Höganäs reports stable demand, indicates that initiatives in new segments are intensifying

October 26, 2010

In an Interim Report covering the period 1 January – 30 September 2010, Höganäs (STO:HOGAB) CEO Alrik Danielsson commented that the market for its metal powders remained positive in the quarter, and Höganäs had its best third quarter ever. But uncertainty regarding short-term demand conditions persists, mainly due to uncertainty regarding progress in Europe. Höganäs is maintaining its cost focus, and has succeeded in increasing production volumes sharply for limited extra costs. This, it was stated, puts Höganäs in a strong position for the future.

Danielsson continued, “Our initiatives on developing applications based on metal powder technology, what we call the ‘Power of Powder’ are intensifying. Events arranged in the third quarter included a seminar on vehicle electric motors in collaboration with the UK Magnetic Society, attracting some 100 delegates from around the world, representing customers, end-users and universities. We also delivered a full series of Somaloy®-based motor components, produced at our PoP Centre, to Oxford YASATM Motors Ltd for use in its pioneering high-performance motors for electric vehicles.”

In the third quarter 2010 (compared to corresponding period of previous year) net sales were MSEK 1,728 (1,193) in the quarter, up 45% year on year. Sales volumes were 26% higher. Demand conditions were better than in the corresponding period of the previous year, and largely unchanged on the second quarter of this year across all markets.

Operating income was MSEK 261 (142) and income after tax was MSEK 189 (102). The income improvement is mainly due to higher sales volumes. Earnings per share for the quarter were SEK 5.43 (2.94).

Cash flow from operating activities was MSEK 189 (287). Rising metal prices resulted in an increased need for working capital, which affected cash flow negatively in the quarter.

For the period 1 January – 30 September 2010 (compared to corresponding period of previous year) net sales were MSEK 5,059 (3,207) in the period, up 58% year on year. Sales volumes were 53% higher. Operating income was MSEK 876 (85) and income after tax was MSEK 642 (49). Earnings per share for the period were SEK 18.45 (1.41), cash flow from operating activities was MSEK 505 (726). In the period, the net debt/equity ratio multiple reduced to 29% from 43%.

Outlook

Overall, the outlook is unchanged compared to the assessment presented in the Interim Report for the second quarter. The market is strong in Asia and South America, while a gradual recovery, albeit at an uncertain rate, is expected in North America. However, Höganäs judges that underlying demand in Europe will remain weak

www.hoganas.com

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