INTERIM REPORT First quarter 2009

INTERIM REPORT First quarter 2009

First quarter 2009 (compared to corresponding period of previous year)
•	Net sales reduced by 42% to MSEK 916 (1,583) in the quarter. The volume
contraction was 50%. Demand was very weak on all markets, and Höganäs assesses
that significant inventory changes were made right through the value chain.
•	Operating income was a deficit of MSEK -111 (196) and income after tax was a
deficit of MSEK -90 (145). The income deterioration was caused by lower sales
volumes.
•	Earnings per share for the quarter were SEK -2.58 (4.15).
•	Cash flow from operating activities was MSEK 142 (197), for reasons including
actions taken to reduce working capital and thus counter the effect of the
negative operating income. 
•	In March, Höganäs, LKAB and StatoilHydro reached an agreement to conduct a
feasibility study for a new ironworks in Norway, to enable future CO2-neutral
DRI (direct-reduced iron) production. 
•	The timing of the recovery is still uncertain, even if Höganäs assesses that
the current severe downturn cannot be expected to persist for an extended
period.

(For tables, see attached PDF)

CEO's comments — first-quarter: De-stocking on a very weak market and new
initiatives in future green technology
In the early months of 2009, the market was as weak as feared.  Demand for
finished products made of our powder was very low.  Moreover, weak demand in
late-2008 meant that inventories were unusually high right through the value
chain at the beginning of the year.  This resulted in many customers closing
production down for long periods in the quarter, which exerted an exceptionally
harsh effect on Höganäs' sales volumes.  Against this background, I am pleased
that our action-plan meant that we were able to generate a positive cash flow
from operating activities in the period.  Meanwhile, I note how our continued
work on future technologies is continuing to generate results, through a
feasibility study for environmental DRI production that we have agreed to
conduct alongside LKAB and StatoilHydro.

Group progress

First quarter 2009
Net sales were MSEK 916 (1,583), a downturn of 42%, mainly due to sharp volume
contraction. Excluding the operation acquired from Kobelco in North America, the
reduction in net sales was 44%.  Net sales experienced a strong positive
influence from currency effects, of 25% due to depreciation of the SEK, and
price increases over and above changes in metal prices.  However, the effect of
changes in metal prices was negative, because market prices of the most
significant metals fell in 2008, resulting in lower metal price surcharges in
the first quarter 2009 than in the corresponding period of 2008.

Sales volumes reduced by 50% compared to the first quarter 2008, which excluding
the acquisition from Kobelco, equates to 53%.  Volumes fell sharply in all
regions.  The volume reduction on the corresponding month of the previous year
was over 50% in January and February, while March was notably better, mainly due
to the downturn in Asia being far less sharp than in the first two months.  In
March, sales volumes in Asia apart from Japan were comparable with the months of
January and February together.  Volumes in Japan were very low throughout the
first quarter.

The significant consumption downturn in the automotive industry, as in most
other sectors in late-2008, resulted in inventory levels being abnormally high
at last year-end.  This caused most customers around the world to make
production stoppages to adjust inventory levels in early-2009.  Accordingly, the
demand for Höganäs' products was very weak in the first quarter.  Some stimulus
measures, like scrapping premiums in Germany, France and Italy, and tax easings
and discounting on durable goods in Asia triggered a subsequent consumption
increase.  However this did not exert any effect on Höganäs' sales volumes until
the end of the quarter.

INCOME AND RETURNS
First quarter 2009
Gross income was MSEK 70 (326), with the negative variance mainly caused by a
very significant shortfall in the range of MSEK 340 due to lower sales volumes.
This also caused a lower rate of inventory turnover than normal, which in this
case, meant that relatively high metal costs were charged to income.  Earnings
from metal hedges were insignificant in the period, against MSEK -20 in the
first quarter of 2008, due to nickel and copper price rises being higher in that
period of the previous year.  Price increases, savings measures and more
favourable exchange rates than in 2008 exerted a positive income effect. 

