Studsvik — Interim / Quarterly Report 2011

Apr 26, 2011

Interim Report January–March 2011

• • Sales amounted to SEK 297.2 million (345.8), which in local currencies is a decrease of 6.8 per cent.
• • The operating profit was SEK 8.7 million (23.2), which includes foreign exchange effects of SEK 0.6 million (5.6).
• • Improved market situation and inflow of orders in the United Kingdom.
• • Cash flow from operating activities after investments was SEK 24.9 million (23.2).
• • Net debt decreased during the quarter by SEK 58.2 million to SEK 167.2 million.

	January– March 2011	January– March 2010	Full year 2010
Sales, SEK million	297.2	345.8	1,344.1
Operating profit, SEK million	8.7	23.2	33.4
Profit after tax, SEK million	0.9	12.7	4.0
Cash flow from operating activities, SEK million	39.6	28.7	107.5
Cash flow after investments, SEK million	24.9	23.2	81.9
Profit per share after tax, SEK	0.11	1.55	0.49
Equity per share, SEK	61.24	65.91	63.37
Equity/assets ratio, %	37.3	37.4	36.5

Sales

Sales amounted to SEK 297.2 million (345.8). SEK 22.5 million of the SEK 48.6 million decrease is a foreign exchange effect on translation of foreign subsidiaries.

Profit

In Sweden production capacity was well utilized, but earnings were negatively affected in comparison with 2010 by foreign exchange effects and the product mix in the melting operations. The positive trend in the United Kingdom continued in the first quarter with a reduced loss in comparison with both the fourth quarter and the first quarter 2010. The USA and Germany reported lower earnings than in 2010 as an effect of normal fluctuations. Global Services reported earnings by and large on a level with the previous year, despite lower new sales of software.

The operating profit for the first quarter amounted to SEK 8.7 million (23.2). The Group's operating profit in the first quarter was impacted by foreign exchange effects of SEK 0.6 million (5.6).

The operating margin adjusted for foreign exchange effects was 3.0 per cent (6.7) for the first quarter. Net financial income amounted to SEK –5.2 million (–5.7). After taxes of SEK –2.6 million (–4.8) the net profit was SEK 0.9 million (12.7) for the first quarter.

Sweden

Sales amounted to SEK 38.8 million (39.6). Operating profit amounted to SEK 4.8 million (10.7). The figure includes value changes in foreign exchange contracts of SEK 1.0 million (5.6) The operating margin, excluding these effects, was 9.8 per cent (12.9). The lower operating margin in 2011 is mainly explained by the product mix in the metal recycling facility.

Capacity utilization was high in both the incineration facility and the metal recycling facility. Both facilities have sound order books.

It was decided during the quarter to build a pyrolysis facility to be brought into operation at the end of 2011. The facility's first customer will be Westinghouse Sweden, after signing a 20-year contract for treatment of uranium-contaminated waste.

According to the original schedule Studsvik should have received and started treating 16 steam generators from the Canadian company Bruce Power in summer 2010. The Canadian regulatory authority granted a license for transportation to Sweden. However. Bruce Power requested a postponement of the transportation in order to be able to carry out an extensive information program. The transportation date has not been decided. The delay will not affect capacity utilization in 2011.

United Kingdom

Sales amounted to SEK 23.5 million (26.2). Operating loss amounted to SEK –3.2 million (–3.7).

The increasing market activity noted in the fourth quarter of 2010 strengthened in the first quarter of 2011. The inflow of orders improved, both in the consulting operations and the metal recycling facility, MRF. Several factors of uncertainty in the market have been removed. This mainly applies to the budget situation for the central government funded Nuclear Decommissioning Authority (NDA), which means that programs financed via the NDA are gradually starting up.

Germany

Sales amounted to SEK 85.4 million (101.9). Operating profit amounted to SEK 2.2 million (5.5). The main explanation for the lower sales and lower operating profit is that in 2010 a major decommissioning project was completed. In addition the power plants' annual service and maintenance outages will start later in the current year, which has led to lower capacity utilization in the first quarter. The operating margin for the first quarter was 2.5 per cent (5.4).

