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Prospectus concerning the listing of shares in HEXPOL AB (publ)
Prospectus concerning the listing of shares inHEXPOL AB (publ)
This prospectus has been prepared in connection with the application by
the Board of Directors of HEXPOL AB (publ) to have the Company’s Class B
shares listed on the OMX Nordic Exchange.
Unless otherwise specified, the terms “HEXPOL,” “the HEXPOL Group,”
“the Group,” or “the Company” refer to HEXPOL AB (publ), Corp. Reg. No.
556108-9631, and its wholly owned subsidiaries, or a particular subsidiary,
depending on context. HEXPOL AB refers to the Parent Company. Unless
otherwise specified, the term “Hexagon” refers to Hexagon AB (publ), Corp.
Reg. No. 556190-4771, and its wholly owned subsidiaries, or a particular
subsidiary, depending on context. Hexagon AB refers to the Parent Company.
The terms “OMX Nordic Exchange” or “the Nordic Exchange” refer to OMX
Nordic Exchange in Stockholm.
In this prospectus, statements regarding future prospects are made by the
Board of Directors of HEXPOL AB and are based on current market condi-
tions. Although such statements have been well processed, readers should
be aware that they, and all other estimates of the future, are associated with
uncertainty. For an overview of risk factors, refer to pages 11-16.
Apart from what is specified in the auditors’ statement on pages 128-129,
or what is expressly stated, no information in this prospectus has been
examined or audited by the Company’s auditors.
This prospectus is subject to Swedish law. Disputes relating to the prospectus,
or associated legal conditions, shall be determined exclusively by a Swedish
court.
The prospectus has been approved and registered by the Swedish Financial
Supervisory Authority pursuant to the provisions of Chapter 2, Sections 25
and 26 of the Financial Instruments Trading Act (1991:980).
This prospectus is available on HEXPOL’s website www.hexpol.com,
Hexagon’s website www.hexagon.se and on Swedbank’s website
www.swedbank.se/prospekt.
The information in this prospectus is a translation of the text in the Swedish-language
prospectus and, accordingly, corresponds in all material respects with the original Swedish
document. In the event of any contradictions between the texts contained in this document
and the text in the Swedish-language prospectus, the latter shall prevail.
HEXPOL 3
Important information
First day of trading on OMX Nordic Exchange ................................................... 9 June 2008
ISIN code ................................................................................................... SE0002452623
Ticker on OMX Nordic Exchange .................................................................... HPOL B
Trading lot .................................................................................................. 100 shares
Website ..................................................................................................... www.hexpol.com
Financial calendar
Interim report January-June 2008 ................................................................ 8 August 2008
Interim report January-September 2008 ........................................................ 23 October 2008
Year-end report for 2008 ............................................................................ February 2009
ContentsSummary ....................................................................................................................... 5
Risk factors .................................................................................................................... 11
Background and reasons ................................................................................................ 19
Terms, conditions and instructions .................................................................................. 20
CEO’s statement ............................................................................................................ 23
Strategic direction .......................................................................................................... 27
Group structure ............................................................................................................. 31
History ........................................................................................................................... 35
HEXPOL Compounding Business area .............................................................................. 37
HEXPOL Engineered Products Business area ................................................................... 47
HEXPOL Gaskets Product area ................................................................................... 49
HEXPOL Wheels Product area .................................................................................... 53
HEXPOL Profiles Product area .................................................................................... 57
Trends and future outlook ............................................................................................... 59
Personnel ....................................................................................................................... 61
Environmental care creates business value ..................................................................... 65
Condensed financial information for 2005-Q1 2008, including comments on the financial trend ....................................................................... 68
Other financial information .............................................................................................. 72
Share and shareholders .................................................................................................. 75
Legal issues and supplementary information ..................................................................... 79
Relationship between HEXPOL and HEXAGON ................................................................. 83
Tax considerations in Sweden ......................................................................................... 87
Interim Report, January 1 – March 31, 2008 ................................................................ 90
Historical financial statements (2005-2007) ................................................................... 101
Auditors’ report concerning the restated historical financial statements .......................... 128
Board of Directors, senior executives and auditors ......................................................... 131
Corporate governance .................................................................................................... 139
Articles of Association .................................................................................................... 143
Addresses to all companies ............................................................................................ 148
4 HEXPOL
HEXPOL 5
This summary should be regarded only as an intro-
duction to and a summary of the other parts of this
prospectus. The prospectus has been prepared in
connection with the listing of HEXPOL AB’s Class B
shares on the OMX Nordic Exchange Stockholm.
Each decision to invest in HEXPOL should be based
on an evaluation of the prospectus in its entirety,
and not just on this summary.
A person may be held responsible for information
that is included or lacking in the summary, or a trans-
lation of it, only if the summary or the translation is
misleading, erroneous or irreconcilable in relation to
other parts of the prospectus. Note that a person
who files claims in a court with reference to informa-
tion in this prospectus may be forced to bear the
costs for translation of the prospectus.
Summary
Background and reasonsHexagon AB’s shareholders resolved at Hexagon’s
Annual General Meeting on 5 May 2008 that all of
the shares in HEXPOL would be transferred to the
shareholders of Hexagon in the form of a dividend.
The intention is that Class B HEXPOL shares will
be listed on the OMX Nordic Exchange Stockholm,
with 9 June 2008 as the first day of trading.
The reason for the separate market listing is that
HEXPOL has reached a size and profitability that
makes its operations attractive as an independently
listed company. HEXPOL has the necessary resources
in terms of management, administration, operational
control and business development, and is thus ready
to continue to develop as an independent company.
By so doing, HEXPOL will be able to capitalize on
opportunities for continued robust growth via the
establishment of new and acquisitions of existing
operations in accordance with an adapted growth
strategy, with an organization and capital structure
that supports this growth.
The Board of Directors of Hexagon is of the opinion
that, over the long term, the value for Hexagon’s
shareholders will increase through a spin-off of
these operations and a distribution of HEXPOL
shares. In addition, a separate market listing of
HEXPOL will make it possible for both current and
new shareholders to choose to invest directly in
HEXPOL.
The Group in brief HEXPOL is one of the world’s leading polymer
groups with strong global market positions that
enable it to offer innovative solutions and products
based on advanced rubber compounds (Compoun-
ding), gaskets for plate heat exchangers (PHE
Gaskets) and wheels made of polyurethane, plastic
and rubber materials for forklifts and castor wheel
applications (Wheels).
The Group is organized in two business areas:
HEXPOL Compounding and HEXPOL Engineered
Products, and has production units in nine countries.
The business areas operate in separate market
segments. Despite this, HEXPOL utilizes distinct
synergies in the areas of technology, purchasing and
production. Customers outside Sweden account for
about 90 percent of invoiced sales, and seven of the
Group’s 15 production units are situated in expan-
sive regions of Asia, Mexico and Eastern Europe.
6 HEXPOL
HEXPOL Compounding
HEXPOL Compounding NAFTA
Tracy Garrison
HEXPOL Engineered Products
HEXPOL Gaskets
Lars-Åke Bylander
HEXPOL Compounding Europe/Asia
Ralph Wolkener
HEXPOL Wheels
Peter Kruk
HEXPOL Compounding Technology
Carsten Rüter
HEXPOL Profiles
Lars-Åke Bylander
President and CEO
Georg Brunstam
CFO / IR
Anders Lyrheden
The total number of employees is approximately
2,300, mainly employed in Asia, the US and Sweden.
Most of the production units are relatively new and
all plants are well-invested. The technology level is
high and far-reaching production and technological
coordination generates cost effectiveness, high and
consistent quality and opportunities to smoothly
relocate production between the various units.
Operations and marketTo develop long-term profitability and sustainable
competiveness, HEXPOL has focused its operations
on markets that offer opportunities to capture
leading positions.
Customers of the HEXPOL Compounding business
area are mainly system suppliers to the global auto-
motive industry. The customers comprise international
companies that subject suppliers to stringent demands
in terms of quality and delivery reliability. The auto-
motive industry, which is a very large user of rubber
components, is characterized by rapid expansion,
particularly in the regions where HEXPOL has its
plants, thus creating favourable growth potential.
OEM manufacturers of plate heat exchangers
comprise the largest customer group of the HEXPOL
Engineered Products business area. Supported by
growing interest in energy efficiency, the market for
plate heat exchangers is characterized by strong
growth and, in turn, strong demand for the products
offered by the HEXPOL Gaskets product area. Since
HEXPOL’s customers include all major manufacturers
of plate heat exchangers, the Group has a strong
position from which to capitalize on the robust
growth in this product segment. The largest customers
of the HEXPOL Wheels product area consist of com-
panies in the segment comprising manufacturers of
materials-handling equipment. As a result of the
increased volume of materials handling throughout
the world, these customers are showing strong
growth. HEXPOL Wheels is favourably positioned
with products including high-quality wheels for fork-
lift trucks and castor wheel applications. HEXPOL
Profiles is one of the leading manufacturers of
The operation’s sales in 2007, distributed
among the two business areas and
geographically, were as follows:
HEXPOL Engineered Products
28%
HEXPOL Compounding72 %
Other markets 73 %
Asia3 %
NAFTA30 %
Europe67 %
Emerging markets (China, Sri Lanka,
Czech Republic, Mexico) 27 %
The operation’s production
(sales value) in 2007 was distributed
as follows geographically:
HEXPOL 7
extruded profiles in the Scandinavian market.
What all of the areas of business have in common is
the importance of cutting-edge expertise related to
polymer materials, applications know-how in the
groups business areas and cost-efficient production
operation.
CompetitorsHEXPOL’s principal competitors are Excel Polymers
and AirBoss in North America and the German com-
pany Kraiburg in Europe (Compounding), the British
TRP Group with business in Great Britain, Dubai and
Romania (Gaskets), the German family-owned com-
panies Räder-Vogel and Wicke in Europe, and the
also family-owned Thombert in North America plus
the Chinese caster wheels manufacturer Hong Xing
Castors (Wheels) and the Swedish company Trelle-
borg (Profiles).
HistoryHEXPOL has its origins in Svenska Gummifabriks
AB, a Swedish industrial company established near
the end of the 19th century in Gislaved, Sweden.
This segment of the once highly diversified Gislaved
Group with operations focused on rubber compounding
and technical products was acquired by Hexagon in
1994. The operations have since been developed
through investments in product development and
acquisitions of complementary companies, most
recently GoldKey in the US, which was acquired
in the autumn of 2007. In addition, proprietary
production units have been constructed in China
and Mexico and production capacity in Sri Lanka
has been increased sharply.
VisionThe vision is to be market leader, ranking number
one or two in selected technological or geographical
segments, to be able to generate growth and share-
holder value.
Business conceptThe business concept is to operate as a product and
application specialist in a limited number of selected
niche areas for the development and production of
polymer products. HEXPOL shall be the most pre-
ferred partner for customers in key industries, such
as the automotive and construction industries, the
energy sector and the materials-handling industry,
based on its offering of innovative and specialized
polymer products and solutions.
StrategyTo achieve sustainable profitability and competitive-
ness, five operating strategies are applied:
• Product development through in-depth and
broad polymer and applications expertise
• The most cost-effective company in the industry
• Efficient supply management that generates
volume and technological benefits
• Management skills through competent and
experienced teams
• Speed management through short and fast
decision-making procedures
In addition to the operating strategies outlined
above, the Group also pursues a strategy to achieve
continued growth, both organically and through
acquisitions.
Financial objectivesThe Board of Directors has established the following
financial objectives over a business cycle: The aim is
that the organic sales growth will be at least 7-10
percent annually and that the operating margin will
be at least 8-10 percent.
Dividend policyHEXPOL’s profit trend and equity/assets ratio deter-
mine the size of the dividend. HEXPOL’s dividend
policy is that 25–50 percent of after-tax net profit for
the year will be distributed as a dividend to HEXPOL’s
shareholders, on condition that the Company’s
equity/assets ratio is regarded as satisfactory.
Success factorsSince 2000, Group operations have expanded from
annual sales of 482 MSEK to slightly more than
3,100 MSEK on an annual basis, with operating
margins that – in most cases – are much better than
those of comparable companies. The operating margin
8 HEXPOL
in 2007 exceeded 11 percent. Cash flow has been strong
despite the rapid growth and, when combined with
approved credit lines, provides the Group with a
strong financial base for continued growth and
expansion.
This favourable trend is the result of deep and
comprehensive product development skills, cost-
effective production plants and successful company
acquisitions. The Group is also positioned strongly
in segments characterized by healthy growth. The
corporate culture is strong, with skilled and experi-
enced employees led by experienced management
teams with short and speedy decision-making routes.
Trends and future outlookHEXPOL operates in markets where short and long-
term growth, both geographically and in terms of
applications, is considered favourable for both the
HEXPOL Group and its customers. Three markets
that offer particularly promising growth potential
are the energy sector, the automotive industry and
the materials-handling industry, areas where
HEXPOL’s customers are key suppliers in various
sub-segments. The Group has also recently established
units in such interesting growth markets as China
and Mexico, which provides competitive advantages
in the form of lower production costs and continued
growth opportunities. These factors, combined with
a continued acquisition-oriented focus, provide the
Group with a strong platform for sustaining its
favourable development.
RisksHEXPOL is an international Group and is thus
exposed to a number of different risks when conduc-
ting its daily operations. The greatest risks include
the general market trend, the competitive situation,
the future price trend, customer relations, the ability
to retain and recruit key personnel, financial risks
and the additional risks that are presented under
the “Risk factors” heading. There are also risks that
are not known to the Company or that the Company
currently regards as insignificant and that could
have an adverse impact on the Company’s operations.
For an overview of risk factors, reference is made to
pages 11–16.
The Board of Directors’ composition,Group Management and auditorsThe Board of Directors of HEXPOL AB consists of
Melker Schörling (Chairman of the Board), Maths O.
Sundqvist, Alf Göransson, Malin Persson, Ulrik
Svensson, Jan-Anders E. Månson and Georg Brun-
stam. Group Management consists of Georg Brunstam
(CEO), Anders Lyrheden, Lars-Åke Bylander, Tracy
Garrison, Peter Kruk, Carsten Rüter and Ralph
Wolkener. All members of Group Management and
the Board of Directors have well-documented indust-
rial experience.
The Company’s auditor is Ernst & Young AB, with
Ingvar Ganestam as auditor-in-charge, and Stefan
Engdahl, Ernst & Young AB.
For additional information concerning the members
of the Board, Group Management and the Company’s
auditors, reference is made to pages 131–137.
Major shareholdersImmediately after the distribution of the shares in
HEXPOL, the ownership structure of the Company
will be identical to that of Hexagon (apart from
share fractions). The number of shareholders in
Hexagon on 30 April 2008 was approximately
10,000, of whom the largest were Melker Schörling
AB, Maths O. Sundqvist, through companies, and
Swedbank Robur Fonder, which jointly accounted for
nearly 45 percent of the capital and approximately
60 percent of the voting rights.
For additional information concerning the ownership
structure, reference is made to pages 75–76.
HEXPOL 9
The financial statements of the HEXPOL Group based on its operational appearance are presented below:
Amounts in MSEK Q1 2008* Q1 2007* 2007** 2006** 2005**
Condensed income statementsSales ............................................................... 852 656 2 730 2 488 2 205Operating expenses ........................................... -769 -587 -2 425 -2 283 -1 950Operating profit ................................................. 83 69 305 205 255Financial items .................................................. -12 -7 -50 -39 -23Profit before tax ............................................... 71 62 255 166 232Tax .................................................................. -21 -18 -69 -48 -70Net profit for the period...................................... 50 44 186 118 162
Condensed balance sheets***
Total assets ..................................................... 2 809 2 153 2 795 2 027 2 003Intangible fixed assets ....................................... 1 091 844 1 134 827 883Tangible fixed assets ......................................... 710 551 735 511 492Financial fixed assets ......................................... 2 2 2 2 2Current assets .................................................. 1 006 756 924 687 626Shareholders’ equity........................................... 1 002 949 1 025 883 881Long-term liabilities ............................................ 1 256 715 1 324 869 848Current liabilities................................................ 551 489 446 275 274
Condensed cash flow statementsCash flow from operational activities ..................... 84 27 265 179 135Investments in intangible fixed assets.................... -2 0 -9 -3 -1Investments in tangible fixed assets ...................... -26 -46 -164 -121 -66Acquisitions of subsidiaries.................................. - - -350 - -25Cash flow from financing activities ........................ -55 -5 370 -18 -52Change in cash and cash equivalents .................... 1 -24 112 37 -9Cash and cash equivalents at period-end ............... 229 92 228 116 79
Key figuresNet sales growth (%).......................................... 29,8 3,2 9,7 12,8 36,6Operating margin (%) ......................................... 9,7 10,5 11,2 8,2 11,6Profit per share (SEK) ........................................ 1,88 1,66 7,01 4,44 6,10
* Figures have not been audited or examined.
** Audited figures.
*** Following the most recent balance-sheet date, financing has been changed. For the current level of indebtedness, reference is made to page 73.
Financial overview
Definitions:
Net sales growthPercentage change in net sales compared with corresponding to period in the preceding year.
Operating marginOperating profit divided by net sales.
Profit per share Net profit for the year divided by the number of shares after the listing.
10 HEXPOL
HEXPOL 11
Ownership of shares is subject to risk. A number of
factors currently affect and could affect the opera-
tions conducted by the HEXPOL Group in either a
positive or negative direction. The risks that exist
concern conditions that are directly connected to
HEXPOL and ones that lack a specific connection to
HEXPOL but which still affect the industry in which
HEXPOL is active.
Here follows a brief and general overview of certain
risk factors that, according to HEXPOL’s Board of
Directors, could be of importance to the Company’s
future development or an investment in the HEXPOL
share.
The greatest risks include the general market trend,
the competitive situation, the future price trend,
customer relations, the ability to retain and recruit
key personnel and financial risks. The risk factors
are described without any internal ranking and the
account does not claim to be exhaustive. This
means that there could be additional risks that
could be of greater of lesser importance to
HEXPOL’s operations.
In addition to the risk factors specified below and
other risks that pertain, the reader should also
carefully consider other information in this prospectus.
Risk factors
Industry and market risksThe HEXPOL Group engages in worldwide opera-
tions that are dependent on both the general economic
and political situation in the world and conditions
that are unique for a certain country or region.
Risk management within the Group is determined
by established policies and procedures that are revised
continuously by the Board of Directors. The Parent
Company’s Board has overall responsibility for
identifying, following up and managing risks.
Impact of the economyAs is the case for almost all business operations,
the general economic climate affects the investment
inclination and investment ability of HEXPOL’s
existing and potential customers. Accordingly, a
weak economic trend in all or parts of the world
could result in lower-than-expected market growth.
Developments in HEXPOL’s customer segments
constitute one of the principal risks related to the
business environment. This results in stringent
demands in terms of understanding of the current
and future requirements, demands and wishes of
both direct and end customers. To reduce the risk
of economic impact, HEXPOL engages in close
cooperation with customers, conducts comprehensive
business intelligence work and continuously reviews
its selected strategies. Although HEXPOL’s operations
have a wide geographic spread, and otherwise an
extensive customer base, HEXPOL’s sales and
operations are exposed to a potential risk of being
adversely affected by a weak economic trend.
Competition and price pressureHEXPOL’s operations are conducted in sectors subject
to competition and are thus affected by, for example,
severe price pressures, which in turn drive demand
for cost-effective solutions. Competing companies
with operations in Asia and other low-cost regions
may, through improvements of their technology and
12 HEXPOL
production expertise, come to produce at low cost
and compete with HEXPOL’s products. HEXPOL’s
future competitive capacity is dependent on its ability
to utilize the Company’s leading-edge knowledge
with respect to rubber compounds and rubber and
plastic products and to transform this knowledge
into attractive products and customized solutions at
competitive prices. To ensure the Company’s compe-
titiveness, investments will be required to maintain
the Group’s prominent position in the area of product
development. While constantly striving to adapt to
changes in the competitive situation, HEXPOL may
also be forced to implement costly restructuring
measures to be able to retain the Company’s market
position and profitability.
Strategic and operational risksHEXPOL’s business is dependent on a number of
factors, each of which may significantly affect the
Group’s profits both positively and negatively.
Technical and market developmentPortions of HEXPOL’s operations are conducted in
industries subject to price pressure and rapid tech-
nical and material developments. To reduce these
risks, HEXPOL’s ability to compete in this market
environment by developing new products that offer
improved functionality while reducing costs for new
and existing products is of great importance. Being
able to attract the right competence for research,
product development, marketing and sales is critical
for success.
Costs of raw materials and energyIn recent years, trends in many raw materials markets
have resulted in higher purchasing prices for raw
materials that are important for HEXPOL. To coun-
ter continued increases in raw materials prices and
increased energy costs, HEXPOL devotes considerable
effort to increasing production efficiency, developing
more cost-effective processes and passing on price
increases to customers. Given the competitive market
situation, however, there is a risk that HEXPOL
cannot increase prices enough to fully offset the
increased costs, thus resulting in reduced margins.
SuppliersHEXPOL’s products consist of raw materials and
goods from several different suppliers. To be able to
manufacture, sell and deliver products, HEXPOL
is dependent on external supplies meeting agreed
requirements with respect to quantity, quality and
delivery time, for example. Incorrect, delayed or
missing deliveries from a company supplier may in
turn mean that HEXPOL’s deliveries are delayed,
deficient or incorrect, which could result in reduced
sales and a negative impact on the Group’s profits.
In HEXPOL’s assessment, the Company is not
dependent on any single supplier, meaning that
interruption of deliveries would not result in any
long-term consequences for HEXPOL’s operations.
No single supplier accounts for more than 12 per-
cent of the Group’s purchases, and all major
suppliers are further replaceable.
CustomersHEXPOL’s operations are conducted in a large
number of geographic markets with many customer
categories. No single customer accounts for more
than 10 percent of the Group’s total sales. HEXPOL
is thus not dependent on any single customer and
therefore has a favourable risk spread in this respect.
The largest single group of customers are system supp-
liers to the automotive industry. For HEXPOL this
customer group may imply certain risks. A decline or
a weak trend in the automotive industry may have a
negative effect on HEXPOL’s business. In the Com-
pany’s assessment, however, the division of the auto-
motive industry in different segments in combination
with the industry’s geographic diversity entails a
more limited overall risk exposure than what the
volume collective sales to the automotive industry
might give the impression of.
Political risksHEXPOL’s operations in Sri Lanka may be affected
by the ongoing armed conflict. HEXPOL follows
developments in Sri Lanka continuously and has
developed an action plan to be able to counter the
risks that an unstable political development in
HEXPOL 13
Sri Lanka may entail for HEXPOL’s operations in
the country.
Key personnelHEXPOL’s future success is in large part dependent
on its ability to recruit, retain and develop qualified
leaders and other key persons. Being an attractive
employer is thus an important success factor. If key
persons leave the Company and appropriate succes-
sors cannot be recruited, this may have a negative
effect on the Company’s operations.
Legal risksThrough its global operations, HEXPOL is affected
by a number of laws, directives, regulations, agreements
and guidelines, including many that relate to the
environment, health, safety, trade restrictions, compe-
tition legislation and currency regulation.
Legislation and regulationTo counter the legal risks, HEXPOL closely monitors
the rules and regulations applying in each market
and works to quickly adapt its operations to identified
future changes in this area. However, changes in
legislation, customs regulations and other obstacles
to trade, price and currency controls and other
government guidelines in the countries in which
HEXPOL operates may limit the Group’s operations.
Health, safety and the environmentIn HEXPOL’s assessment, operations are conducted
in all significant respects in compliance with appli-
cable laws and regulations regarding health, safety
and the environment. A number of companies within
the Group conduct operations that are subject to
permits or reporting obligations according to local
environmental legislation. These operations are thus
under the supervision of due authorities. HEXPOL
strives to continuously ensure that all material
permits are obtained and that all material appli-
cable reporting obligations are fulfilled. Changes in
legislation and regulation by the authorities entailing
tougher requirements and changes in terms relating
to health, safety and the environment or a trend
toward more stringent application of laws and regu-
lations by the authorities may require further invest-
ments and result in increased costs and other obliga-
tions for the companies within the Group that are
subject to such regulation. Changes in legislation and
official regulations may also prevent or limit HEXPOL’s
operations.
