Dan Sten Olsson - March 2024
MINIMUM ONCE A YEAR, WE NEED TO COUNT OUR CASH AS WELL AS ASSESS OUR FUTURE
Despite that 2023 has been a difficult year for the world economy, global production and consumption have increased slightly. Stena Line, Stena Metall as well as Stena Adactum´s companies are struggling with lower demand. Stena AB is on the other hand delivering almost the same profit for 2023 as in 2022. The difference is as small as the profit from the sale of one ship. Stena Metall AB’s profit has reduced remarkably but is still the second best since the very beginning.
Hence, our positive financials are not to be despised. The tanker market for sea transportation remains and we are having tankers in open positions to seize opportunities from the situation. Our drilling units have around 2 billion SEK of increased revenues when entering 2024 which mainly will cover their cost of capital. Due to low fixed interest rates and investments in solar energy and AI, Stena Fastigheter’s operating costs are low which generates a significant surplus.
We had the opportunity to sell our property portfolio for soaring prices three years ago. Instead, we developed a plan to improve our business to deliver the same value within five years. It is gratifying to see that after three years of dedicated work, the people at Stena Fastigheter have already reached these goals.
Stena Line’s profit in 2023 was half compared to 2022. The performance behind the result this year is however more remarkable than that of 2022 due to the worsened economic situation.
The majority of Stena Adacum’s companies are serving the consumption sector of the economy. Stena Adactum’s total profits have decreased by a fourth. Despite the decreased profit, we have all the reasons to be happy that the results are not worse. Our customers are happy with our work, and we are dedicated to satisfying them. We might not always have the most effective production, but we do have the most customized products.
Stena Recycling’s customers have seen a decrease in volumes, which proportionally also affects us. Enabling reduced costs simultaneously as meeting the expectations of Stena Recycling’s customers requires consistent advanced improvements. Stena Metall’s result is decreasing but is still delivering a healthy profit.
IT IS EASY TO UNDERESTIMATE THE THREATS OF THE FUTURE
Our strong market positions are one important source of generating our profits. Although many competitors are often planning for growth by the ambition to take market shares specifically from us. Low operating costs are always our best defense. It is demanding and does not always work and it is not enough. It is most important to always offer the most customized products and services. We are always following up on Stena Recycling and Stena Stål’s wholesale business and we have won more A-customers than we have lost. Our results remain favorable although we have seen new aggressive actors in some markets. We are measuring Stena Line’s freight customers in the same way. Our freight customers increase in numbers as well as in volume, but many companies are acquired by both freight competitors and by our ferry competitors which in turn results in new priorities. We can see that we lose especially clients being acquired by our ferry competitors from our client base. Our own forwarder/ freight company is growing but is enforcing Stena Line’s routes marginally. Stena Line has invested in new ferries taking larger volumes. It comes with increased capital costs, requiring larger volumes to remain profitable. Stena Line’s return to capital employed is decreasing while we continue making a profit. Positively, traveling with our ferries has got an upturn again. The ideal proportion between freight and passengers has varied between our routes and over the years. Freight ferries are cheaper than combined freight/passenger ferries, but our routes have a demand for both types of transportation.
Stena Line’s business therefore requires constant investments in ferries as well as terminals, business systems, and ports. Accordingly, we are planning for 1.8 billion SEK in new and replacement investments for Stena Line. This takes almost Stena Line’s entire free cash flow.
Stena Metall is a less capital-demanding business. However, the demand for capital is growing while we are transforming ourselves into an industrial specialist regarding almost all types of material to be recycled. The latest competencies in our portfolio are the recycling of plastic and batteries. We have invested billions in technologies for these operations. Our clients for recycled materials are making huge savings, as we know how to fine-tune the quality of the materials and diminish the size of particles in our deliveries. Of course, this requires energy while fragmenting, but our clients save more during their melting processes if the particles are well-defined and smaller.
A total overview of our businesses shows, that we continue being a curious company. Curiosity and the will to be innovative have historically taken us where we are today. Curiosity generates new ways to study and understand what we do and what is happening in our surroundings. By analyzing what we do through a magnifying glass, we will find that all our activities are interesting and could be improved. Our surroundings are constantly changing. This is fantastic, while it on the other hand is a threat. I am thinking, and sometimes, I am shouting “Finally” when I wake up in the morning in relief over being able to walk to the office and solve both urgent as well as long-term tasks. It is important to enjoy the pling, when one hears the pling in the cashbox. The availability of cash is creating the critical resources for us to remain curious, have manageable safety, and be useful in a world, that despite all success becomes more and more uncertain.
Dan Sten Olsson, CEO
Göteborg January 2024