Lower sales volumes resulted in very weak absorption of fixed costs, which also
put pressure on gross income in SEK/ton.
Other operating income and operating expenses were MSEK  -40 (6), which include
an earnings effect from currency forwards contracts of MSEK -63 (13) and
exchange rate differences of MSEK 21 (-10). The sharp depreciation of the SEK
caused a significant deficit on forward contracts, but also some upward
revaluation of foreign currency asset and liability positions. This re-valuation
generated positive exchange rate differences.

In year-on-year terms, the total currency effect on income, i.e. on gross income
and other operating items, is measured at MSEK 7.
Operating income was a deficit of MSEK -111 (196).  Operating margin for the
first quarter was a negative -12.1% (12.4).  The weak absorption of fixed costs
put pressure on operating margins and gross income per ton above.

Income before tax was a deficit of MSEK -119 (191).  Income after tax was a
deficit of MSEK -90 (145).

Return on capital employed
Return on capital employed for the past 12 months reduced to 5.4% (16.3). 
Losses in the two most recent quarters mean that the positive trend of returns
until the third quarter 2008 inclusive has been broken.  Moreover, the very
sharp depreciation of the SEK resulted in a marked upward revaluation of capital
employed. 


Progress of Höganäs' business areas

COMPONENTS
The Components business area, which represents some 70% of consolidated sales,
covers all powder that is refined into components.  Höganäs delivers high-grade
metal powder that is refined into components in finished, or semi-finished, form
by component producers.  In turn, they deliver their components through product
or system producers, or directly to OEMs (Original Equipment Manufacturers).

Sales
Net sales for the period were MSEK 604 (1,190), a 49% decrease on the first
quarter of the previous year. 
Price increases and currency effects had a positive impact on net sales, while
sales volumes reduced by 56%, or 59% excluding the acquisition from Kobelco in
North America.

Sales volumes were very weak across all regions. High inventory levels through
the value chain worldwide at the beginning of the year resulted in very low
sales in the period.

This means that increasing new car sales in some European countries resulting
from scrapping premiums have not yet exerted any appreciable effect on Höganäs'
sales.  In the period, Höganäs' customers focused on cash flow and cost-cutting
by shortening working-hours, temporary plant closures and insourcing production.
Moreover, all members of the value chain reduced their inventory levels, with
many changing their behaviour to place orders with shorter advance planning to
reduce their risk.

In North America, the production of components was at a very low level for the
same reason.

The North American market was also restrained by uncertainties associated with
the future of the major car producers.  Tax easings were introduced in South
America and parts of Asia in the period, which did have some effect.  In China,
the stimulus package included discounting on household appliance purchases,
which had implications including the demand for powder-based components for
compressor production increasing. March was a significantly better month than
January-February across most Asian countries.  However, a sharp reduction in
working-hours by customers in Japan resulted in low production rates and very
low purchasing volumes of powder throughout the first quarter.

Income
Operating income was a deficit of MSEK -91 (151) and operating margin was -15.1%
(12.7).
Lower sales volumes caused a very sizeable shortfall, while also implying very
weak absorption of fixed costs.  This resulted in a negative operating margin. 
Significant price increases (over and above changes in metal prices), savings
and more favourable exchange rates than 2008 mitigated the sharp volume
contraction only marginally.

CONSUMABLES
The Consumables business area, which represents some 30% of consolidated sales,
covers those powders used in processes like brazing, welding and surface
coatings, and in the chemical and metallurgical process industries.  Höganäs
customers include producers of welding materials, users of brazing and surface
coating technologies, and producers of food and feed supplements.

Sales
Net sales in the period were MSEK 312 (393), a 21% reduction on 2008. 

Volumes reduced by 29% compared to the first quarter of the previous year. 
Price increases and currency effects had a positive effect, while lower pricing
of alloy metals had a negative effect.

Sales volumes did not fall as much as in Components, because market progress was
not as weak and inventory levels in the value chain were lower.  Nor were
volumes exclusively weak across all regions.  Progress in China, Japan,
Southeast Asia and India remained positive through much of the first quarter due
to high sales of welding powder, oxygen absorbing products, carrier cores (for
printer toners) and hot bags.

For most customers, activity in Europe and the Americas remained very low, and
accordingly, sales were weaker. 

