CARDO AB: Report on Operations 2003

• Earnings after financial items in the current operations: SEK 428 million (449)
• Earnings per share in the current operations: SEK 10.28 (10.38)
• The Board of Directors proposes a dividend of SEK 8.00 (previous year 8.00 regular dividend) per share

The Rail business area was disposed of on September 25 2002 and is included in the consolidated financial statements for the previous year until the time of disposal. The previous year's earnings also include the capital gain of SEK 323 million on the disposal. The income statement and cash flow broken down by current operations and the operation disposed of are shown in enclosure 5.

The Group's inflow of orders stood at SEK 7,669 million (10,493). Adjusted for the effects of exchange rate movements and the disposal of Rail, this is a decrease of 4 percent, which is entirely attributable to Cardo Door. Company acquisitions made a positive contribution of 1 percentage point.

Net sales amounted to SEK 7,687 million (10,376). Adjusted for the effects of exchange rate movements and the disposal of Rail, this is a decrease of 5 percent. Company acquisitions made a positive contribution of 1 percentage point. Net sales relating to customers outside Sweden accounted for 90 percent (93) of the Group's total net sales.

Net earnings amounted to SEK 308 million (675), which is equivalent to SEK 10.28 (22.50) per share. The figures for the previous year include Rail's earnings until the time of disposal and the capital gain on the disposal, in all SEK 363 million. Current operations The Group's current operations embrace the Cardo Door and Cardo Pump business areas.

Operating earnings in the current operations amounted to SEK 448 million (472) during the year. Earnings for the previous year include a provision of SEK 40 million for restructuring at Cardo Door. Compared with the previous year, earnings decreased during the fourth quarter as a consequence of lower invoicing, mainly owing to a weak construction market in Europe.

Earnings after financial items amounted to SEK 428 million (previous year 449 including restructuring cost of SEK 40 million). Exchange rate movements had only a marginal impact on earnings.

Net earnings amounted to SEK 308 million (previous year 312 including restructuring cost of SEK 40 million), which is equivalent to SEK 10.28 (previous year 10.38 including restructuring cost) per share.

Cash flow from operations was SEK 715 million (686) after tax, which is equivalent to SEK 23.83 (22.87) per share. Adjusted for the effects of exchange rate movements on the change in working capital, cash flow after tax was SEK 21.87 (20.63) per share.

Cardo Door

Cardo Door's inflow of orders was, after adjustment for the effects of exchange rate movements, 6 percent lower than the previous year. Company acquisitions made a positive contribution of 1 percentage point.

Demand for industrial doors and dock loading systems was considerably weaker than during 2002. However, some stabilization of demand was noted late in the year. The trend for service remained good. The demand for garage doors was lower than the previous year.

Net sales amounted to SEK 4,805 million (5,344), which after adjustment for exchange rate movements is a fall of 7 percent. Company acquisitions made a positive contribution of 1 percentage point.

Operating earnings amounted to SEK 266 million (previous year 359 excluding restructuring costs of SEK 40 million). Earnings were adversely affected by lower volumes in consequence of the weak construction market in Europe.

Cardo Pump

The inflow of orders was on a par with the previous year after adjustment for the effects of exchange rate movements.

In water and wastewater and building services, demand was somewhat lower than the previous year, while it increased from the process industry.

Net sales amounted to SEK 2,882 million (3,057), which adjusted for the effects of exchange rate movements is 1 percent lower than the previous year. Operating earnings amounted to SEK 243 million (214).

Liquidity and financing

At year-end, the Group's liquid assets amounted to SEK 171 million (922). In addition, there are unutilized credit facilities of approximately SEK 1.5 billion (approximately 3.0).

The Group's gross investments, exclusive of company acquisitions, stood at SEK 270 million (309).

Net interest bearing debt at year-end amounted to SEK 179 million as against net liquid funds of SEK 593 million the previous year.

Equity amounted to SEK 2,886 million (3,875), which is equivalent to SEK 96.21 (129.17) per share.

At year-end, the Group's equity ratio was 57.9 percent (63.4).

