HEXPOL — Interim / Quarterly Report 2008

Aug 8, 2008

Half-Year Report, January – June 2008

published August 8, 2008

Second quarter of 2008 – Continued strong growth and increased profit

• Net sales increased by 30 percent till 846 MSEK (650)
• Operating profit increased by 7 percent to 88 MSEK (82)
• Profit after tax rose 12 percent to 54 MSEK (48)
• Earnings per share increased by 13 percent to 2.04 SEK (1.80)
• Sales in business area HEXPOL Compounding rose 44 percent
• Continued raw-materials price increases, but with marginal earnings effect
• HEXPOL AB was listed on the OMX Nordic Exchange Stockholm on June 9

First six months of 2008 – Strong growth and increased profit

• Net sales increased by 30 percent to 1,698 MSEK (1,306)
• Operating profit increased 13 percent to 171 MSEK (151)
• Profit after tax rose 13 percent to 104 MSEK (92)
• Earnings per share increased by 13 percent to 3.92 SEK (3.46)
• Operating cash flow was strong and amounted to 70 MSEK (11)

President's comments

"Our strong growth continues. During the second quarter, sales rose 30 percent. Sales in business area HEXPOL Compounding increased by a full 44 percent despite reduced activity, particulary in the automotive industry and construction sector in the US. Our operating profit increased by 7 percent to 88 MSEK (82). Capacity utilization was also favourable during the quarter, except in business area HEXPOL Engineered Products, where we experienced declining production volumes, particularly at the end of the quarter.

"The first six months of the year generated strong growth, with favourable volumes in our operations. To date this year, sales have increased by 30 percent and earnings per share has risen to 3.92 SEK (3.46). Our operating cash flow is strong and amounted to 70 MSEK (11)."

Georg Brunstam, President and CEO

	April - June		January - June		Full-year	July 2007-
MSEK	2008	2007	2008	2007	2007	June 2008
Net sales	846	650	1,698	1,306	2,730	3,122
Operating profit, EBIT	88	82	171	151	305	325
Operating margin, %	10.4	12.6	10.1	11.6	11.2	10.4
Profit before tax	76	68	147	130	255	272
Profit after tax	54	48	104	92	186	198
Earnings per share, SEK	2.04	1.80	3.92	3.46	7.01	7.47
Operating cash flow	14	30	70	11	92	151
Equity/assets ratio, %			31.6	46.0	36.7
Return on capital employed, %			15.3	17.7	15.1

Group summary

HEXPOL is a world-leading polymers group with strong global positions in advanced rubber compounds (Compounding), gaskets for plate heat exchangers (Gaskets) and wheels made of plastic and rubber materials for truck and tracked wheel applications (Wheels). Customers are primarily OEM manufacturers of plate heat exchangers and trucks, as well as global systems suppliers to the automotive industry. The Group is organized in two business areas, HEXPOL Compounding and HEXPOL Engineered Products, and has about 2,300 employees in nine countries. In 2007, HEXPOL had sales of about 2,700 MSEK. Read more at www.hexpol.com

Second quarter 2008

Group's sales increased by 30 percent during the second quarter to 846 MSEK (650). Acquired units accounted for 124 MSEK of sales. Currency effects had a negative impact on sales totalling 33 MSEK, primarily due to a weakening of the USD.

Operating profit increased by 7 percent to 88 MSEK (82), corresponding to an operating margin of 10.4 percent (12.6). This marginal decrease was partly the result of lower profit in business area HEXPOL Engineered Products and low capacity utilization at the newly started units in China and Mexico within business area HEXPOL Compounding. Profit was also impacted negatively by exchange-rate fluctuations in the amount of 4 MSEK.

Business area HEXPOL Compounding increased its sales by 44 percent to 648 MSEK (451) and its operating profit by 26 percent to 63 MSEK (50). Volumes remained strong during the quarter, primarily due to favourable demand from the European automotive industry.

