Granges AB

STO:GRNG

Earnings Call Analysis

Granges Sees Return to Volume Growth and Positive Outlook

Granges reported a slight year-on-year sales volume growth to 122,000 tonnes, with a notable 13% sequential rise in the first quarter of 2024. Despite a 9% net sales decline to SEK 5.4 billion due to lower prices, the company achieved SEK 356 million in adjusted operating profit, down 13% from Q1 last year. A key driver was the full utilization of the new recycling and casting center in Americas. For Q2, Granges expects mid- to high single-digit percentage growth. The company also highlighted its strong sustainability efforts, with 44% of raw materials sourced from recycled aluminum and a 30% reduction in carbon emissions since 2017.

A Strong Start to 2024

Granges reported a robust performance in the first quarter of 2024, signaling a return to volume growth. The company achieved a sales volume increase of 2% year-on-year to 122,000 tonnes, attributed to stabilization in market demand and successful market share gain initiatives. The overall market environment appears more normalized, thanks to an end to the extensive destocking that characterized previous periods.

Financial Highlights and Profitability

Despite fluctuations in average fabrication prices and ongoing wage inflation, Granges maintained a stable adjusted operating profit of SEK 356 million, a decline of 13% from last year's figures when excluding a one-time energy cost compensation. Adjusted earnings per tonne remained relatively resilient, though slightly down to SEK 2,900 compared to SEK 3,300 in Q1 2023. The report showed an improved return on capital employed, now at 11.8%, marking a notable increase of 2.2 percentage points from the previous year.

Navigating Cost Pressures

The company successfully offset challenging market conditions, such as lower fabrication prices and rising energy costs, through effective metal management and improved productivity. The utilization of new recycling and casting centers has provided operational advantages, contributing to reduced raw material costs. Moreover, capacity utilization reached 80% in Q1, indicating room for further operational improvement.

Geographical Performance Variations

The Americas segment experienced a 7% decline in sales volume, attributed primarily to delayed customer order fulfillment in the HVAC sector. However, Granges reported positive momentum in its Eurasia segment, registering an 8% increase in sales volume year-on-year. In Asia specifically, automotive sector growth was noteworthy, climbing 11% as demand stabilized.

Outlook and Guidance for Q2

Looking ahead, Granges anticipates mid- to high single-digit revenue growth for the second quarter, buoyed by normalized inventory levels and ongoing market share gains. Cost-effective productivity measures are expected to mitigate further price pressures. The company expressed confidence that the market will provide conditions conducive to continued growth.

Commitment to Sustainability

Granges is making significant strides in sustainability, achieving a 30% reduction in carbon emission intensity since 2017 and increasing the share of recycled aluminum to 44% of total raw materials. This ongoing commitment positions Granges as a leading entity within the aluminum recycling sector, aligning with its long-term climate neutrality goals for 2040.

Investment and Expansion Plans

In line with their expansion strategy, Granges forecasted a total capital expenditure of SEK 1.2 billion for 2024, of which SEK 800 million will be allocated to expansion efforts. Highlights of this plan include advancements in battery cathode foil production capabilities and the establishment of additional recycling centers. The firm expects to complete current projects by the end of 2024, setting the stage for further market growth.

Earnings Call Transcript 2024-Q1

[Jorgen Rosengren, executive]