The German market was characterized by a normal level of activity and capacity utilization in all the segment's operational areas. The annual refueling and maintenance outages at the German nuclear power reactors started at the end of the first quarter and are planned to continue to a varying extent until the end of October. The order situation in the segment is good.

In response to the natural disaster in Japan, the German government decided to temporarily shut down a number of the oldest reactors for a three-month period. It cannot be ruled out that the decision to shut down will affect the refueling and maintenance outages and hence capacity utilization.

USA

Sales amounted to SEK 60.4 million (87.5). Operating profit amounted to SEK 3.0 million (5.3). The operating margin for the first quarter was 5.0 per cent (6.0).

Capacity utilization at the Erwin facility was good, but did not achieve the unusually high level of 2010. Capacity utilization at the facility is linked to the service and maintenance outages and varies from quarter to quarter and year to year.

Capacity utilization at the facility for treatment of metallic and organic waste in Memphis was unchanged compared with the first quarter of 2010. Forward planning in the market continues to be short-term.

The consulting operations, to which Studsvik's joint venture THOR Treatment Technologies also belongs, developed somewhat better than in the previous year.

Global Services

Sales amounted to SEK 81.7 million (77.9). Operating profit amounted to SEK 11.2 million (12.1). The figure includes value changes in foreign exchange contracts of SEK 0.5 million (0). The operating margin for the first quarter, excluding these effects, was 13.1 per cent (15.6).

Materials testing and consulting services continued to develop well and the order book is sound. Sales were somewhat lower for the software operations in the first quarter compared with the previous year.

Investments

The Group's investments in the first quarter amounted to SEK 14.7 million (5.5).

Cash flow

Cash flow from operating activities before working capital changes was SEK 11.7 million (27.7). Working capital decreased by SEK 27.9 million (1.0).

Cash flow from operating activities after investments in the first quarter was SEK 25.3 million (19.0).

Financial position and liquidity

Cash and cash equivalents, including current investments, amounted to SEK 77.2 million (79.6).

Equity amounted to SEK 503.6 million (541.9) and the equity/ assets ratio was 37.3 per cent (37.4).

The interest-bearing liabilities have been reduced considerably by repayment and were SEK 244.4 million (350.6). The Group's total borrowing was conducted entirely in foreign currencies through investments and business acquisitions in the USA, Germany and the UK. Exchange rate effects on translation of interest-bearing liabilities to Swedish kronor amounted to SEK –13.5 million (–7.0).

Personnel

The average number of employees was 1,151 (1,144).

Parent company

Parent company operations comprise the co-ordination of tasks for the Group and assets mainly consist of shares in subsidiaries. The parent company's sales in the first quarter amounted to SEK 2.6 million (2.6). The operating loss for the first quarter amounted to SEK –7.8 million (–6.6). Loss after financial items amounted to SEK –6.4 million (–6.3).

Cash and cash equivalents amounted to SEK 37.4 million (36.6) and interest-bearing liabilities to SEK 111.6 million (191.1).

Significant post balance sheet events

On April 15 it was announced that President and CEO Magnus Groth will take up a new position at SCA on a date to be decided later. The process of finding a successor has been started.

Risks and uncertainties

Studsvik operates in an international, competitive market and is thereby exposed to both business and financial risks and uncertainties.

The business uncertainties include the fact that Studsvik and Studsvik's customers handle radioactive material and waste, which requires legal or regulatory licensing. Licensing is required for production facilities, but also for individual activities such as transport and transfer of material. This means that the operations of Studsvik and Studsvik's customers are exposed to delays in these licensing processes, or the withdrawal of licenses, which may result in shifts in delivery and production plans.

