Quarterly report January - March 2009

Tough start to the year but strong cash flow

• Operating income fell by SEK 218 million, amounting to SEK 663 million (881)
• Revenues from Volvo Cars and GM fell by SEK 171 million compared with Q1 2008
• The operating loss was SEK 42 million (75 m), giving an operating margin of -6.3% (8.5)
• The operating profit/loss were hit by one-off items of SEK - 10 million (6)
• Staff cuts implemented and estimated over the first six months of the year are expected to cut costs by SEK 180 million annually, achieving full impact from mid-2009 onwards
• The loss after tax was SEK 31 million (46 m)
• Earnings per share (EPS) was SEK -1.73 (2.59)
• The operating cash flow from current activities was SEK 140 million (-24)

“We have experienced a tough start to the year with a drop in business volumes, low utilization ratio, mainly in the automotive and engineering industries as well as greater price pressure, which has all negatively impacted the company’s revenues and results over the quarter. However, the cash flow is strong due to a lower tied up operating capital. Measures taken will come into effect from Q2 onwards and we believe that we’ve now adapted the company to the prevailing market situation.”
Kjell Nilsson, President and CEO

Income and results analysis
A majority of the fall in business volumes over the last year is due to the reduced business from our two largest customers, Volvo Cars and GM. Income from these customers fell by a total of SEK 171 million, representing approximately 70% compared with Q1 2008.

The international distribution of earnings rose by 12% compared with last year and amounted to 45%.

The drop in volume in Q1 has forced staff cuts mainly at Göteborg and Trollhättan.
A total of 73 people have been made redundant. A further 200 or so people are expected to be made redundant in Q2, which will burden the results by around SEK 30 million.

The operating income for Q1 was SEK 663 million (881 m). Organic growth was -29%.

The operating loss was SEK 42 million (+75 m), giving an operating margin of -6.3% (8.5). Lower volumes and a low utilization ratio and an increased price pressure explain the lower results. Results were negatively impacted by one-off costs of SEK 10 million for staff cuts. Measures taken will have an effect from Q2 onwards. The operating profit for last year included revenues attributable to the lower pension contributions due to the discount from Alecta of SEK 6 million. The operating loss, excluding one-off costs, was SEK 32 million (+69 m), giving an operating margin of -4.9% (7.8).

The loss before tax was SEK 44 million (+65 m). Net financial items amounted to SEK -2 million (-10 m). Net financial items include positive one-off items of around SEK 3 million. The loss after tax was SEK 31 million (+46 m). EPS was SEK -1.73 (2.59).






Events during the first quarter
• The number of Semcon AB’s ordinary shares increased on 12 January 2009 by 330,000 through the conversion of the company’s class C shares, as part of the Share saving scheme. After the conversion there were 18,112,534 ordinary shares
• Semcon streamlined the business and started trade union negotiations concerning staff cuts affecting around 300 employees in Sweden. A rationalization scheme was meanwhile introduced throughout the whole of the Semcon Group. The rationalization scheme introduced is expected to generate savings of around SEK 15 million in 2009. Staff cuts and the rationalization scheme costs are expected to impact Q1-Q2 by SEK 40 million of which 10 SEK million has burden the result during the first quarter
• Semcon Project Management acquired a small German company, Triple-Constraint, and strengthened its range of project management services in Europe
• JCE announced on 5 March 2009 that following the acquisition of 115,583 shares in Semcon, it now has a share of the voting rights and capital in Semcon equivalent to 30.0 per cent and that the limit for the Mandatory Bid Rule had been passed. JCE was willing to pay SEK 14 in cash for each of the Semcon shares

Events after the end of the period
• Semcon will construct and install a new electrical and control installation for the energy company Fortum at a power station in Härjedalen with an annual production of 283 GWh
• Semcon is investing in the offshore industry and opened a new office in Lidköping. Fifteen specialists have been employed with extensive experience of international offshore projects and expertise of developing accommodation modules on oilrigs (living quarters)

Staff and organisation
The headcount on 31 March was 3,166 (3,722), of which 1,952 (2,538) in Sweden and 1,214 (1,184) abroad. The average number of employees was 3,241 (3,717). The number of employees in the respective business areas at the end of the quarter was: Automotive R&D 1,911 (2,419), Design & Development 859 (907) and Informatic 396 (396).

Outlook
Despite the instability on the market for some industries and individual customers, there is still a need for development services. The long-term trend where the market’s demand to produce more products, models and versions at an ever-increasing rate is continuing, meaning excellent business opportunities when the market situation improves. The outlook is still very difficult to predict over the short-term, meaning that more cutbacks cannot be discounted.