INTERIM REPORT, JANUARY - SEPTEMBER 2007

Highlights

(For table see attached fil.)

· Sustained strong progress in Europe and healthy volume gains in China and Southeast Asia. Weaker volume growth in the US, Japan and Korea is in line with the market.
· Volumes grew by 4% in quarters 1 - 3, which is consistent with the market.
· Gross profit was MSEK 859 (806), due to metal price volatility, time-lag on pricing models to customers and depreciation of the JPY and USD. In the third quarter, gross profit was down MSEK 12 year on year.
· Operating income adjusted for earnings from currency forward contracts was MSEK 448, a 10% increase year on year.
· Cash flow from operating activities was MSEK 199. Working capital was adversely affected by higher metal prices, particularly nickel.

GROUP

NET SALES AND EARNINGS

Quarters 1 - 3 2007
Net sales were MSEK 4 420 in quarters 1 - 3, a 14% increase. The higher turnover is due to larger volumes, price increases and product range adjustments.

Volumes expanded by 4% year on year. Höganäs’ volume growth was positive, or consistent with the previous year, 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 reduced volumes of low-price product.

In North America, Höganäs’ sales volumes were unchanged overall despite car sales and car production declining year on year. The European market made positive progress.

Operating income was MSEK 475 (456). Excluding earnings from currency forward contracts, earnings were MSEK 448 (407), a 10% increase.

Income was favoured by increased turnover, but because of a time delay in pricing models to customers, the raw material cost increases that peaked in June were not fully compensated during the third quarter. Prices of scrap, nickel, copper and molybdenum rose sharply in the first half-year and then gradually reduced in Q3. Fluctuations of this type cause margin variations between quarters, in this case benefiting the first half-year at the expense of Q3.

Selling expenses increased in the period year on year due to investments in sales and marketing resources.

Other operating income and other operating expenses amounted to MSEK 33 (36) and include earnings from currency forward contracts of MSEK 27 (49), a reversal of provisioning for tax expenses in Brazil of MSEK 3 and an item comprising sales of emission rights of MSEK 3. The previous year also included an item comprising tax expenses in Brazil of MSEK 41, a MSEK 10 capital gain from the sale of production equipment in Brazil and MSEK 18 earnings from the sale of emission rights.

In 2007, disregarding currency forward contracts, the Swedish krona exchange rate, mainly against the USD and JPY, had a distinctly negative impact on operating profits.

Income before tax was MSEK 437 (387). Provisioning in the previous year in Brazil reduced net financial income/expenses by MSEK 21.

Income after tax was MSEK 323 (283) or SEK 9.29 (8.12) per share. The effective tax rate was 26.1% (26.9).

(For full report see attached file.)