- The total return for the first half of the year was 18% for the Class A shares and 19% for the Class C shares, compared with 10% for the SIXRX total return index.
- Net asset value on June 30, 2015, was SEK 175/share, representing an increase of 14% including reinvested dividend since the start of the year. Earnings per share for the first half of the year were SEK 21.43 (11.63).
- Fredrik Lundberg was elected at the Annual General Meeting on May 6, 2015 as new Chairman of the Board.
- The holding in Kone was sold for SEK 1.2 billion, generating an annual total return of 15% for the holding period.
CEO’s message
Moderate growth with large geographic differences
Halfway into the year, indications are strong that global GDP growth will remain moderate for the full-year 2015. The IMF projects global growth in 2015 at 3.5%, which is a marginal rise compared with 2013 and 2014. At the regional level, however, the changes are greater. Overall, growth in the developed economies is expected to strengthen, while growth in emerging markets is expected to be lower than previously. In the U.S., the recovery is continuing, with greater activity and lower unemployment. Indications are also strong for a gradual normalization of monetary policy. Europe is still struggling with major challenges, even though the weakening of the euro against the U.S. dollar and dollar-related currencies is helping export companies. The market for corporate credit is also improving, which is a precondition for increased investment and future growth. A recovery in Europe will likely require support from the European Central Bank for a longer period of time. A very topical issue is the Greek referendum and its impact on the country's possible exit from the currency union and the payment of debts. Another dark cloud is the UK’s skepticism to deepened integration with the EU. Performance on the whole is better in northern Europe, while the southern European economies continue to struggle with substantial problems. Several countries have taken strong measures. One example is Spain, where GDP growth for 2015 is expected to amount to 4% and unemployment is falling steadily. China’s economic slowdown has continued during the year. Support measures that have been carried out and announced point to a stabilization of China’s growth during the second half of the year.
Work on change for a stronger Industrivärden
Two intensive months have now passed since I took office as acting CEO of Industrivärden. For me this has been a very positive reunion, since I previously served for more than eight years in the management of Industrivärden’s investment operations. Industrivärden has an equity portfolio of very high quality, and committed and competent employees. At the same time, recent events and turbulence have shown that the company is facing several major challenges. My assignment is to begin a long-term change process aimed at strengthening Industrivärden and its ability to create shareholder value. In short, it is a matter of finding different ways to build trust in Industrivärden as a serious, perceptive and value-creating asset manager. To achieve this, we are striving to strengthen and clarify our corporate governance model, deepen our cooperation and dialog with other owners, and broaden our network. Parallel with this, work is under way to recruit a new CEO for Industrivärden, who the Board hopes to be able to present during the third quarter. The work on developing and strengthening Industrivärden is in full swing, and it will be the new CEO’s task to drive this work forward.
Broadened network and new chairman at Sandvik
A central concern in our role as an influential, active owner is to participate in the nomination work ahead of the election of board members of our portfolio companies. Without a well composed board, it is hard to execute the best strategies. It is therefore gratifying that we have been able to play a role in the nomination of Johan Molin, who was elected as Chairman of the Board of Sandvik in May. We believe that Johan is highly suited to lead and develop the work of Sandvik’s board. The nomination of Johan Molin is also an expression of a stated ambition to broaden Industrivärden’s network of highly qualified board members.
Overall favorable performance by portfolio companies
The portfolio companies develop overall well, and several of the companies that are working with strategic review, cost-cutting programs and management changes have had good growth in value during 2015. In October Martin Lundstedt will take office as President and CEO of Volvo. Martin has had a long and successful career at Scania and has a depth of knowledge about the heavy trucks market. SSAB’s integration with Rautaruukki is continuing, and the work on realizing synergies is proceeding according to set goals.
Favorable performance during first half of year
During the first half of the year net asset value, including reinvested dividends, grew by 14% to SEK 75.5 billion, or SEK 175 per share. On June 30 the value of the portfolio was SEK 87.8 billion, and Industrivärden’s debt amounted to SEK 12.3 billion, corresponding to a debt-equities ratio of 14%. Industrivärden’s stock generated a favorable total return of 18% for the Class A shares and 19% for the Class C shares, compared with 10% for the total return index.
Sale of holding in Kone
Industrivärden’s sales of stocks during the first half of 2015 amounted to SEK 2.0 billion, net. The largest sale was the divestment of the entire holding in the Finnish company Kone, for SEK 1.2 billion. During the time Industrivärden held Kone stock, the investment generated an annual total return of 15%.
Continued positive earnings performance for trading
Industrivärden’s trading operation showed continued favorable performance, with a half-year profit of SEK 131 M (130). It is gratifying that we can take advantage of our market knowledge in this way to create additional shareholder value.
Organizational changes and major one-off costs
As a result of the changes I have described above, we carried out several organizational changes within Industrivärden during the first half of the year. Several executives and certain other employees have left Industrivärden, which has given rise to large one-off costs – mainly salary costs during the notice period and for social security charges and pensions. We have also gone through all consultancy and partner contracts, resulting in the conclusion of certain undertakings. Of total management costs of SEK 171 M during the first half of the year, approximately SEK 90 M consists of one-off costs.
Following a tumultuous year in many respects, we have now entered into a more stable work phase. I am convinced that as a result of the actions we have taken and the change work that is currently under way, we are well equipped to build an even stronger Industrivärden.
Stockholm, July 6, 2015
Bengt Kjell
