Alfa Laval

Earnings Release • Oct 25, 2017

Third quarter 2017

Summary

		Third quarter			First nine months
SEK millions	2017	2016	%	% *	2017	2016	%	% *
Order intake	8,418	7,540	12	15	26,848	23,351	15	12
Net sales	8,169	8,581	-5	-2	25,202	25,730	-2	-4
Adjusted EBITA **	1,310	1,339	-2		3,999	4,065	-2
- adjusted EBITA margin (%) **	16.0	15.6			15.9	15.8
Result after financial items	1,012	93	988		3,013	2,448	23
Net income for the period	672	-106			1,927	1,696	14
Earnings per share (SEK)	1.59	-0.27			4.57	4.00	14
Cash flow ***	1,044	911	15		2,890	3,054	-5
Impact on adjusted EBITA of:
- foreign exchange effects	19	107			190	337
Impact on result after financial items of:
- comparison distortion items	-	-1,100			-	-1,100

* Excluding currency effects. ** Alternative performance measures, see page 23. *** From operating activities.

Comment from Tom Erixon, President and CEO

"The order intake in the third quarter increased by 15 percent compared to the same quarter last year. The development was particularly strong in the Marine Division, primarily driven by a good order intake for environmental applications and an improved contracting for tankers at the ship yards. Geographically, the most positive development was seen in Asia and North America. Compared to the previous quarter, the order intake decreased as expected, mainly due to fewer bookings of large orders, fewer projects within Food & Water and a normal seasonality for HVAC applications.

The adjusted EBITA margin improved in the quarter and amounted to 16 percent. The impact from the lower invoicing in the Marine Division was compensated by clear margin reinforcements in the Energy Division and the Food & Water

Outlook for the fourth quarter

"We expect that demand during the fourth quarter 2017 will be somewhat higher than in the third quarter."

The interim report has been reviewed by the company's auditors, see page 24 for the review

Division. The unit called Greenhouse was affected by a factory closing in the U.S. Excluding these one-time costs the result in Greenhouse was stable compared to the previous quarter.

The change programme had a continued positive effect in the quarter. The part that relates to changes in the manufacturing structure continued according to plan.

Operations had a good productivity development in the quarter. Previous capacity adaptations, combined with an increased production pace impacted the gross margin positively. Selective investments to increase the production capacity are carried through in light of the increased order intake that has been seen during the year."

Earlier published outlook (July 17, 2017): "We expect that demand during the third quarter 2017 will be lower than in the second quarter."

report.

This information is information that Alfa Laval AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out below, at CET 7.30 on October 25, 2017.

Alfa Laval AB (publ) PO Box 73 SE-221 00 Lund Sweden Corporate registration number: 556587-8054

Visiting address: Rudeboksvägen 1 Phone: + 46 46 36 65 00 Website: www.alfalaval.com For more information, please contact: Gabriella Grotte, Investor Relations Manager Phone: +46 46 36 74 82, Mobile: +46 709 78 74 82, E-mail: gabriella.grotte@alfalaval.com

Management's discussion and analysis

Important events during the third quarter

Large orders 1) in the third quarter

Division		Order	Total per Business Unit
Business Unit	Delivery	amount	Q3 2017	Q3 2016
Scope of supply	date		SEK millions
Food & Water
Food Systems
Equipment to a fermentation plant in India.	2017/2018	60	60	-
Marine
Boiler & Gas Systems
A waste heat recovery system to a power plant in Southeast Asia.	2018	50	50	-
Total			110	-

Order intake

Orders received has amounted to SEK 8,418 (7,540) million for the third quarter and to SEK 26,848 (23,351) million for the first nine months 2017. Compared with earlier periods the development per quarter has been as follows.

The change compared with the corresponding periods last year and the previous quarter can be

split into:

Consolidated		Order bridge
				Change
	Order intake		Excluding currency effects After currency effects
	Prior	Structural	Organic		Currency		Current
	periods	change 2)	development 3)	Total	effects	Total	periods
	SEK millions	(%)	(%)	(%)	(%)	(%)	SEK millions
Q3 2017/2016	7,540	-	14.9	14.9	-3.3	11.6	8,418
Q3 2017/Q2 2017	9,629	-	-9.0	-9.0	-3.6	-12.6	8,418
YTD 2017/2016	23,351	-	12.5	12.5	2.5	15.0	26,848

Orders received from the aftermarket Service⁴ constituted 30.8 (34.0) percent of the Group's total orders received during the third quarter and 30.8 (33.5) percent during the first nine months 2017. The change compared with the corresponding periods last year and the previous quarter can be split into:

Consolidated	Service order intake
		Change excluding currency effects
	Structural	Organic
%	change	development	Total
Q3 2017/2016	-	4.3	4.3
Q3 2017/Q2 2017	-	-5.9	-5.9
YTD 2017/2016	-	3.5	3.5

Order backlog

Excluding currency effects and adjusted for acquisition of businesses the order backlog was 2.4 percent larger than the order backlog at September 30, 2016 and 9.4 percent larger than the order backlog at the end of 2016.

1. Structural change relates to acquisition of businesses.

2. Parts and service.

^3. Organic development relates to change excluding acquisition of businesses.

