Welcome to Gränges conference call for the second quarter of 2020. As usual, here in Stockholm, it's me, Johan Menckel, CEO of Gränges, and with me I have CFO Oskar Hellström. We will start this presentation with an update of the general market situation and Gränges performance during the last quarter. After that, Oskar will take you through the financial results, and then we will conclude the presentation with a short summary and a Q&A session. When we now have the second quarter of 2020 behind us, we can conclude that this turned out to be the most challenging quarter in the modern history of Gränges. As we're all aware of, the world is currently severely impacted by the outbreak of COVID-19. The extraordinary measures that have been taken to reduce the spread of the virus have significantly affected market conditions for Gränges in the second quarter.
We started to see the impact on demand already in the first quarter, when the car producers in Asia and Europe closed their production facilities. The same thing followed in North America in the second quarter, resulting in that the end market demand on the automotive side declined with 50%. The demand for our HVAC products, however, held up slightly better, mainly explained by the increased market share in 2020. In total, our sales volume declined by 24% year-over-year, and the adjusted operating profit declined to SEK 42 million in the second quarter. On a positive note, the cash generation continued to be very strong, and the adjusted cash flow before financing amounted to SEK 238 million in quarter two.
Our top priority during the quarter has been to work in accordance with our contingency plans to secure the health and wellbeing of our employees and take measures to mitigate the negative impact on Gränges business from COVID-19. Gränges annual general meeting was also held in the second quarter. At the meeting, Gränges new Chairman, Fredrik Arp, was elected. The AGM also authorized the board to issue new shares of total SEK 2 billion to finance the acquisition of Aluminium Konin and Gränges growth strategy. The difficult market conditions became very evident when looking at some statistics over the recent market development. For the automotive market, the research firm IHS currently estimates a global decline in light vehicle production of 47% in the second quarter.
If we look at estimates by region, we can see that the decline in the light vehicle production was largest in Americas and Europe, with 73% and 65% respectively. Asia is holding up somewhat better, being down only 25% year-over-year. This is largely due to China, that was first severely impacted by COVID-19 in the first quarter, but now has partly recovered. IHS estimates that there was a slight year-over-year growth in the Chinese light vehicle production in the second quarter. Although the production stops at many car producers now seem to have come to an end, the uncertainty about the real customer demand remains very high as we go into the second half of the year. Currently, IHS expects a gradual recovery of the automotive production and a smaller year-over-year decline of 12% compared to the 47% in quarter two.
If we look at America's HVAC market, this is typically a more stable market than automotive and to a large extent driven by replacements. It doesn't mean that it has been unaffected by COVID-19, and the unit production is expected to have declined by 19% in quarter two. Given the current market uncertainty, it is very difficult to predict how the HVAC market will develop in the third quarter. To a large extent, this will depend on how the general economy in the U.S. develops considering the COVID-19 outbreak. When looking at Gränges sales volume development during the second quarter, we can clearly see the impact of the lower automotive demand in all regions. In total, our sales of automotive materials declined by 41%. In Asia, sales volume was down 28%, in Europe 47%, and in Americas, we experienced a 60% decline.
This largely follows the pattern of the development of light vehicle production in the quarter, but we see a slightly lower decline for Gränges. The key reason for this is that the uncertainty in the market and the difficulty in predicting the market demand has resulted in customers building up additional inventory, which will be reduced over time. If I should mention something on the positive side for automotive, it is the development in China, where we see a higher activity in the second than in the first quarter. Given the current situation, this can likely continue going into quarter three. For HVAC and other business in Americas, we see a volume decline of only 7%. There are two main reasons for this. First, we have contracted a market share increase as of 2020, as we communicated in our first quarter report.
Secondly, the demand for specialty packaging materials for food and pharmaceutical has increased as a consequence of the COVID-19 outbreak. Especially the demand for materials for food containers for home deliveries and takeaway has increased as a result of the lockdown in many U.S. states. As we communicated in our quarter one presentation, we have activated contingency plans focusing on three primary areas, continuity, cash, and cost, to mitigate the impact of COVID-19. In the second quarter, we have continued to work in accordance with these plans to secure business continuity, protect cash flow, and reduce cost. Safety always come first in Gränges. Our highest priority is to ensure the health and safety of our employees while maintaining continuity and developing the business. During the quarter, we have continued to adapt operations to the new market situation, and we have managed to avoid COVID-19 related operational disturbances in our own facilities.
