Studsvik — Interim / Quarterly Report 2012

Apr 26, 2012

Interim Report January–March 2012

• • Sales amounted to SEK 322.7 million (297.2).
• • The operating profit decreased to SEK –9.7 million (8.7).
• • Earnings improved in the UK, which reported a profit. Other segments reported lower operating profit than the previous year.
• • Cash flow after investments amounted to SEK 11.7 million (24.9).
• • Net interest-bearing debt decreased to SEK 91.0 million (167.2).

	January–March 2012	January–March 2011	Full year 2011
Sales, SEK million	322.7	297.2	1,200.7
Operating profit, SEK million	–9.7	8.7	53.6
Profit after tax, SEK million	–14.4	0.9	22.7
Cash flow from operating activities, SEK million	28.6	39.6	151.1
Cash flow after investments, SEK million	11.7	24.9	95.7
Profit per share after tax, SEK	–1.76	0.11	2.77
Net debt, SEK million	91.0	167.2	95.6
Equity per share, SEK	63.82	61.24	66.77
Equity/assets ratio, %	37.4	37.3	37.7

Sales

Sales amounted to SEK 322.7 million (297.2), an increase of 6.9 per cent in local currencies. Sales in local currencies increased in Sweden, the United Kingdom and the USA, while they decreased in Germany and Global Services.

Profit

The operating result for the first quarter was SEK –9.7 million (8.7). The operating result increased in the UK, which reported a profit after a number of loss quarters. The other segments reported lower operating profit than the previous year. Foreign exchange effects had an impact of SEK 0.5 million (0.6) on the Group's operating result for the first quarter.

The operating margin adjusted for foreign exchange effects deteriorated and was –3.2 (3.0) per cent for the first quarter. Net financial income improved to SEK –3.0 million (–5.2). Taxes were SEK –1.7 million (–2.6) and the net profit was SEK –14.4 million (0.9).

Sweden

Sales amounted to SEK 40.9 million (38.8). Operating profit amounted to SEK 2.4 million (4.8). The figure includes value changes in foreign exchange contracts of SEK 0.1 million (1.0). Excluding these effects, the operating margin amounted to 5.6 (9.8) per cent.

During the quarter the metal recycling facility was not effectively utilized. The volume of easily processed material that can go directly to melting was low, while material in the production line for large components required extensive processing. All in all, this means decreased profitability in this part of the operations. After the reporting date five heat exchangers arrived from the UK. The first of them went into production in April, which means a normalization of capacity utilization and profitability. Capacity utilization in the incineration facility was high. Production and profitability increased compared with the previous year. Combustible material from Germany, which should have arrived in the fourth quarter of last year, arrived in the first quarter. The order book for the incineration operations is good, creating sound possibilities of continued high capacity utilization and good profitability.

United Kingdom

Sales increased to SEK 56.7 million (23.5) and the operating profit improved to SEK 2.7 million (–3.2). The operating margin was 4.8 (–13.5) per cent.

Capacity utilization was high in the metal recycling facility (MRF). Production doubled compared with the previous year and reached 325 tonnes in the first quarter. The production increase was made possible by an improved order situation and the introduction of a second shift from January. During the quarter five heat exchangers, each weighing more than 300 tonnes, were transported from the disused Berkeley nuclear power plant. The heat exchangers are to be treated in Sweden. The consulting operations were well utilized. The order book is sound for both the MRF and the consulting operations, which provides scope for a continued high level of capacity utilization in both operational areas.

Germany

Sales amounted to SEK 76.7 million (85.4). The operating loss amounted to SEK –2.9 million (2.2). The main part of the loss refers to the French operations. The operating margin amounted to –3.8 (2.5) per cent.

