NOTE — Interim / Quarterly Report 2012

Oct 19, 2012

INTERIM REPORT JANUARY-SEPTEMBER 2012

FINANCIAL PERFORMANCE IN JANUARY-SEPTEMBER

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FINANCIAL PERFORMANCE IN JULY-SEPTEMBER

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CEO's comment

CASH FLOW REMAINS STABLE

Despite fairly weak market conditions for over a year, NOTE has now been able to achieve eight consecutive quarters of positive profits and strong cash flows. Cash flow for the first three quarters of this year was SEK 2.46 per share, and on a rolling 12-month basis, SEK 2.84 per share. Thus net debt had been significantly reduced to some SEK 50 million by the end of the period. This cash flow has been created thanks to a sharp focus on logistics solutions and working methods to rationalise our utilisation of working capital.

We are seeing clearly that ongoing debt restructuring in several European countries is affecting demand on our markets. Accordingly, we continue to note caution from industry, primarily in the form of stock redimensioning and delays to customer projects. However, the fact that our operational structure is continuing to cope with inconsistent utilisation levels is positive.

Last summer, we had cause to expect some demand stabilisation through the autumn. However, sales in the third quarter were lower than expected.

Essentially, our business builds on creating and developing long-term relationships with our customers. We have also been sharpening our focus on sales growth for some time. In order to further develop our business, it's important to expand our customer base. Consequently, it's pleasing that despite a more challenging market situation, we succeeded in establishing collaborations with a fairly large number of new small and medium-sized customers, in Sweden and internationally. We will be working hard to develop these relationships and product launches positively.

We are well equipped to manufacture electronicsbased products that require high competence and flexibility across large parts of product lifecycles. Our Nearsourcing business model is strong and tailored for the high mix/low volume market segment. It builds on developing business at our Nearsourcing Centres in Sweden, Norway, Finland and the UK in close collaboration with customers. Usually, we locate labour-intensive volume production at our Industrial Plants in Estonia and China.

PROGRESS IN JANUARY-SEPTEMBER

The demand slowdown meant that our sales, which are strongly linked to the progress of volumes in ongoing customer assignments in the short-term perspective, reduced by 13% to SEK 788.8 million. The downturn was primarily in Sweden and Finland, while sales performance in Norway and the UK was more stable.

The initiative we took last year to increase direct sales from Industrial Plants in Estonia and China has gone well so far. Largely, this business addresses customers in Europe, and comprised 17% (7%) of total sales in the first three quarters.

We continued our group-wide improvement work industriously, focusing on creating increased efficiency, superior delivery precision and quality levels. As part of these efforts, we conducted qualityenhancing initiatives in the year across basically all units.

Through continued rationalisation, we have cut our costs by 9% year to date. And despite significantly lower volumes, this helped us to achieve an operating profit of SEK 31.4 million for the first three quarters. Operating margin in the third quarter was 4.5%, and 4.0% overall for the period.

One important component of our value offering is to ensure competitive pricing of materials and effective logistics solutions for customers. The global market for electronic components can be considered to have been fairly stable in the year. Our focus on improving working capital utilisation enabled us to succeed in reducing our stock by 15% on the corresponding point of the previous year. The combination of this destocking and profit performance contributed to cash flow (after investments) increasing by SEK 25.4 million to SEK 71.0 million.

FUTURE

With the cost structure improvements we have achieved to date and the support of our ongoing improvement work, we see opportunities for getting a better pay-off from our positive customer relationships and capabilities.

We want to expand our customer base and have sharpened our focus on growth. In the short term, we view future progress on our markets and our customers' plans for the future with great humility.

Peter Laveson

Sales and results of operations

SALES, JANUARY-SEPTEMBER

Mainly because of global economic uncertainty, a slowdown in demand has been apparent since summer last year. This has meant the volumes of ongoing customer assignments contracting. In addition, changed logistics setups, stock redimensioning by customers and delays to customer projects had a negative effect on sales in the year.

Sales in the first three quarters of the year were SEK 788.8 (911.2) million, a 13% decrease. Adjusted for one-off deliveries in the previous year and zero-margin materials sales linked to the previously sold joint venture in Krakow, Poland, the decrease was some 10%.

