Year-End Report 2007
- Net asset value on December 31, 2007, was SEK 54,837 M (58,511), or SEK 142
per share (151), a decrease of SEK 3,674 M. Including reinvested dividends, net
asset value decreased by 3%, which was in parity with the return index. Thus far
in 2008, net asset value has decreased by SEK 6,924 M, and was SEK 47,913 M (SEK
124 per share) on February 12, 2008.
- Consolidated net income for 2007 totaled SEK -1,942 M (SEK -5.03 per share),
compared with SEK 11,621 M for 2006 (SEK 30.09 per share).
- The total return in 2007 was -14% for the Class A shares, mainly due to a
higher discount to net asset value.
- During the year, share purchases totaled SEK 8,834 M, of which SEK 4,216 M was
in Volvo A. Shares worth a total of SEK 2,275 M were purchased in SSAB's rights
issue. Shares were sold for SEK 2,124 M.
- Short-term trading generated a profit of SEK 142 M (173) during the year,
which amply covered management costs.
- The Board proposes a dividend of SEK 5.00 per share (4.50), an increase of
11%.
CEO'S MESSAGE
2007 and the start of 2008 have been characterized by a volatile stock market
trend and anxiety in the financial markets. 2007 began with a continued rise in
the stock market as a result of a strong global growth scenario, but ended with
negative returns due to a deflated credit and liquidity bubble in the
international financial market. This gave rise to pervasive concerns that the
subsequent credit tightening would lead to a recession in the U.S., with a
negative impact on the entire world economy.
Our net asset value and stock performed well up until July, after which they
dropped sharply. Net asset value including reinvested dividends ended the year
down 3%, which was on a par with the return index. However, our stock performed
below the index due to a doubling in the discount to net asset value, from 10%
to 20%. The total return was -14% for the Class A shares and -15% for the Class
C shares, compared with -3% for the return index. Over the long term, however,
Industrivärden's stock has been a good investment and has generated substantial
excess returns compared with the return index.
Industrivärden's business mission is to generate favorable returns for its
shareholders by serving as an active owner and thereby contribute to growth in
value in a concentrated portfolio of well positioned companies. Examples of this
can be seen in a number of activities that were carried out in 2007 by our
portfolio companies.
SSAB acquired the North American steel manufacturer IPSCO. The acquisition
enhances SSAB's ambition to continue developing its strategy to be a dominant
global player in quenched and high strength steels.
Handelsbanken sharpened its focus on growth of its core business through the
sale of SPP. The deal further strengthens the bank's already favorable capital
base.
SCA continued its work on developing its business, entailing the sale of its
U.S. packaging business and the acquisition of Procter & Gamble's European
tissue operation.
Ericsson made a couple of significant acquisitions in 2007 to strengthen its
strategic base in its infrastructure business as well as in the new Multimedia
business unit. Ericsson performed well as a company, especially compared with
its competitors. However, last year was a disappointment for us as a
shareholder, since the company's stock dropped by more than 40%. Our view is
that, with its leading position, Ericsson is well equipped to meet future
demand for communication solutions for speech, data, music and images.
In 2007 we bought stocks for SEK 8.8 billion and sold for SEK 2.1 billion - thus
net purchases of SEK 6.7 billion. Among other measures, we invested SEK 2.3
billion in SSAB's rights issue and increased our holding in Volvo by SEK 4.2
billion. Major sales were of Tandberg Television, Sandvik redemption shares and
Isaberg Rapid.
As a result of share purchases made during the year, our interest-bearing net
debt increased by SEK 6.4 billion to SEK 11.0 billion, bringing our debt-equity
ratio to 16.6% at year-end. Most of our debt portfolio is long-term, and the
interest rates on our new loans are fixed for an average of five years. The
additional interest expense is less than the dividends generated by our new
purchases of stock in SSAB and Volvo.
Our short-term trading in 2007 generated a profit of SEK 142 M (173), which is
satisfactory considering the high volatility in the market during the second
half of the year. This covered our management costs by a good margin.
For 2007 the Board has proposed raising the dividend by 11% (29%) to SEK 5.00
per share (4.50). This proposal entails that we once again will have achieved
our goal of paying a dividend that exceeds the average for the Stockholm Stock
Exchange at the same time that we achieve a balance in our operating cash flow.
Through active ownership in internationally active quality companies, most of
which are leaders in their respective industries, I believe that we have good
prospects to create value and continue delivering competitive returns to our
shareholders.
Anders Nyrén