The German market for service and maintenance work decreased when eight reactors were taken out of operation in March 2011. Both customers and suppliers are still adapting to the new market situation. An effect of this is that orders that were placed were of short duration. The lower sales figure in the first quarter was a result of there being no reactor refueling and maintenance outages. These outages are normally planned for the second and third quarters, which is also the case in 2012. In 2011 refueling and maintenance was carried out on a number of reactors in the first quarter. Service and maintenance staff numbers are gradually being adapted to the new market situation. The order book is growing, which enables satisfactory capacity utilization when refueling and maintenance outages start in the second quarter. Engineering and decommissioning operations have been strengthened in Germany, the Netherlands, Switzerland and Belgium.

USA

Sales amounted to SEK 71.7 million (60.4). The operating loss amounted to SEK –11.5 million (3.0). The operating margin for the first quarter amounted to –16.0 (5.0) per cent.

In Erwin the new business model is gradually being introduced. It was established as part of Studsvik's SempraSafe joint venture. The business model means that in the long term Erwin will have increased production volumes and higher sales but lower margins. The new business model is expected to give more even capacity utilization and earnings when it is fully implemented. Treated volumes of low and intermediate level waste during the quarter were on the whole at a somewhat lower level than in the previous year and about half of the volume came from the new business model. Treated volumes in Memphis fell by about 50 per cent in comparison with the previous year. The decrease is due to a combination of a generally slow market and the fact that several power plants are not carrying out waste transportation in parallel with preparing the annual refueling and maintenance outage. The order book is short-term in all operational areas. The market picture is unchanged as regards size and competitors. Forward planning by customers continues to be short term and the order volume and order structure vary considerably between quarters. This is normally evened out over the year.

Global Services

Sales amounted to SEK 71.1 million (81.7). Operating profit amounted to SEK 4.7 million (11.2). The figure includes value changes in foreign exchange contracts of SEK 0.7 million (0.5). The operating margin, excluding these effects, was 5.6 (13.1) per cent.

In the first quarter a major planned overhaul of the Hot Cell laboratory was carried out, testing reactor fuel and reactor material. This explains the entire sales and earnings difference compared with the previous year. The laboratory is in operation again. The order book is good, making a rapid return to normal capacity utilization possible. The software operations developed better than in the previous year in terms of both sales and earnings. In this area too there is a sound order book.

Investments

The Group's investments amounted to SEK 16.9 million (14.7). The increased investment refers mainly to a pyrolysis facility in Sweden.

Cash flow

Cash flow from operating activities before working capital changes amounted to SEK –1.5 million (11.7). Working capital decreased by SEK 30.1 million (27.9).

Cash flow from operating activities after investments was SEK 11.7 million (24.9).

Financial position and liquidity

Cash and cash equivalents, including current investments, amounted to SEK 115.9 million (77.2). Equity amounted to SEK 524.8 million (503.6) and the equity/assets ratio was 37.4 (37.3) per cent.

The interest-bearing liabilities have been reduced by repayment and were SEK 206.9 million (244.4). The Group's total borrowing was conducted entirely in foreign currencies through investments and business acquisitions in the USA, Germany and the UK.

The net interest-bearing debt decreased to SEK 91.0 million, a decrease from the beginning of the year of SEK 4.6 million and, compared with the first quarter of the previous year, a decrease of SEK 77.2 million.

Personnel

The average number of employees was 1,106 (1,151). The decrease mainly refers to Germany.

Parent company

Parent company operations comprise the co-ordination of tasks for the Group and assets mainly consist of shares in subsidiaries. Parent company sales in the first quarter amounted to SEK 3.0 million (2.6). The operating loss for the first quarter amounted to SEK –6.1 million (–7.8). The loss after financial items amounted to SEK –5.8 million (–6.4).

Cash and cash equivalents amounted to SEK 21.7 million (37.4) and interest-bearing liabilities to SEK 90.7 million (111.6).

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 also 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.

