Slide 1: Capital Markets Day
CAPITAL MARKETS DAY
Slide 2: Johan Menckel, CEO
Johan Menckel CEO
Slide 3: Gränges today
Gränges today ○ 1,600 employees ○ Listed on Nasdaq Stockholm ○ Net sales of SEK 11 billion ○ Production capacity of 420,000 20% Global market share in rolled products for brazed aluminium metric tonnes heat exchangers ○ Adjusted operating profit of SEK 933 million 4
Slide 4: Gränges has a strong track record of growth
Gränges has a strong track record of growth Sales volume (ktonnes) 400 350 300 Americas acquired 250 200 Americas 150 100 Asia 50 Europe 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 5
Slide 5: Gränges' share price has outperformed the market since the listing in October 2014
Gränges’ share price has outperformed the market since the listing in October 2014 Index 240 220 Gränges 200 180 160 140 OMX Stockholm 120 100 80 60 2015 2016 2017 2018 6
Slide 6: Today's agenda
Today’s agenda Time Program Speaker 08:00 Registration and coffee 08:30 Update on goals and strategy Johan Menckel, CEO Kent Schölin, Drive growth through innovation SVP Research & Innovation Torbjörn Sternsjö, SVP Technology Electric vehicles & Business Development 09:50 Q&A Session 10:10 Coffee br
Slide 7: Today's agenda
Today’s agenda Time Program Speaker 10:30 Create value from sustainability Sofia Hedevåg, VP Sustainability Gränges Asia Colin Xu, President Asia Gränges Americas Patrick Lawlor, President Americas Financial update Oskar Hellström, CFO 12:15 Q&A Session 12:25 Closing remarks and summary Johan Mencke
Slide 8: Update on goals and strategy
UPDATE ON GOALS AND STRATEGY Achievements since launch and strategic direction for the future
Slide 9: Gränges – a leading position on the global market
Gränges – a leading position on the global market Headquarter in Stockholm ○ Production facilities in Sweden, China and the US ○ Research & Innovation centres in Sweden and China 10
Slide 10: Focused product portfolio
Focused product portfolio Sales volume per end customer market 2017 – Total sales volume 373 ktonnes Niche markets 28% 46% Automotive industry 26% HVAC industry HVAC = Heating, ventilation and air conditioning. 11
Slide 11: A strong position in the value chain
A strong position in the value chain Material Heat exchanger End customer Aluminium producers producers producers markets 12
Slide 12: A modern car can have more than ten different heat exchangers
A modern car can have more than ten different heat exchangers ○ Evaporator AC ○ Active chiller ○ Compartment heater (for battery cooling) ○ Passive chiller (for battery cooling) ○ Hybrid system radiator ○ Charge air cooler ○ Condenser AC ○ Engine radiator ○ Engine oil cooler ○ Transmission oil coole
Slide 13: Multi-layer cladding adds unique properties and enables tailored solutions
Multi-layer cladding adds unique properties and enables tailored solutions ~200 active alloy combinations ~3,000 active articles Clad tube Clad fin Unclad fin Clad plate 14
Slide 14: Market position
Where we are today Americas Europe Asia Global Trend Auto 2 1 1 1 (Brazed) Market position HVAC 1 1 1 (Brazed) (Brazed) Other 1-2 15
Slide 15: End customer markets characteristics
End customer markets characteristics The automotive industry The HVAC industry ○ High barriers to entry ○ High demands on operational efficiency ○ High technical requirements ○ Delivery precision ○ Customized products ○ Strong customer relations ○ Long-term relationships ○ Geographical proximity ○ G
Slide 16: Global trends – industry growth drivers
Global trends – industry growth drivers Implications for the industry ○ Artificial intelligence, autonomous Urbanization driving and electrification of the automotive industry ○ Connectivity and shared economy Digitalization ○ New marketing channels and supply chains Limited resources ○ Energy effic
Slide 17: Success factors
Success factors Attention to Leading-edge Operational customer needs technology excellence 18
Slide 18: Vision
Vision To transform the world through innovative, aluminium engineering 19
Slide 19: Business concept
Business concept We support our customers with research and innovation, product development, and technical support during the product’s lifecycle. Thereby, Gränges helps create smaller, lighter and more designable materials that increase economic efficiency and reduce environmental impact. 20
Slide 20: Gränges' 2020 goals
Gränges’ 2020 goals ○ Grow significantly above the market rate ○ Become the market leader in all geographical regions ○ Maintain good and sustainable profitability 21
Slide 21: Gränges' 2020 strategy
Gränges’ 2020 strategy Drive growth Create value Increase efficiency Grow presence through from through continuous through structural innovation sustainability improvements expansion 22
