YEAR-END REPORT 2019 January 1 – December 31, 2019 . Net asset value on December 31, 2019, was SEK 112.7 billion, or SEK 259 per share, an increase during 2019 of SEK 63 per share. Including reinvested dividend, net asset value increased by 35%. On February 6, 2020, net asset value was SEK 271 per share. The total return for 2019 was 30% for the Class A shares as well as for the Class C shares, com- pared with 35% for the Stockholm Stock Exchange’s total return index (SIXRX). Earnings per share during 2019 were SEK 68.56. During 2019 shares were acquired in Volvo, Class A for SEK 1.6 billion, in Sandvik for SEK 0.5 bil- lion, in Skanska, Class B for SEK 0.4 billion, in Essity, Class B for SEK 0.3 billion, in SCA, Class B for SEK 0.2 billion and in Handelsbanken, Class A for SEK 0.2 billion. Furthermore, shares were di- vested in, Essity, Class A for SEK 0.3 billion and SCA, Class A for SEK 0.1 billion. On May 15 the exchangeable bond in the ICA Gruppen share matured preceded by exchangeable holders calling for redemptions in 2019 worth SEK 4.1 billion. During the second quarter of 2019 the remaining shares in ICA Gruppen were sold. The debt-equities ratio as per December 31, 2019, was 3%, a decrease during the year of 4 percentage points. The Board of Directors proposes a dividend of SEK 6.00 per share (5.75). VALUE PERFORMANCE Annual average change as per December 31, 2019 Total return Net asset value* Industrivärden C Index (SIXRX) 2019 35% 30% 35% 3 years 13% 13% 12% 5 years 13% 14% 11% 7 years 14% 15% 14% 10 years 12% 15% 12% *Including reinvested dividend. AB INDUSTRIVÄRDEN (PUBL) REG NO 556043-4200 WWW.INDUSTRIVARDEN.NET CEO’s message EXTERNAL FACTORS PORTFOLIO COMPANIES The global economy slowed in 2019, albeit with large variations Sandvik continued its efficiency improvement work and pre- between geographies and sectors. The economy continued to sented new financial and sustainability targets. A number of perform well in North America, while a slowdown transpired structure measures were also carried out, such as the sale of primarily in Europe and Asia. Looking at various sectors, manu- Varel, at the same time that Sandvik strengthened its business facturing showed declining growth, while the service sector areas through a number of well-considered smaller acquisi- performed relatively well. Despite a developing economic slow- tions. Stefan Widing took office on February 1, 2020, as new down in 2019 and weaker outlook for 2020, the stock market CEO. Volvo also carried out measures for greater flexibility as performed very well during the previous year. The Stockholm well as capacity adjustments to a weaker market situation. At Stock Exchange generated a total return of 35%. The histori- the end of the year Volvo announced its intention to form a stra- cally low real interest rates continued to buttress the stock mar- tegic alliance with Isuzu Motors, in order to create a stronger, ket. However, external areas of concern, such as rising geopolit- combined heavy-duty truck business for Isuzu Motors and UD ical tension, trade barriers and Brexit, resulted in periods of Trucks in Japan and across international markets. Essity has higher volatility. taken a number of efficiency improvement measures and deliv- ered favorable earnings in line with its targets. Under the lead- INDUSTRIVÄRDEN’S PERFORMANCE ership of its new CEO, Carina Åkerström, Handelsbanken has During 2019 Industrivärden’s net asset value grew by SEK 63 carried out a focusing of its business on profitable areas in per share to SEK 112.7 billion. This represents an increase of which the bank has clear strengths. It has also launched an ac- 35% including reinvested dividend, which is on par with the tion program for lower costs. Ericsson continued to strengthen Stockholm Stock Exchange’s total return index, which grew both its profitability and cash flow, and is growing organically 35%. in its core businesses. The company’s successful growth in 5G – The total return for Industrivärden’s stock in 2019 was 30% the next generation of mobile networks – is a good example of for both the Class A and Class C shares. The difference between this. As a result of investigations regarding regulatory viola- growth in net asset value and the share price reflects a wider tions, a settlement has been reached with the U.S. authorities, discount to net asset value during the year. At the same time which among other things, resulted in penalties totaling ap- one can note that the stock has performed well over time with proximately SEK 10 billion. SCA continued its targeted effi- an excess annual return for the Class C shares of 1 and 3 per- ciency improvement work at the time that it has worked with centage points, respectively, during the last three- and five-year