While maintaining continuity and developing the business, it is of great importance to secure cash flow. As part of this, we have increased the focus on working capital control and receivables collection. This is an area where we continue to see positive effects in the second quarter. To preserve cash, we have further reviewed our CapEx spending, and we have revisited the ongoing expansion programs. It is equally important to ensure good liquidity. On 30th of June, Gränges had available cash and unutilized committed credit facilities of about SEK 2.1 billion, well above the need for the coming 12 months. Finally, we have addressed the cost base to adjust it to expected market demand in the short to medium term. This means reductions of capacity and manning, primarily through temporary plant closures and layoffs.
We have also reinforced our general saving program, a limited spend to allow only business critical expenses for the time being. Considering the weak sales and earnings performance in the second quarter, I'm however satisfied with the way we have addressed and proactively responded to the challenging situation, especially with the speed of the actions taken. On this slide, I want to give you an indication of what the current status of operation and expansion initiatives in Gränges looks like. The production plants in Huntington and Newport in the U.S. and the Shanghai plant in China are currently operating as normal. In Europe, we have closed part of the plant in Finspång by end of March, and the parts that remain in operation have been reduced to about 40% of normal capacity as an adjustment to the market demand decline.
During the quarter, we have gradually scaled up the capacity to meet the actual market demand. All employees have been temporarily laid off up to 60% of the time, and we have reached an agreement with the workers' union, which gives us flexibility to scale up or down the manning level at short notice. In the U.S., we have two plants with the same capabilities, which gives us an even greater flexibility to adjust capacity to market demand. The Salisbury plant was temporarily closed in early April, and all production has been transferred to the larger and more cost-efficient plant in Huntington. As in the Finspång plant, employees in Salisbury were temporarily laid off during the second quarter.
As the expansion investment in Huntington continues to deliver very well and soon is fully ramped up, we have made the decision to extend the temporary closure of the Salisbury plant until year-end. As a consequence of this, more than 100 employees were terminated at the end of June. Depending on how demands develop going forward, we may do further capacity adjustments. As I mentioned earlier, one of the actions we have taken to mitigate the effects of COVID-19 is to postpone our capital expenditure. This goes for the maintenance investment as well as for the two ongoing expansion projects in Newport and Finspång. In the fourth quarter of 2019, we announced the acquisition of Aluminium Konin. The acquisition will strengthen the product offering and presence in Europe and contribute with the strong positions in new attractive niche markets.
Aluminium Konin will also add new capabilities and capacity to expand the offering for future transportation solutions, such as electrical vehicles. The completion of the transaction is subject to customer approval from the competition authorities. Due to the COVID-19 outbreak, the process to receive clearance will take a longer time than originally anticipated. The closing of the transaction is expected to take place in the second half of 2020. With that, I hand over to Oskar for the financials.
Thank you, Johan. As Johan has talked about, COVID-19 has been the main theme for Gränges in the first half of 2020, and for natural reasons, even more so in the second than in the first quarter. The drop in sales volume in quarter two led to a significant reduction in operating profit and operating profit per ton, as you can see on this slide. The primary driver behind the decrease in profits is the low capacity utilization resulting from the low volume in the quarter. If we compare with Gränges' theoretical maximum capacity, the utilization was on average around 60% in Q2, around 70% on the HVAC side, and only about 50% on the automotive side. Given that a large part of our cost base is fixed or semi-fixed, this had a significant negative impact on the operational leverage in the quarter.
This is especially true for the automotive business, and you can see it on this page that the operating profit per ton is declining for automotive, whereas it is more stable for HVAC. One important reasons for this, in addition to the fact that we have a lower volume reduction on the HVAC side, is that we have successfully taken out capacity for HVAC by temporarily closing the Salisbury location, as Johan mentioned. If we adjust for the capacity taken out in Salisbury, the utilization on the HVAC side was above 85% in the quarter. Another thing that I think is worth to highlight is the mix shift with more HVAC and less automotive products in the quarter.