Income
Operating income was a deficit of MSEK -20 (45) and the operating margin was
-6.4% (11.5). The effect of volume reduction also overshadowed all other income
variance in Consumables. A lower rate of inventory turnover combined with
falling metal prices meant that relatively high metal costs were charged to
income.  On the other hand, the earnings from metal hedges were better than in
the first quarter 2008.  Price increases (over and above changes in metal
prices) were implemented, and exchange rates improved income in year-on-year
terms.  Savings were made by adapting production to prevailing demand
conditions, but this only compensated for low sales volumes to a certain extent.


Group highlights

FIRST QUARTER
Höganäs AB, LKAB and StatoilHydro conduct feasibility study for ironworks in
Norway
In March, Höganäs AB, LKAB and StatoilHydro reached an agreement to conduct a
feasibility study for a new ironworks outside Trondheim, Norway.  This project
will examine the possibility for future DRI (direct-reduced iron) production in
Norway.  This collaboration unites the parties' technological know-how with the
benefits of LKAB's iron ore pellets, Höganäs' usage and sale of metal products
and StatoilHydro's skills in energy generation and gas refining.  The intended
location of the works is close to the Tjeldbergodden industrial facility, south
of Trondheim, where there are good links to existing infrastructure such as an
incoming natural gas pipeline, methanol plant and harbour. One main reason for
using Tjeldbergodden is that CO2 emissions can be minimised by using natural
gas.  The ambition is to project manage the world's most CO2-neutral DRI plant —
an ironworks with the lowest CO2 emissions technologically possible. The study
is scheduled for completion in mid-2010.


Other financial information

FINANCIAL POSITION
The equity/assets ratio was 44.3% at the end of the period, against 42.6% at
year-end 2008. Shareholders' equity per share was SEK 69.64, against SEK 69.14
at the beginning of the financial year.

Consolidated financial net debt was MSEK 1,764 at the end of the period, up MSEK
21 since year-end due to exchange rate fluctuations. The net debt/equity ratio
at the end of the period was a multiple of 0.73 against 0.72 at the beginning of
the financial year.
Net financial income and expenses were MSEK -8 (-5). Interest costs increased
after the redemption procedure in June 2008, which was partly financed through
increased utilisation of credit facilities.  To some extent, this was offset by
lower interest rates compared to the first quarter 2008. 

Cash and cash equivalents were MSEK 213 against MSEK 220 at the beginning of the
financial year.  Unutilised credit facilities of MSEK 1,050 are additional. 

CASH FLOW
Cash flow from operating activities was MSEK 142 (197). The change in working
capital had a positive effect on income of MSEK 238 in the period. 

Financing activities had an MSEK -68 (-220) effect on cash flow.  Utilisation of
confirmed credit facilities was unchanged in the period.  Utilisation of
unconfirmed credits reduced.

INVESTMENTS, DEPRECIATION AND AMORTISATION
Consolidated net investments in fixed assets were MSEK 84 (38).  Depreciation
and amortisation of fixed assets was MSEK 73 (66).

HUMAN RESOURCES
There were 1,457 employees at the end of the period, against 1,524 at the
beginning of the year.

HIGHLIGHTS AFTER THE END OF THE REPORTING PERIOD
Sale of CO2 emission rights
In early April, Höganäs divested CO2 emission rights with a value of MSEK 40,
corresponding to the number of emission rights Höganäs now judges that it will
not need over the next three years.

SHARE CAPITAL
On 31 March 2009, Höganäs' share capital was unchanged at SEK 175,494,660
divided between a total of 35,098,932 class A and B shares, all with a nominal
value of SEK 5.00 per share.

RISKS AND UNCERTAINTY FACTORS
The group's and parent company's significant risk and uncertainty factors
include business risks in the form of high exposure to the automotive industry.
Considering global market conditions in the automotive industry, this risk is
highly significant. Financial risks, primarily currency risks and metal price
risks, are additional. No other significant risks are considered to have arisen
in addition to those reviewed in Höganäs' Annual Report 2008, with the risk
management section and Note 31 offering a detailed review of the group's and
parent company's risk exposure and risk management.

