Interim Report January 1 - June 30, 2008
Value development
* Net asset value on July 31, 2008, was SEK 101 per share, including reinvested
dividends a decrease of 26% since the start of the year. On June 30, 2008, net
asset value was SEK 108 per share.
* The total return for the Class A shares was -20% for the first seven months.
* Consolidated earnings per share for the first half of 2008 were SEK -29.01
(34.16).
* During the first half of the year, Industrivärden purchased Class A shares in
Volvo for SEK 1.2 billion, after which Industrivärden's ownership amounts to
6.9% of the votes. The purchases were financed through sales of stock.
Significant events for portfolio companies
* SSAB's sale of IPSCO's tubular operations was completed, whereby SSAB's
debt-equity ratio was reduced from 150% to 42%.
* Sandvik is carrying out additional measures aimed at improving the
profitability of Sandvik Materials Technology.
* SCA's sale of its corrugated board business in the UK enhance profitability
and strengthens the company's focus on products that provide higher value-added.
Long-term return
* During the last ten-year period, the average annual return for
Industrivärden's Class A shares has exceeded the return index by 1 percentage
point.
CEO's Message
During the first seven months of the year, concerns about the economic
development have grown increasingly strong. The international credit crisis has
continued and can be expected to remain until clear signs appear that the U.S.
housing market has hit bottom. At the same time, sharply higher prices for oil,
commodities and agricultural products have fueled inflation expectations in the
West. All this comes at a time in which we are seeing ever-greater signs of a
distinct economic slowdown. In pace with sharply rising oil prices and higher
interest rates, concerns for stagflation have taken hold. Personally I do not
think the situation is quite as dark as it may seem; however, we will see a
slowing in the global rate of growth. The question is how strong this slowdown
will be.
Stock markets in the West have reacted strongly to these worries. Seldom has the
risk premium for owning stock been as great as now. This is reflected in the
fact that companies that are reporting performance beyond expectations and
positive forecasts have seen their stock prices drop upon releasing their
reports. Anxiety and thus volatility in the stock market can be expected to
continue until the economic scenario becomes clearer.
The companies in our portfolio that are exposed to the infrastructure
development that is taking place in emerging markets such as Asia, South America
and Eastern Europe are seeing continued good demand. However, the companies that
are more exposed to consumer products have reported a softening in demand. On
the whole, company descriptions of future demand are more positive than
reflected by the market.
During the period January-July, Industrivärden's net asset value including
reinvested dividends fell by SEK 13.9 billion, or 26%, which was 8 percentage
points worse than the return index. This is due to the fact that several of our
portfolio companies have had a sharper price decline than the stock market so
far this year. At the same time, we know that at current prices, the expected
dividend yield for our portfolio will be high. Industrivärden posted a negative
total return for the period, -20% for the Class A shares and -22% for the Class
C shares, compared with -18% for the return index.
During the first seven months we bought Class A shares in Volvo for SEK 1.2
billion and sold Class A shares in SSAB for SEK 0.8 billion. These transactions
are a prime example of how we continuously make minor changes in our portfolio
and can thereby strengthen our positions in our portfolio companies.
Through the additional purchases of shares we have made in Volvo during the
year, our ownership now amounts to just under 7% of the votes in the company. I
am convinced that, based on its leading positions and established economies of
scale, Volvo has favorable conditions for continued profitable growth.
A debate is currently being conducted on whether owners with various classes of
stock should have the right to the same price per share in bid situations. Some
argue that voting rights lack value when a party makes a bid for a company and
that the market's pricing should therefore be disregarded. We and many other
class-A shareholders do not share that view. Clearly, share classes with
different voting power are traded at different prices. Disregarding this in
connection with a bid would seem to be a peculiar questioning of the market's
right and ability to price various goods at different values. With today's
rules, there is scope to achieve this in particular. It is then an entirely
different matter that most bids end up at the same price or at the same premium
expressed as a percentage, for the different stock classes. In such case it is
the market that has set the price and not the rules.
Last year and during the first half of 2008, Industrivärden has had a good
influx of new shareholders. In turbulent times like these, it is important to
keep an eye on the fundamentals. Industrivärden has a portfolio of well-managed
companies that are well-positioned in their respective markets. Given the
historical profitability and growth that we have seen in these companies, there
is every reason to expect the same also in the future. I therefore see it as a
good sign that increasing numbers of investors see the strength of our
investment philosophy and the favorable performance this has given our
shareholders over time.
Contact Information
Anders Nyrén, President and CEO, tel. +46 8 666 64 00
Sverker Sivall, IR, tel. +46 8 666 64 19
Carl-Olof By, Executive Vice President, tel. +46 8 666 64 00
Martin Hamner, CFO, tel. +46 8 666 64 00
