Gränges AB (publ)

Good morning, ladies and gentlemen. My name is Jørgen Rosengren. I'm the CEO of Grengis, and I'd like to welcome all of you to this earnings call for the third quarter of 2023. With me here I have our CFO, Oskar Hallström. So let's start with the comments on the third quarter, which was in many, many respects a very good quarter. Most of all, we're proud of the strong profitability and the record cash flow in the quarter. We saw in the third quarter stable sales volumes of 115,000 tons compared to 120,000 last year. This is slightly down, as you can see, and that's more or less in line with the market development we've had and sales development that we've had earlier in this year of 2023. The background to that is that in automotive we see stability in the demand, but in the large HVAC segment we see a return to the normal seasonality in that segment, which is, of course, weaker in the fall and stronger in the spring. And in the past years, that seasonality has been masked by the supply chain difficulties that we've had in the past in the world and by other factors. But now we're back to the normal seasonality. And this presents a year-on-year decline in that particular segment, also exacerbated by the stocking. As we have done now for many quarters in a row, we have been able to offset the price with price and with productivity improvements, the cost increases that we're seeing generally in the world now with the return of inflation in a very good way. which then also helps the profitability to be very strong despite the hesitant markets. So it's in fact up 40% to 439 million. And the last 12 months rolling profitability is the highest that Grange's has ever presented, both on the operating profit level and also on the net profit level. We have in the quarter also a point of pride, our good sustainability performance. I'll speak a little bit more about that in a moment. And finally, we've used a good profitability and also an excellent cash flow in order to strengthen our balance sheet, which is good because we're now very well within our target range for our financial gearing, our leverage. And all of this, in fact, we see as proof positive that the Navigate plan that we set out about a year ago is continuing to deliver good results. Looking at the market, it's a bit of a mixed picture. If we start with Granus Americas, we're down there in the quarter relative to the strong level in 2022. That is, inside the segment, also a mixed picture. Automotive is stable, not to say strong. But as I mentioned before, we have the destocking and seasonality effects in HVAC. Partly offset by a good result in specialty packaging. Eurasia is flattish, up a bit in fact. And there we have good development in both parts, in fact both in Europe and in China. But China had a very tough comparable because of an excellent third quarter last year. So all in all we have to say that 2% up in grains Eurasia is a good result. All in all, the group has stable but slightly down volumes of minus 4%. And as you can see here, the automotive is a very stable part of our business, whereas HVAC right this quarter is negative year on year due to mainly a return to normal seasonality. All in all, minus 4%, which is exactly in line with what we have for the first nine months of the year. Sustainability. We have very, very high recycling volumes. They are, in fact, all-time high. And in the last 12 months, we have recycled 39% of the purchased raw material has been recycled raw material. So we're now actually up against almost 200,000 tons of recycled aluminum as an input. So recycling is starting to become a very important business for Grengis. This also is part of the explanation for our record low emissions. Our last four months emissions now are down to 8.6 tons per ton product sold, which is indeed a record level, and in the quarter we were even lower at about 8 tons per ton. So a very good development there. Also, the 8.6 number is about 25% down from our starting point in 2017. So you could say that we're about a quarter on the way from where we were in 2017 to our target of climate neutrality in 2014. We think that's good performance. This has happened despite the phase out that is now complete since a while back of Russia produced low carbon primary aluminum. We're happy that we have completed that transition, but we're even happier that we're able to continue the good carbon footprint development despite it. And very positive is that we have reached a long-term target to have all of our production sites certified by the organization called the Aluminum Stewardship Initiative, ASI. And this is because we communicated last week that we have completed the certification of our latest large acquisition, the site in Konin. These certifications mean a lot of work, but they also mean that we can guarantee traceability and can guarantee transparency of our sustainability efforts in accordance with the highest industry standards. And therefore, we're proud to reach this milestone. Turning to Navigate for a moment, we set out a very simple but also very ambitious plan about a year ago, which has three steps in it, restore, build, and invest. And in this quarter, we feel, and also, in fact, in the year to date, 2023, we feel that we're showing very good results, not the least of the restore initiative. The strategy as a whole is intended to build, in fact, the world's best aluminum technology company to achieve 15% ROCE, to achieve 10% yearly operating profit growth, and to continue our already very good progress towards climate neutrality in 2014. Some examples of the build part of the strategy, I guess we can see on this picture here, where you see to the left, in fact, recycling. So we have, as you know, invested quite a bit in remelting and recycling operations in the Americas and also in Europe, in fact. And we are continuing that investment because we believe, firstly, it's a good investment from a business perspective, but it is also a very good investment from a sustainability perspective. In this picture, you can see some of the recycled aluminum that we're going to use then in producing new high-tech products in our facility in Huntington in Tennessee. Top right, you have some happy colleagues of ours in Poland who are celebrating the certification of the facility in Konin against the Illumina Stewardship Initiative that I spoke about before. And bottom right, you can see an example of something very important for a long-term strategy, namely partnerships. So our strategy is very focused on partnerships because we believe in a circular world, partnerships both upstream and downstream are going to become much more important in order to be able to create circular flows. And in the picture, you can see the customer conference that we had recently in Shanghai with 400 attendees, where we're also devoting a large part of the conference to the partnerships that we want with our customers and that they also want with us in order to achieve circularity and to work together towards carbon neutrality, as said before. These are all examples of what we're doing in the build part of our strategy. But I know that many participants on this call are very interested in the quarterly numbers, and therefore I'm going to turn it over now to Oskar, who's going to take us through some of the details on that.