Tax risksHEXPOL conducts its operations through companies
in a number of countries. Its business, including
transactions between Group companies, is conducted
in accordance with the Company’s interpretation of
prevailing tax legislation, tax agreements and regu-
lations in the various countries and tax authorities
in question. The Company has obtained advice in
these matters from independent tax advisors.
However, it cannot be generally ruled out that the
Company’s interpretation of applicable laws, tax
agreements and regulations or their interpretation
or administrative application by the authorities is
deemed incorrect or that such rules may change,
possibly with retroactive effect. HEXPOL’s tax
situation may change through decisions by the
relevant authorities.
DisputesHEXPOL is occasionally involved in disputes in the
course of its normal business operations. Major and
complicated disputes may be costly and demanding
in terms of time and resources and could interfere
with the normal business operations. Neither can it
be ruled out that the result of such disputes could
have a negative impact on HEXPOL’s profits and
financial position.
Intellectual property rightsHEXPOL has entered into an agreement with Hexagon
regarding continued use of the name “Hexagon” in
combination with the word “Polymers” in the names
of certain subsidiaries within the HEXPOL Group.
If certain events specified in the agreement occur,
including changes in control over HEXPOL or changes
in HEXPOL’s area of operations, HEXPOL is obligated
to ensure that the use of the Hexagon name is dis-
continued prematurely. This could result in a tempo-
14 HEXPOL
rary negative effect for HEXPOL until new company
names for the subsidiaries in question are established
in the market.
Under a licensing agreement with Bayer AG, HEXPOL
is entitled to use the Vulkollan brand and logotype
in connection with wheel manufacturing and marketing
within HEXPOL Wheels. The licensing agreement is
valid for periods of one year at a time and can be ter-
minated following three-month notice. Termination
of the licensing agreement by Bayer would have an
adverse impact, since Vulkollan wheels currently
account for a large portion of the subsidiary Stellana
AB’s sales.
HEXPOL sells products under several well-known
brands. It is of great commercial importance for the
Group that these brands can be protected against
unauthorized use by competitors and that the good-
will associated with the brands can be maintained.
To meet market requirements, HEXPOL must
continuously develop new technical solutions and
applications. To guarantee a return on the resources
that HEXPOL invests in research and development,
it is of the utmost importance that such new techno-
logy can be protected against unauthorized use by
competitors.
It is not certain that applications for protection of
patents, brands and other intellectual property
rights will be granted or, if they are granted, that
they will provide satisfactory protection that cannot
be circumvented by competitors. Neither is there
any guarantee that HEXPOL will not be considered
to infringe on other companies’ intellectual property
rights or that HEXPOL’s rights will not be questioned
or contested by others. In addition, HEXPOL’s com-
petitors may develop or acquire intellectual property
rights that may prove to be essential for portions
of HEXPOL’s operations. Furthermore, HEXPOL
depends on know-how that falls outside the realm
of protectable intellectual property rights. It cannot
be ruled out that competitors may develop the corre-
sponding know-how or that HEXPOL will not succeed
in protecting its expertise effectively.
If it should prove to be the case that HEXPOL’s
operations are considered to infringe on another
party’s valid intellectual property rights or entail
impermissible use of another party’s business secrets,
it cannot be ruled out that the resulting claims may
have a negative effect on HEXPOL’s profits and
financial position.
Financial risksIn its capacity as a net borrower and through its
extensive operations outside Sweden, HEXPOL is
exposed to various financial risks. The Group’s
financial policy provides guidelines for financial
exposure and how these risks are to be managed
within the Group. The financial policy is established
each year by the Board of Directors.
HEXPOL’s financial operations are centralized in
the Group’s internal bank, which is responsible for
coordinating currency and interest exposure. The
internal bank is also responsible for the Group’s
external and internal financing. Centralization
results in significant economies of scale, lower
financing costs and better control and management
of the Group’s financial risks. The internal bank
does not have any mandate to conduct commercial
trading with currency or interest instruments.
Credit risk at the customer level is managed by the
relevant subsidiary.
Currency riskIn its operations, HEXPOL is exposed to various
financial risks, of which the currency risk is the domi-
nant one. Currency fluctuations affect HEXPOL’s
profits in part when sales and purchases take place
in different currencies (transaction exposure) and in
part when the income statements and balance sheets
of foreign subsidiaries are translated to Swedish
kronor, SEK (translation exposure).
HEXPOL’s net flows in foreign currency amounted
to about 362 MSEK in 2007. Contracted currency
flows are hedged in their entirety. Expected flows
in excess of contracted flows are hedged by between
40 and 75 percent with a horizon of twelve months.
The Group’s translation exposure is managed
HEXPOL 15
through currency hedging via loans or forward
contracts in the currency of the net asset.
Interest riskHEXPOL is also affected by interest rate fluctuation.
Changes in interest rates affect the Group’s net inte-
rest income and/or cash flow. Based on the average
interest-rate period in the Group’s total loan port-
folio at 31 December 2007, a simultaneous change
of one percent in all of HEXPOL’s loan currencies
would have an effect on full-year profit of about
10 MSEK before tax. This is also deemed to reflect
the situation for the current year.
Credit riskThe financial risks to which HEXPOL is exposed
also include credit risks, meaning the risk that a
customer or other business party will not be able
to settle his obligations to HEXPOL. There is no
significant concentration of credit risks, either
geographically or to any given customer segment.
Acquisitions and financing of acquisitionsHEXPOL has long worked with an active acquisition
strategy, resulting in a number of successful acquisi-
tions. Strategic acquisitions will also be a part of the
growth strategy in the future. It cannot be guaranteed,
however, that HEXPOL will be able to find suitable
acquisition targets nor can it be guaranteed that the
necessary financing for future acquisition targets
can be obtained on terms that are acceptable for the
Company. This may result in reduced or declining
growth for HEXPOL.
The completion of acquisitions also entails risks. In
addition to the Company-specific risks, the acquired
company’s relations with customers, suppliers and
key persons may be affected negatively. There is also
a risk that integration processes may prove more
costly or take more time than estimated and that
anticipated synergies in whole or in part fail to
materialize.
Future capital requirementsIn the assessment of HEXPOL’s Board of Directors,
the Group’s future financial position is favourable,
and its operations generate strong cash flow under
normal market conditions. If the Group’s develop-
ment deviates from what is anticipated, it cannot,
however, be ruled out that a situation may arise in
the future in which new capital must be raised.
There is no guarantee that HEXPOL will be able
to raise the necessary capital on terms that are
favourable for the Company. In this respect, also the
general market conditions for raising capital are of
considerable importance.
Equity market risks
Share price performancePrior to the distribution of HEXPOL, no trading has
occurred in the HEXPOL share. Although an appli-
cation has been submitted for a listing of HEXPOL’s
B share on the OMX Nordic Exchange Stockholm, no
guarantees can be made regarding the share’s liquidity.
Neither are there any guarantees that the share
price will perform positively. Factors affecting the
share price include variations in the Company’s
profits and financial position, changes in the stockmar-
ket’s expectations regarding future profits, supply
and demand for the shares, developments in the
Company’s market segments and general economic
trends. This means that the price at which the share
trades will vary and that, even if HEXPOL’s business
develops positively, investors may risk incurring a
loss of capital when the shares are sold.
Cost base as an independent listed companyPrior to the distribution of the shares in HEXPOL,
the Company is a wholly owned subsidiary of the lis-
ted company Hexagon AB. HEXPOL thus has a
limited history on which the Group can be assessed
and has not previously had any direct responsibility
for corporate governance, financial reporting and the
publication requirements to which listed companies
are subject. As a listed company, HEXPOL may be
affected by increased costs for which the Company
has not previously been directly responsible. This
increase is estimated at between 3 and 5 MSEK.
16 HEXPOL
Future dividendsFuture dividends will be proposed by HEXPOL’s
Board of Directors. In its assessment, the Board of
Directors will take into consideration several factors,
including business development, profits, cash flow,
financial position and expansion plans. See also the
section Dividend policy on page 28. There are risks
that may affect the Company’s profits negatively,
and there are no guarantees that HEXPOL will be
able to generate profits that permit a dividend
to the shareholders during each fiscal year in
the future.
HEXPOL 17
18 HEXPOL
HEXPOL 19
The Board of Directors of HEXPOL, headquartered in Malmö, is responsible for the information in this prospectus.
Assurance is hereby given that all reasonable precautions have been taken to ensure that the information in
this prospectus, to the best of the knowledge of the Board of Directors of HEXPOL, complies with actual
conditions and that nothing has been omitted that could impact its meaning.
Malmö, 22 May 2008
HEXPOL AB (publ)
Board of Directors
Background and reasonsThe shareholders of Hexagon resolved at the
Annual General Meeting of Hexagon on 5 May 2008
to distribute all of the shares of HEXPOL to the
shareholders of Hexagon in the form of a dividend.
The intention is that the Class B HEXPOL shares
will be listed on the OMX Nordic Exchange Stock-
holm, with 9 June 2008 as the first day of trading.
A separate listing of HEXPOL is a natural step in
the development of the operations of Hexagon and
HEXPOL. During recent years, HEXPOL has evolved
from a local Nordic player to a rapidly growing group
of companies with global manufacturing and global
customers. The Company is currently a world leader
in advanced rubber compounds and gaskets for plate
heat exchangers, and is also one of the leading players
in the global market for the manufacture of poly-
urethane, plastic and rubber wheels.
The reason for a separate listing of the polymer
operations is that HEXPOL has reached a size
and level of profitability that makes the business
attractive as an independently listed company.
The spin-off will enable the management and Board
of Directors of both Hexagon and HEXPOL to capi-
talize on the operational and strategic opportunities
that arise in each company, including increased
potential to continue to grow via the establishment
of new operations and the acquisition of companies.
HEXPOL has sufficient resources in terms of manage-
ment, administration, operational control and busi-
ness development, and is thus ready to continue to
develop as an independent company.
As an independent company, HEXPOL can apply a
focused and well-adapted growth strategy, with an
organization and capital structure that supports this
growth.
In the opinion of the Board of Directors of Hexagon,
the long-term value for the shareholders will increase
through a spin-off of the operation and the distribu-
tion of the shares in HEXPOL. A separate market
listing of HEXPOL will further enable both current
and new shareholders to choose to invest directly in
HEXPOL.
20 HEXPOL
SVER
IGES RIKSBANK
SVER
IGES RIKSBANK
RIKSBANK
SVER
IGES RIKSBANK
SVER
IGES RIKSBANK
RIKSBANK
SVER
IGES RIKSBANK
RIKSBANK
100 Hexagon shares
5,000 Hexagon shares
343 Hexagon shares
8 Hexagon shares
10 HEXPOL shares
500 HEXPOL shares
34 HEXPOL shares
A cash amount corresponding to the sales proceeds for
0.3 HEXPOL shares
A cash amount corresponding to the sales proceeds for 0.8 HEXPOL shares
Resolution regarding distributionThe Annual General Meeting of Hexagon AB (publ)
on 5 May 2008 resolved in accordance with the Board
of Directors’ proposal to distribute all of the shares in
the wholly owned subsidiary HEXPOL AB (publ) to
the Hexagon shareholders. The intention is that the
shares in HEXPOL will be distributed, in accordance
with the “Lex ASEA” rules, to the Hexagon sharehol-
ders in proportion to their current shareholding in
Hexagon. For each multiple of ten class A or class B
shares, one share of the corresponding class of HEXPOL
shares will be received. If holdings of class B shares
are not equally divisible by ten, fractions of a share
will be received. Such fractions of HEXPOL shares
will be combined into complete HEXPOL shares,
which will then be sold on the OMX Nordic Exchange
under the auspices of Swedbank. Settlement amounts,
with no deductions for brokerage, will be paid via VPC.
Examples:
HEXAGONSHARE
HEXPOLSHARE
Terms, conditions and instructions
HEXAGONSHARE
HEXPOLSHARE
HEXAGONSHARE
HEXPOLSHARE
HEXAGONSHARE
HEXPOL 21
Record dateThe record date at VPC for determining the share-
holders that will be entitled to receive HEXPOL
shares is 5 June 2008. The final day of trading in
Hexagon shares including rights to the distribution
of HEXPOL shares is 2 June 2008. The shares in
Hexagon will be traded ex-rights to HEXPOL shares
as of 3 June 2008.
Receipt of sharesThose persons who on the record date are registered
in the share register of shareholders in Hexagon
maintained by VPC will receive HEXPOL shares
without having to take any action. On the day after
the record date, the HEXPOL shares will be available
in the shareholders’ VP accounts (or in the VP accounts
belonging to those that in some other manner are
entitled to distribution). Subsequently, VPC will
send a VP notice stating the number of shares that
are registered in the recipient’s VP account.
Nominee-registered shareholdingsShareholders whose holdings in Hexagon are nominee-
registered by a bank or other nominee will receive
no issue report. Instead, notification will be sent in
accordance with the directions of the respective
nominee.
ListingThe Board of Directors of HEXPOL has applied for
a listing of the Company’s class B share on the OMX
Nordic Exchange Stockholm. The first day of
trading is expected to be 9 June 2008. The ISIN code
for Class B HEXPOL shares is SE0002452623. The
Company’s ticker on the OMX Nordic Exchange
Stockholm will be HPOL B. HEXPOL does not intend
to apply for a listing of the HEXPOL share on any
other exchange or marketplace. Nor does the Com-
pany intend to register the shares under the United
States Securities Act of 1933 or any other foreign
equivalent, or take any actions that would subject
HEXPOL to the reporting requirements of the SEC
(United States Securities and Exchange Commission).
Right to dividendsThe HEXPOL shares carry entitlement to dividends
as of the 2008 financial year. Payment of any dividend
will be executed by VPC or, if the shares are nominee-
registered, in accordance with the procedures of the
particular nominee.
AdvisorIn connection with the distribution and listing of
HEXPOL shares, Swedbank Markets is serving as
the issuer agent and financial advisor to
Hexagon and HEXPOL.
Important dates
2 June 2008 Final day of trading in Hexagon shares including rights to the distribution
of HEXPOL shares
3 June 2008 Hexagon shares traded ex-rights to HEXPOL shares
5 June 2008 Record date for receipt of HEXPOL shares
5 June 2008 Publication of listing prospectus
9 June 2008 Estimated date for the listing of class B HEXPOL shares on OMX Nordic
Exchange Stockholm
22 H
HEXPOL 23
CEO’s statement
Very strong growth with good profitabilityHEXPOL is one of the world’s leading polymer Groups
with strong global market positions in advanced
rubber compounds (Compounding), gaskets for plate
heat exchangers (PHE Gaskets) and wheels made of
polyurethane, plastic and rubber materials for fork-
lifts and castor wheel applications (Wheels). The opera-
tions are organized in two business areas – HEXPOL
Compounding and HEXPOL Engineered Products.
With our global presence, we have strong positions
in these areas. Our customers are mainly system
suppliers to the global automotive industry and
OEM manufacturers of plate heat exchangers and
forklift trucks.
HEXPOL is the new name of Hexagon’s former
Hexagon Polymers business area. The operations
originated as the Technical Products Division of
Svenska Gummifabriks AB in Gislaved, which created
the core of a niche-based growth strategy in polymer
products. Growth has been very strong under
Hexagon’s ownership, which started in 1994. Sales
in 1997 amounted to 350 MSEK; 10 years later, sales
had risen to 2,730 MSEK and, based on the annualized
effect of the GoldKey acquisition, sales totalled
about 3,100 MSEK. Growth has been achieved with
a sustained strong cash flow. The Group’s plants are
well-invested with high technological standards.
New expansion-oriented investments in China and
Mexico have been completed and will generate
growth with a lower level of investments in the
years ahead.
Business expansion has been achieved through
organic growth and successful acquisitions. From
our start as a Swedish business, we have developed
into a global polymer group with 90 percent of sales
invoiced outside Sweden. We have production opera-
tions today in nine countries, including emerging
markets such as China, Sri Lanka, Mexico and the
Czech Republic. Seven of our 15 production companies,
or nearly 50 percent, are situated in these countries.
Our presence for global OEM manufacturers is strong.
Expansion and profitabilityThe operations have expanded sharply during recent
years, with operating margins that – in most cases –
are higher than many of our competitors. Our opera-
ting margin in 2007 exceeded 11 percent.
Our largest acquisitions in Compounding have
been GFD (Germany) in 2002, Thona Group (the US,
Belgium, Czech Republic and Canada) in 2004 and
GoldKey (USA) in 2007.
To create a global platform for wheel operations
(Wheels), the wheels activities of Trostel (USA)
were acquired in 2005.
Background to the listingHEXPOL has now reached a size, position and level
of profitability that make the business attractive on
its own merits. Accordingly, the Annual General
Meeting of Hexagon AB has resolved to distribute
the shares in HEXPOL and has applied for a listing
of the Company’s Class B shares on the OMX Nordic
Exchange, effective June 9, 2008. The listing will
support HEXPOL’s continued growth, both organi-
cally and through acquisitions.
StrategyOur goal is to achieve continued rapid growth with
healthy profitability, based on a strategy of strong
organic growth and continued acquisitions in the
polymer segment.
24 HEXPOL
We have large global customers in growth markets
such as the automotive industry, plate heat exchangers
and materials handling products.
We will continue to expand our Compounding opera-
tions in emerging markets such as China, Mexico,
eastern and central Europe. Our customers in the
automotive industry are growing strongly in these
markets, and we are well equipped to meet their
demand. We also have a strong position and business
growth based on Japanese and Korean systems and
OEM manufacturers in NAFTA1 , Asia and Eastern
Europe.
Our strategy is based on comprehensive and broad
polymer and applications expertise. For example,
unique proprietary formulas that we offer our
customers through technical cooperation agreements
account for 80 percent of Compounding’s sales
in Europe.
During recent years, we have invested strongly in
PHE Gaskets to meet the segment’s strong demand.
The next stage in our expansion is the new production
plant in China, which will be placed in operation
gradually during the latter part of 2008.
The strategy within Wheels is also based on the
offering of global deliveries to major OEM customers.
In addition to operations in Europe and the US, we
also started production in China during 2007.
Our strong brands provide a solid base for our
future positioning in the marketplace.
ResultsWe had a successful year in 2007. We strengthened
our global positions through the acquisition of
GoldKey and production start-ups at new plants in
China (Compounding and Wheels) and Mexico
(Compounding). We increased our sales by 10 percent
and operating profit improved by nearly 49 percent.
We are also off to a good start in 2008. The first
quarter of 2008 showed continued strong sales
growth, +30 percent, and a continued increase
in profits.
FutureOur strategy for achieving favourable profitable
growth through strong global positions in growth
industries is based on highly skilled personnel and
a powerful corporate culture. Our affiliation with
Hexagon has provided us with healthy growth and
a profitability-oriented culture based on competence
and a flexible and rapid organization.
I am convinced that this base and this heritage are a
solid foundation for continued success and an exciting
journey on “our own two feet”.
Welcome as shareholders in HEXPOL AB!
Georg Brunstam
President and CEO
1 North American Free Trade Agreement – Canada, Mexico, USA.
HEXPOL 25
26 HEXPOL
Vision
The Company’s vision is to be a market leader,
ranking number one or two in each selected
technological or geographical segments, to be
able to generate growth and shareholder value.
Business concept
The business concept is to operate as a product
and application specialist in a limited number of
selected niche areas for the development and
production of polymer products. HEXPOL shall be
the most preferred partner for customers in key
industries, such as the automotive and construction
industries, the energy sector and the materials-
handling industry, based on its offering of innovative
and specialized polymer products and solutions.
HEXPOL 27
HEXPOL is one of the world’s leading polymer
groups with strong positions in markets for rubber
compounds (Compounding), gaskets for plate heat
exchangers (PHE Gaskets) and wheels made of
polyurethane, plastic and rubber materials for fork-
lifts and castor wheel applications (Wheels). Customers
are mainly system suppliers to the global automotive
industry and OEM manufacturers of plate heat
exchangers and forklifts.
The Group is organized in two business areas,
HEXPOL Compounding and HEXPOL Engineered
Products, and has production operations in nine
countries. Markets outside Sweden account for a
full 90 percent of total invoiced sales and seven of
the manufacturing units are located in expansive
regions of Asia, Mexico and Eastern Europe. The
number of employees is approximately 2,300, most
of whom are active in Asia, the US and Sweden.
Most of the plants are relatively new and all of them
are well invested. The level of technology is high and
far-reaching production and technological coordination
results in cost-effectiveness, high and uniform quality
and the ability to smoothly relocate production
among the units.
Operational strategyTo be able to sustain its long-term profitability and
sustainable competitiveness, HEXPOL attaches
great importance to the competitiveness of each in-
dividual business line. In order to attain the vision,
the following five operational strategies are applied:
1. Product development
The Group possess in-depth and broad polymer
and applications expertise. Within the HEXPOL
Compounding business area, for example, 80 percent
of the products marketed in Europe are based on
unique proprietarily developed formulas and the
Group offers its customers technological cooperation
for the products’ continued development. Product
development is conducted at each production unit
and the HEXPOL Compounding business area has
a corporate technology department in Belgium.
In total, approximately 5 percent of HEXPOL
Compounding’s employees work in the field of
development work and many of them are highly
qualified chemists and technicians.
2. Most cost-effective company in the industry
Well-invested plants characterized by a high level
of technology and broad-based expertise in a flat and
cost-effective organization facilitate success and
progress.
3. Efficient supply management
The Group continuously focuses on finding cost-
effective supply solutions that enable the exploitation
of benefits resulting from high volume and advanced
technologies. Close cooperation with customers
through local presence also provides opportunities
for effective solutions.
4. Superior management expertise
Skilled and experienced management teams based
on global coordination and continuous exchanges of
experiences enables all the units to be adapted to
best practice in the Group and the industry.
5. Speed Management
Short and fast decision-making processes and time-
effective implementation enhance competitiveness
and boost the organization’s capacity.
Strategic direction
28 HEXPOL
Growth strategyOver the years, HEXPOL has expanded robustly on
the basis of healthy organic growth and strategic
acquisitions. The same orientation will be pursued
in the future.
Organic growthThe Group’s principal markets and customers are
showing favourable growth. One example is the
market for plate heat exchangers, which is under-
going very strong growth driven by the quest for
energy savings and in which HEXPOL supplies
key components to all major OEM manufacturers.
Another example is the automotive industry, which
is growing robustly in Asia, Mexico and Eastern
Europe. In these areas, HEXPOL has established
state-of-the-art facilities for satisfying the techno-
logical and demand requirements of customers.
The strategy continues to be to capitalize on the
opportunities that arise when manufacturers of
rubber compounds have to decide whether to switch
to outsourcing or continue with their in-house com-
pounding operations, with the resulting investment
and renovation requirements. The materials-handling
industry is also growing globally, as a result of sharply
increasing volumes of cargo, which entails increased
demand for forklifts and thus increased demand for
HEXPOL’s products in the form of wheels.
HEXPOL’s acquisition strategyThe Group’s strategy is to continue to acquire
companies in the polymer field, primarily within
current business areas but including a broadening
of application areas and geography.
Potential acquisition targets are monitored continu-
ously in accordance with a distinct acquisition
model, whereby interesting targets are analyzed
on the basis of a series of strategic parameters.
The Group has a strong cash flow and a healthy
financial position which, together with committed
lines of credit, generate the financial preparedness
required for acquisitions.
BrandsHEXPOL markets its products via a number of
well-established brands. For example, the Gislaved
Gummi brand is well-known and highly reputed far
beyond the borders of Sweden. In addition, GoldKey,
Stellana and Elastomeric are recognized brands in
their respective product areas and geographical
markets.
Financial objectivesThe Board of Directors has established the following
financial objectives over a business cycle: The aim
is that the organic sales growth will be at least
7-10 percent annually and that the operating margin
will be at least 8-10 percent.
Dividend policyHEXPOL’s profit trend and equity/assets ratio deter-
mine the size of the dividend. HEXPOL’s dividend
policy is that 25–50 percent of after-tax net profit for
the year will be distributed as a dividend to HEXPOL’s
shareholders, on condition that the Company’s
equity/assets ratio is regarded as satisfactory.
HEXPOL 29
30 HEXPOL
HEXPOL 31
The Group is divided into two business areas,
Compounding and Engineered Products, and four
product areas, Compounding, Gaskets, Wheels
and Profiles.
