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ÅF - Interim report January - September 2007: Continued improvement in earnings

Published november 09, 2007
For further information:

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

Q3 2007
* Net sales totalled SEK 844 million (Q3 2006: SEK 746 million)
* Operating profit totalled SEK 65 million (SEK 37 million)
*  Profit after tax rose to SEK 45 million (SEK 15 million)
*  Earnings per share, before dilution, amount to SEK 2.65 (SEK 0.98)

Q1-Q3 2007
*  Net sales totalled SEK 2,744  million (Q1-Q3 2006: SEK 2,140
*  Operating profit totalled SEK 224 million (SEK 111 million)
*  Operating profit, excluding other operating income, totalled SEK
  224 million (SEK 92 million)
*  Profit after tax rose to SEK 152 million (SEK 61 million)
*  Earnings per share, before dilution, amount to SEK 9.18 (SEK 4.34)

A few words from the President, Jonas Wiström

ÅF continues to grow, profitability is improving, and we can report
our best third-quarter performance to date. Our operating margin rose
to 7.7 percent (4.9 percent). The state of the economy remains
strong, and ÅF is capturing new shares of the market.

It is also a source of great pleasure to report that we are
continuing to attract the best consultants. In October, in a poll
among professional engineers in Sweden, ÅF was voted the consulting
industry's most attractive employer. (Source: Career Barometer,

ÅF is growing particularly strongly in the expansive energy sector. A
new and highly significant step in our expansion in this area was
taken in the third quarter with the acquisition of the Swiss energy
consulting company Colenco, which has 250 employees and clients in
more than 40 countries. As a result, ÅF can now offer clients access
to more than 750 highly qualified energy and environmental
consultants on an international market.
Across the board, ÅF's various divisions are developing in line with,
or better than expectations.

Corporate acquisitions and disposals, Q3 2007

ÅF acquired 100 percent of the shares in the Swiss energy consulting
company Colenco, which employs 250 members of staff in Europe and
Asia. The takeover has made ÅF one of the largest independent
consulting companies in the energy sector, with a position as a world
leader in nuclear power.

Colenco is an international energy consulting concern with its
headquarters in Baden, Switzerland. The company has a 250-strong
workforce, 180 of whom have Switzerland as their base. Colenco has
offices in eleven countries and is currently engaged in projects in
more than 40 countries. The company's main areas of activity are
nuclear power, hydropower, electrical networks and conventional power
plants. The acquisition of Colenco reinforces ÅF's market position in
Europe, the Baltic region, Russia, South-East Asia and South Asia.For
financial data relating to the acquisition of Colenco, you are
referred to page 11 in this interim report.

At an extraordinary meeting of shareholders held on 14 August 2007, a
resolution was upheld to approve the sale of the subsidiaries ÅF-CTS
Oy and ÅF-Chleq Froté S.A to purchasers that include the management
of each of the respective companies. The sales are part of a strategy
to realign the operations of the Process Division.

Important events during Q3 2007 and after the close of the period

ÅF won a major order from Banverket, the authority responsible for
rail transport in Sweden, in conjunction with the Stockholm City Line
rail link. The value of the order for ÅF's part is estimated to total
approximately SEK 200 million. The consulting contract consists for
the most part of three technical assignments: Tomteboda freight
yards, the double-track tunnel and new commuter stations, and a risk
and safety management assignment.

ÅF has been engaged by the pulp and paper company Portucel as the
principal consultant in a major project to extend the integrated pulp
and paper mill at Viana in Portugal.
The contract is worth in excess of SEK 30 million for ÅF.

In August the Board of Directors of ÅF formulated the following
overall financial objectives for the Group:

-   ÅF shall be the most profitable among the closest comparable
companies in the industry and achieve an operating
    margin (EBIT) of at least 10 percent over a business cycle.
-   ÅF shall have net debt. The net debt shall not exceed 40 percent
of equity.

The previous formulation for the Group's growth target, which
specifies that ÅF shall attain sales of at least SEK 5 billion by
2010, remains unchanged.

In conjunction with the first conversion opportunity for the ÅF
co-worker convertibles programme for 2005/2008, a new issue has been
made of a total of 523,608 of a possible 660,644 class B shares. This
gives a 3.1 percent dilution of the share capital and a 2.2 percent
dilution of the votes. The new number of shares in ÅF now totals
16,892,534, of which 804,438 are class A shares, and 16,088,096 are
class B shares.

Sales and profits
Net sales for the full nine-month reporting period totalled SEK 2,744
million, an increase of 28 percent on the figure for
January-September 2006 of SEK 2,140 million. Sales in the third
quarter amounted to SEK 844 million (SEK 746 million), an increase of
13 percent.