Thank you, Jörgen. As we just heard from Jörgen, we continued to improve the earnings in the third quarter, despite the challenging market environment and the slightly lower sales volume. And higher earnings generated on the lower volume, of course, also means an improved margin. And as you can see on the right hand side on this slide, the EBIT per ton improved by 1.1 thousand SEC from 2.7 thousand SEC in Q3 2022 to 3.8 thousand SEC this year. There are, of course, several drivers behind this improvement, but I would say that the most important ones in Q3 are the full utilization of the new recycling and casting center in Americas, which together with improved metal management had a very positive impact on our raw material costs in the quarter. We also continue to see higher average fabrication prices, improved productivity, and also improved In many instances, lower inflationary pressure on costs for, for instance, energy and freight. In terms of geographical mix, though, that had a negative impact on the operating profit in the quarter, as we experienced the largest decline in demand in Americas, where we currently also have the highest margins. On a positive note, we have received a compensation for high energy costs in Sweden related to the years 2021 and 2022. And this totals 22 million SEK. This is a one time amount, I should say. So this will not be recurring in the fourth quarter. Excluding the energy cost compensation, the Q3 adjusted operating profit per ton would be 3.6 thousand SEK, so slightly below the Q2 level of 3.7, but still a very good level for a third quarter. In terms of capacity utilization, which you know is an important driver for profits for Grengis, we continue to operate below the optimal level. For the group, the capacity utilization declined to about 75% in Q3. I will come back and comment more on the individual business areas shortly, but let's first look at the group financials for the third quarter. Starting with the sales volume, this decreased with about 4% to 114.9 thousand tons, while the net sales decreased by 10% to 5.6 billion SEK. The development of the net sales in Q3, that's the net effect of the lower sales volume, decreased aluminium price, increased fabrication price and positive changes in foreign exchange rates compared with the third quarter last year. During the quarter, we've also settled and closed the insurance case related to the fire that occurred in Konin in May last year. As a consequence of this, we have additional revenues of 106 million SEK in Q3 related to insurance compensation. This does, however, not have an impact on the adjusted operating profit in the quarter. as this amount is matched by write downs and additional expenses related to the fire. But the insurance settlement does impact the reporting operating profit, which we will see shortly. Moving on to the earnings then. The adjusted operating profit increased by 38% to 439 million SEK, which is the second highest level in an individual quarter for Granges. And the key drivers behind this are, as I mentioned, the reduced raw material costs. And that, of course, relates a lot to the new recycling center in Americas, but also then improved pricing, better productivity and reduced inflationary cost pressure. Lower sales volume and the shift in geographical mix, together with changes in foreign exchange rates, had a net negative impact on the operating profit in the quarter. The additional write-downs that I mentioned, that relates to the assets then damaged by the fire in Kornim, amounted to 47 million SEK in Q3 this year. Excluding this, as well as then the write-down of assets made a year ago for the same reason, The underlying depreciation increased by 12 million SEK year on year in the third quarter. And this increase is primarily related to that we've completed the logistics improvement project in Finnspång and the recycling center in Huntington. And we started to depreciate these. The reported operating profit of 479 SEK. million SEK in the quarter, further than includes items affecting comparability of positive 40 million SEK, and this is fully related to the insurance compensation for the fire in Konin. The profit for the period increased to 332 million SEC and earnings per share increased to 3.12 SEC in the quarter. Also, the return on capital employed continued to increase and reached 11.2% by the end of September. That's up 1.7 percentage points compared to the year before. Now, moving on to one of the highlights of the quarter there. During Q3, we reduced the financial net debt by about a billion SEK to 2.9 billion SEK. And this, together with improved earnings, led to that the leverage came down to 1.3 times EBTA in September. This means that the net debt to EBITDA ratio is now comfortably within our target range of between 1 and 2 times. As you can see on this slide, the adjusted cash flow before financing activities was strong in the quarter, totaling 1.1 billion SEK. In addition to the strong earnings, the key driver of the strong cash flow is the continued focus on reducing net working capital, and in particular then the inventory, and this continued to have a positive effect on cash generation also in the third quarter. In addition to this, the cash flow in the quarter includes received insurance compensation of in total 293 million SEK related to the firing Conan. We also continued to invest in total 94 million SEK in the expansion of Granges and then in key areas such as more sustainable and circular products. And the majority of the spend in Q3 relates to the expansion of capacity and capabilities for battery cathode foil production in both Europe and Americas, and also to the second of the two recycling and casting centers that we're building in Americas. I would say that all in all, I'm very happy that our focus on reducing networking capital continues to pay off and that we continue to see a strong operational cash generation and leverage reduction. The strong cash generation will lead to that we can reduce also our gross debt and therefore also the financing cost for the Grenges Group. And consequently, I foresee that the financial net will continue to come down going forward, further improving the earnings per share ratio. Moving on to the business areas, looking first then at Grengis Americas. As you heard from Jörgen earlier, the market demand in Americas was significantly lower than last year. Despite some successful actions then compensating for some of this, the sales volume was down about 10% year on year. And even with the lower sales volume, the adjusted operating profit increased by 33% to 302 million SEC. And this corresponds to an adjusted operating profit per ton of 5.3 thousand SEC. This is a very good margin level given that we are only operating at about 80% capacity utilization in Americas in the third quarter. The by far most important profit driver from a year-over-year perspective is the new recycling and casting center in Huntington that was operating at full utilization during the quarter. In addition, good metal management with a high share of recycled material had a further positive impact on the raw material cost. And finally, improved pricing and productivity continued to impact positively also in the third quarter. Leaving Grains Americas, moving on to Eurasia. Here we continued to experience a mixed market development in the third quarter, as you saw from Jörgen's slide earlier. And this resulted in a total 1% year-on-year sales volume growth. This growth was primarily then driven by Europe, where we experienced an increased demand coming from gradual normalization of the downstream inventory levels in combination with a stable demand from automotive. And this led to a 3% year-on-year sales volume growth in Europe. In Asia, we met very strong comparables as sales volume in Q3 last year was positively impacted by backlogs that was built up during the COVID lockdown one quarter earlier. And as a consequence, our sales volume in Asia was 3% lower than in Q3 last year. The adjusted operating profit continued to increase and reached 122 million SEK in the third quarter, up from 87 million SEK in the same quarter last year. The adjusted operating profit includes the 22 million SEK of energy cost compensation in Sweden that I mentioned earlier, but it also includes a negative effect from net changes in foreign exchange rates of minus 17 million SEK compared with last year. So if we adjust for these two things, we see an underlying operating profit improvement of around 34% or about 500 sec per ton year on year. And this improved profit is primarily driven by higher sales volume, improved productivity and more efficient metal management. From a capacity utilization perspective, this remained below the optimal level. It was slightly above 70% in the quarter for Eurasia. With that, I hand over back to Jörgen then, who will provide you with an outlook for the fourth quarter and the summary of the third quarter.