The organization is adapted to ensure rapid
decision-making processes, characterized by
distinct and decentralized responsibility. The
operational structure is presented below:
Group structure
President and CEO
Georg Brunstam
CFO / IR
Anders Lyrheden
HEXPOL Compounding
HEXPOL Compounding NAFTA
Tracy Garrison
HEXPOL Engineered Products
HEXPOL Gaskets
Lars-Åke Bylander
HEXPOL Compounding Europe/Asia
Ralph Wolkener
HEXPOL Wheels
Peter Kruk
HEXPOL Compounding Technology
Carsten Rüter
HEXPOL Profiles
Lars-Åke Bylander
32 HEXPOL
Shareholding Country
HEXPOL AB Sweden
Gislaved Gummi AB 100% Sweden
Megufo AB 50% Sweden
Stellana AB 100% Sweden
Elastomeric Engineering Company Ltd 99,6%1 Sri Lanka
Elastomeric Technologies Ltd 100% Sri Lanka
Elastomeric Tools & Dies Ltd 100%2 Sri Lanka
Hexagon Polymers Compounding HQ Sprl 100% Belgium
Hexagon Polymers Compounding Sprl 100% Belgium
Hexagon Polymers Compounding s.r.o 100% Czech Republic
Thona Canada BV 100% Netherlands
Hexagon Polymers Compounding ULC 100% Canada
Hexagon Polymers Compounding Inc. 100% North Carolina, USA
Stellana U.S. Inc. 100% Wisconsin, USA
Hexagon Polymers Compounding GmbH 100% Germany
GoldKey Processing, Inc. 100% Ohio, USA
Hexagon Polymers Compounding (Qingdao) Co, Ltd 100% China
Hexagon Polymers Gaskets (Qingdao) Co, Ltd 100% China
Stellana (Qingdao) Co, Ltd 100% China
Hexagon Polymers Compounding SA de CV 100% Mexico1 Gislaved Gummi AB holds 200 shares included in this ownership. The remaining 0.4 percent of the shares are held by external parties.2 Elastomeric Technologies Ltd. holds 69.6 percent and Elastomeric Engineering Company Ltd. holds 30.4 percent of the shares.
The operation’s sales in 2007, distributed among the two business areas and geographically, were as follows:
HEXPOL Engineered Products
28%
HEXPOL Compounding72 %
Asia3 %
NAFTA30 %
Europe67 %
Legal structure
Emerging markets(China, Sri Lanka, Czech
Republic, Mexico) 27 %
Other markets 73 %
The operation’s production (sales value) in 2007 was distributed as follows geographically:
HEXPOL 33
34 HEXPOL
The brothers Carl and Wilhelm Gislow formed
Svenska Gummifabriks AB in 1895.
The principal phases in the development into the current HEXPOL have been:
• 1893 The Gislow brothers form a rubber factory in Gislaved
• 1966 A new factory for Technical Rubber is built
• 1990 The Technical Rubber division becomes Gislaved Gummi AB
• 1991 Production of gaskets for plate heat exchangers is acquired
• 1994 Hexagon AB acquires the Company
• 1995 Stellana AB in Laxå is acquired
• 1998 Elastomeric Engineering Co. Ltd. in Sri Lanka is acquired
• 2002 GFD Technology GmbH in Germany is acquired
• 2004 Thona Group of Belgium, with operations in Belgium, Czech Republic, Canada and the US, is acquired
• 2005 Trostel SEG of the US is acquired
• 2007 Establishment of three new plants for rubber compounds, wheels and gaskets in China and a new plant
for rubber compounds in Mexico
• 2007 GoldKey Processing Ltd of the US is acquired
HEXPOL 35
0
500
000
500
2000
2500
3000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
3000
2500
2000
1500
1000
500
0
GoldKey (September 2007)
Trostel (September 2005)
Thona Group (May 2004)
GFD (July 2002)
Elastomeric (July 1998)
HEXPOL
History
Acquired units are shown in a different colour, representing consolidated
sales during the year of acquisition and following year.
Contribution to sales made by acquisitions in the past ten years, MSEK
(Month of acquisition in parentheses)
HEXPOL has its origins in Svenska Gummifabriks
AB, a Swedish industrial company established near
the end of the 19th century in Gislaved, Sweden.
This segment of the once highly diversified Gislaved
Group with operations focused on rubber compounding
and technical products was acquired by Hexagon in
1994. The operations have since been developed
through investments in product development and
acquisitions of complementary companies. By far
the largest and principal single step in the develop-
ment was the acquisition of Thona Group in 2004.
The strategy has resulted in the Group showing
robust growth in recent years, both organically and
via acquisitions, as shown in the diagram below.
36 HEXPOL
HEXPOL 37
0
500
000
500
000
500
0
50
100
150
200
250
0
2
4
6
8
10
12
14
20072006200520042003
14 %
12 %
10 %
8 %
6 %
4 %
2 %
0 %
2500
2000
1500
1000
500
02003 2004 2005 2006 2007
72 %
63 %
31 %
250
200
150
100
50
0
Key figures 2007 2006 2005
Sales, MSEK 1 955 1 784 1615
Operating profit, MSEK 195 143 181
Operating margin, % 10,0 8,0 11,2
Average number of employees 584 486 460
Operating profitSales
Sales and operating profit, MSEK Operating margin
Net sales Operating profit Number of employees
HEXPOL Compounding is one of the world’s
leading companies in the development and
production of advanced, high-quality rubber
compounds, and is one of only a few truly global
companies in the industry.
HEXPOL Compounding offers customers advanced
rubber compounds and world-class services. Long-
term growth, which is an overall goal, is achieved
through effective organizations in a safe environ-
ment characterized by continuous improvements.
This is made possible by well-trained and highly
skilled employees who are proud of their work and
do their utmost to satisfy our customers.
MarketCustomers of the HEXPOL Compounding business
area comprise rubber product manufacturers who
Business area HEXPOL Compounding
Business area’s share of the Group
For comments on profit trends see pages 70-71.
38 HEXPOL
1 CSM Worldwide – CSM Global Production Summary, 1Q 2008.
place high demands on performance and global delivery
capabilities. The largest market segment is the auto-
motive industry, followed by building and construction.
Other key segments include cable, water management,
pharmaceutical, energy and oil industries.
The automotive industry currently accounts for 68
percent of sales invoiced by HEXPOL Compounding.
A modern passenger car contains hundreds of rubber
components and a luxury car, for example, contains
more than 50 metres of sealing profile. For many car
manufacturers, particularly in the premium segment,
high-quality sealing systems represent a key compo-
nent. The sealing system often influences the end-
customer’s quality impressions in the form of quiet
performance. HEXPOL Compounding is one of the
leading suppliers of synthetic rubber compounds in
this area.
All major manufacturers in the automotive industry
and their system suppliers are global companies.
These factors favour HEXPOL Compounding, which
focuses on global delivery capabilities for the market’s
best products, with identical quality regardless of
the production unit.
The global automotive market is growing rapidly.
The number of light vehicles manufactured in the
next few years is expected to increase sharply, mainly
due to greater demand from emerging markets such
as China and India. According to statistics from
CSM1, approximately 68 million new light vehicles
were manufactured during 2007. Weak production
growth is expected in North America in the next few
years, following a decline in light vehicle production
this year. This will be offset primarily by markets in
Southern Asia, China and South America, where
strong growth is expected in the next few years.
According to forecasts by CSM, global production
of light vehicles in 2012 is projected at about 84
million new units, corresponding to an average
annual increase of slightly more than 4 percent.
At the same time, the industry is undergoing exten-
sive changes. Many manufacturers are gradually
transferring parts of their production to low-cost
countries and new, more expansive markets such as
Eastern Europe, China, India and Mexico. For supp-
liers, this trend is creating demands from customers
to follow their example and offer production in these
new markets. As a result of these trends, HEXPOL
Compounding has established units in Mexico and
China. Operations were already established in the
Czech Republic, where the business area has one
of its largest production plants, which supplies the
markets in Central and Eastern Europe.
In addition to the business expansion outlined above,
Japanese and Korean automotive manufacturers are
also increasing their global and regional production
operations. HEXPOL Compounding has positioned
itself favourably to meet these market changes.
Technology and productsGeneral definition of rubber compounds
Rubber compounds are semi-finished products and
can be seen as homogenous mixtures of different
ingredients that have been defined in a specific for-
mulation or “recipe”. These ingredients, or raw ma-
terials, can be subdivided into the following
categories: polymers, fillers, plasticizers, accelerators,
cross-linking agents and many other special products.
Only the right composition and a perfect mixing
process result into optimum properties of the final
product.
Rubber compounds leaving the HEXPOL Compoun-
ding production facilities will be further processed
by their customers via processes such as extrusion,
injection molding or compression molding in order
to reach the part’s final shape. Finally, continuous
or discontinuous vulcanization will provide to the
rubber part its typical elastic behavior.
Production process
The production sites of HEXPOL Compounding
feature some of the most advanced processing lines
HEXPOL 39
“Strained” strip
Rolling mill
Mixing
Raw material storage
Chemical additives
Quality control
Shipping
“Unstrained” strip Pellets
Process for production of rubber compounds
40 HEXPOL
found in an industry that, otherwise, has not tradi-
tionally been considered particularly sophisticated
in terms of technology. The plants are equipped with
an impressing quality assurance concept, covering
data gathering of raw materials, mixing parameters
and final control. The entire production process is
fully computerized in order to assure efficiency and
quality.
Raw material and preparation
After a quality assurance inspection, the various
raw materials are stored in large silos, tanks or a
warehouse. Mixing in an internal mixer is a so-called
batch process and, as a result, all ingredients must
be prepared in accordance with the weight specified
in the recipe.
Plasticizers, carbon black and fillers are weighed
automatically, while polymers and chemicals must
be weighed manually. All of the different weighing
stages are monitored by an IT system to ensure
maximum accuracy in the weighing process and
full-lot traceability.
Mixing
The constantly increasing demands on material
properties require, besides proper development of
formulations, an excellent manufacturing process.
Indeed, both recipe and mixing process have a major
impact on the product quality. Therefore HEXPOL
Compounding R&D people design them according to
application, used ingredients and
quality requirements. All weighed ingredients
are mixed together in the internal mixer, which is
the heart of a mixing room. The mixing steps are
computer-controlled in order to guarantee batch
uniformity. When mixed to a perfect degree of
dispersion, the rubber compound is dropped onto
an open mill.
Downstream equipment
The open mill itself has 3 major functions:
- further homogenization of the rubber compound,
- very efficient cooling of the compound, and
- conversion uninterrupted downstream processing
Especially for the sealing systems applications, the
production plants are facing high requirements for
“defect free” surface finish. In order to meet these
expectations, HEXPOL Compounding puts a lot of
efforts into developing the most modern way of
straining rubber compounds in an online process.
With the installed advanced technology of strainer-
extruders, online pelletizing units and gearpumps,
the plants can easily adapt their process to customers'
requirements. With the help of this advanced tech-
nology, HEXPOL Compounding can offer a large
variety of rubber compounds in different product
forms, such as endless strained or unstrained strips,
and rubber pellets.
Packaging depends on customer needs. Various
possibilities are offered: recyclable or disposable
packaging for strips, or bags for rubber pellets, as
known from the plastics industry.
Quality inspection and transport
In an intensive approval procedure, modern IT
systems in combination with state-of-the-art test
instruments are used for the quality inspection.
Only after a 100% compliance to requirements,
rubber compounds will be released for shipment,
together with full quality certificates and shipping
documents.
Research and developmentThe foundation for HEXPOL Compounding’s position
as a world leader in rubber compounding has always
been its commitment to excellence in compounding
development. Through the recruiting and training
of top rubber technologists, HEXPOL Compounding
has built an international team of developers (ap-
proximately 5% of total employees) who use the latest
in communication tools to share knowledge.
HEXPOL Compounding takes an integrated app-
roach to recipe and mixing process development,
which takes into consideration customers' processes,
technical specifications, cost effectiveness, and the
latest in raw materials.
HEXPOL 41
As a major force in rubber compounding, HEXPOL
Compounding,
- provides an unmatched portfolio of high quality
compounds for many rubber applications in
various industries;
- combines expertise in materials formulations
with advanced technical production methods
and technical service capability;
- provides solutions based on different polymer
types, such as EPDM, SBR, (H)NBR, NR, CPE,
AEM, ACM, FKM and many others.
QualityAll HEXPOL Compounding plants have implemented
a quality management system focused on customer
satisfaction and continuous improvement. They are
committed to deliver customers with high-quality
products that meet their expectations, delivered on
time, at the best possible price and service.
Through close monitoring of process performance,
all members of the personnel are committed to
improve the performance and effectiveness of the
quality management system with the goal to achieve
the highest level of product and service quality.
Highly automated production processes store relevant
data from each process step including raw material
data, mixing parameters and final control of products.
These data are available online and used to control
process and product performance. Each plant is
equipped with a production control laboratory per-
forming extensive testing.
In combining the physical, mechanical, rheological
and analytical testing capabilities of the laboratories
at the various subsidiaries, HEXPOL Compounding
has the ability to perform a large spectrum of test
methods necessary to fulfill the test demands of the
various business areas where its compounds are used.
EngineeringBy focusing exclusively on compounding, HEXPOL
Compounding has taken a leading role in mixing
innovation, introducing a high degree of automation.
As a result of standardization the same state-of-
the-art equipment can be found in most HEXPOL
Compounding plants. In cooperation with leading
machinery suppliers and with the production facilities
that provide feedback from daily operations, HEXPOL
Compounding’s engineering department is continu-
ously striving towards the improvement of the pro-
cessing lines. The engineers’ experience and know-
how guarantee most advanced equipment designed
to needs and technological leadership on the long term.
Business modelProduction is primarily order-based and focused on
a limited number of raw materials. The important
rubber compound formulas are often developed in
close cooperation with customers and unique exper-
tise is required to achieve optimal production results.
For example, about 80 percent of the compounds
used in Europe today are based on HEXPOL’s own
recipes. In most cases, the recipes are HEXPOL’s
property.
Since the raw materials are largely oil-based and
exposed to sharp price fluctuation, pricing is renego-
tiated several times every year. Sales take place
mainly through HEXPOL’s own sales force.
The concept “Think Global, Act Local” accurately
describes how HEXPOL Compounding functions.
StrategyFocus on innovation and cost effectiveness
HEXPOL Compounding’s business is focused on
production and sales of high-quality products that
are developed in close cooperation with demanding
customers. The Company consciously aims to develop
products that lower its customers’ total production
costs.
Further growth in existing and new markets
HEXPOL Compounding is positioned favourably to
capitalize on changes in market dynamics.
High-quality products for demanding applications
The automotive and construction industries are
42 HEXPOL
Unit Location No. of employees Area, m2 Production capacity
HPC Belgium Eupen, Belgium 60 3 400 16 000 tonnes
HPC Sweden Gislaved, Sweden 65 9 200 16 000 tonnes
HPC Germany Hückelhoven, Germany 91 5 420 35 000 tonnes
HPC China Qingdao, China 25 4 500 12 000 tonnes
HPC Czech Republic Unicov, Czech Republic 121 8 590 32 000 tonnes
HPC Mexico Aguascalientes, Mexico 45 6 500 8 000 tonnes
HPC North Carolina Statesville, North Carolina, USA 89 3 400 16 000 tonnes
GoldKey Middlefield, Ohio, USA 164 14 864 40 000 tonnes
HPC Canada Magog, Canada 63 4 617 16 000 tonnes
Total 723 60 491 191 000 tonnes
HEXPOL Compounding’s primary customer segments.
Customers in the automotive industry are not the
automotive manufacturers themselves, but rather
large system suppliers to the manufacturers (Tier 1).
However, it is essential that these system suppliers
meet the automotive industry’s very high demands.
Close relations with strong customers
Growth is further boosted by cooperation with
customers operating in expansive markets such
as the automotive market, which is enjoying overall
expansion. However, it is also important to serve
as a supplier to automotive manufacturers that
are increasing their market shares. HEXPOL
Compounding has a well-conceived customer
structure, including substantial deliveries to
expansive Japanese and Korean manufacturers.
Continuous improvements
HEXPOL Compounding works continuously to
improve the processes used within the organization.
One example is the internal benchmarking of pro-
duction data, which creates a strong drive towards
best practice.
OrganizationHEXPOL Compounding’s operations are divided
geographically into three regions comprising Europe,
NAFTA and Asia, and include nine production
plants. Sales in Europe and Asia are managed from
Belgium, while sales in NAFTA are coordinated
from the US. The head office provides service to
the production units and assumes global responsibi-
lity for:
- research and development (coordination
between production plants and new materials
and products),
- global customer agreements (global solutions in
all parts of the world),
- global supply agreements (strategic supplier
choices, price negotiations),
- engineering (design equipment to needs),
- information and communication technology
(critical software, information databases).
- quality systems (best practices, continued
improvement)
- training
All production units are structured as separate
companies with complete organizational functions
for sales, product development and production, but
they also operate in close cooperation with each
other in all areas. Services to major customers are
also coordinated globally with Key Account Managers.
Operating unitsAll HEXPOL Compounding plants maintain world-
class standards, and several units are completely
new. The plants are also similar in terms of technolo-
gical capabilities. Standard technologies facilitate
servicing and upgrading, optimize the people’s
knowledge and experience and easily allow produc-
HEXPOL 43
Middlefield, Ohio, USA Statesville, North Carolina, USA
Qingdao, China
Eupen, Belgium Hückelhoven, Germany Gislaved, Sweden Unicov, Czech Republic
Aguascalientes, Mexico
Magog, Canada
tion to be moved between units. Each plant’s geo-
graphic proximity to its customers completes the
picture of a modern, professional compounder.
Recently acquired GoldKey Processing in Middlefield,
Ohio, USA, specializes in advanced elastomeric
applications outside the automotive industry, inclu-
ding applications for the aerospace, pharmaceutical
packaging and textile industries. As a result, Gold-
Key complements the Group’s other units.
The Group’s rapidly growing unit in the Czech Republic
is favourably positioned to meet market demand
from Central and Eastern Europe.
HEXPOL started operations at a new plant in Mexico
during the autumn of 2007. Some production equip-
ment from the plant in Canada was transferred to
the new unit. The plant got off to a good start and
production is increasing steadily.
HEXPOL’s new plant in China was placed in operation
during the summer of 2007. The purpose of the in-
vestment was to offer deliveries to existing customers
with operations in China. With these operations as a
base, the Group also plans to start cultivating local
customers. The establishment of the operations has
proceeded as planned.
Total production capacity for all Group units amounts
to approximately 191,000 tonnes of rubber compounds
annually.
44 HEXPOL
CompetitionThere are only a few large manufacturers of rubber
compounds with global operations, including Excel
Polymers, which is owned by a private equity company,
in the US, Mexico and China, the Canadian listed
AirBoss in North America and the German family-
owned Kraiburg in Europe and China. There are
also many, smaller manufacturers that operate locally.
The competition within rubber compounds consists
partly of customers with proprietary operations in
rubber compounds. However, due to cost and process-
technology considerations, there is a general trend
whereby small and midsize rubber companies are
facing growing difficulties in maintaining proprie-
tary production of rubber compounds, opting instead
to outsource a growing percentage of their operations
to HEXPOL Compounding production plants.
HEXPOL Compounding’s potential to offer a global
concept and cost-effective production of rubber com-
pounds is highly competitive, compared with local
and regional competitors or the in-house production
operations of customers.
Success factorsWith operations in Europe, NAFTA and Asia, HEXPOL
Compounding is a truly global player in the market
for rubber compounds. This is a strength since custo-
mers often have business activities in several regions
worldwide and recognize the advantages of
dealing with a global supplier that is also represented
in close proximity to many of its customers’ local
production units.
Other success factors include standardized production
equipment, internally developed and modern equip-
ment standards, and R&D expertise shared between
employees in virtually all parts of the world. HEXPOL
Compounding also has a centralized purchasing organi-
zation that generates volume and technology benefits.
Overall, this enables the Company to develop econo-
mically viable solutions for special applications and
to guarantee full technical service to its customers.
Future outlookHEXPOL Compounding aims to strengthen its leading
global market position as a developer and supplier of
high-quality rubber compounds to demanding custo-
mers, such as the automotive industry. The Company’s
strategy also focuses on increased sales in other de-
manding application areas, such as the cable, water
management, pharmaceuticals, energy and petroleum
industries. Currently, one of the challenges facing the
Group is to handle the raw material environment by
developing more cost-effective solutions or adjusting
market prices. HEXPOL Compounding is well-pos-
itioned for continued growth, both from a geographical
and application viewpoint.
HEXPOL 45
46 HEXPOL
HEXPOL 47
0
100
200
300
400
500
600
700
800
900
0
20
40
60
80
100
120
0
2
4
6
8
10
12
14
16
18
20072006200520042003
18 %
16 %
14 %
12 %
10 %
8 %
6 %
4 %
2 %
0 %
900
800
700
600
500
400
300
200
100
02003 2004 2005 2006 2007
28 %
37 %
69 %
120
100
80
60
40
20
0
For comments on profit trends see pages 70-71.
Operating profitSales
Net sales
Sales and operating profit, MSEK
Operating profit Number of employees
Supported by comprehensive expertise in polymers
and the production of rubber, plastic and poly-
urethane products, HEXPOL Engineered Products
has captured a position as one of the world’s
leading suppliers of sophisticated products such
as gaskets for plate heat exchangers and wheels
for the truck industry.
HEXPOL Engineered Products has a long history
as a manufacturer of rubber components. Based on
compounds produced in-house, the Group manufac-
tures finished rubber components through various
production methods such as extrusion and compres-
sion, transfer and injection moulding.
Business area HEXPOL Engineered Products
Operating margin
Business area’s share of the Group
Key figures 2007 2006 2005
Sales, MSEK 775 704 590
Operating profit, MSEK 110 62 74
Operating margin, % 14,2 8,8 12,5
Average number of employees1 536 1 447 1231
48 HEXPOL
OrganizationThe business area is divided into three product
areas: Gaskets, Wheels and Profiles. The business
area is managed from the Group’s head office in
Malmö, with the Gaskets and Profiles products
areas managed from Gislaved and the Wheels
product area from Laxå.
The product areas are relatively differentiated and
more detailed descriptions of each are presented in
the following section of this prospectus.
StrategyThe business strategy of Engineered Products focuses
intently on niche sectors that offer potential for the
business area to become one of the leading players.
The strategy is also formulated specifically to refrain
from product segments where HEXPOL Engineered
Products might run the risk of competing with its
customers within rubber compounds.
BrandsHEXPOL Engineered Products meets the customers
under a number of well-established brands. Gislaved
Gummi is a well-known and respected brand in
the entire global market for Gaskets. The Stellana
brand is also used internationally within Wheels,
while operations in Sri Lanka work under the
Elastomeric brand.
Success factorsThe Group’s comprehensive skills in materials
development and production technology provide
the foundation for the business area’s competitive-
ness and focus on high-quality products. All produc-
tion units include test laboratories.
Global presence through units in Europe, NAFTA
and Asia represents a strength factor in efforts to
cultivate internationally active customers.
In addition to local market presence, the units in
Sri Lanka and China provide access to competitive
production in terms of cost, since this type of produc-
tion is more labour-intensive than the operations of
HEXPOL Compounding.
HEXPOL Engineered Products concentrates on
the production of niched quality products, with
a strong focus on logistics, which creates competi-
tive advantages.
HEXPOL 49
Product areaHEXPOL GasketsHEXPOL Gaskets is one of the world’s leading supp-
lier of rubber gaskets for plate heat exchangers and
other applications. The gaskets are produced in
various sizes ranging from a few decimetres in
length to more than three metres. HEXPOL Gas-
kets focuses on high material performance and
precise gasket fit, which are key factors when
customers choose the Company’s products.
MarketThe market for HEXPOL Gaskets consists mainly of
manufacturers of plate heat exchangers. The market
is expansive, as the widespread interest in energy
savings and environmental issues are driving demand
for products manufactured by the product area’s
customers.
