Cardo Reports Continued Improved Profitability

08.11.2006

Cardo has published the Interim Report, January - September 2006. The company reports a net sales of SEK 6,004 million (5,476), while positive earnings trend continues for all divisions.

Third quarter

The process of change within the group is continuing according to plan, and the third quarter saw a positive trend with continued improvement in earnings compared with the corresponding period the previous year. Within Door & Logistics Solutions, we are growing strongly in our prioritized segments. Furthermore, growth remained good within Residential Garage Doors. However, the competitive situation in these divisions in combination with rises in prices of materials continued to affect the margins. Selective price rises were implemented during the quarter in order to meet the rises in the prices of materials.

The group's inflow of orders amounted to SEK 2,109 million (1,930) during the third quarter, up 11% after adjustment for the effects of exchange rate movements. Organic growth was 7%. The inflow of orders in Germany within Door & Logistics Solutions increased by almost 10%, while the rate of growth in the USA decreased in Wastewater Technology Solutions in particular.

Net sales amounted to SEK 2,056 million (1,901), up 9% after adjustment for the effects of exchange rate movements. Organic growth was 5%.

The group's operating earnings were SEK 140 million (117) during the period. Costs for the group as a whole are continuing to decrease as Cardo's new strategy and organization are implemented.

Door & Logistics Solutions

Adjusted for the effects of exchange rate movements, the inflow of orders and net sales rose by 14 and 12% respectively, whereof the acquisition of Combursa accounted for 7%. Operating earnings improved to SEK 66 million (58).

Wastewater Technology Solutions

Adjusted for the effects of exchange rate movements, the inflow of orders and net sales rose by 6 and 7% respectively, whereof the acquisition of Style Industries accounted for 1 and 2% respectively. Operating earnings amounted to SEK 64 million (63).

Pulp & Paper Solutions

Adjusted for the effects of exchange rate movements, the inflow of orders and net sales rose by 9 and 8% respectively. Operating earnings improved to SEK 10 million (2).

Residential Garage Doors

Adjusted for the effects of exchange rate movements, the inflow of orders and net sales rose by 10 and 6% respectively. Operating earnings improved to SEK 16 million (9).

The period January - September

The group's inflow of orders amounted to SEK 6,535 million (5,881), up 10% after adjustment for the effects of exchange rate movements. Organic growth was 8%.

Net sales amounted to SEK 6,004 million (5,476), up 9% after adjustment for the effects of exchange rate movements. Organic growth was 6%.

Operating earnings amounted to SEK 328 million (185). Improvements in earnings occurred in all divisions. The effects of the restructuring program are appearing according to plan. The impact of exchange rate movements on operating earnings was only marginal.

Net earnings amounted to SEK 215 million (113), which is equivalent to SEK 7.15 (3.77) per share.

Cash flow from operating activities was SEK 96 million (64) after tax, which is equivalent to SEK 3.20 (2.13) per share.

Door & Logistics Solutions

For Cardo's division Door & Logistics Solutions with its corporate brand Crawford, the inflow of orders amounted to SEK 3,145 million (2,770), up 12% on the corresponding period the previous year adjusted for the effects of exchange rate movements. Organic growth was 7%.

Net sales amounted to SEK 2,919 million (2,630), up 10% adjusted for the effects of exchange rate movements. Organic growth was 5%. Operating earnings were SEK 202 million (146). The improvement in earnings is an effect of increased sales and continued measures to enhance efficiency. Earnings were adversely affected to an extent of SEK 25-30 million by increases in the prices of materials.

Wastewater Technology Solutions

For the division Wastewater Technology Solutions with its corporate brand ABS, the inflow of orders amounted to SEK 1,918 million (1,765), up 7% on the previous year adjusted for the effects of exchange rate movements. Organic growth was 6%.

Net sales amounted to SEK 1,763 million (1,625), up 7% on the corresponding period the previous year adjusted for the effects of exchange rate movements. Organic growth was 6%. Operating earnings amounted to SEK 161 million (139).

