2008 Year-end Report. Highlights 2008 - 4th Quarter . Drastic global volume decline in automotive industry with other industries following Temporary plant closures and inventory adjustments Unprecedented volume decline having a very big impact on Höganäs results
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Highlights 2008 - 4th Quarter • Drastic global volume decline in automotive industry with other industries following • Temporary plant closures and inventory adjustments • Unprecedented volume decline having a very big impact on Höganäs results • Restructuring - personnel reduction • Cash-flow focus • Fuel cells R&D grant
Highlights 2008 - Full Year • All time high 1st half year - volumes and results • Automatic redemption programme - 740 MSEK distributed to shareholders • Kobelco NA iron powder acquisition • Consolidation of operations in Brazil • Weakening markets in Q3 • Unprecedented pace and magnitude of decline in Q4
Market development Global sales and production of Cars, HCVs and LCVsQuartely rolling 12 months • Q4 2008 unprecedented fall in production of cars and LCVs: • WE big 5 -26% • US -28% • Japan -15% • Inventory adjustments • Other industries following Production Sales Source: Global Insight UK
Sales 2008 - Europe • Europe: Net Sales -7% • Increasingly weaker 2nd half year in line with the market - not only automotive • Inventory reductions • Growth in Russia • Short-term outlook bleak • Restructuring • Investing for the future - Power of Powder Centre (Components Prototype Centre) HöganäsPrototypeCentre
Sales 2008 - Asia • Asia: Net Sales +13% • Volume growth in China/Taiwan/SEA • Weak Q4 in Components across the region in line with the market • Q4 growth in Consumables driven primarily by welding, oxygen absorbers and hot-bags • Restructuring • Customer R&D project activity extremely high - very positive prospects for conversion once the market turns
Sales 2008 - Americas • Americas: Net Sales +14% • Volume growth in NA as well as SA • Höganäs market share in North America 30% + • Q4 very weak • Short-term outlook bleak • Restructuring • Kobelco NA acquisition progressing well
Results 2008 - Components • Net sales 4 465 MSEK +5% • Very strong 1st half year - very weak 4th quarter • Customer temporary plant closures and inventory adjustments • Volume decline -5% in line with the market, except share gain in North America • Operating Income 402 MSEK +14% • Very strong up to end Q3 • Price increases • Losing on metals up to end Q3 - gaining in Q4 • Currency gains in Q4 • Q4 -33% sales volume decline • Energy costs • Restructuring costs Components • ~70% of group sales • 75% of this segment is for the automotive industry • Customers: • Suppliers of components to equipment manufacturers. • These producers supply components to Automotive, Power Tool, Compressors, Electrical motors and others.
Results 2008 - Consumables • Net Sales 1 638 MSEK +4% • Strong growth trend coming to temporary stop in Q4 • Customer temporary plant closures and inventory adjustments • Asia still growing in Q4 - welding segment remaining stable • Operating Income 159 MSEK -27% • Metals impact: • abnormal metal inventory gains in 1st half 2007 • inventory write-down in Q4 2008 • Currency gains in Q4 • Restructuring costs • Falling nickel prices give positive metal hedge results, then subsequently inventory losses, and vice versa Consumables • ~30% of group sales • major part of this segment is non-automotive applications • Customers: • Metallurgical and Chemical process industry, producers of Welding, Filter and Friction consumables, users of Fusion, Cutting and Coating technology, food & feed enrichment and others.
2008 CEO summary • Geared up for a good year • Changes to senior leadership • Pricing • Cost leadership • Lean alloys launch to eliminate alloy metal price escalation problem • Strategic acquisition • Prototype Centre investment to shorten speed-to-market • Nov-Dec decline - new priorities
Outlook 2009 • Q4 decline continuing into early 2009 • Recovery will come, but timing uncertain • Asia is likely to recuperate first • Metal prices and currency volatility seen through 2007-2008 is likely to continue • Short term results impact
Managing through the downturn • Restructuring • Prices • Cash-flow focus • Invest in R&D for the future
Fuel cells - faster commercialization • Grant obtained from Vinnova for project partners Höganäs - GETT - KTH (Stockholm University of Technology) • Innovative membrane (electrolyte) enables substantially lower working temperature in fuel cell • Eliminating the major disadvantage of current solid oxide fuel cells • Membrane using Höganäs powder based filter technology • Gas diffusion layers on both sides of the core are Höganäs powder based stainless steel filters • Platform for business in the area of environmentally friendly energy systems
Innovative electrical motors • Launch of innovative motor family based on Höganäs Soft Magnetic Composites (Somaloy®) by world leading electrical motor manufacturer, Hitachi • Competing with conventional motors: • Small - half the size. • Efficient • Competitive cost • Easy assembly • Easy recycling • Targeted for application areas where direct drive & high torque is required: • Home appliances • Industrial • Automotive • Production start mid 2009 • Platform for further big scale R&D partnerships