Net sales

Net invoicing was SEK 8,169 (8,581) million for the third quarter and SEK 25,202 (25,730) million for the first nine months 2017. The change compared with the corresponding periods last year and the previous quarter can be split into:

Consolidated		Sales bridge
				Change
	Net sales		Excluding currency effects		After currency effects	Net sales
	Prior	Structural	Organic		Currency		Current
	periods	change	development	Total	effects	Total	periods
	SEK millions	(%)	(%)	(%)	(%)	(%)	SEK millions
Q3 2017/2016	8,581	-	-2.2	-2.2	-2.6	-4.8	8,169
Q3 2017/Q2 2017	8,907	-	-4.9	-4.9	-3.4	-8.3	8,169
YTD 2017/2016	25,730	-	-4.2	-4.2	2.1	-2.1	25,202

Net invoicing relating to Service constituted 31.2 (30.0) percent of the Group's total net invoicing in the third quarter and 31.2 (29.5) percent in the first nine months 2017. The change compared with the corresponding periods last year and the previous quarter can be split into:

Consolidated	Service sales
		Change excluding currency effects
	Structural	Organic
%	change	development	Total
Q3 2017/2016	-	1.6	1.6
Q3 2017/Q2 2017	-	-4.1	-4.1
YTD 2017/2016	-	1.4	1.4

Income

CONSOLIDATED COMPREHENSIVE INCOME Third quarter First nine months Full year Last 12 SEK millions 2017 2016 2017 2016 2016 months Net sales 8,169 8,581 25,202 25,730 35,634 35,106 Cost of goods sold -5,405 -6,336 -16,706 -17,733 -24,581 -23,554 Gross profit 2,764 2,245 8,496 7,997 11,053 11,552 Sales costs -1,018 -1,138 -3,076 -3,386 -4,328 -4,018 Administration costs -378 -327 -1,308 -1,056 -1,649 -1,901 Research and development costs -201 -191 -618 -590 -822 -850 Other operating income 135 97 433 383 613 663 Other operating costs -257 -721 -735 -1,194 -1,893 -1,434 Share of result in joint ventures 10 3 20 15 15 20 Operating income 1,055 -32 3,212 2,169 2,989 4,032 Dividends and changes in fair value 0 0 0 0 47 47 Interest income and financial exchange rate gains 53 141 214 357 645 502 Interest expense and financial exchange rate losses -96 -16 -413 -78 -356 -691 Result after financial items 1,012 93 3,013 2,448 3,325 3,890 Taxes -340 -199 -1,086 -752 -1,013 -1,347 Net income for the period 672 -106 1,927 1,696 2,312 2,543 Other comprehensive income: Items that will subsequently be reclassified to net income Cash flow hedges 185 137 311 280 245 276 Market valuation of external shares 0 0 0 0 0 0 Translation difference -202 829 -1,271 1,588 1,882 -977 Deferred tax on other comprehensive income -33 -61 82 -92 -143 31 Sum -50 905 -878 1,776 1,984 -670 Items that will subsequently not be reclassified to net income Revaluations of defined benefit obligations 50 25 150 75 -505 -430 Deferred tax on other comprehensive income -14 -7 -42 -21 67 46 Sum 36 18 108 54 -438 -384 Comprehensive income for the period 658 817 1,157 3,526 3,858 1,489 Net income attributable to: Owners of the parent 669 -111 1,917 1,678 2,289 2,528 Non-controlling interests 3 5 10 18 23 15 Earnings per share (SEK) 1.59 -0.27 4.57 4.00 5.46 6.03 Average number of shares 419,456,315 419,456,315 419,456,315 419,456,315 419,456,315 419,456,315 Comprehensive income attributable to: Owners of the parent 658 810 1,154 3,487 3,815 1,482 Non-controlling interests 0 7 3 39 43 7

The gross profit has been affected negatively by a lower invoicing volume and positively by a favourable mix between capital sales and service, a better utilisation in certain factories and by currency effects.

Sales and administration expenses amounted to SEK 1,396 (1,465) million during the third quarter and SEK 4,384 (4,442) million during the first nine months 2017. Excluding currency effects and acquisition of businesses, sales and administration expenses were 3.8 percent and 3.4 percent respectively lower than the corresponding periods last year. The decrease is entirely explained by the change programme that was initiated during the last six months of 2016. The corresponding figure when comparing the third quarter 2017 with the previous quarter is a decrease with 7.1 percent.

The costs for research and development during

the first nine months 2017 corresponded to 2.5 (2.3) percent of net sales. Excluding currency effects and acquisition of businesses, the costs for research and development have increased by 6.3 percent during the third quarter and by 3.6 percent during the first nine months 2017 compared to the corresponding periods last year. The corresponding figure when comparing the third quarter 2017 with the previous quarter is a decrease with 7.2 percent.

Earnings per share, excluding amortisation of step-up values and the corresponding tax*, was SEK 5.94 (6.47) for the first nine months 2017.

Consolidated	Income analysis
	Third quarter		First nine months		Full year	Last 12
SEK millions	2017	2016	2017	2016	2016	months
Net sales	8,169	8,581	25,202	25,730	35,634	35,106
Adjusted gross profit *	3,019	3,066	9,283	9,343	12,744	12,684
- adjusted gross margin (%) *	37.0	35.7	36.8	36.3	35.8	36.1
Expenses **	-1,558	-1,568	-4,816	-4,800	-6,548	-6,564
- in % of net sales	19.1	18.3	19.1	18.7	18.4	18.7
Adjusted EBITDA *	1,461	1,498	4,467	4,543	6,196	6,120
- adjusted EBITDA margin (%) *	17.9	17.5	17.7	17.7	17.4	17.4
Depreciation	-151	-159	-468	-478	-643	-633
Adjusted EBITA *	1,310	1,339	3,999	4,065	5,553	5,487
- adjusted EBITA margin (%) *	16.0	15.6	15.9	15.8	15.6	15.6
Amortisation of step-up values	-255	-271	-787	-796	-1,064	-1,055
Comparison distortion items:
Write down of goodwill and step-up values	-	-550	-	-550	-627	-77
Restructuring	-	-550	-	-550	-873	-323
Operating income	1,055	-32	3,212	2,169	2,989	4,032

* Alternative performance measures, see page 23. ** Excluding comparison distortion items.

