Gränges’ interim report January–March 2023

First quarter 2023

• Sales volume decreased by 5.2 per cent to 120.2 ktonnes (126.7) and net sales decreased to SEK 5,968 million (6,080).
• Adjusted operating profit increased to SEK 401 million (331) and included energy cost compensation of SEK 32 million.
• Adjusted operating profit per tonne increased to 3.3 kSEK (2.6).
• Operating profit was SEK 401 million (331).
• Profit for the period increased to SEK 254 million (240).
• Diluted earnings per share increased to SEK 2.38 (2.25).
• Cash flow before financing activities adjusted for expansion investments and acquisitions was SEK 287 million (–1,224).
• Financial net debt was SEK 3,897 million at 31 March 2023 (SEK 3,882 million at 31 December 2022), corresponding to 1.8 times adjusted EBITDA (1.9 times at 31 December 2022).
• Total carbon emissions intensity (scope 1+2+3) was 9.1 tonnes CO2e/tonne (9.1).
• The share of sourced recycled aluminium increased to 37.6 per cent (31.0).

Comments by Gränges’ CEO Jörgen Rosengren:
Good start to the year
 
Operating profit on record level on the back of sales volume recovery
In the first quarter, sales volume recovered as expected from the seasonal dip in the fourth quarter but was down 5 per cent relative to the strong first quarter of 2022.
 
In Gränges Americas, quarterly market demand was significantly lower than last year. HVAC customers, as expected, shifted focus from securing supply to managing inventory and cash in a softer market. In packaging, domestic customers struggled with low-priced imports of finished products. We were able to partly mitigate this by gaining new business. Sales volume was unchanged from the previous quarter, but about 6 per cent lower than in the first quarter of 2022. Nevertheless, good work on price and productivity led to improved operating margin and profit.
 
In Gränges Eurasia too, demand was lower than in 2022. In Europe, we saw good demand from automotive customers as supply chains started to clear up, but lower demand in other sectors than in the very strong first quarter of 2022. In Asia, we had good growth supported by order backlog despite lower vehicle production than last year. Eurasia’s sales volume recovered significantly from the fourth quarter and was almost level with the very strong first quarter of 2022. We fully compensated cost increases with productivity and price, and we also benefited from energy cost compensation. As a result, operating margin and profit improved significantly.
 
In summary, sales volume recovered as expected despite weak demand in the quarter. By fully compensating for year-on-year cost increases with productivity and price, we reached an adjusted operating profit of SEK 401 million. This is our best quarterly result ever, and one we’re very proud of achieving in such challenging external circumstances.
 
Significantly improved cash flow
In the first quarter, we normally experience a seasonal build-up of working capital. This year, we mitigated this by successful working capital reduction actions, which improved our cash flow significantly. The good cash flow further strengthened our balance sheet in line with our financial targets, which brings flexibility and stability for the future.
 
Important advances in Navigate build sustainable growth
To reach our ambition of carbon neutrality by 2040, we need much more recycling. In the first quarter, we inaugurated our new recycling and casting centre in Huntingdon, which is now in full use. This and other improvements resulted in all-time high recycling volumes and share. In the quarter, we also shifted to renewable electricity supply in Asia, leading to record-low emissions from our own energy use. Despite these achievements, total carbon emissions intensity was the same as in 2022, mainly due to the phase-out of low-carbon primary aluminium supply from Russia.

In Asia, access to low-carbon aluminium is scarce, leading to higher carbon emissions than elsewhere. We are therefore very proud to have agreed on a joint venture with Shandong Innovation Group to build a recycling and casting operation in Yunnan in China. It will secure access to low-carbon primary aluminium and renewable energy. Once fully operational, the new partnership will enable a dramatic reduction of our carbon footprint and allow us to meet customer demand for sustainable aluminium solutions in Asia.
 
We continued our work to meet the growing worldwide demand for battery components, which are critical to the electrification of transportation and other industries. In Asia, sales started already in 2022 and continued to grow in the first quarter. In Europe, production is now up and running in the new facility for battery cathode foil. We also announced a new investment in January, which will double our cathode foil capacity by 2025. In Gränges Americas, construction of our battery foil facility continued as planned. We keep investing in our team and continue to see a very high level of interest from leading global customers.
 
Stable outlook despite uncertain market
Market uncertainty remains high in all regions. However, Gränges has shown that flexibility, productivity, and good commercial execution can help offset market fluctuations.
 
In the second quarter, we expect continued good momentum with automotive customers but softer demand in other markets. We also intend to flexibly meet demand variation with new business growth. In total, we currently expect sales volume to remain stable at or slightly below the strong second quarter of 2022. We aim to continue to offset year-on-year cost increases with productivity improvement and price increases, and we expect a positive impact on cost and efficiency of the new recycling and casting centre in Huntingdon.
 
Best-ever quarter thanks to strong team effort
This year has started with our best-ever quarterly adjusted operating profit, and the fifth consecutive quarter of year-on- year profit improvement. We have also taken important steps forward in the execution of our Navigate plan for sustainable growth, and gotten closer to our ambitious targets for growth, profitability, and sustainability. Delivering on this level despite challenging markets does not happen by chance. Growth and innovation, operational improvement and building recycling solutions and partnerships are the result of commitment, teamwork, and dedication.
 
I would like to thank our customers worldwide for their continued support, and the whole Gränges team for a very good start to 2023.
 
Jörgen Rosengren, President and CEO
 

Webcasted presentation
CEO Jörgen Rosengren and CFO Oskar Hellström will present Gränges’ interim report for the period January–March 2023 at a webcasted conference call at 10.00 CEST, Thursday 27 April 2023.

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.