An overall analysis of the Group's risks and how they are dealt with is given in the Annual Report, which is available on the company's website. Apart from these risks, no further significant risks are considered 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. In Germany a decision has been made to phase out nuclear power by 2022, which will reduce demand for service and maintenance. The German facilities taken out of operation in 2011 will be subject to decommissioning. When this process will start is as yet not clear. Decommissioning of nuclear facilities in other markets is expected to expand substantially in the long term.

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, 2011. 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, 2012

On behalf of the Board of Dirctors

Anders Jackson President

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

Time schedule for financial information

Interim Report January–June 2012	July 20, 2012
Interim Report January–September 2012	October 26, 2012
Year-end Report January–December 2012	February 2013

For further information please contact

Anders Jackson, President and Chief Executive Officer, +46 155 22 10 82 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–March 2012	January–March 2011	Full year 2011
Net sales	322.7	297.2	1,200.7
Cost of services sold	–270.0	–232.3	–924.8
Gross profit	52.7	64.9	275.9
Other operating income	2.3	7.5	21.8
Selling and marketing expenses	–12.5	–11.6	–46.6
Administrative expenses	–45.4	–44.0	–171.9
Research and development costs	–6.1	–6.7	–28.4
Share in non-controlling interest	0.9	2.3	7.6
Other operating expenses	–1.6	–3.7	–4.8
Operating profit	–9.7	8.7	53.6
Financial income	3.8	8.2	15.1
Financial expenses	–6.8	–13.4	–28.0
Profit after financial items	–12.7	3.5	40.7
Income tax	–1.7	–2.6	–18.0
Profit for the period	–14.4	0.9	22.7
Other comprehensive income
Translation differences on foreign subsidiaries	–12.2	–20.3	6.6
Cash flow hedges	3.5	3.0	–1.8
Income tax on items recognized in other comprehensive income	–0.9	–0.8	0.5
Other comprehensive income for the period, net after tax	–9.6	–18.1	5.3
Total comprehensive income for the period	–24.0	–17.2	28.0
Income for the period attributable to
Parent company's shareholders	–14.4	0.9	22.7
Non-controlling interest	–	–	–
Total comprehensive income attributable to
Parent company's shareholders	–24.0	–17.2	28.0
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	–1.76	0.11	2.77
After dilution	–1.76	0.11	2.77

Group statement of financial position

Amounts in SEK million
------------------------	--	--	--	--

		December
		2011
306.5	298.2	315.9
32.4	33.8	34.8
474.9	469.1	481.1
175.0	164.8	169.2
988.8	965.9	1,001.0
16.2	17.6	14.8
208.2	206.0	223.0
75.7	83.5	95.1
115.9	77.2	122.1
416.0	384.3	455.0
1,404.8	1,350.2	1,456.0
524.5	503.3	548.5
0.3	0.3	0.3
83.2	125.4	92.1
283.7	249.5	283.1
39.7	13.3	39.1
406.6	388.2	414.3
78.4	66.5	84.2
123.7	119.0	125.5
271.3	272.9	283.2
473.4	458.4	492.9
1,404.8	1,350.2	1,456.0
170.2	111.2	174.4
144.8	130.7	154.0
	March 2012	March 2011

Changes in equity

Amounts in SEK million
		Other			to the parent	Non
	Share capital	contributed capital	Reserves	Retained earnings	company's shareholders	controlling interest	Total equity
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	-	-	5.3	22.7	28.0	–	28.0
Closing balance at December 31, 2011	8.2	225.3	3.7	311.3	548.5	0.3	548.8
Opening balance at January 1, 2012	8.2	225.3	3.7	311.3	548.5	0.3	548.8
Total comprehensive income for the period	-	–	–9.6	–14.4	–24.0	–	–24.0
Closing balance at March 31, 2012	8.2	225.3	–5.9	296.9	524.5	0.3	524.8

