AB Ångpanneföreningen (publ)
Interim report, January-March 1999

• Turnover +20% to SEK 380 (316) million
• Consolidated profit SEK 14 (21) million. The drop, due to investments in NDT and the consolidation of SIFU, is temporary.
• Division of ÅF-Industriteknik into two companies, Electronics and Mechanical Engineering, in preparation for an approach in business area Software, Electronics & Mechanical Engineering.
• Establishment in Denmark.
• The company is included in the refund of premiums announced by the SPP insurance company.
• The forecast for 1999 is for volume growth of at least 10% and a profit margin level with that of 1998 (6%).

The market for the ÅF Group’s services declined during the latter part of 1998 and beginning of 1999. According to the National Institute of Economic Research, Swedish export companies, which form the basis of the ÅF Group’s market in Sweden, experienced a drop in orders. This meant less industrial investment and less demand for consulting services.

Overall, turnover rose by 20%. This includes the consolidation of the educational company SIFU, which is responsible for one-third of the increase in turnover. Considerable expansion took place in business area Inspection & Testing in order to offer total coverage in non-destructive testing (NDT).

Capacity utilisation within the Group amounted to 67% (70%). About half of the drop was due to the start-up of NDT operations - a field which is also characterised by considerable seasonal variation, with the first quarter being the poorest.

The consolidated profit after net financial items and interest in associated companies amounted to SEK 14.3 (21.0) million. This corresponds to a return on shareholders’ equity of 12% (19%).

Turnover amounted to SEK 380 (316) million and profit margin was 3.8% (6.6%). Profit margin for the whole year was 6.2%.

The order book increased to SEK 425 (379) million.

The consolidated profit was charged with a calculated bonus to the employees of SEK 0.9 (1.7) million.

The number of full-time equivalent employees during the period, including those in associated companies, was 2,135 (1,843).

The parent company's turnover amounted to SEK 21 (20) million and profit/loss after net financial items was SEK -0.6 (5.1) million.

The Group’s net worth, after 20% standard tax on the estimated surplus value of property, was SEK 88 (84) per share. The equity ratio was 44% (50%).

At the beginning of the period, a further 56% of SIFU was acquired as previously decided. The ÅF Group now owns 75% of the company. SIFU has a turnover of approx. SEK 80 million and 60 employees.

During the period the Group also acquired Lundstrom Engineering, Sveriges Tekniska Kontrollinstitut in Luleå, and Cresita - totalling 75 employees of which about 60 are with Cresita.

At the end of the period, 25% of the Danish electronics and IT consultancy Hansen & Henneberg was acquired. The company has 60 employees and is one of Denmark’s leading technical consulting firms with major assignments for the Great Belt Bridge, the Öresund Bridge and Copenhagen Airport at Kastrup.

During the period work proceeded according to plan on Year 2000 compliance for hardware, software and other time-dependent electronics. The work was based on the IT Commission’s definition of millennium compliance and covers production equipment and building installations. The work was led by those responsible for Y2K within each Group company. The operation is co-ordinated and directed throughout the ÅF Group as a whole by a central steering group of which the managing director is a member. Work is expected to be completed during the second half of 1999.

Consulting businesses

The consolidated profit for the consulting businesses after financial items amounted to SEK 14.9 (22.1) million. Turnover rose to SEK 398 (339) million.

The first-quarter profits of business areas Electrical Engineering & Instrumentation; Energy, Environment & Process Technology; and HVAC & Sanitation Engineering were equivalent to the corresponding period in 1998. Profits for Software, Electronics & Mechanical Engineering fell but were comparable to the other quarters of 1998.

At the beginning of July operations within the Group’s largest subsidiary, ÅF-Industriteknik, will be divided between two companies for Electronics and Mechanical Engineering respectively. This aims at providing more efficient units and a more distinctive image in the market. The goal is strong expansion in the next few years.

Business area Inspection & Testing posted a poorer financial result because of start-up costs for services in non-destructive testing (NDT). This field has a strong synergy relationship with testing operations and means that the ÅF Group can offer a new, highly-qualified service to the forest and petrochemical industries and to power utilities. Establishment has gone as planned and the drop in profits was expected since accreditation according to plan was not received until the end of the period. Costs for NDT amounted to SEK 4 million. NDT is expected to show a profit for the whole year 1999.

In business area Education & Management, which now also includes SIFU, the first quarter began slowly. SIFU’s operations are in a restructuring phase which is expected to be completed during 1999. As the ÅF Group became majority owner, some changes in management were also made.

Current projects include an energy policy plan for Tanzania and an energy study for Vilnius, the capital of Lithuania. Together with ABB Stal, the ÅF Group is building a gas combiplant in Turkey. Major contracts have been received from Iggesund Paperboard for electrical equipment and instrumentation.

A big project is being carried out for the Swedish Civil Aviation Administration which includes designing all the electrical and teletechnical installations for Arlanda Nord, at Stockholm-Arlanda International Airport. A thorough regional quality training programme is being carried out for the county labour board of Västra Götaland county.

	Profit/loss MSEK	Turnover MSEK	Whole year 1998, MSEK Profit/loss Turnover
Electrical, Engineering & Instrumentation	11(11)	118(103)	51 436
Energy, Environment & Process	6( 6)	100( 91)	21 373
HVAC & Sanitation Engineering	3( 2)	49( 41)	8 164
Software, Electronics & Mechanical Engineering	4( 7)	85( 80)	17 310
Inspection & Testing	- 7( -4)	19( 13)	-16 55
Education & Management	-2( 1)	27( 11)	2 55

Account in figures Jan-Mar 1999