Interim report, January - June 2002

- Inflow of orders: SEK 5,591 million (5,704)

- Invoiced sales: SEK 5,385 million (4,990)

- Earnings after financial items: SEK 191 million (208)

- Final agreement on sale of Rail


During the first half-year, the Group’s inflow of orders amounted to SEK 5,591 million (5,704), which is 7 percent lower than the previous year for the current structure of the Group after adjustment for the effects of exchange rate movements. The decrease is almost exclusively attributable to Rail.

Invoiced sales amounted to SEK 5,385 million (4,990), a rise of 6 percent after adjustment for the effects of exchange rate movements. Company acquisitions account for 4 percentage points of this figure.

Operating earnings amounted to SEK 242 million (258), providing an operating margin of 4.5 percent (5.2). Pump’s and Rail’s earnings increased during the second quarter. For Door, the continued weak market conditions have resulted in lower volumes and reduced margins in industrial doors and dock loading systems, which together with a somewhat lower-than-expected growth rate in service had an adverse effect on earnings.

Earnings after financial items were SEK 191 million (208), providing a profit margin of 3.6 percent (4.2). Earnings per share after full tax were SEK 4.11 (4.51).

The impact of exchange rate movements on Group earnings is estimated to have been only marginal.

Sale of the Rail business area
In late July, Cardo entered into an agreement on the sale of the Cardo Rail business area to Vestar Capital Partners, a leading private equity firm. Through the sale, Cardo is gaining a strong balance sheet and capital is being freed up for an expansion in Door and Pump, which both operate in sectors with considerable aftermarket potential and good growth opportunities via acquisitions.

As a result of the agreement, Vestar will take over Rail’s business through a company newly established for the purpose. The deal, which is expected to close during the month of September, is subject to the approval of the competition authority and to Vestar receiving final financing.

The selling price is approximately SEK 2 billion for the company free from debt, generating a tax-free capital gain of approximately SEK 345 million, which is equivalent to earnings per share of approximately SEK 11.50. The selling price will be paid by the purchaser taking over existing loans within Rail, paying approximately SEK 1.2 billion cash for the shares on the day of taking possession and issuing a warrant that gives Cardo the right at any time prior to December 31 2020 to acquire 5 percent of the shares in the acquiring company at their nominal value. The present value of the warrant has been estimated at SEK 10 million.

Basing calculations on the previous year’s earnings, and computing interest on proceeds of the sale, the whole-year effect of the sale of Rail would have resulted in a reduction of group earnings per share by slightly more than SEK 1.

After the sale, the group will have net liquid funds of approximately SEK 500 million and an equity ratio of slightly more than 60 percent.

Company acquisitions
As of January 2002, Cardo Pump includes the acquired companies Swedmeter AB and Nopon Oy with an aggregate annual turnover of approximately SEK 150 million. As of the same date, Cardo Door includes the acquired company Amber Doors Holding Limited with its subsidiary Amber Doors Limited. Amber Doors has an annual turnover of approximately SEK 240 million.

Cardo Door
Cardo Door is one of the world's largest manufacturers of industrial doors and Europe's leading supplier of dock loading equipment. Cardo Door is also the market leader in servicing these products and one of Europe's largest manufacturers of residential garage doors.

Cardo Door's inflow of orders for the current structure was 1 percent lower than the previous year after adjustment for the effects of exchange rate movements.

Demand for industrial doors and dock loading systems was lower than the previous year. Demand for residential garage doors remained weak in Germany, but totally was on a par with the previous year. The growth rate for service declined somewhat during the second quarter as a consequence of the continued weak market conditions in Europe.

Major orders during the first quarter included ones for 76 industrial doors for the building contractor Max Boegl for a fire station in Frankfurt in Germany, 53 dock loading units for the food distributor Colruyt in Belgium and 43 dock loading units and 17 high-speed doors for the food group NorgesGruppen in Oslo, Norway. In the USA, 11 big Megadoor doors were sold to the airports in Lehi in Pennsylvania and St Augustine in Florida and to Ogden Airport in Utah.

Invoiced sales during the period amounted to SEK 2,532 million (2,377), which adjusted for the effects of exchange rate movements and company acquisitions is on a par with the previous year. Operating earnings amounted to SEK 105 million (137). The continued weak market conditions have resulted in lower volumes and reduced margins in industrial doors and dock loading systems. This, together with a somewhat lower-than-expected growth rate in service, had an adverse effect on earnings during the second quarter.

During the second quarter, the unit for the manufacture of residential garage doors in Switzerland was closed and production moved to the plant in Moosburg in Germany. The manufacture of industrial doors in Örebro, Sweden, was discontinued; and production has been moved to the plants in Gothenburg and Strömstad in Sweden and Hobro in Denmark.

Cardo Pump

Cardo Pump is one of Europe’s largest manufacturers of pumps, mixers and aerators and a global leader in the production of sophisticated measuring instruments for the pulp and paper industry.

The inflow of orders rose by 3 percent for the current structure after adjustment for the effects of exchange rate movements.

In water and wastewater, which is Cardo Pump’s biggest segment, demand increased compared with the corresponding period the previous year. In the building services segment, demand has stabilized after the downward trend during most of 2001. Demand from the process industry was on a par with the previous year.

