- The total return for the first nine months of the year was 15% for the Class A shares and 12% for the Class C shares, compared with 4% for the SIXRX total return index.
- Net asset value on September 30, 2015, was SEK 159/share, representing an increase of 4% including reinvested dividend since the start of the year. Earnings per share for the first nine months of the year were SEK 6.15 (7.54).
- Helena Stjernholm new President and CEO from September 1, 2015.
CEO’s message
Continued development of Industrivärden for greater value creation
Just over a month has passed since I took office as CEO of Industrivärden. I am very excited to have been entrusted with leading and developing the company at the same time that I have a great deal of respect for the task ahead. Industrivärden is a great company with committed employees and a portfolio of first-rate companies. It is now my task to continue developing Industrivärden into a long-term asset manager with even greater focus on enhancing growth in net asset value. As support in this work I have a background of experience in active ownership and investment activity from many years in the private equity business. Our work going forward will rely on a clear business focus, structured advocacy processes, focus on results and close follow-up, but also on effective cooperation with different stakeholders. A good team embodies strong transformational power. Toward this end I can also contribute an outside perspective. I am now working intensively on immersing myself in Industrivärden and in the portfolio companies’ operations in parallel with my efforts to meet with a broad range of stakeholders. This is important work that has strengthened me in my conviction that we have a solid foundation to build further on.
The transformational work that is now in progress can be summarized in three points: a stronger corporate governance structure, refined work models, and deeper collaborations.
Industrivärden has taken numerous steps towards strengthening its governance structure. The board nomination process is now headed by representatives from Industrivärden’s board or by me as CEO – people who represent the company’s highest decision-making bodies with respect to ownership issues. Conducting preparatory work for the nomination of board members ahead of AGM elections is one of our most important ownership duties. It is against this background that I have taken the role as nominating committee chair for Handelsbanken, SCA, Skanska and SSAB. Another important change is that we have taken a structured approach to expanding the base of potential candidates for nomination to board elections. Parallel with this, a clear intention has been communicated to avoid personal constellations, etc. on the boards of the companies in which Industrivärden is an active owner.
The second development point involves strengthening our work models in order to be a more focused asset manager and active owner. This work has now been started.
To be a relevant actor with power to act we must have highly developed collaborative relationships with our most important stakeholder groups. The third development point is therefore to deepen our collaboration with other owners of our portfolio companies and other stakeholders, and to broaden our networks.
Greater uncertainty over global growth
Development of the world economy remains staggered, with considerable regional differences between the major emerging market economies and several of the developed countries. Although growth in countries like China and India is relatively good, it continues to be on a downward slope, while several Western countries like the U.S. and the UK are performing well. The euro area is also showing growth, but here, too, the regional differences are great. The recovery in Europe and the U.S. is fragile, however, and is partly reliant on stimulus measures.
As a result of falling commodity prices and lower business activity, global trade activity is decreasing, mainly due to weaker growth in emerging markets.
A key factor at present is the extent to which China succeeds at halting its economic slowdown and further stimulating its economy without risking an overheating situation in the equity or real estate markets. China’s leadership has the tools to implement structural reforms and adapt finance and monetary policy, but it is a tough balancing act.
The U.S. is performing well, but the anticipated interest rate hike in September did not transpire, which indicates some uncertainty about the economic trend. There are also fears in the U.S. over the weakened economic development in China and other important emerging market countries.
Owing to uncertainty over global economic development combined with mounting geopolitical tensions, the stock markets are showing major volatility. The Stockholm Stock Exchange has also been shaky, and since hitting a high point in April, it has fallen by nearly 16%.
Varied price trend in Industrivärden’s equities portfolio
Industrivärden’s shareholdings have generated varying returns during the last three-year period. SCA, Handelsbanken, Skanska and ICA Gruppen have performed well compared to the return index. Ericsson has performed slightly lower than the stock market as a whole. Volvo, Sandvik and SSAB have clearly been underperformers, with weak value development.
Value development
During the first nine months, net asset value grew to SEK 68.5 billion, or SEK 159 per share, representing an increase of 4% if one includes reinvested dividend. During the same period, sales of stocks net, were SEK 2.2 billion. On September 30 the portfolio was worth SEK 81.0 billion, and net debt was SEK 12.4 billion, corresponding to a debt-equities ratio of 15%. The total return for the Class A and Class C shares was 15% and 12%, respectively, compared with 4% for the total return index.
Ongoing transformational work in some of the portfolio companies
The portfolio companies are currently in various phases. Volvo and Sandvik are working with extensive strategic development and cost-cutting programs, and both companies have new CEOs who are taking office during the fourth quarter. At SSAB, work on realizing all of the synergies from the acquisition of Rautaruukki is proceeding according to plan with the goal of annual savings of SEK 1.4 billion from the second half of 2016.
As a long-term investor it is important that we closely monitor our portfolio companies and that we have a clear understanding of them from both the company and investment perspectives. Combining these perspectives is a central challenge in our business as a long-term asset manager.
The long-term work on strengthening Industrivärden’s focus on shareholder value continues, and I look forward to leading this endeavor.
Stockholm, October 5, 2015
Helena Stjernholm