Thank you, Oskar. The outlook for the fourth quarter is, I guess you could call it stable. There is, of course, a weaker market than we had last year. And it also remains a very hard market to predict, especially concerning the inventory reduction that is inevitable, but hard to time and downstream from Gregorius. however we generally have a very relatively good view of the near-term demand and based on that and on our plan to have slightly longer maintenance stops than usual in the fourth quarter we expect the sales volume in the fourth quarter to be roughly in line with the same quarter of last year that also reflects our ambition to continue to take market share in this very volatile market so as to partly offset market weakness. We have a very high ambition and also we believe now a very strong track record in flexibly meeting the market fluctuations with new sales, but also in protecting our margins against any cost variations. And in the past two years now almost we have been able to completely offset any cost changes with productivity improvements and with price adjustments. And that of course is our ambition also going forward. Then, to summarize this report, we feel this is a very strong quarter. It is a strong quarter financially, and we're especially proud of that as it happens despite some hesitancy in the markets. We improved our profit. We improved our profitability. Both, in fact, look at the last 12 months' numbers to record levels. And we did so while generating an excellent cash flow. And this excellent cash flow helps reduce our net debt. It helps to reduce our gross debt. It helps to reduce the negative impact of our financial costs. And it strengthens our balance sheet and finally also reduces our risk as measured, for instance, in our financial leverage. For the longer term, it may be even more important perhaps with the very strong sustainability performance that we've had now for quite a long time. And I mentioned already the 25% reduction of our carbon intensity numbers since 2017 and the all-time high recycling numbers in the quarter and year-to-date. And what's not visible in this report, but is equally important, is the operational performance. This looks easy when it looks good, but it isn't easy, in fact. These results are made possible by the very hard work of the Granges teams in our regions in Asia, in Europe, and in Americas, and also by the very good operational performance that they deliver. which is, of course, critical to be able to maintain, for instance, the strong customer relations that we have and enjoy and intend to continue to have also in the future. In the quarter, we've continued our systematic work on executing our Navigate plan that we launched about a year ago, which aims at sustainable growth and the targets that I mentioned before. And we believe that the quarter is a very good proof of how that work is starting to pay off. And although the outlook is uncertain, our ambition remains the same, a very high one. And we feel some confidence in our ability to be able to deliver on that also going forward. And with that, we have concluded our prepared remarks on the quarter. And operator, we're then therefore opening up for any questions that the audience may have. Please go ahead.