In business area HEXPOL Engineered Products, sales remained largely unchanged and amounted to 198 MSEK (199). Operating profit decreased to 25 MSEK (32). The weaker trend for the quarter was caused by declining growth for gaskets for plate heat exchangers, continued low volumes of polyurethane and rubber wheels and generally decreased capacity utilization.

Demand was favourable in Europe during the quarter and capacity utilization in the European units remained high. Deliveries to the automotive industry in Eastern Europe contributed to the positive trend within business area HEXPOL Compounding.

Within NAFTA (Canada, the US and Mexico), we see lower activity, particularly in the automotive industry and in the US construction sector. These segments are HEXPOL's largest segments in the North American market. Nonetheless, business area HEXPOL Compounding's volumes increased in the second quarter. However, volumes remained low at business area HEXPOL Engineered Products' US production unit for polyurethane wheels.

In Asia, the new plants in China within business areas HEXPOL Engineered Products and HEXPOL Compounding gradually increased production.

Raw-materials prices continued to increase during the second quarter. The impact on the Group's profit was marginal, however, as a result of continued measures that included revised material

formulas, changed suppliers and price increases. Nonetheless, discussions with customers concerning price increases were more difficult than in the preceding quarter.

Group's operating cash flow during the second quarter amounted to 14 MSEK (30). Cash flow was impacted by increased working capital. Inventories of raw materials, in particular, increased due to advance purchases made before future raw-materials price increases. The Group's net interest expenses during the second quarter amounted to 12 MSEK (14).

Profit before tax increased to 76 MSEK (68). Profit after tax rose 12 percent to 54 MSEK (48), corresponding to earnings per share of 2.04 SEK (1.80).

On June 9 2008, HEXPOL was listed on the mid-cap list of the OMX Nordic Exchange Stockholm. The prospectus prepared for the listing of the shares in HEXPOL AB was published on June 5 2008 and is available at www.hexpol.com

First six months of the year 2008

During the first six months of the year, Group's sales rose 30 percent to 1,698 MSEK (1,306). Acquired units accounted for 246 MSEK of sales. Currency effects had a negative impact on sales totalling 51 MSEK, primarily due to a weakening of the USD. Operating profit increased by 13 percent to 171 MSEK (151), corresponding to an operating margin of 10.1 percent (11.6).

Business area HEXPOL Compounding increased its sales by 42 percent to 1,296 MSEK (911) and its operating profit by 27 percent to 118 MSEK (93). Growth within the business area was strong during the first six months of the year. In Europe, favourable demand from customers in the automotive industry resulted in increased volumes. This trend was particularly strong in Eastern Europe. Volume trends were also positive in NAFTA despite declining market conditions. The integration of GoldKey, which was acquired in September 2007, is proceeding according to plan and the newly established unit in Mexico reported increased volumes and positive figures during most of the first six months of the year. In Asia, volumes at the newly established plant in Qingdao, China, increased gradually.

In business area HEXPOL Engineered Products, sales rose 2 percent to 402 MSEK (395). Operating profit amounted to 53 MSEK (58). Growing volumes of gaskets for plate heat exchangers were reported during the first six months of the year. However, a lower level of activity in the market in general, a decrease in major projects and delayed call-offs resulted in declining development late in the period. Declining demand for polyurethane and rubber wheels caused a weak trend in the area of wheels during the first six months of the year.

Group's operating cash flow rose to 70 MSEK (11) during the first half of the year. This strong cash flow was achieved through reduced working capital, profit improvements and a lower rate of investment. The Group's net interest expenses during the period amounted to 24 MSEK (21).

Profit before tax increased to 147 MSEK (130). Profit was negatively impacted by currency fluctuations totalling 3 MSEK. Profit after tax rose 13 percent to 104 MSEK (92), corresponding to earnings per share of 3.92 SEK (3.46).

Profitability

Return on average capital employed amounted to 15.3 percent (17.7). This lower return was primarily attributable to the acquisition of GoldKey. Return on average shareholders' equity amounted to 21.2 percent (19.6).