Particularly strong growth has been noted in gaskets
for plate heat exchangers for the market segment
comprising bio-fuels, oil and gas. During recent years,
HEXPOL Gaskets has benefitted from the continued
expansion of ethanol production units in the US and
Brazil. Since the industry is relatively new and energy-
intensive, the need for new plate heat exchangers is
considerable. Strong growth also characterizes the
segments comprising air conditioning and district
heating, driven in part by higher living standards in
developing nations. HEXPOL Gaskets is currently
a supplier to all major OEM manufacturers of plate
heat exchangers. The global market is dominated
by about ten major manufacturers. In addition,
rapid progress is now being made in China, where
a number of manufacturers are established. The
aftermarket is believed to account for about one-
fourth of today’s total market.
Technology and productsThe largest part of the product area sales comes from
gaskets for plate heat exchangers. The gaskets are manu-
factured through compression and injection moulding.
Meticulous demands for product quality present
a challenge for manufacturers of gaskets for plate
heat exchangers. An inferior gasket can incur very
substantial costs for the customer if the finished
heat exchanger has to be dismantled to replace the
faulty gasket. Accordingly, HEXPOL Gaskets devotes
highly determined efforts to constantly improving
the quality systems that control production. The
product area is certified in accordance with ISO
9000/14001. Development work conducted in close
cooperation with customers also helps to quickly
identify and correct potential problem areas. All
process parameters that are critical for product
quality and performance are also controlled through
technical coordination, and the gaskets are identical
regardless of production unit. Lead time from order
booking to series deliveries are minimized through
proprietary production of moulds for gasket manu-
facturing in Sri Lanka.
Business model and strategyThe constituent rubber compounds needed for the
product area’s manufacturing operations are purchased
internally within the Group and refined to create
products that are sold to OEM manufacturers. Low-
volume products, which are characterized by a high
level of customer adaptations, account a small per-
centage of total sales. The short series items are pro-
duced directly to customer order. Production planning
for volume products is based on customer forecasts,
which minimizes inventory costs, and deliveries are
50 HEXPOL
The gasket – a central and vital part of the plate heat exchanger
made directly from warehouses. Through Internet-
based solutions, customers are able to access inven-
tory balance figures, which provide increased
opportunities to plan their proprietary production.
Gaskets are produced in large volumes in Sri Lanka,
while gaskets in smaller volumes and advanced
material qualities are produced in Sweden.
OrganizationThe product area’s management team is situated in
Gislaved, which also serves as the base of global
sales management activities. Sales personnel have
been recruited to work at the Group unit in Qingdao,
which cultivates sales in the Chinese market. Deli-
veries to other markets in Asia are managed directly
The principle for a plate heat exchanger (PHE) is to
transfer heat. A plate heat exchanger consists of thin,
stamped plates comprising corrosion-resistant material,
mainly stainless steel and titanium. The entire package
of plates is compressed between two solid frames
equipped with long bolts. Gaskets between the plates
separate the flow so that one liquid flows in the even
plates, while the other liquid passes through the odd
plates. The gaskets eliminate any risk that the liquids
will be mixed together (see illustration above). Plate
heat exchangers are compact heat exchangers that
offer much higher degrees of efficiency than tube heat
exchangers. This means the required surface for a
plate heat exchanger corresponds to about 25 percent
of the surface area required for a tube heat exchanger.
A gasket-based plate heat exchanger has the advan-
tage over brazed or welded units in that they can be
separated. This is extremely important in connection
with food applications, but also in terms of achieving a
continuously high degree of efficiency, since coatings
develop over time in a heat exchanger’s flow channels.
HEXPOL has been manufacturing gaskets for plate
heat exchangers since 1967. The Company’s core
skills related to gaskets comprise materials develop-
ment, production processes, logistics and marketing.
HEXPOL Gaskets has worked in very close cooperation
with most of the world’s leading producers of heat
exchangers since the mid-1970s, with particular
emphasis on the development of new materials that
provide the gaskets with significantly higher performance
standards. As a result of such cooperation, HEXPOL
and the manufacturers of plate heat exchangers are
able to define the need for greater performance that
enables the manufacturers to reach a broader market
and formulate uniform requirement specifications.
Accordingly, HEXPOL Gasket’s mission is to develop
new materials to meet the defined requirements for
gaskets.
The materials always undergo accelerated tests in
laboratory environments that are often complemented
by field tests before the materials are approved. The
development of new materials is a lengthy process that
often extends over several years before approval for
series production is granted. HEXPOL owns exclusively
all of the recipe formulations that have been developed,
and the customer has no knowledge of them.
HEXPOL 51
Gislaved, Sweden
from the plant in Gislaved, or the plant in Sri Lanka.
All other gaskets manufactured in Sri Lanka are
shipped first to the central warehouse in Gislaved
before distribution to customers, along with gaskets
produced in Gislaved.
Operating unitsHEXPOL Gaskets has two gasket production units in
operation today, one in Gislaved, Sweden, and the other
in Sri Lanka. Due to the need for additional production
capacity and closer proximity to major customers, a
third production plant has been built in China. The
new unit will be placed in operation gradually during
the latter part of 2008. All production units are
equipped with modern production machinery, which
meets the requirements for rational and cost-effective
production.
Unit Location Number of employees Area, m2
Gislaved Gaskets Gislaved, Sweden 187 8 000
Elastomeric Gaskets Bokundara, Sri Lanka 637 7 000
HPG China Qingdao, China 15 8 000
Total 839 23 000
Bokundara, Sri Lanka Qingdao, Chiina
52 HEXPOL
China has been the fastest growing market for plate
heat exchangers for the past several years. Today,
many of the product area’s customers are already
established there and receive their gasket supplies
from HEXPOL Gaskets in Gislaved. The current
trend indicates that even more existing customers
will establish proprietary production in China.
Domestic production of plate heat exchangers in
China is growing rapidly, but the gaskets are often
low-performance products. Through the establishment
of proprietary operations in China, HEXPOL Gaskets
will narrow the gap to existing customers with their
own production in the country, but also gain much
better access to the domestic market. For customers
that place high demands on product quality, the
establishment of operations by HEXPOL Gaskets
will provide a welcome alternative to the present
domestic production. From a geographical perspective,
the plant in China is situated in a central location
that provides access to most domestic manufacturers
of plate heat exchangers.
During 2008, HEXPOL Gaskets will also establish
a functional laboratory in China to provide on-site
examples of the quality differences between different
gasket producers. An initial contract was signed in
the spring of 2008 for deliveries of gaskets to one
of the largest domestic manufacturers of plate heat
exchangers in China.
CompetitionIn addition to HEXPOL Gaskets, the product segment
includes only a few major suppliers, the most prominent
of which is the family-owned TRP in Great Britain,
Dubai and Romania. Some OEM manufacturers of
plate heat exchangers also have proprietary gasket
production operations. In this context, the HEXPOL
Group’s collective compounding and polymer expertise
is a critical competitive advantage.
Future outlookThe market for the product area is now in a highly
expansive phase, which provides scope for favourable
growth. Global energy demand is increasing steadily
and, combined with the growing interest in environ-
ment-friendly solutions, the need for energy-effective
technologies is creating strong demand for heat ex-
changers. With its innovative products and flexible
production structure, HEXPOL is positioned favou-
rably as a supplier to the most successful players.
The Group’s position provides favourable potential
to indirectly increase its market share through
growth in parallel with customers, both in existing
markets and completely new markets. A priority,
however, is to balance this business growth with
increased sales to a larger number of customers
in order to avoid excessive dependence on a few
customers.
Increased globalization is another factor driving
demand for plate heat exchangers. As globalization
proceeds, the number of marine cargo transports
is also increasing, which is enhancing demand for
ocean-going vessels equipped with a large number
of plate heat exchangers to cool engines, and to
provide onboard comfort (heating/air conditioning).
It is extremely important that customers under-
stand the significance of the powerful technological
skills offered by suppliers of polymer products, and
that they regard HEXPOL Gaskets as the leader in
this area. This applies in particular to new emerging
markets such as China, Russia and Brazil. These
markets include large numbers of small local manu-
facturers of heat exchangers that may become acqui-
sition targets of larger global players. It is important
that HEXPOL Gaskets is already a supplier to the
companies that may be acquired, or the natural
choice as a new supplier following an acquisition.
The success of HEXPOL Gaskets in achieving its
goals is totally dependent on efforts to maintain
the very high quality it offers customers in terms
of delivery reliability and product quality. The
HEXPOL Group’s vision of being a market leader
in areas where it conducts business operations
also creates an internal focus that enhances the
achievement of these goals.
HEXPOL 53
Product areaHEXPOL WheelsHEXPOL Wheels is a leading player in the global
market for wheels made of polyurethane, plastic
and rubber. The largest customers in this pro-
duct area are producers of electric trucks and
forklifts as well as castor wheel manufacturers.
The business area also produces different types
of special wheels for other applications, including
wheels for tracked vehicles, wheels that tolerate
high temperatures in baking ovens and wheels
for conveyor belts. The wheels are produced in
Sweden, the US, Sri Lanka and China.
MarketMost customers are manufacturers of trucks and
castor wheels. A consolidation process is now in
progress in the expansive lifting truck market,
which is dominated by a handful of major players.
Global sales of new trucks during 2006 amounted
to 825,000 units divided between counterbalanced
trucks and electric warehouse trucks. The secondary
market comprising spare parts and new wheels is
critical in terms of size. The market for warehouse
trucks is dominated mainly by Western European
and North American manufacturers, although several
of these companies are owned by Japanese business
interests. The market for castor wheels is not charac-
terized by the same degree of consolidation and, in
addition to a limited number of major players, includes
a large number of locally active companies in all parts
of the world.
The operations of HEXPOL Wheels are conducted
mainly in the following four areas:
• Polyurethane wheels and solid tyres for forklifts
• HEXPOL Wheels is one of the three largest
manufacturers of cast polyurethane wheels for
warehouse trucks in Europe. HEXPOL Wheels
is one of the four largest manufacturers in
NAFTA.
• In the segment comprising solid tyres for
counterbalanced trucks, HEXPOL Wheels
is a minor player focused on the aftermarket.
• Thermoplastic wheels for hand pallet trucks
• HEXPOL Wheels is the leading supplier of plastic
and polyurethane wheels for hand pallet trucks
in Europe and NAFTA. An ongoing trend reflects
the transfer of production of hand pallet trucks
to Asia (primarily China) and, during 2007,
HEXPOL established production operations in
Qingdao, China.
• Castor wheels
• HEXPOL Wheels is the market leader in Europe
for natural rubber castor wheels.
• HEXPOL Wheels also has a strong position in
the segment comprising thermoplastic and
polyurethane castor wheels. This market, how-
ever, is more fragmented than the market for
warehouse trucks.
• Other
• With its comprehensive know-how in polymer
materials, HEXPOL Wheels is also a niche supp-
lier of various other products, including track
pads for tracked-wheel tractors and sealing strip
for windows.
Technology and productsHEXPOL Wheels offers customers a broad product
palette of wheels in several different materials with
different properties, such as polyurethane, natural
rubber, thermoplastic and thermosets.
54
By combining first-class raw materials with continuous
supervision of the entire production process, extremely
high-quality products are produced. Modern injection
moulds and a high degree of automation provide effi-
cient production that yields competitive moulding
machines products.
Five types of products are produced by Wheels:
• Polyurethane wheels
• Thermoplastic wheels
• Rubber wheels and tyres
• Solid rubber tyres
• Various special products comprising the materials
presented above
The choice of materials is based on the desired, specific
properties. Examples include strength and durability,
temperature sensitivity, surface friction and driving
comfort for the truck operator, as well as contradictory
preferences that must be considered in relation to
each other when choosing the optimal blend. Depen-
ding on the intended purpose of the wheel, widely
varying demands can be imposed. For warehouse trucks,
Vulkollan is the market-leading polyurethane material
in Europe. It is highly durable and able to tolerate high
load factors without losing its shape. The Vulkollan
brand is owned by Bayer Material Science, and rights
to use the materials are licensed to a number of app-
roved manufacturers, including HEXPOL Wheels, which
has produced Vulkollan wheels since the early 1960s.
Today, HEXPOL Wheels is one of the leading producers
of Vulkollan wheels for industrial truck manufacturers.
HEXPOL Wheels’ laboratory is equipped with a
testing device that provides the business area with
a leading position in the development of new wheels.
The test simulates how a truck is driven and is used
to test various wheel properties. The equipment
enables HEXPOL Wheels to actively support the
development of wheels for new truck models.
Truck wheels are normally equipped with metal hubs,
which are purchased from external suppliers, mainly
in Eastern Europe but also in China. Hub priming,
or painting, which secures adhesion between the hub
and the polyurethane, is an important stage in the
production of wheels with metal hubs.
Vulkollan wheels for
trucks and high-load
castor wheel applica-
tions.
Solid rubber wheels for
counterbalanced trucks
provide driving comfort
for the operators and
good surface friction.
Castor wheels for
shopping carts with
rubber tread on plastic
hubs.
Thermoplastic wheels
with polyurethane roller
conveyors for hand pal-
let trucks.
Rubber tyres for castor
wheels.
HEXPOL 55
Unit Location Number of employees Area, m2
Stellana Sweden Laxå, Sweden 104 8 000
Stellana US Lake Geneva, Wisconsin, USA 60 6 660
Elastomeric Wheels Horana, Sri Lanka 494 2 500
Stellana China Qingdao, China 12 1 080
Total 670 18 240
Business model and strategyIn its capacity as a product specialist, HEXPOL
Wheels’ business concept is to develop, manufacture
and market wheels for transport and material-hand-
ling applications. The business model includes the goal
of serving as a natural choice mainly for large manu-
facturers of trucks and offering competitive products
for replacing used wheels on existing trucks.
HEXPOL Wheels has many years of experience in the
industry and of cooperating with key customers. As
opposed to most of its competitors, HEXPOL Wheels
has a global presence that enhances the Company’s
value as a cooperation partner in the expansion plans
of its customers. The establishment of a production
plant in China was made in part to support a multi-
year agreement with a customer who also wanted
HEXPOL to serve as its supplier in the Chinese mar-
ket. With these operations as the base, the domestic
Chinese market can now be cultivated locally.
OrganizationHEXPOL Wheels consists of four units and is managed
from Laxå, Sweden. Most marketing operations are
conducted regionally, with Stellana in Sweden assuming
responsibility for Europe while the NAFTA market is
managed by the unit in the US and Elastomeric Wheels
in Sri Lanka manages marketing operations in Asia.
The Chinese market is cultivated from the unit in China.
Operating unitsHEXPOL Wheels has four operating units: Laxå in
Sweden, Lake Geneva in WI, USA, Horana in Sri
Lanka and Qingdao in China.
Stellana Sweden situated in Laxå, Sweden, is a
major player in the global market for wheels for
electric trucks and fork lift trucks. A comprehensive
test data bank has been developed through many
years of experience in designing wheels, and the
Company also has a sophisticated wheels laboratory.
Supported by the laboratory, HEXPOL Wheels is a
leader in the development of new truck models and
is able to optimize all properties of the truck wheels.
Cast polyurethane (including Vulkollan) and polya-
mide wheels are produced in Laxå, as well as limited
volumes of rubber and thermoplastic wheels.
Stellana US in Lake Geneva, Wisconsin, USA, is
a major supplier of cast polyurethane wheels and
tyres for electric trucks and general industrial appli-
cations. During recent years, Stellana US has attrac-
ted attention in the US through several new product
launches, including Smoothy™.
Elastomeric Wheels situated in Horana, Sri Lanka,
manufactures and delivers rubber wheels for castor
wheels and solid rubber tyres throughout the world.
The plant encompasses the entire spectrum of
machinery for the production of cast rubber pro-
ducts, including internal mixers and form-moulding
machines for the production of complete wheels with
thermoplastic hubs.
Construction of the Stellana China production plant
started toward the end of 2006 and operations were
initiated during the third quarter of 2007. The plant
is equipped for series production of thermoplastic
polyamide wheels. In the future, the plant will also
be equipped to produce polyurethane wheels. At the
present time, the unit has not been assigned any
global product responsibility, operating instead
within Stellana Sweden’s area of business.
56 HEXPOL
Laxå, SwedenLake Geneva, Wisconsin,USA
Horana, Sri Lanka Qingdao, China
CompetitionHEXPOL Wheels is one of the world’s largest players
in the product segment comprising wheels. There are
about 10 major manufacturers of polyurethane wheels in
the world, including HEXPOL Wheels. The Company’s
main competitors are the German family-owned
Räder-Vogel and Wicke in Europe, the latter having
a caster wheels factory in China and the family-owned
Thombert in North America. Other competitors consist
mainly of locally active, family-owned companies.
The relatively fragmented market offers opportunities
for continued growth through acquisitions.
HEXPOL Wheels is the market leader in Europe for
natural-rubber castor wheels, and competes mainly
with a number of low-cost manufacturers in China,
the largest of which is Hong Xing Castors.
Future outlookHEXPOL Wheels sees good potential for business
growth. Efforts to increase volumes have the highest
priority and this will be achieved through increased
market shares and growth in the underlying mar-
ket. These efforts will be made possible by continued
growth in global trade, which is creating increased
demand for materials handling and, in turn, greater
demand for the Group’s products and equipment for
the materials-handling industry.
HEXPOL 57
Product areaHEXPOL ProfilesThe product area comprises the niche operations
conducted by HEXPOL Profiles, which produces
extruded products in the form of thin-walled
profiles primarily for customers in the Scandina-
vian market.
MarketThe market consists mainly of Scandinavian manu-
facturers of products for the construction industry
and other engineering industries.
Technology and productsThe niche market segment for HEXPOL Profiles
comprises thin-walled, rubber and silicone profiles
manufactured through a modern extrusion process
to meet customer-specific requirements. Production
also includes spliced sealing rings for the ventilation
industry. Products manufactured by HEXPOL Profiles
are characterized by high quality standards that are
verified continuously in the production process.
HEXPOL Profiles concentrates mainly on customers
that require larger volumes.
Business model and strategyThe rubber compounds used in the extrusion process
are purchased internally within the HEXPOL Group.
HEXPOL Profiles shall be perceived by the market
as a cost-effective manufacturer that creates added
value through quality, competence and delivery
reliability. Competitive advantages are also created
through HEXPOL’s unique materials expertise,
which provides cost and performance advantages.
HEXPOL Profiles offers its customers individually
customized logistics solutions ranging from traditional
customer order-controlled production to solutions
whereby HEXPOL Profiles replenishes customer
inventories.
OrganizationOperations are concentrated in Gislaved where the
business area has a proprietary organizational
structure for the entire production flow and sales.
Overall business management is shared with other
operations in Gislaved, however.
Operating unitsThe operations are conducted in close affiliation
with compounding operations in Gislaved.
CompetitionThe Scandinavian market for profiles is dominated
by Trelleborg, but a number of major international
manufacturers are also active in the product seg-
ment. HEXPOL Profiles is positioned as Number 2
in the Scandinavian market.
Future outlookA small number of major customers account for a
significant percentage of the product area’s sales,
which presents a serious challenge to expand the
operations. Since the competition comes mainly
from much larger players, considerable importance
must also be assigned to continuous development
of productivity and quality.
Unit Location Number of employees Area, m2
Gislaved Profiles Gislaved, Sweden 28 5 700
Total 28 5 700
58 HEXPOL
HEXPOL 59
Trends and future outlook
This section contains forward-looking statements
based on evaluations and calculations by the Board
of Directors and executive management. HEXPOL’s
true profits may deviate from forecasts presented in
this section due to a large number of factors,
including but not restricted to risks presented in
the section “Risk factors” on pages 11-16.
HEXPOL is active in global markets believed to
offer long and short-term growth potential for the
HEXPOL Group and its customers. Three sectors of
particular prominence are the energy, automotive
and materials-handling industries.
• The need for energy-effective solutions is increa-
sing constantly in the expanding energy sector.
This growth is creating demand for modern heat
exchangers for which HEXPOL’s products com-
prise important components.
• In large parts of the world, with particular
emphasis on rapid-growth markets in Eastern
Europe, China and India, the need for and sales
of passenger cars is increasing steadily, creating
opportunities for HEXPOL as a strategic partner.
HEXPOL has strong, long-term business relations
with most of the global systems suppliers, and
the Group’s products are used by most global
OEM manufacturers. Through modern produc-
tion units in all major markets, particularly
with new units in the aforementioned emerging
markets, the Group is also favourably positioned
for growth.
• The ongoing globalization of world trade is
creating strong growth in materials and cargo
handling, and the Group’s products are already
used in the highly expansive materials-handling
industry.
Overall, these factors provide HEXPOL with favou-
rable growth opportunities over the short and long
term.
HEXPOL has noted very strong growth for a number
of years, with good margins by industry standards.
The Company has strong global market positions
with well-known brands. To meet the growing
demand from customers, the Group has invested in
its production plants and new production capacity.
HEXPOL also recently established units in such
interesting emerging markets as China and Mexico,
which provide the Company with distinct competi-
tive advantages and greater flexibility. The Group’s
executive management and management teams
within the respective business areas are highly
experienced, and HEXPOL’s Board of Directors has
comprehensive industrial and financial experience.
Executive management and the Board of Directors
are presented on pages 131-137.
These factors, combined with a continued acquisition-
oriented focus, whereby acquired companies are
successfully integrated into the Group, provide
HEXPOL with a strong platform for continued
favourable development.
HEXPOL 61
0
10
20
30
40
50
60
70
80
90
100
0
200
400
600
800
000
200
400
0
500
1000
1500
2000
2500
0%
10%
20%
30%
40%
50%
60%
2007
2007
2006
2006
2005
2005
2500
2000
1500
1000
500
0
60 %
50 %
40 %
30 %
20 %
10 %
0%
100 %90 %80 %70 %60 %50 %40 %30 %20 %10 %
0 %
1400
1200
1000
800
600
400
200
0
2005 2006 2007
Asia Europe NAFTA
Sweden Belgium CzechRepublic
Germany Mexico Canada USA China Sri Lanka
Women
Proportion men and women
Geographic distribution of employees 2007,
Average number
Average number of employees
Geographic trend of the proportion of employees
Men
Key ratios 2007 2006
Number of employees 2 327 2 016
Average number of employees 2 120 1 933
Number of countries 9 8
Employees outside Sweden,% 83 82
Personnel costs, MSEK 410 352
The competency and experience of employees are
critical factors for the successful pursuit and realiza-
tion of the goals of the daily operations.
To achieve successful research and development,
corporate culture plays an important role. It involves
ensuring the right outlook and attitude. As an indi-
vidual, you have to dare to fail in order to succeed.
It is management’s task to create a positive working
climate in a true entrepreneurial spirit that will
encourage creativity and innovation. HEXPOL
encourages participation and strives to involve all
employees in improvement work and also aims at a
non-bureaucratic culture with rapid decision routes.
Personnel
62 HEXPOL
Global Group with local presenceHEXPOL’s management philosophy is based on
professionalism and trust. In order to achieve
increased profitability and the financial objectives,
good leadership and motivated employees are
essential.
HEXPOL represents a dynamic workplace with
employees worldwide. In the management groups
for HEXPOL’s business and product areas, more
than 10 nationalities are represented. For a global
company like HEXPOL, local competency is necessary
and crucial to the success of a specific geographic
market.
For HEXPOL, diversity is about mutual respect.
The corporate culture also embraces professionalism,
competency, ambition, loyalty and creativity. It is
management’s task to create a positive working
climate in a true entrepreneurial spirit to encourage
innovation.
The average number of employees at HEXPOL in
2007 was 2,120, including five in the Parent Company.
The number of employees within the Group at the end
of 2007 totalled 2,327. The proportion of employees
outside Sweden was 83 percent and the proportion
of women was 13 percent.
Recruitment and competency developmentHEXPOL’s employees work in research and develop-
ment, marketing, sales, administration and production.
The high level of technology requires qualified and
highly educated employees.
As a result of HEXPOL’s conviction concerning the
importance of true local presence in the geographic
market, recruitment occurs primarily locally.
HEXPOL’s employees have the right to form and
join trade unions and are entitled to collective
negotiations. Employees also have full insight
and right of codetermination in accordance with
regulations in national legislation.
Within HEXPOL, professional competency develop-
ment is connected to the individual’s situation.
Senior executives undergo individual manager
development programs.