Operating profit for the period was SEK 224 million (SEK 111
million), and the operating margin was 8.2 percent (5.1 percent). For
the third quarter, operating profit was SEK 65 million (SEK 37
million), and the operating margin was 7.7 percent (4.9 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 at this stage of the year totalled SEK 92 million and the
operating margin was 4.3 percent.

Capacity utilisation for the period was 75.1 percent (72.4 percent).
For the third quarter, capacity utilisation was 74.3 percent (72.9

Profit after net financial income/expense was SEK 220 million (SEK
102 million) with a profit margin of 8.0 percent (4.7 percent). For
the third quarter, profit after net financial income/expense totalled
SEK 64 million (SEK 30 million), and the profit margin was 7.5
percent (4.0 percent).

Profit after tax amounted to SEK 152 million (SEK 61 million). For
the third quarter, profit after tax was SEK 45 million (SEK 15

Earnings per share before dilution amounted to SEK 9.18 (SEK 4.34).
For the third quarter, earnings per share before dilution were SEK
2.65 (SEK 0.98).

Cash flow and financial position

Cash flow over the full nine-month period was negative: SEK -124
million (Jan-Sept 2006: SEK -70 million). Before dividends,
borrowings and amortisation, cash flow was SEK -47 million
(SEK -534 million).

Cash flow for the third quarter was negative, SEK -188 million (SEK
-88 million).

The Group's liquid assets totalled SEK 134 million (SEK 172 million).

Equity per share totalled SEK 74, and the equity/assets ratio was 49
percent. At the beginning of the year, equity per share was SEK 67
and the equity/assets ratio was 48 percent.

The Group's net loan debt (cash and cash equivalents minus
interest-bearing liabilities) at the close of the third quarter
totalled SEK 211 million (SEK 184 million).


In addition to investments in corporate acquisitions, gross
investments for the period January-September 2007 totalled SEK 29
million (Jan-Sept 2006: SEK 23 million).

Divisional performance

Engineering Division                                  Operating
margin Q3: 8.6% (9.7%)

Operating margin 9 mths: 9.2% (8.9%)

The Engineering Division,  which offers  services within  automation,
industrial IT and mechanical engineering, is a leader in its field in
the Nordic countries.

The sustained strong state of the industrial market led to another
quarter with high levels of capacity utilisation for the Engineering
Division, with particularly brisk demand in the energy and mining

During the third quarter co-workers with high levels of expertise in
certain selected specialist fields and spheres of industry have been
brought together in so called "Competence Centres". It is anticipated
that this new approach to working will further improve our prospects
for performing more advanced projects and consulting assignments in
the future.

Activity remained very strong in the nuclear power sphere. The
division enjoys a strong position in this market in Sweden, but is
also acquiring international commissions: the third quarter saw
assignments related to nuclear power facilities in both Finland and

Several assignments were also registered from biofuel plants in
Sweden. One example was a contract from Biobränsle i Norrköping AB,
appointing the division as principal consultant for a new factory for
processing rapeseed into biofuels.

Infrastructure Division                                Operating
margin Q3: 5.1% (4.9%)

 Operating margin 9 mths: 9.8% (7.7%)

The Infrastructure Division offers infrastructure consulting services
in the following business areas: Communications & Maintenance,
Installations, Infrastructure Planning, Electric Power and Sound &

The market remained good for all of the Infrastructure Division's
business areas in the third quarter, with demand being driven by
factors such as the major investment programmes that are being
undertaken to improve and expand the Swedish road and rail network.
ÅF is involved in important undertakings for the City Tunnel rail
project in Malmö and the City Line rail link in Stockholm.

Recently the Infrastructure Division has also noticed an increase in
demand for highly qualified services relating to wind power and

For the division's largest business area, Installations, demand
continues to be fuelled by the prolonged boom in the construction and
property markets together with an ever-growing interest in energy
consulting services. For example, ÅF has been contracted to carry out
energy declaration inspections for the entire portfolio of properties
held by the property company AB Bostäder in Borås. Installations has
also been commissioned by IBM to undertake a systems engineering
project for the extension of IBM's server halls in Stockholm. The
project places great demands on operational reliability and
accessibility, with special focus on a dependable electricity supply
and the effect on operations of cold weather.

Inspection Division                             Operating margin Q3:
20.7% (17.5%)

Operating margin 9 mths: 14.8% (11.3%)

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.