Financial position and liquidity

The equity/assets ratio was 31.6 percent (46.0). Group's total assets increased to 2,969 MSEK (2,161). Group's net debt amounted to 1,268 MSEK (701) and the debt/equity ratio was a multiple of 1.4 (0.7). The interest-coverage ratio was a multiple of 4.8 (6.2).

Cash flow

During the period, cash flow from operations before changes in working capital increased by 19 percent to 150 MSEK (126). Cash flow from operations amounted to 133 MSEK (106). Operating cash flow amounted to 70 MSEK (11).

Investments, depreciation and amortization

The Group's net investments, excluding company acquisitions and divestments, totalled 63 MSEK (95) in the first six months of the year. Investments during the period primarily comprised investments in production facilities for gaskets for heat plate exchangers in Qingdao, China and increased production capacity at the rubber-compounds plant in Mexico. Depreciation and amortization during the period amounted to 46 MSEK (34).

Tax expenses

The Group's tax expenses during the first six months of the year amounted to 43 MSEK (38), corresponding to a tax rate of 29.3 percent (29.2). Tax expenses are affected by the fact that a significant portion of profit is generated in subsidiaries in countries where the tax rate differs from that in Sweden.

Personnel

The number of employees at the end of the period was 2,360 (2,181). This increase in the number of employees was attributable to the acquisition of GoldKey and a rise in personnel in Sri Lanka and the newly started HEXPOL Compounding units in China and Mexico.

Events after the closing date

On July 14, 2008, the company announced that an Extraordinary Annual General Meeting would be held on August 18, 2008 to establish a decision concerning a directed issue of warrants.

Business area HEXPOL Compounding

Business area HEXPOL Compounding is a world leader in the development and manufacture of high-quality advanced rubber compounds (Compounding). Customers are manufacturers of rubber products with stringent demands for performance and global delivery capacity. The largest market segments are the automotive industry, followed by the construction industry. Other key segments are the cabling, water treatment, pharmaceutical, energy and oil industries.

		April - June		January - June	Full-year	July 2007-
MSEK	2008	2007	2008	2007	2007	June 2008
Net sales	648	451	1,296	911	1,955	2,340
Operating profit	63	50	118	93	195	220
Operating margin, %	9.7	11.1	9.1	10.2	10.0	9.4

During the second quarter, sales increased by 44 percent and amounted to 648 MSEK (451). Acquired units accounted for 124 MSEK of the quarter's sales. Operating profit increased by 26 percent to 63 MSEK (50), corresponding to an operating margin of 9.7 percent (11.1). The operating margin was impacted by low capacity utilization at the newly started plants in China and Mexico and the continued weakening of the USD.

In Europe, the volume trend remained favourable during the second quarter and capacity utilization was high. Deliveries to customers within the automotive industry in Eastern Europe resulted in favourable growth in the Czech operations. Volumes in the Belgian company were also strong during the period as a result of deliveries to the European automotive industry. The positive trend in the Nordic region and Germany continued.

In NAFTA, the unit in Mexico displayed favourable growth as a result of the continued transfer of car production from the US to Mexico and the newly started company in Mexico reported a profit during the quarter. Activity decreased further in the US and Canada, particularly within the automotive industry and construction sector. However, HEXPOL's volumes in NAFTA generally increased during the quarter thanks to a favourable market position. In Canada, volumes remained stable, but low. In Asia, volumes at the newly established plant increased gradually, but capacity utilization remained relatively low.

Raw-materials prices continued to rise in business area Compounding during the quarter, but the impact on profit was marginal as a result of measures that included price increases, revised material formulas and changed suppliers. Price increases have been implemented following difficult discussions with customers due to general cost pressures in the industry.