OUTLOOK
The outlook is unchanged compared to that reported in the Year-end Report on 5
February. The very severe reduction in demand in the fourth quarter 2008 has
continued in early 2009. Höganäs still judges that a market downturn of this
scale is not expected to persist for an extended period, but how long it will
take for a recovery to occur is uncertain. It appears likely that Asia will be
the first market where progress will turn. 

Metal prices and exchange rates can be expected to remain volatile, which may
have an effect on earnings performance. 
PARENT COMPANY 
Net sales and earnings
Parent company net sales were MSEK 376 (923), a 59% decrease. Sales to group
companies were MSEK 68 (408). Lower sales were mainly due to reduced sales
volumes.

Operating income in the period was a deficit of MSEK -31 (93). Parent company
income was negatively affected, mainly by a very substantial shortfall caused by
a reduction in sales volumes.

Financial position
Investments in fixed assets were MSEK 42 (27). Parent company cash and cash
equivalents were MSEK 26 at the end of the period, against MSEK 88 at the
beginning of the financial year. 

Significant transactions with related parties
The parent company exerts a controlling influence over its subsidiaries. The
supply of services and products between group companies is subject to business
terms and market prices. There were MSEK 68 (408) of sales of goods to related
parties, while purchases of goods from related parties were MSEK 10 (20).
Outstanding receivables from related parties were MSEK 1,640 (1,379) at the end
of the period, and liabilities to related parties were MSEK 571 (460). The
parent company had guarantees of MSEK 289 (189) in favour of subsidiaries. MSEK
19 (20) of dividends were received from subsidiaries.

ACCOUNTING PRINCIPLES
This Report has been prepared pursuant to IFRS (International Financial
Reporting Standards) as endorsed by the EU Commission for adoption in the EU. 

The Interim Report has been prepared pursuant to IAS 34, Interim Financial
Reporting, which is consistent with the stipulations of RR 31, Interim Reporting
for Groups (issued by Redovisningsrådet, the Swedish Financial Accounting
Standards Council). The accounting principles applied are unchanged compared to
the previous year. For a review of the group's accounting principles and
definitions of certain terms, the reader is referred to the accounting
principles section of the Annual Report for 2008. 

ANNUAL GENERAL MEETING
The AGM will be held at 3 p.m. on 27 April 2009 at HB-hallen, Höganäs, Sweden.
Proposals from the Board and the Nomination Committee for the AGM are available
at Höganäs' website, www.hoganas.com.

FINANCIAL INFORMATION
The AGM will be held on 27 April 2009 
Second-quarter Interim Report 2009, 17 July 2009
Third-quarter Interim Report 2009, 23 October 2009 

STREAMED PRESS CONFERENCE
Alrik Danielson, CEO, and Sven Lindskog, CFO, will present the interim report in
a conference call at 10:30 a.m. on 
22 April 2009.

The press conference will be streamed at: www.hoganas.com/Investor
Relations/Conference Call. It is open to journalists, analysts and investors. 
Participants are welcome to call on +44 (0)207 162 0125.

Alrik Danielson
CEO and President
Höganäs AB (publ)

Höganäs, Sweden, 22 April 2009

NB:
This information is mandatory for Höganäs to publish pursuant to the Swedish
Securities Act and/or the Swedish Financial Trading Act. The information was
submitted for publication at 9 a.m. on 22 April 2009. 






FOR MORE INFORMATION

Please contact:
Alrik Danielson, CEO and President, +46 (0)42 33 80 00
Sven Lindskog, Chief Financial Officer, +46 (0)42 33 80 00


Höganäs AB is the world's leading producer of iron and metal powders.  Building
on its clear vision of the possibilities of powder to improve efficiency, the
consumption of resources and environmental impact across a raft of segments, the
company has developed in-depth application skills.

Thus Höganäs can help create the automotive components, white goods, water and
exhaust treatment products of the future in collaboration with its customers. 
Founded in 1797, the company had sales of MSEK 6,103 in 2008, and is quoted on
NASDAQ OMX Stockholm's Mid Cap List.
For more information, visit our website: www.hoganas.com.