SOURCE: Hoganas

April 18, 2007 03:46 ET

Interim Report, January-March 2007

HÖGANÄS, SWEDEN -- (MARKET WIRE) -- April 18, 2007 --

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


| MSEK                                             |      Q 1       |
| Net sales                                        | 1 413 |    +8% |
| Operating income                                 |   188 |   +15% |
| Operating margin,%                               |  13,3 | (12,5) |
| Income before tax                                |   172 |   +15% |
| Income after tax                                 |   126 |   +14% |
| Earnings per share before and after dilution,    |       |        |
| SEK                                              |  3,62 | (3,17) |
| Equity/assets ratio, %                           |  51,8 | (50,3) |

  * Sustained robust volume growth. Volumes grew by 9%, which is
    better than the market.
  * Operating income adjusted for one-off items and earnings from
    currency forward contracts was MSEK 169, a 13% increase year on
  * Cash flow from operating activities was slightly negative at MSEK
    -9, caused by higher metal prices and increased sales, as well as
    planned inventory increases in Brazil, India and the US.
  * Demand for powder on the American market was weakly negative
    compared to the corresponding period of the previous year.
    Höganäs is still making positive progress in the US.


Net sales grew by 8%, to MSEK 1 413. The higher turnover is due to larger volumes and an increased price/mix. Currency effects resulting from a stronger krona exerted a 7% negative effect on turnover.

Volumes expanded by 9% year on year. Höganäs' volume growth was generally 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 supplies to the low-end hot bag segment reducing.

North American car sales and car production decreased year on year. The North American powder market reduced somewhat on the previous year. The US is the largest powder market. The European market made positive progress.


Operating income was MSEK 188 (164). Excluding earnings from currency forward contracts of MSEK 17 and one-off items of MSEK 2, income was MSEK 169 (150), a 13% increase.

Increased turnover affected income positively. Prices of scrap, nickel and copper increased robustly in the first quarter, while molybdenum prices were less volatile.

Other operating income and operating expenses were MSEK 26 (25) and includes earnings from currency forward contracts of MSEK 17 (12) and one-off items. The one-off items, consisting of CO2 emission rights, exerted a positive income effect of MSEK 2 (2).

Disregarding currency forward contracts, operating income was reduced by some MSEK 20, mainly due to lower JPY and USD exchange rates compared to the corresponding period of the previous year.

Income before tax was MSEK 172 (150).

Income after tax was MSEK 126 (110), or SEK 3.62 (3.17) per share before and after dilution. The effective tax rate was 26.7% (26.7).


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.


The net sales of the Components business area were MSEK 1 016 (935), a 9% increase year on year. The increase is due to higher volumes and an increased price/mix.

YTD volumes increased by 9%. Volume growth was healthy on all markets apart from Japan. As stated above, volumes in Japan were somewhat weaker year on year.

Operating income was MSEK 102 (106). Higher volumes made a positive income contribution, while metal price increases, on nickel particularly, adversely affected income. Operating margins were 10.0% (11.3).


For Consumables, net sales were MSEK 397 (375), a year on year increase of 6%.

Volumes increased by 8% year on year. Volume growth was positive on all markets apart from the US and Japan.

Operating income was MSEK 69 (46). Income was positively affected in the quarter, mainly by metal earnings and increased volumes. Metal price changes feed through quickly in the Consumables business area. Operating margins increased to 17.4% (12.3).


Return on capital employed was 15.9% (11.4) and return on equity was 15.5% (11.3). Returns are calculated on the most recent 12-month period.


The equity/assets ratio was 51.8% at the end of the period, against 51.5% at year-end 2006. Shareholders' equity per share was SEK 78.00, against SEK 75.40 at the beginning of the financial year.

Consolidated financial net debt was MSEK 1 077 at the end of the period, up MSEK 68 since the previous year-end. Net financial income and expenses were MSEK -16 (-14).

Cash flow from operating activities was MSEK -9 (236). Working capital increased by MSEK 200, mainly due to higher metal prices, increased turnover and planned inventory increases. Investments in fixed assets were MSEK 37 (55). Financing activity increased cash flow for the period by MSEK 14 (-106) attributable to a net change in loans.


Höganäs had 1 563 employees at the end of the period, against 1 557 as of 1 January.


Parent company net sales were MSEK 817 (713) of which MSEK 356 to group companies. Income after financial items was MSEK 112 (125). Investments in tangible fixed assets were MSEK 24 (29). The parent company's liquid funds were MSEK 4 at the end of the period, against MSEK 42 as of 1 January.


Positive progress on the metal powder markets in Asia and South America is expected to continue. Weaker progress in North America is expected to persist, while the outlook for Europe, previously considered stable, is upgraded to positive. The trend towards smaller and more fuel-efficient vehicles in North America will continue to hamper the growth of metal powders. Metal prices are expected to remain volatile in 2007. With these market assumptions Höganäs expects to achieve continued positive volume progress.

Alrik Danielson
CEO and President
Höganäs, Sweden, 18 April 2007



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



Höganäs intends to publish the following financial information in 2007:

  * The AGM will be held on 25 April
  * Second-quarter Interim Report 2007, 17 July
  * Third-quarter Interim Report 2007, 23 October

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

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

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