Slide 22: 2020 goal and strategy – achievements: drive growth through innovation
Gränges’ 2020 goal and strategy – achievements ○ New organization for Gränges Research & Innovation Drive growth through innovation ○ Increased number of development projects with external parties ○ 165 patents, with further 73 patent applications pending ○ Launch of TRILLIUM® Lean in the autumn of
Slide 23: 2020 goal and strategy – achievements: create value from sustainability
Gränges’ 2020 goal and strategy – achievements ○ A carbon footprint study was conducted to provide Create value a baseline for reduced emissions from sustainability ○ Increased focus on cross-audits to improve safety and share of best practice ○ Completed training in Gränges’ Code of Conduct ○ Updat
Slide 24: 2020 goal and strategy – achievements: increase efficiency
Gränges’ 2020 goal and strategy – achievements Increase efficiency ○ Increased capacity in the Americas by 5% through continuous ○ Improved quality and reduced number of claims improvements by 25% has contributed to higher productivity ○ Reduced energy consumption by 2% ○ Increased share of internal
Slide 25: 2020 goal and strategy – achievements: grow presence
Gränges’ 2020 goal and strategy – achievements Grow presence ○ Acquisition of Noranda’s downstream operations in the United States in 2016 – added nearly 200,000 tonnes through structural in capacity and sales of SEK 4.7 billion yearly expansion ○ Announced plans for expansion in Huntingdon (USA) ○
Slide 26: Gränges has more than doubled in size
Gränges has more than doubled in size Sales volume 373 ktonnes 221 Americas Sales volume 160 ktonnes 23 59 66 Europe 78 86 Asia 2014 2017 27
Slide 27: More diversified product portfolio
More diversified product portfolio Sales volume 373 ktonnes 28% Other 26% HVAC Sales volume 160 ktonnes 2% 6% 92% 46% Automotive 2014 2017 28
Slide 28: Strong performance against targets 2017
Strong performance against targets 2017 Net debt over Growth ROCE adjusted EBITDA Dividend SEK +4.6% 1 16.7% 1.8 3.002 35% Target: Target: Target: Target: 30–50% above market 15–20% 1.0–2.0 times of net profit (1) Organic sales volume growth in 2017 (2) The Board of Director’s proposal for the 2018
Slide 29: Focus 2018
Focus 2018 ○ Continue to assess growth opportunities in all regions ○ Increase efforts in R&I and business development related to solutions for electrical vehicles ○ Implement the new global and group-wide sustainability framework ○ Continue to implement and communicate Gränges’ model for operationa
Slide 30: Conclusion
Conclusion o Gränges has delivered on its goals and strategy since the IPO in 2014 o Strong position in market niches serves as a foundation for future growth o R&I to play an even more important role in the future o An integrated sustainability work and operational excellence will ensure that we ma
Slide 31: Drive growth through innovation
DRIVE GROWTH THROUGH INNOVATION Kent Schölin SVP Research & Innovation
Slide 32: Innovation part of Gränges' 2020 strategy
Innovation part of Gränges’ 2020 strategy Increase efficiency Grow presence Drive growth Create value from through continuous through structural through innovation sustainability improvements expansion 33
Slide 33: Increased focus on Research & Innovation
Increased focus on Research & Innovation Global R&I centre ○ Finspång, Sweden ○ Global development of Regional R&I centre materials and solutions ○ To be established, for brazed heat USA exchangers and new technologies ○ Materials and solutions for stationary ○ Regional development heat exchangers f
Slide 34: Gränges R&I – highly educated employees worldwide
Gränges R&I – 60 highly educated employees worldwide Metallurgists Chemists Metallographers Physicists Technicians 35
Slide 35: Continued rapid pace of innovation
Continued rapid pace of innovation Number of patent families UACJ 124 Gränges 50 Kobe 47 Mitsubishi 43 Aleris 31 December 31, 2017 Arconic 21 Hydro 21 ○ 52 patent families Constellium 18 ○ 165 patents Novelis 12 Showa 8 ○ 73 patent applications pending Huafon 6 Note: Published patent families with p
Slide 36: Annual technical seminars in Asia
Annual technical seminars in Asia 2016 in Nanjing, China 2017 in Pune, India 400 participants consisting of customers 80 participants consisting of customers, and leading industry representatives suppliers and OEMs 37
Slide 37: Innovative products for heat exchanger applications
Innovative products for heat exchanger applications ○ TRILLIUM® – a disruptive technology ○ Multi-layer products – more layers for improved brazeability and corrosion resistance to support further down- gauging ○ Strong sagging resistant fins – advanced processing giving improved properties ○ Strong