Pulp & Paper Solutions

The division Pulp & Paper Solutions includes the Lorentzen & Wettre and Scanpump operations. The inflow of orders amounted to SEK 531 million (493), up 6% on the previous year adjusted for the effects of exchange rate movements.

Net sales amounted to SEK 468 million (427), up 8% adjusted for the effects of exchange rate movements. Operating earnings amounted to SEK 29 million (12).

Residential Garage Doors

Residential Garage Doors' operation is run under the Crawford, Normstahl and Henderson brands. The inflow of orders amounted to SEK 956 million (868), up 9% on the corresponding period the previous year adjusted for the effects of exchange rate movements.

Net sales amounted to SEK 871 million (809), up 7% adjusted for the effects of exchange rate movements. Earnings amounted to SEK -15 million (-40). The improved earnings are attributable to better capacity utilization and lower fixed costs. There are still difficulties in passing on increases in the prices of materials to customers.

Company acquisitions during 2006

Late March saw finalization of the acquisition of Combursa, Spain's leading supplier of docking systems and industrial doors with annual sales of approximately SEK 275 million and employing about 150 people. The results of the Door & Logistics Solutions division include Combursa from April 1.

Early July saw the acquisition of the operations of the Australian company Style Industries with annual sales of approximately SEK 45 million and employing a little less than 30 people. The company pursues sales and service of pumps and peripheral equipment for water treatment and wastewater applications. The results of the Wastewater Technology Solutions division include this operation from July 1.

Liquidity and financing

At September 30, the group's cash and cash equivalents amounted to SEK 142 million (149) as against SEK 168 million at the beginning of the year. In addition, there are unutilized credit facilities of approximately SEK 1.5 billion (approximately 2.0).

The group's gross investments, exclusive of company acquisitions, stood at SEK 107 million (183).

Net interest bearing debt at September 30 amounted to SEK 1,096 million (631) as against SEK 554 million at the beginning of the year. The increase is explained by company acquisitions and by the payment of dividend.

Equity amounted to SEK 2,876 million (2,882), which is equivalent to SEK 95.87 (96.07) per share.

At September 30, the group's equity ratio was 47.1% (52.7).

Personnel

The average number of employees in the group was 5,788 (5.708).

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% of all shares in the Company. Acquisition is to be made on the Stockholm Stock Exchange 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

This interim report has been drawn up in accordance with IAS 34, Interim Financial Reporting, which accords with the requirements of recommendation RR 31 of the Swedish Financial Accounting Standards Council concerning interim reports for groups. The same accounting principles have been applied in the interim report as in the latest annual report.

Parent company

The parent company's earnings after financial items amounted to SEK 438 million (-17), gross investments to SEK 1 million (0) and cash and cash equivalents to SEK 0 million (0) as against SEK 10 million at the beginning of the year.

Changes in management

Fredrik Groth has been appointed Vice President Business Development with responsibility for the group's business development. Consequently, he left his post as head of the Wastewater Technology Solutions division on November 1. Until further notice, Cardo's President and CEO Peter Aru will be acting head of the division and its main operation ABS.

Election committee

The election committee that has been appointed ahead of the 2007 Annual General Meeting consists of:

Ulf Lundahl (chairman), L E Lundbergföretagen AB, Stockholm

Britt Reigo, Robur funds, Stockholm

Per-Erik Mohlin, SEB funds, Stockholm

Fredrik Lundberg, Chairman of Cardo's Board of Directors

Proposals regarding election of members of the Board of Directors and the Board fee may be sent either to a member of the election committee or to the Company to be forwarded to the election committee.

Annual General Meeting

The Annual General Meeting will be held in Malmö, Sweden, on Monday, April 2 2007.

Previous market prospects

In the interim report that was published August 10 2006, the following information was provided:

We assess that the market trend for industrial products will be generally relatively favorable during 2006, even if there are differences between different geographical regions. There is still uncertainty in the garage door division owing to the large excess capacity within the industry.

Market prospects

We assess that the market trend for industrial products will be generally relatively favorable during the remainder of 2006 and the beginning of 2007, even if there are differences between different geographical regions. There is still uncertainty in the garage door division owing to the large excess capacity within the industry.

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