Good morning, ladies and gentlemen, and welcome to this First Quarter Presentation for Granges. My name is Jorgen Rosengren, I'm Granges' CEO, and I will be taking you through this presentation today together with our CFO, Oskar Hellstrom, who is here with me.The first quarter of 2024 showed a return to volume growth and that happened because we saw a stabilization of the market demand in most sectors after a long period of destocking downstream from us. And now we believe that inventory levels are more normal in most of the sectors that we serve. But it also happened because we have focused some time on market share gains and again, some good results from that in the first quarter of this year. And as a result, we did indeed then show some volume growth, albeit at the modest level of 2% to 122,000 tonnes in the first quarter relative to 120,000 tonnes last year.We also managed to achieve good productivity improvements. And they, together with the growth that were recorded largely offset the customer price pressure. That is a normal feature of the environment today with lower energy prices and so on. And as a result, we recorded an operating profit of SEK 356 million, which we regard as a good result and more or less in line with last year when compensated for energy compensation that we received in the first quarter of last year. We also are very proud of our sustainability performance where we recorded some very, very good results in the first quarter.Turning to the market then and to our sales in our various business areas and segments. We saw negative volume growth in Granges Americas. And the most important factor there is somewhat later sell into the customers in the HVAC segment as a result of their manufacturing starting up a little later than last year on the tail end of their inventory reduction, which lasted most of 2023. But the outlook, however, is more positive and we're starting to see towards the end of the first quarter some good sell-in to those customers. So, we're relatively optimistic still about Granges Americas.In Granges Eurasia, we saw strong growth of 10% relative -- mostly driven then by a normalization of inventory levels in several segments and by a stable demand in automotive. And that evens out then for the whole group to a small but important volume growth of 2% for Granges. In parallel with all this, we're continuing systematic work on executing our Navigate plan, which has the 3 steps; restore, build and invest and where we're aiming to become the world's best aluminum flat-rolling and recycling company in the niches that we serve to achieve a 15% return on capital employed, to have, on average, 10% operating profit growth over the years and to continue executing our plans to reach our 2040 climate neutrality target and commitment.And on that last point, we saw in this quarter a record sustainability performance and it's not just a one-off either. It's really a long-term positive trend that we're continuing here. And as you can see here, we reached a very low carbon emission intensity. That's the level of carbon emissions measured as the tonne per tonne of sold product. And we're now at a level of 30% lower than we were when we started this and the reference year of 2017. But we also saw a very high share of sourced recycled aluminum, which now reached 44% in this last quarter. And that is -- that means that 44% of all raw materials that we use are in fact recycled. So, Granges is now quickly and quite substantially becoming also a recycling company of note in the aluminum industry.And with that, I would like to turn over to Oskar to take us through the financials and some other numbers for the first quarter of 2024. Go ahead, Oskar.

[Oskar Hellström, executive]

