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ÅF: Interim report January-March 2007: Q1 - a good start to 2007

Published May 08, 2007
For further information:

Jonas Wiström, President/CEO                  +46 (0)8-657 11 15 /
+46 (0)70-608 12 20
Viktor Svensson,
Director, Corporate Information                   +46 (0)8-657 12 01
/ +46 (0)70-657 20 26


* Net sales rose to SEK 932 million (Q1 2006: SEK 623 million)
* Operating profit totalled SEK 74 million (SEK 44 million)
* Operating profit excl. other operating income totalled SEK 74
  million (SEK 25 million)
* Profit after tax totalled SEK 49 million (SEK 31 million)
* Earnings per share before dilution were SEK 3.01 (SEK 2.38)

A few words from the President, Jonas Wiström

ÅF grew its business by 50 percent and notched up a substantial
increase in profitability during the first quarter of 2007, compared
with figures for the corresponding period last year. The operating
margin was 8.0 percent, compared to 4.0 percent for the first quarter
in 2006.

One important reason behind this positive development has been the
success of our corporate acquisitions, but we should not overlook the
fact that the market continues to remain strong. It is also
encouraging to note that the major investments we have made in recent
years to make ÅF a more cohesive and more international organisation
are now reaping results. We see this in the fact that we are now
winning bigger contracts and enjoying greater confidence among
clients on the markets where we have chosen to be active.

Capacity utilisation (the proportion of time debitable to clients
relative to the time that all the Group's employees spend at work)
rose to 74.2 percent for the first quarter, compared to 70.3 percent
for the corresponding period last year.

Developments in the Infrastructure Division have been particularly
gratifying, with profitability continuing to rise as the division
captures new shares of the market. The operating margin for the first
quarter was 11.5 percent (Q1 2006: 9.4 percent).

The Process Division performed according to expectations, increasing
its profitability - albeit from a low level - as part of a process of
gradual improvement that is expected to continue. There was a steep
increase in orders during the first quarter and the division is
growing steadily in the highly expansive area of energy. Developments
in the other divisions were also well in line with expectations.

Our strong position in the market, coupled with brisk demand for the
majority of the services that ÅF offers, means that the outlook for
the remainder of 2007 is good.


Important events during the first quarter

ÅF acquired (through its Engineering Division) the Estonian technical
consulting company Automaatika with 20 employees on 1 January.
Automaatika is a well established company offering consulting
services in the fields of automation and industrial IT.

As part of an internal reorganisation and in order to make the
company's offer more transparent to existing and presumptive clients,
130 co-workers were transferred internally from the Process Division
to the Engineering Division on 1 January 2007.

ÅF, again through its Engineering Division, took over a unit from the
technical consulting company Xdin on 1 March 2007. The unit, known as
Xdin Order to Delivery (O2D), is based in Gothenburg and has 7
members of staff. Xdin O2D helps clients to make the right decision
when investing in or rationalising their production and logistics
systems.

ÅF-TÜV Nord AB, in which ÅF-Kontroll owns a 50% share, was appointed
by OKG to serve as an accredited inspection body to inspect the
mechanical equipment at OKG's three nuclear reactor units in
Oskarshamn on the Swedish south-east coast. The assignment will run
over a period of several years and is expected to constitute
approximately 11,000 working hours per year.

ÅF was awarded a large consulting project in a new combined heat and
power plant in Tartu, Estonia. The consulting project will be carried
out by ÅF's Estonian and Finnish units.

ÅF was appointed by Finland's Kuopion Energia Oy as chief engineering
consult for a new power plant in Kuopio. This contract, worth
approximately SEK 33 million for ÅF, further reinforces ÅF's position
as a leading supplier of technical consulting services for biomass
power plants in Northern Europe.

Sales and profits

Net sales rose to SEK 932 million (SEK 623 million), an increase of
50 percent.

Operating profit totalled SEK 74 million (SEK 44 million), and the
operating margin rose to 8.0 percent (6.9 percent).