Demand for the services of the Inspection Division was relatively
strong during the third quarter. The division continued to capture
new shares of the market and consolidated its position in the
expansive nuclear and petrochemical industries.
New local offices were opened in Uppsala and Kalmar, and the
recruitment of new staff continued across the board, particularly for
the Testing business area.
The division has been commissioned by Hitachi to perform technical
inspections of all the pressure equipment at Öresundsverket's
gas-fired power station. Parallel with this, in another project at
the same site, Inspection staff are involved in testing the power
station's pipelines for Koch de Portugal.
During the third quarter the division also won an international
assignment to perform technical inspections for Metso Power in
conjunction with the construction of an evaporation plant at the
Celbi pulp mill in Portugal.

Process Division
Operating margin Q3: 5.8% (0.3%)

Operating margin 9 mths: 6.1% (0.4%)

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 in the
energy sector.

Demand has remained very strong in all energy-related sectors. In the
forest industry demand was particularly high with regard to chemical
pulp projects.

During the third quarter ÅF acquired the Swiss energy consulting
company Colenco with 250 employees. Colenco is currently active in
the areas of nuclear power, hydropower, conventional power plants,
electrical networks and environmental projects in more than 40
countries. Operations were consolidated in the third quarter and
immediately made a positive contribution to the division's profits
and operating margin. The acquisition has reinforced ÅF's market
position in Europe, the Baltic region, Russia, South Asia and
South-East Asia.

The positive change in operating margin for the Process Division as a
whole owes much to the acquisition of Colenco and the disposal of
underperforming business operations.

Process won a number of major orders in the third quarter, including
project planning and project management assignments for the Illisu
hydro-electric power plant in Turkey. The division was also appointed
principal consulting partner for an extensive capacity expansion
project at Portucel's integrated pulp and paper mill at Viana in
Portugal. The brisk inflow of orders has meant that the level of
orders currently on the books is now historically high.

Systems Division                                            Operating
margin Q3: 8.7% (2.4%)

Operating margin 9 mths: 7.8% (5.3%)

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

The market for the Systems Division remained strong throughout the
third quarter, particularly in telecommunications. The division's
leading-edge skills in product development, test systems and product
care are perfectly attuned to current business trends.

One growing trend is for clients to request that environmental
expertise be factored into their product development activities. To
meet this need, the Systems Division has established the EcoDesign
Center, a network to facilitate clients' access both to the
division's core competences and to ÅF's extensive expertise within
the field of environmental consulting services.

Organic growth remained high. The division recruited a further 25 new
members of staff in the third quarter to bring the total of new
recruits so far this year to 125. In line with the strategy laid down
previously, the average age of the division's co-workers has been
significantly reduced over recent years as a result of this resolute
process of new recruitment.

Among new assignments in the third quarter is ongoing development
work on a multimedia project for Sony Ericsson. Systems also won a
development assignment from Bombardier for a new control computer for
trains, and a fleet management development project for Scania.

Parent Company

Parent company sales totalled SEK 144 million (SEK 142 million) and
related primarily to intra-group services. There was a loss after net
financial income/expense of SEK 17 million, as opposed to a profit of
SEK 8 million for the corresponding period in 2006.

Bank overdraft facilities for the parent company amount to a total of
SEK 300 million, of which SEK 127 million were utilised as per 30
September 2007 (30 Sept 2006: SEK 13 million). Gross investment in
machinery and equipment for the period January-September 2007
amounted to SEK 4 million (Jan-Sept 2006: SEK 7 million).

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

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.

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, the propensity of various markets to invest, the ability
to recruit and retain qualified co-workers and the effect of
political decisions. The Group is further exposed to a range of
financial risks such as currency risk, interest-rate risk and credit
risks. No significant risks are considered to have arisen over and
above those risks described on pages 36-38 in ÅF's annual report.

ÅF shares

The ÅF share price was SEK 175 at the close of the reporting period,
which represents a rise of 20.7 percent since the beginning of the
year. The Stockholm Stock Exchange all-share index (OMXSPI index)
grew by 4.6 percent during the same period.

Next reporting date

The summary of the ÅF Group's annual report for 2007 will be
published on 19 February 2008.

The Board of Directors and the President/CEO confirm that this
interim report gives a true and fair view of the operation,
performance and position of the company and the Group, and describes
the significant risks and uncertainty factors to which the company
and the companies comprising the Group are exposed.

Stockholm, Sweden - 9 November 2007
AB Ångpanneföreningen (publ)

Jonas Wiström,
President & CEO

The information in this interim report is that which ÅF is required
by Swedish law to disclose under the terms of the Swedish Securities
Exchange and Clearing Operations Act and/or the Financial Instruments
Trading Act. The information was released for publication on 9
November 2007.

The full report including tables can be downloaded from the following

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