If we compare from a year-over-year perspective, this mix shift means an unfavorable profitability effect for Gränges due to the historically higher margins for automotive products. If we look at the second quarter in isolation and at the current volume levels, we have presently higher earnings in absolute terms on HVAC than on automotive products. If we look at the second quarter financials and compare with the same quarter last year, we can see that the sales volume decreased by 24% to 70,800 tons, and that the net sales decreased by 30% to SEK 2.2 billion. The main reason for the net sales decreasing more than the sales volume is lower metal prices than last year. Changes in foreign exchange rates did not have a material impact compared with the second quarter of 2019. Looking at the earnings, the adjusted operating profit amounted to SEK 42 million in Q2.
That's a decrease of SEK 250 million or 84% on prior year. The main driver behind the reduced operating profit is the low sales volume, leading to the low capacity utilization. In addition to this, we saw some effects of less optimal metal management in the quarter, and the primary reason for this is that it's difficult to optimize the raw material mix in our cast houses when we have large changes in volume and product mix. Over time, this will be adjusted for and optimized based on the new volume level. Similar to the first quarter, we see increased depreciation of in total SEK 27 million, primarily related to the completed expansion projects in Huntington. A slightly higher average conversion price contributed positively, and net changes in foreign exchange rates was positive SEK 4 million in the quarter.
The second quarter operating profit further includes SEK 14 million of government grants related to financial support in connection with COVID-19. The majority of this is related to temporary layoffs in Sweden. Including the SEK 14 million of government grants, the total cost savings from the COVID-19 actions amount to about SEK 50 million in the second quarter. Looking at the profit margin, the adjusted operating profit per ton declined from SEK 2,800 to SEK 600 in the quarter. Items affecting comparability amounted to, in total, SEK 5 million in the quarter. These are related to the ongoing acquisition of Aluminium Konin. Including the items affecting comparability, the operating profit amounted to SEK 37 million in the second quarter. The profit for the period was SEK 1 million, and this is not a level that we are satisfied with, but it may be considered acceptable under the circumstances.
During the second quarter, the net debt decreased by SEK 312 million to SEK 3.2 billion, or 2.9 times adjusted EBITDA. We continue to see a strong underlying cash generation in the quarter. The cash flow before financing, adjusted for the expansion investments, amounted to SEK 238 million. As Johan mentioned earlier, one of the areas that we have increased our focus on as a response to COVID-19 is working capital management. Here, we continue to see a positive development in the second quarter. In total, we released SEK 108 million of working capital. Part of the release is enabled by the sequential business downturn from Q1 to Q2, but it's also a lot of active work behind this in terms of supplier management, inventory management, and not the least, receivables collection.
Despite the very challenging market situation for many of our customers, especially on the automotive side, we have managed to keep the level of overdue receivables stable during the first half of the year. We have also continued to invest in total SEK 40 million in our expansion programs. Of this, SEK 27 million are related to Sweden and SEK 13 million to the U.S. As you know, we've put the expansion programs on hold, due to the contracts with the suppliers, spend does not come down to zero immediately. Still, for the second half of the year, we expect very limited expansion CapEx unless we make a decision to restart any of the projects. With the planned reduction in maintenance CapEx, and provided that the expansion investments are not restarted before year-end, we currently expect the full-year CapEx for 2020 to be about SEK 450 million.
The effects and other component on this slide is primarily not cash related, but it's the result of currency translation effects on U.S. dollar-denominated debt as the SEK appreciated against the U.S. dollar in the quarter. In terms of access to liquidity, we currently have cash of close to SEK 1 billion and committed available credit facilities above SEK 1.1 billion. This does not include the financing arrangement for Aluminium Konin, which is a separate facility. Excluding commercial papers, which are backed by a revolving credit facility and a small working capital loan in China, we have no loans or bonds that are due until the third quarter of 2021. We believe that the financing that we have in place gives Gränges the strength to meet both the downturn as well as the expected recovery.
With that, I'll hand over back to Johan Menckel, who will provide an outlook and a summary of the second quarter.