Business area HEXPOL Engineered Products

Business area HEXPOL Engineered Products, through its considerable expertise in polymers and the production of rubber, plastic and polyurethane products, has gained a world-leading position as a supplier of advanced products, such as gaskets for plate heat exchangers (Gaskets) and wheels for truck and castor wheel applications (Wheels).

		April - June		January - June	Full-year	July 2007-
MSEK	2008	2007	2008	2007	2007	June 2008
Net sales	198	199	402	395	775	782
Operating profit	25	32	53	58	110	105
Operating margin, %	12.6	16.1	13.2	14.7	14.2	13.4

Sales in the second quarter remained largely unchanged and amounted to 198 MSEK (199). Operating profit decreased and amounted to 25 MSEK (32), corresponding to an operating margin of 12.6 percent (16.1). Lower volumes at the end of the quarter and reduced capacity utilization were the primary causes of this decrease in profit.

Product area Gaskets reported unchanged sales during the quarter. Declining activity in the market in general, a decrease in major project-related orders and delayed call-offs resulted in lower production volumes in our units at the end of the quarter. As previously announced, start of production at the facility for gaskets for plate heat exchangers in China was postponed due to lower volumes and a favourable productivity trend in Sri Lanka.

Within product area Wheels, development remained weak during the second quarter. Volumes in Europe and the US were lower than in the preceding year due to a general weakening of demand in the market. Within product areas Profiles, the volume trend during the quarter matched the yearearlier level.

Increases in raw-materials prices were also substantial within business area Engineered Products. Natural-rubber and metal prices continued to rise, while prices for other raw materials also increased. Discussions with customers concerning prices were and continue to be difficult.

Parent Company

The Parent Company reported a loss after tax of 18 MSEK (loss: 2). Shareholders' equity amounted to 382 MSEK (579).

Outlook

HEXPOL expects a continued favourable development during 2008.

Risk factors

The Group's and the Parent Company's business risks, risk management and management of financial risks are described in the prospectus for the listing of HEXPOL AB shares that was published on June 5, 2008. No events of significant importance occurred during the period that could affect or change these descriptions of the Group's or the Parent Company's risks and their management.

Accounting principles

This interim report was prepared in accordance with IAS 34 Interim Reporting and the Annual Accounts Act. The accounting and valuation principles applied in the prospectus for the listing of HEXPOL AB shares were also applied in this half-year report.

Financial information

HEXPOL AB will publish financial information for the 2008 fiscal year on the following dates:

Event Date

Interim report, January – September Thursday October 23, 2008

Year-end report 2008 Tuesday February 10, 2009

The report will be presented at Sund Kommunikation's office, located at Birger Jarls gatan 58, at 9:30 a.m. on August 8. The presentation will also be available at www.hexpol.com.

Financial information in Swedish and English is also available at HEXPOL AB's web site at www.hexpol.com

For further information, contact:

• Georg Brunstam, President and CEO Tel: +46 708 55 12 51
• Anders Lyrheden, CFO Tel: +46 703 20 96 95

Board of Directors declaration

This half-year report provides a fair overview of the Parent Company and Group's operations, position and earnings. It also describes significant risks and uncertainty factors faced by the Parent Company and companies belonging to the Group.

This interim report was not subject to special review by the company's auditors.

Malmö August 8, 2008 HEXPOL AB (publ)

Melker Schörling, Chairman of the Board	Maths O. Sundqvist
Ulrik Svensson	Alf Göransson
Malin Persson	Jan-Anders Månson
Georg Brunstam, President and CEO
Address:	Skeppsbron 3 SE-211 20 Malmö

Corporate registration number: 556108-9631 Tel: +46 40-25 46 60 Fax: + 46 40-25 46 89 Website: www.hexpol.com

This is the type of information that HEXPOL AB is obliged to disclose in accordance with the Swedish Securities Market Act and/or the Financial Instruments Trading Act. The information was submitted to the media for publication at 8:00 a.m. on 8 August 2008.

