Interim report January – September 2014

Quarter, July–September 2014

• Net sales totaled SEK 73.6 million (69.9), up 5.3 percent. Changes in the USD and EUR exchange rates had a positive impact of SEK 2.0 million on net sales.
• Operating profit was SEK 10.0 million (loss: 91.7).
• Net profit amounted to SEK 9.5 million (loss: 72.4).
• Earnings per share before and after dilution amounted to SEK 2.02 (loss: 15.38).

Interim period January–September 2014

• Net sales totaled SEK 216.6 million (204.6), up 5.9 percent. Changes in the USD and EUR exchange rates had a positive impact of SEK 3.7 million on net sales.
• Operating profit totaled SEK 19.5 million (loss: 85.6).
• Net profit was SEK 15.5 million (loss: 68.2).
• Earnings per share before and after dilution amounted to SEK 3.29 (loss: 14.49).

Key events during the quarter

Continued efficiency enhancement

The efficiency-enhancement program, called the P20 project, which was launched in the first quarter of 2014 continued and was intensified.

Relocation of Swedish operations

In July, the head office and instrument manufacturing operations were relocated from Västberga in southern Stockholm to newly renovated premises in Spånga in northern Stockholm. Despite an increase in the number of square meters, the total rental charge is unchanged. The new premises will lead to more efficient production, enable cost-efficient customer training and facilitate the future expansion of the operations.

Key events after the period

No key events occurred after the period

Comments from the CEO

During the third quarter, our markets performed in line with our earlier reports in 2014. Sales for the quarter rose 5.3 percent year-on-year and sales during the interim period by 5.9 percent year-on-year. The gross margin remained unchanged at 44.9 percent and the ratio between instrument sales and consumables was also largely unchanged.

We can confirm that the market efforts implemented in Latin America, the Middle East and Africa contributed to the favorable trend, particularly system sales to the human market. In the interim period, sales increased 13 percent in Latin America, 46 percent in Africa and 10 percent in the Middle East, year-on-year.

Asia is still a challenge although there are bright spots. The two largest potential markets for our products are China and India. In China, the challenges were primarily slow registration processes, which impeded our sales. Most of the issues have been resolved and the most important products have now been approved in China. Accordingly, we will now increase our activity and presence in the Chinese market. With respect to India, we previously reported on a significant reorganization of our distribution network, which had an impact on sales earlier this year. We can now report an increase in sales in India, corresponding so far to the level of sales in the year-earlier period.

In the North American market, sales of consumables to proprietary instruments increased during the January-September 2014 period. North American instrument sales, both to human and veterinary customers, are lower than in the year-earlier period. During the third quarter of 2014, instrument sales rose slightly. OEM sales remained unchanged, year-on-year, but continue to be an area offering potential future growth.

The efficiency-enhancement program that was launched in early 2014 continued to generate results, which we believe will continue throughout 2014. This is particularly evident in operating profit for the third quarter of 2014, which rose to SEK 10 million compared with SEK 4 million in the year-earlier period (before impairment charges for the POC project in 2013). For the January-September 2014 period, operating profit was SEK 19 million compared with SEK 10 million in the year-earlier period (before impairment charges for the POC project).

Finally, we have moved into modern, customized premises and I am particularly pleased that the move was implemented without disrupting instrument production. We now have a cost-efficient platform with expansion potential.

Ernst Westman

President and CEO