Slide 38: New technologies for the future
New technologies for the future ○ Investment in Getek for spray forming of TRILLIUM® billets in 2017 ○ Possibilities for development of high performing alloys for HEX and other applications ○ Aluminium with high content of other metals ○ Aluminium with added non-metallic materials – metal matrix com
Slide 39: Video
Video 40
Slide 40: Less work, more capacity
Less work, more capacity TRILLIUM® Solid Flux containing braze metal TRILLIUM® Lean 41
Slide 41: Well suited for most components in the customer applications
Well suited for most components in the customer applications Welded tubes Folded tubes Tube plates, stamped plates, drawn plates Inserts, turbulators Headers Side plates 42
Slide 42: Conventional brazing process
Conventional brazing process Brazing Drying Fluxing Degreasing 43
Slide 43: Brazing with TRILLIUM
Brazing with TRILLIUM® Brazing No drying No fluxing No degreasing 44
Slide 44: Added value from every angle
Added value from every angle DESIGN FREEDOM More complex constructions possible PERFORMANCE IMPROVEMENT Lower weight loss and improved resistance to corrosion PROCESS OPTIMIZATION Simpler, faster production process ENVIRONMENT, HEALTH AND SAFETY COST SAVINGS Streamlined process, environmentally- con
Slide 45: Electrical vehicles
Electrical vehicles GRANGES
Slide 46: Customer case – Raal
Customer case – Raal “ The main advantages we have seen with TRILLIUM® technology are reduced labour and production costs. We also achieve much better fluxing and brazing quality and uniformity, especially in complex structures.” Cornelia Cocian Chemical Engineer, Raal 47
Slide 47: Conclusion
Conclusion ○ Increase efforts in R&I ○ Leading development in heat exchanger materials ○ Large potential in other advanced aluminium applications with spray forming investment ○ Development in cooperation with customers 48
Slide 48: Electric vehicles
ELECTRIC VEHICLES Torbjörn Sternsjö SVP Technology & Business Development
Slide 49: Hybrids and battery electric vehicles will make up a significant share of the market in 2025
Hybrids and battery electric vehicles will make up a significant share of the market in 2025 BEV & HEV CAGR Light vehicle production 9% Adaptation of battery electric (million units) vehicles and hybrids LVs CAGR 45% 1% speeding up 120 2% 109 116 ○ Technical innovation 102 ○ Changing consumer prefer
Slide 50: Growth in hybrids and battery electric vehicles will affect share of powertrains
Growth in the number of hybrids and battery electric vehicles will affect share of powertrains significantly… 2016 2025 ○ Regional differences 6% – Europe and Asia will have the largest 14% change in powertrains Asia 34% 81% 55% ○ Gränges has a strong presence in both 11% Europe and Asia – R&I cente
Slide 51: New requirements and system designs for thermal management
…and creates new requirements and new system designs for thermal management Internal combustion Hybrid Battery electric engine vehicle electric vehicle vehicle Examples of heat exchangers Radiator Charge air cooler Radiator Charge air cooler Cooling plate Condenser Evaporator Condenser Evaporator Co
Slide 52: Battery powered cars have significant need for thermal management
Battery powered cars have significant need forthermal management Key challenges Operating temp (°C) ○ Thermal management for 25-40 Battery performance and lifetime ○ Cooling and heating 0 100 50-80 Powertrain ○ Cooling only electronics and e-motor ○ Intermittent heat generation 0 100 ○ Cooling and h
Slide 53: Three main cooling system solutions for batteries
Three main cooling system solutions for batteries Air Liquid Refrigerant cooling cooling cooling o Air forced through the battery o Liquid circulated through the o Refrigerant liquid channelled pack, by a fan battery pack through battery cooling plates o Air dissipates the heat o Liquid cooled by A/
Slide 54: Chinese manufacturers of electric vehicles adopting active thermal management
Chinese manufacturers of electric vehicles are adopting active thermal management solutions o BYD mainly uses liquid o NIO ES8 debuted in o Byton unveiled its concept cooling system for battery December 2017, uses car at CES 2018 thermal management, liquid cooling for its including its JV brand with
Slide 55: Automotive OEMs position in value chain is being challenged
Automotive OEMs position in value chain is being challenged by electrification/battery players Automotive Tier-3 Tier-2 Tier-1 OEM Tier-structure Parts and material Component supplier System supplier Vehicle assembly Battery Forward integration for manufacturers’ value capture value chain Future mai
Slide 56: Dynamics in the value chain could impact the thermal management supply chain