To further utilize the Group’s collective competency,
HEXPOL works in a focused and systematic manner
with networks between the companies and across
business area borders. Researchers and engineers
from operations worldwide meet regularly to discuss
Group-wide research and development projects.
Another example is the annual management confe-
rence at which the Group’s top executives gather
to get to know each other’s operations and markets
better.
Equality and work environmentHEXPOL’s work environment shall be stimulating
and developmental. Naturally, it shall also fulfil
existing legal requirements. No employee shall be
discriminated due to gender, religion, disability,
sexual preference, nationality, political view or
social or ethnic origin.
Measures to ensure employees’ health and safety
are driven based on local conditions and regulations.
HEXPOL’s work on improving the work environment
is conducted in cooperation between employer, emp-
loyees and the trade union organizations.
RemunerationSince the right person could be crucial to HEXPOL’s
success in a business segment or a geographic market,
market-based and competitive remuneration are
vital to HEXPOL. Variable remuneration connected
to the profit trend that can be influenced by the indi-
vidual is paid in parts of the Group. Personnel costs
for 2007 amounted to 410 MSEK.
HEXPOL
HEXPOL 65
Environmental care creates business value
HEXPOL’s fundamental principle is that the activi-
ties shall not harm the environment or have a
negative impact on human health. During pre-
vious years progress has been made concerning
a number of environmental issues. HEXPOL is,
how-ever, convinced that society’s – and it’s own
– ambitions concerning continual improvement
will increase. As a result of it’s environmental
work HEXPOL also see’s business opportunities.
Focus on the significant environmental aspectsDirect and indirect environmental impacts are the
results of HEXPOL’s operations, at 15 plants in 9
countries. Examples of direct environmental aspects
are energy consumption, use of fossil raw materials,
handling of hazardous chemicals, emission of pollu-
tants and greenhouse gases to the atmosphere, and
generation of waste. The activities of suppliers,
transport of raw materials and finished products,
and the use of our products, are examples of indirect
environmental aspects. Important occupational
health and safety aspects are, for example, exposure
to dust, hazardous chemicals and noise, heavy lifting,
repetitive work, and workplace accidents. In the
Environmental Policy HEXPOL highlights areas of
special importance for the company to work further
with.
Continual improvementSince several years, the different manufacturing sites
have managed environmental issues. Important driving
forces are environmental legislation, possibilities to
more efficient use of resources and energy, image
issues, increasing awareness among managers and
employees concerning environment, health and safety,
and increasing environmental requirements from
customers. In the latter case, requirements presented
by the automotive industry are of special importance.
Here are some examples of what the company has
achieved in the environmental field during recent
years:
• In the HEXPOL Compounding Business Area
several of the plants were recently constructed.
Irrespective of where on Earth this took place,
most appropriate techniques were applied. This
includes, for example, energy recovery, filtration
of outlet process emissions, reduction of water
consumption, and efficient management of waste.
• In HEXPOL Compounding there are ongoing
efforts to reduce the use of chemical substances
that are hazardous to the environment and
human health. Examples are the reduced use of
zinc oxide, the phasing out of lead compounds,
the introduction of nitrosoamine free curing
systems, the replacement of highly aromatic
process oils (HA oils) with paraffine oils, and
that certain phtalates (DOP) are on their way
to be substituted.
• Many activities have been implemented to
manage waste products. One example is the
reuse of waste rubber in certain product groups.
Environmental legislationIn the countries where HEXPOL operates the manu-
facturing plants are subject to environmental, health
and safety legislation. In Sweden the operations are
subject to licences according to the Environmental
Protection Act. Monitoring programmes and inspec-
tions are implemented to ensure compliance with
66
environmental licences. The environmental perfor-
mance of the Swedish plants is annually reported to
the supervising authorities. At the plant in Gislaved
there is one open environmental licence condition
concerning emissions of curing fumes. It is not known
if the final conditions may result in installation of
emission abatement equipment. The plants in Czech
Republic, Belgium, Germany, Canada, the US, Mexico,
Sri Lanka and China are subject to integrated envi-
ronmental licences, or specific licences for different
environmental aspects. It is not expected that
ongoing or future applications for environmental
licenses will result in specific measures.
Concerning occupational health and safety HEXPOL
continually works to reduce the number of work-
place accidents, to minimise the exposure to dust
and chemicals, and to reduce noise at workplaces.
At a number of plants, industrial hygiene activities
include frequent health surveys and workplace
monitoring programmes.
REACH legislationIn EU the REACH legislation concerning chemical
products is now under implementation. Gradually
it will cause significant impact on companies that
handles chemical products. The basic idea of the new
legislation is that hazards with chemicals should be
identified as early as possible. The industry has
therefore been given the responsibility to provide
information concerning hazardous and risks. In
HEXPOL it is primarily the HEXPOL Compounding
Business Area that is affected by REACH. HEXPOL
has therefore allocated resources to analyse the con-
sequences of REACH and to implement relevant
measures. As a first step HEXPOL ensures that all
chemicals that are used in it’s compounds, are inclu-
ded in the ongoing preregistration process. HEXPOL
Compounding has therefore contacted all its suppli-
ers of chemicals and asked each supplier to affirm
that the specified chemicals will be registered for
the use in rubber products.
Environmental risksRequirements on precautionary environmental mea-
sures and to restore damaged environments may
cause substantial costs for a company. In this area,
clean-up of contaminated land, and the management
of asbestos related problems, are well know examples.
HEXPOL has conducted an overall risk assessment
concerning the occurrence of any contaminated land
and the presence of asbestos containing materials.
HEXPOL is not aware of contaminated land at any
of the premises that are owned by HEXPOL. Several
of the plants are recently constructed at land (“green-
field”) where no polluting activities have occurred in
the past. Underground storage tanks are not present,
and there are no records of spills, leakage, or acci-
dents with oils, solvents or chemicals. As a part of
the due diligence process during acquisition of com-
panies, environmental audits have been carried out.
Based on the present level of knowledge the risk
HEXPOL
for contamination of soil and groundwater at the
new plants is assessed as “low”. At the older plant
the risk is assessed as “low/medium”. Note: Intrusive
soil and groundwater sampling has not been carried
out at any of the premises.
Concerning asbestos containing materials the proba-
bility is very low that such materials are present at
the new plants. At some of the older plants asbestos
surveys have been carried out showing no presence
of asbestos. Concerning the remaining older plants
it is assumed that asbestos is not at all present,
or present only in limited quantities, in buildings
and installations. HEXPOL considers the probability
that asbestos containing materials are present
in HEXPOL’s facilities as “low”.
Business opportunitiesHEXPOL’s judgement is that the awareness in society
concerning environmental care and sustainable
development will remain high in society. By being
resource efficient and proactive HEXPOL will furt-
her reduce its environmental impact and strengthen
the Group’s image and economic performance. In
addition to that HEXPOL anticipates that the increasing
environmental requirements will be beneficial for
the sales of a number of HEXPOL’s products. Here
are some examples:
• Since a long time ago HEXPOL complies with the
requirements from the automotive industry that
rubber and other polymers must be free from
certain hazardous chemicals. HEXPOL is there-
fore well prepared to meet similar requirements
from other industrial sectors, for example, the
construction industry.
• Interest in energy savings and climate change
issues is high and in the Product Area Gaskets
the market for plate heat exchangers is very
expansive.
• The build-up in the US and Brazil of capacity
for production of ethanol for vehicles has been
very beneficial for HEXPOL. Also in the area of
district heating there is a strong development.
In such equipments, HEXPOL’s gaskets are key
components. These are good examples where
environmental care and business opportunities
walk hand in hand.
You need commitment, systematic methods and a
long-term perspective to achieve results concerning
sustainable development. Such prerequisites are
present among HEXPOL’s management and employees.
By implementing environmental management systems
HEXPOL gets a useful and credible tool in the daily
work. HEXPOL is convinced that environmental
care creates business value.
68 HEXPOL
Condensed financial informationfor 2005-Q1 2008, includingcomments on the financial trend
Amounts in MSEK Q1 2008* Q1 2007* 2007** 2006** 2005**
Condensed income statementNet sales ......................................................... 852 656 2 730 2 488 2 205Operating expenses ........................................... -769 -587 -2 425 -2 283 -1 950Operating profit ................................................ 83 69 305 205 255Financial items ................................................. -12 -7 -50 -39 -23Profit before tax ............................................... 71 62 255 166 232Tax ................................................................. -21 -18 -69 -48 -70Net profit ......................................................... 50 44 186 118 162
Condensed balance sheet***
Total assets ..................................................... 2 809 2 153 2 795 2 027 2 003Intangible fixed assets ....................................... 1 091 844 1 134 827 883Tangible fixed assets ......................................... 710 551 735 511 492Financial fixed assets ......................................... 2 2 2 2 2Current assets ................................................. 1 006 756 924 687 626Shareholders’ equity .......................................... 1 002 949 1 025 883 881Long-term liabilities ........................................... 1 256 715 1 324 869 848Current liabilities ............................................... 551 489 446 275 274
Condensed cash-flow statementCash flow from operations .................................. 84 27 265 179 135Investments in intangible fixed assets ................... -2 0 -9 -3 -1Investments in tangible fixed assets ..................... -26 -46 -164 -121 -66Acquisition of subsidiaries .................................. - - -350 - -25Cash flow from financing activities ....................... -55 -5 370 -18 -52Change in cash and cash equivalents ................... 1 -24 112 37 -9Cash and cash equivalents at the end of the period ... 229 92 228 116 79
Key dataAverage shareholders’ equity .............................. 1 013 916 953 882 830Average capital employed ................................... 2 382 1 758 2 136 1 757 1 571Profit margin before tax (%) ............................... 8,3 9,5 9,3 6,7 10,5Return on shareholders’ equity, (%) ..................... 19,7 19,2 19,5 13,4 19,6Return on capital employed, (%) .......................... 15,1 16,4 15,1 12,1 16,8Net sales growth (%) ......................................... 29,8 3,2 9,7 12,8 36,6Operating margin (%) ........................................ 9,7 10,5 11,2 8,2 11,6Profit per share (SEK) ....................................... 1,88 1,66 7,01 4,44 6,10
HEXPOL 69
Definitions:
Return on equity Net profit as a percentage of average shareholders’ equity.
Return on capital employed Operating profit plus financial income as a percentage of average capitalemployed.
Net sales growth Change as a percentage of netsales compared with the year-earlier period.
Sales per employee Sales divided by the averagenumber of employees.
Operating margin Operating profit divided by netsales.
Debt/equity ratio Interest-bearing liabilities lesscash and cash equivalents divided by shareholders’equity at the end of the period.
Equity/assets ratio Shareholders’ equity as a percentage of total assets at the end of the period.
Capital employed Total assets less non-interest-bearing liabilities.
Profit margin before tax Profit after financial itemsas a percentage of net sales.
Profit per share Net profit divided by thenumber of shares after the listing.
Comments on the financial trendA summary of comments on the HEXPOL Group’s
financial trend during the past three years is pre-
sented below.
Although sales show no distinct seasonal variations, it
is influenced by the manner in which the number of
working days is distributed throughout the year.
Q1 2008 compared with Q1 2007Consolidated sales increased during the first quarter
2008 by 30 percent to 852 MSEK (656). Currency
effects were a negative 18 MSEK, primarily due to
a weakening of USD.
Operating profit increased by 20 percent to 83 MSEK
(69), corresponding to an operating margin of 9.7
percent (10.5). Costs for the new plants started up in
China and Mexico within the HEXPOL Compounding
business area were charged against profit for the
quarter. Without these units, the operating margin
was 10.4 percent (10.8).
In the HEXPOL Compounding business area, sales
increased by 41 percent to 648 MSEK (460) and ope-
rating profit increased 28 percent to 55 MSEK (43).
Volumes were generally strong during the first quarter,
particularly in Europe, at the same time as newly
acquired GoldKey contributed strongly.
The HEXPOL Engineered Products business area in-
creased its sales by 4 percent to 204 MSEK (196).
Operating profit amounted to 28 MSEK (26), up 8
percent. The trend within the business area was po-
sitive, with continued favourable growth in Gaskets.
In Asia, the positive trend in Sri Lanka continued
Amounts in MSEK Q1 2008* Q1 2007* 2007** 2006** 2005**
Capital structureDebt/equity ratio (%) ......................................... 1,1 0,8 1,1 0,8 0,8Equity/assets ratio (%)....................................... 35,7 44,1 36,7 43,6 44,0
Employees Average number of employees ............................ 2 315 2 128 2 120 1 933 1 691Number of employees at the end of the period ......... 2 337 2 124 2 327 2 016 1 760Sales per employee ........................................... 0,37 0,31 1,29 1,29 1,30
* Non revised or audited figures
** Audited figures.
*** Financing changed after the most recent closing date. For current indebtedness, refer to page 73.
70 HEXPOL
1 Information about a comparable Group compare the Group excluding companies acquired during the year with
full-year figures for the corresponding Group in the preceding year. Companies acquired during a year in pro-
gress are included for the entire year, when comparisons are made with following year.
and the new plants in China for the Wheels product
area and the HEXPOL Compounding business area
are now gradually increasing production. Raw mate-
rials prices continued to increase during the first
quarter. The impact on profits was marginal, how-
ever, as a result of extensive measures that included
revised material formulas, changed suppliers and
price increases. Consolidated operating cashflow
increased during the first quarter and was a positive
56 MSEK (-19). The strong cash flow was achieved
through reduced working capital, profit improve-
ments and a lower rate of investment. The Group’s
net financial items during the first quarter amounted
to an expense of 12 MSEK (expense: 7).
For further information, reference is made to the
section Interim report January-March 2008, on
page 90.
2007 compared with 2006The Group’s sales increased by 10 percent to
2 730 MSEK (2 488) during 2007. Acquired units
during the year accounted for 148 MSEK of sales.
Sales for the comparable Group1 increased by 94
MSEK. Operating profit increased by 49 percent to
305 MSEK (205), corresponding to an operating
margin of 11.2 percent (8.2). The sharp improvement
was mainly attributable to improved margins within
the HEXPOL Engineered Products business area.
The average number of employees in 2007 was 2 120
(1 933). The increase in the number of employees
occurred through the acquisition of GoldKey and the
newly started units in China and Mexico. During
2007, capacity was good in most of the production
plants and, combined with increased productivity,
contributed to improved margins.
On 1 September 2007, HEXPOL acquired the US
custom rubber compound company, GoldKey Proces-
sing Ltd. GoldKey produces rubber compounds for
industrial operations as well as the automotive,
building, pharmaceutical and aircraft industries.
The Company’s production plant has a capacity of
40,000 tonnes per year. GoldKey’s head office is located
in Middlefield, Ohio, the US. The Company has ap-
proximately 160 employees. Since September 2007,
GoldKey is included in the HEXPOL Compounding bu-
siness area.
The Group’s operating cash flow increased, due to
the improved results during 2007, by 67 percent
to 92 MSEK (55). The Group’s net financial items
during 2007 amounted to an expense of 50 MSEK
(expense: 39). Profit before tax increased to 255 MSEK
(166). Profit after tax increased by 58 percent to
186 MSEK (118).
Analysis
Compared with 2006, currency effects had a nega-
tive impact on sales of 68.6 MSEK or 2.5 percent.
The devaluation of the US dollar had by far the
greatest impact. However, profit were positively
affected by exchange-rate fluctuations amounting to
2.8 MSEK. The trend of the Sri Lankan rupee was
the primary reason for the positive effect.
Raw material prices continued to rise during 2007,
although at a somewhat reduced rate than in the
preceding year. However, price increases gathered
momentum during the latter part of the year, alt-
hough the Company was better at offsetting price
increases by reformulating formulas, productivity
improvements and by passing on cost increases to
customers.
2006 compared with 2005Consolidated sales increased by 13 percent to 2 488
MSEK (2 205). Sales for the comparable Group in-
creased by 219 MSEK. Operating profit amounted
to 205 MSEK (255), corresponding to an operating
margin of 8.2 percent (11.6).
The average number of employees during 2006 was
1 933 (1 691). The increase was primarily due to
HEXPOL 71
increased staffing in Sri Lanka. In the HEXPOL
Compounding business area, the production plant
in Canada was affected by declining demand for
rubber compounds for sealing systems for auto-
motive applications during the year, due to a decline
in parts of the North American automotive industry.
In 2006, the North American automotive industry
moved portions of its operations to Mexico, which is
why HEXPOL Compounding hastened the establish-
ment of its production plant in Mexico.
The Group’s operating cash flow was reduced during
2006 followed by a weakened result of 18 percent
during 2006 to 55 MSEK (68) as a consequence of
the decling profit level. The Group’s net interest
items amounted to an expense of 39 MSEK (expense:
23). Profit before tax amounted to 166 MSEK (232).
Profit after tax amounted to 118 MSEK (162).
Analysis
Currency effects had a negative impact of 4.0 MSEK
on sales compared with 2005. However, profit were
positively impacted by exchange rate fluctuations in
an amount of 3.3 MSEK. The Company’s negative
net flow of Sri Lankan rupees, which weakened in
2006, was the primary reason for the positive effect.
The operating margin in 2006 decreased due to the
extremely high prices for raw materials. Above all,
price increases and capacity shortages in the pro-
duction of oil-based raw materials such as carbon
black and EPDM had a negative impact on opera-
tions. In order to minimize the negative effects of the
raw material price increases as far as possible, the
Company focused on enhancing the efficiency of
production, developing more cost-effective compound
formulas and transferring cost increases to customers.
2005 compared with 2004During 2005, sales increased by 37 percent to 2 205
MSEK (1 615). Units acquired during the year accoun-
ted for 32 MSEK of sales. Sales for the comparable
Group increased by 246 MSEK. Operating profit in-
creased to 255 MSEK (199), corresponding to an
operating margin of 12 percent (12).
The average number of employees during 2005 was
1 691 (1 542) and the increase was primarily attri-
butable to employees from the Thona acquisition in
2004 impacting the full year in 2005. On 1 September
2005, the Company acquired the wheel division of
Trostel SEG in Lake Geneva, Wisconsin, USA. This
acquisition resulted in the HEXPOL Wheels product
area establishing itself in NAFTA with proprietary
production, primarily within the wheel segment for
indoor trucks. The acquisition led to an annual sales
increase of approximately 100 MSEK. The new com-
pany in the US was Stellana U.S. Inc. In November,
the fourth mixing line was put into operation in the
Czech Republic, which entailed a capacity increase
from 24,000 to 32,000 tonnes of rubber compounds
per year.
The Group’s operating cash flow decreased during
the year, mainly due to increased working capital,
by 22 percent to 68 MSEK (87). The Group’s net
interest items during 2005 amounted to an expense
of 23 MSEK (expense: 21). Profit before tax amounted
to 232 MSEK (178). Profit after tax amounted to
162 MSEK (124).
Analysis
Currency effects had a positive impact of 49.1 MSEK
or 2.3 percent on sales compared with 2004. Profits
were positively impacted by exchange rate fluctua-
tions, which affected profit by 8.6 MSEK. A strong
CAD and EURO offset the effects of a stronger Sri
Lankan rupee. The reason for the unusual strengt-
hening of the rupee was the inflow of foreign curren-
cies into Sri Lanka due to tsunami contributions.
During the first half of 2005, raw material prices
were stable, during the second half, primarily prices
of natural rubber rose strongly, which affected the
profitability of rubber wheels manufactured in Sri
Lanka.
72 HEXPOL
Other financial information
InvestmentsDuring 2005, investments mainly comprised invest-
ments in Gaskets and Wheels (18.7 MSEK). A new
mixer in the Czech Republic was another significant
investment (9.4 MSEK).
During 2006, major investments were made in green-
field facilities, primarily in China (68.9 MSEK). In-
vestments were also made in Gaskets (15 MSEK).
During 2007, major investments were also made in
green-field facilities in China and Mexico (103 MSEK).
Investments were also made in Gaskets (23 MSEK).
During 2007 the largest investment was the acquisi-
tion of GoldKey. The investments are, in all significant
respects, debt financed.
Fixed assetsSignificant fixed assets comprise all production units
including corresponding machinery. Decisions from
permit authorities are among the primary environ-
mental factors that could influence the use of fixed
assets. Intangible fixed assets refer primarily to
goodwill from acquisitions of subsidiaries.
Political measuresAmong the political measures that could directly or
indirectly affect HEXPOL’s operations, the agree-
ments with tax authorities that have been entered
into in Asia deserve special mention. These govern
the tax rate paid by the company, but since they are
limited in terms of time the tax rate in this region
could be raised in the future. This applies, for example,
to the subsidiaries in Sri Lanka, where an agreement
concerning tax relief expired on 1 April 2008 and
another agreement may be expected to expire on
1 April 2009. In China, recent legislative amendments
could result in a deterioration in the tax situation
for the Chinese subsidiaries.
Cash flowAs a Group, HEXPOL has a historically strong cash
flow despite strong investments in recent years.
Credit agreementsHexagon is responsible for financing until the listing
date, at which time HEXPOL will change to an
external structure. To guarantee financing of the
working capital requirements and ensure financial
preparedness for future development, committed
lines of credit totalling SEK 1.7 billion have been
secured from a number of banks.
The lines of credit extend for five years and all loans
will carry a variable interest rate. The terms of the
line of credit include stipulations that HEXPOL
must fulfil certain covenants concerning the Group’s
net borrowing in relation to operating profit before
depreciation, amortization and impairment (EBITDA).
The credit agreement also contains a customary
provision that entitles the lender to require the
borrower to repay the loan prematurely in the event
of a change of control.
HEXPOL’s Board of Directors believes that a total
credit framework of SEK 1.7 billion is sufficient to
cover the Group’s working capital requirements for
a minimum of 12 months. This analysis also stipulates
that the positive annual cash flow may be used for
debt amortization if deemed necessary.
On the facing page, information is provided about
the Group’s net indebtedness as per 31 March 2008.
For means of comparison, the corresponding figures
are presented including the effects of the adjustment
of financing that has subsequently occurred ahead of
the distribution of the HEXPOL shares.
HEXPOL 73
Shareholders’ equity and indebtedness 2008-03-311 2008-03-31
Adjusted2
Total current liabilities ............................................................................. 1024 1024
Against guarantee ................................................................................... 0 0
Against collateral (negative clause3) ............................................................ 102 102
Unsecured credit .................................................................................... 04 04
Total long-term liabilities (excluding the current
portion of long-term liabilities) ................................................................. 1 2294 1 4104
Against guarantee ................................................................................... 0 0
Against collateral (negative clause3) ............................................................ 1 2294 1 4104
Unsecured credit .................................................................................... 0 0
Total shareholders’ equity ......................................................................... 1 002 821
Share capital ........................................................................................... 0 53
Reserve fund .......................................................................................... 0 0
Other reserves ....................................................................................... 1 002 768
Total ........................................................................................................ 2 333 2 333
Net indebtedness 2008-03-311 2008-03-31
Adjusted2
Cash and cash equivalents .......................................................................... 229 229
Total liquidity ............................................................................................ 229 229
Current receivables ................................................................................. 04 04
Current bank liabilities ................................................................................ 88 88
Current portion of long-term liabilities ............................................................. 0 0
Other current liabilities ................................................................................. 144 144
Total current liabilities ............................................................................. 1024 1024
Net current indebtedness ........................................................................ -127 -127
Long-term bank loans ................................................................................. 4 1 410
Issued bonds ............................................................................................. 0 0
Other long-term loans ................................................................................. 1 2254 04
Long-term indebtedness .......................................................................... 1 2294 1 4104
Net indebtedness .................................................................................... 1 102 1 283
Indirect indebtedness and contingent liabilities (guarantee for bank loan Megufo AB) .... 4 4
1 Non revised or audited figures.2 Adjusted for the changes in financial structure after the balance sheet date. In order to achieve the targeted net
debt ratio of three times EBITDA, calculated on the last twelve month period, a dividend was paid out to the
parent company and inter-company loans were replaced with bank debt.3 No company in the Group is entitled to pledge assets as collateral for other borrowing.4 Excluding non-interestbearing items.
HEXPOL 75
Share and shareholdersShare capitalHEXPOL AB’s share capital amounts to 53 103 954
SEK, represented by 26,551,977 shares, of which
1,181,250 Class A shares and 25,370,727 Class B
shares. According to the Articles of Association, the
maximum share capital is 160,000,000 SEK and the
maximum number of shares 80 million. The shares’
par value is 2 SEK and all the shares are fully paid.