capacity increases at its mills in Östrand, Munksund and Ob- periods. bola. At year-end, SCA changed the accounting method used for 2019 was yet another eventful year. During the spring we valuation of the company’s forest asset, recognizing significant sold our remaining ownership position in ICA Gruppen and can value. At Skanska, the company has worked on implementation thereby look back on what was a good deal for Industrivärden, of a strategic plan aimed at sharpening its focus and simplifying with an average annualized total return of 22% during the hold- its structure. Margins in the largest business stream, construc- ing period. At the same time, the transaction reduced our debt tion, have improved. Finally, SSAB encountered more challeng- and increased our financial flexibility. For the full year the debt- ing conditions in 2019 and has taken various adaptation equities ratio decreased by 4 percentage points to 3%. With this measures to give it greater room to maneuver in a weaker mar- as a starting point, in 2019 we took advantage of opportunities ket situation. on a number of occasions to increase our exposure to portfolio All-in-all I can affirm that our portfolio companies devel- companies that we believe have long-term attractive value po- oped their operations in various ways in 2019 and took a num- tential. During the year we invested a net total of SEK 2.7 billion ber of measures to minimize risks and capitalize on opportuni- in our portfolio companies, of which SEK 1.6 billion in Volvo, ties arising out of changes in the external operating environ- SEK 0.5 billion in Sandvik, SEK 0.4 billion in Skanska and SEK ment, such as digitalization, electrification and sustainability. 0.2 billion in Handelsbanken. We also carried out transactions During the past years we have resolutely strengthened both in Essity and SCA, most of which were made to shift Class A our conditions to exercise a value-creating ownership role and shares to Class B shares and thereby create scope to maneuver our financial position. With this as a starting point, the Board of and increase our equity stakes over time. Directors proposes that the Annual General Meeting decide to increase the dividend to SEK 6.00 (5.75) per share. Helena Stjernholm CEO 2 INDUSTRIVÄRDEN 12M:2019 Overview INDUSTRIVÄRDEN IN BRIEF EQUITIES PORTFOLIO, DECEMBER 31, 2019 Industrivärden conducts long-term value-creating asset SSAB Skanska 1.5 Övrigt management through active ownership. The operation is 6.6 1% 0.4 SCA 6% 0% 6.7 conducted in two main processes, investment and active Sandvik 6% ownership. Active ownership is exercised primarily 28.4 24% through involvement in nomination processes for board Ericsson 7.4 elections, through board representation and through evalu- 6% ation of company boards, CEOs and Executive Manage- Market value in SEK bn ment. Industrivärden monitors its portfolio companies con- Share of portfolio in % Essity tinuously and where necessary, by influencing the portfolio 20.2 companies’ overall development through their respective 17% Volvo boards. Through these measures Industrivärden contrib- 25.0 21% utes to the portfolio companies’ growth in value over time. Handelsbanken Industrivärden’s long-term objective is to increase net 20.7 18% asset value and thereby generate a return for the sharehold- ers that exceeds the market’s required rate of return. Tak- ing into account the risk profile of the portfolio’s invest- ments, the shareholders are to be given a total return which over time is higher than the average for the Stockholm Stock Exchange. More information can be found at www.industrivar- den.net. COMPOSITION OF EQUITIES PORTFOLIO AND NET ASSET VALUE 12/31/2019 12M:2019 Share of ownership, % Market value Total return holdings Share of Portfolio companies No. of shares Capital Votes SEK M SEK/share value, % SEK M % Sandvik 155,400,000 12.4 12.4 28,384 65 24 9,346 49 Volvo A 154,600,000 24,458 7.4 24.157 21 8,037 47 Volvo B 3,600,000 565 Handelsbanken A 204,900,000 10.3 10.5 20,674 48 18 1,665 8 Essity A 34,000,000 10,251 9.5 29.2 46 17 6,056 42 Essity B 32,800,000 9,899 Ericsson A 86,052,615 7,349 2.6 15.1 176 779 12 Ericsson B 1,000,000 82 SCA A 33,785,290 3,375 9.7 29.0 15 6 1,985 42 SCA B 34,575,273 3,285 Skanska A 12,667,500 2,682 7.4 24.3 15 6 2,387 58 Skanska B 18,500,000 3,916 SSAB A 44,334,933 4.3 11.8 1,456 3116412 Other 374 1 0 62 Equities portfolio 116,750 268 100 30,481 33 Interest-bearing net debt -4032 -9 Net asset value 112,718 259 Debt-equities ratio 3% INDUSTRIVÄRDEN 12M:2019 3 Performance NET ASSET VALUE Contribution analysis of equities portfolio 12M:2019 Net asset value on December 31, 2019, was SEK 112.7 billion, San dvik 9.3 or SEK 259 per share, an increase of SEK 63 per share dur- Volvo 8.0 ing 2019.