Dynamics in the value chain could impact the thermal management supply chain Automotive Tier-3 Tier-2 Tier-1 OEM Tier-structure Parts and material Component supplier System supplier Vehicle assembly Thermal Aluminium brazing A/C system, management Heat exchangers material Engine cooling value chain
Slide 57: Electrification creates new opportunities in brazed material development
Electrification creates new opportunities for Gränges in brazed material development Volume index of brazed material in different powertrains Volume forecast 2016-2030 Brazed material Index demand (ktonnes) 2.0 1,400 Full HEV 2% Volume Growth 1.8 1,200 1,132 CAGR 1.6 1,061 1.4 BEV 1,000 960 871 BEV/
Slide 58: Pipeline of new materials ready for launch to meet needs from electric vehicles
Pipeline of new materials ready for launch to meet new needs from electric vehicles New portfolio of materials being launched… …to meet customers new needs ○ TRILLIUM® Lean ○ Battery cooling plates ○ Further down gauging ○ Chillers ○ New stamping and tube designs ○ Charge air coolers 59
Slide 59: Building on core strengths and working across value chain
Gränges building on core strengths and working across value chain to benefit from electrification Thermal management value chain getting more and more integrated and connected Tier-3 Tier-2 Tier-1 OEM Parts and material Component supplier System supplier Vehicle assembly Early adaptation to market t
Slide 60: Conclusion
Conclusion Heat exchanger material demand ○ Battery powered cars have significant need for thermal management ○ Exponentially growing markets in early phases of its product lifecycle ○ Gränges well positioned Technology shift to capture growth ○ No mainstream “solution” apparent in current and next
Slide 61: Create value from sustainability
CREATE VALUE FROM SUSTAINABILITY Sofia Hedevåg VP Sustainability
Slide 62: Sustainability part of Gränges' 2020 strategy
Sustainability part of Gränges’ 2020 strategy Increase efficiency Grow presence Drive growth Create value from through continuous through structural through innovation sustainability improvements expansion 63
Slide 63: Strong global push for sustainable development
Strong global push for sustainable development • Today’s world a challenging one • Strong global push for sustainable development • Increased focus on sustainability will benefit both our planet and our citizens • Also offers a competitive edge • How can Gränges turn this opportunity into success? 6
Slide 64: Aluminium as the green metal with unique properties
Aluminium as the green metal with unique properties Light but strong High corrosion resistance and durable Versatile Impermeable Energy saving and highly recyclable 65
Slide 65: Gränges' main objective is to maximize value creation
Gränges’ main objective is to maximize value creation – For our business and stakeholders …contributes positively to a more sustainable society in large, which… …makes us a … helps to secure trusted partner to Gränges’ long-term customers, competitiveness and employees and growth, which… other stake
Slide 66: Stakeholders' input has been guiding our sustainability priorities
Stakeholders’ input has been guiding our sustainability priorities Gränges’ sustainability materiality matrix Very high 1 Material topics 4 1 Occupational health and safety Importance to Gränges’ stakeholders 2 Recycled aluminium 3 Ethics and anti-corruption 3 High 7 4 Emissions to air and water 12
Slide 67: Our updated global sustainability pillars and topics
Our updated global sustainability pillars and topics ENSURE RESPONSIBLE & SECURE ETHICAL RUN SUSTAINABLE BUILD DIVERSE & HIGH- DEVELOP SUSTAINABLE SUSTAINABLE SOURCING BUSINESS PRACTICES OPERATIONS PERFORMING TEAMS PRODUCT OFFERINGS ○ Responsible ○ Ethics and anti- ○ Climate ○ Career and ○ Eco-respo
Slide 68: Ensure responsible and sustainable sourcing
Ensure responsible and sustainable sourcing WE WILL ensure that our o Conducted audits of strategic suppliers to suppliers maintain high ensure compliance to Gränges’ sustainability standards by sustainability standards enforcing strict sustainability criteria in supplier sourcing agreements and par
Slide 69: Secure ethical business practices
Secure ethical business practices WE WILL be a reliable and o Participates in the UN Global Compact since ethically sound partner in all October 2016 our business relations and in the societies in which we o Completed training in Gränges’ Code of conduct our business. We never accept corruption Cond
Slide 70: Run sustainable operations
Run sustainable operations WE WILL strengthen o Reduced the energy use by 2% per tonne operational efficiency and continuous improvements in o Increased the share of internal recycled our operations (energy, aluminium in production by 3% materials), reduce emissions to air and water and provide a sa