If you wish to ask a question, please dial star 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star 5 again on your telephone keypad. The next question comes from Gustav Schwen from Handelsbanken. Please go ahead.

If I can... start with some of the outlook comments so uh when you say longer than usual maintenance stops um what does that mean can you quantify that in any way how much longer are you planning to shut down and is that then a reflection of what could come as a slowdown in q1 seeing as you say visibility is quite good uh one quarter ahead that's supposed to be

Gustav, good morning. This is Jørgen speaking. Oscar may want to amplify my answer in a moment, but we're not going to quantify the maintenance stops in hours or days. But rather say this, that this is a reflection not of anything we know or don't know about Q1, but rather a reflection of our yearly need to maintain our equipment, which is best done in the fourth quarter, and the market picture as we have seen it in the third quarter and going into the fourth quarter. And the maintenance stop being longer than usual is just additional background information for you and others, but is fully weighed in into this overall assessment we have of the fourth quarter volume coming in in line with the fourth quarter of 2022. I don't know, Oskar, if you want to add to that.

No, I think you summarized it in a good way, right? You could argue that why didn't we make these longer stops last year when we foresee the same volume level for the fourth quarter? Well, first of all, it's difficult to know exactly what the volume level will be this year. We know we will have an opportunity to do it. And we also believe that we have some larger maintenance, which is well suited to do in this time period. So not much more to add from my perspective there.

All right. But I guess when we think about fixed cost absorption in Q4, I mean, if you look versus a normal maintenance period, it's nothing that really stands out that we should be worried about. Is that how we should read it?

No, but I would say not maybe so much in that respect. But of course, there will require some capital expenditure for some of this maintenance. And therefore, I think you could expect to see slightly higher than usual capex levels for the fourth quarter this year. But there we have a full year guidance form of maintenance. capex for 1.3 billion and I currently don't estimate that we will hit that number even though we see a higher than usual capex for fourth quarter.

