Höganäs AB reports 6% increase in net sales in 2011; regional analysis reviews a turbulent year for the Powder Metallurgy industry.

February 14, 2012

sales_charts

Höganäs AB sales by quarter, 2007-2011

Swedish iron powder producer Höganäs AB has published year end results for 2011. CEO Alrik Danielsson stated that net sales were MSEK 7,081 (6,671), 6% up on the previous year, with positive progress in all regions. Sales volumes were also 6% higher.

“Just as in 2010, in 2011 we achieved our long-term objectives for growth, operating margin and returns. During the autumn we were negatively affected by inventory adjustments made by our customers, which also caused us to reduce our inventories and cut our production rates. We did this to protect our strong cash flow, even if it is having a negative effect on earnings in the quarter.”

“The prospects for 2012 are uncertain, and Höganäs is being affected by fluctuations in the global economy, although as a company, we are in a strong position for our future. We are now launching inductors under the Höganäs brand Inductit™, which is another big step in Höganäs’ work in the value chain. These products are really promising, not least because of increased demand for environmentally friendly energy sources.”

Net sales by geographic region show that Asia is once again the company’s largest market, accounting for 2,525 MSEK. Sales in Europe were 2,284 MSEK, whilst American sales were 2,272 MSEK.

Analysis of sales to the PM components sector

The components business area represents some 75% of Höganäs’s consolidated sales. Net sales for the year in this sector were MSEK 5,378 (5,046) up 7% year on year. The net sales increase was mainly due to higher sales volumes, at +7%. The negative currency effects were offset by the positive effects of higher metal prices.

In the spring, the market featured production limitations by Japanese car producers as a result of the effects of the tsunami, with a production recovery achieved late in the third quarter. In the second half-year, a declining business cycle resulted in many customers destocking. The some 16,000 tons of finished and semi-finished goods as one-off deliveries to Hoeganaes Corporation (GKN) in tandem with the production stoppage at its plant in Gallatin, US, following an accident at the end of May, also had a significant impact on sales volumes in the year.

Europe

In Europe, Höganäs states that the market was stronger than expected initially. Demand in Germany was high until the third quarter inclusive. However, a sharper than normal seasonal slowdown was apparent in the fourth quarter. Early in the year, Höganäs’ customers benefitted from high export demand and good domestic demand. This outlook was changed by the presentation of weak automotive statistics for the second and third quarters. Nevertheless, Höganäs grew briskly in France and Italy in the year. Höganäs judges that it won market share over the period.

North and South America

Höganäs states that it achieved consistently good sales performance in North America. The market was generally stable and Höganäs has benefitted from sales volumes in the operations acquired from Kobelco in 2008. Höganäs’ market share has increased slightly in 2011, even excluding the volumes to Hoeganaes Corporation (GKN).

In South America, Höganäs’ customers, car manufacturers and manufacturers of household and other products alike, sustained high activity levels until the third quarter inclusive, but in the fourth quarter, most customers downscaled purchasing due to relatively high inventory levels and concerns over weaker car sales statistics.

Asia

In Asia, sales overall were in line with the previous year. Production limitations by Japanese car manufacturers as a result of the tsunami limited growth prospects. A recovery was apparent from the end of the third quarter onwards, which offset the seasonal downturn that normally occurs in the autumn. However, the policy tightenings implemented in China to prevent the economy overheating did result in credit difficulties for many customers, which in turn resulted in destocking and lower rates of production right through the year. In addition, the short-term growth rate is being limited by capacity shortages amongst Höganäs’ customers.

In Korea, production rates were consistently high for Höganäs’ customers, thanks to strong export growth, which resulted in very good sales performance for Höganäs. Höganäs’ positive growth in India slowed during the fourth quarter, when week car sales in the July-October period resulted in Höganäs’ customers downscaling their purchasing during the final quarter of the year, due to high inventory levels and an uncertain outlook. Nevertheless, car sales returned to growth in the November-December period.

www.hoganas.com 

Edited by: Paul Whittaker, Editor ipmd.net, [email protected]   

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