When comparing these results with those from 2006 it is important to
bear in mind that the figures for the first quarter of 2006 were
positively affected by a capital gain of SEK 19 million following the
sale of the software company PX Business Solutions. If the profits
from this sale are excluded from last year's figures, operating
profit totalled SEK 25 million and the operating margin was just 4.0
percent.

Capacity utilisation for the first quarter was 74.2 percent (70.3
percent).

Profit after tax was SEK 72 million (SEK 43 million) and the profit
margin was 7.8 percent (6.7 percent).

Earnings per share totalled SEK 3.01 (SEK 2.38).

Divisional performance

Engineering Division (formerly ÅF-Benima)   Operating margin 3  mths:
9.1% (-)

The division, which offers services within automation and industrial
IT, is a leader in its field in the Nordic countries. Engineering is
a newly formed division, following the acquisition of Benima in May
2006.

The market continued to remain strong. While brisk demand for
services has, in certain instances, led to difficulties in finding
enough consultants with the requisite qualifications, recruitmenthas, on the whole, been successful, and the number of employees has
risen by approximately 10 percent.
In general, the inflow of orders has been good throughout the first
three months. A new database for tenders was introduced in the first
quarter, together with a new sales support system designed to
reinforce the division's marketing and sales activities even further.
Among the orders won by the newly acquired Estonian automation
consulting company, Automaatika, was a contract to upgrade a control
system at the water purification plant in the Estonian capital,
Tallinn.
The division was also engaged by Foster Wheeler in Finland to carry
out control technology work at one of the world's largest power
boilers. The Engineering Division has developed its own method for
regulating and controlling boilers like this, which was one of the
decisive factors behind the client's choice of ÅF in the face of
stiff international competition.

In addition, the division, together with the Process Division, won a
contract relating to a pharmaceutical project for ALK Abello in
Denmark.

Infrastructure Division                           Operating margin  3
mths: 11.5% (9.4%)

The Infrastructure Division offers infrastructure consulting services
in four sectors: Communications & Maintenance, Installations,
Infrastructure Planning and Electric Power.

During the first quarter market demand for the services offered by
the Infrastructure Division remained stable or showed a slight
increase. Business got off to a good start early in the year and this
contributed to the fact that capacity utilisation was high in all
four business areas. The strong economy and a portfolio of services
well adapted to the demands of the market have paved the way for a
good result throughout the division.
Demand was particularly brisk in segments such as construction and
plant design, electric power and defence. The quarter also saw a new
expression of the confidence that the Swedish Armed Forces have in
the division with an order to carry out work on systems support for
command centres.
The division also noted an increase in demand and activity in the
area of wind-power.
Business in Norway continued to develop positively and during the
quarter the division received a fairly large installations assignment
at the Stavanger Concert Hall.
Process Division
Operating margin 3 mths:  5.7% (2.0%)

The Process Division offers consulting services for every aspect of
an industrial process and possesses world-leading expertise in
certain specialist areas of the pulp and paper industry and
energy-intensive industries.

The market for the services of the Process Division remained strong
during the first quarter, with several clients - particularly in the
energy sector - making new investment decisions. This obviously
benefited the division and contributed to an improvement in earnings.
Since the fourth quarter of 2006 the work of the division has been
conducted according to a new strategy and with a revamped
organisation that focuses specifically on the sectors of energy and
pulp and paper.
Within the energy segment marketing activities are concentrated to
Sweden, Finland, the Baltic states and Russia.
Pulp & Paper operations will continue worldwide, but the division
will realign its offer to correspond more closely to client
requirements. The focus will be firmly on expertise in specialist
consulting and on project management, while the resources the
division currently has within the field of mechanical construction
and design will, as previously stated, be sold or reorganised. This
work is now proceeding with greater intensity than ever.
The inflow of orders was good during the first quarter. These
included extensive agreements relating to new power plants in Finland
and Estonia, which confirm ÅF's status as Northern Europe's leading
technical consulting company for energy plants. The division also won
several medium-sized contracts for the forest industry, primarily in
Finland, including some that involve project engineering and planning
work in conjunction with new pulp and paper lines.