NOTE sells to a large customer base, essentially active in the engineering and communication industries in the Nordics and UK. NOTE endeavours to obtain long-term customer relations, and its 15 largest customers in sales terms represented 58% (54%) of the group's sales.

NOTE conducted an initiative to increase sales direct from Industrial Plants in Estonia and China last autumn. This business, largely addressing customers in Europe, performed positively and made up 17% (7%) of total sales in the period.

The global market for electronics components was subject to a problematic shortage in the first half of the previous year, with long lead-times for electronic components. This required extra work to maintain deliveries as planned. However, since summer last year, the situation on the electronic components market has basically stabilised.

RESULTS OF OPERATIONS, JANUARY-SEPTEMBER

The fairly extensive restructuring program completed at year-end 2010 is fundamental to NOTE's positive profit performance over the past two years. Electronics production was then concentrated on fewer units in Sweden and internationally. Unprofitable operations were sold off or closed down and central costs adapted to prevailing market conditions. Parts of electronics production were relocated to other NOTE units. In this way, the group's capacity utilisation was increased simultaneous with costs being reduced.

Mainly as a result of NOTE's continued methodical improvement work, costs were reduced by 9%.

But decreased production and sales volumes resulted in the gross margin contracting by 0.6 percentage points to 10.3% (10.9%).

Sales and administration overheads reduced by 7% and were 6.1% (5.7%) of sales.

Other operating expenses/income, primarily consisting of revaluations of foreign currency assets and liabilities, were SEK -1.9 (1.3) million. In the second quarter last year, other operating expenses/income were positively affected by the sale of NOTE Tauragé, Lithuania.

Operating profit was SEK 31.4 (49.3) million, equivalent to an operating margin of 4.0% (5.4%).

Mainly as a result of continued positive cash flow and reduced funding costs, net financial income/expense reduced by SEK 0.7 million to SEK -5.5 (-6.2) million.

Profit after financial items was SEK 25.9 (43.1) million corresponding to a profit margin of 3.3% (4.7%).

Profit after tax was SEK 20.4 (30.8) million, or SEK 0.71 (1.07) per share.

SALES AND RESULTS OF OPERATIONS, JULY-SEPTEMBER

Sales in the third quarter decreased by 14% to SEK 234.0 (272.5) million. Essentially, the decrease was linked to the combination of continued weak market conditions, which is affecting volumes on current customer assignments negatively, as well as delays on customer projects. Sales from Industrial Plants in Estonia and China continued to perform positively, comprising 22% (8%) of quarterly sales. However, a minority of the increase was due to the transfer of production from Europe to China.

Manufacturing costs reduced by 11% in the third quarter. However, lower volumes meant gross margin contracted by 0.5 percentage points to 10.7% (11.2%).

Sales and administration overheads reduced by 5 percentage points and were 5.9% (5.3%) of sales in the quarter.

Other operating expenses/income were SEK -0.8 (-2.6) million.

Operating profit for the period was SEK 10.5 (13.5) million, or an operating margin of 4.5% (4.9%). Profit after net financial items was SEK 8.3 (12.6) million.

Operating segments

NOTE is a specialist manufacturing partner for producing electronics-based products that require high technology competence and flexibility.

As part of the Nearsourcing business model, operations are conducted as an integrated process. Nearsourcing Centres provide development and production engineering services in close partnership with customers, such as selecting materials, production of prototypes, batch production and testing. Essentially, NOTE's Industrial Plants provide cost-efficient volume production in both Europe and Asia. Development, management and coordination of operations are conducted in the parent company, and sourcing operations in NOTE Components.

Significant key ratios for NOTE's business segments are stated in the following table, in accordance with IFRS 8. Essentially, these consist of Nearsourcing Centres and Industrial Plants. Nearsourcing Centres include selling units in Sweden, Norway, Finland and the UK, where there is a close partnership with customers to develop new and existing business. Largely, Industrial Plants are the production units in Estonia and China. Other units are business support, group-wide operations.

