already shows good promise. In Gränges Americas, we have soon fully recovered from the unfortunate mill fire in May, and the investment in a new recycling and casting center is progressing well.

Even more important for the future are the large efforts to develop customer relations, technology and manufacturing technology for the fast-growing market for electric vehicles and battery technology. The first commercial deliveries to battery customers will begin in 2022, albeit at low volumes. It is encouraging to see a very strong interest from global customers in our capabilities in this area.

Good progress on sustainability
In 2021, we made good progress against our ambitious sustainability targets. Highlights include reducing our total carbon emissions, increasing our volumes of sourced recycled aluminium, emitting our first Sustainability-Linked Bond, and having more products with third-party verified sustainability information.

I’m also very proud that Gränges in the fourth quarter achieved a Platinum rating from the independent sustainability rating company EcoVadis, which placed us among the leading 1 per cent in our industry. During the fourth quarter, Gränges Finspång achieved Gränges’ first certification against the Aluminium Stewardship Initiative (ASI) Chain of Custody Standard, followed by Gränges Shanghai in the beginning of 2022. This means that we can now offer customers verified sustainability credentials demonstrating that our products are responsibly sourced and produced.

Price and volume actions drive gradual recovery during 2022
During the end of the year, the teams throughout Gränges have worked very hard to counter the effects of the dramatic changes in the world around us.

Analysts currently forecast the shortage of semiconductors to negatively impact automotive production during at least the first half of 2022. Gränges has therefore had full focus on sales to and production capacity for other market segments, where good demand is expected. We therefore expect volumes in the first quarter to increase sequentially to approximately the same level as in the strong first quarter of 2021.

Even more important, we have agreed with the majority of our customers on significant price increases and surcharges taking effect during the first half of 2022. Combined with a strong focus on cost and productivity in all our units, we expect these increases to offset a large part of the cost increases during the first quarter of 2022.

A growth plan in the making
Gränges has a good starting point: a global footprint, strong technical capabilities, solid long-term customer relations, industry leading sustainability performance and a strong team. On the other hand, the financial performance during 2021 was not satisfactory, especially against the backdrop of a generally strong economy.

However, the large investments made in the last few years are now beginning to bear fruit and will contribute fully from 2023. The timing is good, as the market outlook especially in the Americas and in Europe is favorable. Gränges is well positioned to take advantage of three strong current trends: the regionalization of supply chains, the electric vehicle revolution, and customer demands for more sustainable solutions.

Our main short-term priority is to secure volumes, price increases and cost productivity. But in parallel, we are also developing plans for the future. They aim at using our strengths and the promising market trends to restore our return on capital employed to its target range of 15–20 per cent, to drive growth, and to build an even stronger and more sustainable company for the future.

I’d like to take this opportunity to thank the whole Gränges team for an outstanding effort in 2021.

Jörgen Rosengren, CEO

Webcasted telephone conference
CEO Jörgen Rosengren and CFO Oskar Hellström will present Gränges’ year-end report for January–December 2021 at a webcasted conference call at 10.00 CET, Thursday 27 January, 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.