- The total return for the first quarter was 3% for the Class A shares and 3% for the Class C shares, compared with 5% for the SIXRX total return index. For longer periods of time, the shares have generated a higher total return than the total return index.
- Net asset value on March 31, 2014, was SEK 169/share, an increase of SEK 14/share, or 9% during the first quarter. Earnings per share for the first quarter were SEK 14.36 (21.00).
- During the first quarter, conversion notice of 4.0 million new Class C shares for the 2015 convertible loan has been given, after which a total of 21% of the loan has been converted to 9.5 million new Class C shares, and approximately SEK 1.1 billion has been added to shareholder’s equity.
CEO’s message
Slow but steady improvement in the real economy
The world economy is now moving in a more positive direction, albeit unevenly between various geographic regions. As always, there are areas of concern which could affect this trend to varying degrees.
A few obvious examples are the situation in Ukraine and its surrounding area, the hard winter in the U.S., which has put a short-term damper on growth in the economy, and imbalances in emerging markets’ economies along with capital flight, which is hurting their currencies.
The financial markets are now positioned for a tapering of the U.S. Federal Reserve’s QE stimulus program. They have also factored in a more positive trend in Europe, despite the major challenges that several countries are still facing.
From a slightly broader perspective, however, it can be noted that real growth is improving in several large and important economies, including the U.S., Japan and Europe. We are thus seeing positive signs even though long-term rates are still at low levels as a result of continued stimulus measures from central banks.
Positive signs reflected also in our portfolio companies
We are now seeing positive signs of the improvement that has taken place in the real economy in our portfolio companies. Order bookings have strengthened in general, even though the increase has been moderate. It is gratifying that we are now seeing tendencies toward lower costs for input goods and raw materials, which is strengthening profitability.
Industrivärden’s performance in 2014
During the first quarter of 2014 Industrivärden’s net asset value rose 9% to SEK 169 per share. The total return for the Class A and C shares was 3% and 3% respectively, compared with 5% for the return index. Our short-term trading performed well and generated a profit of SEK 82 M (24).
Strengthened investment in Volvo
In early March we took advantage of an opportunity to acquire an additional 10 million Class A shares in Volvo at attractive prices. During the five years that we have been a long-term active owner in the company, Volvo has undergone several important changes. The company is now in the midst of a structural and efficiency improvement program at the same time that it has entered 2014 with a new product lineup that will further strengthen the company’s competitiveness. The fact that we, as engaged owners, have increased our position in Volvo is an expression that we believe in the company’s future potential.
Conversion of convertible loan
During the first quarter, additional conversions were initiated of the loan that matures in 2015. Together with previous conversions of the same loan, these new conversions represent 9.5 million new Class C shares, corresponding to 21% of the entire loan. A total of 67 million additional shares will thereafter be issued upon full conversion of the outstanding loans. Through conversion, our debt is converted to equity at the same time that the number of Class C shares in issue increases, which improves the stock’s liquidity.
Important to stand up for a successful corporate governance model
For several years we have strongly advocated for the need to make necessary adaptations to Swedish corporate governance practice in the implementation of new EU directives in the Swedish regulatory environment. Such adaptation is an important part of every member state’s implementation of EU directives, and other EU countries normally adapt their application of directives to their own special conditions and needs. The Swedish corporate governance model is and has long served as a pillar for the emergence and development of the country’s export companies, which play such an important role in Sweden’s economy. If consideration is not given to the special conditions that have made this possible, companies’ scope to maneuver will be restricted in what has otherwise been a successful and highly effective corporate governance model. This will hurt not only individual companies, but the export sector in general. I hope and believe that greater insight will be gained into the importance of national adaptation in the implementation of new EU directives in the Swedish regulatory environment.
70 year anniversary in 2014
This year marks 70 years since Industrivärden was established, and since then the company has demonstrated its astute ability to generate competitive shareholder value over time. The anniversary will be highlighted at Industrivärden’s AGM on May 6, where the operations of some of our portfolio companies will be on exhibit. Hope to see you there!
Anders Nyrén
The information provided in this interim report is such that AB Industrivärden (publ) is obligated to publish pursuant to the Securities Market Act. Submitted for publication at 10:00 a.m. on April 7, 2014.
