Interim financial report - 3rd quarter 2008

24.11.2008Announcement No. 20SUMMARY Effects of more difficult market conditions seen on several fronts With Group revenue in 3rd quarter 2008 of 3,528 mDKK (+ 5%), adjusted operatingincome (EBIT) of 272 mDKK (+10%) and Group net income before tax of 218 mDKK,earnings development compared with 3rd quarter 2007 was acceptable - but belowexpectations for the period. Overall, organic growth of 4% was realised in 3rdquarter 2008. The negative development that has taken place during 2008 has broughtsignificantly more difficult market conditions to a number of the markets inwhich NKT operates. As expected, this is negatively influencing earnings inboth NKT Cables and Nilfisk-Advance, but it is also creating opportunities torealise a number of desirable measures. The positive development of the past couple of years has made it difficult toimplement major structural measures without at the same time losing marketshares. The decline in the level of activity now makes it appropriate toaccelerate a number of the structural initiatives which the Group Managementhad planned for the current strategic period - initiatives whose purpose is toconsolidate and strengthen NKT's business segments for the future. At NKT Cables, a very sharp slowdown has been registered in the level ofactivity in the low voltage cable market. A slowdown sharper than anticipated,and with a negative impact on earnings. This development has led to fallingsales volumes and therefore increasing competition. The market for high voltagecables remains strong, but this is not sufficient to compensate for the fall inlow voltage sales volumes. The construction of the new factory in Cologne isproceeding to plan, and the factory is still expected to be ready forproduction in 2009. At Nilfisk-Advance, the 3rd quarter results are satisfactory, but here toodevelopments were characterised by declining market growth and rising pressureon earnings. This development will negatively influence rest of 2008. Despitecontinuing high raw material prices and lower capacity utilisation, grossprofit rose slightly. The first signs of future falling raw material priceshave appeared. The execution of structural and adjustment measures referred toin the 2nd quarter interim financial report is proceeding to plan, at a cost of31 mDKK in the 3rd quarter. At NKT Flexibles development continues to be positive, with another strongperformance in the 3rd quarter. Due to the negative developments in trading conditions the expectationspreviously declared for the NKT Group are no longer feasible. Forecast Groupnet earnings before tax and restructuring costs for 2008 have therefore beenadjusted from around 950 mDKK to around 775 mDKK. In order to tackle the more difficult market situation at NKT Cables it hasbeen decided to implement a series of restructuring measures aimed at furtheradjusting employee numbers and at the same time optimising the product range byphasing out certain types of items. Collectively these measures will in 2008result in implementation costs of around 75 mDKK with a negative impact onliquidity of 25 mDKK. The measures will positively influence earnings by around25 mDKK, with full effect from 2009. After taking into account this initiative and also the measures atNilfisk-Advance described in the 2nd quarter interim financial report, forecastGroup net earnings before tax for 2008 have been reduced with 250 mDKK toaround 650 mDKK, compared with around 900 mDKK initially predicted.