Thank you, Oskar. Given the rapid development of the spread of COVID-19 and the high level of uncertainty in the market, it is currently very difficult to provide an accurate forecast, even for the short term. The research firm IHS currently assumes a gradual recovery of the global light vehicle production with a sequential growth and a lower year-over-year decline in the third than in the second quarter. As commented earlier, the inventory levels are high at many of our customers, and we expect that these will start to come down in the third quarter. This will have a slowing effect on the demand for the Gränges products in the third quarter. Our belief at this point is, however, that we will see a lower year-over-year decline in our sales volume in the third than in the second quarter.
Our current best guess is that the sales volume in the third quarter will be around the same level as in the second quarter. That goes for the group as well as for the individual regions. Keeping the seasonality of our business in mind, this is, however, an improvement since quarter 3 is typically a weaker quarter than quarter 2. Further, we expect to see increasing positive effects in the third quarter from the cost reductions measures that we have taken as part of the actions to mitigate the impact of COVID-19. Although the short-term implications of COVID-19 should not be underestimated, we believe that for Gränges, the medium to long-term fundamental is still positive. Our focus on supporting sustainability, light weighting, and electrification is likely to keep us in a favorable position also in the post-COVID-19 environment.
It may even be so that the current crisis will speed up developments in other areas and create additional opportunities for Gränges. With a strong commitment to constantly improve and develop, Gränges is well positioned to continue to deliver sustainable and profitable growth throughout economic cycles. To conclude the 2020 second quarter report, the COVID-19 and measures taken to reduce the spread of the virus affected the markets in which Gränges operates, and the demand for our automotive materials declined by over 40% in the quarter. This was, however, partly balanced by increased market shares on the HVAC side, leading to that our sales volume declined by 24% in the quarter. The adjusted operating profit was reduced to SEK 42 million, but the cash generation remained strong, with an adjusted cash flow before financing of SEK 238 million.
The profit for the quarter is not at a level that we are pleased with. Considering the weak sales and earnings performance in the second quarter, I'm, however, satisfied with the way we have addressed and proactively responded to the challenging situation, especially with the speed of actions taking. Although the market conditions are expected to continue to be very challenging in the coming quarter, we continue to be positive about the medium to long-term outlook and are determined to continue to grow and strengthen our presence and positions globally. Thank you for listening, and now we open up for questions.
Thank you very much. Ladies and gentlemen, if you have questions, please press zero one on your telephone keypad, and you enter into a queue. Please press zero one on your telephone keypad, and you enter a queue. Now, I would like to invite Mr. Rustell from Rootes Maykin to ask your question. Please go ahead. Okay, I would like to invite the next person, Mr. Cole from ABG Sundal Collier, to ask your question. Please, Mr. Cole.
Thank you and good morning. First question from my side, I think relating to the ramp-up contribution. Is it possible to get an indication of how many kilotons we're talking about here, approximately?
Good morning, Cole. I guess you refer to the ramp-up of the Huntington expansion program?
Yes, exactly. How much it perhaps contributed on this quarter.
Yeah
sort of incrementally.
I think that, if you recall, we had a plan to reach 75% of the 40,000 tons annual capacity there by mid-year. It's basically after second quarter, but we indicated already in Q1 that we are ahead of that plan, which was, of course, very positive. As we now exit the second quarter, we have almost reached the full available capacity at this stage of this investment, so we are very close to finalizing the ramp-up there. This means that basically we have close to the 40,000 tons annual capacity available. Of course, in terms of utilization, we have more or less utilized all of this in the second quarter because this is now the most efficient equipment we have in North America, and we try to fill that first. That's also what Johan speaks about, the temporary closure of the Salisbury facility.
The volume that was previously produced in Salisbury has been reallocated to this new investment, basically. It has a very high utilization in the second quarter.
All right. Thank you. If I'm not mistaken, I think in the past quarterly reports, you mentioned that you saw a positive contribution from Huntington and Newport. It's just interesting hearing, given the fact that you mentioned that you put a Newport upgrade on hold, I was just wondering if you could perhaps provide a bit of clarity on how much extra volumes that is coming from Newport?