Comparison distortion items

Consolidated	Comparison distortion items
	Third quarter		First nine months		Full year	Last 12
SEK millions	2017	2016	2017	2016	2016	months
Operational
Cost of goods sold	-5,405	-5,786	-16,706	-17,183	-23,954	-23,477
Comparison distortion costs 1)	-	-550	-	-550	-627	-77
Total cost of goods sold	-5,405	-6,336	-16,706	-17,733	-24,581	-23,554
Other operating costs	-257	-171	-735	-644	-1,020	-1,111
Comparison distortion costs 2)	-	-550	-	-550	-873	-323
Total other operating costs	-257	-721	-735	-1,194	-1,893	-1,434

1) Write down of allocated step-up values and goodwill.

2) Costs for lay-off of about 1,000 employees, write down of assets and provisions for lease agreements.

The comparison distortion costs during 2016 related to three initiatives that Group Management started for cost adaptations and a new organisation, restructuring of the manufacturing structure and transformation of the activities within "Greenhouse". During the first nine months 2017 savings of SEK 230 million were realised as a result of the initiatives.

Consolidated financial net and taxes

The financial net for the first nine months 2017 has amounted to SEK -73 (-94) million, excluding realised and unrealised exchange rate losses and gains. The main elements of costs were interest on the debt to the banking syndicate of SEK -4 (-6) million, interest on the bilateral term loans of SEK -31 (-43) million, interest on the private placement of SEK - (-3) million, interest on the commercial papers of SEK 0 (-0) million, interest on the corporate bonds of SEK -58 (-60) million and a net of dividends, fair value changes and other interest income and interest costs of SEK 20 (18) million. The net of realised and unrealised exchange rate differences has amounted to SEK -126 (373) million.

The tax on the result after financial items was SEK -340 (-199) million in the third quarter and SEK -1 086 (-752) million in the first nine months 2017. The tax cost for the third quarter and the first nine months 2017 has been affected by a dividend distribution tax in India of SEK -100 million. The tax cost for the first nine months 2017 has also been affected by a non-recurring item of SEK -113 million concerning additional tax relating to prior years concerning acquired businesses according to a settlement with the former owners. The tax cost for the first nine months 2016 was affected by non-recurring items of about SEK +86 million concerning adjustments of deferred taxes relating to step up values, due to reduced company taxes in certain countries and thereby decreased deferred tax liabilities.

Key figures

Consolidated	Key figures
	September 30		December 31
	2017	2016	2016
Return on capital employed (%) *	15.5	17.0	15.3
Return on equity (%) **	12.7	13.9	11.8
Solidity (%) ***	38.6	37.7	38.0
Net debt to EBITDA, times *	1.60	1.90	1.81
Debt ratio, times *	0.47	0.56	0.47
Number of employees (at the end of the period)	16,388	17,192	16,941

* Alternative performance measures, see page 23.

** Net income in relation to average equity, calculated on 12 months' revolving basis, expressed in percent.

*** Equity in relation to total assets at the end of the period, expressed in percent.

Observe that the return on capital employed and on equity has been impacted by the one-time costs during the last two quarters 2016.

Business Divisions

The development of the order intake for the Divisions and their Business Units and the split between capital sales and after sales & service appear in the following charts.

Orders received by Business Unit Q3 2017

SEK millions Order intake split on capital sales and after sales & service by Business Division

Energy Division

Consolidated
		Third quarter	First nine months		Full year	Last 12
SEK millions	2017	2016	2017	2016	2016	months
Orders received	2,513	2,475	8,323	7,284	10,208	11,247
Order backlog*	4,883	4,252	4,883	4,252	4,230	4,883
Net sales	2,598	2,584	7,742	7,641	10,641	10,742
Operating income**	417	351	1,056	976	1,423	1,503
Operating margin***	16.1%	13.6%	13.6%	12.8%	13.4%	14.0%
Depreciation and amortisation	74	75	230	223	302	309
Investments	16	14	48	44	76	80
Assets*	9,181	8,883	9,181	8,883	8,797	9,181
Liabilities*	3,175	2,522	3,175	2,522	2,608	3,175
Number of employees*	3,058	3,497	3,058	3,497	3,440	3,058

* At the end of the period. ** In management accounts. *** Operating income in relation to net sales.

Consolidated	Change excluding currency effects
		Order intake Net sales
	Structural	Organic		Structural	Organic
%	change	development	Total	change	development	Total
Q3 2017/2016	-	6.9	6.9	-	4.2	4.2
Q3 2017/Q2 2017	-	-16.2	-16.2	-	-5.8	-5.8
YTD 2017/2016	-	13.4	13.4	-	0.0	0.0

All comments below are excluding currency effects.

Order intake

The Energy Division's overall order volume decreased in the third quarter compared to the previous quarter, mainly due to fewer large orders. The overall base business*, however, remained on the good level recorded in the second quarter.

Welded Heat Exchangers showed a continued positive base-business development, but declined overall as the number of larger projects that was booked in the quarter declined. The main driver for the positive base business outcome was the volumes generated by customers in the hydro carbon chain. Also for the Energy Separation Business Unit, the overall order volumes were down, due to non-repeat larger orders in oil & gas. Power, steel, mining and petrochemicals, however, all grew. The base business developed well across the business unit. The order intake for the Business Unit Gasketed Heat Exchangers

was down, due to the non-repeat of a very large petrochemical order in the previous quarter. Equipment for HVAC and oil & gas-related applications, however, did well. The base business was flat compared to the previous quarter. The Brazed & Fusion Bonded Business Unit saw order volumes come down compared to the record-high levels seen in the second quarter. This is in line with normal seasonality for the customers in the heat pump and A/C industries.

Service also reported a decline compared to the previous quarter, the main reason being the nonrepeat of larger service orders in oil & gas, refinery and power.

Operating income

The increased operating income for Energy during the third quarter 2017 compared to the corresponding period last year is above all explained by positive effects from the Group's change programme and an improved sales mix.

^* Base business and base orders refer to orders with an order value of less than EUR 0.5 million.