	2012 03	2011 03	2012 01-03	2011 01-03	Rolling 12 mth.	2011 Full vr.
NEARSOURCING CENTRES
EXTERNAL SALES	182.0	250.4	653.7	851.7	922.0	1,120.0
INTERNAL SALES	0.9	4.7	3.9	17.5	8.2	21.8
DEPRECIATION AND AMORTISATION	-2.3	-2.7	-7.2	-8.8	-9.5	-11.1
OPERATING PROFIT	5.5	12.7	21.8	55.2	41.6	75.0
PROPERTY, PLANT AND EQUIPMENT	26.3	32.5	26.3	32.5	26.3	31.0
STOCK	93.4	124.2	93.4	124.2	93.4	110.9
TOTAL ASSETS	402.3	486.8	402.3	486.8	402.3	474.6
AVERAGE NUMBER OF EMPLOYEES	384	446	390	446	397	440
INDUSTRIAL PLANTS
EXTERNAL SALES	52.0	22.1	135.1	59.4	164.5	88.8
INTERNAL SALES	52.7	72.8	174.8	222.9	242.5	290.6
DEPRECIATION AND AMORTISATION	-1.7	-2.1	-5.3	6.8	-7.2	-8.7
OPERATING PROFIT	4.7	0.2	8.3	1.4	5.0	-1.9
PROPERTY, PLANT AND EQUIPMENT	20.8	27.1	20.8	27.1	20.8	25.9
STOCK	81.8	82.6	81.8	82.6	81.8	91.4
TOTAL ASSETS	202.4	214.0	202.4	214.0	202.4	199.6
AVERAGE NUMBER OF EMPLOYEES	502	486	486	488	482	483
OTHER UNITS AND ELIMINATIONS
EXTERNAL SALES	0.0	0.0	0.0	0.0	0.0	0.0
INTERNAL SALES	-53.6	-77.5	-178.7	-240.4	-250.7	-312.4
DEPRECIATION AND AMORTISATION	0.0	0.0	0.0	0.0	-0.1	0.0
OPERATING PROFIT	0.3	0.6	1.3	-7.3	-0.1	-8.7
PROPERTY, PLANT AND EQUIPMENT	0.0	0.0	0.0	0.0	0.0	0.0
STOCK
TOTAL ASSETS	-25.6	-47.4	-25.6	-47.4	-25.6	-40.9
AVERAGE NUMBER OF EMPLOYEES	15	17	16	17	16	16

CASH FLOW EQUITY TO ASSETS RATIO

LIQUIDITY

INVESTMENTS

Parent company

Parent company NOTE AB (publ) is primarily focused on the management, coordination and development of the group. In the period, revenue was SEK 29.4 (25.9) million and mainly related to intra-group services. The profit after tax was SEK 0.5 (-4.4) million.

As a result of the sale of the CAD operation and the 50% holding in NOTEFideltronik in 2010, interestbearing receivables of approximately SEK 3.2 (10.0) million remain in the parent company.

Significant operational risks

NOTE is a leading manufacturing partner for electronics production in the Nordics. It has especially strong market positioning in the high mix/low volume market segment, i.e. for products in small to medium-sized series that require high technology competence and flexibility. NOTE produces PCBs, sub-assemblies and box build products. The customer offering covers the whole product lifecycle, from design to after-sales.

NOTE's focus on Nearsourcing, targeting increased sales growth in combination with reduced overheads and investment costs in high-cost countries, is a way of reducing the risks of operations.

The Board of Directors of NOTE AB (publ)

Danderyd, Sweden, 18 October 2012

TRANSACTIONS WITH RELATED PARTIES

Like previous years, transactions with related parties were at a negligible level.

For a more detailed review of the group's operational and financial risks, refer to the Risks section on page 14, the Report of the Directors on pages 34-35 and note 24 Financial risks and finance policy on page 51 of NOTE's Annual Report for 2011.

NOTE's operations set fairly high demands on working capital funding. Accordingly, NOTE has a sharp focus on managing liquidity risk.

One of NOTE's customers reported profitability problems and impending restructuring measures in the first half-year 2012. In light of the situation, NOTE is continuing deliveries in close dialogue with this customer.