Statement of cash flow

Amounts in SEK million	January–March	January–March
	2012	2011	Full year 2011
Operating activities
Operating profit	–9.7	8.7	53.6
Depreciation	15.5	15.8	62.3
Adjustment for non-cash items	5.1	–1.4	21.9
	10.9	23.1	137.8
Financial items. net	–3.3	–3.5	–13.0
Income tax paid	–9.1	–7.9	–12.0
Cash flow from operating activities before changes
in working capital	–1.5	11.7	112.8
Changes in working capital	30.1	27.9	38.3
Cash flow from operating activities	28.6	39.6	151.1
Investing activities
Investments	–16.9	–14.7	–55.4
Other changes from investing activities	–12.0	0.4	17.8
Cash flow from investing activities	–28.9	–14.3	–37.6
Cash flow from operating activities after invest
ments and other changes from investing activities	–0.3	25.3	113.5
Financing activities
Change in borrowings	–3.9	–16.7	–59.3
Dividend to shareholders	–	–	–
Cash flow from investing activities	–3.9	–16.7	–59.3
Changes in liquid assets	–4.2	8.6	54.2
Liquid assets at the beginning of the year	122.1	68.4	68.4
Translation difference in liquid assets	–2.0	0.2	–0.5
Liquid assets at the end of the period	115.9	77.2	122.1

Financial ratios for the Group

Amounts in SEK million	January–March	January–March
	2012	2011	Full year 2011
Operating profit
Operating profit before depreciation	5.9	24.5	115.9
Margins
Operating margin before depreciation, %	1.8	8.3	9.7
Operating margin, %	neg	2.9	4.5
Profit margin, %	neg	1.2	3.4
Profitability
Return on operating capital, %	neg	5.0	8.2
Return on capital employed, %	neg	8.7	9.1
Return on equity, %	neg	0.7	4.3
Capital structure
Operating capital	615.8	670.7	645.4
Capital employed	731.7	748.0	767.5
Equity	524.8	503.6	548.8
Interest-bearing net debt	91.0	167.2	95.6
Net debt-equity ratio	0.2	0.3	0.2
Interest cover ratio	neg	1.3	2.5
Equity/assets ratio, %	37.4	37.3	37.7
Cash flow
Self financing ratio	1.0	2.9	2.6
Investments	16.9	14.7	55.4
Employees
Average number of employees	1,106	1,151	1,153
Net sales per employee	1.2	1.0	1.0

Data per share	January–March	January–March
	2012	2011	Full year 2011
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	–1.76	0.11	2.77
Earnings per share after dilution, SEK	–1.76	0.11	2.77
Equity per share, SEK	63.82	61.24	66.77

Net sales per geographical segment

Amounts in SEK million	January–March	January–March
	2012	2011	Full year 2011
Sweden	37.5	39.2	199.9
Europe, excluding Sweden	176.2	158.0	652.5
North America	87.2	92.7	321.2
Asia	21.8	7.3	27.1
Total	322.7	297.2	1,200.7

Quarterly review

Amounts in SEK million	2010				2011				2012
	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1
Net sales	345.8	328.1	295.3	374.9	297.2	290.0	252.8	360.7	322.7
Operating expenses	–322.6	–313.7	–304.4	–341.2	–288.5	–287.6	–262.9	–308.1	–332.4
Operating profit	23.2	–14.4	–9.1	33.7	8.7	2.4	–10.1	52.6	–9.7
Financial items. net	–5.7	–3.2	–6.6	–3.6	–5.2	–2.1	–3.2	–2.4	–3.0
Profit after financial items	17.5	–17.6	–15.7	30.1	3.5	0.3	–13.3	50.2	–12.7

