Sales Q3: SEK 235 million (SEK 234 m)
Operating margin Q3: 13.6% (8.6%)
Sales Q1-Q3: SEK 834 million (SEK 816 m)
Operating margin Q1-Q3: 13.6% (9.2%)
The Engineering Division, which offers services within automation, industrial IT and mechanical engineering, is a leader in its field in the Nordic countries.
The market remained strong throughout the reporting period and the inflow of orders was good, despite noticeable signs of a contraction, for example in the automotive industry. The division's capacity utilisation rate remained high in all business areas.
The Engineering Division has more than 2,000 active clients representing most sectors of industry. Demand was strongest in the energy sector, which now accounts for 35 percent of the division's sales. A new, long-term agreement was signed with the Ringhals nuclear power plant in the third quarter. The division is currently in the middle of a successful campaign to recruit further expertise in the area of nuclear power.
The proportion of international assignments is growing steadily. In the third quarter approximately 25 percent of projects were performed outside Sweden. The division's Czech unit, for example, signed an agreement with the French energy concern Areva for project engineering services relating to a planned, new nuclear power plant in China.
Sales Q3: SEK 302 million (SEK 242 m)
Operating margin Q3: 7.4% (5.1%)
Sales Q1-Q3: SEK 993 million (SEK 856 m)
Operating margin Q1-Q3: 10.9% (9.8%)
The Infrastructure Division offers infrastructure consulting services in the following business areas: Communications & Maintenance, Installations, Infrastructure Planning, Electric Power and Sound & Vibrations.
The market for qualified consulting services in the field of infrastructure developments has remained strong. The division's capacity utilisation rate rose during the third quarter and all five business areas reported better results than for the corresponding period last year. Once clear trend that the division has noticed is that projects are increasing in size.
The high level of activity in the largest of the division's business areas, Installations, with 500 members of staff, is particularly noteworthy. New legislation and high energy prices are playing their part in buoying up demand from property owners and local and regional government for more efficient energy solutions in residential apartments and other premises.
Business remains brisk, too, for the second largest business area, Infrastructure Planning. This is thanks to substantial investments in the Swedish rail network. Environmental criteria and high oil prices are combining to generate greater political interest in railbound traffic solutions. ÅF is involved in several rail projects with a long-term investment horizon.
Two thirds of the division's earnings originate from the public sector, with the remainder coming from private companies.
Sales Q3: SEK 85 million (SEK 68 m)
Operating margin Q3: 15.5% (20.7%)
Sales Q1-Q3: SEK 241 million (SEK 195 m)
Operating margin Q1-Q3: 13.5% (14.8%)
The Inspection Division works with technical inspections, chiefly in the form of periodic inspections, testing and certification. Major clients include the engineering and nuclear power industries.
The market for technical inspections remained strong in the third quarter, although capacity utilisation was somewhat lower than anticipated.
Demand was once again strongest from the nuclear power and petrochemical industries. The third quarter saw Inspection secure an assignment to conduct non-destructive testing activities in connection with a new chemical factory for Borealis in Stenungsund on the Swedish west coast.
Elsewhere, the extensive testing and inspection agreement signed by Ringhals AB at the start of the third quarter offers proof of the success of the division's focus on periodic testing of reactor vessels.
On 1 September the Inspection Division acquired the Czech inspection and testing company Qualitest with approximately 80 employees. Qualitest is the division's first establishment outside Sweden.
Sales Q3: SEK 281 million (SEK 238 m)
Operating margin Q3: 6.3% (5.8%)
Sales Q1-Q3: SEK 871 million (SEK 669 m)
Operating margin Q1-Q3: 8.5% (6.1%)
The Process Division offers technical consulting services for the energy and pulp & paper industries worldwide.
Demand from the market continued to remain strong in the field of energy production, driven by the global rise in energy consumption and the expansion of capacity. Capacity utilisation was satisfactory in all units, except in Sweden, where a change in management took place during the quarter, and in the Finnish pulp and paper consulting operations.
