First Quarter 2020 Earnings Conference 30 April, 2020 Todays - - PowerPoint PPT Presentation

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First Quarter 2020 Earnings Conference 30 April, 2020 Todays - - PowerPoint PPT Presentation

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First Quarter 2020 Earnings Conference 30 April, 2020 Todays presenters JOHAN OSKAR MENCKEL HELLSTRM CEO CFO Since: 2012 Since: 2011 Grnges since: 2004 2 First quarter 2020 Successful US expansion balanced slowing demand

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First Quarter 2020 Earnings Conference

30 April, 2020

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JOHAN MENCKEL CEO

Since: 2012 Gränges since: 2004

OSKAR HELLSTRÖM CFO

Since: 2011

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Today’s presenters

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First quarter 2020 Successful US expansion balanced slowing demand

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○ Very challenging market conditions

– Automotive market demand negatively impacted by COVID-19 pandemic

○ Successful ramp-up of new US capacity ○ Stable sales volume and reduced operating profit

– Sales volume declined by 1% – Adjusted operating profit SEK 210 million

○ Continued strong cash generation

– Adjusted cash flow before financing SEK 329 million

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Light vehicle production decreased by 23% while HVAC production increased by 5% in the first quarter

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End market production growth (YoY)

Source: Automotive light vehicle production - IHS Automotive, April 2020 HVAC unit shipments - AHRI, April 2020

End market Automotive HVAC Region Global Asia Europe Americas Americas Q1 2020 Q2 2020

  • Full year

2020

  • 23%
  • 30%
  • 11%
  • 25%

+5%

  • 19%
  • 47%
  • 30%
  • 60%
  • 19%
  • 22%
  • 26%
  • 72%
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Successful ramp-up of new US capacity partly offset demand reduction in Asia and Europe

Gränges sales volume (ktonnes)

Automotive HVAC & Other

Asia Europe Americas Gränges Group

8.5 7.8 45.9 51.7 54.4 59.5 2019 2020 20.0 16.7 2019 2020 45.0 38.2 45.9 51.7 90.8 89.9 2019 2020 16.5 13.7 2019 2020 ○ Significant decline in light vehicle production due to COVID-19 outbreak ○ Build-up of inventories at several customers ○ Significant decline in light vehicle production due to COVID-19 outbreak ○ Increased sales volume for HVAC & Other due to successful ramp-up of new production capacity in Huntingdon and Newport facilities ○ Automotive sales decreased by 15% ○ HVAC & Other sales increased by 13%

  • 17%
  • 1%

+9%

  • 17%
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Contingency plans have been activated to mitigate the impact on Gränges of the COVID-19 pandemic

○ Ensure health and safety of employees ○ Secure ability to operate production facilities ○ Secure supply of critical material

Continuity Cash Cost

○ Control working capital ○ Postpone capex ○ Ensure good liquidity and committed credit facilities ○ Adjust production capacity and manning ○ Reinforce general savings program ○ Conduct scenario planning

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Temporary plant closures have been implemented to adjust production capacity and take out cost

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Newport Huntingdon Finspång Salisbury Americas

○ Salisbury plant temporary

closed and employees temporary laid off as of April

○ Huntingdon and Newport

plants operating as normal Asia

○ Shanghai plant temporary

closed for two weeks in February

○ Normal operations as of

March Europe

○ Finspång plant reduced to

40% capacity and employees temporary laid off as of April Shanghai

Status – current operations

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Ongoing expansion activities have been delayed or actively postponed

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Newport Newport

○ Upgrade of third and final

rolling mill put on hold Konin

○ Acquisition awaiting

approval from competition authorities

○ Closing expected in second

half of 2020 Finspång

○ Site logistics improvement

project put on hold Konin Finspång

Status – expansion initiatives

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Successful ramp-up of new capacity in Huntingdon contributing to the best quarter so far in Americas

○ Huntingdon expansion project

finalized in fourth quarter 2019

○ Market share increase contracted

as of January 2020

○ Ramp-up of new capacity better

than plan – currently at 90%

○ Increased flexibility for optimizing

capacity utilization

Huntingdon

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Stable sales volume and lower adjusted operating profit driven by product mix in the first quarter

Sales volume and adjusted operating profit

209 362 371 463 541 687 933 1005 866 801 250 500 750 1,000 1,250 100 200 300 400 500 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Sales volume (ktonnes) Sales volume Adjusted operating profit

Q1 R12

2.3 1.4 2.7 2.0 1 2 3 4 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Adjusted operating profit per tonne (kSEK) Gränges Group Automotive HVAC & Other

Q1 R12

Adjusted operating profit per tonne

Adjusted operating profit (SEK million)

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Financial overview – first quarter 2020

SEK million Q1 Rolling 12 months 2020 2019 Change Mar 2020 Dec 2019 Change Sales volume (ktonnes) 89.9 90.8

  • 1.1%

346.4 347.3

  • 0.3%

Net sales 3,063 3,109

  • 1.5%

11,932 11,978

  • 0.4%

Adjusted operating profit1 210 275

  • 23.6%

801 866

  • 7.5%

Adjusted operating margin (%) 6.9 8.8

  • 2.0 ppt

6.7 7.2

  • 0.5 ppt

Adjusted operating profit per tonne (kSEK) 2.3 3.0

  • 0.7

2.3 2.5

  • 0.2

Operating profit 204 275

  • 25.9%

765 836

  • 8.5%

Profit for the period 133 184

  • 27.8%

549 600

  • 8.5%

Earnings per share2 (SEK) 1.76 2.44

  • 0.68

7.27 7.95

  • 0.68
  • Adj. cash flow before financing activities3

329 166 98.2% 1,118 1,048 6.7% Return on capital employed, R12 (%) 10.3 15.5

  • 5.2 ppt

Net debt / adjusted EBITDA, R12 2.8 2.2

(1) Adjusted for items affecting comparability (2) Diluted (3) Adjusted for expansion investments and acquisitions

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  • 3,465

345 66

  • 23
  • 58
  • 149
  • 275
  • 3,559
  • 4,000
  • 3,500
  • 3,000
  • 2,500
  • 2,000

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The net debt amounted to SEK 3.6 billion on 31 March

Change in net debt

Net debt 31 Dec 2019 Adjusted EBITDA Change in working capital Other

  • perating

items Maintenance investments Expansion investments & acquisitions FX &

  • ther

Net debt 31 Mar 2020

Net debt over adjusted R12 EBITDA

SEK million Adjusted cash flow before financing SEK 329 million 2.6 2.8

Note: Net debt including pension and leasing liabilities. As per 31 March 2020, total pension and leasing liabilities amounted to SEK 639 million.

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Outlook - second quarter 2020

○ The uncertainty around the COVID-19 pandemic

makes reliable forecasting very difficult

○ IHS estimates that global light vehicle production

will decrease by 47% in the second quarter

○ End-market mix change is expected to have a

negative impact on profitability

○ Medium to long term market fundamentals likely

to remain in Gränges’ favour post COVID-19 – Sustainability – Light weighting – Electrification

13 Source: IHS Automotive, April 2020

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Summary - first quarter 2020

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○ Very challenging market conditions ○ Successful ramp-up of new US capacity ○ Stable sales volume and reduced

  • perating profit

○ Continued strong cash generation

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Q&A

Johan Menckel, CEO Oskar Hellström, CFO

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