In all countries storage and final disposal of nuclear waste are subject to a strict regulatory framework, which for example stipulates criteria that the waste must meet in physical and chemical terms when it is sent for final disposal. Changes in this regulatory framework could mean that the business competitiveness of some of Studsvik's services would be changed.

Issues concerning nuclear technology may be subject to various expressions of opinion and debate. In such a context it cannot be ruled out that opinion may emerge on matters that directly or indirectly alter Studsvik's scope of business action.

The financial risks and uncertainties mainly include fluctuations in exchange rates and interest rates, and the company's ability to uphold contracts for withdrawable lines of credit. The financial risks also include counterparty risk, i.e. that the Group can be exposed to losses due to counterparty insolvency.

An overall analysis of the Group's risks and how they are dealt with is given in the Annual Report for 2010, which is available on the company's website.

Apart from these risks, no further significant risks are estimated to have arisen.

Outlook

The need for electricity is increasing globally and electricity production from nuclear power will increase. New nuclear power capacity is being planned and built in many countries, in parallel with the modernization and output increase of nuclear power plants in several of the countries where Studsvik operates. The impact on the market of the natural disaster in Japan may in the short term lead to increased demand for qualified consulting services in special niches. At the same time, in the short term it cannot be ruled out that some orders will be postponed. This assessment applies mainly to Japan and Germany. Decommissioning of nuclear facilities is continuing and is expected to continue by and large at an unchanged rate.

Accounting policies

Studsvik AB applies International Financial Reporting Standards as adopted by the European Union. Material accounting policies and valuation principles are in accordance with those of the annual accounts for the financial year ended December 31, 2010. This interim report was prepared in accordance with IAS 34 and the Annual Accounts Act. The interim report for the parent company was prepared in accordance with the Annual Accounts Act and the Swedish Financial Reporting Board recommendation RFR 2 Accounting for legal entities.

Stockholm, April 26, 2011

On behalf of the Board of Directors

Magnus Groth President

Time schedule for financial information

Interim Report January–June 2011	July 20, 2011
Interim Report January–September 2011	October 27, 2011
Year-end Report 2011	February 2012

This report has not been reviewed by the company's auditors.

For further information please contact

Magnus Groth, President and Chief Executive Officer, +46 155 22 10 86 or Jerry Ericsson, Chief Financial Officer, +46 155 22 10 32.

The interim report will be presented at a conference call to be held in English on April 26, at 14:30 CET. Further information for those interested in participating is available at www.studsvik.se.

Group statement of comprehensive income

Amounts in SEK million	January–	January–
	March 2011	March 2010	Full year 2010
Net sales	297.2	345.8	1 344.1
Cost of services sold	–232.3	–257.6	–1 027.2
Gross profit	64.9	88.2	316.9
Other operating income	7.5	6.2	3.3
Selling and marketing expenses	–11.6	–13.3	–52.8
Administrative expenses	–44.0	–46.5	–186.6
Research and development costs	–6.7	–12.8	–40.3
Share in non-controlling interest	2.3	1.4	7.3
Other operating expenses	–3.7	0.0	–14.4
Operating profit	8.7	23.2	33.4
Financial income	8.2	2.1	3.8
Financial expenses	–13.4	–7.8	–22.9
Profit after financial items	3.5	17.5	14.3
Income tax	–2.6	–4.8	–10.3
Profit for the period	0.9	12.7	4.0
Other comprehensive income
Translation differences on foreign subsidiaries	–20.3	–5.0	–28.3
Cash flow hedges	3.0	–9.5	5.3
Income tax on items recognized in other comprehensive income	–0.8	2.5	–1.4
Other comprehensive income for the period, net after tax	–18.1	–12.0	–24.4
Total comprehensive income for the period	–17.2	0.7	–20.4
Income for the period attributable to
Parent company's shareholders	0.9	12.7	4.0
Non-controlling interest	-	-	-
Total comprehensive income attributable to
Parent company's shareholders	–17.2	0.7	–20.4
Non-controlling interest	0.0	0.0	0.0
Earnings per share calculated on income attributable to
the parent company's shareholders during the period, SEK
Before dilution	0.11	1.55	0.49
After dilution	0.11	1.55	0.49

