SOURCE: Hoganas

April 19, 2006 03:48 ET

HÖGANÄS AB (publ): INTERIM REPORT JANUARY - MARCH 2006

HÖGANÄS, SWEDEN -- (MARKET WIRE) -- April 19, 2006 --


Highlights

+--------------------------------------------------+
|                      |            Q1             |
|----------------------+---------------------------|
| Net saels            | 1 310 | MSEK |        20% |
|----------------------+-------+------+------------|
| Opeating income 1)   |   152 | MSEK |        24% |
| Operating margin  1) |    12 |    % |      (11%) |
|                      |       |      |            |
|----------------------+-------+------+------------|
| Operating income     |   164 | MSEK |         1% |
| Operating margin     |    13 |    % |      (15%) |
|                      |       |      |            |
|----------------------+-------+------+------------|
| Income before tax    |   150 | MSEK |         1% |
|----------------------+-------+------+------------|
| Income after tax     |   110 | MSEK |         4% |
|----------------------+-------+------+------------|
| Earnings per share   |  3.17 |  SEK | (3.10 SEK) |
|----------------------+-------+------+------------|
| Equity/assets ratio  |  50.3 |    % |    (47.7%) |
+--------------------------------------------------+


1) Excluding currency forwards contracts.

-- Operating income was up 24% year on year, to MSEK 152, excluding
   currency forwards contracts.

-- Robust volume growth in the first quarter: +6%.

-- US powder markets - sustained weak progress due to the American
   car industry.
GROUP

NET SALES

Net sales were MSEK 1 310 in the first quarter, a 20% increase. Currency effects resulting from a weaker krona exerted a 9% positive effect on turnover. Price increases in the quarter were conducted in North America, Europe and elsewhere.

Volumes expanded by 6% year on year despite weak progress on the North American market. The increase on the fourth quarter 2005 was also 6%. Höganäs' volume growth has been good on all markets apart from China and Taiwan.

North American car sales increased somewhat in the first quarter, while car production reduced. The trend towards smaller, more fuel-efficient cars, simultaneous with the two largest American car producers losing market share, mean that the US powder market continued to contract in the first months of the year. The US powder market represents about half of the global market. The market in Western Europe has made a slow rally. Growth in Asia and South America was unable to offset the downturn in the US.

EARNINGS

First-quarter operating income was MSEK 164 (162). Income before tax was MSEK 150 (149).

Turnover in the first quarter was healthy, making a positive impact on income. Metal prices remained volatile, with scrap, nickel and copper prices increasing in the quarter, while molybdenum prices were stable.

Other operating income and operating expenses were MSEK 25 (54) including items such as earnings from currency forwards contracts. The outcome from these forwards contracts was MSEK 12 (39). Disregarding these forwards contracts, the weaker krona exerted a positive MSEK 20 operating income effect in 2006.

Income after tax was MSEK 110 (106) or SEK 3.17 per share (3.10). The effective tax rate was 26.7% (28.9).

BUSINESS AREAS

As a step towards an increased market orientation, Höganäs has chosen to monitor and report its operations from a market perspective from 2006 onwards. That portion of the metal powder market where Höganäs is active can be divided into two main fields of application: Components and Consumables. Components encompasses all powder where value is added to create components. Whether these components are produced from iron or high-alloy metal powder is less important, and may change over product life-cycles. Consumables covers those powders used in a process such as preparing metals, as supplements to chemical processes, surface coatings or food additives. Components represents some 701% of consolidated turnover, and Consumables, 30 %.

Components

The net sales of the Components business area were MSEK 935 (761) a 23% increase year on year. Apart from price changes implemented in North America and Europe, the turnover increase is due to higher volumes, a weaker krona and higher metal prices.

Volumes increased by 6% in the quarter. Generally, all markets are performing positively, apart from China and Taiwan.

Operating income was MSEK 106 (81).

Consumables

For Consumables, net sales were MSEK 375 (334), a year-on-year increase of 12%. The increase is due to higher volumes, metal price fluctuations and price changes effected in the quarter. As for Components, the weaker krona had a positive turnover effect.

First-quarter volumes increased by 6% year on year. The volume growth has been good mainly in China, South Korea and South America.

Operating income was MSEK 46, against MSEK 42 for the first quarter of the previous year.

PROFITABILITY

Return on capital employed was 11.4% (16.1) and return on equity was 11.3% (18.7). Returns are calculated on the most recent 12-month period.

FINANCIAL POSITION AND CASH FLOW

The equity/assets ratio was 50% at the end of the period, against 48% at year-end 2005. Shareholders' equity per share was SEK 76.40, against SEK 73.30 as of 1 January.

Consolidated financial net debt was MSEK 1 172 at the end of the period, down MSEK 215 since the previous year-end. Net financial income and expenses were MSEK -14 (-13).

Cash flow from operating activities was MSEK 236 (-25). Working capital improved by MSEK 116. Investments in fixed assets were MSEK 55 (52). The krona has depreciated since the previous year-end, implying currency effects that do not affect liquidity of MSEK 6 (-5).

HUMAN RESOURCES

Höganäs had 1 537 employees at the end of the period, against 1 551 as of 1 January.

PARENT COMPANY

Parent company net sales were MSEK 713 (594) of which MSEK 321 to group companies. Income after financial items was MSEK 125 (100). Investments in tangible fixed assets were MSEK 29 (31). The parent company's liquid funds were MSEK 50 at the end of the period, against MSEK 30 as of 1 January.

OUTLOOK FOR 2006

Höganäs expects continued positive development of Asian and South American powder markets. Höganäs also anticipates continued weaker development of the US powder market. The powder market in Europe expects to have a slight growth during this year, which is a change from earlier outlook of continued weaker development. Metal prices are expected to remain volatile in 2006.

Earnings from currency forward contracts are estimated to be substantially lower than in 2005, based on current exchange rates.

Alrik Danielson
CEO and President
Höganäs, Sweden, 19 April 2006

ACCOUNTING PRINCIPLES

This Report has been prepared pursuant to IFRS (International Financial Reporting Standards) and IAS 34.

This Interim Report has not been reviewed by the company's auditors.

FINANCIAL INFORMATION

Höganäs intends to publish the following financial information in 2006:

-- Second-quarter Interim Report, 14 July

-- Third-quarter Interim Report, 20 October

-- The AGM will be held in Höganäs, Sweden, on 25 April

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

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