Slide 71: Run sustainable operations – Energy recovery project in Finspång
Run sustainable operations – Energy recovery project in Finspång 72
Slide 72: Build diverse and high-performing teams
Build diverse and high-performing teams WE WILL ensure that our o Focused on building “One Gränges”; our people are motivated and corporate culture committed and that we provide an open, diverse and o Established a global HR Council non-discriminatory workplace where employees can realize their full
Slide 73: Build diverse and high-performing teams – Family Days in Shanghai
Build diverse and high-performing teams – Family Days in Shanghai 74
Slide 74: Develop sustainable product offerings
Develop sustainable product offerings WE WILL enhance the o Initiated efforts to establish environmental environmental performance performance deliverables into our R&I process of our products through development of innovative o Conducted a carbon footprint study to provide and eco-responsible offer
Slide 75: The carbon footprint study
The carbon footprint study – In accordance with GHG protocol Supply chain Gränges’ operations Customers • Scope 3: Indirect emissions • Scope 1: Direct emissions • Scope 3: Indirect emissions from transports and from Gränges’ sites from use of Gränges’ products production of purchased • Scope 2: Ind
Slide 76: Main material production accounts for more than 90 per cent of total impact
Main material production accounts for more than 90 per cent of total impact Total CO2e emissions 2017: 4.6 Mtonnes Direct CO2e emissions & indirect CO2e emissions from purchased electricity and heat 1% 3% 4% [tonnes CO2e/tonnes product] 1% 1.2 1.0 0.8 91% 0.6 0.4 Material production (Scope 3) 0.2 Tr
Slide 77: Turning the opportunity into success
Turning the opportunity into success – Shared benefits for our business and stakeholders 78
Slide 78: Conclusion
Conclusion o Global push for sustainable development brings opportunities o Aluminium with its unique properties contributes positively to sustainable development o Continued integration of sustainability aspects across our business o Long-term objective is to create value from sustainability and se
Slide 79: Gränges Asia
GRÄNGES ASIA Colin Xu President Asia
Slide 80: Gränges Asia
Gränges Asia 81
Slide 81: Gränges has presence in major Asian markets
Gränges has presence in major Asian markets Distribution of sales volume in Asia in 2017 Rest of Asia Korea China India Production facility Sales office and technical support Research and innovation center 82
Slide 82: Strong historical track record – sales volume driven by Chinese automotive growth
Strong historical track record – sales volume driven by rapid growth in Chinese automotive market Gränges sales volume in Asia 2004-2017 Sales volume (ktonnes) 86 78 81 75 76 70 65 61 43 40 36 27 14 17 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 83
Slide 83: Asian market has outperformed the global growth in the automotive industry
Asian market has outperformed the global growth in the automotive industry Light vehicle production in Asia Rolled aluminium heat exchanger material in Asia (Million units) Sales volume (ktonnes) 444 461 398 409 413 352 348 379 50 49 45 44 43 41 2010 2011 2012 2013 2014 2015 2016 2017 Source: Gränge
Slide 84: Gränges has gained a leading position among customers as a high quality supplier
Gränges has gained a leading position among customers as a high quality supplier Gränges position in clad materials in Asia Gränges Asia Price index Competitor D 2.0 Tech Competitor F service Competitor E Competitor D 1.8 Gränges Asia 1.6 Delivery Solution lead-time provider Competitor A Competitor
Slide 85: Gränges holds a market share of 23 per cent in clad products in Asia
Gränges holds a market share of 23 per cent in clad products in Asia Clad product market shares Others Gränges Asia 23% Competitor C Competitor F Competitor D Competitor E 86
Slide 86: Success factors
Success factors Customer tailored Market-driven Quality reputation solutions innovation Operational Technical support Strong culture excellence 87
Slide 87: Gränges Asia awarded Best Performance Supplier by Hanon China
Gränges Asia awarded Best Performance Supplier by Hanon China ○ Hanon Group has been one of Gränges’ strategic and largest global key accounts for many years ○ Gränges was awarded for high quality, outstanding performance and good team work ○ The event was held on 14 December 2017 88
Slide 88: Focus on fast growing heat exchanger applications
Focus on fast growing heat exchanger applications Charge air cooler Folded tube Chiller ○ Conversion to folded tube ○ Is becoming standard to ○ Critical application in all design in Commercial replace multiport electrical vehicle systems vehicles extrusions in condensers and evaporators ○ Estimated