Personnel

The average number of employees in the Group was 6,203 (7,851).

Company acquisition

As of January 2003, Cardo Door includes the acquired company SEA B2L with annual sales of approximately SEK 70 million.

Expanded group management

As of January 1 2004, Group management has been expanded by the head of the Garage field within Cardo Door, Tom Lövstad, and the head of the Measuring Instruments field within Cardo Pump, Peter Uddfors.

Accounting principles

The report has been drawn up in accordance with recommendation RR 20 of the Swedish Financial Accounting Standards Council concerning interim financial reporting. The accounting principles used are the same as in the annual report for 2002 except for the new recommendations of the Swedish Financial Accounting Standards Council effective as of January 1 2003. The application of the new recommendations has not given rise to any adjustment of previously reported periods.

New accounting principles 2004

As of January 1 2004, the Group will apply recommendation RR 29, Employee Benefits, of the Swedish Financial Accounting Standards Council. This recommendation accords in all essentials with IAS 19, Employee Benefits. Pensions and other remuneration after retirement have previously been accounted for in accordance with the local regulations in each country.

The changeover to RR 29 will involve the Group's provisions for pensions increasing by approximately SEK 70 million, which, after deductions for deferred tax, will reduce the Group's equity by approximately SEK 50 million net. The effect of this change of accounting principle will be recorded directly against equity.

Reporting in accordance with IFRS

As of 2005, listed companies within the EU are to draw up their financial reports in accordance with IFRS (International Financial Reporting Standards).

Work is under way on identifying any effects on the Group as a consequence of the differences that exist between current accounting principles and IFRS (as they stand at present). As yet, no significant differences have been identified.

Furthermore, preparations are being made to adjust accounting instructions, reporting, etc. to meet the new requirements.

Parent company

The parent company's earnings after financial items amounted to SEK 437 million (969), gross investments to SEK 0 million (0) and liquid assets to SEK 0 million (176).

Dividend

The Board of Directors and President propose a dividend of SEK 8:00 (previous year 8.00 regular dividend) per share for the financial year 2003, which requires SEK 240 million (previous year 240 regular dividend). The dividend is equivalent to 78 percent (36) of earnings per share.

Nominations committee

The Annual General Meeting has resolved to appoint a nominations committee consisting of the Chairman of the Board, who is to be the convener, and one representative of each of the Company's three largest shareholders at September 30 each year. The duties of the nominations committee are to submit proposals to the Annual General Meeting in respect of the election of the Board of Directors, auditors whenever applicable and fees. The election committee that has been appointed ahead of the 2004 Annual General Meeting consists of:

Fredrik Lundberg (Chairman of Cardo), L E Lundbergföretagen AB, Stockholm

Mats Andersson, National Swedish Pension Fund, 3rd Fund Board, Stockholm

Ramsay Brufer, Alecta, Stockholm

The nominations committee has made known that it intends to recommend to the 2004 Annual General Meeting that the present Board of Directors be re-elected and that Carina Malmgren Heander be elected.

Annual General Meeting and financial reports

The Annual General Meeting will be held in Malmö on Monday, April 5 2004 at 5 pm at Storan, Malmö Musikteater.

• The Annual Report will be distributed in early March.
• The first quarter Interim Report will be published on May 4.
• The half year Interim Report will be published on August 10.
• The third quarter Interim Report will be published on November 2.

Market prospects

In the interim report of October 29 2003, the following market prospects were presented: "The assessment that there is still uncertainty about the market trend continues to apply. There are signals of a certain degree of stabilization of the general market situation, but few signs indicating imminent improvement. For Cardo's part, this means continued focus on cost adjustment and improvements in efficiency."

In the present situation, the following assessment is made:

In recent months, Cardo has seen some signs that may indicate a stabilization as far as the demand for construction-related products is concerned. This, together with external assessments of an improvement in the general economic situation, could mean that the markets for Cardo's business will stabilize during the first half-year and that a certain degree of upturn may occur at the end of the year.

For further information please visit the Cardo website.