No, that's a good question, Carl. What we do see, Newport is the facility where we have the capabilities to produce this super thin aluminum foil, and that goes into packaging and pharmaceuticals and so forth. We have seen an increased demand for that type of product in the second quarter. We are gradually ramping up that production facility and qualifying customers. There has been fairly limited production volume, but increasing. The reason why we put the investment on hold in Newport was not necessarily from the CapEx perspective. It was more related to the fact that the equipment supplier couldn't travel to Newport and finalize the upgrade of the last mill there, because it's an Italian equipment supplier, and they couldn't travel to the U.S. for COVID-19 reasons.
We are now discussing to try to restart this investment again, because we do see that the capacity that we can get from the upgraded third mill is going to be sold in the market in the very short future. That's a decision that we have on the table to make at an appropriate point in time.
Understood. Just final one from me on the CapEx side before just another question is, when you now target a reduction in expansion CapEx, how do you believe that one should think about the planned Finspång expansion? For example, if or when things would normalize, when would you make the decision to start expansion projects there? When, if so, could one expect volumes from the facility? I think you previously targeted contributions in the second half of 2021 before COVID-19.
Yeah, absolutely. At this point in time, we have decided to stop that project. We haven't made a decision yet on when to restart, but if we assume now for a second that we will keep the project temporarily on hold for the rest of the year, it means basically that we see six to nine months delay. You're absolutely right. We expected to see the benefits to start to materialize second half of 2021. Everything else the same, that means we are into the late first half of 2022, I guess, when you start to see these benefits. We also need to keep in mind then that there is a twofold benefits coming out from this project. One part is the additional capacity, that's 20,000 tons. Depending on the market development, that capacity may or may not be needed within this time frame.
In that perspective, the delay may not have that much of an impact. The other part, of course, is that this is going to be quite substantial cost saving for the Finspång facility. That impact, of course, is something that we want to try to get as soon as possible, of course. From that perspective, the 6 months to 9 months delay is unfavorable, I would say.
All right, thank you. Final question. You mentioned or highlighted that you received government support this quarter. Do you expect to receive anything in Q3 or Q4 as well? My follow-up also, when it comes to volume, you say sales volume's fairly in line. When you say fairly in line, if I may, does that mean somewhere around plus/minus 5% versus Q2? How do you think one should think about it?
Yeah, Oskar, I can answer maybe the first question there on the government grants, and then Johan can give some more flavor around the sales volume. If you start then with the government grants, of course, a large part of these grants are related to the temporary layoffs that the Swedish government has made available to companies operating in Sweden. That scheme will continue in the third quarter, and provided that we have the same or similar volume outlook, I foresee that we will continue to receive those grants. It's basically a balance between using the temporary layoffs and getting the grants, and doing more permanent layoffs. That's, of course, something that we are always evaluating as well. With the current outlook, I do foresee that we will receive grants also in the third quarter.
For the fourth quarter, it very much depends on what the business activity will look like, and that's a little bit early to comment on, I think.
You had a question regarding the outlook for quarter three. Johan here, and I think the question was if you can assume the volume in quarter three to be in line plus or minus 5% with the volume we had for quarter two, and then that's a correct statement as we can see it right now. Just to give some more comments about that, for the automotive market, we saw that China was, of course, coming in first in this COVID-19 crisis, and there was an inventory buildup in quarter one that impacted the sales in China in the quarter two negatively. We have the same, so to say, pattern in the rest of Asia and in Europe and Americas for quarter three, where there was an inventory buildup in quarter two, which will have to be reduced during quarter three.
China is, in a way, we have a more positive view in quarter three in terms of demand for automotive. Your assumption there, Carl, is fair and correct.
Okay. Thank you very much.
Thank you very much. I would like to invite the next participant, Oskar Lindström from Danske Bank. The floor is yours.
Hi, this is Oskar Lindström from Danske Bank. Two questions from my side. One, I guess it's following up a little bit on Cole's question there about the government grants. You mentioned here that you had some SEK 50 million in cost savings and government grants in the second quarter. You mentioned in the report that you expect the cost savings to increase in the third quarter. What size of cost savings should we expect in the third quarter?