Slide 89: Added resources and competence to focus on EV trend
Added resources and competence to focus on EV trend and explore new opportunities Battery pack ○ Battery air cooling is the common solution – trend is towards liquid cooling ○ Stamping + brazing design looks promising for lighter weight and better cost position Cooling plate ○ Designing and prototyp
Slide 90: Innovative solutions provide growth opportunities for non-auto business
Innovative solutions provide growth opportunities for non-auto business ○ Windmill market becomes new growth engine for vacuum brazed heat exchanger materials ○ 30% power capacity newly installed in 2017 ○ Establish material standard for the industry together with leading OEMs and suppliers ○ Awarde
Slide 91: R&I competences strongly focused to serve Asian customers
Research & Innovation competences strongly focused to serve Asian customers ○ Integrated part of the customer offering ○ Product management ○ Yearly technical forums ○ Application center complementing product development ○ Development projects for electrical vehicles 92
Slide 92: R&I plays more important role in business development
Research & Innovation plays more important role in business development Customer case ○ Harsh standards on corrosion – needed new solution ○ R&I team initiated new trials of process innovation ○ New solution was developed with creative ideas of material process change ○ Optimization of brazing proce
Slide 93: Continuous efforts to improve productivity and address cost competitiveness
Continuous efforts to improve productivity and address cost competitiveness Total unit cost improvement (%) 100 97 ○ Operational excellence 91 91 – Productivity – scale 84 – Metal management – Quality programs – Process yield improvement 2013 2014 2015 2016 2017 – Sourcing optimization – Headcount f
Slide 94: Improved metal management has contributed to better cost position
Improved metal management has contributed to better cost position, but still room for further improvements Achieved ○ Better sorting operation ○ Dynamic cast house planning Clad scrap recycle rate last five ○ Slab outsourcing optimization years increased more than ○ New scrap categories Potential ○
Slide 95: Annual quality program leads to significant improvement
Annual quality program leads to significant improvement and helps maintaining premium quality reputation ○ Risk oriented Quality system – Focus on effectiveness 72 ○ Process capability – Know-how built in process – Sophisticated monitoring and % inspection systems – Automation ○ Prevent defects – Sm
Slide 96: Digitalization will continue to drive operational excellence and efficiency
Digitalization will continue to drive operational excellence and efficiency ○ On our way to be less labor intense Level 5 APQP >> Order processing >> Planning >> WO and maximize contribution by engineering competence Level Production and process database - Integration of all ○ Achieved high level of
Slide 97: Stable and engaged workforce
Stable and engaged workforce Employed Turnover Annual OPI over 10 years 5 < % > 50% > 1,500 98
Slide 98: External factors that will impact Gränges' strategic agenda in Asia
External factors that will have an impact on Gränges’ strategic agenda in Asia Macro trends Competition Customers Supply New entries 99
Slide 99: Grow with healthy profitability and remain the leading player
Grow with healthy profitability and remain the leading player Drive growth Create value Increase efficiency Grow presence through from through continuous through structural innovation sustainability improvements expansion ○ Focus on development ○ Zero accident target ○ Autonomation/ ○ M&A to expand
Slide 100: Conclusion
Conclusion o Gränges Asia holds a strong market position through a well-defined value proposition o The success factors have enabled Gränges Asia to deliver value and staying competitive o The success factors will remain important to achieve healthy and sustainable performance in coming years 101
Slide 101: Gränges Americas
GRÄNGES AMERICAS Patrick Lawlor President Americas
Slide 102: Aluminum Markets
Aluminum Markets
Slide 103: Strong macroeconomic outlook in the United States
Strong macroeconomic outlook in the United States Positive outlook for both Light Vehicle Sales Forecast Employment & Consumer Confidence Million units CAGR 4% % Index 17.6 18.2 10 100 15.9 10.6 9 Consumer Confidence 90 8 80 2009 2013 2017 2022 Source: FRED University of Michigan Consumer Sentiment
Slide 104: Trade legislation impacting aluminium imports into the United States