Group's income statement

	April - June			January - June		July 2007-
MSEK	2008	2007	2008	2007	2007	June 2008
Net sales	846	650	1,698	1,306	2,730	3,122
Cost of goods sold	-708	-528	-1,422	-1,073	-2,238	-2,587
Gross profit	138	122	276	233	492	535
Selling and administration costs, etc.	-50	-40	-105	-82	-187	-210
Operating profit	88	82	171	151	305	325
Financial income and expenses	-12	-14	-24	-21	-50	-53
Profit before tax	76	68	147	130	255	272
Tax	-22	-20	-43	-38	-69	-74
Net profit for the period	54	48	104	92	186	198
- of which, attributable to the Parent	54	48	104	92	186	198
Company's shareholders
Earnings per share, SEK	2.04	1.80	3.92	3.46	7.01	7.47
Earnings per share after dilution, SEK	2.04	1.80	3.92	3.46	7.01	7.47
Shareholders' equity per share, SEK			35.33	37.47	38.60
CB number of shares, thousands	26,552	26,552	26,552	26,552	26,552	26,552
Average number of shares, thousands 1)	26,552	26,552	26,552	26,552	26,552	26,552
Average number of shares after dilution, thousands 1)	26,552	26,552	26,552	26,552	26,552	26,552
Depreciation, amortization and impairment included in an amount of	-23	-17	-46	-34	-70	-82

1) number of shares after exchange listing

Group's balance sheet

	June 30	June 30	Dec 31
MSEK	2008	2007	2007
Intangible fixed assets	1,128	845	1,134
Tangible fixed assets	732	578	735
Financial fixed assets	2	2	2
Total fixed assets	1,862	1,425	1,871
Inventories	360	245	308
Accounts receivable	443	365	344
Other receivables	43	35	26
Prepaid expenses and accrued income	26	9	18
Total current receivables	512	409	388
Cash and cash equivalents	235	82	228
Total current assets	1,107	736	924
Total assets	2,969	2,161	2,795
Attributable to the Parent Company's shareholders	938	995	1,025
Total shareholders' equity	938	995	1,025
Provision for pensions	9	9	10
Provision for deferred tax	21	35	20
Interest-bearing liabilities	1,403	531	1,294
Total non current liabilities	1,433	575	1,324
Interest-bearing liabilities	100	252	92
Accounts payable	315	212	252
Other liabilities	53	44	13
Accrued expenses and deferred income	130	83	89
Total current liabilities	598	591	446
Total shareholders' equity and liabilities	2,969	2,161	2,795

Group's changes in shareholders' equity

	June 30	June 30	Dec 31
MSEK	2008	2007	2007
Opening shareholders' equity	1,025	883	883
Translation difference	-15	20	49
Exchange-rate differences in hedging instruments	5	-	-
Net profit for the period	104	92	186
Total changes in net asset value, excluding transactions involving company shareholders	94	112	235
Dividend	-181	-	-
Group contributions	0	0	-93
Closing shareholders' equity	938	995	1,025

Number of shares, trend

	Total number of Class A shares	Total number of Class B shares	Total number of shares
Number of shares at 1 January		100	100
Split 500:1		50,000	50,000
Bonus issue	1,181,250	25,370,727	26,551,977

Group's cash-flow statement

	January - June		Full-year
MSEK	2008	2007	2007
Cash flow from operations before change in working capital	150	126	268
Change in working capital	-17	-20	-3
Cash flow from operations	133	106	265
Net investments in ordinary operations	-63	-95	-173
Operating cash flow	70	11	92
Acquisition of subsidiaries	-	-	-350
Cash flow from financing activities	-63	-45	370
Change in cash and cash equivalents	7	-34	112
Cash and cash equivalents at 1 January	228	116	116
Cash and cash equivalents at 30 June	235	82	228

