Sapa develops, manufactures and markets value-added profiles, profile-based building systems and heat transfer strips in aluminium. Its business concept is based on close cooperation with customers, who are largely located in Europe, North America and Asia. Its largest customer segments are the construction, transport and engineering industries and the domestic and office sectors. Sapa’s core businesses are Profiles, Building System and Heat Transfer.
Sapa was consolidated from 1 January 2005. Figures for 2001-2004 are from Sapa’s accounts.
Profiles is the world’s leading producer of extruded aluminium profiles and has production facilities in eleven European countries, the USA and China. Building System is one of the three largest European suppliers of construction systems based on aluminium profiles and has operations in some 20 European countries. Heat Transfer is one of the world’s leading manufacturers of heat transfer strips for different types of heat exchangers for the automotive industry. Production takes place at plants in Sweden and China.
Delivered volumes in 2005 totalled 383,815 tonnes, down 1 % from the year before. Operating revenues increased 4 % to SEK 14,541 million. Currency effects from translation to SEK increased operating revenues by 2 %. The main reason for the growth in operating revenues was the upswing in aluminium prices, which rose by more than 10 % in 2005. In the last quarter, the average metal price was 30 % higher in SEK and 24 % higher in EUR. Operating profit before amortisation amounted to
SEK 591 million, down SEK 105 million from 2004. Most of the negative
difference is attributable to the decline in profit from Profiles.
In Orkla’s consolidated financial statements, Sapa’s operating revenues totalled NOK 12,517 million in 2005 and operating profit before amortisation amounted to
NOK 496 million.
Profiles has extensive operations in aluminium profile processing, including surface treatment, hydroforming, friction-stir welding and CNC-processing. Aluminium profiles are used in design solutions in almost every sector. The construction and transport industries account for about 65 % of sales, while the engineering industry and household and office products account for about 10 % each. Profiles comprises three strategic business segments: Sapa Automotive, Sapa Mass Transportation and Sapa TeleCom. These segments coordinate the Group’s resources to meet the requirements of customers in the automotive, rail, marine and telecom industries in an optimal manner.
Weak market conditions in Europe, particularly the UK, resulted in a 2 % volume decline for profiles. This was estimated to be in line with the decline for the market as a whole. During the year, energy-related costs rose sharply and, combined with steadily increasing aluminium prices, put pressure on margins. Consequently, profit for Profiles in Europe was considerably weaker than in 2004. The cost increases were countered by the improvement programmes being implemented in all European units.
In the USA, demand for aluminium profiles improved and the market is estimated to have grown about 3 % in 2005. Volumes for Profiles rose 4 % in the US but profit was slightly lower than in 2004, mainly due to increased pressure on margins.
During the year, Profiles UK decided to close the Holmewood plant, which will entail a workforce reduction of around 20 employees. In December, Profiles in Sweden decided to reorganise its manufacturing operations, resulting in a reduction of up to 50 employees. The closure of the plant in Etten Leur, Netherlands, will result in a reduction of 34 employees.
Eastern Europe is an important growth market for Sapa. In Poland, where Sapa has approximately 25 % of the profiles market, press capacity was doubled during the year through investment in a third press. The new press, which was put into operation at the beginning of 2006, will enable the plant to make larger profiles of up to 280 mm in diameter. This will expand the company’s product range and enable it to reach new customer groups. Sapa has expanded eastwards through the acquisition of Alufinal, a profiles company in Slovakia. Located close to markets showing strong growth and near the large, established markets in Central Europe, Alufinal is a strategically important acquisition. With sales of approximately EUR 35 million and about 300 employees, Alufinal holds a strong position on the Slovakian and Czech markets. Sapa’s focus on added value is further emphasised by its SEK 200 million investment in the construction of a vertical anodising plant in Vetlanda, Sweden, which will be completed in the first half of 2006. The plant’s automated production will ensure greater efficiency and improve the working environment.
Sapa’s building systems are developed in close collaboration with architects and contractors, resulting in solutions that facilitate the construction process and ensure a high level of quality. The systems are used in both residential and commercial buildings. Today, the markets for building systems are largely local, since they are subject to local regulations and standards. Consequently, proximity is important. There is a tendency towards growing European regulation of construction projects, the European Union being one of the driving forces. In Building System, Sapa has a coordinated organisational structure that ensures optimal conditions for developing the necessary technical solutions, while exploiting synergies in purchasing, marketing, sales and IT.
Taking into account exchange rate fluctuations and the impact of high metal prices, sales for Building System remained virtually unchanged compared with 2004. The most successful markets were Scandinavia and France, while the British residential market sector, which is Sapa’s main sales segment in the UK, remained on a par with 2004. The UK commercial market improved and substantial efforts were made to increase Sapa’s market share. The Portuguese market for construction systems showed no signs of growth and stronger competition led to reduced margins. This situation was compounded by high metal prices. Although Sapa’s business in Portugal continued to report a loss, it improved its results compared with 2004 due to the continued restructuring program. The strong trend for Building System in Sweden and France and the reduced loss in Portugal led to an improvement in operating profit in 2005, albeit not to a satisfactory level. Further improvement programmes have been launched.
Heat Transfer produces heat transfer strips for various types of heat exchangers for the automotive industry such as radiators, oil coolers, charge-air coolers and air-conditioning plants.
Volumes for Heat Transfer dropped 1 % in 2005. The Swedish business, which serves the European and US markets, saw volumes decrease by 5 %, all during the second half of the year, when demand softened somewhat and competition intensified. Operations in China continued to show strong growth and volumes increased 22 %. Due to the marginally lower volumes and problems with production yield in Swedish operations, operating profit for Heat Transfer was lower than in 2004 but still satisfactory. In China, investments have been made in expansion in parallel with normal operations. When in place, from around mid-2006, this investment will double the annual capacity of the Chinese operations to 44, 000 tonnes.
Long-distance ice skates are among the products made from Sapa aluminium profiles