INTRODUCTION

ORIENTATION AND SCOPE OF LIMITED REVIEW

FOR MORE INFORMATION, PLEASE CONTACT

FORTHCOMING FINANCIAL REPORTS

CONCLUSION

ACCOUNTING AND VALUATION PRINCIPLES DISCREPANCIES BETWEEN REPORTS

Consolidated Income Statement

	2012 03	2011 03	2012 Q1-Q3	2011 01-03	Rolling 12 mth.	2011 Full yr.
REVENUES COST OF GOODS AND SERVICES SOLD	234.0 -209.0	272.5 -242.0	788.8 -707.6	911.2 -811.8	1,086.5 -972.1	1.208.8 -1,075.8
GROSS PROFIT	25.0	30.5	81.2	99.4	114.4	133.0
SALES COSTS ADMINISTRATIVE COSTS OTHER OPERATING INCOME/COSTS	-6.3 -7.4 -0.8	-7.5 -6.9 -2.6	-24.6 -23.3 -1.9	-26.9 -24.5 1.3	-34.1 -30.5 -3.3	-36.3 -32.1 -0.2
OPERATING PROFIT	10.5	13.5	31.4	49.3	46.5	64.4
NET FINANCIAL INCOME/EXPENSE	-2.2	-0.9	-5.5	-6.2	-7.4	-8.1
PROFIT AFTER FINANCIAL ITEMS	8.3	12.6	25.9	43.1	39.1	56.3
INCOME TAX	-1.8	-3.2	-5.5	-12.3	-10.1	-16.9
PROFIT AFTER TAX FOR THE PERIOD	6.5	9.4	20.4	30.8	29.0	39.4

Earnings per share

	2012 03	2011	2012 Q3 Q1-Q3 /	2011	Rolling Q1-Q3 12 mth.	2011 Full yr.
NUMBER OF OUTSTANDING SHARES AT END OF PERIOD (000) WEIGHTED AVERAGE NUMBER OF SHARES (000) EARNINGS PER SHARE, SEK	28,873 0.23	28,873 28,873 28,873 0.32	28,873 28.873 0.71	28.873 28.873 1.07	28.873 28.873 1.00	28,873 28,873 1.36

Consolidated Statement of Comprehensive Income

	2012 03	2011 03	2012 Q1-Q3	2011 7 01-03	Rolling 12 mth.	2011 Full yr.
NET PROFIT	6.5	9.4	20.4	30.8	29.0	39.4
OTHER COMPREHENSIVE INCOME
EXCHANGE RATE DIFFERENCES	-2.9	4.0	-4.3	3.6	-5.0	2.9
CASH FLOW HEDGES	0.0	0.1	0.1	0.2	0.0	0.1
OTHER COMPREHENSIVE INCOME FOR THE PERIOD	-2.9	4.1	-4.2	3.8	-5.0	3.0
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD			3.6		34.6	42.4

Consolidated Balance Sheet

	2012 30 Sep	2011 30 Sep	2011 31 Dec
ASSETS GOODWILL OTHER INTANGIBLE ASSETS PROPERTY, PLANT AND EQUIPMENT DEFERRED TAX ASSETS OTHER FINANCIAL ASSETS	70.5 0.1 47.1 17.3 3.4	70.6 0.1 59.6 18.4 4.5	70.5 0.1 56.9 15.8 4.5
FIXED ASSETS	138.4	153.2	147.8
CURRENT INTEREST-BEARING RECEIVABLES STOCK ACCOUNTS RECEIVABLE-TRADE OTHER CURRENT RECEIVABLES CASH AND CASH EQUIVALENTS	0.2 175.2 201.5 25.9 37.9	6.0 206.8 216.6 31.9 38.9	2.1 202.3 226.9 24.9 29.3
CURRENT ASSETS	440.7	500.2	485.5
TOTAL ASSETS	579.1	653.4	633.3
EQUITY AND LIABILITIES EQUITY	266.9	251.6	259.4
NON-CURRENT INTEREST-BEARING LIABILITIES DEFERRED TAX LIABILITIES OTHER LONG TERM PROVISIONS	0.8 3.2	4.6 2.5	2.1 3.4
NON-CURRENT LIABILITIES	4.0	7.1	5.5
CURRENT INTEREST-BEARING LIABILITIES ACCOUNTS PAYABLE-TRADE OTHER CURRENT LIABILITIES SHORT-TERM PROVISIONS	91.7 148.9 67.4 0.2	161.1 155.6 75.2 2.8	143.1 153.0 70.9 1.4
CURRENT LIABILITIES	308.2	394.7	368.4
TOTAL EQUITY AND LIABILITIES	579.1	653.4	633.3

