Interim report January - March 2012

First Quarter 2012

• Revenue growth of 37% Y-o-Y
• Sales revenue amounted to EUR 57.6m (42.1m)
• Operating profit amounted to EUR 1.2m (-0.3m)
• The Operating margin was 2.0% (-0.8%)
• EBITDA for the first quarter was EUR 1.5m (1.1m)
• The after-tax result amounted to EUR -0.5m (-0.7m)
• Cash flow from (used in) operating activities amounted to EUR 9.6m (-17.6m)
• Lars Corneliusson appointed President and CEO of Ferronordic Machines LLC

Note: Comparative figures in parenthesis related to the same period in 2011.

Ferronordic Machines’ CEO Lars Corneliusson comments:

Ferronordic Machines experienced strong growth in the first quarter of 2012 with the number of machines sold increasing almost 70% Y-o-Y to 294 units. The product mix however shifted somewhat towards smaller machines, e.g. backhoe loaders, resulting in a smaller increase in revenue of 37% to EUR 58 million. Revenue from machine sales increased 35%, from parts 30% and from service 35%. In addition, revenue from the rental business grew significantly. EBITDA for the quarter was EUR 1.5m, an increase with approximately 34% compared to Q1 2011. Cash flow from operating activities was solid, resulting in a decrease in net debt from EUR 63 million at the end of 2011 to EUR 56 million at the end of the quarter.

In the first quarter we have continued to reduce our inventory levels and improve the quality of our inventory. In total, the value of the inventory was reduced almost EUR 10 million. This is a result of a more centralized approach to inventory management as well as a close dialogue and improved logistics process with Volvo CE. In the first quarter we have also made significant efforts in consolidating our organization and making it more efficient in order to even better serve our large customer base.

The Company has also continued to grow throughout Russia, both in terms of number of outlets as well as employees. We have today 56 outlets throughout Russia compared to 53 in the beginning of the year. Number of employees has also increased, from 540 at the end of 2011 to 561 at the end of the quarter.

The lower revenue in Q1 2012 compared to Q4 2011 was expected. The first quarter of the year is traditionally the weakest quarter of the year due to the holiday period in January, the shorter month of February and extreme weather conditions in more or less the entire country.

The construction equipment market also grew significantly with the number of imported units almost doubling in quantity during the first two months of the year compared to the same period last year. Out of the main product lines the importation of Backhoe loaders increased by 117%, whereas Excavators enjoyed a somewhat smaller increase of 48%.

Despite the strong growth in our sales many customers have experienced a slowdown in governmental disbursements in the last few months. Contractors are performing works, and are awarded new contracts, but they are not getting paid. Reportedly, the main contributing factor to this is the perceived uncertainty of potential personnel changes within the Government and different authorities following Mr. Putin’s inauguration as President on May 7th. Obviously, this has a negative effect in investment decisions into new construction machinery. We expect the effects of this relative slowdown in growth to continue until mid-June but do not expect any long term impact on demand in the market.

With an oil price forecasted to continue at above 100 USD/barrel and a budget deficit as low as around 1% of GDP the consensus forecast for the GDP development of the Russian economy in 2012 remains one of the highest in the World at close to 4%. The financial instability in the Eurozone however continues to affect the sentiment to a certain extent. Overall, we remain cautiously optimistic as we look forward through the remaining quarters of 2012, but continue to follow the key risks created by the international economic instability and the potential effects on business conditions in Russia.

For further information, please contact:
Anders Blomqvist, Chief Financial Officer,
Ferronordic Machines AB, Tel: +46 70 7766 485
Ferronordic Machines AB, Hovslagargatan 5B, 111 48 Stockholm, Sweden