And then secondly the pricing comment that you make in the report on pressure on market pricing. Can you help us out to read this? Why are you mentioning it when you at the same time say you're going to protect your margins? Is this just a reflection of underlying demand or is there an element of aluminium prices coming down and your fabrication price getting more visible and that's putting some pressure on it? Can you help me out here?

I don't think it has so much to do with the aluminum price. But generally, of course, there is a price pressure on manufactured goods now in the economy, right? If you compare it to 2022, when we were seeing very high energy prices, also high freight prices during part or at least large parts of that year, and also prices for other cost components. So there is generally, of course, price pressure on manufactured goods, and that price pressure also hits Gränges. We are not, in fact, really concerned about keeping a specific price level. We're concerned about protecting margins. So if energy goes down, there will, of course, be pressure on our prices, but then we also have lower energy costs. Although we do not give margin forecast neither for the fourth quarter nor for any subsequent quarters, we are being very clear, we feel, about our ambition to protect our margins on the contribution margin level. because we feel that they are fair. We have caught up completely with the cost increases that have happened over the last two years, as we demonstrated in the second quarter report. And therefore, we feel that these margins are fair and ought to be protected. And that certainly is our ambition going forward. I don't know if it answers your question, Gustav. Otherwise, please feel free to follow up.

Yeah, no, no, that's fair enough. I guess a follow-up could be if you can keep these... margin for next year, no matter the market outlook. But you're not going to answer that, so maybe I'll skip it. Just lastly, in America, if you look at the year-over-year bridge, how much help in absolute numbers are you getting from the cashing center in the quarter? Is it more than the 50 million that you've indicated before?

Good question. Since we highlighted a little bit extra this year, this quarter, of course, it means that we are very happy with the performance of that particular investment. And you're absolutely right then that we have indicated about 50 million SEC or so of positive EBIT impact every quarter from running this. And this year it was slightly, or this quarter, it was slightly above that level. So more than 50 million.

All right. Just a last follow-up on that. Will there be sort of a seasonal effect on the contribution from there? Because I guess it's dependent on how much volumes you're selling out, just for us to understand some kind of run rate.

Yeah, it's absolutely so that the benefit from this recycling center will only be there provided that we have products to sell, right? And you're absolutely right that there is a seasonal reduction in volumes in Q4 now. Of course, what we will try to do is to utilize this new center with better recycling capabilities first, right? So we try to run this at full utilization. And then if we need to reduce output from our casting facilities, we will probably try to reduce that from some other casting center that does not have the same capabilities for recycling and try to keep the recycling rates up and try to keep the utilization up of this new facility.

And if I can add to that, this is Jörgen speaking, it really is an outstanding investment. It has so many good properties. It reduces our cost, as evidenced in this 60 million boost that we got in this particular quarter. It increases our productivity because of shorter supply lines. It reduces our working capital and thereby contributes in this year quite strongly to our cash flow. And for the longer term, also very important, it helps our sustainability in two ways. It reduces our carbon footprint in a very good way, and it increases our circularity. So strategically, this push that we made over the past couple of years and are continuing to make to be more balanced when it comes to remelting and recycling, and less dependent on outside partners there, is, I think, a very strong strategic step that Gragas has taken, which is also now bearing fruit.

Yeah. Yeah, you said the 16. All right.

He might have said that. But 60 is also more than 50. So I think we can, we can say 60. Yeah.

Okay. Thank you.

The next question comes from Matt's list from Kepler Chewbacca. Please go ahead.

Yeah, hi. Thank you. Congrats on the good quarterly numbers. I had a couple of questions as well, so I guess... You mentioned the sustainability progress you make and I guess the recycling capacity is one thing that helps you there. But do you feel also that customers appreciate your sort of better emissions and that you are able to price accordingly? I mean, supporting your prices as well to customers.