Information about the HEXPOL shareThe ISIN code for the Company’s Class B share is
SE0002452623. The ticker on OMX Nordic Exchange
Stockholm will be HPOL B and the trading lot will be
100 shares. The Company’s Class A shares are not
listed. The HEXPOL shares have been issued in
accordance with Swedish law and owners’ rights
connected with the shares can only change in accor-
dance with the legal proceedings stated in the Swedish
Companies Act (2005:551). At a General Meeting,
each Class A share in HEXPOL carries 10 votes and
each Class B share one vote. Each shareholder who
is entitled to vote, may vote for their full number
of shares without restriction. Each share provides
equal rights to dividends and to any surplus after
liquidation. The share is not the object of any re-
strictions pertaining to transfer rights. According
to the Swedish Companies Act (2005:551), share-
holders have preferential rights to subscription of
new shares, warrants and convertible debentures,
but these preferential rights may be disapplied
following a resolution by a General Meeting. The
shares are not the object of any offers made as a
result of mandatory bid obligations, redemption
rights or redemption obligations. There have not
been any public takeover bids pertaining to the
Company’s shares during the current or preceding
financial year.
CSD registrationThe Company and its shares are registered with the
electronic securities system known as the VP system,
with VPC as the central securities administrator
and clearing organization (VPC AB, Box 7822,
SE-103 97 Stockholm). Shareholders are not provided
with any physical share certificates; instead, trans-
actions with shares occur electronically through
registration in the VP system by authorized banks
and other securities administrators. Shares are
registered by person and denominated in the
Swedish currency, SEK.
Ownership structureHexagon’s ownership structure and distribution in
terms of size on 30 April 2008, based on information
from VPC, is presented on the following page. Following
the spin-off, the ownership structure and distribution
for HEXPOL will reflect the equivalent in Hexagon
with the adjustment that ten Hexagon shares corre-
spond to one HEXPOL share.
76 HEXPOL
Class A shares Class B shares Capital, % Votes, %
Melker Schörling AB 11 812 500 50 415 654 23,4 45,4
Maths O Sundqvist through companies 40 000 000 15,1 10,8
Swedbank Robur Fonder 16 389 888 6,2 4,4
AFA Försäkring 14 251 792 5,4 3,8
Columbia Wanger Asset Management 10 950 000 4,1 2,9
Handelsbanken Fonder 4 288 473 1,6 1,2
Handelsbanken 4 121 804 1,6 1,1
Andra AP-fonden 3 974 439 1,5 1,1
AMF Pensionsförsäkrings AB 3 900 000 1,5 1,0
JP Morgan 3 434 131 1,3 0,9
Simon Bonnier 3 227 430 1,2 0,9
Fidelity Fonder 3 148 960 1,2 0,8
Didner & Gerge Aktiefond 3 046 400 1,1 0,8
SEB Investment Management 2 964 305 1,1 0,8
Mellon Omnibus 2 905 385 1,1 0,8
Ola Rollén 2 731 152 1,0 0,7
AMF Pension Fonder 2 574 200 1,0 0,7
Fjärde AP-fonden 1 830 787 0,7 0,5
Tredje AP-fonden 1 771 509 0,7 0,5
Gamla Livförsäkringsaktiebolaget 1 428 950 1,5 0,4
Total, 20 largest owners 11 812 500 177 355 259 72,4 80,7
Total, others – 76 182 226 27,6 19,3
Total number of shares 11 812 500 253 537 485 100,0 100,0
Source: Direct and nominee-registered holdings at VPC on 30 April 2008 owner-grouped.
Number of owners Number of Class A shares Number of Class B shares
1 - 500 5 007 – 987 791
501 - 1 000 1 652 – 1 321 411
1 001 - 2 000 1 383 – 2 042 391
2 001 - 5 000 1 283 – 4 137 169
5 001 - 10 000 561 – 4 056 632
10 001 - 20 000 319 – 4 416 070
20 001 - 50 000 188 – 5 789 515
50 001 - 100 000 81 – 5 835 626
100 001 - 500 000 97 – 21 891 139
500 001 - 1 000 000 36 – 25 966 531
1 000 001 - 5 000 000 30 – 59 612 261
5 000 001 - 10 000 000 1 – 6 200 160
10 000 001 - 4 11 812 500 111 280 789
Total 10 642 11 812 500 253 537 485
Source: Direct and nominee-registered registered holdings at VPC on 30 April 2008.
Number of shares per shareholder
Ownership structure in Hexagon
HEXPOL 77
DividendResolutions concerning the payment of dividend are
made by the General Meeting. Dividends are normally
paid in a cash amount per share through VPC, but
may also pertain to other than cash (distribution in
kind). Entitlement to dividends is reserved for those
who are registered as owners in the VPC share
register on the record day established by the General
Meeting. Such a record day must not occur later than
the day prior to the next Annual General Meeting. If
the shareholder cannot be reached through VPC, the
shareholder will retain his claim on HEXPOL for
the dividend, which is restricted only through limi-
tation rules. In the event of limitation, the dividend
amount shall accrue to HEXPOL.
There are no restrictions or particular procedures
according to the Swedish Companies Act or HEXPOL’s
Articles of Association pertaining to dividends to
shareholders residing outside Sweden. With the
exception of possible limitations from banking
and clearing systems, payment occurs in the same
manner as for shareholders residing in Sweden.
However, shareholders who are not fiscally domiciled
in Sweden are normally subject to a Swedish with-
holding tax; also refer to Tax consideration in
Sweden on page 87.
Year Transaction Change in Total Par value Total Totalshare capital, share capital, per share, number of number
SEK SEK SEK Class A shares Class B shares
1967 Formation 50 000 50 000 1 000 – 50
1997 New issue 50 000 100 000 1 000 – 100
2008 Split 500:1 – 100 000 2 – 50 000
2008 Bonus issue 53 003 954 53 103 954 2 1 181 250 25 370 7271
1 Between 30 April 2008 and dividend, the number of Class B shares in Hexagon AB is increased through exercise of
options to 253 707 270.
Share capital development
78 HEXPOL
HEXPOL 79
Significant agreementsWithin HEXPOL the following agreements are of
material importance.
Customer and supplier agreements
HEXPOL enters into a number of agreements with
customers and suppliers as part of its ongoing business
operations. All of these agreements are normal for
companies of this size and with an operational focus
such as HEXPOL’s. No single customer or supplier is
crucial to the Company’s operations; nor is the Group
dependent on a single agreement, although each in-
dividual customer is naturally important. All of the
Group’s key suppliers are replaceable. However, losing
certain customers or replacing certain suppliers
could have a tangible effect on profits or expenses.
Licensing agreement with Bayer
In accordance with a licensing agreement with
Bayer AG, HEXPOL is entitled to use the Vulkollan
brand and logotype in connection with wheel manu-
facturing and marketing within HEXPOL Wheels.
The licensing agreement with Bayer is valid for
periods of one year at a time and can be terminated
following three-month notice.
Acquisition agreement pertaining to GoldKey
In 2007, HEXPOL carried out a major acquisition
with the purchase of GoldKey Processing Inc. in
Ohio, USA. GoldKey Processing Inc. manufactures
rubber compounds for industrial operations and the
automobile, construction, pharmaceutical and avia-
tion industries. In 2007, the Company had annual
sales of approximately 75 MUSD and about 160
employees. The acquisition strengthened HEXPOL’s
market position in the US, while the operation con-
tributed new product groups, knowledge and exper-
tise in new materials technology.
Separation agreement with Hexagon
HEXPOL and Hexagon have entered into a separa-
tion agreement to regulate certain conditions related
to the distribution and listing of HEXPOL. For more
information, refer to the section “Relationship between
HEXPOL and Hexagon” on page 83.
With the exception of these agreements, HEXPOL
deems that no individual agreement is of material
significance.
Intellectual property rightsThe Vulkollan brand is owned by Bayer AG and the
right to use the brand is licensed to a number of
approved manufacturers, including HEXPOL. Apart
from HEXPOL’s brands, HEXPOL does not hold and
is not permitted to utilize or permit other parties to
utilize any other significant intellectual property
rights. HEXPOL’s protection of intellectual property
rights is monitored continuously and supplemented
when necessary.
InsuranceHEXPOL deems the insurance cover for its operations
to be adequate. Until the dividend distribution, HEXPOL
will be covered by the Hexagon Group’s insurance
agreement, HEXPOL’s insurance agreement and the
Group companies’ own local insurance, respectively.
For the period after the dividend distribution, HEXPOL
holds an insurance agreement that offers the same co-
verage as the Hexagon Group’s insurance agreement
and the Group companies will have their own local in-
surance as previously.
Legal issues and supplementary information
80 HEXPOL
Shareholder agreementsThe Board of Directors of HEXPOL is not aware of
any shareholder agreements or any other agree-
ments between prospective shareholders in HEXPOL
pertaining to joint control over the Company.
DisputesIn a few cases, disputes have arisen in connection
with the Company’s operating activities; however,
these disputes were not of material significance to
the Group. HEXPOL is not involved, and has not
been involved in the past 12 months, in any legal
proceedings or arbitration procedures that could
have a significant effect on the Company’s or the
Group’s financial position or profitability. The Board
of Directors of HEXPOL is not aware of any factors
that could result in any such proceeding with a
scope that would be significant for HEXPOL or
the Group.
Board of Directors and senior executivesFor information about HEXPOL’s Board of Directors
and senior executives, refer to pages 131-137. All
Board members are elected until the 2009 Annual
General Meeting.
Transactions with related partiesNo Board member or senior executive at HEXPOL
is participating or has participated directly or indi-
rectly in any business transaction with the Company
that is or has been of an unusual nature or subject
to unusual terms. Nor has HEXPOL granted loans
or guarantees to or entered into sureties for the
benefit of a Board member or a senior executive at
HEXPOL.
Persons with reporting obligationsBesides the members of HEXPOL’s Board of Directors
and senior executives, no individual holds 10 per
cent or more of the capital or votes in HEXPOL or
is subject to reporting obligations in accordance with
prevailing insider regulations.
Registration and form of associationHEXPOL’s corporate registration number is 556108-
9631. The Company was formed in Sweden on
1 February 1967 and was registered at the Swedish
Companies Registration Office (then the Patent and
Registration Office) on 8 March 1967. The Company’s
form of association, a public limited company, is
regulated by the Swedish Companies Act (2005:551).
The Company’s registered office is located in the
municipality of Malmö, Skåne County.
Head officeThe Company’s head office is located at Skeppsbron 3,
SE-211 20 Malmö. The telephone number of the head
office is +46 (0)40-25 46 60.
History of registered corporate namesThe Company has held the following registered
corporate names:
Corporate name Date from
HEXPOL AB 23 April 2008
Hexagon Polymers Aktiebolag 13 May 2003
Örechrona Aktiebolag 18 January 1994
NKA Industri i Landskrona Aktiebolag 8 April 1992
Hexagon Aktiebolag 3 April 1991
Munksjö Bruk Aktiebolag 15 March 1983
Aktiebolaget Nybro Wellkartong 8 March 1967
Available documentsThe following documents are available at HEXPOL,
Skeppsbron 3, SE-211 20 Malmö, and on the Group’s
website, www.hexpol.com:
• Articles of Association for HEXPOL
• HEXPOL AB’s annual reports and audit reports
for financial years 2005, 2006 and 2007.
HEXPOL 81
82 HEXPOL
HEXPOL 83
This section describes the relationship between
the HEXPOL Group and the Hexagon Group,
including how this relationship will be affected
by the distribution and listing of the shares in
HEXPOL. After the distribution and listing,
HEXPOL will operate as a separate company
that is independent of Hexagon.
Restructuring of the GroupPrior to the listing, the legal structure of HEXPOL
has been changed only through an intra-Group
transfer of the German subsidiary Hexagon Polymers
Compounding GmbH from Hexagon Metrology GmbH
to HEXPOL. HEXPOL deems that the acquisition
occurred at market price.
Separation agreement HEXPOL and Hexagon have entered into a separa-
tion agreement to regulate certain conditions related
to the distribution and listing of HEXPOL. The sepa-
ration agreement regulates such areas as liability
for events that occur before and after the separation,
settlement of intra-Group loans in connection with
the separation, handling of tax and insurance issues
attributable to the period before the separation and
HEXPOL’s continued use of the Hexagon Polymers
corporate name within the HEXPOL Group.
In accordance with the separation agreement, HEXPOL
and Hexagon, as a general rule, are to indemnify one
another from any obligations and losses related to
their respective operations. The parties are to work to
ensure that any problems that arise due to the sepa-
ration can be solved through cooperation and mutual
understanding. During a two-year period, the parties
are to refrain from recruiting certain key employees
from one another.
Previously, HEXPOL primarily financed its opera-
tions using its own funds and loans via the Hexagon
Group. After the separation, HEXPOL will instead
utilize an external structure. For further informa-
tion, refer to “Credit agreements” in the section
“Other financial information” on page 72.
HEXPOL was previously covered by the Hexagon
Group’s general insurance package. This relations-
hip is terminated since HEXPOL will no longer be-
long to the Hexagon Group. Instead, HEXPOL has
negotiated its own Group-wide corporate insurance.
For further information, refer to “Insurance” in the
section “Legal issues and supplementary informa-
tion” on page 79. The separation agreement also con-
tains regulations that aim to guarantee continuous
insurance coverage for HEXPOL in terms of claims
attributable to the period before the separation.
Within the HEXPOL Group, the name “Hexagon” is
used in combination with the word “Polymers” in the
names of certain subsidiaries. In accordance with
the separation agreement, HEXPOL undertakes to
ensure that the use of the Hexagon name within the
HEXPOL Group is terminated not later than three
years after the separation. During this three-year
period, Hexagon’s consent will be required to expand
the current use of the Hexagon name. Hexagon, for
its part, undertakes not to use or give another party
permission to use the combination of words “Hexagon
Polymers” during the same period. If certain events
specified in the agreement should occur, such as a
change of control over HEXPOL or if HEXPOL changes
its area of operations, HEXPOL is liable for ensuring
that the use of the Hexagon name is terminated in
advance.
Relationship between HEXPOL and HEXAGON
84 HEXPOL
An agreement is in effect between HEXPOL and
Hexagon concerning Hexagon’s obligation to provide
certain management positions relating to areas such
as financing structures, external communications,
coordination of tax and legal advisory services and
personnel administration to HEXPOL. This agree-
ment will expire in connection with the separation,
at which time HEXPOL will handle these issues itself.
HEXPOL 85
HEXPOL 87
SummaryThe distribution of HEXPOL shares is intended to be
made under the Lex ASEA provisions and will thus
not result in any immediate taxation. The tax basis
of the shares in Hexagon giving entitlement to the
distribution shall be allocated between these shares
and the HEXPOL shares received.
Below follows a summary of certain Swedish tax
provisions that apply in conjunction with Hexagon’s
distribution and listing of class B HEXPOL shares for
shareholders who have an unlimited tax liability in
Sweden, unless otherwise stated below. The summary
is based on prevailing legislation and is intended as
general information only. The summary below does
not cover situations where the shares in Hexagon
or HEXPOL are held for business purposes or as
current assets in business operations or by a part-
nership. Special rules apply for certain categories of
tax payers. The tax implications for each shareholder
depend in part on the shareholder’s specific circum-
stances. Accordingly, each shareholder should consult
a tax advisor as to the tax consequences relating to
his or her particular circumstances, including the
applicability and effect of foreign rules and tax treaties.
Tax considerations in Sweden
Taxation upon the distribution of HEXPOL sharesAccording to confirmation from the Swedish Tax Agency,
the distribution of HEXPOL shares is exempted from
taxation in Sweden under the Lex ASEA provisions.
The tax basis of the shares in Hexagon providing entit-
lement to the distribution shall be allocated between
these shares and the HEXPOL shares received. The
allocation of the tax basis will be based on the change
in value of the shares in Hexagon due to the distribution
of the HEXPOL shares. Hexagon will request general
guidelines from the Swedish Tax Agency on the alloca-
tion of the tax basis. Information regarding the guide-
lines will be published as soon as possible on the websites
of Hexagon, HEXPOL and the Swedish Tax Agency.
Taxation upon the disposal of shares and fractions of shares in HEXPOLCapital gains taxation is triggered upon the disposal of
HEXPOL shares received. The same applies to share-
holders who receive fractions of HEXPOL shares that
are sold on their behalf. The capital gain or capital loss
on quoted shares is computed as the difference between
the sales proceeds, after deduction for sales costs, and
the tax basis (acquisition cost). The acquisition cost of
the HEXPOL shares received through the distribution
is to be determined on the basis of the general guide-
lines that the Swedish Tax Agency will render. The
acquisition cost for every fraction of a share should
equal the corresponding part of the acquisition cost of
one HEXPOL share, as determined pursuant to the
Swedish Tax Agency’s guidelines. When the capital gain
or the capital loss is computed, the tax basis of all shares
of the same series and type in HEXPOL are computed
collectively under the “average method”. Since the class
B HEXPOL shares will be quoted, the tax basis may
alternatively be determined to be 20 percent of the net
sales revenue under the “standard method”.
For individuals, a capital gain is normally taxed in the
capital income category at a rate of 30 percent. A capital
loss on quoted shares may be fully offset against taxable
capital gains in the same year on shares and other quoted
securities that are taxed as shares except for units in
88 HEXPOL
Swedish investment funds that only contain Swedish
receivables (Sw: räntefonder). A capital loss that cannot
be offset will be deductible from other income from capital
at 70 percent. Should an overall deficit arise in the capital
income category, a reduction from municipal and national
income tax as well as from real estate tax and municipal
real estate charge is granted. A tax reduction of 30 per-
cent is provided for deficits that do not exceed SEK
100,000 and of 21 percent for any remaining part. Deficits
cannot be carried forward to later fiscal years.
For limited liability companies, capital gains on shares
that are not deemed to be held for business purposes are
taxed as income from business operations at a rate of
28 percent. Capital losses on such shares are normally
only deductible against taxable capital gains on shares
and other securities that are taxed as shares. Such a
capital loss may also, if certain conditions are fulfilled,
be offset against capital gains on shares and securities
that are taxed as shares in companies within the same
group, provided that group contributions are permitted
among the companies. Capital losses that have not been
utilized within a certain year may be carried forward
and be offset against eligible capital gains on shares
and securities that are taxed as shares in subsequent
fiscal years without limitation in time.
Taxation of dividends from HEXPOLDividends from HEXPOL are taxed in the capital income
category for individuals at a rate of 30 percent and as
income from business operations at a rate of 28 percent
for limited liability companies. For individuals resident
in Sweden, a preliminary tax of 30 percent is withheld.
The preliminary tax is generally withheld by VPC or,
for nominee-registered shares, by the nominee.
Net wealth taxThe Wealth Tax Act was abolished as of income year 2007.
Taxation of shareholders with a limited tax liability in SwedenFor shareholders who have a limited tax liability in
Sweden and who receive dividends from Swedish limited
companies, Swedish withholding tax is generally payable.
However, the distribution of HEXPOL shares is exempt
from Swedish withholding tax under the “Lex ASEA
provisions”. The distribution may, however, entail tax
consequences in the shareholder’s country of residence.
For shareholders who have a limited tax liability in
Sweden, Swedish withholding tax will normally be
payable on dividends received from HEXPOL. The tax
rate is 30 percent but is generally reduced under tax
treaties that Sweden has concluded with other countries
for the avoidance of double taxation. Most of Sweden’s
tax treaties enable a reduction of the Swedish tax to the
tax rate stipulated in the treaty immediately on the
dividend-payment date, if requisite details of the domi-
cile of the person entitled to the dividend are known.
However, such immediate reduction is not stipulated in
Sweden’s tax treaty with Switzerland. In Sweden, the
withholding tax is normally withheld by VPC or, for
nominee-registered shares, by the nominee. In cases where
the 30 percent tax on dividends is withheld in connection
with payment to a person who is entitled to be taxed at
a lower rate, or if the withholding tax has otherwise been
withheld in an excessive amount, a refund may be re-
quested from the Swedish Tax Agency prior to the end
of the fifth calendar year following the dividend distri-
bution. Shareholders who have a limited tax liability in
Sweden and who are not carrying out business opera-
tions from a fixed place or a permanent establishment
in Sweden are generally exempt from capital gains tax-
ation in Sweden on the disposal of shares. However, share-
holders may be liable for tax in their countries of residence.
According to a special tax provision, however, individuals
who have a limited tax liability in Sweden may be subject
to capital gains taxation in Sweden in connection with
the disposal of Swedish shares or fractions of such shares,
if such an individual has been resident or lived perma-
nently in Sweden at any time during the calendar year
of the sale or the ten calendar years immediately prece-
ding the year of the sale. In several cases, this rule has
been limited by tax treaties that Sweden has concluded
with other countries.
Tax considerations for shareholders resident in Switzerland1
Due to the secondary listing of the Hexagon B-share at
SWX Swiss Exchange, Hexagon has applied for a tax
ruling in the Canton of St.Gallen where Hexagon’s sub-
sidiary Leica Geosystems is located. For the purpose of
HEXPOL
cantonal/communal income taxes of the Canton of
St.Gallen applicable to residents of the Canton of
St.Gallen, the stock dividend is treated as follows:
The nominal value of the HEXPOL shares (2 SEK) is
treated as taxable income. The difference between the
fair market value and the nominal value is exempt
from income taxes. This exemption from income tax is
granted in a tax ruling by the cantonal tax authority in
St.Gallen.
With respect to other cantons than St.Gallen, it is un-
certain whether other cantons take the same view as
the Canton of St.Gallen. It cannot be excluded that some
cantons may fully tax the stock. Shareholders resident
in other cantons may ask their cantonal tax authority
to grant them the same tax treatment of the distribution
of HEXPOL as the tax authority of St.Gallen by
referring to the tax ruling granted by the tax
authority of St.Gallen.
For direct federal tax purposes, no tax ruling
was obtained from the responsible tax
authority. According to the information
received from the cantonal tax administra-
tion of St.Gallen, it must be expected that,
for direct federal tax purposes, the stock
dividend distributed to the shareholders of
Hexagon may be characterized, notwith-
standing the Swedish tax treatment, as a
fully taxable dividend in the hands of
Swiss resident shareholders holding the
shares as part of their private assets.
However, Hexagon is in new dis-
cussions with the federal tax
authority and as soon as Hexagon
has more information on the out-
come of obtaining a tax ruling,
more information will be avail-
able on Hexagon’s website
www.hexagon.se.
With respect to Swiss resident
shareholders holding the shares
as part of a business, or non-Swiss
resident persons holding the shares
through a fixed place of business or a permanent estab -
lishment located in Switzerland, as a rule, the tax treat-
ment follows the accounting treatment, i.e. taxable
income may be realized if and to the extent that the
shareholder recognizes income in its books kept in
accordance with Swiss accounting principles.
The above is not intended to be tax advice. Each share-
holder must obtain their own tax advice applicable to
their specific tax situation.
1 This information is specific for this English language prospectus and
is consequently not included in the Swedish language prospectus.
90 HEXPOL
First quarter – Continued strong growth and increased profit• Net sales increased by 30 percent to 852 MSEK (656)
• Operating profit increased by 20 percent to 83 MSEK (69)
• Profit after tax rose 14 percent to 50 MSEK (44)
• Profit per share after tax advanced 13 percent to 1.88 SEK (1.66)
• Operating cash flow was strong and amounted to 56 MSEK (-19)
• Decision was taken on 2 April to change Hexagon Polymers AB’s name to HEXPOL AB
• Decision was taken at the Annual General Meeting of Hexagon AB on 5 May to distribute all
shares in HEXPOL AB to the shareholders of Hexagon AB (publ)
• Listing on the OMX Nordic Exchange Stockholm is planned to take place on 9 June 2008
President’s comments“The year 2008 started well for HEXPOL. Sales in-
creased by 30 percent during the first quarter to
852 MSEK (656). This, despite lower activity in the
US automotive industry and construction sector and
an increasing concern for a general economic down-
turn in our major markets. Volumes and capacity
utilization were nevertheless high in most of our
operations. Operating profit rose 20 percent to 83
(69) MSEK.
