SOURCE: Hoganas

July 18, 2007 01:37 ET

HÖGANÄS AB (publ): Interim Report, January - June 2007

HÖGANÄS, SWEDEN--(Marketwire - July 18, 2007) -


HÖGANÄS AB (publ) corporate ID no. 556005-0121

Highlights

+------------------------------------------------------------------+
| MSEK                           |       Q2       |      Q1-2      |
|--------------------------------+----------------+----------------|
| Net sales                      | 1 518 |   +16% | 2 931 |   +12% |
|--------------------------------+-------+--------+-------+--------|
| Operating income               |   175 |   +24% |   363 |   +19% |
| Operating margin, %            |  11.5 | (10.7) |  12.4 | (11.6) |
|--------------------------------+-------+--------+-------+--------|
| Income before tax              |   160 |   +50% |   332 |   +29% |
|--------------------------------+-------+--------+-------+--------|
| Income after tax               |   119 |   +53% |   245 |   +30% |
|--------------------------------+-------+--------+-------+--------|
| Earnings per share             |       |        |       |        |
| before and after dilution, SEK |  3.42 | (2.24) |  7.04 | (5.41) |
|--------------------------------+-------+--------+-------+--------|
|                                |       |        |       |        |
|                                |       |        |       |        |
| Equity/assets ratio, %         |       |        |  47.6 | (47.4) |
+------------------------------------------------------------------+

  * Sustained robust volume growth. Volumes grew by 5%, which is
    better than the market.
  * Höganäs' North American sales volumes continued to expand in the
    period despite negative market progress.
  * Operating income adjusted for one-off items and earnings from
    currency forward contracts was MSEK 341, a 15% increase year on
    year.
  * Cash flow from operating activities was   MSEK 88, and adversely
    affected by higher metal prices, particularly nickel.

GROUP

NET SALES AND EARNINGS

First half-year 2007

Net sales were MSEK 2 931 in the first half-year, a 12% increase. The higher turnover is due to larger volumes, price increases and change in product mix. Currency effects resulting from a stronger Swedish krona also exerted a 6% negative effect on turnover.

Volumes expanded by 5% year on year. Höganäs' volume growth was positive on all markets apart from Japan. Volumes in Japan were somewhat weaker than the previous year due to customers' operations being relocated from the country, and reduced volumes within the low value product Hot Bags. Metal powder sales to the Japanese Components segment were consistent with the previous year.

In North America, Höganäs' sales volumes increased despite car sales and car production declining year on year. The European market made positive progress.

Operating income was MSEK 363 (305) in the first half-year. Excluding the aforementioned one-off items and earnings from currency forward contracts, income was MSEK 341 (297), a 15% increase.

Increased turnover affected income positively. Prices of scrap, nickel, copper and molybdenum increased robustly in the first half-year.

Other operating income and operating expenses were MSEK 22 (7) and include earnings from currency forward contracts of MSEK 19 (28) and one-off items. The one-off items comprised sales of emission rights of MSEK 3. In the previous year, one-off costs mainly comprised tax expenses in Brazil of MSEK 41 and MSEK 19 earnings from the sale of emission rights.

Disregarding currency forward contracts, the Swedish krona has reduced operating income by MSEK 27 in 2007.

Income before tax was MSEK 332 (257). Provisioning in the previous year in Brazil reduced net interest income/expenses by MSEK 21.

Income after tax in the quarter was MSEK 245 (188) or SEK 7.04 (5.41) per share. The effective tax rate was 26.2% (26.8).

Second quarter 2007

Second-quarter turnover was up 16% year on year, the increase due to expanded volumes, higher pricing and metal price surcharges. Sales volumes were healthy in the period, consistent with the first quarter, and 2% above the corresponding period of the previous year. The second quarter 2006 was that year's strongest quarter.

Currency effects due to a stronger Swedish krona exerted a marginal effect on turnover in the second quarter.

Operating income was MSEK 175 (141). The provisioning in the previous year for expenses in Brazil was effected in the second quarter, and accordingly, reduced income in this period entirely. Earnings from currency forward contracts in the quarter were MSEK 2. Trading income excluding one-off items and earnings from forward contracts was MSEK 172 (147).

Income before tax was MSEK 160 (107).

BUSINESS AREAS

Höganäs has two business areas: Components and Consumables. Components encompasses all powder where value is added to create components. Consumables covers those powders used in processes such as preparing metals, as supplements to chemical processes, surface coatings and food additives.

Components

The net sales of the Components business area were MSEK 2 139 (1 880), a 14% increase year on year.

Volumes grew by 6% in the first half-year. Progress was positive, particularly in Europe, North and South America, while Japan, China and Southeast Asia were consistent with the previous year.

Operating income was MSEK 193 (186). Operating income was adversely affected by metal price performance. The operating margin for the first half-year was 9.0% (9.9).

Consumables

For Consumables, net sales were MSEK 792 (744), a year on year increase of 6%.

