Cardo AB Interim Report

• Inflow of orders: SEK 4,002 million (3,897)
• Net sales: SEK 3,691 million (3,703)
• Net earnings: SEK 65 million (104)
• Earnings per share: SEK 2.16 (3.45)
• New marketing organization in Pump

Net sales amounted to SEK 3,691 million (3,703), an increase of 1 percent after adjustment for the effects of exchange rate movements.

Operating earnings amounted to SEK 102 million (155) during the period. The lower earnings are mainly due to the product mix and costs for increased activities in both sales and product development.

In order to increase its competitiveness and rate of geographical expansion, the Pump field within Cardo Pump will change its sales organization. The measures include implementation of a new, geographically based organization, which involves the sales resources being moved nearer the customers, and an expansion of the organization in Asia. The measures will create better conditions for increasing organic growth at the same time as they are expected to bring an annual net saving of SEK 30-40 million, whereof the main part as of 2005. The cost of the measures is expected to amount to SEK 50-70 million and will be charged to earnings for the second half-year.

Group earnings after financial items amounted to SEK 93 million (148). The impact of exchange rate movements on earnings was only marginal.

Net earnings amounted to SEK 65 million (104), which is equivalent to SEK 2.16 (3.45) per share.

Cash flow from operations was SEK 126 million (265) after tax, which is equivalent to SEK 4.20 (8.83) per share.

Cardo Door

The inflow of orders increased as far as industrial doors, dock loading systems and service were concerned. For garage doors, the inflow of orders was on a par with the corresponding period the previous year. For the business area as a whole, the increase was 5 percent after adjustment for the effects of exchange rate movements.

Net sales amounted to SEK 2,317 million (2,323), an increase of 1 percent after adjustment for the effects of exchange rate movements.

Operating earnings amounted to SEK 65 million (85). Earnings were affected by costs for increased activities in both sales and product development.

Sales companies in Austria and also Denmark were consolidated during the period. These measures are part of the strategy of making the sales organization more efficient and concentrating sales activities for industrial products under the leading brand, Crawford.

Cardo Pump

The inflow of orders rose in the water and wastewater segment, while it fell for building services and industry. For the business area as a whole, the inflow of orders increased by 4 percent after adjustment for the effects of exchange rate movements.

Net sales amounted to SEK 1,374 million (1,380), an increase of 1 percent after adjustment for the effects of exchange rate movements.

Operating earnings amounted to SEK 69 million (100). Earnings were adversely affected by the product mix in the period.

Cardo Pump has enhanced its internal efficiency by rationalization in a number of different areas, resulting in improved profitability in recent years. Decisions have also been taken on a concentration of pump manufacture in Sweden.

In order to increase its competitiveness and rate of geographical expansion, the Pump field within Cardo Pump will change its sales organization. The measures include implementation of a new, geographically based organization, which involves the sales resources being moved nearer the customers, and an expansion of the organization in Asia. The marketing activities that are pursued today under the ABS and Pumpex trademarks will be concentrated on the ABS brand and a single sales channel, which means that the parallel sales organizations in Sweden, France, Germany and the USA will be merged. A sales company will be formed focusing on customers in the pulp and paper industry globally. The measures will create better conditions for increasing organic growth at the same time as they are expected to bring an annual net saving of SEK 30-40 million, whereof the main part as of 2005. The cost of the measures is expected to amount to SEK 50-70 million and will be charged to earnings for the second half-year.

Liquidity and financing

At June 30, the Group's liquid funds stood at SEK 121 million (158) compared with SEK 171 million at the beginning of the year. In addition, there are unutilized credit facilities of approximately SEK 1 billion (approximately 2.0).

The Group's gross investments, excluding company acquisitions, stood at SEK 127 million (154).

Net interest bearing debt on June 30 amounted to SEK 527 million (491) compared with SEK 179 million at the beginning of the year.

Equity amounted to SEK 2,691 million (2,745), which is equivalent to SEK 89.70 (91.51) per share.

The Group's equity ratio by June 30 was 52.7 percent (52.8).

Personnel

The number of employees in the Group on June 30 was 5,762 (6,026).

Repurchase of shares

At this year's Annual General Meeting of Cardo AB, a resolution was passed authorizing the Board of Directors to acquire up to so many own shares before the next Annual General Meeting that the Company's holding at no time exceeds 10 percent of all shares in the Company. Acquisition is to be made on Stockholmsbörsen at the market value applying on the occasion of acquisition. The purpose of the repurchase is to give the Board the opportunity to adjust the capital structure of the Company during the period until the next Annual General Meeting. The Board has yet to resolve to utilize the authorization and thus no repurchase has been made.

Accounting principles

The interim report has been drawn up in accordance with recommendation RR 20 of the Swedish Financial Accounting Standards Council concerning interim reports. The accounting principles used are the same as in the annual report for 2003 except in relation to accounting for benefit-based pension schemes, for which the change is described below.

As of January 1 2004, Cardo applies the Swedish Financial Accounting Standards Council's recommendation RR 29, Employee Benefits, which in all essentials agrees 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 application of RR 29 involves a change of accounting principle and the effect of the change has been recorded directly against equity. The changeover to RR 29 has involved the Group's provisions for pensions increasing by SEK 74 million, which, after taking deferred tax into consideration, has reduced the Group's equity by SEK 57 million net. In accordance with the transition rules of the recommendation, Cardo has not recalculated figures for previous financial years in respect of the new recommendation.

The parent company

The parent company's earnings after financial items amounted to SEK -9 million (-7), its gross investments to SEK 0 million (0) and its liquid funds to SEK 0 million (1) as against SEK 0 million at the beginning of the year.

Market prospects

The markets for Cardo's business stabilized during the first half-year. The general economic upturn now seems more assured and is reflected in an increased demand for construction-related products, which it is assessed could continue.

Cardo is an international engineering group and a leading supplier of high-quality products and systems with a good aftermarket. Cardo holds strong positions in the markets for doors and pumps. Cardo has subsidiaries in about 30 countries with the focal point resting in western Europe.