Growth was particularly strong in business area
HEXPOL Compounding, where sales growth of a
full 41 percent was noted. The recently acquired
company GoldKey made a favourable contribution,
together with continued high volumes in Europe
and the start-up of new plants in China and Mexico.
Business area HEXPOL Engineered Products also
showed a positive trend with healthy growth, especi-
ally in product area Gaskets. Working capital was
also managed well, and cash flow from operations
was strong.”
Georg Brunstam, President and CEO, HEXPOL AB
Net sales and profit during the firstquarter
HEXPOL Group Consolidated sales increased during the first quarter
by 30 percent to 852 MSEK (656). Acquired units
accounted for 122 MSEK of sales. Currency effects
were a negative 18 MSEK, primarily due to a weake-
ning of USD.
Operating profit increased by 20 percent to 83 MSEK
(69), corresponding to an operating margin of 9.7 per-
cent (10.5). Costs for the new plants started up in
China and Mexico within business area HEXPOL
Compounding have burdened the operating profit
and operating margin for the quarter. Without these
units, the operating margin was 10.4 percent (10.8).
In business area HEXPOL Compounding, sales in-
creased by 41 percent to 648 MSEK (460).
Operating profit increased 28 percent to 55 MSEK.
Volumes were generally strong during the first
quarter, particularly in Europe.
Interim report, January – March 2008
HEXPOL 91
0
200
400
600
800
1000
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08
1000
800
600
400
200
0 0
20
40
60
80
100
0
2
4
6
8
10
12
14
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08
100
80
60
40
20
0
14%
12%
10%
8%
6%
4%
2%
0%
Jan–March Jan–March Jan–DecKey figures 2008 2007 2007
Net sales, MSEK ............................................................... 852 656 2 730
Operating profit, MSEK ....................................................... 83 69 305
Operating margin, % .......................................................... 9,7 10,5 11,2
Profit before tax, MSEK ...................................................... 71 62 255
Profit after tax, MSEK ........................................................ 50 44 186
Profit per share, SEK ......................................................... 1,88 1,66 7,01
Operating cash flow, MSEK.................................................. 56 -19 92
Equity/assets ratio, %........................................................ 35,7 44,1 36,7
Return on capital employed, %............................................. 15,1 16,4 15,1
Business area HEXPOL Engineered Products increased
its sales by 4 percent to 204 MSEK (196). Operating
profit amounted to 28 MSEK (26), up 8 percent. The
trend within the business area was positive, with
continued favourable growth in Gaskets.
Overall, demand was favourable in Europe during
the period, and capacity utilization in the European
units was high. Within NAFTA (Canada, US and
Mexico), activity was lower, particularly in the
automotive industry and in the US construction
sector, which are important market segments for
HEXPOL Compounding. Nonetheless, HEXPOL
Compounding’s volumes increased. However, the
US unit in product area Wheels reported lower
volumes. In Asia, the positive trend in Sri Lanka
continued and the new plants in China for product
area Wheels and business area HEXPOL Compoun-
ding are now gradually increasing production.
Raw materials prices continued to increase during
the first quarter. The impact on profit was marginal,
however, as a result of extensive measures that
included revised material formulas, changed suppliers
and price increases.
Operating cash flow increased during the first quarter
and was a positive 56 MSEK (-19). The strong cash
flow was achieved through reduced working capital,
profit improvements and a lower rate of investment.
The Group’s interest expenses during the first quarter
amounted to -12 MSEK (-7). Profit before tax increased
to 71 MSEK (62). Profit was positively affected by
currency fluctuations in an amount of 1 MSEK.
Profit after tax increased by 14 percent to 50 MSEK
(44), corresponding to profit per share of 1.88 SEK
(1.66).
Net Sales Operating profit and operating marginMSEKMSEK
92 HEXPOL
During the first quarter, HEXPOL prepared for the
listing of its shares on the OMX Nordic Exchange
Stockholm, which is scheduled for 9 June 2008. On
5 May, Hexagon AB’s Annual General Meeting took
the final resolution to distribute all of the shares in
HEXPOL AB to the shareholders of Hexagon AB.
A prospectus for the listing of HEXPOL AB shares
is expected to be published on 5 June 2008. While
planning for the listing, Hexagon Polymers AB was
renamed HEXPOL AB. Furthermore, the company’s
head office was moved to Malmö, where the company
also has its registered office.
ProfitabilityReturn on average capital employed amounted to
15.1 percent (16.4). The lower return was primarily
attributable to the acquisition of GoldKey. Return on
average shareholders’ equity amounted to 19.7
percent (19.2).
Financial position and liquidityThe equity/assets ratio was 35.7 percent (44.1). Total
consolidated assets increased to 2,809 MSEK (2,153).
Consolidated net debt amounted to 1,102 MSEK (738),
and the debt/equity ratio was a multiple of 1.1 (0.8).
The interest coverage ratio was a multiple of 4.9 (6.6).
Cash flowDuring the first quarter, cash flow from operations
before changes in working capital increased by 16
percent to 71 MSEK (61). Cash flow from operations
amounted to 84 MSEK (27). Operating cash flow
amounted to 56 MSEK (-19).
Investments, depreciation and amortizationThe Group’s net investments, excluding company
acquisitions and divestments, totalled 28 MSEK
(46). Investments during the quarter primarily
consisted of investments in production facilities
for gaskets for plate heat exchanges in Qingdao,
China. Depreciation and amortization during the
first quarter amounted to 23 MSEK (17).
Tax expensesThe Group’s tax expenses during the period amounted
to 21 MSEK (18), corresponding to a tax rate of 29.6
percent (29.0). Tax expenses are affected by the fact
that a significant portion of profit are generated in
subsidiaries in countries where the tax rate differs
from that in Sweden.
PersonnelThe number of employees at 31 March 2008 was
2,337 (2,124). The increase in the number of
employees was attributable to the acquisition of
GoldKey, and a rise in personnel in Sri Lanka and
in the newly started HEXPOL Compounding units
in China and Mexico.
Significant events after the closing dateDecision was taken on 2 April to change the name of
Sales, operating profit and operating margin by business area
Jan-March Jan-March Full year Jan-March Jan-March Full year Jan-March Jan-March Full yearMSEK 2008 2007 2007 2008 2007 2007 2008 2007 2007
HEXPOL Compounding........ 648 460 1 955 55 43 195 8,5 9,3 10,0
HEXPOL Engineered
Products...................... 204 196 775 28 26 110 13,7 13,3 14,2
Group total ...................... 852 656 2 730 83 69 305 9,7 10,5 11,2
Sales Operating profit Operating margin %
0
10
20
30
40
50
60
0
2
4
6
8
10
12
0
200
400
600
800
HEXPOL 93
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08
800
600
400
200
0
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08
60
50
40
30
20
10
0
12%
10%
8%
6%
4%
2%
0%
Net Sales MSEK
Operating profit and operating marginMSEK
Hexagon Polymers AB to HEXPOL AB. Resolution
was taken at Hexagon AB’s Annual General Meeting
on 5 May to transfer all of the shares in HEXPOL
AB to the shareholders of Hexagon AB (publ) in the
form of a dividend. The HEXPOL share will be listed
on the OMX Nordic Exchange Stockholm starting on
9 June 2008.
The company has its head office and registered office
in Malmö.
Business area HEXPOL Compounding
Business area HEXPOL Compounding is a world
leader in the development and manufacture of high-
quality advanced rubber compounds. Customers are
manufacturers of rubber products with stringent
demands for performance and global delivery capacity.
The largest market segments are the automotive
industry, followed by the construction industry.
Other key segments are the cabling, water treat-
ment, pharmaceutical, energy and oil industries.
Sales increased by 41 percent and amounted to 648
MSEK (460). Acquired units accounted for 122 MSEK
of the quarter’s sales. Operating profit increased by
28 percent to 55 MSEK (43), corresponding to an
operating margin of 8.5 percent (9.3). The decline in
operating margin was attributable to the newly started
units in China and Mexico, which in its start-up
phase have burdened the profit.
In Europe, the volume trend was favourable, and
capacity utilization was high during the quarter.
Deliveries to customers in Eastern Europe resulted
in strong growth in the Czech operations. Successful
marketing also resulted in a recovery of volumes in
the company in Germany. Volume growth was also
high in the Nordic region during the quarter.
In NAFTA, Mexico showed rapid growth as a result
of increased car production, and the newly started
company in Mexico reported a profit in March. In
the US, activity was lower, particularly in the auto-
motive and construction sectors. However, HEXPOL’s
volumes continued to increase during the quarter, as
a result of successful sales efforts and a favourable
market position. The integration of GoldKey, which
was acquired in September 2007, is proceeding as
planned, and both volumes
94 HEXPOL
0
10
20
30
40
0
5
10
15
20
0
50
100
150
200
250
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08
250
200
150
100
50
0
Q1 07 Q2 07 Q3 07 Q4 07 Q1 08
40
30
20
10
0
20%
15%
10%
5%
0%
Net Sales MSEK
Operating profit and marginMSEK
Business areaHEXPOL Engineered Products
Business area HEXPOL Engineered Products,
through its considerable expertise in polymers and
the production of rubber, plastic and polyurethane
products, has gained a world-leading position as a
supplier of advanced products, such as gaskets for
plate heat exchangers and wheels for the forklift
industry.
Sales increased by 4 percent and amounted to 204
MSEK (196). Operating income rose 8 percent to
28 MSEK (26), corresponding to an operating margin
of 13.7 percent (13.3). The improvement in the opera-
ting margin was a result of increased sales and im-
proved productivity.
The trend within the business area remained favou-
rable. Product area Gaskets, in particular, showed
favourable growth during the period, although on
a somewhat lower level than in the year-earlier
period. The lower growth was due to a certain
adaptation of customer inventories and to lower
demand from some project-related market segments.
The construction of the production facility for gaskets
for plate heat exchanges in China is proceeding as
planned. Start of production was postponed to the
latter part of the year, however, primarily due to a
favourable productivity trend in Sri Lanka.
Within product area Wheels, development was weak
during the first quarter. In both Europe and the
US, volumes were lower than in the year-earlier
period. In Sri Lanka, the trend was stable, but price
increases for natural rubber continued. Within
product area Profiles, the volume trend during the
quarter matched year-earlier level.
Parent CompanyThe Parent Company reported a loss after tax of
8 MSEK (2). Shareholders’ equity amounted to
573 MSEK (580).
OutlookHEXPOL expects a continued favourable develop-
ment during 2008.
Risk factorsThe Group’s and the Parent Company’s business
risks, risk management and management of
financial risks are described in Hexagon AB’s 2007
Annual Report and in the prospectus for the listing
of HEXPOL AB shares that is scheduled to be
published on 5 June 2008. No events of significant
importance occurred during the period that could
affect or change these descriptions of the Group’s
or the Parent Company’s risks and their manage-
ment.
Accounting principlesThis interim report was prepared in accordance with
IAS 34 Interim Reporting and the Annual Accounts
Act. The accounting and valuation principles applied
in the most recent annual report were also applied
in this interim report.
HEXPOL 95
Jan-March Jan-March Full yearMSEK 2008 2007 2007
Net sales.......................................................................... 852 656 2 730Cost of goods sold ............................................................. -714 -545 -2 238Gross profit .................................................................... 138 111 492
Sales and administration costs, etc. ..................................... -55 -42 -187Operating profit............................................................... 83 69 305
Financial income and expenses ............................................ -12 -7 -50Profit before tax.............................................................. 71 62 255
Tax .................................................................................. -21 -18 -69Net profit........................................................................ 50 44 186- of which, attributable to the Parent Company’s shareholders .. 50 44 186
Profit per share (SEK) 1)...................................................... 1,88 1,66 7,01Profit per share after dilution (SEK) 1).................................... 1,88 1,66 7,01Shareholder’s equity per share (SEK) 1).................................. 37,74 35,74 38,60CB number of shares, thousands 1) ...................................... 26 552 26 552 26 552Average number of shares, thousands 1) ............................... 26 552 26 552 26 552Average number of shares after dilution, thousands 1) ............. 26 552 26 552 26 552Depreciation and write-downs included in an amount of ........... -23 -17 -70
1) refers to the estimated number of shares after exchange listing
Condensed consolidated income statement
Financial informationHEXPOL AB will publish financial information for
the 2008 fiscal year on the following dates:
Event Date
Interim report, Friday 8 August
January - June 2008
Interim report, Thursday
January - September 23 October 2008
Year-end report 2008 February 2009
Financial information in Swedish and English
is also available at Hexagon AB’s web site at
www.hexagon.se.
For further information, contact:Georg Brunstam, President and CEO
Tel: +46 708 55 12 51
Anders Lyrheden, CFO
Tel: +46 703 20 96 95
Malmö 8 May 2008
HEXPOL AB
Georg Brunstam
President and CEO
This report was not subject to special review by the
company’s auditors.
Address: Skeppsbron 3, 211 20 Malmö
Corporate registration number: 556108-9631
Tel: +46 40-25 46 60
Fax: + 46 40-25 46 89
Web site: www.hexpol.com
This is the type of information that HEXPOL AB is
obliged to disclose in accordance with the Swedish
Securities Market Act and/or the Financial Instruments
Trading Act. The information was submitted to the
media for publication at 2:00 p.m. on 8 May 2008.
96 HEXPOL
Changes in shareholders’ equity
31 March 31 March 31 DecMSEK 2008 2007 2007
Opening shareholders’ equity ........................................... 1 025 883 883Translation difference ......................................................... -73 22 49Net profit for the period...................................................... 50 44 186Total changes in net asset value, excluding
transactions involving company shareholders............... -23 66 235Group contributions ........................................................... - - -93Closing shareholders’ equity ............................................ 1 002 949 1 025
31 March 31 March 31 DecMSEK 2008 2007 2007
Intangible fixed assets ........................................................ 1 091 844 1 134Tangible fixed assets .......................................................... 710 551 735Financial fixed assets.......................................................... 2 2 2Total fixed assets ............................................................ 1 803 1 397 1 871
Inventories ...................................................................... 306 242 308
Accounts receivable ........................................................... 411 360 344Other receivables............................................................... 45 52 26Prepaid expenses and accrued income.................................. 15 10 18Total current receivables ................................................. 471 422 388
Cash and cash equivalents .................................................. 229 92 228Total current assets ........................................................ 1 006 756 924Total assets .................................................................... 2 809 2 153 2 795
Shareholders’ equity attributable to the Parent Company’s shareholders 1 002 949 1 025Total shareholders’ equity ................................................ 1 002 949 1 025
Pension provisions ............................................................ 9 9 10Provision for deferred tax.................................................... 18 34 20Interest-bearing liabilities..................................................... 1 229 672 1 294Total long-term liabilities .................................................. 1 256 715 1 324
Interest bearing liabilities .................................................... 102 158 92Accounts payable............................................................... 299 220 252Other liabilities................................................................... 43 29 13Accrued expenses and deferred income................................ 107 82 89Total current liabilities ..................................................... 551 489 446Total equity and liabilities ................................................. 2 809 2 153 2 795
Condensed consolidated balance sheet
HEXPOL 97
Jan-March Jan-March Full yearMSEK 2008 2007 2007
Cash flow from operations before changes in workingcapital.......................................................................... 71 61 268
Changes in working capital .................................................. 13 -34 -3Cash flow from operations .............................................. 84 27 265
Net investments in ordinary operations ................................ -28 -46 -173Operating cash flow ........................................................ 56 -19 92
Acquisitions of subsidiaries.................................................. - - -350Cash flow from financing activities ........................................ -55 -5 370Change in cash and cash equivalents .............................. 1 -24 112Cash and cash equivalents at 1 January................................ 228 116 116Cash and cash equivalents at 31 March .............................. 229 92 228
Consolidated cash flow analysis
Jan-March Jan-March Full yearKey figures 2008 2007 2007
Operating margin, % .......................................................... 9,7 10,5 11,2
Profit margin before tax, % ................................................. 8,3 9,5 9,3
Return on shareholders’ equity, % ........................................ 19,7 19,2 19,5
Return on capital employed, %............................................. 15,1 16,4 15,1
Equity/assets ratio, %........................................................ 35,7 44,1 36,7
Interest coverage ratio, multiple........................................... 4,9 6,6 5,3
Average number of shares after exchange listing, thousands .... 26 552 26 552 26 552
Profit per share, SEK ......................................................... 1,88 1,66 7,01
Cash flow per share, SEK.................................................... 3,16 1,02 9,98
Cash flow per share before changes in working capital, SEK..... 2,67 2,30 10,09
98 HEXPOL
Quarterly data, Group
Sales per business area Jan-March Jan-March April-June July–Sept Oct-Dec Full yearMSEK 2008 2007 2007 2007 2007 2007
HEXPOL Compounding .......................... 648 460 451 495 549 1 955HEXPOL Engineered Products ................ 204 196 199 185 195 775Group total........................................ 852 656 650 680 744 2 730
Sales per geographic area Jan-March Jan-March April-June July–Sept Oct-Dec Full yearMSEK 2008 2007 2007 2007 2007 2007
Europe .............................................. 535 473 459 447 451 1 830NAFTA .............................................. 284 159 166 211 272 808Asia .................................................. 33 24 25 22 21 92Group total........................................ 852 656 650 680 744 2 730
Operating profit per business area Jan-March Jan-March April-June July–Sept Oct-Dec Full yearMSEK 2008 2007 2007 2007 2007 2007
HEXPOL Compounding .......................... 55 43 50 55 47 195HEXPOL Engineered Products ................ 28 26 32 31 21 110Group total........................................ 83 69 82 86 68 305
Jan-March Jan-March Full yearMSEK 2008 2007 2007
Net sales.......................................................................... 8 6 22Selling, administrative costs, etc.. ........................................ -9 -6 -26Operating profit/loss .................................................... -1 0 -4
Financial income and expenses ............................................ -10 -2 -14Loss before tax .............................................................. -11 -2 -18
Tax .................................................................................. 3 0 5Net loss ........................................................................ -8 -2 -13
Condensed Parent Company income statement
HEXPOL 99
31 March 31 March 31 DecMSEK 2008 2007 2007
Total fixed assets ............................................................ 1 482 783 1 342
Total current receivables ................................................ 153 105 152
Cash and cash equivalents .................................................. 0 0 0Total current assets ........................................................ 153 105 152Total assets .................................................................... 1 635 888 1 494
Total shareholders’ equity ................................................ 573 580 581
Total long-term liabilities .................................................. 0 0 0
Total current liabilities .................................................... 1 062 308 913Total shareholders’ equity and liabilities .......................... 1 635 888 1 494
Parent Company balance sheet in summary
Financial definitions:
Capital employed Total assets less non-interest-bearing liabilities.
Cash flow Cash flow from operating activities afterchange in working capital.
Cash flow per share Cash flow from operating activities after change in working capital, divided byaverage number of shares.
Profit per share Net profit divided by average number of shares.
Equity/assets ratio Shareholders’ equity as a percentage of total assets.
Interest-cover ratio Profit before tax plus interestexpenses divided by financial expenses.
Investments Purchases less sales of tangible and intangible fixed assets, excluding those included in acquisitions and divestments of subsidiaries.
Debt/equity ratio Interest-bearing liabilities lesscash and cash equivalents divided by shareholders’equity.
Operating margin Operating profit as a percentageof net sales for the period.
Profit margin before tax Profit before tax as a per-centage of net sales for the period.
Return on capital employed Profit before tax plusinterest expenses as a percentage of average capitalemployed.
Return on equity Net profit as a percentage of average shareholders’ equity.
Shareholders’ equity per share Shareholders’equity divided by the number of shares at yearend.
Share price Last settled transaction on the OMXNordic Exchange on the last business day for the period.
Section contentsConsolidated income statement .................. 102
Consolidated balance sheet .......................... 103
Change in Group capital ............................. 104
Consolidated cash-flow statement ............... 104
Parent Company income statement ............. 105
Parent Company balance sheet ................... 106
Change in Parent Company equity .............. 107
Parent Company cash-flow statement ......... 107
Accounting policies .................................... 108
Notes ......................................................... 114
HEXPOL 101
Historical financial statements(2005-2007)The following section contains the legal accounting
records for HEXPOL AB for 2005, 2006 and 2007.
The accounts have been prepared for this prospectus
and include consolidated financial statements that
were not prepared historically because the Parent
Company, HEXPOL AB, as wholly owned subsidiary
of Hexagon AB, was not obligated to prepare consoli-
dated accounts. To give an accurate view of the dis-
tribution of operations, these consolidated financial
statements were prepared following the inclusion of
the German subsidiary previously included in the
Hexagon Polymers segment, but legally treated as
a subsidiary of another company in the Hexagon
Group, effective 1 January 2005. The consolidation is
based upon the audited accounts of the subsidiaries.
All amounts are presented in MSEK and rounded to
whole numbers.
Applied accounting policiesFrom 1 January 2005, recommendation RR 32,
Accounting for legal entities, issued by the Swedish
Financial Accounting Standards Council, is applied
in the preparation of the Parent Company HEXPOL
AB’s accounts. The recommendation complies with
the International Financial Reposting Standards
(IFRS), except in cases when Swedish law does not
permit the application or when strong grounds for
deviation exist.
The consolidated financial statements have been
prepared in accordance with IFRS. The German
subsidiary Hexagon Polymers Germany GmbH,
which was formally transferred from another part
of the Hexagon Group in the first quarter of 2008,
is reported as a part of the HEXPOL Group and
included in the accounts for the entire period.
A corporate acquisition involving companies under
joint control is a transaction whereby merged com-
panies are fully controlled by the same party before
and after the acquisition and the controlling influence
is not temporary. In the absence of more specific
guidelines and provided that pricing is not based on
a negotiation between two parties that are indepen-
dent of one another, and that HEXPOL AB is consi-
dered to have controlling influence over the company
before the formal transfer of ownership the German
subsidiary is reported at the historical carrying
amount in the Hexagon Group.