Consolidated change in equity

	2012 03	2011 03	2012 Q1-Q3	2011	Rolling Q1-Q3 12 mth.	2011 Full yr.
OPENING EQUITY TOTAL COMPREHENSIVE INCOME FOR THE PERIOD AFTER TAX DIVIDEND	263.3 3.6	238.1 13.5	259.4 16.2 -8.7	217.0 34.6	251.6 24.0 -8.7	217.0 42.4
CLOSING EQUITY		266.9 251.6 266.9 251.6 266.9 259.4

Consolidated Cash Flow Statement

	2012 03	2011 (3	2012 OT-03	2011 Q1-Q3	Rolling 12 mth.	2011 Full vr.
PROFIT AFTER FINANCIAL ITEMS REVERSED DEPRECIATION AND AMORTISATION OTHER NON-CASH ITEMS TAX PAID	8.3 4.0 1.5 -2.4	12.6 4.8 0.2 -1.1	25.9 12.5 -0.8 -6.7	43.1 15.6 4.0 -5.0	39.1 16.8 -5.1 -3.8	56.3 19.8 -0.3 -2.1
CHANGE IN WORKING CAPITAL	10.4	0.6	41.0	-28.4	33.1	-36.2
CASH FLOW FROM OPERATING ACTIVITIES	21.8	17.1	71.9	29.3	80.1	37.5
CASH FLOW FROM INVESTING ACTIVITIES	-0.1	5.0	-0.9	16.3	1.7	19.0
CASH FLOW FROM FINANCING ACTIVITIES	-16.1	-18.4	-60.7	-41.5	-80.4	-61.2
CHANGE IN CASH AND CASH EQUIVALENTS	5.6	3.7	10.3	4.1	1.4	-4.7
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD CASH FLOW AFTER INVESTING ACTIVITIES FINANCING ACTIVITIES EXCHANGE RATE DIFFERENCE IN CASH AND CASH EQUIVALENTS	33.9 21.7 -16.1 -1.6	34.3 22.1 -18.4 0.9	29.3 71.0 -60.7 -1.7	33.7 45.6 -41.5 1.1	38.9 81.8 -80.4 -2.4	33.7 56.5 -61.2 0.3
CASH AND CASH EQUIVALENTS AT END OF PERIOD	379	33.9	37.9	33.9	37.9	29.3
UN-UTILISED CREDITS	54.8	41.2	54.8	41.2	54.8	35.6
AVAILABLE CASH AND CASH EQUIVALENTS	92.7	80.1	92.7	80.1	92.7	64.9

Consolidated six-year summary

	Rolling 12 mth.	2011	2010	2009	2008	2007
SALES	1,086.5	1,208.8	1.210.7	1.200.0	1,709.5	1.743.8
GROSS MARGIN	10.5%	11.0%	5.0%	2.2%	7.2%	12.9%
OPERATING MARGIN	4.3%	5.3%	-4.0%	-7.6%	-0.2%	6.4%
PROFIT MARGIN	3.6%	4.7%	-4.9%	-8.2%	-0.8%	6.0%
CASH FLOW AFTER INVESTING ACTIVITIES	81.8	56.5	-13.6	23.9	25.1	-0.5
EQUITY PER SHARE, SEK	9.24	8.98	7.52	21.81	30.64	34.02
CASH FLOW PER SHARE, SEK	2.83	1.96	-0.56	1.52	1.59	-0.03
RETURN ON OPERATING CAPITAL	13.5%	17.7%	-12.1%	-18.8%	-0.7%	21.4%
RETURN ON EQUITY	11.2%	16.5%	-29.1%	-32.1%	-4.2%	26.3%
EQUITY TO ASSETS RATIO	46.1%	41.0%	31.3%	27.9%	31.1%	34.5%
AVERAGE NUMBER OF EMPLOYEES	895	939	1,000	977	1,201	1,171
SALES PER EMPLOYEE, SEK 000	1,214	1,287	1,211	1,228	1,423	1.489