Thank you, Jorgen. Yes, as we heard earlier, and as you can also see on this slide, our sales volume grew slightly year-on-year, but it also showed a strong 13% sequential growth in the first quarter. As a consequence of this, we also see a normal seasonal increase of both the operating profit and on the operating profit per tonne in the quarter. And looking from a year-on-year perspective, we do see a slight decline as the EBIT per tonne decreased by [ SEK 400 ] from [ SEK 3,300 ] in Q1 '23 to [ SEK 2,900 ] in '24.But here, we do need to remember something that Jorgen touched upon also, and that is that the SEK 401 million of EBIT that we delivered in Q1 last year includes one-off energy cost compensation related to the years 2021 and '22, and that totals SEK 32 million. And if we adjust for this, the year-on-year EBIT development is much more stable, showing only SEK 13 million or SEK 200 per tonne reduction. If we look at the drivers behind this development, we can see that we largely managed to offset the continued market price pressure as well as salary and wage inflation in the first quarter. And the main contributors to this are the full utilization of the new recycling and casting center in Americas, which together with generally good metal management had a positive impact on our raw material costs. The second thing is the continued normalization of costs for energy, especially in Europe. And third, improved cost productivity that we -- with that, we managed to offset continued wage and salary inflation.In terms of geographical mix, that had a negative impact in the operating profit -- on the operating profit in the quarter, as we saw lower sales volume in Americas where we currently have the highest margins. If we look at the capacity utilization, which is an important profit driver for Granges, we continue to operate below the optimal level. And for the group, the capacity utilization reached 80% in the first quarter.Let's now look at the group financials in a bit more detail. And then starting with the sales volume, it increased with 1.5% to 122,000 tonnes, while the net sales decreased by 9% to SEK 5.4 billion. And the development of the net sales is the net effect of lower average fabrication prices, a lower aluminum price and positive changes in foreign exchange rates compared with the first quarter last year. If we move on to the earnings, the adjusted operating profit reached SEK 356 million, 13% lower than in Q1 last year when excluding the one-off energy cost compensation. On the negative side, we see the lower fabrication price, the continued wage inflation and less favorable geographical mix. But as we said, this is offset by good metal management and improved cost productivity.The remaining difference to last year is explained by SEK 12 million increase in depreciation related to completed expansion projects and by the net effect from changes in foreign exchange rates that was slightly negative at minus SEK 3 million compared with last year. There are no items affecting comparability in the quarter and the reported operating profit is therefore the same as the adjusted operating profit in the first quarter. The profit for the period reached SEK 237 million and the earnings per share was SEK 2.23. The return on capital employed increased to 11.8% by the end of first quarter. That's up 2.2 percentage points compared to the year before.If we move on then to the balance sheet, during the first quarter, our financial net debt increased slightly to SEK 3 billion. The net debt-to-EBITDA ratio was 1.3x and that means that we remain well within our target range of 1 to 2x EBITDA. As a consequence of the seasonality of our business, we typically see a large buildup of net working capital in Q1. We have, however, continued our focus on working capital efficiency and thereby limited the net working capital increase to SEK 378 million. That's about half of what you could expect from the sequential sales increase. So that's a pretty good result, I think.This, in turn, leads to that the adjusted cash flow before financing was positive at SEK 95 million in the first quarter. We continued to invest in total SEK 134 million in expansion and the majority of the spend in Q1 relates to expansion of capacity and capabilities for battery cathode foil production in both Europe and Americas. And it's also -- we invested in the second of the 2 recycling and costing centers that we are building in Americas. Finally, I think it's also worth to comment on the fairly large currency translation effect that impacts the net debt in the quarter and this is primarily related to our dollar-denominated debt and the depreciation of the SEK against the U.S. dollar in the quarter.Even though the currency is working against us on the debt side, we can say, I think it's very positive that we continue to see strong cash generation and we continue to remain well within our target range for leverage. If we look ahead a little bit here, I think that it's worth to note that the aluminum price has increased by about 15% or $400 per tonne or so far in April. And if this current price level remains, we expect to see an impact of this on our net working capital and our cash flow in the second quarter because this will lead to a working capital buildup for us.Moving on to the business areas and starting with Granges Americas. As you heard from Jorgen earlier, the market demand in Americas was lower than last year. But on the positive side, the actions taken to compensate for the lower market demand with increased market share is starting to have effect. And this limits the sales volume decline in Q1 to 7% year-on-year. Even with the lower sales volume and lower average fabrication price, the adjusted operating profit remained stable at SEK 267 million. And the adjusted operating profit per tonne increased to SEK 4,800. I would say that this is a very good margin level given the fact that we were only operating at about 80% capacity utilization in the first quarter in Americas.The most important profit driver from a year-on-year perspective is the new recycling and casting center in Huntingdon that was operating at full utilization throughout the quarter. And this has now been in operation for more than a year and the full annual benefit from this is now included in the financial statements. In addition to this, good metal management with a generally high share of recycled material and a high utilization of our cast houses had a further positive impact on the raw material cost. Net changes in foreign exchange rates were fairly neutral in Americas in the quarter.So, moving on to Granges Eurasia. Here, we continue to experience the mix but generally positive market development in the first quarter and this resulted in a total 8% year-on-year sales volume growth. In Asia, we continue to see a positive development in especially the automotive market and this resulted in that our sales volume in Asia increased by 11% compared with Q1 last year. In Europe, we experienced an increased demand coming from normalization of downstream inventory levels, especially within the general engineering and distribution markets. And in combination then with somewhat lower demand from automotive customers, this led to a 6% year-on-year sales volume growth in Europe.The adjusted operating profit per tonne reached SEK 120 million in the first quarter. This represents a decline by SEK 19 million compared with the same quarter last year when adjusting for the one-off energy cost compensation in '23. Lower average fabrication price and changes in foreign exchange rates had a negative impact on the Q1 operating profit, but this was partly offset by the higher sales volume, improved cost productivity and generally good metal management in the quarter.With that, I hand over back to Jorgen, who will provide you with an outlook for the second quarter and the summary of the first quarter.

[Jorgen Rosengren, executive]

Certainly. Regarding the second quarter then, the -- it is, of course, so that the end customer markets to which we are now fully exposed to speak, are -- remain hard to predict. We live in uncertain world. But of course, Granges has gotten used to, and also, we believe, quite good at dealing with uncertainty and also with volatility over the past couple of years. So, it's with the confidence that we look forward towards the second quarter. More concretely, we expect the second quarter to provide growth in the mid- to high single-digit percentage range year-on-year and sequentially as well. And that's the result partly of the more normal downstream inventory levels that we're seeing now, but also backlog levels that we're seeing now compared to 1 year ago and also the result of our continued focus on market share gains. We aim to continue to offset any further price pressure and wage inflation during the second quarter with further cost productivity. And this outlook is -- we regard as a fairly optimistic one, in fact, and one that bodes well for the rest of the year for Granges.To summarize the first quarter, we think it's a really robust start to the year. We have normalized inventory levels in the market and we have taken market share. And those 2 things together marked a return to volume growth that we are now predicting will be able to sustain into the second quarter. Our volume growth but also our excellent metal management and cost productivity have largely offset the price pressure that we're facing in the market, thereby leading to the good results we just reported. And I also think it's worthwhile mentioning that our balance sheet is dramatically stronger now than it was 1 year ago, as a result of good work in that area also.We're recording some truly excellent sustainability results and we're predicting for the second quarter even more growth, both sequentially and year-on-year. And in the background, we're continuing our work on our long-term Navigate plan to systematically achieve our goal of becoming a leading company in our industry and to reach our 15% ROCE level and our long-term commitment to climate neutrality in 2014.And with that, that concludes our prepared statements. So, if there are now any questions from the audience, now it's a good time to ask them.

[Operator]

[Operator Instructions] The next question comes from Adrian Dilone from ABG Sundal Collier.

[Adrian Gilani Göransson, analyst]

A few questions from my end. First of all, I'd like to start on the Q2 volume guidance. Volumes being up mid- to high single digits. Could you, I guess, help us out by adding some color at the segment level there? Do you expect fairly similar figures for the two segments or one being clearly better than the other?

[Jorgen Rosengren, executive]

Yes. So the -- we don't, of course, as you know, Adrian, give a detailed guidance per segment. But it's also not so that we're clearly saying one is going to be very strong and the other very weak or the opposite. So, the guidance is the total effect of what we're seeing in the market and is then driven by the lower inventory levels that we're seeing in the market, generally speaking, among our customers and their customers and by our market share gains. And we expect a fairly equal distribution across the 2 segments.

[Adrian Gilani Göransson, analyst]

And you're also right that you aim to offset any further price pressure with productivity? Are you able to specify what kind of productivity measures that you can take going forward?

[Jorgen Rosengren, executive]

Well, we're working, in fact, on all levels of productivity, right? So metal management, of course, is very important in our industry, but also very mundane things like procurement and making sure that we're getting the price decreases from our suppliers that we're seeing generally in the industry. Labor cost productivity is always important, right, to make sure that we can get this volume gain to happen without adding cost in the same -- at the same rate. So, it's really across the board productivity, which has given good results in Q1, and we hope we'll continue to give good results also in Q2.

[Adrian Gilani Göransson, analyst]

A follow-up to that, perhaps it's hard to give an exact answer, but in an environment with further price pressure, do you think you can sort of offset that [ 1 to 1 ] with lower costs and better productivity? Or do you see a risk of margin pressure in that case?

[Jorgen Rosengren, executive]

We aim to continue to do as good a job of it as we did in the first quarter, also in the second quarter, I guess, is the answer to your question. But that remains to be seen. That's an ambition for looking -- going ahead and we'll see how well we do with that when we report in the second quarter.

[Adrian Gilani Göransson, analyst]

Also, last quarter, I believe you said that you expect that the Huntingdon casting facility would add roughly SEK 20 million year-on-year to EBIT in Q1. Could you confirm whether it was SEK 20 million or whether it was more or less than that?

[Oskar Hellström, executive]

Yes, it's Oskar here. It was slightly more than SEK 20 million. It was about SEK 30 million year-over-year in the quarter that came from that.

[Adrian Gilani Göransson, analyst]

And a final question from my end. Regarding the Finspang and Konin expansions, could you give us an update as to, first of all, whether they are progressing as planned and also what the volume ramp-up time line is expected to look like when they actually start producing?

[Jorgen Rosengren, executive]

Yes. So, at the end of this year, at the end of 2024, we aim to be complete with all the ongoing expansion projects that are currently running, give or take, some month or week or so, but give or take. And then the ramp-up, that then depends on how successful we are in the market and how successful the market is in itself, right? So from now on, we have -- we feel good capacity in Eurasia. And our ambition is then to continue to take market share and outgrow the market. And that is what's going to determine the ramp-up.

[Operator]

The next question comes from Gustaf Schwerin from Handelsbanken.

[Gustaf Schwerin, analyst]

Yes. Gustaf, Handelsbanken. I have 2 questions. Coming back to the guidance. I mean if you say mid- to high single-digits, let's assume 7% that takes us to something like 130,000 tonnes. I'm going to try -- I mean, what is the biggest driver here? I mean are you expecting to see a significant step-up in the HVAC volumes year-over-year? Or is this more about, well, inventory destocking being over and you guys taking more market share in other segments? I'll start there.

[Jorgen Rosengren, executive]

Well, let me comment in general, then maybe Oskar can add some color to it. In general, it's so that last year, throughout the year, we did not see the true market demand in our figures because our market -- the demand from Granges was dampened relative to market demand by significant destocking in most sectors throughout the year. The only exception being automotive where the opposite was the case. We're working off backlogs or the automotive companies we're working on backlogs to a large extent at least during the beginning of last year.This year, that is not the case. There are no backlogs and the inventory situation, we believe, is rather normalized. And that means that even if in a flat market, for instance, HVAC, as you asked about, that means then for Granges year-on-year growth. How good the HVAC season is going to be this year? We don't know, and we believe nobody knows. That depends, for instance, on the weather. But if it is the same demand for HVAC units in the market as last year for Granges that would mean growth.So maybe, Oskar, if you would like to add to that or you think it's complete and say complete.

[Oskar Hellström, executive]

Yes, I think you covered it well, Jorgen. So, nothing more smart than I can say there, I think.

[Gustaf Schwerin, analyst]

And then just secondly, on your auto volumes in Asia and specifically China, if you can give me that, how were they year-over-year?

[Oskar Hellström, executive]

Yes. I mean we do see a good growth in especially automotive in Asia. And then we also know that the large part of the automotive market in Asia is related to China and we grow some 9%, 10% in automotive in Asia in the first quarter year-over-year.

[Gustaf Schwerin, analyst]

Sorry. Did you say 9% to 10%. Hello, hear me?

[Jorgen Rosengren, executive]

Yes, we hear you fine, 9% to 10% is right.

[Operator]

The next question comes from Albin Nordmark from Nordea.

[Albin Nordmark, analyst]

So, I will start with the other niches, which is developing very well in Eurasia. What is the underlying [ products ]? Is it only normalized inventories? Or is it something else also?

[Jorgen Rosengren, executive]

I guess we'd have to say that it's mostly normalized inventory, which then drives good demand growth, but it is also so that this is one of the areas where we believe that Granges can take market share and should take market share and also now where we have taken market share. But that being said, market share takes time to grow and to gain. And in a single quarter, usually the most important influences are, of course, the market development. And in this case, the most important influence is the market development that's driven by more normalized inventory levels.

[Albin Nordmark, analyst]

And there's no underlying products like I know that the battery cattle foil is not really out there yet, but is it any special products that are running faster?

[Jorgen Rosengren, executive]

If we look at the overall number, that's driven by the inventory situation as just explained. Then in this segment, we have many, many different products and some are going better and some are going worse, but that is not what is driving the overall demand. If we talk specifically about battery and EV-related products, that is an area where we intend to take market share and also believe that we have a very good market share situation with a good share of new platforms. And that is then a battery foil, but more importantly, maybe battery cathode, battery cooling plates and battery casing and other materials related to the EV revolution.Now of course, there we're seeing some slower production levels, especially in Europe and Americas of electric vehicles. But on the other hand, we're making up for that then by more growth in other car segments such as the hybrids, right? So in total, therefore, we believe that -- when total therefore, we're reflecting, I guess, the production levels in the automotive.

[Albin Nordmark, analyst]

And my last question is regarding expansionary CapEx. Do you have any updated guidance there for '24 and '25?

[Oskar Hellström, executive]

Yes. No, we have not updated our guidance on expansion CapEx, but I'm more than happy to reiterate what we have said there to make sure that it's clear. So for '24, we expect to spend a total CapEx, sustaining CapEx and expansion CapEx in total of SEK 1.2 billion, around SEK 800 million of that is expansion and SEK 400 million is maintenance CapEx. And as Jorgen also referred to earlier here, the target we have is to complete or be almost complete with all ongoing expansion projects by the end of the year. There might be some spillover in '25, but the target is to complete it by the end of '24. And that means then that in '25, what you can expect, based on what we've communicated at this point, is a more normal year with primarily maintenance CapEx. And our maintenance CapEx guidance is that over time, you can expect some 60% to 70% of depreciation, so let's say, around SEK 500 million or so in maintenance CapEx.

[Operator]

[Operator Instructions] The next question comes from Mats Liss from Kepler Cheuvreux.

[Mats Liss, analyst]

A couple of questions here. First, could you just update me on the capacity utilization you have currently? I mean, you gain market share and so on or try to do it, so I guess there are still some headroom to add on more orders.

[Oskar Hellström, executive]

Sure, Mats. That's no problem. I think it's fair to say that we do have headroom to deliver more volume for sure. In the first quarter, we ran at about 80% capacity utilization in the group and that's up. We had 75% in Q4, so it's up sequentially. But we also believe that we have a sweet spot at around 90% or so capacity utilization. So in that respect, we are, of course -- we have room to grow, so to say. And if you look at the capacity utilization sort of across the group, it's about 80%, both in Americas and Eurasia. So it's fairly evenly spread. But if you want to have some more nuances, we can say that in Asia, we are currently running at a slightly higher capacity utilization than in Europe, but the average is around 80%.

[Jorgen Rosengren, executive]

I can maybe add to that and say that the situation is, of course, of course, we would like more volume, right, and a higher utilization. But it also is a situation that's rather easy to manage them because that means that since about a year, we have been able to in all of our regions and all of our sales team to make a very clear mandate and a very clear target to increase our market share. And such clear statements internally also are easier to get results from. And now we're starting to see the first results and market share gains as a result of that effort. So clearly, we should increase our utilization and it's also clearly our ambition to do so. And we're thinking that we're now seeing the first results of that effort.

[Mats Liss, analyst]

And secondly, I mean, coming back to the HVAC segment there, and it seems that things are moving in the right direction. And I guess also there, your end user customers like carriers or whatever they our named are sort of -- well, they don't know yet, so to speak. But is it more like they -- we feel their inventories make a good estimate for the remaining of the year? Or is it sort of -- is it not relating to inventory, it's more end users sort of build? Could you give me some more about that?

[Jorgen Rosengren, executive]

That sector, as in many other sectors, there was for quite some time, a very dramatic inventory buildup throughout the supply chain because it was very difficult to deliver, in fact. And then when the delivery situation cleared up, then the inventories, of course, built up even further because there were very large and long orders placed by everybody. And that high inventory, downstream inventory situation is mostly located downstream from our customers, so in distributors and in retailers and not really in the factories of our customers. So therefore, our customers, of course, also don't have a perfect picture of that situation, but it's our understanding that the inventory situation in the downstream supply chain for HVAC is rather normal right now.And therefore -- but on the and the supply situation is also easier. So, I think rather than expecting a large inventory buildup, we should expect that the actual end customer consumption of such units is reflected in the demand that our customers see and in the demand that we see throughout 2024. But like I said, to I think Gustaf before, the -- that means that if the market does not grow, then Granges will grow because last year, we were -- our demand was depressed by destocking throughout the year. I hope that clarifies it somewhat, Mats, or otherwise, please feel free to follow up.

[Mats Liss, analyst]

And in Eurasia, I see sort of a similar situation or I mean, you have been suffering from destocking previously and now it's sort of -- is it sort of a restocking situation now? Or is it all more related to end user? Yes, it's sort of the same thing, but do the distributors restock now and do you continue to do that for a while and have you seen the best of it?

[Jorgen Rosengren, executive]

No, I don't think that there is a large effect of restocking. What we're seeing in our demand is an effect of the end of destocking rather than restocking. So, I think across, in fact, all our sectors, we're now seeing the actual end customer demand as far as we can tell. In automotive, specifically though, it is important to point out that last year, we had a situation of our automotive customers. Our end customers in automotive working down backlogs, right, which, of course, then meant that more cars were being produced than were being sold. Whereas this year, we expect those things to be more in balance. So not restocking, but fortunately, no more destocking, if you want to simplify things a bit.

[Mats Liss, analyst]

And finally, just, I mean, cash flow looks pretty good there, and you had some working capital support in this quarter as well. And have you come to the end of the line there? Or do you see more opportunities to fine-tune inventories going forward as well?

[Oskar Hellström, executive]

It's a good question, Mats. I think we have achieved quite a lot in terms of working capital efficiency over the last 2 years, really. But of course, we know that there is always more to be done. At the same time, also, we need to remember now that what we communicate in terms of the outlook is volume growth. And of course, that means that in absolute terms, we expect to grow working capital also as a consequence, right, growing volumes, growing net working capital. There is more we can do on the efficiency side that will have a positive effect. But as I mentioned earlier, now short term, we may see a negative effect on working capital and cash flow due to the higher aluminum prices that we've seen now in April. If this continues on this level during Q2, we will have a working capital buildup as a consequence of that. But in terms of our own internal efficiency, we will continue to strive for improvements there.

[Operator]

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

[Jorgen Rosengren, executive]

[indiscernible]. Then I would like to thank everybody who has attended this first quarter presentation for Granges for your interest and also for the many interesting questions and wish you a good day. Good-bye.