Financial data per segment

Amounts in SEK million		United			Global		Elimina
January–March 2012	Sweden	Kingdom	Germany	USA	Services	Other	tions	Group
External sales revenue	37.4	56.7	76.4	71.7	71.0	9.5	–	322.7
Revenue from segment	3.5	–	0.3	–	0.1	3.1	–7.0	0.0
Operating profit	2.4	2.7	–2.9	–11.5	4.7	–5.1	–	–9.7
Assets	122.1	225.9	217.3	585.4	190.5	299.8	–236.2	1,404.8
Liabilities	139.5	125.7	158.6	385.6	112.9	193.9	–236.2	880.0
Investments	10.7	0.4	0.2	0.1	5.1	0.4	–	16.9
Depreciation/amortization	2.0	1.3	0.6	8.3	1.5	1.8	–	15.5
Average number of employees	95	83	598	104	155	71	–	1,106
		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
Full year 2011	Sweden	Kingdom	Germany	USA	Services	Other	tions	Group
External sales revenue	163.8	107.8	363.5	242.6	287.5	35.5	–	1,200.7
Revenue from segment	3.5	–	1.8	–	0.4	11.5	–17.2	0.0
Operating profit	19.8	–9.7	18.4	22.6	33.7	–31.2	–	53.6
Assets	172.8	207.0	227.9	606.7	195.7	299.8	–253.9	1,456.0
Liabilities	171.2	106.2	166.1	383.9	131.7	202.0	–253.9	907.2
Investments	26.1	1.6	1.3	7.4	17.5	1.5	–	55.4
Depreciation/amortization	11.2	5.0	2.9	32.7	5.9	4.6	–	62.3
Average number of employees	92	71	646	109	161	74	–	1,153

Parent company income statement

Amounts in SEK million	January–March	January–March
	2012	2011	Full year 2011
Net sales	3.0	2.6	10.9
Cost of services sold	–0.7	–0.5	–5.0
Gross profit	2.3	2.1	5.9
Other operating costs	–8.4	–9.9	–31.1
Operating profit	–6.1	–7.8	–25.2
Dividends from subsidiaries	–	–	–12.1
Financial net	0.3	1.4	3.1
Profit before tax	–5.8	–6.4	–34.2
Income tax	1.5	1.6	–0.6
Profit for the period	–4.3	–4.8	–34.8

Parent company balance sheet

Amounts in SEK million	March 2012	March 2011	December 2011
Property plant and equipment	0.0	0.1	–
Financial non-current assets	1,053.2	1,094.5	1,048.4
Total non-current assets	1,053.2	1,094.6	1,048.4
Current assets	36.7	9.6	28.5
Liquid assets	21.7	37.4	45.7
Total current assets	58.4	47.0	74.2
Total assets	1,111.6	1,141.6	1,122.6
Equity and liabilities
Equity	844.1	878.5	848.4
Non-current liabilities	68.8	87.7	73.5
Current liabilities	198.7	175.4	200.7
Total liabilities	267.5	263.1	274.2
Total equity and liabilities	1,111.6	1,141.6	1,122.6

Major shareholders, March 31, 2012

	Number of shares	Share, %
The Karinen family	1,769,552	21.5
Briban Invest AB	1,283,492	15.6
Credit Agricole Suisse SA	348,098	4.2
Avanza Pensionsförsäkring AB	236,723	2.9
Invus Investment AB	224,800	2.7
Nordnet Pensionsförsäkring AB	182,397	2.2
State Street Bank, Boston	158,918	2.0
Malte Edenius	150,000	1.8
HSBC Trinkahaus and Burkhardt AG	136,530	1.7
Blue Whale Ltd	131,246	1.6
Total ten largest shareholders – holdings	4,621,756	56.2
Other shareholders	3,596,855	43.8
Total	8,218,611	100.0

The Studsvik share

In the first quarter the share price varied between a high of SEK 49.50 on March 16 and a low of SEK 32.50 on January 2, 2012. The price was SEK 31.80 at the beginning of the year and the closing price on March 31 was SEK 47.80. In the first quarter 2.655 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 1,100 employees in 7 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, SWEDEN Telephone +46 155 22 10 00 Fax +46 155 26 30 00 E-mail studsvik@studsvik.se www.studsvik.se