Group statement of financial position

Amounts in SEK million

	March 2011	March 2010	December 2010
Assets
Goodwill	298.2	335.0	313.4
Other intangible non-current assets	33.8	43.9	37.3
Property. plant and equipment	469.1	510.7	490.1
Financial non-current assets	164.8	159.0	173.8
Total non-current assets	965.9	1,048.6	1,014.6
Inventories	17.6	25.1	19.5
Trade receivables	206.0	219.1	239.7
Other current receivables	83.5	77.3	84.8
Liquid assets	77.2	79.6	68.4
Total current assets	384.3	401.1	412.4
Total assets	1,350.2	1,449.7	1,427.0
Equity and liabilities
Equity attributable to parent company's shareholders	503.3	541.6	520.5
Non-controlling interest	0.3	0.3	0.3
Borrowings	125.4	253.3	146.0
Provisions	249.5	173.9	259.4
Other non-current liabilities	13.3	11.9	13.6
Total non-current liabilities	388.2	439.1	419.0
Trade payables	66.5	70.2	85.8
Borrowings	119.0	97.3	129.9
Other current liabilities	272.9	301.2	271.5
Total current liabilities	458.4	468.7	487.2
Total equity and liabilities	1,350.2	1,449.7	1,427.0
Pledged assets	111.2	157.5	120.3
Contingent liabilities	130.7	81.6	139.3

Changes in equity

Amounts in SEK million
		Other			attributable to the parent	Non
	Share	contributed		Retained	company's	controlling
	capital	capital	Reserves	earnings	shareholders	interest	Total equity
Opening balance at January 1, 2010	8.2	225.3	22.8	284.6	540.9	0.3	541.2
Total comprehensive income for the period	-	-	–24.4	4.0	–20.4	-	–20.4
Closing balance at December 31, 2010	8.2	225.3	–1.6	288.6	520.5	0.3	520.8
Opening balance at January 1, 2011	8.2	225.3	–1.6	288.6	520.5	0.3	520.8
Total comprehensive income for the period	-	-	–18.1	0.9	–17.2	-	–17.2
Closing balance at March 31, 2011	8.2	225.3	–19.7	289.5	503.3	0.3	503.6

Statement of cash flow

Amounts in SEK million	January–March	January–March
	2011	2010	Full year 2010
Operating activities
Operating profit	8.7	23.2	33.4
Depreciation	15.8	17.0	68.6
Adjustment for non-cash items	–1.4	–1.8	4.8
	23.1	38.4	106.8
Financial items. net	–3.5	–4.1	–15.7
Income tax paid	–7.9	–6.6	–12.3
Cash flow from operating activities before changes
in working capital	11.7	27.7	78.8
Changes in working capital	27.9	1.0	28.7
Cash flow from operating activities	39.6	28.7	107.5
Investing activities
Investments	–14.7	–5.5	–25.6
Other changes from investing activities	0.4	–4.2	–15.9
Cash flow from investing activities	–14.3	–9.7	–41.5
Cash flow from operating activities after invest
ments and other changes from investing activities	25.3	19.0	66.0
Financing activities
Change in borrowings	–16.7	–12.2	–68.7
Dividend to shareholders	-	-	-
Cash flow from investing activities	–16.7	–12.2	–68.7
Changes in liquid assets	8.6	6.8	–2.7
Liquid assets at the beginning of the year	68.4	74.7	74.7
Translation difference in liquid assets	0.2	–1.9	–3.6
Liquid assets at the end of the period	77.2	79.6	68.4

