CARDO AB: Interim Report, January – March 2004

...First quarter earnings, which are normally Cardo's weakest, were affected this year by a decrease in net sales as a consequence of the weak inflow of orders during the second half of 2003 and costs for offensive activities in sales and product development," says president and CEO Kjell Svensson.

• Good inflow of orders during beginning of year: SEK 1,943 million (1,887)
• Lower net sales reduced earnings
• Net sales: SEK 1,709 million (1,801)
• Net earnings: SEK 1 million (41)
• Earnings per share: SEK 0.02 (1.35)

The Group's inflow of orders amounted to SEK 1,943 million (1,887), an increase of 6 percent after adjustment for the effects of exchange rate movements.

Net sales amounted to SEK 1,709 million (1,801). Adjusted for the effects of exchange rate movements, this is a decrease of 3 percent.

Operating earnings amounted to SEK 5 million (56). The lower earnings are mainly due to the lower net sales and costs for increased activities in both sales and product development.

Earnings after financial items amounted to SEK 1 million (58). The impact of exchange rate movements on earnings was only marginal.

Net earnings amounted to SEK 1 million (41), which is equivalent to SEK 0.02 (1.35) per share.

Cash flow from operations was SEK 116 million (170) after tax, which is equivalent to SEK 3.87 (5.67) per share.

Cardo Door

The market for Cardo Door's products stabilized, and the inflow of orders increased during the period by 6 percent after adjustment for the effects of exchange rate movements.

All product areas, i.e. industrial doors, dock loading systems, service and garage doors, noted an increased inflow of orders compared with the corresponding period the previous year.

Net sales amounted to SEK 1,096 million (1,153), which adjusted for the effects of exchange rate movements is a decrease of 3 percent.

Operating earnings amounted to SEK 13 million (41). Earnings were affected by the lower net sales and 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 by 5 percent after adjustment for the effects of exchange rate movements. The increase occurred in the water and wastewater segment. The inflow of orders decreased for building services and industry.

Net sales amounted to SEK 613 million (648), which adjusted for the effects of exchange rate movements is a decrease of 2 percent.

Operating earnings amounted to SEK 8 million (30). Earnings were affected by the lower net sales and by the product mix in the period.

The construction of the new production facility in Vadstena, Sweden, has begun. The current pump production in Mölndal and two plants in Vadstena will be concentrated in the new manufacturing unit during the first half of 2005.

Liquidity and financing

At March 31, the Group's liquid funds stood at SEK 125 million (922) compared with SEK 171 million at the beginning of the year. In addition, there are unutilized credit facilities of approximately SEK 1.5 billion (approximately 3.0).

The Group's gross investments, excluding company acquisitions, stood at SEK 49 million (79).

Net interest bearing debt at March 31 amounted to SEK 223 million (previous year: net liquid funds of SEK 681 million) compared with SEK 179 million at the beginning of the year.

Equity amounted to SEK 2,906 million (3,925), which is equivalent to SEK 96.85 (130.85) per share.

The Group's equity ratio at March 31 was 58.1 percent (65.3).

Personnel

The number of employees in the Group at March 31 was 5,811 (6,097).

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 applied 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 -3 million (2), its gross investments to SEK 0 million (0) and its liquid funds to SEK 1 million (1) as against SEK 0 million at the beginning of the year.

Market prospects

In the Report on Operations, the assessment was made that there were some signs that could mean a stabilization of the markets for Cardo's business during the first half-year. The general economic upturn now seems ever more assured and is reflected in an increased demand for construction-related products, which it is assessed could continue.