- The total return for the first half of the year 2016 was -4 % for the Class A shares and -3 % for the Class C shares, compared with -4 % for the total return index (SIXRX).
- Net asset value on June 30, 2016, was SEK 69.3 billion, or SEK 160/share, which is unchanged since the end of 2015 and an increase of 3 % including reinvested dividend.
- Earnings per share during the first half of the year 2016 were SEK 6.77 per share.
- The debt-equities ratio as per June 30, 2016, was 14 %, a decrease since the year-end 2015 of 1 %-point.
- SSAB’s rights issue, where Industrivärden has subscribed its share of SEK 0.6 billion, strengthens the company’s long-term value potential.
- During the first half of the year 2016, stocks were sold net for SEK 0.9 billion.
CEO’s message
Great uncertainty after Brexit referendum
The day after Britain’s referendum we woke up to a new reality, with the British people voting in favor of an exit from the European Union. The result of this referendum has sent a shock wave of turbulence through the financial markets. On the first day of trading after the referendum, the Stockholm Stock Exchange lost 8%, but has since recovered.
The uncertainty surrounding the consequences of the referendum’s outcome in political circles and on the real economy will likely remain for a long time. The UK is an important market for several of our portfolio companies, which will now have to work with somewhat changed conditions going forward.
Personally I feel that a cohesive and well-working EU is important for building competitiveness in Europe and thereby for creating favorable conditions for European companies in the ever-growing global competition. Hopefully the situation that has now arisen will compel the EU to focus on the most central issues facing its citizens.
Net asset value growth better than the stock market during the first half
On June 30, 2016, net asset value amounted to SEK 69.3 billion, or SEK 160 per share, which is unchanged since the end of 2015 and an increase of 3% including reinvested dividend. During the same period, we sold stocks for a net value of SEK 0.9 billion. At the end of the period, the portfolio value was SEK 80.5 billion, and net debt was SEK 11.2 billion, corresponding to a debt-equities ratio of 14%. This represents a decrease in the debt-equities ratio by 1 percentage point during the first half of the year. The total return for Industrivärden’s Class A and C shares was -4% and -3%, respectively, compared with -4% for the return index.
During the first half year our investments in Sandvik, SSAB and Volvo – companies that are in the midst of major change processes – performed better than the stock market. The same applies for SCA and Skanska. Handelsbanken and ICA Gruppen was in line with the market. Ericsson, however, performed below the market.
Varied performance for the portfolio companies
The Swedish economy remains strong, which is having a positive effect above all on the portfolio companies with a large share of local business. In many cases the more internationally active portfolio companies are encountering weak demand. The tough market situation is especially tangible for companies that manufacture and sell investment goods. Low capacity utilization and uncertain future growth prospects are damping the willingness to invest in
several sectors. Companies are dealing with this situation through cost-cutting, continued automation, innovation and an increased service/aftermarket content. As a long-term active owner we attach great importance to ensuring that our portfolio companies have a keen ability to adapt, that they capitalize on future opportunities, and that they have a favorable financial position and flexibility.
Several of Industrivärden’s portfolio companies are showing stable development, which is illustrated by the fact that they have altogether generated a favorable dividend yield for their shareholders. At mid-year the dividend yield for the portfolio companies was 3.8%.
SSAB’s rights issue strengthens long-term value potential
As a long-term active owner in SSAB we subscribed for our portion of the rights issue of in total approximately SEK 5 billion that was carried out at the end of June 2016. The rights issue, together with refinancing activities and internal measures, creates the financial stability needed to further develop the company in a tough steel market. We have a positive view of SSAB’s strategic plan, which takes aim at greater specialization and attaining leading positions in selected niches.
Intensive work with portfolio companies
The very core of active ownership involves participating in board work and monitoring and evaluating our portfolio companies and their business environments from a long-term ownership perspective. Based on our conclusions we are engaged in an ongoing dialog with our portfolio companies in an effort to enhance value creation over time. Parallel with this, we are also analyzing a number of potential new investments in stock market companies. We are not in any hurry, however, and will act when the conditions are right.
The board composition in our portfolio companies is of vital importance. With the annual meeting season now behind us, I can affirm that a number of constructive changes have been made in the boards of our portfolio companies. Evaluating and adapting these boards to the situations that the companies find themselves in is a continuous process that we are focusing on with utmost importance.
Helena Stjernholm