Financial ratios for the Group

Amounts in SEK million	January–March	January–March
	2011	2010	Full year 2010
Operating profit
Operating profit before depreciation	24.5	40.2	102.1
Margins
Operating margin before depreciation, %	8.3	11.6	7.6
Operating margin, %	2.9	6.7	2.5
Profit margin, %	1.2	5.1	1.1
Profitability
Return on operating capital, %	5.0	11.2	4.3
Return on capital employed, %	8.7	11.2	4.4
Return on equity, %	0.7	9.4	0.8
Capital structure
Operating capital	670.7	813.0	729.3
Capital employed	748.0	892.6	797.7
Equity	503.6	541.9	520.8
Interest-bearing net debt	167.2	271.0	208.5
Net debt-equity ratio	0.3	0.5	0.4
Interest cover ratio	1.3	3.2	1.6
Equity/assets ratio, %	37.3	37.4	36.5
Cash flow
Self financing ratio	2.9	2.1	2.1
Investments	14.7	5.5	25.6
Employees
Average number of employees	1,151	1,144	1,169
Net sales per employee	1.0	1.2	1.1

Data per share	January–March	January–March
	2011	2010	Full year 2010
Number of shares at the end of the period	8,218,611	8,218,611	8,218,611
Average number of shares	8,218,611	8,218,611	8,218,611
Earnings per share before dilution, SEK	0.11	1.55	0.49
Earnings per share after dilution, SEK	0.11	1.55	0.49
Equity per share, SEK	61.24	65.91	63.37

Net sales per geographical segment

Amounts in SEK million	January–March	January–March
	2011	2010	Full year 2010
Sweden	39.2	71.3	240.8
Europe, excluding Sweden	158.0	155.9	724.4
North America	92.7	111.0	353.7
Asia	7.3	7.6	25.2
Other markets	-	-	0.0
Total	297.2	345.8	1,344.1

Quarterly review

Amounts in SEK million	2009				2010				2011
	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1
Net sales	277.0	315.8	275.0	348.5	345.8	328.1	295.3	374.9	297.2
Operating expenses	–298.2	–354.9	–282.8	–310.4	–322.6	–313.7	–304.4	–341.2	–288.5
Operating profit	–21.2	–39.1	–7.8	38.1	23.2	–14.4	–9.1	33.7	8.7
Financial items. net	–5.4	–6.9	–5.5	–1.9	–5.7	–3.2	–6.6	–3.6	–5.2
Profit after financial items	–26.6	–46.0	–13.3	36.2	17.5	–17.6	–15.7	30.1	3.5

Financial data per segment

Amounts in SEK million		United			Global		Elimina
January–March 2011	Sweden	Kingdom	Germany	USA	Services	Other	tions	Group
External sales revenue	36.5	23.5	85.1	60.4	81.6	10.1	-	297.2
Revenue from segment	2.3	-	0.3	-	0.1	2.9	–5.6	0.0
Operating profit	4.8	–3.2	2.2	3.0	11.2	–9.3	-	8.7
Assets	152.5	192.9	244.8	549.1	157.9	266.2	–213.2	1,350.2
Liabilities	129.4	89.3	174.6	353.8	104.8	207.9	–213.2	846.6
Investments	6.3	0.1	0.2	0.2	7.3	0.6	-	14.7
Depreciation/amortization	2.9	1.4	0.8	8.2	1.3	1.2	-	15.8
Average number of employees	90	64	654	107	161	75	-	1,151
		United			Global		Elimina
January–March 2010	Sweden	Kingdom	Germany	USA	Services	Other	tions	Group
External sales revenue	38.7	26.2	101.5	87.5	77.8	14.1	-	345.8
Revenue from segment	0.9	-	0.4	-	0.1	2.1	–3.5	0.0
Operating profit	10.7	–3.7	5.5	5.3	12.1	–6.7	-	23.2
Assets	160.3	196.1	269.1	649.1	175.9	420.0	–420.8	1,449.7
Liabilities	117.3	169.4	190.0	411.4	103.7	336.8	–420.8	907.8
Investments	1.6	0.3	0.4	1.6	1.0	0.6	-	5.5
Depreciation/amortization	2.6	1.6	1.0	9.0	1.4	1.4	-	17.0
Average number of employees	92	64	650	100	147	91	-	1,144
		United			Global		Elimina
Full year 2011	Sweden	Kingdom	Germany	USA	Services	Other	tions	Group
External sales revenue	175.7	80.5	460.0	272.0	296.3	59.6	-	1,344.1
Revenue from segment	4.2	-	1.5	-	0.4	8.1	–14.2	0.0
Operating profit	19.9	–24.2	28.8	1.4	33.1	–25.6	-	33.4
Assets	129.3	182.3	254.3	608.9	187.1	390.3	–325.2	1,427.0
Liabilities	125.6	154.6	184.8	398.5	139.6	228.3	–325.2	906.2
Investments	8.4	1.1	1.8	3.5	9.2	1.6	-	25.6
Depreciation/amortization	11.1	6.0	4.9	35.5	5.9	5.2	-	68.6
Average number of employees	92	64	661	107	153	92	-	1,169