Trade legislation impacting aluminium imports into the United States Foil case Sheet case Section 232 general tariffs of 10% on all aluminium • March 15, 2018, U.S. ITC • US Commerce imports voted unanimously that Department self-initiated unfairly-traded Chinese ADD/CVD • March 8, 2018, President i
Slide 105: U.S. imports of aluminum foil from China
U.S. imports of aluminum foil from China Preliminary Subsidy Margins tonnes 19,000 18,253 18,000 Preliminary Dumping 17,000 Margins 16,000 15,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,592 2,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr M
Slide 106: Gränges Americas – efficient manufacturing facilities
Gränges Americas – efficient manufacturing facilities with a track record of consistent performance 200 Huntingdon, TN Salisbury, NC Newport, AR Franklin, TN ktonnes capacity Gränges Americas Footprint Huntingdon, TN Newport, AR Salisbury, NC 160 ktonnes idle 40 ktonnes 107
Slide 107: Gränges Americas serves niche segments totaling 12 per cent of flat rolled market
Gränges Americas serves niche segments totaling 12 per cent of the flat rolled market Sales volume per end use market – excluding imports # Market position in North America Non heat exchanger material Heat exchanger material Other HVAC #1 15% Automotive heat shields 3% 9% Transformer windings #1 48%
Slide 108: Gränges Americas is a highly focused niche player in the North American market
Gränges Americas is a highly focused niche player in the 5.2 million tonnes North American market ktonnes 1,777 920 525 524 623 194 590 1% 1% 2% 4% Other Imports 14% 12% 14% 24% China Imports 5% Domestic supply 24% 26% 65% Gränges Import Gränges Americas 97% 96% 59% 35% 82% 2% 59% 33% 28% 14% 3% Can
Slide 109: Significant opportunity for growth as proposed legislation targets sheet, foil and Auto HEX
…with significant opportunity for growth as proposed legislation targets sheet, foil and Auto HEX ktonnes 1,777 920 525 524 623 194 590 1% 1% 2% 4% Other Imports 14% 12% 14% 24% China Imports (47) 5% 24% Domestic supply 26% 65% (150) Gränges Import (239) Gränges Americas 97% 96% 59% Opportunity Chin
Slide 110: Americas market growth of 4 per cent expected in 2018
Americas market growth of 4 per cent expected in 2018 Market Q1 2018 outlook FY 2018 outlook Automotive +2% +4% HVAC +7% +6% Container / Packaging +2% +2% Source: IHS Automotive, December 15, 2017 BSRIA Global HVAC Industry Report, January 22, 2018 Aluminum Foil Containers Manufacturers Association,
Slide 111: Continued strong performance in 2017
Continued strong performance in 2017 Volume (ktonnes) ○ Adjusted operating profit was +12% SEK 268 million in 2017 (87) 217 ○ Cashflow from operations amounted 208 Gränges to SEK 302 million in 2017 (183) 194 30 28 import 22 Gränges 180 187 US production 172 2015 2016 2017 Note: 2016 Post-Acquisitio
Slide 112: Strong and long term relationships with customers
Strong and long term relationships with customers 50% ○ 2018 price increases in place on the other 50% of volume ○ Sales volume limited by capacity of volume under constraints – expect low, single contract until end 2019 digit growth in 2018 113
Slide 113: North American HVAC market facts
North American HVAC market facts North American HVAC market ○ HVAC market grew by 7% in 2017; by manufacturer (by value) projected at +6% in 2018 (20M units) Other Daikin ○ Main market drivers are housing 25% 26% starts, consumer confidence, and environmental legislation ○ 95% of homes built after 2
Slide 114: Focused investments to achieve our growth strategy
Focused investments to achieve our growth strategy Huntingdon plant expansion o Domestic unclad automotive heat exchanger production o Foil growth above market to maintain leading share o New capacity available in second half of 2019 Potential JV with Mitsubishi Aluminum o Enable automotive heat exc
Slide 115: Gränges will invest USD 110 million to expand Huntingdon plant
Gränges will invest USD 110 million to expand capacity and capabilities in the Huntingdon plant ○ Investment in Huntingdon, Tennessee to meet growing demand on automotive heat exchanger materials, HVAC, and foil ○ Production capacity to increase from 160 to 200 ktonnes ○ The expansion will create 85
Slide 116: Gränges and Mitsubishi Aluminum to form a joint venture in North America
Gränges and Mitsubishi Aluminum to form a joint venture in North America ○ Gränges has signed an LOI with Mitsubishi Aluminum Co., Ltd to form a joint venture in North America for manufacturing of advanced aluminium products for brazed heat exchangers and selected niche industrial applications ○ Bot
Slide 117: Trade legislation presents an opportunity to serve light gauge foil customers