Food & Water Division

Consolidated
	Third quarter		First nine months		Full year	Last 12
SEK millions	2017	2016	2017	2016	2016	months
Orders received	2,788	2,795	9,335	8,318	11,327	12,344
Order backlog*	4,541	3,963	4,541	3,963	3,741	4,541
Net sales	2,882	2,797	8,563	8,088	11,364	11,839
Operating income**	410	351	1,263	1,139	1,596	1,720
Operating margin***	14.2%	12.5%	14.7%	14.1%	14.0%	14.5%
Depreciation and amortisation	31	42	107	122	165	150
Investments	18	14	37	45	82	74
Assets*	8,084	7,556	8,084	7,556	7,525	8,084
Liabilities*	3,579	2,669	3,579	2,669	2,785	3,579
Number of employees*	4,007	3,702	4,007	3,702	3,674	4,007

* At the end of the period. ** In management accounts. *** Operating income in relation to net sales.

Consolidated	Change excluding currency effects
		Order intake Net sales
	Structural	Organic		Structural	Organic
%	change	development	Total	change	development	Total
Q3 2017/2016	-	4.6	4.6	-	6.5	6.5
Q3 2017/Q2 2017	-	-13.3	-13.3	-	2.7	2.7
YTD 2017/2016	-	11.2	11.2	-	4.4	4.4

All comments below are excluding currency effects.

Order intake

The division showed a decline in order intake in the third quarter compared to the previous quarter, primarily due to fewer larger orders. The effect was particularly evident in edible oil, but also in ethanol, starch and sugar. Dairy was unchanged compared to the second quarter, while growth was recorded in areas exposed to the pharma & biotech markets. Geographically, contractions were seen in Western and Eastern Europe as well as the Americas, while Asia was unchanged.

Business Unit High Speed Separation declined due to lower demand from brewery, pharma and biotech as well as dairy, whereas the edible oil business recorded growth. Business Unit Decanters declined, partly due to a certain decline in general food applications, but more so because activity in the water treatment and waste water sector came down from the high level seen in the second quarter. A good development was noted in the areas of ethanol and starch. Order intake in Business Unit Food Heat Transfer was affected by a decline in traditional food applications. Brewery, however, was unchanged and the dairy sector showed a strong increase. Business Unit Hygienic Fluid Handling reported an unchanged order intake compared to the previous quarter. Pharma was flat, dairy developed favourably while a certain decline was noted for applications towards the other food markets. Business Unit Food Systems showed a decline, due to the nonrepeat of larger orders, particularly in edible oil, but to some extent also within other food applications. A very large order was recorded in India, giving a strong boost to the biotech sector. Brewery also showed growth.

The aftermarket showed an overall slight decline, although both Food Heat Transfer and Hygienic Fluid handling noted unchanged levels from the previous quarter.

Operating income

The increase in operating income for Food & Water during the third quarter 2017 compared to the corresponding period last year is explained by a slightly higher invoicing and the effect of the savings' programme.

Marine Division

Consolidated
	Third quarter		First nine months		Full year	Last 12
SEK millions	2017	2016	2017	2016	2016	months
Orders received	2,725	1,824	7,959	6,517	8,760	10,202
Order backlog*	8,714	9,074	8,714	9,074	8,285	8,714
Net sales	2,322	2,826	7,652	8,923	12,125	10,854
Operating income**	361	508	1,171	1,640	2,051	1,582
Operating margin***	15.5%	18.0%	15.3%	18.4%	16.9%	14.6%
Depreciation and amortisation	188	194	573	569	765	769
Investments	18	14	38	51	77	64
Assets*	23,335	23,795	23,335	23,795	23,380	23,335
Liabilities*	5,762	5,055	5,762	5,055	5,126	5,762
Number of employees*	2,906	3,011	2,906	3,011	2,962	2,906

* At the end of the period. ** In management accounts. *** Operating income in relation to net sales.

Consolidated		Change excluding currency effects
		Order intake	Net sales
	Structural	Organic		Structural	Organic
%	change	development	Total	change	development	Total
Q3 2017/2016	-	52.6	52.6	-	-14.9	-14.9
Q3 2017/Q2 2017	-	4.2	4.2	-	-10.5	-10.5
YTD 2017/2016	-	19.5	19.5	-	-15.8	-15.8

All comments below are excluding currency effects.

Order intake

Order intake for the Marine Division increased somewhat in the third quarter compared to the second quarter 2017, mainly due to higher demand for boilers.

Business Unit Marine Separation & Heat Transfer Equipment reported an unchanged order intake in the third quarter compared to the second. Demand for separators and heat exchangers grew, while demand for equipment for engine power plants was down from the previous quarter. PureBallast only declined somewhat from the very strong level seen in the previous quarter, with a good mix between new-build orders and retrofit. The Boiler & Gas Systems Business Unit reported a good quarter, as demand for boilers increased for marine as well as diesel engine power applications. The higher order intake for boilers was only partly off-set by lower demand for Alfa Laval PureSOx. The Pumping Systems Business Unit was unchanged from the previous quarter, as contracting of chemical tankers at yards in South Korea and China led to a continued good demand for cargo pumping systems.

Service declined, partly as there was less of offshore commissioning for pumping systems, following a very strong second quarter. The order intake increased somewhat compared to last year.

Operating income

The decrease in operating income for Marine during the third quarter 2017 compared to the corresponding period last year is explained by a lower sales volume and a negative mix in capital sales, partly compensated by primarily the effects of the savings' programme and positive currency effects.

Greenhouse Division

Consolidated
	Third quarter			First nine months		Last 12
SEK millions	2017	2016	2017	2016	2016	months
Orders received	392	446	1,231	1,232	1,765	1,764
Order backlog*	536	502	536	502	614	536
Net sales	367	374	1,245	1,078	1,504	1,671
Operating income**	-34	-39	-26	-118	-143	-51
Operating margin***	-9.3%	-10.4%	-2.1%	-11.0%	-9.5%	-3.1%
Depreciation and amortisation	12	23	37	67	77	47
Investments	1	4	5	13	21	13
Assets*	1,053	1,192	1,053	1,192	1,162	1,053
Liabilities*	516	519	516	519	572	516
Number of employees*	686	1,114	686	1,114	1,082	686

* At the end of the period. ** In management accounts. *** Operating income in relation to net sales.

