Report on Operations 2001: Increased inflow of orders at Cardo Pump

14.02.2002

Cardo announced increased inflow of orders and invoiced sales of its business unit Pumps, where ABS is the major part.

The inflow of orders rose by 4 percent after adjustment for the effects of exchange rate movements. This was despite weak demand in Germany and the UK.

Demand rose in Cardo Pump's biggest segment, water and wastewater, as it also did from the process industry. In the building services segment, demand was somewhat lower than the previous year, mostly owing to the weak demand in Germany.

Invoiced sales amounted to SEK 2,825 million [about EUR 307 million] (2,537 [276]), which adjusted for the effects of exchange rate movements is a rise of 3 percent. Operating earnings amounted to SEK 176 million [about EUR 19 million] (220 [24]), exclusive of restructuring costs as set out below. Including these costs, earnings were SEK 132 million [about EUR 14 million]. Earnings were adversely affected by weak sales and low margins in Germany and the UK as well as by unsatisfactory margins for process pumps for the pulp and paper industry, which will also affect earnings during the first quarter of 2002 to some extent.

A program to reduce costs was established in the fall; and measures were introduced in operations in markets with a falling demand in particular. The program mainly comprises staff reductions and the closure of certain regional offices. The restructuring program relates to the sales companies in Germany, the UK, Austria, Norway and France. The cost amounts to SEK 44 million [about EUR 4,8 million] and was charged to earnings for the third quarter. The measures are expected to produce an annual improvement of approximately SEK 30 million [about EUR 3.3 million] in earnings and to take full effect as of 2003. During the course of the year, rationalization was also carried out at the production unit in Mölndal, Sweden.

The objective is to achieve an operating margin of 10-11 percent at Cardo Pump within a two-year period.

The aftermarket area expanded strongly during the year with a rate of increase that was twice as high as that for other areas. Service workshops were established and acquired in countries that included the USA, the Republic of Ireland, the UK, France and Spain.

In the fourth quarter, orders received included one from the USA for a number of big submersible pumps for the treatment of process water at a new, major plant in the food industry. From a private company in water and wastewater management in Manila in the Philippines, an order was received for 23 big and 3 smaller submersible wastewater pumps. This order is to be seen as a breakthrough in the Philippine market. From the American paper maker Westwaco, an order was received worth approximately SEK 10 million [about EUR 1.1 million] relating to two complete systems for the measurement of paper quality.

At the end of the year, an agreement was signed on the acquisition of Swedmeter AB, one of Scandinavia's leading companies in the field of control engineering for water treatment processes etc. The company, which has a turnover of approximately SEK 30 million [about EUR 3.3 million], manufactures and markets standardized products for purposes such as level and flow control, analysis, process control and remote monitoring for both municipal and industrial processes. Swedmeter is part of Cardo Pump as of January 2002.

January 2002 saw the acquisition of the Finnish company Nopon Oy, one of the world's leading manufacturers of products for aeration in connection with biological wastewater treatment. Nopon has a turnover of approximately SEK 120 million [about EUR 13 million] and employs 65 people. The company manufactures and markets fine-bubble aeration systems complete with associated compressors and mechanical aerators. The products are used in both municipal treatment plants and in treatment plants for various types of industries.

About Cardo Pump

Cardo Pump is one of Europe's largest manufacturers of pumps, mixers and aerators and a global leader in the production of sophisticated measurement instruments for the pulp and paper industry. Products are marketed under the brand names ABS, Pumpex and Lorentzen & Wettre.

About Cardo

Cardo is an international engineering group with a turnover of SEK 10.8 billion [about EUR 1.2 billion] in 2001. Cardo holds a strong position in the markets for doors, pumps and rail-vehicle brake systems. Cardo has subsidiaries in about 30 countries with the focal point resting in western Europe, and roughly 8,000 employees.

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