It's a good question, Oskar. We haven't sort of provided a specific guidelines or guidance on exactly how large additional cost savings will be. Basically what we are doing with our cost savings is trying to take out as much as of the fixed cost and as of the semi-variable cost as possible, basically trying to convert that into variable cost. That's of course, actions behind that. From that perspective, I would say that we have taken a lot of actions during Q1 and Q2. We have not yet sort of received the full quarterly run rate impact from that, if you wish. As Johan indicated earlier, we are also reducing, now making a permanent reduction of the workforce in the Salisbury plant by the end of June.
That's expected to have additional positive contributions going into the third quarter. That said, we haven't given an exact amount for what additional savings that way will be expected. The government grants, I think is fair to assume that they will be on a similar level in Q3, provided that the market activity is similar.
Right. Could you say maybe, what the run rate is in terms of personnel reduction now compared to at the beginning of, or the average of Q2, or?
I think the way to think about it is we have some comments in the report there on sort of the number of personnel and the average during the quarter. I think the key sort of difference here, that you can think is that we have 128 blue-collar employees that have been on temporary layoff for a large part of the second quarter, and those have now been permanently laid off by the end of the second quarter. That will mean some additional savings coming out of that. That's between, I would say, between SEK 3 million and SEK 5 million from that specific action. Then there are other actions as well, of course.
Right. Okay. My second question is more general. Very clearly, demand from your customers for existing business has slowed dramatically, and hopefully it will sort of recover now as more factories open. I'm thinking a little bit about the new business acquisition. Has that completely stopped during this past quarter, or you continue to sort of plan for new models, and supplying new products to customers, or is it merely sort of them calling and focusing on volumes?
No, I mean, Johan here, good question. All these kind of long-term activities is, of course, still very active. Just to give you an example, in the European Union, there's been investment of EUR 60 billion for the electrification of the automotive industry. The market for flat roll products for battery, which is a non-existing market for Gränges today has the equal global size as the whole heat exchange market for combustion engines. There is a lot of activities ongoing and on Gränges' side with new products. Of course, due to the slowdown in the general market due to COVID-19, a lot of tests and customer interaction has been stopped, of course, just for practical reasons. The interest and the demand for this kind of long-term business development is still very valid.
For sure, having a more of a medium to long-term view, we are very confident that our products and offerings will well serve the need in the future. Nothing has changed on that side. It's more short-term practical, very difficult to work with new business developments, since we have not been able to meet customers, basically.
All right. Yeah. Thank you. Thank you for those questions.
Thank you very much for the question. We have a question from Julian Baton from Pasca Avios. Please. Ladies and gentlemen, if you have a question, please press zero one on your telephone keypad, and it will enter a queue.
You're on mute.
Yes. Mr. Julian, could you question, please?
Yeah. Sorry, I was on mute. It's regarding the EBIT per ton. In Q2, it was obviously very low. Usually in Q3, it's lower seasonally over the last four or five years. My question is, how exceptionally low Q2 was, basically?
Sorry, Julian, I didn't catch your question there at the end.
Yeah. The EBIT per ton in Q2 was extremely low. Usually Q3 EBIT per ton is seasonally lower, right?
Yes.
My question is, how much in Q2 EBIT per ton was affected by what you describe, I guess, around the semi-variable cost and the fixed cost? What strike me in the P&L of the Q2 is the fact that the below gross profit costs are not moving much despite the much lower volume and revenue. While I guess, or I had expected the cost between EBIT and gross profit were a bit more variable than this.
I think it's a good question, Julian. If I try to start with what you ended with there, the part of the cost and how variable it is, I think that it's fair to assume that the cost of materials, that's more or less 100% variable with volume, right? You look at payroll and other operating expenses, which is called in the P&L there. I think it's fair to assume that that's roughly 50% variable, 50% fixed in the short to midterm there. Of course, there is a large part of this that is semi-variable. The semi-variable cost is maybe easy to take out when you have smaller fluctuations in sales volume. Of course, when you have these dramatic volume changes that we have seen in the second quarter, it's basically a lot of hard work to get that semi-variable cost out.
That's certainly one thing. 50/50 split, I think is a fair sort of basic assumption there. I completely agree with you that we have a low EBIT per ton in the second quarter. Typically, the Q3 EBIT per ton would be even lower. Again, this year, as Johan commented on also, we do expect a sort of similar sales volume in Q3 as in Q2, with what we see in the market right now, I should say. We also see additional cost savings coming through, which means that for 2020, it will most likely then be a little bit different than a normal year, because we expect to see the EBIT per ton to be higher in the third quarter than in the second quarter with the sort of the outlook we have today.
Hopefully, the second quarter of 2020 is going to be our low point in this. Again, of course, it's an uncertain market, so it's difficult to know that for sure.
Okay. Thank you.
Thank you.
Thank you very much, Mr. Julian. I would like to invite Mats Liss from Kepler Cheuvreux to ask the question, please.
Yeah. Hi. Well, a couple of questions. First, you mentioned the high inventory. Well, my question is if you could shed some light there on in which segment geographically and what customer segments you see these high inventories, if there is any difference there.
Yeah. Johan here. Mats, good question. The inventory buildup as we've seen is related to the automotive business globally. The exemption is China, where we had a high inventory that we see now has been reduced during Q2, and therefore will have a positive impact. The rest of Asia, if you're considering Thailand, India, Japan, and Europe, and in America's automotive, we have the same situation as we had in China earlier this year with an inventory built up during Q2 that has to be consumed then during Q3. That is the reason why we are not maybe fully in line with the outlook for IHS when it comes to automotive vehicle light production. Comment on other segments, HVAC and several other segments that we are serving in U.S., container foil. We have heat shields and transformer windings and packaging.
There we see actually an increased demand that we have really grown that business. Bear in mind, these are fairly then small compared to the automotive. For the HVAC business, we see a more of a less of a flat development going forward for U.S. That's kind of the summary of the different segments and the outlook for them.
Great. Coming back to the HVAC segment there, and I guess in the U.S. it's normally a seasonally somewhat stronger quarter, the third quarter, but could you say something there about the customer activity and how they run production currently? It seems you are a bit off. You downplay the expectations somewhat, I guess.
Yeah. When it comes to HVAC, for Americas, we saw a decrease of some 7% in Q2, whereas the market, if you refer to the distribution and sale of air conditioning equipment, was actually worse. Of course, we saw a market share gain in U.S. We declined less than the market. I think in U.S. in general, there is, of course, a lot of uncertainty in relation to different states and the phase where they are in, of course. It's actually quite difficult to give a very good view of America's HVAC business for the short term. Our position when it comes to the HVAC segment has, in a way, strengthened during Q2, and also that goes for Q3. It's more the market uncertainty.
Okay, good. Could you say something there about the U.S. pricing in general?
Yes.
You have indicated it positive.
Yeah, we had pricing up single-digit figures for 2020. That is part of the renegotiated contracts that we've been through the past, I would say, quarters here, which had a positive impact on our earnings. That's kind of the situation for 2020. Right now, we would not really expect pricing gains in the 2021.
I would say on the pricing there in the U.S., Mats, we have previously said 4%-5% increase in conversion price on 50% of the volume, and that's what we see coming through in the second quarter as well.
Okay, great. Finally, just about Konin then. You expect the closing during the second half, but it seems you have been hindered by the travel restrictions and so on to do the final checkup. Well, it's a delay, but market development and maybe also the development of your own business have been soft given COVID-19. What's your view on Konin currently? It adds competence and you improve your position going forward in the electric vehicles area. Is there any sort of reason to change the initial view you had that maybe could you shed some light there if market conditions have been so soft that you don't see it a short-term boost for you to acquire them?
Yeah. Good. Johan here. Of course, first of all, I just want to underline that Aluminium Konin still is a very high strategic value for Gränges, we still see that that acquisition will contribute very positive to Gränges. There are many reasons for that. Aluminium Konin has unique capabilities to grow within the electrification of EV, they're also very suited for other non-automotive business. Also the company in itself is not so exposed to the automotive industry as Gränges in Europe, of course, therefore, having a much different performance and a better performance. We still haven't changed our view on the importance and the strategic value for Gränges to pursue this opportunity. As you said, of course, the process for receiving confirmation from the European Commission has been delayed.
Right now we have basically finalized what we call the pre-notification phase, which means that by mid-August, we intend to basically file the application. That means practically that late Q3, this can be finalized at the earliest point. I think the only reason for this is that it has been a delayed process due to COVID-19. That's the only reason for this delay as of today. Okay, thank you very much.
Thank you very much. We have a question next from Mr. Gusta from Handelsbanken. Your question, please.
Roger Söchting from Handelsbanken. Sorry to come back to the volume guidance, trying to understand that a bit better. I am a bit surprised when you say in line sequentially, given the IHS forecast we have, even in a destocking situation. How much is the destocking expected to affect volumes negatively? Perhaps how much was the actual positive effect from restocking in Q2? On the guidance, are you taking a lot of height for the uncertainty in HVAC demand for Q3, how should we view that? The reason I'm asking is because if I look at this, we have to use both significantly higher negative growth rates versus IHS and a significant negative year-on-year growth for HVAC to get to sort of similar volumes sequentially. Thanks.
Yeah. It's Oskar here. I think I have understood your question there, but I think to try to answer a question in a simple way that it could be quite complex to answer, but I think if you think about Gränges, and if you think about the automotive production, what we have sort of between Gränges and the automotive production is typically one, sometimes two, basically component manufacturers or HVAC manufacturers. There are inventories in both these levels or one level. I would say the key explanation or by far the largest one both up and down here, if you compare with IHS and Gränges, is really the inventory in the supply chain. I think it's fair to assume that the reason why we have decreased less than the car production in Q2 has to do with inventory.
The reason why we expect to not grow as much or decrease more than the car production really in the second quarter, third quarter, sorry, is related to the inventory. That's really the single largest explanation. I think in terms of HVAC, if you compare year-over-year, we have a much better development than the underlying market, and that comes down to what Johan said earlier. It's about market share gain, really. We also need to bear in mind then that it's really HVAC, but we also have some other products in there, the packaging material and so forth, that has had a favorable development compared to last year, really. It's a set of different factors, but for automotive, inventory is really the big swing factor here, I would say.
Great. Secondly, from my side, I know it's not in your book yet, but any possibility to shed some light on volume and first profitability development in Konin. You mentioned better performance, but can you specify that a bit?
As you said, we are not really allowed to comment on that since this is not part of Gränges today. What we know and to our understanding, actually, they had a good start of the year, actually, what we have seen so far. I think one of the reasons also that they have a much more diverse product portfolio than Gränges European business. What we know, they had a good start of the year or the first half of 2020.
Okay. Thank you.
Thank you.
Thank you very much. Next, we have a question from Mr. Julian from. Mr. Julian, the floor is yours.
Yeah. Hello, just a quick one. It's regarding volume in Asia. Q2 was markedly lower compared to Q1, and you touched on this. Considering Q3 last year was especially weak due to some destocking also, could that be that Q3 compared to Q2 be higher or markedly higher compared to in Asia? The second question is on, can you specify CapEx for the full year? What is your range now?
I think, Julian, you're right there. Q3 in Asia last year was not particularly strong. If I base the answer on the guidance that Johan gave here, if we look at and say, okay, we have a fairly similar volume level for Q3 as in Q2 this year, if we take that assumption and apply that to Asia as well, that would mean if you compare year-over-year, you would expect a smaller reduction in Asia compared to what you would see, for instance, in Americas and Europe if you make that calculation. That also comes back a little bit to what Johan said earlier, that in Asia, we have China that is ahead a little bit on the rest of the world here in terms of the recovery, and that certainly has a positive impact there as well.
That said, the overall picture that we see right now is fairly stable or similar volumes in Q3 compared to Q2 for the group as well as for Asia. In terms of the CapEx, with the reductions we have in maintenance CapEx as well as the expansion projects now being put on hold, we expect around SEK 450 million for the full year total at current FX rates. We've spent a little bit more than SEK 290 in the first half of the year, so that means around SEK 160 then for second half.
Okay. Very clear. Thank you.
Thank you.
Thank you very much. Ladies and gentlemen, if you have a question, please press 01 on your telephone keypad. Ladies and gentlemen, if you have any questions, please press 01 on your telephone keypad.
Johan here. If there are no more questions, I would like to conclude this session. I would like to thank you, everyone, for participating during today's call. As usual, we received very good and interesting questions, and we look forward to our next call on the 22nd of October when we present our third quarter report. I wish you all a nice summer as well, and thank you, and goodbye.