AB Ångpanneföreningen (publ)
Interim report, January-September 2000

• Strong third quarter SEK 20 (6) million
• Operating profit, excluding SPP refunds, doubled to SEK 59 (30) million
• Profit after net financial items, including SPP refunds, was SEK 303 million
• Turnover rose by 3 percent to SEK 1,200 (1,163) million
• Net worth SEK 111 (75) per share

Demand for ÅF Group services continued to improve during the third quarter compared with the corresponding period in 1999. Some improvement was also noted for energy and process technology projects towards the end of the period. Capacity utilisation rose successively during the reporting period from 64 to 71 percent and averaged 69 (69) percent for the year. Profit for the Group's consulting operations showed a considerable improvement. September saw the Group reporting its best monthly profit ever.

Projects within technical and administrative IT services continued to increase, which had a positive impact primarily on Software, Electronics & Mechanical Engineering. This business area's turnover rose by almost 20 percent and the profit margin hit 11 percent.

Although Inspection & Testing generated a loss, this was less than half that in the corresponding period in 1999. The business area continued to increase its market share despite a reduction in capacity.

The present value of the SPP refunds to ÅF of SEK 299 million had previously been calculated at SEK 257 million. One of the assumptions made in this calculation was that the PRI pension commitments of SEK 105 million will be redeemed during the year. The final decision on any redemption of these commitments will be taken by the company's board before the year-end.

Turnover rose to SEK 1,200 (1,163) million. The lion's share of this rise is again attributable to operations in Software, Electronics & Mechanical Engineering, a development well in line with the ambition to increase the significance of this business area relative to the ÅF Group as a whole. Energy, Environment & Process Technology reported a drop in turnover as a result of the weak market.

The operating margin, excluding SPP refunds, was 4.9 (2.6) percent, compared with 3.1 percent for the whole of 1999. Order stocks rose to SEK 476 (412) million.

The profit figure includes a calculated bonus to the Group's employees amounting to SEK 5.6 (1.9) million. Group profit after tax was SEK 214.7 (19.8) million.

Excluding SPP refunds, consolidated profit after net financial items and proportional interests in associated companies amounted to SEK 46.2 (26.6) million.

The number of full-time equivalents during the period, including employees in associated companies, was 2,198 (2,222). The parent company recorded net sales of SEK 77 (72) million and the profit after net financial items was SEK 1.0 (a loss of 3.6) million.

The Group's net worth, after the standard 20 percent tax deduction on the estimated surplus value of property, was SEK 111 (75) per share. The adjusted equity ratio was 43 (39) percent.

At the beginning of the period the ÅF Group acquired Miljöforskargruppen AB (MFG). It later went on to increase its ownership stake in ÅF-QPS Consultants, a UK company with a staff of around 30 people, from 40 to 70 percent. The Group also signed a cooperation agreement with Joseph Maier Papiertechnologie, which paves the way for an option to invest in an ownership stake in this paper-machine consulting business. This agreement gives the Group greater access to the important German pulp and paper industry market.

More than 700 employees subscribed for convertible bond loans during the reporting period for a total of SEK 96 million, which was paid in July 2000.

Consulting activities
The consolidated profit after net financial items for the Group's consulting activities increased by 54 percent to SEK 53 (35) million, with net sales rising to SEK 1,281 (1,231) million.

Profit/loss and net sales per business area (SEK million)

Reporting period, (corresponding period in 1999) and full-year figures for 1999

Although the Electrical Engineering & Instrumentation business area benefited from a stronger construction market, it was affected by the current low levels of investment in the energy sector and process industries, as was Energy, Environment & Process Technology, most of whose customers are to be found in the process industries and the energy sector. Capacity utilisation remained low despite reductions in capacity. While the energy market is not expected to pick up in the near future, the process industries are signalling higher levels of activity, which resulted in more new orders during the autumn.

Business for HVAC & Sanitation has developed positively and looks set to continue in this vein for the rest of the year. The profit margin for this business area rose to 9 percent.

In line with the Group's expansion strategy, the Software, Electronics & Mechanical Engineering business area grew most during the reporting period, recording sales growth of almost 20 percent and a profit margin of 11 percent.

Inspection & Testing was affected by seasonal variations where demand is weak during the first half-year but rallies during the second. Nevertheless, cost-cutting exercises implemented by the nuclear power industry mean that demand this year has been even weaker than anticipated, affecting all players in the sector and resulting in losses. Work is continuing throughout the inspection and testing market to achieve a better balance between supply and demand, with all the major players reducing capacity. The ÅF Group is playing an active role in this restructuring drive.

The result for Education & Management was somewhat better than that recorded for the corresponding period in 1999, and the restructuring of education company ÅF-SIFU is proceeding according to plan. The difficulties of securing financing for aid programmes had a negative impact on developments in the Group's international management consulting activities.

Real Estate and Finance Administration
The ÅF Group's liquid assets totalled SEK 147 (30) million and were invested in interest-bearing instruments in Sweden. Interest-bearing liabilities and allocations totalled SEK 373 (344) million, bringing the Group's net borrowings to SEK 226 (314) million. This figure will be reduced by SEK 105 million during the course of the autumn if the board chooses to redeem the Group's PRI pension commitments.

Gross investments in machinery and equipment totalled SEK 31 (71) million.

The Group's properties, which consist of 95 percent offices, are used mainly by the Group's consulting businesses. During the period the Group sold premises in Södertälje for SEK 7 million, which generated a capital gain of SEK 0.6 million. At the end of the reporting period the Group owned 33,000 square metres of real estate, with 18,000 square metres in the Stockholm area.

At the 1998 year-end, the Group's properties were valued by Catella Fastighetsekonomi at a market value of SEK 370 million. By the beginning of 2000 the market value was assessed to have risen to SEK 400 million. The book value was SEK 263 million.

Outlook for the full year 2000
The market has improved successively during the year, and the Group is now beginning to reap the rewards of its various initiatives to improve profitability. This being the case, consolidated profit, excluding SPP refunds, is expected to amount to SEK 70 million, or SEK 9 per share.

Stockholm, 27 October 2000
AB ÅNGPANNEFÖRENINGEN (publ)

Gunnar Grönkvist
Managing Director

Account for previous year in figures