Main activities in 2011
Despite soft markets, the Sapa Group’s EBITA1 improved in 2011 compared with 2010. The improvement in EBITA was mainly driven by continuous internal improvement work carried out within strategic initiatives focused on commercial, sourcing and operational activities. The restructuring that commenced in the second quarter of 2011 has proceeded according to plan, and cost savings are expected to take full effect by the end of 2012.
* Operating profit before amortisation and other income and expenses.
Total net sales NOK 30,719 million
The business Area
Sapa develops, manufactures and markets value-added profiles, profile-based building systems and heat exchanger solutions, all in the light-weight material aluminium. Sapa has operations in Europe, North America and Asia, and consists of the three core areas Sapa Profiles, Sapa Building System and Sapa Heat Transfer. Sapa primarily serves customers in the building, transport, automotive, engineering, telecom and renewable energy industries.
Goals
- Utilise synergies within the Group to achieve a 6% EBITA1 margin over a cycle
- Optimise operational footprint to improve the cost position
- Achieve profitable market share growth across all markets
Strategy
Sapa’s strategy is grounded in delivering synergies across the Group through three initiatives: "World Class Operations", aimed at transferring best practices to increase operational efficiency, "Leading Edge Strategic Sourcing", focused on reducing the total costs of externally purchased materials and "Towards Solutions", designed to improve the business area’s ability to offer more value-adding solutions to our customers.
More about Sapa in 2011
Sapa Profiles faced a challenging market in 2011, but managed, through focus on the three strategic initiatives to capture volume growth compared to 2010. The strategic initiatives also rendered productivity and cost improvements which further offset the effects of the weak market, and Sapa Profiles’ EBITA1 improved compared with 2010. In Asia, the acquisitions of Alufit in India and Haihong in China were finalised, as well as the establishment of a joint venture with Chinese aluminium producer Chalco. The process of integrating these Asian entities into the Sapa system has begun, and will continue in 2012. Sapa Profiles’ sales volume reached 854.000 tonnes, compared with 789.000 tonnes in 2010.
Sapa Building System’s market continued to deteriorate in 2011. The effects of the strategic initiatives could not fully counteract the negative market trend, and EBITA1 declined compared with 2010. Sapa Heat Transfer’s overall market was relatively flat in 2011. However, EBITA1 for the business unit declined in relation to 2010, primarily due to the weak performance of Sapa Heat Transfer’s entity in Sweden. The entity was highly affected by negative exchange rate effects due to a stronger SEK relative to the USD and EUR, as well as by weaker productivity performance. Sapa Heat Transfer’s volume for 2011 totalled 185,000 tonnes, compared with 164,000 tonnes in 2010.
A major improvement programme is under implementation to mitigate the negative profit trend in Sapa Heat Transfer. Initiatives include footprint optimisation by transferring volume from Finspång to China in order to leverage the better cost position of the Sapa Heat Transfer facility in Shanghai, upgrading and expanding the capacity of the cast house and the cold rolling mills to reduce costs and increase manning productivity at the Finspång plant, and investments in capacity and productivity enhancements in the Shanghai plant to provide an improved platform for profitable growth when the automotive market regains momentum.
* Operating profit before amortisation and other income and expenses.
* Internal sales between segments have not been eliminated.
* Operating profit before amortisation and other income and expenses.
1 Operating profit before amortisation and other income and expenses.