Interim Report, January 1 – September 30 2009

AB Industrivärden (publ)

Value development • Net asset value on October 30, 2009, was SEK 107 per share, an increase of 73% since the start of the year. Net asset value on September 30, 2009, was SEK 101 per share. • The value of the equities portfolio increased by SEK 17.4 billion to SEK 52.1 billion, or 50%, during the first ten months of the year. The Stockholm Stock Exchange gained 44%. • The total return for the Class A shares was 60% for the first ten months of the year, compared with 50% for the return index. • Earnings per share for the first nine months of the year were SEK 43.68 (-48.81) and SEK 50.08 as per October 30. Long-term return • During the last ten-year period, the annual total return for the Class A share has exceeded the return index by an average of one percentage point. Current status “The improved earnings of our portfolio companies during the third quarter were driven not by higher sales, but by persistent work on cost-cutting and efficiency-improvement. At the same time, reductions in working capital have made a favorable contribution to the companies’ cash flows. It is especially pleasing to note that a large part of the cost savings are of a structural character. The conditions are therefore favorable for margin improvements once demand returns to more normal levels,” comments Anders Nyrén, President and CEO of Industrivärden. CEO’s message During the third quarter, the global economy continued to develop in line with the positive trend that was noted in our half-year report, and ever-greater signs now point to a recovery. At the same time, we must be clear that many of the fundamental reasons for the downturn that began in autumn 2008 remain. The imbalances in trade between various regions – mainly exemplified by the deficit in the U.S. and surplus in China and the rest of Southeast Asia – still remain. In addition, access to financing with low interest rates is still high. The G-20 nations’ stimulus measures in their respective economies in the form of strong pressure on interest rates, bank support and direct stimulus measures have been entirely decisive. Thanks to swift action, the freefall was halted and a gradual normalization has been made possible. Despite this improvement, it should be kept in mind that the gradual recovery that we are now seeing is taking place from a very low level. There is a long way to go before the economies in the West begin expanding again at healthy growth rates. The credit and finance markets have improved. For example, we see that the corporate bond market in Europe is working increasingly better. I also want to underscore that the rapid recovery that has taken place in countries like China, India and Brazil is favorable and is helping to improve stability in the global economy. But perhaps even more important is the fact that this trend is enabling a structural shift from a strong dependence on U.S. consumer behavior to a global economy with a broader regional balance. In the glow of the improved macroeconomic situation, the world’s bourses have performed in a positive direction. We should remember that the stock market is normally ahead of real development. When the market’s valuation of companies increases without there being any concrete improvements in the companies’ business conditions, naturally this increases the risk for a backlash in the stock market. So it is gratifying to see that our portfolio companies, with only a couple of exceptions, have reported sequential profitability improvements during the third quarter. This improvement is driven not by higher sales, but by persistent work on cost cutting and efficiency-improvement. At the same time, reductions in working capital have made a favorable contribution to the companies’ cash flows. It is especially pleasing to note that a large part of the cost savings are of a structural character. There are therefore good conditions for margin improvements once demand returns to more normal levels. Handelsbanken continues to impress with steady, strong performance. Both profitability and its growth rate are among the top of Europe’s banks. This has been achieved at the same time that the Tier 1 capital ratio is among the best in Europe, without requiring the bank to shore up its finances through a new issue. SCA has shown continued favorable performance during 2009, with a satisfactory return. The company’s strength is in a diversified portfolio, where a large and growing share of the Group’s earnings are derived from consumer products. In general the company’s performance has set it apart considerably from the more traditional paper and forest products companies. The portfolio companies that are exposed to the sharp drop in capital goods – Volvo, Sandvik and SSAB – are all showing sequential recovery, with improved cash flows. Also worthy of mention is Höganäs, which despite its exposure to the auto industry, has succeeded in achieving better quarterly earnings than in the corresponding period a year ago. This is a result of a greater presence in Asia and focused efficiency-improvement work. During the year to date, Industrivärden’s net asset value has grown by SEK 17.6 billion, or 82% if including reinvestment of the dividend, as per 30 October 2009, compared with 50% for the return index. Our debt-equity ratio has fallen to nearly 20%, or expressed from a different perspective, our equity ratio is approximately 80%. As a result of this decrease, the credit rating agency Standard & Poor’s upgraded our rating to A/stable/A–1 – one of the few upgrades to be seen in the corporate world. Our short-term trading showed nine-month earnings of SEK 76 M (59). Industrivärden’s total return for the ten-month period was 60% or the Class A shares and 68% for the Class C shares, an excess return of 10 and 18 percentage points, respectively. Our relative return remains favorable also over the longer time frame.