Inspection Division
Operating margin 3 mths: 6.2 % (3.6%)

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.

Despite the fact that, historically, the first quarter is the weakest
of the year, demand for the services of the Inspection Division was
good. All business areas recorded strong growth enabling the division
to report its best ever first-quarter figures. Taken across the
board, the pace of growth was restored to bring it in line once again
with the target of 10 percent.
The division recruited a number of new co-workers in the first
quarter, and will continue to do so during the second quarter as
well, in order to keep pace with the rise in demand.
During the first three months of the year the division won several
contracts from the nuclear power industry, including assignments to
develop sophisticated testing systems for Sweden's Ringhals and
Forsmark facilities. ÅF-TÜV Nord, in which ÅF-Kontroll owns a 50%
share, was appointed by OKG to serve as an accredited inspection body
to inspect the mechanical equipment at the three nuclear reactor
units in Oskarshamn on the Swedish south-east coast.
In addition, the division has also undertaken status assessments of
kraft recovery units in, for example, Indonesia and Thailand.

Systems Division
Operating margin 3 mths: 6.9% (8.4%)

The Systems Division offers services in the field of embedded
systems, mechanical engineering and IT systems.

The market remained strong with many enquiries from clients and
well-filled order books. Demand was brisk from all areas of the
business: telecommunications, automotive, life science, industry and
defence.
Systems continued to be successful in its recruiting campaigns,
adding a further 50 or so new co-workers during the first three
months of the year. As a result of this, it is quite probable that
the previous target of recruiting around 100 new consultants a year
will actually be exceeded before the end of 2007. The market in
southern Sweden is especially buoyant, with the southernmost province
of Skåne alone currently keeping almost 50 consultants fully
employed.
First-quarter profits were affected, however, by redundancy costs
relating to operations in Lysekil. The focus is now on increasing the
capacity utilisation rate and on managing and running projects more
efficiently and more profitably.
New assignments during the first quarter include a multimedia project
for Sony Ericsson in Lund and a system for data communication for
rail traffic to be developed on behalf of Bombardier. The division is
also undertaking a product development project for GE Healthcare for
separation equipment.
Accounting principles

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 statements on
interpretation from the International Financial Reporting
Interpretations Committee (IFRIC), as they have been approved by the
European Commission for use in the EU, and in accordance with the
Swedish Financial Accounting Standards Council's Recommendation RR 31
("Interim Reporting for Groups"), and 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 2006 (see Note 2, page
52).
The parent company has implemented the Swedish Financial Accounting
Standards Council's Recommendation RR 32:06, which means that the
parent company 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.

Investments

Gross investment in machinery and equipment for the period totalled
SEK 8 million (Q1 2006: SEK 8 million).

Cash flow and financial position

First-quarter cash flow was SEK 8 million (SEK 13 million). Cash flow
for the first quarter of 2006 included liquidity of SEK 21 million
from the sale of PX Business Solutions. The ÅF Group's liquid assets
totalled SEK 265 million (SEK 255 million).

Equity per share was SEK 71 and the Group's equity/assets ratio was
48 percent: this compares to figures of SEK 53 and 49 percent
respectively at the end of the first quarter last year.

ÅF shares

At the end of the reporting period the value of the ÅF share had
risen 7.4 percent since the start of the year to SEK 157. The
Stockholm Stock Exchange's (OMXSPI) all-share index rose by
approximately 5.9 percent during the same period.

Next reporting date

The ÅF Group's interim report for the period January to June 2007
will be published on 21 August 2007.

Stockholm, Sweden - 8 May 2007
AB Ångpanneföreningen (publ)
Jonas Wiström, President and CEO


 (This report has not been subjected to scrutiny by the company's
auditor)

The full report including tables can be downloaded from the following
link:

Download/open as file: