Sandvik to Alleima: Shaping Swedish Industrial History Since 1862

While not a household name, Alleima is a company deeply ingrained in Swedish industrial history, with origins dating back to the 1860s. The company was formerly called Sandvik Materials Technology up until it was spun off by the Swedish global engineering powerhouse Sandvik in 2022. This was a process that took several years, and when CEO Göran Björkman rang the opening bell at Nasdaq Stockholm on 31 August 2022, Alleima began trading at a SEK 10 billion valuation.

Its name is derived from the combination of “alloy” and “material,” representing the core strengths of this innovator in the materials technology sector. The foundations of the Alleima story were laid 1862, when Göran Fredrik Göransson founded Sandvikens Jernverk (Ironworks in English) in Sandviken, a small Swedish town about 200 km north of Stockholm.

Before digging deeper into the company’s origins, let’s get to know its founder. Göran Fredrik Göransson was born into a shipping family in Gävle, a coastal city roughly 170 km north of Stockholm. He was the eldest of seven siblings, and his upbringing would come to profoundly influence his approach to business.

At the age of 19, Göranson displayed strong character traits of strength and determination. He worked at the family’s shipping office at the time, but his father had higher expectations, and ended up sending him abroad to gain international business experience. This took the barely 20-year-old Göranson to Germany, the UK, the US, and France, gaining experience from foreign business partners, as well as learning multiple languages.

After 18 months abroad, Göransson returned to Sweden brimming with ideas for the family business. He would gradually try to incorporate his learnings, and over time, the company’s focus shifted increasingly more towards wholesale trading – particularly in steel and iron goods.

In the mid-1850s, Göranson acquired the significant iron producer Högbo Bruk, paving the way for the establishment of Sandvikens Jernverk in 1862. The location choice for the new ironworks fell on the almost uninhabited – but more strategically advantaged – Sandviken. The proximity to mines for ore and forests for coal, along with the potential for creating hydroelectric power through canal digging, were decisive factors. In an innovative move for the time, Göransson opted for steam-powered machinery for the new plant.

By locating the ironworks in Sandviken, Göransson essentially created an entirely new community, and attracting a workforce required offering favorable conditions for families, including wages and comfortable housing. He decided that each employee should have their own apartment with a separate entrance and a garden plot. By 1862, five buildings were ready to house four families each, and by 1865, eight more were completed. Additional facilities, such as a guesthouse, healthcare services, free firewood, and social amenities, were also established.

To further enhance living conditions, tree-lined avenues were planted, water supply systems with pumps installed, and special buildings for laundry, bread baking, and brewing were constructed. This rapid population growth came with a need for expansion of social services, leading to the establishment of a clinic, a sanatorium, a pharmacy, and a bathhouse.

The Ironworks grew and distinguished itself early on by being among the first in the world to successfully utilize the Bessemer method for steel production. This method was developed by Sir Henry Bessemer, and involved blowing air through molten iron to remove impurities, particularly carbon, which made the iron brittle.

It fundamentally changed the landscape of steel production, producing both stronger and more malleable steel – essential qualities for a wide range of industry applications.

By 1876, the ironworks became a leading supplier of cold-rolled strip steel and flat wire, and in 1889, it started supplying seamless steel tubes to the power industry. This innovator's mindset continued, and the company was an early adopter of stainless steel manufacturing in 1921. 16 years after that, the company neared its 75th year since inception, and by this time it already had a global footprint, with subsidiaries in Argentina, Canada, Denmark, Finland, France, Norway, Poland, Schweiz, Spain, Great Britain, and the US.

An innovator's mindset spanning over centuries, CMD 2022: Slide 9

Zeroing in more on Alleima, the spinoff set the stage for the next step of accelerated growth and innovation. The company continues to be a world-leading manufacturer of advanced stainless steels, special alloys, and heating systems for the most demanding industries. But now on its own wings. Since being separately listed in August 2022, the company gave early investors an approximate 100% return in less than one and a half years.

With over 5.5K employees, 27 production facilities worldwide, sales in over 90 countries, and 80% of revenues coming from direct sales, Alleima serves ten different customer segments. From Industrial, Chemical & Petrochemical, and Oil & Gas, to Industrial Heating, Consumer, and Power Generation, Alleima is a niche player with a premium offering based on leading metallurgy.

Alleima is a niche player in niche markets, CMD 2023: Slide 7

These ten customer segments offer premium products across three divisions: Tube, Kanthal, and Strip. Under these divisions, Alleima has leading market positions within:

• Umbilical tubing

• Aerospace titanium tubing

• Steam generation tubing

• Industrial heating solutions

• Medical wiring

• Compressor valve steels

• Razor blade steels

• Stainless knife steels

The company has a stated focus of executing for profitable growth, and rides the megatrends of changing demographics, increasing and changing energy demand, electrification of industry and transportation, as well as growth in emerging markets.

A growth strategy built to capitalize on global megatrends, CMD 2022: Slide 14

Before being spun off and rebranded to Alleima, Sandvik Manufacturing Technology had a revenue of SEK 12 billion, and an EBIT of SEK 492 million in the full year of 2020. Since then, the company has as of Q3 2023 almost doubled its revenue, amounting to SEK 21 billion, and more than quadrupled its EBIT, amounting to little more than SEK 2 billion.

The transformation of Alleima from humble beginnings to a global leader in materials technology is a story of relentless innovation. As of its recent spinoff from Sanvik and listing as a separate entity, a new chapter of growth might begin. Alleima’s dedication to developing advanced materials and specialized alloys, coupled with its focus on catering to diverse and demanding industries, positions it at the forefront of technological advancements.