Consolidated	Change excluding currency effects
		Order intake		Net sales
	Structural	Organic		Structural	Organic
%	change	development	Total	change	development	Total
Q3 2017/2016	-	-12.1	-12.1	-	-2.1	-2.1
Q3 2017/Q2 2017	-	-5.9	-5.9	-	-16.5	-16.5
YTD 2017/2016	-	-3.9	-3.9	-	11.4	11.4

All comments below are excluding currency effects.

Order intake

Greenhouse's overall order intake decreased in the third quarter compared to the previous quarter, as heat exchanger systems saw a seasonally reduced demand and as a structural change was implemented in tubular heat exchangers.

Heat exchanger systems decreased from the seasonal peak in the second quarter. Demand was steady in most regions with a particularly good development in Russia and Benelux. Tubular heat exchangers decreased due to the closure of a factory in the U.S. Air heat exchangers on the other hand, saw continued good order intake in the quarter. Demand was particularly good for industrial cooling applications in the power related industries as well as for industrial refrigeration for the cold chain in the food industry. The Nordic region and Russia showed good development.

Operating income

The negative operating income for Greenhouse during the third quarter 2017 is more than well explained by lower productivity and additional costs in connection with a factory closing, while the other activities generated a result in line with the previous quarter.

Operations and Other

Operations and Other covers procurement, production and logistics as well as corporate overhead and non-core businesses.

Consolidated
	Third quarter			First nine months		Last 12
SEK millions	2017	2016	2017	2016	2016	months
Orders received	0	0	0	0	0	0
Order backlog*	0	0	0	0	0	0
Net sales	0	0	0	0	0	0
Operating income**	-99	-93	-303	-411	-471	-363
Depreciation and amortisation	101	96	308	293	398	413
Investments	67	88	265	209	361	417
Assets*	4,965	5,815	4,965	5,815	5,826	4,965
Liabilities*	2,342	2,339	2,342	2,339	1,996	2,342
Number of employees*	5,731	5,868	5,731	5,868	5,783	5,731

* At the end of the period. ** In management accounts.

The somewhat deteriorated operating income in the third quarter compared to the corresponding period last year is mainly explained by slightly higher project related costs.

Reconciliation between Divisions and Group total

Consolidated
	Third quarter			First nine months		Last 12
SEK millions	2017	2016	2017	2016	2016	months
Operating income
Total for divisions	1,055	1,078	3,161	3,226	4,456	4,391
Comparison distortion items	-	-1,100	-	-1,100	-1,500	-400
Consolidation adjustments *	0	-10	51	43	33	41
Total operating income	1,055	-32	3,212	2,169	2,989	4,032
Financial net	-43	125	-199	279	336	-142
Result after financial items	1,012	93	3,013	2,448	3,325	3,890
Assets **
Total for divisions	46,618	47,241	46,618	47,241	46,690	46,618
Corporate ***	4,071	6,065	4,071	6,065	6,688	4,071
Group total	50,689	53,306	50,689	53,306	53,378	50,689
Liabilities **
Total for divisions	15,374	13,104	15,374	13,104	13,087	15,374
Corporate ***	15,728	20,090	15,728	20,090	20,015	15,728
Group total	31,102	33,194	31,102	33,194	33,102	31,102

* Difference between management accounts and IFRS. ** At the end of the period. *** Corporate refers to items in the statement on financial position that are interest bearing or are related to taxes.

Information about products and services

	Net sales by product/service *
Consolidated
	Third quarter		First nine months		Full year	Last 12
SEK millions	2017	2016	2017	2016	2016	months
Own products within:
Separation	1,488	1,552	4,546	4,695	6,591	6,442
Heat transfer	3,799	4,001	11,785	11,820	16,371	16,336
Fluid handling	1,725	2,094	5,671	6,220	8,498	7,949
Other	267	231	748	769	1,022	1,001
Associated products	418	289	1,057	996	1,389	1,450
Services	472	414	1,395	1,230	1,763	1,928
Total	8,169	8,581	25,202	25,730	35,634	35,106

* The split of own products within separation, heat transfer and fluid handling is a reflection of the current three main technologies. Other is own products outside these main technologies. Associated products are mainly purchased products that complement Alfa Laval's product offering. Services cover all sorts of service, service agreements etc.

Information by region

All comments are excluding currency effects.

Western Europe including Nordic

The region reported a decline in order intake in the third quarter compared to the previous quarter, driven by the Energy and Food & Water Divisions. The Marine Division developed well, lifted by a large waste heat recovery order as well as an increase in demand for pumping systems.

Central and Eastern Europe

Order intake dropped across the whole region in the third quarter compared to the second quarter. The Food & Water and Marine Divisions both declined, while the Energy Division was overall flat as a lower order intake in certain parts of the region were compensated for by a number of energy related projects in Russia.

North America

Overall the region reported a decline in the third

quarter compared to the previous quarter, as the strong development in Canada could not compensate for a decline in the U.S. Canada was boosted by a strong development for capital sales and service in both Food & Water and Energy. The U.S. reported a good base business* development in the Energy Division, but the overall order intake still declined due to the non-repeat of a large order booked in the second quarter.

Latin America

Latin America reported a decline in order intake in the third quarter compared to the second quarter, mainly due to the non-repeat of a large vegetable oil order booked in Brazil in the second quarter. The base business developed well across the region with Brazil and Argentina as the main

* Base business and base orders refer to orders with an order value of less than EUR 0.5 million.

drivers. Still, Brazil continues to see the lingering effects from recent years' difficult economic climate as well as the political situation.