Key figures

	April - June			January - June	Full-year
	2008	2007	2008	2007	2007
Operating margin, %	10.4	12.6	10.1	11.6	11.2
Profit margin before tax, %	9.0	10.5	8.7	10.0	9.3
Return on shareholders' equity, %			21.2	19.6	19.5
Return on capital employed, %			15.3	17.7	15.1
Equity/assets ratio, %			31.6	46.0	36.7
Interest-coverage ratio, multiple			4.8	6.2	5.3
Average number of shares, thousands	26,552	26,552	26,552	26,552	26,552
Earnings per share, SEK	2.04	1.80	3.92	3.46	7.01
Cash flow per share, SEK	1.85	2.97	5.01	3.99	9.98
Cash flow per share before change in working capital, SEK	2.98	2.45	5.65	4.75	10.09

Quarterly data, Group

Sales per business area	2008		2007					Jul 2007-
MSEK	Jan - Mar	Apr - Jun	Jan - Mar	Apr - Jun	Jul - Sep	Oct - Dec	Full year	Jun 2008
HEXPOL Compounding	648	648	460	451	495	549	1,955	2,340
HEXPOL Engineered Products	204	198	196	199	185	195	775	782
Group total	852	846	656	650	680	744	2,730	3,122
Sales per geographic area	2008		2007					Jul 2007-
MSEK	Jan - Mar	Apr - Jun	Jan - Mar	Apr - Jun	Jul - Sep	Oct - Dec	Full year	Jun 2008
Europe	535	531	473	459	447	451	1,830	1,964
NAFTA	284	276	159	166	211	272	808	1,043
Asia	33	39	24	25	22	21	92	115
Group total	852	846	656	650	680	744	2,730	3,122
Operating profit per business area	2008		2007					Jul 2007-
MSEK	Jan - Mar	Apr - Jun	Jan - Mar	Apr - Jun	Jul - Sep	Oct - Dec	Full year	Jun 2008
HEXPOL Compounding	55	63	43	50	55	47	195	220
HEXPOL Engineered Products	28	25	26	32	31	21	110	105
Group total	83	88	69	82	86	68	305	325

Parent Company income statement

		April - June	January - June	Full-year
MSEK	2008	2007	2008	2007	2007
Net sales	7	5	15	11	22
Selling and administration costs, etc.	-8	-4	-17	-10	-26
Operating profit/loss	-1	1	-2	1	-4
Financial income and expenses	-13	-2	-23	-4	-14
Loss before tax	-14	-1	-25	-3	-18
Tax	4	1	7	1	5
Net loss for the period	-10	0	-18	-2	-13

Parent Company balance sheet

	June 30	June 30	December 31
MSEK	2008	2007	2007
Total fixed assets	1,482	792	1,342
Total current receivables	574	29	152
Cash and cash equivalents	70	0	0
Total current assets	644	29	152
Total assets	2,126	821	1,494
Total shareholders' equity	382	579	581
Total non current liabilities	1,404	0	0
Total current liabilities	340	242	913
Total shareholders' equity and liabilities	2,126	821	1,494

Financial definitions

Capital employed	Total assets less non-interest-bearing liabilities.
Cash flow	Cash flow from operating activities after change in working capital.
Cash flow per share	Cash flow from operating activities after change in working capital, divided by average number of shares.
Earnings per share	Net profit divided by average number of shares.
Equity/assets ratio	Shareholders' equity as a percentage of total assets.
Interest-coverage ratio	Profit before tax plus interest expenses divided by interest expenses.
Investments	Purchases less sales of tangible and intangible fixed assets, excluding those included in acquisitions and divestments of subsidiaries.
Debt/equity ratio	Interest-bearing liabilities less cash and cash equivalents divided by shareholders' equity.
Operating margin	Operating profit as a percentage of net sales for the period.
Profit margin before tax	Profit before tax as a percentage of net sales for the period.
Return on capital employed	Profit before tax plus interest expenses as a percentage of average capital employed.
Return on equity	Net profit as a percentage of average shareholders' equity.
Shareholders' equity per share	Shareholders' equity divided by the number of shares at end of period.