In the first half-year, volumes increased 3% year on year. Progress remained positive, particularly in China, South Korea and South America.

Operating income was MSEK 151, against income of MSEK 91 for the first half-year 2006. Operating income benefited from metal price performance. The first half-year operating margin was 19.1% (12.2).


PROFITABILITY

Return on capital employed was 16.9% (12.0) and return on equity was 17.8% (11.7). Returns are calculated on the most recent 12-month period.

FINANCIAL POSITION AND CASH FLOW

The equity/assets ratio was 47.6% at the end of the period, against 51.5% at year-end 2006. Shareholders' equity per share was SEK 76.40, against SEK 75.40 at the beginning of the financial year. Dividends of SEK 6.25 per share were paid in the period.

Consolidated financial net debt was MSEK 1 209 at the end of the period, up MSEK 200 since the previous year-end. Net financial income and expenses were MSEK -31 (-48), of which provisioning for tax in Brazil in the previous year reduced net financial income and expenses by MSEK 21.

Cash flow from operating activities was MSEK 88 (471). Working capital increased by MSEK 305. Cash flow was adversely affected in the period by increased accounts receivable, higher inventories resulting from increased metal prices and higher sales. Investments in fixed assets were MSEK 78 (105). Financing activities increased cash flow by MSEK 27 (-312) due to dividends paid of MSEK -217 and a MSEK 244 net change in borrow-ings.

SIGNIFICANT RISKS AND UNCERTAINTY FACTORS

The group's and parent company's significant risk and uncertainty factors include business risks in the form of high exposure to the automotive industry. Financial risks, primarily currency risks and metal price risks are additional. No other significant risks are considered to have arisen in addition to those reviewed in Höganäs' Annual Report 2006, with Note 30 offering a detailed review of the group's and parent company's risk exposure and risk management.

HUMAN RESOURCES

Höganäs had 1 580 employees at the end of the period, against 1 557 as of 1 January.

OUTLOOK 2007

Höganäs expects positive progress on the Asian and South American powder markets to continue. Weaker progress in North America is also expected to persist. Höganäs sees positive prospects for progress in Europe. The trend towards smaller and more fuel-efficient vehicles in North America will continue to hamper the growth of press powder. Metal prices are expected to remain volatile in 2007. With these market conditions, Höganäs expects to achieve sustained positive volume growth.

PARENT COMPANY

NET SALES AND EARNINGS

Parent company net sales were MSEK 1 710 (1 450), an 18% increase. Sales to group companies were MSEK 751 (622).

Turnover in the second quarter was MSEK 893, up 21% year on year. The higher turnover is due to larger volumes, price increases and change in product mix.

Operating income was MSEK 144 (226) in the first half-year. Excluding one-off items and earnings from currency forward contracts, income was MSEK 122 (179). Parent company income was reduced by volatile metal prices and exchange rate variations, mainly of the USD and JPY.

FINANCIAL POSITION

Investments in tangible fixed assets were MSEK 52 (63). Parent company liquid funds were MSEK 58 at the end of the period, against MSEK 42 as of 1 January.

SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES

The parent company exerts a controlling influence over its subsidiaries. The supply of services and products between group companies is subject to business terms, and at market prices. There were MSEK 751 (622) of sales to related parties, while purchases of goods from related parties were MSEK 76 (19).

Outstanding receivables from related parties are MSEK 1 531 (1 564), and liabilities to related parties were MSEK 336 (177). The parent company has guarantees of MSEK 101 (101) in favour of subsidiaries. MSEK 10 (14) of dividends were received from subsidiaries.

This Interim Report offers a true and accurate view of the parent company's and group's operations, position and profits, and states the significant risks and uncertainty factors facing the parent company and those companies that are part of the group.

Höganäs, Sweden, 17 July 2007

ACCOUNTING PRINCIPLES

This Report has been prepared pursuant to IFRS (International Financial Reporting Standards) as endorsed by the EU Commission for adoption in the EU. The Interim Report has been prepared pursuant to IAS 34, Interim Financial Reporting, which is consistent with the stipulations of RR 31, Interim Reporting for Groups (issued by Redovisningsrådet, the Swedish Financial Accounting Standards Council). The accounting principles applied are unchanged compared to the previous year. For a review of the group's accounting principles and definitions of certain terms, the reader is referred to the accounting principles section of the Annual Report for 2006.


FINANCIAL INFORMATION

Höganäs intends to publish the following financial information:

  * Third-quarter Interim Report 2007, 23 October
  * Year-end Report for 2007, 8 February 2008
  * First-quarter Interim Report for 2008, 16 April 2008
  * The AGM will be held on 21 April 2008

Höganäs AB (publ), SE-263 83 Höganäs, Sweden tel +46 (0)42 33 80 00 fax +46 (0)42 33 83 60 www.hoganas.com

The full report with tables can be downloaded from the following link:

Interim Report, January - June 2007: http://hugin.info/1095/R/1140116/215151.pdf

Copyright © Hugin ASA 2007. All rights reserved.

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