So the short answer is yes, they appreciate it. They appreciate it differently depending on who they are and how important it is for them and their customers with sustainability. We don't price it in the way that your question implies, that we would say, look, here's the product, and then you pay an extra X percent for it being a sustainable product. Rather, we think that in this business, the growth and also profitable growth is going to depend on the competitiveness of a particular company, and in the competitiveness tomorrow, sustainability is going to be much more important than today, and today already it's much more important than yesterday. And this is actually happening in all of the regions, as witnessed, for instance, by this customer conference in China, where you would think maybe that these, where you could think perhaps that these topics are not so important. But in fact, both the customers and ourselves and also our suppliers are putting great emphasis on that for the future, which is also a reason why we're now trying to set up a joint venture in the south of China in order to dramatically reduce our carbon footprint there, for instance. So all in all, I would say, yes, it is important to the customers, and yes, they appreciate it. And although it will not be a separate invoice line, it will be very important for Grengen's competitiveness going forward to be more sustainable, to be a leader, in fact, in this field. Thank you.

And then, I guess, your outlook there for unshipped volumes, and I guess you are able to use more recycled material than maybe because it's lower volume. Do you expect that to sort of support the year-over-year margins, I guess, putting aside the potential impact of maintenance stops and investment costs related to that?

I don't think we're going to start to comment on components of the year-on-year margins if we're not commenting on the margin itself. All in all, it's good for us if we recycle more.

And I think maybe what we can say, Jörgen, is that tying back to the question we got earlier, of course, that we will try to continue to utilize our new recycling center in the US as much as we can also in Q4. And of course, we should have a healthy year over year benefit from that also in the fourth quarter. I think that would be fair to assume.

And then about the capacity utilization, it's lower than you would like, I guess, 80%. Do you see more opportunities going forward? You mentioned that you are able to try to gain market share, but would it sort of mean that you add on more low margin volumes? Could you give some more call on that?

Well, we think of the 25% upside-down, so to speak, in volume that is theoretically there as simply that, as an upside. And therefore, all of the regions in Grangis now, Asia, Europe, and Americas, all of them are focusing on what we call hunting. So all of them are focusing on finding additional business that we can use to employ this new capacity. And then even more capacity is going to come online later, right, when we are completely finished with our, completed our investment program in Europe, especially with our new rolling mill in Köln. So, it represents an upside. We are going to try to take on the business that is the best for Grengis' shareholder overall. And as with any company that represents a mix of low and high margin businesses and so on, right? What matters is the total utilization and the total mix that you have.

Thank you. And finally, just about the tax charge there. You mentioned that 19% is the sort of charge you expect going forward. Is that right? Is 19% the charge we should use going forward?

I think for the full year of this year, 19 to 20% is a reasonable effective tax rate for the Gränges Group. And I think that's also a fair assumption for next year.

Okay, great. Thank you.

As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. The next question comes from Oscar Lindstrom from Danske Bank. Please go ahead.

Good morning. Three questions from my side. Number one is what you brought up already, the casting center in North America and metal management as reasons or part of the reasons for the strong results in the quarter. If we're looking at the metal management part, how sustainable is this going forward? That's my first question. Would you like me to go on with the other ones?

We can take them one on one. I think Oscar is jumping up and down to answer number one here.

Now, it's a very good question, right? Because what we call metal management has many different components to it. But basically, all of those components relate to our ability to optimize our handling of the metals and therefore reduce our raw material costs. Metal management has nothing to do with the actual aluminum market price. That's something else. This is Just how efficiently we handle the metal. And of course, when it comes to this area, the recycling center is a big driver. In addition to that, we do see year over year positive impacts on the metal management. metal premiums coming down as one thing. You also see us being able to source scrap in a better way in the market or recycled aluminium in a better way in the market than maybe we did last year. And as we talked about earlier also, when we talked about sustainability, the share of recycling, provided that you can get hold of the right quality of aluminium scrap or recycled aluminium that can be a good cost saving compared to buying primary aluminium so there is a clear raw material cost benefit in relation to the sustainability related benefits there now will it be recurring or not well I think in its nature this is something that can vary a little bit from time to time depending on various factors but it's a very prioritized area within Gränges and we are putting large efforts of course into increasing recycling and therefore also finding the right type of recycled materials and so forth so our ambition is certainly to sustain this now this particular quarter I think we did maybe a little bit better in this field than a normal quarter but we will certainly try to do our best to keep the level up

If I can add to that on the long term, then we also, I mean, we have the ambition and have also invested not only in the Americas, but also in Europe and are certainly intending also to increase our recycling, both in Europe and in Asia. And in fact, we're seeing some pretty good results there also, right? So the ability to recycle material and to work on the technology, on the partnerships, on the on the commercial aspects of it, are really strategic things for Grengis, exactly like Oskar said, and things that we expect will have a lot to do with our competitiveness also in the future. So it's quarter by quarter, it can vary, but this is certainly a strategic area for Grengis.

