Six-Month Report January - June 2000

Six-Month Report January - June 2000 * Profit before taxes increased by 19 per cent to SEK 60.1M (50.6). The result includes items of a one-off nature of SEK +14.9M (0). * Net sales rose by 27 per cent to SEK 615M (486). Excluding acquisitions, net sales amounted to SEK 565M (486). * Order intake amounted to SEK 579M (501), an increase of 16 per cent. * Excluding acquisitions, order intake amounted to SEK 523M (501). * The acquisition of LMT has been completed and a restructuring programme is underway according to plan. * New forecast: Profit before taxes is expected to be higher than in the previous year (102). The forecast includes surplus funds from SPP and restructuring costs. Summary During the past six months, KMT has laid several important foundation stones for future growth. Market-leading product programmes were launched in all product areas and were positively received in the market. At the same time, further steps were taken for increased growth with the acquisition of Lidköping Machine Tools - LMT - a world-leading manufacturer of advanced machines and equipment for precision grinding of roller bearings. A strong end of the six months, together with items of a one-off nature, generated profit before taxes which exceeded the previous year by nearly 20 per cent. Regarding the business trend in KMT's sectors, the scenario is fragmented. In Sweden, the slow-down at the end of 1999 and beginning of 2000 came to an end and investments started to increase. In the United Kingdom investments are levelling out, whereas they gained momentum in Germany. In the USA, investments are levelling out in general, whereas they are falling in the contracting and agricultural sectors. In Product Area Precision Grinding, UVA reported a falling trend in order intake. However, following strong order intake in July, the order intake rate has turned up. In the newly-acquired company, LMT, profitability improving measures are underway in line with KMT's plans at the time of acquisition. Product Area Sheet Metal Working's new product range did not contribute to increased order intake until the end of the period due to the short space of time since the launch. Unfavourable movements in the Euro, which benefited KMT's most important competitors, affected the period's prices and profitability. In order to accelerate profitability, operations will be reviewed and a restructuring reserve of SEK 10M was allocated within KMT's six-month results. Product Area Tube Forming gradually gained stronger response for its new product programme which is now beginning to be noticed in order intake. Acquisition of Lidköping Machine Tools - LMT Following due diligence, the acquisition of LMT from SKF was completed at the April/May turn of the month. LMT's operations as a world-leading manufacturer of precision grinding machines and equipment for roller bearings, amongst other things, supplement KMT's existing operations very well. As planned, a restructuring programme aimed at improving profitability was drawn up and implementation started. In connection with the acquisition, provisions were made to cover costs for implementing the programme which will essentially be completed during the current year. LMT's effect on the year's profit is expected to be marginal. The target is that LMT will contribute positively to KMT's result from next year. LMT is consolidated in the KMT Group from 1 May 2000. Operations Order intake Order intake for the second quarter increased by 21 per cent to SEK 370M (306). For the six-month period, order intake amounted to SEK 579M (501). For the quarter and the half-year, acquisitions contributed with SEK 56M (0). Of order intake, SEK 446M (383) referred own products. Order intake on a twelve-month rolling basis amounted to SEK 1,069M (965). Acquisitions are included with SEK 56M of the increase. Backlog The backlog amounted to SEK 446M (396), of which own products accounted for SEK 387M (330). The backlog includes SEK 101M from the acquisitions of LMT. SPP surplus funds and restructuring reserve The Group's discounted share of SPP's surplus funds amounts to SEK 24.9M, excluding LMT. Payments to the Group companies are expected to be made over more than three years with a start in September 2000. Added to that is the aforementioned restructuring reserve for Product Area Sheet Metal Working, amounting to SEK 10M. These items are reported in the second quarter as items affecting comparability of +14.9M. Net sales and results Net sales for the second quarter rose by 42 per cent to SEK 416M (292). For the quarter and the half-year acquisitions accounted for SEK 50M (0). For the six-month period, net sales amounted to SEK 615M (486). Net sales calculated on a twelve-month rolling basis increased and amounted to SEK 1,129M (960) including acquisitions. Own products increased by SEK 84M, of which acquisitions account for SEK 50M. Consolidated profit before taxes for the second quarter amounted to SEK 56.0M (39.5), an increase of 42 per cent. Excluding items of a one-off nature, the increase was 4 per cent. The acquisition of LMT did not have any effect on the result. For the six months, profit including one-off items rose by 19 per cent to SEK 60.1M (50.6). Profit before taxes calculated on a twelve-month rolling basis increased by 17 per cent to SEK 111M, of which acquisitions are included by SEK 0M. Profit margin for the half year amounted to 9.8 per cent including acquisitions and items of a one-off nature (10.4). Excluding acquisitions and one-off items, profit margin amounted to 8.0 per cent. An increased share of agency products has had an negative effect on the periods margins. Seasonal variations KMT's products are investment goods. Normally, order intake as well as invoicing and profit is higher during the second and fourth quarters compared with the first and third quarters. Capital expenditure During the period, capital expenditure in real estate, machinery and equipment amounted to SEK 92.2M (8.2) and in patents and goodwill to SEK 39.7M (0). The majority of the capital expenditure is attributable to the take-over of LMT. Excluding these effects, capital expenditure in machinery and equipment amounted to SEK 9.6M. Investments in patents amount to SEK 9.7M. Financial position Cleared of one-off effects of acquisitions and with LMT included from May, cash flow from operations was SEK 54.3M (44.2). Changes in working capital amount to SEK -85.5M (-14.2), mainly as a result of high trade debtors due to large deliveries at the end of the period and a receivable from SPP for surplus funds. Following net capital expenditure of SEK 19.3M (8.2), the cash flow amounts to SEK -50.7M (21.8). The cash flow is expected to develop positively during the remainder of the year. During the second quarter, a dividend of SEK 21.3M (19.0) was paid. At the period-end, liquid assets including unutilised overdraft facilities and credit promises amounted to SEK 89.2M (130.2). The change is partly due to the acquisition of LMT. As a result of the acquisition of LMT the equity ratio fell and amounted to 34 per cent (49) at the period-end. Number of shares and shareholders The number of shares in KMT amounts to 5,000,000. The number of shareholders was unchanged at the period-end, approximately 4,700. Full-year forecast Profit before taxes, including items of a one-off nature with an estimated net effect of SEK +15M, is forcasted to be higher than the previous year (SEK 102M). ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/08/16/20000816BIT00400/bit0001.doc The full report http://www.bit.se/bitonline/2000/08/16/20000816BIT00400/bit0002.pdf The full report

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