Cardo Pump continues to expand in Asia; and orders received during the second quarter included one worth SEK 6.5 million for process pumps and mixers for a paper mill in Indonesia and one for 7 big water and wastewater pumps and 48 mixers for a new treatment plant in Nanjing in China.

In Chile, 300 process pumps were sold to one of the world’s biggest forest companies; and a major paper mill in South Africa placed an order worth SEK 5.5 million for systems for the automatic measurement of paper quality. In Holland, two major contracts were signed, worth a total of SEK 9.5 million, relating to the delivery of pumping stations for wastewater systems. Nopon, which was acquired in January, secured orders that included ones worth SEK 8.6 million and SEK 4.9 million respectively for fine-bubble aeration systems for a Spanish wastewater treatment plant and for a mechanical aeration system for an industrial wastewater treatment plant in South Africa.

Invoiced sales amounted to SEK 1,511 million (1,306), which adjusted for the effects of exchange rate movements is a rise of 14 percent. Company acquisitions account for 8 percentage points of this figure. Operating earnings rose to SEK 83 million (73).

Cardo Rail

Cardo Rail is one of the world’s largest manufacturers of brake systems and brake components for rail vehicles.

The inflow of orders during the half-year period amounted to SEK 1,343 million, which adjusted for the effects of exchange rate movements is 24 percent lower than the previous year. The decrease is accounted for by the comparison with an unusually strong inflow of orders during the corresponding period last year. The inflow of orders rose during the second quarter this year compared with the first, particularly in the aftermarket where the increase was 23 percent. Among other things, a rise in demand for aftermarket products was noted in Italy.

During the second quarter, agreements entered into included a frame agreement with Bombardier Transportation worth SEK 75 million relating to brake equipment for commuter trains for delivery to the British operator Govia. On the aftermarket front, an order worth SEK 32 million was received from Bombardier relating to equipment for high-speed trains in Norway. Stadler in Switzerland ordered bogie-mounted brake equipment for commuter trains for delivery to the Swiss operator Thurbo. This order, which is worth SEK 41 million, is one of Cardo Rail’s biggest so far in the Swiss market.

Invoiced sales amounted to SEK 1,342 million (1,307), which is a rise of 2 percent adjusted for the effects of exchange rate movements. Operating earnings amounted to SEK 92 million (86).

Liquidity and financing

At June 30, the Group’s liquid assets stood at SEK 201 million (210) compared with SEK 264 million at the beginning of the year. In addition, there are unutilized credit facilities of approximately SEK 2.8 billion (3.3).

Cash flow from operations was SEK 518 million (128) after tax, which is equivalent to SEK 17.27 (4.27) per share. Adjusted for the effects of exchange rate movements on the change in working capital, cash flow was SEK 13.57 (8.00) per share after tax. The Group’s gross investments, excluding company acquisitions, stood at SEK 151 million (147).

Net interest bearing debt at June 30 amounted to SEK 1,495 million (1,495) compared with SEK 1,242 million at the beginning of the year. The increase is mainly attributable to company acquisitions.

Equity amounted to SEK 3,330 million (3,232), which is equivalent to SEK 110.99 (107.73) per share.

The Group’s equity ratio at June 30 was 41.9 percent (42.2).

Personnel

The number of employees in the Group at June 30 was 8,076 (7,940).

Accounting principles

The interim report has been drawn up in accordance with recommendation RR20 of the Swedish Financial Accounting Standards Council concerning interim reports. The accounting principles used are the same as in the annual report for 2001 except for the new recommendations of the Swedish Financial Accounting Standards Council effective as of January 1 2002. The application of the new recommendations has not given rise to any adjustment of previously reported periods.

The parent company

The parent company's earnings after financial items amounted to SEK 313 million (75), its gross investments to SEK 0 million (0) and its liquid assets to SEK 1 million (0) as against SEK 0 million at the beginning of the year.

Market prospects

The assessment in the previous report still applies:
"Market prospects continue to be difficult to assess, not least when it comes to Germany. As regards Cardo, the Group is still considered to be capable of showing greater growth than that of the underlying market for the whole year."

Malmö, Sweden, August 14 2002

Cardo AB (publ)

Kjell Svensson

President and CEO

This report has not been subjected to special examination by the Company’s auditors.

Cardo's interim report for January-September will be published on November 8 2002.

Enclosed: 1. Invoiced sales, operating earnings and operating margin by business area

2. Consolidated income statement and balance sheet in brief

3. Consolidated cash flow statement in brief

4. Group financial summary



About Us

Cardo is a world-leading supplier of industrial doors and logistics systems, wastewater treatment systems, process equipment for the pulp and paper industry and garage doors. Operations are pursued in the Group’s divisions: Door & Logistics Solutions, Wastewater Technology Solutions, Pulp & Paper Solutions and Residential Garage Doors. With sales of almost SEK 10 billion and more than 6,000 employees worldwide, Cardo delivers solutions that help to solve some the toughest challenges of our time in the fields of water, transportation and energy. Corporate headquarters are located in Malmö, Sweden.

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