Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Achieved an all-time high quarterly adjusted operating profit of SEK471 million, a 5% increase year-on-year.
- Sales volume grew by 9% year-on-year, reaching 131,000 tons.
- Continued successful decarbonization efforts, with recycled aluminum now approaching 50% of input material.
- Strong performance in specialty packaging and other niche markets, contributing significantly to new business gains.
- Record sustainability performance, with a 30% reduction in carbon emissions intensity compared to 2017.
Negative Points
- Muted demand in core segments like automotive and HVAC, leading to subdued market growth.
- Continued price pressure and wage inflation impacting profitability, despite productivity improvements.
- Lower average fabrication prices affecting net sales growth, which increased only by 2% compared to a 9% increase in sales volume.
- Increased depreciation costs by SEK6 million due to completed expansion projects.
- Negative impact from changes in foreign exchange rates, amounting to SEK15 million.
Q & A Highlights
Q: Can you provide more details on the expected utilization rate for the Shandong partnership in 2025 and 2026?
A: We haven't closed the deal yet, but we see it as a 150,000-ton capacity opportunity. We expect the business to be profitable in 2025, offsetting the dilution of the minority share, and contributing positively to EPS.
Q: Why has the Shandong factory been idle if the Chinese auto market is strong?
A: The competitive situation in China is tough, with many plants operating at low utilization. We believe our team will manage the factory better, generating growth and profitability.
Q: Do you expect fabrication price pressure to continue in the second half of the year?
A: We don't forecast SOP pricing due to its complexity. However, any further price pressure will be offset by productivity improvements.
Q: Are there any delays in the planned expansions to be commissioned at the end of this year?
A: No significant delays. We remain on track with the timelines previously communicated.
Q: Can you provide more details on the growth in the automotive segment in Asia?
A: Growth in the automotive segment in Asia was between 5% and 10% year-over-year in Q2.
Q: What is the potential for further profitability improvement in Granges Americas?
A: There is still potential to run more volume through our American operations. However, maintaining a 20% return on capital employed is already a high achievement in our industry.
Q: Can you elaborate on the new business gains in specialty packaging and other niches?
A: We have extended our scope and capabilities, particularly in higher gauges in Granges Americas and specialty packaging in Europe. This has contributed to our growth.
Q: What is the current demand from HVAC customers in Granges Americas?
A: The demand continues to be more or less as planned, with the production season ongoing. Hot weather in the US is good for HVAC sales, which bodes well for demand.
Q: How confident are you in the quality of the Shandong facility and your ability to ramp it up?
A: The technical quality of the asset is very high. The challenge lies in building up the quality of the organization, processes, and customer relationships, which will take time.
Q: Do you expect the new business gain momentum to continue improving in the third quarter?
A: We expect the market and growth to be similar to the second quarter, with new business gains contributing to this stability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
