Interim Report July – September, 2015

2015-10-29

Healthy value growth for several portfolio companies

Significant events during the third quarter

  • Several portfolio companies performed positively during the quarter including Pelagicore, SmartEye and Alelion Batteries, which secured major orders from OEMs and leading manu-facturers
  • Fouriertransform invested a total of SEK 34.7 million in six existing portfolio companies in the quarter
  • Fouriertransform received an additional purchase consideration of SEK 55.7 million for the sale of LeanNova Engineering to ÅF in February 2015, resulting in a total capital gain for Fouriertransform of SEK 260.3 million.
  • Since inception, Fouriertransform has invested a total of SEK 1,517 million in 26 companies in Sweden’s automotive and manufacturing sectors
  • The market value of the existing portfolio of 22 companies including realized values on sales and amortized capital from portfolio companies, equates to a value decrease of appr 6 percent of total invested capital since Fouriertransform’s inception
  • Profit/loss after tax for the quarter amounted to SEK -33.4 million (-2.8), including the revaluation of investments in securities of SEK -11.3 million (4.9).
  • Cash flow for January-September amounted to SEK 4.7 million (-13.5), of which investments in new and existing portfolio companies amounted to SEK -150.8 million (-342.5)
  • Cash and bank balances and investments in securities at the end of the quarter amounted to SEK 1,850 million (1,895)

The amounts in the table below are for what is called the investment company, and accordingly, financial investments, investments in portfolio companies and investments in securities are valued at estimated fair value.

CEO’s comments – an uncertain global market and Swedish manufacturing migrating to foreign countries

Worrying signals from China shook the markets during the summer, the big question being whether the effects of a lower growth rate in China will continue and exacerbate in the form of falling commodity prices and volatile financial markets. Many commentators anticipate that this will be the case, due to the major challenges China faces in realigning her economy, deregu-lating financial markets and managing high debt levels. A declining growth rate in China, com-bined with interest rate hikes in the US, may have dramatic consequences for future confi-dence and global growth going forward.

Another major current source of uncertainty is that no one can really predict the actual con-sequences of ongoing problems related to Volkswagen’s exhaust scandal. The manipulation has obviously reverberated throughout the automotive industry, creating concerns among subcontractors especially, as was clearly apparent at a major Swedish suppliers’ expo, Stora Leverantörsdagen, in Gothenburg recently.

The Swedish economy is progressing fairly well, but this is not helping Swedish manufacturing, despite the weak krona. Sweden stands out for her heavier downturn and slower recovery at the production level than other countries since the 2008 crisis. Research from Swedbank cites the total cost level in goods-producing sectors having increased far more than competing countries. Simply, Swedish companies and Swedish-based manufacturing are two different things. Companies take a global perspective to production and producing in Sweden is costlier than in other parts of the world. In our operations, we are seeing clear evidence of this, with industrial production migrating away from Sweden. Accordingly, capital must be allocated to productivity-boosting investments in Sweden, if the emigration of Swedish companies is to be stopped.

For Fouriertransform, the past quarter meant continued work on activities to prioritize the value growth of our portfolio companies. Several progressed very positively in the period, such as Powercell, whose share price has risen robustly recently. But others too, such as Pelagicore, SmartEye and Alelion Batteries, also have good prospects. ArcCore, which develops software platforms for the automotive industry, has now decided to open an office in India.

Our regular summer seminars in Västra Götaland—and especially those in Smögen and Lysekil—were well attended, this year attracting over 300 regional entrepreneurs. The theme was entrepreneurship and how companies can develop and gain funding for future growth, especially in the segments of the environment, maritime development and female entrepre-neurship. Since the seminars began five years ago, some 50 companies have developed or started up in this region, and new business centers are now planned in Västra Götaland.

We are also still noting high interest in new transactions from companies seeking capital, and we have a lot of proposals under consideration. In anticipation of the government’s final stance, which will include a more detailed review of the orientation of government business finance, Fouriertransform is continuing to work in accordance with our current mission.

Per Nordberg