Asia

The region reported a slight drop in order intake in the third quarter compared to the previous quarter, mainly due to the non-repeat of orders booked in the Energy Division in the second quarter. The Food & Water Division was unchanged from the previous quarter. The Marine Division did well, as both South Korea and China benefitted from an increased level of contracting at the ship yards earlier in the year. Overall, China reported a small decrease in order intake stemming from the Energy Division, which was exposed to substantial non-repeat large refinery orders. The Food & Water Division was flat, the Marine Division grew, as did the Energy Division, excluding the nonrepeats. The base business was strong, across all divisions.

Consolidated	Net sales
	Third quarter			First nine months		Last 12
SEK millions	2017	2016	2017	2016	2016	months
To customers in:
Sweden	213	192	631	569	784	846
Other EU	2,140	2,095	6,770	6,347	8,959	9,382
Other Europe	659	552	1,880	1,774	2,597	2,703
USA	1,372	1,466	4,190	4,301	6,013	5,902
Other North America	204	172	571	551	716	736
Latin America	432	457	1,192	1,296	1,788	1,684
Africa	78	62	229	223	307	313
China	1,087	1,232	3,251	3,397	4,705	4,559
South Korea	630	807	2,074	2,734	3,594	2,934
Other Asia	1,242	1,427	4,051	4,221	5,731	5,561
Oceania	112	119	363	317	440	486
Total	8,169	8,581	25,202	25,730	35,634	35,106

Net sales are reported by country on the basis of invoicing address, which is normally the same as

the delivery address.

Consolidated	Non-current assets
	September 30		December 31
SEK millions	2017	2016	2016
Sweden	1,313	1,321	1,321
Denmark	4,543	4,580	4,572
Other EU	3,495	3,744	3,639
Norway	12,898	13,975	13,717
Other Europe	152	169	169
USA	3,724	4,156	4,359
Other North America	129	131	136
Latin America	295	312	329
Africa	8	7	9
Asia	2,714	3,013	2,993
Oceania	90	93	94
Subtotal	29,361	31,501	31,338
Other long-term securities	44	28	25
Pension assets	4	4	3
Deferred tax asset	1,540	1,883	2,056
Total	30,949	33,416	33,422

Information about major customers

Alfa Laval does not have any customer that accounts for 10 percent or more of net sales. Tetra Pak within the Tetra Laval Group is Alfa Laval's

single largest customer with a volume representing 3-5 percent of net sales.

Cash flows

CONSOLIDATED CASH FLOWS

		Third quarter	First nine months		Full year	Last 12
SEK millions	2017	2016	2017	2016	2016	months
Operating activities
Operating income	1,055	-32	3,212	2,169	2,989	4,032
Adjustment for depreciation, amortisation and write down	406	980	1,255	1,824	2,334	1,765
Adjustment for other non-cash items	18	34	-40	28	16	-52
	1,479	982	4,427	4,021	5,339	5,745
Taxes paid	-362	-363	-1,374	-1,218	-1,161	-1,317
	1,117	619	3,053	2,803	4,178	4,428
Changes in working capital:
Increase(-)/decrease(+) of receivables	184	-149	19	414	592	197
Increase(-)/decrease(+) of inventories	-249	-82	-630	-359	32	-239
Increase(+)/decrease(-) of liabilities	-141	-140	448	-361	-424	385
Increase(+)/decrease(-) of provisions	133	663	0	557	601	44
Increase(-)/decrease(+) in working capital	-73	292	-163	251	801	387
	1,044	911	2,890	3,054	4,979	4,815
Investing activities
Investments in fixed assets (Capex)	-120	-134	-393	-362	-617	-648
Divestment of fixed assets	10	10	25	48	39	16
Acquisition of businesses	-11	-5	-69	-43	-230	-256
Divestment of businesses	0	12	-	13	13	0
	-121	-117	-437	-344	-795	-888
Financing activities
Received interests and dividends	24	22	89	89	163	163
Paid interests	-93	-96	-172	-203	-243	-212
Realised financial exchange gains	22	111	56	179	316	193
Realised financial exchange losses	-98	-17	-207	-47	-89	-249
Dividends to owners of the parent	0	0	-1,783	-1,783	-1,783	-1,783
Dividends to non-controlling interests	0	-5	-5	-17	-17	-5
Increase(-) of financial assets Decrease(+) of financial assets	-79 -83	0 -36	-79 0	0 29	0 8	-79 -21
Increase of loans	-288	0	775	1,860	1,860	775
Amortisation of loans	-700	-898	-1,676	-3,113	-3,781	-2,344
	-1,295	-919	-3,002	-3,006	-3,566	-3,562
Cash flow for the period	-372	-125	-549	-296	618	365
Cash and cash equivalents at the beginning of the period	2,369	1,772	2,619	1,876	1,876	1,680
Translation difference in cash and cash equivalents	-48	33	-121	100	125	-96
Cash and cash equivalents at the end of the period	1,949	1,680	1,949	1,680	2,619	1,949
Free cash flow per share (SEK) *	2.20	1.89	5.85	6.46	9.97	9.36
Capex in relation to net sales	1.5%	1.6%	1.6%	1.4%	1.7%	1.8%
Average number of shares	419,456,315	419,456,315	419,456,315	419,456,315	419,456,315	419,456,315

* Free cash flow is the sum of cash flows from operating and investing activities.

During the first nine months 2017 cash flows from operating and investing activities amounted to SEK 2,453 (2,710) million. Depreciation, excluding allocated step-up values, was SEK 468 (478) million during the first nine months 2017.

Acquisition of businesses during the first nine months 2017 relates to purchase of the remaining shares in Chang San Engineering Co Ltd in South Korea for SEK -58 million and payment of retained part of purchase price concerning prior acquisitions with SEK -11 million.