Trade legislation presents an opportunity to once again serve light gauge foil customers Market evolution timeline Next steps (to be investigated) ktonnes 137 ○ Restart idled light gauge mill 132 Gränges in Salisbury 127 1 121 21 112 117 5 6 Other ○ Upgrade the Newport plant 15 10 Imports 20 25 ○ Ra
Slide 118: Conclusion
Conclusion o Strong foundation for growth o Strategy supports group targets o Niche market diversification o Timing of US investments critical 119
Slide 119: Financial update
FINANCIAL UPDATE Oskar Hellström CFO
Slide 120: Gränges has a strong track record of growth
Gränges has a strong track record of growth Sales volume by region 2005-2017 400 373 Sales volume (ktonnes) 300 239 200 186 164 176 152 159 160 149 132 105 106 96 84 93 100 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Europe Asia Americas Americas acquired 121
Slide 121: Earnings have improved by 350 per cent since 2011
Earnings have improved by 350 per cent since 2011 Adjusted operating profit 2011-2017 Adjusted operating profit per tonne 2011-2017 Adjusted operating profit per tonne (SEK thousand) +724 SEK million (+350%) Adjusted operating profit (SEK million) 1,000 933 4 3.6 800 687 3 665 2.5 600 600 541 463 2
Slide 122: Earnings improvement driven by volume, productivity, US acquisition and FX
Earnings improvement driven by volume and productivity increase, US acquisition, and FX tailwind Adjusted operating profit 2011 vs 2017 1,000 268 933 Adjusted operating profit (SEK million) 258 -160 800 56 -15 600 317 400 209 200 4.3% 8.2% 1.4 2.5 0 Operating Volume FX Price Produc- Deprec- Acquired
Slide 123: Gränges has established itself as one of the most profitable companies in the industry
Gränges has established itself as one of the most profitable companies in the industry Aluminium rolling suppliers’ operating profit margin 2016-2017 14% 13% Adjusted operating profit margin (%) 12% 11% 10% 10% 10% 10% 8% 8% 7% 6% 6% 5% 5% 5% 4% 4% 4% 4% 4% 3% 3% 2% 2% 0% Kaiser AMAG Gränges Novelis
Slide 124: Improved earnings successfully converted into cash
Improved earnings successfully converted into cash Adjusted operating profit to cash flow before financing conversion 2011-2017 1000 150% 129% Adjusted operating profit and cash flow 121% 111% 111% before financing (SEK million) 750 Cash conversion (%) 81% 100% 61% 500 50% 250 0% 0 -250 -50% 2011 20
Slide 125: Cash generation supported by working capital reduction
Cash generation supported by working capital reduction Working capital days 2011-2017 125 112 96 95 Working capital days 100 92 92 75 63 60 50 25 2011 2012 2013 2014 2015 2016 2017 Note: Working capital days calculated based on rolling 3 months average working capital and rolling 3 months sales 126
Slide 126: Strong debt repayment capacity
Strong debt repayment capacity Net debt to EBITDA ratio 2013-2017 3.0 Refinancing Refinancing for acquisition for IPO of Gränges Americas 2.0 Target Net debt to EBITDA range 1.0 0.0 -1.0 -2.0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2013 2014 2015 2016 2017 127
Slide 127: Strong financial position provides flexibility while balancing business risk
Gränges’ strong financial position provides flexibility while balancing business risk ○ Sustaining capex to ○ Reliable and ensure operational predictable excellence, improve dividend productivity, and Sustaining payments reduce costs Dividend capex Strong balance sheet for ○ Exposure to auto- shareh
Slide 128: Capital expenditure to increase following decision to expand in Huntingdon
Capital expenditure to increase following decision to expand in Huntingdon Capital expenditure 2011-2017 Capital expenditure guidance 500 250% ○ Long term sustaining capex Capital expenditure over depreciation (%) 80-90% of depreciation Capital expenditure (SEK million) 400 200% ○ 2018 sustaining ca
Slide 129: Track record of increased value creation
Track record of increased value creation Return on capital employed (ROCE) vs weighted average cost of capital (WACC)1 2011-2017 20% 15% ROCE & WACC (%) Value 10% 5% 0% 2011 2012 2013 2014 2015 2016 2017 ROCE WACC (1) WACC pre-tax, 2011-2014 Orkla Group WACC for Gränges 10.7%, 2015-2017 Gränges Grou
Slide 130: Increased value creation has benefitted shareholders
Increased value creation has benefitted shareholders Gränges earnings per share and dividend 2014-2017 Total shareholder return 2014-20181 10 100% 150% Earnings and dividend per share (SEK) 125% Total shareholder return (%) 8 80% Dividend ratio (%) 100% 6 60% 52% 4 40% 50% 34% 2 20% 0% 0 0% SIX retu
Slide 131: Conclusion
Conclusion o Strong track record of growth and earnings improvement o Top profitability among industry peers o Effective capital management supporting cash conversion and debt repayment o Solid balance sheet allowing for dividends and investments in future growth o Increasing value creation and retu