Axis AB Interim Report January-September 2001

- The gross margin for comparable units continued to improve and was 55.4 percent during the third quarter.

Axis implemented restructuring measures during the second quarter of 2001, including divestment of its holding in Netch. Unless stated otherwise, the outcome and comparative data presented in the following text applies to comparable units, excluding Netch. The aim has been to show the development of the restructured company. Results and comparative data including Netch's performance are presented in the subsequent tables. Sales Sales for comparable units during the nine-month period amounted to SEK 487 M (440), an increase of 11 percent compared with the corresponding period in the preceding year. Total sales, including Netch, which was divested during the year, amounted to SEK 507 M (491). Sales were affected positively by exchange-rate gains of SEK 56 M. Sales for comparable units in the third quarter amounted to SEK 155 M (157). Camera products continue to be the fastest growing area of operations, with sales growth of 39 percent during the first nine months, compared with the corresponding period in the preceding year. The OEM area is also continuing to develop well, and several major projects will be completed on schedule during the fourth quarter. Axis is continuing to take market shares in the print server market, although this does not compensate for the weak market in the Networked Office area. The uncertain economic situation is affecting sales in all geographic markets. Axis notes increasing interest in Camera products in all markets - particularly in the United States - as a result of a widespread and growing awareness of security needs. Netch, which was previously reported in sales for the EMEA market area, ceased to be part of the Group after June 30, 2001. Operating result The Group's operating result for comparable units for the nine-month period was a loss of SEK 91 M (including restructuring costs of SEK 20 M), an improvement of SEK 45M, compared with the corresponding period in the preceding year. The loss after financial items was SEK 95 M (loss: 112). The operating result during the third quarter amounted to a profit of SEK 1 M (loss: 37), an improvement of SEK 38 M, compared with the corresponding quarter of the preceding year. The operating loss for the nine-month period, including Netch, was SEK 122 M (loss: 168). Profitability during the third quarter represents Axis' achievement of a strategically important objective. Profitability is the result of continued favorable development of basic operations and the impact of the restructuring and action programs implemented in the preceding quarter. Gross margin for comparable units improved by 4.8 percentage points in comparison with the first six months of 2001, due to the transfer of a high proportion of the company's production to Asia. Operating earnings were affected positively by exchange-rate gains of SEK 16 M. Air transport problems due to actsof terrorism in the United States had a negative impact on operating earnings for the third quarter since sales amounting to more than SEK 10 M could not be invoiced until October. The number of employees at the end of the period amounted to 340 (561, including divested units). Business trend Demand for Camera products is increasing. Among other things, this is due to a gradual switch from analogue to digital solutions in the market place. In addition, there is increasing investment in infrastructure security enhancement, in both the public and private sectors. New Camera solutions are being developed on a continuous basis in order to expand business opportunities and establish new areas of application. In the autumn of 2001, for example, Axis is launching a product that transmits both sound and vision. In the Networked Office area the development of Axis' distributor and retail network is proceeding asplanned. In addition, Axis' network technology is used in an increasing number of industrial contexts. Several new and strategically important customer contracts were established during the third quarter in the OEM and technology area, for example in Italy and Taiwan. Cash flow and financial position Cash flow from ongoing operations amounted to a deficit of SEK 15 M during the period. Net investment amounted to an expense of SEK 1 M. Axis has liquid funds amounting to SEK 139 M and unutilized lines of credit totaling SEK 85 M. As a result, Axis had total disposable funds of SEK 224 M at September 30, 2001. Equity The Group's shareholders' equity amounts to SEK 288.0 M. The changes during the period reflect the loss of SEK 75.9 M reported for the period, costs of SEK 17.2 M for changes in the Group structure, and revenues of SEK 1.4 M from the issue of warrants. The total number of shares amounted to 68,900,000 at the end of the period. After full exercise of outstanding warrants, the total number of shares is 71,253,100. The Group's equity/assets ratio at September 30, 2001 was 60.1 percent. Parent Company The Parent Company's operations primarily focus on Group administration. The Parent Company has no employees. The Parent Company reported an operating loss of SEK 55 M before tax. Liquid funds amounted to SEK 29 M and borrowing to SEK 50 M. Outlook for the fourth quarter of 2001 Despite considerable uncertainty about business trends in the immediate future, Axis is maintaining its target of generating continued operating profit during the remainder of the year. The holding in nBand - currently booked at SEK 32 M - may need to be written down during the fourth quarter, depending on the outcome of nBands financing process currently under way. Lund, October 18, 2001 Board of Directors This interim report has not been reviewed by Axis' auditors. Future financial reports Year-end financial statement February 12, 2002 Interim report January-March 2002 April 19, 2002 Interim report January-June 2002 July 19, 2002 Interim report January-September 2002 October 18, 2002 The full Interim Report including tables is available to download from the enclosed link. Interim Report January-September 2001 Further information is available from the CEO, Peter Ragnarsson, tel: +46-46 272 18 00 or Anne Rhenman, Head of Corporate Communications and Investor Relations, tel: +46-708 90 18 29, e-mail: anne.rhenman@axis.com The Annual Report for 2000 is available on the Axis website, www.axis.com/corporate/investor/