Parent company income statement

Amounts in SEK million	January–March	January–March
	2011	2010	Full year 2010
Net sales	2.6	2.6	10.5
Cost of services sold	–0.5	–0.8	–3.1
Gross profit	2.1	1.8	7.4
Other operating costs	–9.9	–8.4	–33.0
Operating profit	–7.8	–6.6	–25.6
Dividends from subsidiaries	-	-	21.4
Financial net	1.4	0.3	1.7
Profit before tax	–6.4	–6.3	–2.5
Appropriations	-	-	-
Income tax	1.6	1.6	6.8
Profit for the period	–4.8	–4.7	4.3

Parent company balance sheet

Amounts in SEK million
	March 2011	March 2010	December 2010
Assets
Property plant and equipment	0.1	0.3	0.1
Financial non-current assets	1,094.5	1,107.8	1,104.2
Total non-current assets	1,094.6	1,108.1	1,104.3
Current assets	9.6	45.1	38.1
Liquid assets	37.4	36.6	43.2
Total current assets	47.0	81.7	81.3
Total assets	1,141.6	1,189.8	1,185.6
Equity and liabilities
Equity	878.5	852.1	883.2
Untaxed reserves	-	-	-
Provisions	-	-	-
Non-current liabilities	87.7	173.8	89.8
Current liabilities	175.4	163.9	212.6
Total liabilities	263.1	337.7	302.4
Total equity and liabilities	1,141.6	1,189.8	1,185.6

Major shareholders, March 31, 2011

Number of shares	Share, %
1,769,552	21.5
1,283,492	15.6
680,105	8.3
348,098	4.2
199,800	2.4
182,651	2.2
164,532	2.0
154,252	1.9
136,730	1.7
131,246	1.6
5,050,458	61.4
3,168,153	38.6
8,218,611	100.0

The Studsvik share

In the first quarter the share price varied between a high of SEK 74 on January 1 and a low of SEK 64 on March 2. The opening price was SEK 73 at the beginning of the year and the closing price on March 31 was SEK 68.75. In the first quarter 0.928 million shares were traded.

Facts about Studsvik

Studsvik offers a range of advanced technical services to the international nuclear power industry in such areas as waste treatment, decommissioning. engineering & services, and operating efficiency. The company has 60 years experience of nuclear technology and radiological services. Studsvik is a leading supplier on a rapidly expanding market. The business is conducted through five segments: Sweden, United Kingdom, Germany, USA and Global Services. Studsvik has 1,200 employees in 8 countries and the company's shares are listed on the NASDAQ OMX Stockholm.

This report is a translation of the Swedish statutory report. In the event of any discrepancies between this document and the Swedish original. the latter shall govern. The content of this interim report may not, in whole or part. be reproduced or stored in a machine-readable medium without the previous permission of Studsvik AB (publ).

Studsvik AB

P.O. Box 556, SE-611 10 Nyköping Tel +46 155 22 10 00 Fax +46 155 26 30 00 E-mail studsvik@studsvik.se www.studsvik.se