HÖGANÄS’ YEAR-END REPORT 2008: VERY WEAK MARKET IN THE FOURTH QUARTER - NEW R&D INITIATIVES
2/5/2009 3:00 AM EST
Höganäs’ sales volumes were down 28% in the fourth quarter due to a very weak market. Combined with reported costs for redundancies and contracted pensions related to personnel reduction, this resulted in an operating loss for the fourth quarter. The market is expected to remain weak for the short term. However, in the longer term, the outlook is positive. Current low production rates through the component industry have triggered greater interest in developing new metal powder applications. There are also major research and development initiatives in new applications. In December, Höganäs received research support from Vinnova (the Swedish Governmental Agency for Innovation Systems) to develop a new type of fuel cell.
Höganäs AB is publishing its Year-end Report for 2008 today. In the fourth quarter, the company’s net sales reduced from MSEK 1 418 to
MSEK 1 353, or by -4.6%. Sales volumes contracted by 28% on the fourth quarter 2007. Volumes fell sharply across all regions, including Asia and South America, where sales remained good in the third quarter. The automotive industry’s sharp downturn after the summer accentuated further in the fourth quarter. Moreover, tightening credit conditions and manufacturing concerns caused inventory adjustments and a significant reduction in consumption across most other sectors. This resulted in an unprecedented demand downturn for Höganäs products in November and December.
Operating income for the fourth quarter was a loss of MSEK -32 (132), with this negative variation primarily caused by a volume reduction. The latter also caused significant metal inventory losses and write-downs, because it was coincident with sharp price downturns on iron scrap and some alloy metals, particularly molybdenum. Where there are functional hedging markets, such as nickel and copper, the inventory losses were offset by metal hedge gains. For iron scrap and metals like molybdenum and cobalt, there are no functional hedges, implying that significant inventory losses could not be offset. The negative variation was partly offset by lower costs for steel scrap. Positive currency differences resulting from a weaker Swedish krona were cancelled by a currency hedging loss.
Net sales for the full year were MSEK 6 103 (5 838), a 4.5% increase mainly due to price increases and higher metal price surcharges. Volume growth for the full year was negative at -3.3%. Excluding sales to Kobelco’s customers, the sales increase was 3.4%, while the volume reduction was -4.7%. Net income for the full year was MSEK 393 (431), a 9% reduction. The Board of Directors is proposing a cash dividend of SEK 3.00 per share (6.25).
Commenting, Höganäs’ President Alrik Danielson said:
“The first half-year 2009 will feature a persistent very weak market. Against this background, we’re acting by cutting costs, deferring investments and keeping a firm grip on our cash flow. Meanwhile I’m pleased that alongside partners, Höganäs is receiving research support in a very promising segment like fuel cells. This demonstrates that Höganäs’ R&D initiatives in metal powder and powder production technology are important, and that it is building a platform for a commercial operation in the forward-looking segment of environmental energy systems.”