Objectives, policies and processes for managing capital
Alfa Laval defines its managed capital as the sum of consolidated net debt and equity including the part that is attributable to non-controlling interests. At the end of 2023 the managed capital was SEK 47,389 (48,774) million.
The Group’s objective when managing capital is to safeguard the Group’s ability to continue as a going concern and provide an adequate return for shareholders and benefits for other stakeholders.
When managing the capital, the Group monitors several measures including:
| Measure | ||||||||
| Goal | Target | Target | Outcome | Average over last | ||||
| 2023 | 2022 | 3 years | 5 years | 8 years | ||||
| Invoicing growth per year | ≥5% * | 22.0% | 27.4% | 16.0% | 11.3% | 7.5% | ||
| Adjusted EBITA margin ** | 15% * | 16.1% | 15.8% | 16.4% | 16.8% | 16.5% | ||
| Return on capital employed ** | ≥20% | 21.0% | 17.3% | 19.4% | 20.1% | 19.5% | ||
| Net debt to EBITDA ** | ≤2.0 | 0.85 | 1.47 | 1.06 | 0.91 | 1.08 | ||
| Cash flow from operating activities including investments in fixed assets *** | 10% | 10.6% | 2.8% | 7.8% | 9.5% | 9.8% | ||
| Investments *** | X | 3.8% | 3.6% | 3.5% | 3.3% | 3.1% | ||
| Return on equity | X | 17.6% | 13.5% | 15.6% | 16.2% | 15.9% | ||
| Solidity | X | 45.4% | 43.9% | 46.5% | 46.1% | 43.5% | ||
| Debt ratio ** | X | 0.27 | 0.37 | 0.29 | 0.26 | 0.31 | ||
| Interest coverage ratio ** | X | 23.1 | 27.9 | 29.8 | 29.9 | 30.2 | ||
| Credit rating |
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| X | BBB+ | BBB+ |
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* Average over a business cycle. ** Alternative performance measures. *** In % of sales.
These measures are connected to each other as communicating vessels. This means that if actions are taken that primarily aim at a certain measure, they will also have an impact on other measures to a varying degree. It is therefore important to consider the whole picture.
In order to maintain a good capital structure, the Group may for instance raise new loans or amortise on existing loans, adjust the amount of dividends paid to shareholders, return capital to shareholders, repurchase own shares, issue new shares or sell assets.
As examples on the Group’s active work with managing its capital the following can be mentioned:
– On August 1, 2022 Alfa Laval raised two loans of EUR 100 million from Svensk Exportkredit that matures in 2027 and 2028 respectively and one loan of EUR 100 million from Svenska Handelsbanken with maturity in June 2024 that was repaid already on December 22, 2023.
– The company’s Euro Medium Term Note (EMTN) programme was increased from EUR 1,500 million to EUR 2,000 million in November 2021. Under the programme, four tranches of corporate bonds have been issued. Three of them of EUR 300 million each matures in June 2024, in February 2026 and in February 2029 respectively, whereas the fourth of SEK 1,000 million was raised in May 2023 and matures in November 2025.
– The company’s commercial paper programme was increased from SEK 2,000 million to SEK 4,000 million in November 2021 with an unchanged duration of 1-12 months.
– On April 22, 2021 Alfa Laval successfully refinanced the company’s revolving credit facility with a EUR 700 million credit facility with a banking syndicate. The facility has a maturity of five years with a possibility to extend it for further two years and it includes a possibility to increase by EUR 200 million. During 2023 also the second extension option of 1 year was utilised.