Financial position and equity

CONSOLIDATED FINANCIAL POSITION

	September 30		December 31
SEK millions	2017	2016	2016
ASSETS
Non-current assets
Intangible assets	24,652	26,612	26,382
Property, plant and equipment	4,677	4,853	4,940
Other non-current assets	1,620	1,951	2,100
	30,949	33,416	33,422
Current assets
Inventories	8,120	8,127	7,831
Assets held for sale	2	4	2
Accounts receivable	5,636	5,932	5,830
Other receivables	2,752	2,902	2,446
Derivative assets	219	234	153
Other current deposits	1,062	1,011	1,075
Cash and cash equivalents *	1,949	1,680	2,619
	19,740	19,890	19,956
TOTAL ASSETS	50,689	53,306	53,378
SHAREHOLDERS' EQUITY AND LIABILITIES
Equity
Owners of the parent	19,483	19,975	20,159
Non-controlling interests	104	137	117
	19,587	20,112	20,276
Non-current liabilities
Liabilities to credit institutions etc.	10,785	12,157	12,169
Provisions for pensions and similar commitments	2,178	1,814	2,425
Provision for deferred tax	2,383	2,747	2,722
Other non-current liabilities	644	612	636
	15,990	17,330	17,952
Current liabilities
Liabilities to credit institutions etc.	1,425	1,729	1,078
Accounts payable	2,696	2,541	2,668
Advances from customers	3,369	3,224	2,721
Other provisions	2,247	2,348	2,365
Other liabilities	5,278	5,796	6,041
Derivative liabilities	97	226	277
	15,112	15,864	15,150
Total liabilities	31,102	33,194	33,102
TOTAL SHAREHOLDERS' EQUITY & LIABILITIES	50,689	53,306	53,378

* The item cash and cash equivalents is mainly relating to bank deposits and liquid deposits.

Consolidated	Financial assets and liabilities at fair value
	Valuation hierarchy	September 30		December 31
SEK millions	level	2017	2016	2016
Financial assets
Other non-current securities	1 and 2	44	28	25
Bonds and other securities	1	510	906	956
Derivative assets	2	251	269	169
Financial liabilities
Derivative liabilities	2	103	301	314

Valuation hierarchy level 1 is according to quoted prices in active markets for identical assets and liabilities. Valuation hierarchy level 2 is out of directly or indirectly observable market data outside level 1.

Consolidated	Borrowings and net debt
	September 30	December 31
SEK millions	2017	2016	2016
Credit institutions	198	197	137
Swedish Export Credit	2,061	3,091	3,153
European Investment Bank	2,342	2,355	2,345
Commercial papers	-	600	-
Corporate bonds	7,609	7,643	7,612
Capitalised financial leases	52	71	66
Interest-bearing pension liabilities	0	0	0
Total debt	12,262	13,957	13,313
Cash and cash equivalents and current deposits	-3,011	-2,691	-3,694
Net debt *	9,251	11,266	9,619

* Alternative performance measure, see page 23.

Alfa Laval has a senior credit facility of EUR 400 million and USD 544 million, corresponding to SEK 8,241 million with a banking syndicate. The facility was not utilised at September 30, 2017. The facility matures in June 2019, with two one-year extension options.

The corporate bonds are listed on the Irish stock exchange and consist of one tranche of EUR 300 million that matures in September 2019 and one tranche of EUR 500 million that matures in September 2022.

The bilateral term loans from Swedish Export Credit consist of one loan of EUR 100 million that matured on June 16, 2017 and one loan of EUR 100 million that matures in June 2021 as well as a loan of USD 136 million that matures in June 2020.

The loans from the European Investment Bank is split on one loan of EUR 130 million that matures in March 2018 and one loan of EUR 115 million that matures in June 2021.

The commercial paper programme of SEK 2,000 million was not utilised at September 30, 2017.

	First nine months		Full year
SEK millions	2017	2016	2016
At the beginning of the period	20,276	18,423	18,423
Changes attributable to:
Owners of the parent
Comprehensive income
Comprehensive income for the period	1,154	3,487	3,815
Transactions with shareholders
Increase of ownership in subsidiaries
with non-controlling interests	-47	-31	-175
Dividends	-1,783	-1,783	-1,783
	-1,830	-1,814	-1,958
Subtotal	-676	1,673	1,857
Non-controlling interests
Comprehensive income
Comprehensive income for the period	3	39	43
Transactions with shareholders
Decrease of non-controlling interests	-11	-6	-30
Dividends	-5	-17	-17
	-16	-23	-47
Subtotal	-13	16	-4
At the end of the period	19,587	20,112	20,276

CHANGES IN CONSOLIDATED EQUITY

Acquisitions and divestments of businesses

On May 19, 2017 Alfa Laval has acquired the remaining 16.67 percent of the shares in the subsidiary Chang San Engineering Co Ltd in South Korea, which made it a fully owned subsidiary. The shareholding in the company was part of the acquisition of Frank Mohn AS in 2014.

Parent company

The parent company's result after financial items for the first nine months 2017 was SEK 1,084 (75) million, out of which dividends from subsidiaries SEK 1,094 (76) million, net interests SEK 0 (-0) million, realised and unrealised exchange rate gains and losses SEK -0 (8) million, costs related

to the listing SEK -3 (-4) million, fees to the Board SEK -5 (-4) million, cost for annual report and annual general meeting SEK -2 (-2) million and other operating income and operating costs the remaining SEK 0 (1) million.

PARENT COMPANY INCOME *

	Third quarter			First nine months
SEK millions	2017	2016	2017	2016	2016
Administration costs	-1	0	-10	-10	-13
Other operating income	-1	-1	0	1	0
Other operating costs	0	0	0	0	-5
Operating income	-2	-1	-10	-9	-18
Revenues from interests in group companies	-	-	1,094	76	76
Interest income and similar result items	0	1	1	9	10
Interest expenses and similar result items	0	0	-1	-1	-2
Result after financial items	-2	0	1,084	75	66
Change of tax allocation reserve	-	-	-	-	-264
Group contributions	-	-	-	-	2,002
Result before tax	-2	0	1,084	75	1,804
Tax on this year's result	1	0	2	0	-381
Net income for the period	-1	0	1,086	75	1,423

* The statement over parent company income also constitutes its statement over comprehensive income.

