Interim Report January 1 - September 30, 2008
Value development
* Net asset value on October 30, 2008, was SEK 64 per share, a decrease of 53%
since the start of the year including reinvestment of the dividend. On September
30, 2008, net asset value was SEK 87 per share.
* The total return for the Class A shares was -47% for the first ten months of
the year.
* Consolidated earnings per share for the first nine months of the year were SEK
-48.81 per share (26.14).
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 one percentage
point.
CEO's Message
The crisis in the world's credit markets that has been unfolding for more than a
year intensified further during the third quarter. After the U.S. investment
bank Lehman Brothers went bankrupt on September 15, the storm gained more
momentum. During the final weeks of September and in early October, the global
credit markets came to a virtual standstill, with clear effects for the
investment plans of companies and households as well as for consumption. There
is an understanding that several structural problems must be solved, and I
welcome the vigorous initiatives that have been taken by central banks and
governments around the world to jumpstart the interbank market, which makes up
the actual hub of the credit system. Spreads on borrowing are on their way down,
and today there are signs that the markets are beginning to function again, but
they are still far from functioning normally. Concerns about repercussions of
the financial crisis on the real economy are now a reality with tangible
effects. The question is how deep and lasting the economic downturn will be.
However, during periods of great uncertainty, it is important to maintain
perspective. The world has experienced several difficult crises in the past, and
given time, the world economy - and thus also the stock markets - will reverse
their negative trend.
All of the world's stock markets have reacted negatively to the major,
prevailing uncertainty. The Swedish stock market has been one of the hardest
hit. Industrivärden's business concept is to be a long-term active owner in
listed companies. That is why the current turmoil has affected the development
of our net asset value. During the first ten months of the year, our net asset
value decreased by SEK 30 billion to SEK 25 billion - a drop of 55% since the
start of the year. During the first ten months the total return for
Industrivärden's Class A and Class C shares was -47% and -48%, respectively,
compared with -39% for the total return index. Shares in our major portfolio
companies have fallen sharply during the last twelve-month period. Earnings are
generally still good, albeit softening.
Industrivärden's debt-equity ratio was 30.0% on October 30. Our debt has
decreased during the year, but it is the denominator - the value of our
shareholdings - that has decreased by SEK 30 billion to 35 SEK billion. We have
locked in our interest rates at an average rate of 4.7%, a level that is widely
below the dividend yield of approximately 10% received at unchanged dividends.
In 2008 we have a positive cash flow, before net stock purchases, of SEK 0.5
billion after we have paid the dividend, all interest and overheads. Our loans
have average terms of 5 years. On the whole, we thus have good control over our
financial situation even going forward.
During the last ten-month period we have been restrictive regarding changes in
the equities portfolio. However, we have increased our holding in Volvo and now
own 7.5% of the votes and 3.0% of the capital. The upweighting in Volvo has been
financed through changes in the portfolio.
Our focus is now on ensuring that the companies that we are involved in as
active owners are able to handle the economic downturn and the difficult
situation on the credit markets. What really makes an impact over time are
well-defined and implemented strategies, good market positions and adept
management. In these respects I feel confident about the quality of our
portfolio companies.