Consolidated quarterly summary

	2012 03	2012 02	2012 Q1	2011 Q4	2011 03	2011 Q2	2011 01	2010 04
SAIFS	234.0	280.1	274.7	297.7	272.5	326.8	311.8	366.8
GROSS MARGIN	10.7%	9.8%	10.5%	11.2%	11.2%	11.6%	10.0%	8.8%
OPERATING MARGIN	4.5%	3.6%	4.0%	5.1%	4.9%	7.2%	3.9%	3.3%
PROFIT MARGIN	3.5%	3.2%	3.2%	4.4%	4.6%	6.5%	3.0%	2.2%
CASH FLOW AFTER INVESTING ACTIVITIES	21.7	13.0	36.3	10.9	22.1	14.5	9.0	40.2
EQUITY PER SHARE, SEK	9.24	9.12	9.15	8.98	8.71	8.25	7.71	7.52
CASH FLOW PER SHARE, SEK	0.75	0.45	1.26	0.38	0.77	0.50	0.31	1.39
EQUITY TO ASSETS RATIO	46.1%	44.1%	43.3%	41.0%	38.5%	35.3% I	32.7%	31.3%
AVERAGE NUMBER OF EMPLOYEES	901	895	879	905	949	ବିଚିର	938	1.008
SALES PER EMPLOYEE, SEK 000	260	313	312	329	287	338	332	364

Parent Company Income Statement

	2012 Q3	2011 Q3	2012 Q1-Q3	2011 Q1-Q3	Rolling 12 mth.	2011 Full yr.
NET SALES COST OF GOODS SOLD	9.8 -6.7	10.0 -7.1	29.4 -19.0	25.9 -20.2	37.3 -26.1	33.7 -27.3
GROSS PROFIT	3.1	2.9	10.4	5.7	11.2	6.4
SALES COSTS ADMINISTRATIVE COSTS OTHER OPERATING INCOME/COSTS	-1.0 -2.5 0.0	-1.0 -2.2 0.0	-3.2 -7.6 0.0	-3.8 -8.6 0.0	-4.5 -9.7 0.0	-5.0 -10.6 0.0
OPERATING PROFIT	-0.4	-0.3	-0.4	-6.7	-3.0	-9.2
FINANCIAL INCOME/EXPENSE	-0.5	2.5	1.1	0.7	43.5	43.1
PROFIT AFTER NET FINANCIAL ITEMS	-0.9	2.2	0.7	-6.0	40.5	33.9
APPROPRIATIONS	-		-	-	-1.1	-1 - 1
PROFIT BEFORE TAX	-0.9	2.2	0.7	-6.0	39.4	32.8
INCOME TAX	-0.2	-0.5	-0.2	1.6	-10.4	-8.6
PROFIT AFTER TAX	-1.1	1.7	0.5	-4.4	29.0	24.2

Parent Company Balance Sheet

	2012 30 Sep	2011 30 Sep	2011 31 Dec
ASSETS PROPERTY, PLANT AND EQUIPMENT DEFERRED TAX ASSETS LONGTERM RECEIVABLES FROM GROUP COMPANIES FINANCIAL NON-CURRENT ASSETS	0.9 83.1 248.2	9.5 85.6 254.4	0.0 88.5 254.3
NON-CURRENT ASSETS	332.2	349.5	342.8
CURRENT INTEREST-BEARING RECEIVABLES RECEIVABLES FROM GROUP COMPANIES OTHER CURRENT RECEIVABLES CASH AND CASH EQUIVALENTS	0.2 33.2 2.8 9.3	6.0 17.0 3.4 18.8	2.1 61.5 3.6 13.3
CURRENT ASSETS	45.5	45.2	80.5
TOTAL ASSETS	377.7	394.7	423.3
EQUITY AND LIABILITIES EQUITY UNTAXED RESERVES	250.8 1.1	232.9 -	261-4 1.1
NON-CURRENT LIABILITIES
LIABILITIES TO CREDIT INSTITUTIONS LIABILITIES TO GROUP COMPANIES OTHER CURRENT LIABILITIES & PROVISIONS	1.4 114.2 10.2	- 12.6 138.3 10.9	16.6 131.6 12.6
CURRENT LIABILITIES	125.8	161.8	160.8
TOTAL EQUITY AND LIABILITIES	377.7	394.7	423.3