PARENT COMPANY FINANCIAL POSITION

	September 30		December 31
SEK millions	2017	2016	2016
ASSETS
Non-current assets
Shares in group companies	4,669	4,669	4,669
Current assets
Receivables on group companies	7,491	6,424	8,548
Other receivables	150	301	6
Cash and cash equivalents	-	-	-
	7,641	6,725	8,554
TOTAL ASSETS	12,310	11,394	13,223
SHAREHOLDERS' EQUITY AND LIABILITIES
Equity
Restricted equity	2,387	2,387	2,387
Unrestricted equity	8,500	7,849	9,197
	10,887	10,236	11,584
Untaxed reserves
Tax allocation reserves, taxation 2011-2017	1,409	1,145	1,409
Current liabilities
Liabilities to group companies	13	12	50
Accounts payable	1	1	0
Tax liabilities	-	-	180
Other liabilities	0	0	-
	14	13	230
TOTAL EQUITY AND LIABILITIES	12,310	11,394	13,223

Owners and shares

Owners and legal structure

Alfa Laval AB (publ) is the parent company of the Alfa Laval Group. The company had 33,023 (35,699) shareholders on September 30, 2017. The largest owner is Tetra Laval B.V., the Netherlands who owns 29.1 (29.1) percent. Next to the largest owner, there are nine institutional investors with ownership in the range of 5.4 to 0.7 percent. These ten largest shareholders owned 48.1 (56.6) percent of the shares.

Nomination Committee for the Annual General Meeting 2018

In accordance with a resolution taken at the Annual General Meeting of Alfa Laval AB on April 26, 2017, the Chairman of the Board, Anders Narvinger, has contacted the largest shareholders to constitute the Nomination Committee in preparation of the Annual General Meeting 2018. The following persons have accepted to be part of

Risks and other

Material factors of risk and uncertainty

The main factors of risk and uncertainty facing the Group concern the price development of metals, fluctuations in major currencies and the business cycle. It is the company's opinion that the description of risks made in the Annual Report for 2016 is still correct.

Asbestos-related lawsuits

The Alfa Laval Group was as of September 30, 2017, named as a co-defendant in a total of 887 asbestos-related lawsuits with a total of approximately 887 plaintiffs. Alfa Laval strongly believes the claims against the Group are without merit and intends to vigorously contest each lawsuit.

Based on current information and Alfa Laval's understanding of these lawsuits, Alfa Laval continues to believe that these lawsuits will not have a material adverse effect on the Group's financial condition or results of operation.

Accounting principles

The interim report for the third quarter 2017 is prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. The accounting principles are according to IFRS (International Financial Reporting Standards) as adopted by the European Union. In the report, alternative performance measures are used. See the annual report 2016 for definitions. Alfa Laval follows the Guidelines on the Nomination Committee: Finn Rausing, Tetra Laval; Ramsay Brufer, Alecta Pensionsförsäkring; Jan Andersson, Swedbank Robur Fonder; Lars-Åke Bokenberger, AMF-Försäkring och Fonder och Johan Strandberg, SEB Investment Management.

The Annual General Meeting of Alfa Laval AB will be held at Sparbanken Skåne Arena, Klostergårdens idrottsområde, Stattenavägen, Lund, Sweden on Monday April 23, 2018, at 16.00 (CET).

Shareholders who wish to submit proposals for the Nomination Committee in preparation of the Annual General Meeting can turn to the Chairman of the Board of Alfa Laval AB, Anders Narvinger or to the other shareholder representatives. Contact can also be made directly via e-mail to valberedningen@alfalaval.com.

Alternative Performance Measures issued by ESMA (European Securities and Markets Authority).

"Third quarter" refers to the period July 1 to September 30 and "First nine months" refers to the period January 1 to September 30. "Full year" refers to the period January 1 to December 31. "Last 12 months" refers to the period October 1, 2016 to September 30, 2017. "The corresponding period last year" refers to the third quarter 2016 or the first nine months 2016 depending on the context. "Previous quarter" refers to the second quarter 2017.

Comparison distortion items are reported in the comprehensive income statement on each concerned line, but are specified on page 7.

The accounting and valuation principles of the parent company comply with the Swedish Annual Accounts Act and the recommendation RFR 2 "Accounting for legal entities" issued by the Council for Financial Reporting in Sweden.

Date for the next financial report

The fourth quarter and full year 2017 report will be published on January 30, 2018.

Alfa Laval will publish interim reports during 2018 at the following dates:

Interim report for the first quarter	April 23
Interim report for the second quarter July 17
Interim report for the third quarter	October 23

The interim report has been issued at CET 7.30 on October 25, 2017 by the President and Chief Executive Officer Tom Erixon by proxy from the Board of Directors.

Lund, October 25, 2017,

Tom Erixon President and Chief Executive Officer Alfa Laval AB (publ)

Review report

Introduction

We have reviewed the summary interim financial information (the interim report) of Alfa Laval AB (publ) as of September 30, 2017 and the nine months' period then ended. The Board of Directors and the President are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements ISRE 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the International Standards on Auditing and other generally accepted auditing practices. The procedures

performed in a review do not enable us to obtain a level of assurance that would make us aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report, in all material aspects, is not prepared for the Group in accordance with IAS 34 and the Swedish Annual Accounts Act and for the Parent company in accordance with the Swedish Annual Accounts Act.

Lund, October 25, 2017,

Håkan Olsson Reising Joakim Thilstedt Authorised Public Authorised Public Accountant Accountant