Super. Thank you for a good answer. This ties in a little bit to my second question. I mean, as you mentioned, you had just 75% capacity utilization capacity. in the quarter and still you delivered this record result. Was this a quarter when sort of everything went well operationally and sort of everything, I don't want to say luck, but sometimes everything just runs perfectly and you can't expect that to happen every time? Or is this a new sort of normal profit level what we can expect at 75% capacity utilization from you.

Yeah, I guess that question is some kind of profit forecast for the future, and those are things we don't give out. But I can say this, that we had nothing really bad happening in the quarter. We have, of course, always operational problems because we're large. global company with a lot of production sites that are technical and complicated. So there are always some things going the wrong direction. But we didn't have any large problems in the quarter. And that in itself is an achievement and something we're proud of. It's also so that when something small happens, it's, of course, easier to absorb that when you don't have 100% capacity utilization, right? So you become less sensitive. And that, I guess, protects us in some way here. And with regard to the long-term profitability outlook of Grengis, I only have two things to say. And one is that we are aiming for a 15% ROCE over time, which is higher, not lower profitability than what we enjoyed, for instance, in this quarter, number one. And number two, that our ambition in the more medium term is to try to protect our contribution margins, right? And to take market share and thereby to do a little bit better than the market on average. So sorry to disappoint you by not giving you a full profit outlook for 2024. But on the other hand, we have, I think, a good degree of both long-term and short-term confidence in our ability to continue to perform well, I guess is the answer.

Thank you. And my final question comes to the last sort of ramp up of the last Corning expansion leg. I believe that's next year. I mean, is this some, how will this, I mean, are you going to be able to sell increased volumes in this type of market that we're seeing now or is there going to be a positive earnings impact through some other mechanism, you know, moving your production in a more optimal way. I'm just a little bit curious about sort of being able to ramp up more volume in quite a tough market.

Yeah, that's a great question. The capacity impact of that investment is not primarily for 2024, but it's primarily for 2025. Firstly, so we get that clear. And of course, making a prediction for the volumes in 2025 is no easy thing, as you can imagine. We really don't care, in fact. We don't worry so much about what the market is going to look like in 2025. What we worry about and what we work on very hard in Europe is to take market share and to benefit from the electrification, not the least, of the automotive industry in Europe. And they're working very hard to, number one, get new business with, for instance, battery cooling plate, battery casing, and of course, also heat exchanger material business for electric new platforms, primarily. And we believe that that will help us take market share and also grow our volumes going forward. But we're also looking into all the other segments. We have packaging. We have engineering, general engineering. We have the common alloy market more in general, right? All segments where we need to take market share and where we have definitely the ambition to take market share. And that is going to be either successful or not. We think successful. And when it is successful, that's going to help fill that new capacity that comes online, like I said, 2025.

Sorry, I mixed up when you were wrapping it up and when the volumes will come out.

That's good. Maybe we can clarify what the current plan looks like there. Technically, we target this equipment to be ready by the end of year 2024, but then you will have a couple of... Months probably of commissioning and a gradual ramp up. So we are also not expecting to see a full year volume being available in 2025. It will gradually start to ramp up during first half there.

But generally, with a focus on your question, you're onto something very important, and that is, of course, something that we're quite proud of, in fact, that we are able to generate this result despite a low capacity utilization, we've got to say, right? We're not proud of low capacity utilization, but we are proud of the results given that fact. Our focus in the organization now is on hunting to make sure that we can better fill our capacity going forward. And all things equal, filling the capacity better is a large profit lever. So the focus of your question is exactly right and also an important opportunity for Grains going forward.

Great. Thank you. Those were my questions. Thank you. Thank you.

There are no more questions at this time, so I hand the conference back to CEO Jorgen Rosengren for any closing comments.

Well, then I'd like to thank all of you, ladies and gentlemen, for attending this third quarter earnings call for Grengels and for your interesting and engaged questions. And I wish you a nice day and see you next time. Take care. Goodbye.