Industrivärden’s Year-End Report 2008

Value development and proposed dividend

- Net asset value on December 31, 2008, was SEK 62 per share, a decrease of 55% for the year including reinvestment of the dividend in 2008. In 2009 net asset value has increased by 11%, to SEK 69 per share on February 9, 2009.

- The total return in 2008 was -47% for the Class A shares.

- Purchases of stock in 2008 totaled SEK 4,644 M, of which SEK 1,830 M was in Volvo Class A shares, after which Industrivärden’s ownership in Volvo amounted to 8.5% of the number of votes. Sales of stock totaled SEK 4,314 M. Stocks were thus purchased for a net amount of SEK 330 M.

- Earnings per share for 2008 were SEK -75.37 (-5.03).

- The Board of Directors proposes a dividend of SEK 4.50 per share (5.00).

Long-term return

- During the last ten-year period, the annual total return for Industrivärden’s Class A shares has exceeded the return index by an average of 2 percentage points per year.

Current status

”Industrivärden has an entirely transparent balance sheet with market-valued assets in liquid stocks. We have no contingent liabilities or financial obligations entailing high risk, and we have refrained from making private equity investments, which are difficult to analyze and which usually entail a high level of gearing and thus high financial risk. With an equity ratio of approximately 70%, firm credit facilities and income that exceeds our expenses, we stand on solid ground in our role as an active long-term owner in our portfolio companies,” comments Anders Nyrén, President and CEO of Industrivärden.

CEO’s message

The price decline on the world’s stock exchanges that began at mid-year 2007 continued throughout 2008 and accelerated considerably after Lehman Brothers declared bankruptcy on September 15. This sharp decline came mainly against the backdrop of a collapsed global credit system that does not have the ability to provide loans and finance activities, which forms the foundation of a working national economy. Unfortunately, as 2009 gets under way there are few clear signs of a return to a more normal function. As a result of interest rate cuts that are now being carried out together with powerful stimulus measures in all key economies, we should begin to see a turn for the better. The question is only how long this normalization process will take and how much damage the credit collapse will have caused.

Industrivärden is a long-term owner in some of Sweden’s leading listed companies, with competitive positions in the world market. They are largely active in industries that have been severely hurt by the lack of normal credits, with poorer sales and profitability as a result. In 2008 the value of our portfolio fell by SEK 31 billion, and Industrivärden’s stock’s total return was -47%, compared with -39% for the total return index. However, a player such as Industrivärden, with a long-term investment philosophy, must be assessed from a long-term perspective. Over long periods of time, Industrivärden’s stock has delivered a competitive total return for its shareholders – which is a clear validation of our strategy.

During the year, as in previous years, in our capacity as an active owner we strived to contribute to the favorable development of our portfolio companies. This is a task that requires a long-term, consistent way of working. I am therefore pleased to note that several of our portfolio companies have further strengthened their positions. Handelsbanken’s focus on the traditional branch operations and SSAB’s strategic acquisition of capacity in IPSCO are prime examples of this.

In 2008 we continued to increase our ownership position in Volvo – an investment that we believe has major potential against the background of the rising global need for transport, extensive infrastructure development in major growth countries, and growing environmental concerns.

Our aim in our borrowing is to maintain a debt-equity ratio of less than 20% over the long term. In an extreme situation of the kind we are now experiencing, with dramatically diminished stock market values, our debt-equity ratio has fallen short of our long-term objective. Our credit undertakings are not contingent on our debt-equity ratio.

Industrivärden has an entirely transparent balance sheet with market-valued assets in liquid stocks. We have no contingent liabilities or financial obligations entailing high risk. We have also refrained from making private equity investments, which are difficult to analyze and which usually entail a high level of gearing and thus high financial risk. With an equity ratio of approximately 70%, firm credit facilities and income that exceeds our expenses, we stand on solid ground in our role as an active long-term owner in our portfolio companies.
With the proposed dividend of SEK 4.50 per share, we continue to achieve our goal of paying a higher dividend yield than the average for the Stockholm Stock Exchange, as this is also the lowest level in order not to pay any income tax.