The division is a market leader in the energy and environment sector in Sweden, Finland, Switzerland and the Baltic countries, and business is growing in Russia and South-east Asia. The investments made by clients extend over a number of years. Today the division has more than 1.5 billion kronor's worth of orders on the books.
Among the assignments that the Process Division won during the third quarter was a commission to assume responsibility for project management and contractor monitoring services for Fortum in connection with the construction of a new biofuel-powered district-heating power plant in Estonia. Another major order was an EPCM project for TNK-BP's gas-fired power plant in Siberia.
There has been a slight downturn in demand from the pulp and paper industry and a decision has been made to wind up the division's unit for local pulp and paper consulting operations in Finland. As a result of this, third-quarter earnings for the division have been charged with costs of SEK 8 million.
Sales Q3: SEK 113 million (SEK 90 m)
Operating margin Q3: 5.8% (8.7%)
Sales Q1-Q3: SEK 386 million (SEK 304 m)
Operating margin Q1-Q3: 10.0% (7.8%)
The Systems Division offers services in the fields of embedded systems, mechanical engineering and IT systems.
The Swedish market for IT and product development services remained strong in the third quarter. This resulted in an improved capacity utilisation rate for the Systems Division.
The reduced operating margin for the third quarter is the result of a loss sustained in a fixed-price project.
Organic growth in the Systems Division over the past 12 months now amounts to 30 percent.
Among the orders that Systems won in the third quarter was a substantial equipment-testing project from a leading manufacturer of telecommunications equipment. Under the umbrella of the "EcoDesign Center" the division also won an order from Morphic Systems relating to a software development assignment.
Parent company sales totalled SEK 185 million (SEK 144 million) and relate primarily to intra-group services. The parent company reported a loss of SEK 25 million (SEK -17 million) after net financial items.
Cash and cash equivalents totalled SEK 2 million (SEK 0 million), and gross investment in machinery and equipment for the period January to September 2008 amounted to SEK 9 million (Jan-Sept 2007: SEK 4 million).
This interim report has been prepared in accordance with IAS 34 ("Interim Financial Reporting"). The report has been drawn up in accordance with International Financial Reporting Standards (IFRS), as well as with statements on interpretation from the International Financial Reporting Interpretations Committee (IFRIC) as approved by the European Commission for use in the EU, and with the relevant references to Chapter 9 of the Swedish Annual Accounts Act. The report has been drawn up using the same accounting principles and methods of calculation as those in the Annual Report for 2007 (see Note 1, page 78). The parent company has implemented the Swedish Financial Reporting Board's Recommendation RFR 2.1 ("Accounting for Legal Entities"), which means that the parent company in the legal entity shall apply all the IFRS and related statements approved by the EU as far as this is possible while continuing to apply the Swedish Annual Accounts Act in the preparation of the legal entity's accounts.
Risks and uncertainty factors
The significant risks and uncertainty factors to which the ÅF Group is exposed include business risks linked to the general economic situation and the propensity of various markets to invest, the ability to recruit and retain qualified co-workers, and the effect of political decisions. In addition, the Group is exposed to a number of financial risks, including currency risks, interest-rate risks and credit risks. No significant risks are considered to have arisen over and above those described on pages 57-60 of ÅF's Annual Report for 2007.
The ÅF share price quoted at the end of the reporting period was SEK 152, which represents a fall of 10 percent since the beginning of the year. During the same period the Stockholm Stock Exchange all-share index (OMXSPI index) fell by 30 percent.
The 2008 Annual General Meeting of Shareholders approved a new performance-related share savings programme for key individuals in the company, including the President/CEO. By the time the application period had expired, 100 ÅF employees in senior positions had expressed an interest in purchasing approximately 20,600 shares for the entire 2008 programme. Provided that the performance targets that have been set are achieved, some 87,000 shares will be transferred to the participants without consideration during 2011 and 2012. This can lead to a dilution of earnings per share corresponding to a maximum of 0.5%.
Next reporting date
The summary of ÅF's annual report for the company's financial year 2008 will be published on 17 February 2009.
Stockholm, Sweden - 23 October 2008,
ÅF AB (publ)
Jonas Wiström, President & CEO
The full report including tables can be downloaded from the following link: