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ÅF - Interim report January-September 2008

Published oktober 23, 2008
For further information:

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

Record earnings and 13% organic growth in Q3

Third quarter 2008
* Net sales totalled SEK 987 million (Q3 2007: SEK 844 million)
* Operating profit rose to SEK 81 million (SEK 65 million)
* Earnings per share, before and after dilution, amounted to SEK 3.46
  (SEK 2.65)
Q1-Q3 2008
* Net sales totalled SEK 3,224 (Q1-Q3 2007: SEK 2,744 million)
* Operating profit rose to SEK 332 million (SEK 224 million)
* Earnings per share, before and after dilution, amounted to SEK
  13.67 (SEK 9.18)

A few words from the President, Jonas Wiström:

ÅF continues to grow at the same time as the company is increasing
its profits. This year's third-quarter results were the best ever for
the company. Our operating margin was 8.2 percent (Q3 2007: 7.7
percent) bringing the figure for the nine-month period as a whole to
10.3 percent (Jan-Sept 2007: 8.2 percent). The improvement is due to
growth in volumes and a higher gross margin.

The past quarter has seen SEK 16 million in costs relating to
redundancies following organisational changes that have been
undertaken to make ÅF even more efficient.

With effect from 1 October the Infrastructure and Systems Divisions
have merged and operations in the Process Division have been
streamlined to focus exclusively on energy and environmental
consulting. The divisions' new names, Infrastructure and Energy
respectively, describe what have been identified as strategic areas
for ÅF's future development. The changes are expected to lead to cost
synergies of SEK 8-10 million a year.

Third-quarter growth was 17 percent overall and 13 percent organic.
ÅF remains a highly attractive employer, ranking eighth in Sweden in
Universum's annual survey of more than 6,000 professional engineers
that was carried out early in October. This was the highest placing
of any consulting company.

ÅF enjoys a strong position in several relatively stable sectors of
industry, and current uncertainty about the future of the economy has
had only a marginal impact on demand for our services so far.
Therefore, while we are fully aware of the signs of a downturn in the
economy, we see no reason to change our basically positive view of
the outlook for the fourth quarter of 2008.

Acquisitions, Q3 2008

ÅF-Kontroll, the ÅF Inspection Division, has acquired the Czech
company Qualitest s.r.o. This is a step in ÅF's strategy to establish
itself as an international name in the technical inspection and
testing market and to underpin further growth in the Czech Republic.
Qualitest, based in the town of Pardubice, has a workforce of 80 and
is the market leader for non-destructive testing in the Czech

ÅF has also acquired the well-established Lithuanian energy
consulting company UAB Termosistemy projektai (TSP) through the ÅF
Process Division. TSP has a total of 16 employees in Kaunas and

Important events during Q3  2008 and after the  end of the  reporting

ÅF has signed a major cooperation agreement with Ringhals AB together
with ES-konsult with regard to services relating to reactor safety
and plant development. The agreement is worth SEK 130-150 million
over 5 years.

On 1 October ÅF's Infrastructure and Systems Divisions merged to form
one of Europe's biggest players in the market for infrastructure
consulting services. The merger is expected to lead to synergies in
both revenues and costs. The new divisional president is Johan
Olsson, formerly president of ÅF's Systems Division.

Sales and earnings, Q3 2008

Net sales for the third quarter totalled SEK 987 million, an increase
of 17 percent on the figure for the corresponding period in 2007 (SEK
844 million).

Operating profit was SEK 81 million (SEK 65 million), and the
operating margin was 8.2 percent (7.7 percent).

The third-quarter accounts have been charged with costs of SEK 16
million relating to some 20 redundancies in ÅF's Finnish pulp and
paper operations and to severance pay due to senior executives in ÅF.

Capacity utilisation during the quarter was 74 percent (74 percent).

Profit after net financial items totalled SEK 80 million (SEK 64
million), and the profit margin was 8.1 percent (7.5 percent).

Earnings per share before and after dilution were SEK 3.46 (SEK

Sales and earnings, Q1-Q3 2008

Net sales for the first nine months of the year totalled SEK 3,224
million, an increase of 18 percent on the figure for the
corresponding period in 2007 (SEK 2,744 million).

Operating profit was SEK 332 million (SEK 224 million), and the
operating margin was 10.3 percent (8.2 percent).

Capacity utilisation was 75 percent (75 percent).

Profit after net financial items was SEK 320 million (SEK 220
million), and the profit margin was 9.9 percent (8.0 percent).

Earnings per share before and after dilution were SEK 13.67 (SEK


The reduction in occupational pension premiums introduced by Alecta
had a positive effect on ÅF's operating profit of SEK 9.5 million in
the third quarter of 2008, compared with 2007. The cumulative effect
over the nine-month period is SEK 28.5 million.

Cash flow and financial position

Cash flow for the period January-September was SEK 12 million
(Jan-Sept 2007: SEK -124 million). Cash flow so far this year has
been affected by SEK 91 million relating to the cost of acquisitions
(Jan-Sept 2007: SEK 223 million), and by a shareholders' dividend of
SEK 110 million (2007: SEK 49 million).

The Group's liquid assets totalled SEK 334 million (SEK 134 million)
at the end of the reporting period. The Group's net loan debt at the
end of September amounted to SEK 183 million (SEK 211 million).

Equity per share was SEK 88.88 and the equity/assets ratio was 47.9
percent. At the beginning of 2008, equity per share was SEK 78.83 and
the equity/assets ratio was 47.9 percent.


Excluding corporate acquisitions, gross investment in property, plant
and equipment for the period January to September 2008 totalled SEK
65 million (Jan-Sept 2007: SEK 29 million). The period has seen
investments of SEK 33 million in land and buildings for ÅF's Swiss
subsidiary, ÅF-Colenco, to facilitate the expansion of this company's
Number of employees

The number of full-time equivalents employed by the company was 3,840
(3,577). The total number of employees at the end of the reporting
period was 4,113 (3,828): 3,173 in Sweden and 940 outside Sweden.

Divisional Performance
Engineering Division
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%

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 &

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

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

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

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

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 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

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

ÅF shares

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

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