102 HEXPOL
Amounts in MSEK Note 2007 2006 2005
Net sales .....................................................................1 2 730 2 488 2 205
Cost of goods sold ............................................................. -2 238 -2 109 -1 814Gross profit ................................................................... 492 379 391
Selling expenses ................................................................ -48 -40 -32Administrative expenses ..................................................... -106 -92 -81Research and development costs ........................................ -23 -19 -15Other operating income and expenses ................................4 -10 -23 -8Operating profit .............................................1, 5, 6, 19 305 205 255
Financial income .............................................................7 9 8 9Financial expenses ..........................................................7 -59 -47 -32Profit before tax ............................................................. 255 166 232
Tax ................................................................................8 -69 -48 -70Profit after tax ................................................................ 186 118 162
Profit per share, SEK- before dilution ................................................................ 7,01 4,44 6,10
Number of shares, thousandsafter the listing ................................................................. 26 552 26 552 26 552
Consolidated income statement
HEXPOL 103
Amounts in MSEK Note 2007-12-31 2006-12-31 2005-12-31
ASSETS
Fixed assetsCapitalized development expenditure ..................................9 6 1 1Goodwill ........................................................................9 1 122 823 880Other intangible fixed assets ..............................................9 6 3 2Tangible fixed assets .....................................................10 735 511 492Financial fixed assets .....................................................11 2 2 2Total fixed assets ........................................................... 1 871 1 340 1 377
Current assetsInventories ....................................................................... 308 241 241Accounts receivables ....................................................12 344 299 284Tax assets ........................................................................ 0 2 0Other receivables (non-interest-bearing).............................11 26 20 16Prepaid expenses and accrued income .............................13 18 9 6Cash and cash equivalents ................................................. 228 116 79Total current assets ...................................................... 924 687 626
TOTAL ASSETS ............................................................... 2 795 2 027 2 003
SHAREHOLDERS’ EQUITY AND LIABILITIES
Shareholders’ equityShare capital .................................................................... 0 0 0Translation reserve ........................................................... 83 34 114Accumulated profit ............................................................ 756 731 605Net profit for the year ....................................................... 186 118 162Total shareholders’ equity .............................................. 1 025 883 881
Long-term liabilitiesInterest-bearing liabilities ...............................................15 1 294 826 806Provision for pensions ..................................................16 10 9 8Deferred tax liabilities ....................................................... 20 34 34Total long-term liabilities ................................................ 1 324 869 848
Current liabilitiesAccounts payable .............................................................. 252 203 203Tax liabilities ..................................................................... 3 0 2Other liabilities (interest-bearing) .....................................15 92 2 4Other liabilities (non-interest-bearing).................................17 10 9 14Accrued expenses and prepaid revenues ..........................18 89 61 51Total current liabilities ................................................... 446 275 274
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES .......... 2 795 2 027 2 003
Pledged assets..............................................................20 None None NoneContingent liabilities .......................................................20 4 4 4
Consolidated balance sheet
104 HEXPOL
Consolidated cash-flow statement
Amounts in MSEK Note 2007 2006 2005
Cash flow from operations.......................................... 22Operating profit ................................................................. 305 205 255 Adjustment for non-cash items ........................................... 71 70 61 Net financial items ............................................................. -50 -39 -23 Tax paid ........................................................................... -58 -36 -68 Cash flow from operations before changes in working capital .............................................................. 268 200 225
Cash flow from changes in working capitalChanges in operating receivables ........................................ -12 -24 -116 Changes in operating liabilities ............................................ 9 3 26 Cash flow from operations ............................................. 265 179 135
Investing activitiesGross investment in tangible fixed assets .............................. -164 -122 -66 Divestment of tangible fixed assets ...................................... 0 1 0 Gross investment in intangible fixed assets ........................... -9 -3 -1 (Operating cash flow) ........................................................ (92) (55) (68)Acquisition of subsidiaries .............................................. 3 -350 0 -25 Cash flow from investing activities .................................. -523 -124 -92
Financing activitiesNew issue ........................................................................ 0 0 0 Borrowings ..................................................................... 463 18 186 Dividend and group contribution ........................................... -93 -36 -238 Amortization of loans ........................................................ 0 0 0 Cash flow from financing activities ................................... 370 -18 -52
Cash flow for the year .................................................... 112 37 -9Cash and cash equivalents at the beginning of the year .......... 116 79 88 Cash and cash equivalents at the end of the year .......... 228 116 79
Share capital Translation reserve Profit brought forward Total shareholders’ equity
MSEK 2007 2006 2005 2007 2006 2005 2007 2006 2005 2007 2006 2005
Opening balance, 1 January............... 0 0 0 34 114 -31 849 767 819 883 881 788Dividends and Group contributions after tax... -93 -36 -238 -93 -36 -238IFRS adjustments ............................ 24 0 0 24Translation difference ....................... 49 -80 145 49 -80 145Net profit for the year ...................... 186 118 162 186 118 162Closing balance, 31 December ........ 0 0 0 83 34 114 942 849 767 1 025 883 881
Consolidated change in shareholders’ equity
HEXPOL 105
PARENT COMPANYParent Company’s income statement
Amounts in MSEK Note 2007 2006 2005
Net sales....................................................................... 2 22 20 16Gross profit .................................................................. 22 20 16
Administrative costs.................................................... 5, 6 -22 -20 -13Other operating income ..................................................... 0 0 0Other operating expenses ................................................... -4 -2 -4Operating profit ............................................................. -4 -2 -1
Other interest income and similar income statement items .... 7 1 1 1Interest expenses and similar income statement items......... 7 -15 -7 -4Profit before tax.............................................................. -18 -8 -4
Appropriations ................................................................. 0 0 0Tax on profit for the year ................................................. 8 5 2 1Net profit for the year ................................................... -13 -6 -3
106 HEXPOL
Parent Company’s balance sheet
Amounts in MSEK Note 2007-12-31 2006-12-31 2005-12-31
ASSETS
Fixed assets
Tangible fixed assets ..................................................10Land and buildings ............................................................ 5 5 5Equipment ....................................................................... 0 0 0Participation in subsidiaries .............................................21 1 337 777 736Total fixed assets ............................................................ 1 342 782 741
Current assets
Current receivablesReceivables in Group companies .......................................... 151 102 86Other receivables .............................................................. 1 2 1Prepaid expenses and accrued income .............................13 0 0 1
Cash and bank ................................................................ 0 0 0
Total current assets ....................................................... 152 104 88
Total assets ................................................................... 1 494 886 829
SHAREHOLDERS’ EQUITY AND LIABILITIES
Shareholders’ equity
Restricted shareholders’ equityShare capital (100 shares) .............................................14 0 0 0Statutory reserve .............................................................. 0 0 0
Unrestricted shareholders’ equityProfit brought forward........................................................ 594 587 584Profit for the year ............................................................. -13 -6 -3Total shareholders’ equity ............................................... 581 581 581
Current liabilitiesAccounts payable ............................................................. 1 0 2Interest-bearing liabilities .................................................... 904 302 243Other liabilities .................................................................. 1 1 1Accrued expenses and prepaid revenues ..........................18 7 2 2Total current liabilities .................................................... 913 305 248
Total shareholders’ equity and liabilities .......................... 1 494 886 829
MEMORANDUM ITEMS ...................................................Pledged assets.................................................................. None None NoneContingent liabilities ........................................................... None None None
HEXPOL 107
Amounts in MSEK 2007 2006 2005 2007 2006 2005 2007 2006 2005
Opening balance, 1 January ................ 0 0 0 581 581 757 581 581 757Dividends and Group contributions after tax 13 6 -173 13 6 -173Net profit for the year .......................... -13 -6 -3 -13 -6 -3Closing balance, 31 December ............ 0 0 0 581 581 581 581 581 581
Share capital Profit brought forward Total shareholders’ equity
Parent Company’s changes in shareholders’ equity
Parent Company’s cash flow statement
Amounts in MSEK 2007 2006 2005
Operations Operating profit ................................................................. -4 -2 -1Adjustments for non-cash items
Depreciations ................................................................ 0 0 0-4 -2 -1
Interest received ............................................................... 1 1 1Interest paid ................................................................... -15 -7 -4Other financial income/expense ......................................... 0 0 0Cash flow from operations before changes in working capital ............................................ -18 -8 -4
Changes in working capitalChanges in receivables ................................................... -48 -16 6Changes in current liabilities ............................................ 608 56 174
Cash flow from operations .............................................. 542 32 176
Investing activitiesInvestments in tangible fixed assets ..................................... 0 0 -5Investments in financial fixed assets ..................................... -560 -41 0Cash flow from investing activities .................................. -560 -41 -5
Financing activities ..........................................................Group contributions received ............................................. 144 67 65Group contributions paid ................................................... -126 -58 -61Dividend .......................................................................... 0 0 -175Shareholders’ contribution ................................................. 0 0 0Cash flow from financing activities ................................... 18 9 -171
Cash flow for the year ................................................... 0 0 0
Cash and cash equivalents at the beginning of the year .... 0 0 0
Cash and cash equivalents at the end of the year .......... 0 0 0
108 HEXPOL
Accounting policiesHEXPOL’s consolidated accounts have been pre-
pared in accordance with the International Financial
Reporting Standards (IFRS) issued by the International
Accounting Standards Board (IASB) and interpretation
statements by the International Financial Reporting
Interpretations Committee (IFRIC), which have been
approved by the EC Commission for application within
the EU.
Furthermore, recommendation RR 30:06, Supplemen-
tary accounting rules for corporate groups, issued by
the Swedish Financial Accounting Standards Council
has been applied.
The Parent Company applies the Annual Accounts
Act and RR 32:06, Accounting for legal entities. This
means that the Parent Company applies the same
accounting policies as the Group, except as outlined
below.
Changed accounting policiesIFRS 7 Financial Instruments – Disclosures and
related amendments to IAS 1 Presentation of Finan-
cial Statements stipulate requirements for compre-
hensive disclosures concerning the significance of
financial instruments for the Company’s financial
position and earnings, as well as qualitative and
quantitative disclosures concerning the character
and scope of risks. IFRS 7 and related amendments
to IAS 1 have resulted in additional disclosures in
the Group’s financial reports for 2007 with respect
to the Group’s financial objectives and capital mana-
gement. The standard has not resulted in a change
of accounting policy, but rather only changes in the
disclosure requirements for financial instruments.
Basis of reporting for the Parent Company and the Group, including criticalaccounting estimates and assumptionsThe functional currency of the Parent Company is
Swedish kronor as is the reporting currency for the
Parent Company and the Group.
Assets and liabilities are reported at historical cost
with the exception of certain financial instruments
(derivatives), which are reported at fair value.
Preparing the reports in accordance with IFRS
requires that company management and the Board
of Directors carryout accounting estimates and
assumptions that affect the application of the
accounting policies and the reported figures for
assets, liabilities, revenues and expenses. The
actual outcome could deviate from these accounting
estimates. Certain accounting matters involve a
larger degree of subjectivity or complexity, which
results in a higher risk of deviation from the accoun-
ting estimates and assumptions applied. Such
matters include: valuation of unutilized deductible
loss carry-forwards, the outcome of complicated
legal disputes, assessment of the present value of
forecast cash flows during analyzes of possible
impairment requirements and the calculation of
pension obligations to employees.
Consolidated financial statementsThe consolidated financial statements consolidate
the Parent Company and the other companies in
which the Parent Company has a direct or indirect
controlling influence.
The consolidated financial statements have been
prepared in accordance with the purchase method,
which means that the Parent Company’s acquisition
value of shares in subsidiaries is eliminated against
subsidiaries’ shareholders’ equity at the time of
acquisition. The shareholders’ equity of acquired
subsidiaries is determined on the basis of a market
valuation of assets and liabilities at the time of
acquisition including those not reported earlier by
the acquired company. In those cases where the
acquisition value of shares in subsidiaries exceeds
the acquired shareholders’ equity as stated above,
the discrepancy is accounted as goodwill in the
balance sheet. In the event of an acquisition of
minority interests, any differences between the
acquisition price and the minority interest in the
subsidiary’s equity value are recognized as goodwill.
In accordance with IFRS, goodwill amortization on a
HEXPOL 109
straight-line basis has been discontinued. Reported
goodwill values are impairment tested at each repor-
ting date.
In accordance with the stated principles for consoli-
dated accounting, divested companies are consolidated
up to their date of divestiture, while acquired com-
panies are consolidated from the time of acquisition
onwards, meaning from the time when a controlling
interest was attained.
The current method is used for the translation of
foreign subsidiaries, meaning that balance sheets are
translated at year-end exchange rates, and income
statements are translated at average exchange rates
for the period. The resulting translation differences
are recognized directly in consolidated shareholders’
equity. The value of the net assets of foreign subsidia-
ries, including goodwill and other intangible assets,
is hedged, mainly through foreign-currency loans.
Currency forward contracts are used to a lesser extent.
In the consolidated financial statements, the after-
tax effects of hedging are offset against those trans-
lation differences that were recognized directly in
shareholders’ equity regarding the foreign subsidiaries.
Associated companies and joint venturesHEXPOL applies the equity method for accounting
associated companies and joint ventures. Associated
companies are those companies over which HEXPOL,
directly or indirectly, has a material influence.
Joint ventures are defined as companies over which
HEXPOL, through partnership agreements with one
or more parties, exercises a joint controlling influence
over the operational and financial control.
Any differences between the acquisition value and
equity value at the time of acquisition are termed
goodwill, and are included in the acquisition value.
In the consolidated balance sheet, holdings in asso-
ciated companies are recognized at acquisition value
adjusted for dividends, share in profits and losses
during the holding period, and accumulated impair-
ment losses. The consolidated income statement
includes share in associated companies’ profits after
elimination of any inter-company gains. Associated
company taxes are included in the Group’s tax ex-
penses.
At the close of every reporting period, the carrying
amounts for associated companies and joint ventures,
including implicit goodwill values, are impairment
tested.
Segment reportingBusiness areas represent the primary segments within
the HEXPOL Group and geographical areas the
secondary segments. Internal billings between
business areas, where they occur, are made at
market value.
RevenuesHEXPOL applies the following principles for revenue
recognition:
Sale of goods
Revenues from sales of goods are recognized when
all the following conditions are satisfied:
• The Company has transferred the essential risks
and benefits associated with the ownership of
the goods to the buyer.
• The Company does not retain any commitment
in ongoing management usually associated with
ownership, and nor does the Company exert any
actual control over the goods that have been
sold.
• Revenues can be reliably calculated.
• It is likely that the financial benefits for the seller
associated with the transaction will arise for the
seller.
• The expenditure that has arisen or is expected
to arise as a consequence of the transaction can
be reliably calculated.
Research and development expenditureExpenditure for research is expensed as incurred,
while expenditure for development is capitalized as
follows: Capitalization of development expenses in
110 HEXPOL
the Group are only applied to new products where
significant development costs are involved, where
the products have a probable profits potential that
the Company may benefit from, and the costs are
clearly distinguishable from ongoing product deve-
lopment expenditure.
LeasingThe HEXPOL Group has entered into both capital
and operational leases. The agreements are classified
in accordance with their financial implication when
they were entered into. Capital leases are not material
and primarily relate to vehicles. For operational leases,
the lease payments are expensed straight-line over
the shorter of the asset’s useful life period and the
lease period. For capital leases the leased asset is
carried on the balance sheet with a corresponding
liability for future lease payments. The leased asset
is depreciated over the same period as for assets of
the same kind owned by the Group. The liability for
future lease payments is interest bearing.
Other operating revenues/expensesOther operating revenues/expenses primarily consist
of gains/losses from sales of fixed assets, currency
exchange gains and losses related to operating
assets and liabilities and revenues for sub-letting
of premises.
Financial instrumentsFinancial instruments are measured and recognized
in accordance with the rules of IAS 39. Financial
assets and liabilities are recognized in, and deducted
from, the balance sheet applying settlement-date
accounting. With certain exceptions, financial assets
and liabilities are entered at acquisition value.
Financial derivative instruments are recognized at
fair value, with changes in fair value recognized in
profit and loss. Changes in fair value are recognized
in profit and loss, apart from cases where the deriva-
tive fulfils the requirement for cash flow hedging, in
which case the change in value is recognized directly
in shareholders’ equity until the hedged transaction
has been recognized. When establishing fair value,
official market listings on the balance-sheet date are
used. If no such listings are available, a valuation is
conducted based on the discounting of future cash
flows to the listed market interest rate for the parti-
cular maturity. Currency swaps and currency for-
ward contracts are valued at the listed market rate.
Translation to SEK is based on the listed exchange
rate on the balance-sheet date.
Receivables resulting from own lending and assets
held to maturity are valued at the accrued acquisition
value, applying the effective interest rate method.
No financial instruments were classified in this
category during 2005, 2006 and 2007.
Accounts receivable and accounts payable are
recognized at acquisition value.
Financial liabilities are mainly measured at accrued
acquisition value, applying the effective interest rate
method.
Balances and transactions are hedged, and hedge
accounting is applied if the hedging actions taken
have the stated objective of constituting a hedge,
have a direct correlation to the hedged item and
effectively hedge the item. An effective hedge gene-
rates financial effects that offset those that arise
through the hedged position. When hedging fair
value, the change in the fair value of the hedging
instrument is recognized in the income statement
together with the change in the value of the liability
or asset to which the risk hedging applies. When
hedging cash flow, the change in value of the hedging
instrument is recognized directly in shareholders’
equity until the hedged transaction has been
recognized.
Borrowing costs in the form of interest expense are
charged against profit during the period to which
they apply, and are normally not included in an
asset’s acquisition value, since HEXPOL normally
does not construct the types of assets that would
permit this. Costs for raising loans are accrued over
the maturity of the loan.
HEXPOL 111
Pension and similar commitments Expenditure for defined contribution plans are
expensed as incurred. Expected expenditure under
defined benefit plans are recognized as a liability
calculated in accordance with actuarial models.
Differences between expected and actual develop-
ment of this liability are not expensed as long as
the deviations remain within the so-called corridor.
Pension expense for the year consists of pensions
vested, interest expense during the period and – if
applicable – accrued actuarial gains and losses.
A deduction is made for the yield on plan assets
intended to cover the obligation. The net cost is
recognized in the income statement. Obligations
related to defined benefit plans are recognized net
in the balance sheet, meaning after a deduction of
the value of any plan assets.
Defined benefit plans for which the insurer (Alecta)
cannot specify HEXPOL’s share of the total plan
assets and pension obligations, pending this in-
formation becoming available, are recognized as
defined contribution plans.
Income taxesIncome taxes comprise:
• Current tax, meaning the tax calculated on
taxable profit for the period, and adjustments
regarding prior periods.
• Deferred tax, meaning the tax attributable to
taxable temporary differences to be paid in the
future, and the tax that represents a reduction
of future tax attributable to deductible tempo-
rary differences, deductible loss carry-forwards
and other tax deductions.
Income tax expenses for the year consist of current
and deferred tax, and shares in associated compa-
nies’ tax.
Receivables and liabilitiesProvisions for loss risks are made on a case-by-case
basis; foreign-currency receivables and liabilities are
translated at the exchange rates prevailing on the
balance-sheet date. The difference between acquisi-
tion value and the value on the balance-sheet date is
recognized as income/expense.
InventoriesInventories are accounted according to the FIFO
(first-in first-out) principle. Market terms are applied
for intra-Group transactions. The necessary provisions
are made for obsolescence and intra-Group gains.
Raw materials, and purchased finished and semi-
finished goods, are recognized at the lower of cost
and fair value.
Manufactured finished and semi-finished goods are
recognized at the lower of manufacturing cost (inclu-
ding a reasonable portion of indirect manufacturing
costs) and fair value.
Depreciation/amortization according to planDepreciation/amortization according to plan is per-
formed on a straight-line basis and is calculated on
the depreciable amount (acquisition cost less estima-
ted residual value) and is based on the useful life of
the asset.
Development work ................................ 3–8 years
Patents and trademarks ...................... 20 years
Other intangible assets ........................ 3–10 years
Computers .............................................. 3–8 years
Machinery and equipment .................... 3–15 years
Office buildings ..................................... 20–50 years
Industrial buildings .............................. 20–50 years
Land improvements ............................. 5–30 years
ImpairmentsAt each reporting date, an analysis is performed to
determine whether indications of an impairment
requirement exist, meaning if the recognized value
of an asset exceeds its recoverable value. If an
impairment need is identified, the item is impaired
to an amount corresponding to the recoverable
value.
112 HEXPOL
The recoverable value is the higher of the asset’s net
realizable value and the value in use, meaning the
discounted present value of future cash flows.
Previous impairments are reversed by relevant
amounts matching the degree to which the impair-
ment is no longer warranted, although goodwill
impairments are never reversed.
The basic assumptions used to determine whether
or not there is an impairment requirement are as
follows:
Basic assumptions used for determining discount
rate per currency (before tax)
Risk-free interest rate .................. 3,8–4,2 %
Tax rate ......................................... 9–31 %
Beta rate ....................................... 0,6–0,9
Applied discount rate ................... 8,0–10,1 %
Forecasting method
Forecast period ........................................ 5 years
Growth after forecast period .................. 2 %
Cash-generating units
The definition of cash-generating units complies
with the Group’s organization, whereby assessments
of whether there are any impairment requirements
are made within each particular business area. The
total value of intangible fixed assets that are not
subject to amortization was 1,122 MSEK at 31
December 2007.
The recoverable value is generally set at the value in
use.
Accounting policies in the Parent CompanyThe Parent Company applies the same accounting
policies as the Group with the following exceptions:
• The Parent Company does not apply IAS 39.
• In the Parent Company, all leases are treated as
operational leases, regardless of their financial
significance.
• In the Parent Company, all pension obligations
are recognized as cost-based obligations.
• The Parent Company normally recognizes Group
contributions issued and received, and the corre-
sponding tax effect, directly in shareholders’
equity. However, in those cases where Group
contributions received can be considered as divi-
dends, the Group contribution is recognized as
financial income, and the tax effect is included
in income tax for the year in the income state-
ment.
• In the Parent Company, the shares in subsidia-
ries are recognized at acquisition value less any
impairment.
The Parent Company applies hedge accounting
for loans in foreign currencies that are effectively
hedged by a counter-item in foreign currencies.
Accordingly, changes in exchange rates are not
reported for loans raised to finance acquisitions
of foreign subsidiaries.
HEXPOL 113
114 HEXPOL
Compounding Engineered products Group
MSEK 2007 2006 2005 2007 2006 2005 2007 2006 2005
External sales ........... 1 955 1 784 1 615 775 704 590 2 730 2 488 2 205Operating profit ......... 195 143 181 110 62 74 305 205 255Operating margin, %... 10,0 8,0 11,2 14,2 8,8 12,5 11,2 8,2 11,6Net financial items...... -50 -39 -23Tax .......................... -69 -48 -70Profit for the year.... 186 118 162
Operative assets ........ 2 124 1 527 1 536 448 391 391 2 572 1 918 1 927Operative liabilities ..... 301 224 231 58 56 42 359 280 273Operative capital ....... 1 823 1 303 1 305 390 335 349 2 213 1 638 1 654Investments ............. 102 92 29 71 32 38 173 124 67Depreciation ............. 43 41 35 27 27 24 70 68 59
NOTES
Note 1 Segment reporting
Geographic Net sales per markets recipient country Operative capital
MSEK 2007 2006 2005 2007 2006 2005
Europe ............................................................... 1 830 1 727 1 553 1 005 968 975NAFTA ................................................................ 808 698 590 970 487 540Asia.................................................................... 92 63 62 238 183 139TOTAL ................................................................ 2 730 2 488 2 205 2 213 1 638 1 654
Note 2
Of the Parent Company’s net sales, 100 percent pertains to other Group companiesand none of the Parent Company’s purchases pertain to other Group companies.
HEXPOL 115
Note 3 Net assets in acquired operations
2007
Acquisition of GoldKey Processing Inc.In September 2007, HEXPOL AB acquired a compound company, GoldKey Processing Inc. in Ohio, USA.
GoldKey’s net assets at the time of acquisition: Carrying Fair Fair value amount value reported in
MSEK before adjustment the Groupacquisition
Goodwill .......................................................................... 0 260 260Other intangibles .............................................................. 1 0 1Tangible fixed assets ......................................................... 131 0 131Current receivables, inventories, etc. .................................. 107 0 107Cash and cash equivalents ................................................ 11 0 11Long-term liabilities (interest-bearing) .................................. -91 0 -91Current liabilities ............................................................... -58 0 -58
Total purchase consideration including acquisition costs .... 361Acquired cash and cash equivalents ..................................... -11Net cash outflow ........................................................... 350
2006
No operations were acquired during 2006.
2005
Acquisition of Trostel SEG Lake Geneva, Wisconsin USA.In September 2005, HEXPOL AB acquired the wheel division of the Trostel operations. The Company’s name is now Stellana US.
Carrying Fair Fair value Stellana’s net assets at the time of acquisition: amount value reported in
before adjustment the GroupMSEK acquisition
Goodwill ........................................................................... 0 20 20Tangible fixed assets ......................................................... 5 0 5Current receivables, inventories, etc..................................... 17 0 17Long-term liabilities (interest-bearing) ................................... -13 0 -13Current liabilities ............................................................... -4 0 -4Net cash outflow ............................................................ 25
Note 4 Other income and expenses
MSEK 2007 2006 2005
Service charges to Hexagon .............................................. -6 -6 -5Capital gain from the sale of equipment ................................ 0 0 1Non-recurring items ........................................................... -5 -18 -4Other .............................................................................. 1 1 0Total ............................................................................... -10 -23 -8
116 HEXPOL
GROUP
Costs for remuneration to employees
MSEK 2007 2006 2005
Salaries and remuneration, etc. ......................................... 314 274 245Total ............................................................................... 314 274 245
To the Board and Presidents, ............................................ 27 23 19of which bonus and similar ................................................. 5 2 1
MSEK 2007 2006 2005
Pension costs .................................................................. 16 11 9Social security contributions ............................................... 80 67 62Total .............................................................................. 96 78 71
Note 5 Employees and personnel costs
Average number of employees 2007 2006 2005Of which Of which Of which
men men men
Sweden ............................................ 364 53% 350 53% 354 54%Belgium ............................................ 83 89% 85 89% 77 90%Czech Republic .................................. 118 92% 106 92% 101 94%Germany .......................................... 92 93% 90 93% 92 93%Mexico ............................................. 19 84% 0 0% 0 0%Canada............................................. 56 84% 64 84% 65 81%USA................................................. 198 88% 142 88% 94 90%China ............................................... 29 85% 7 85% 0 0%Sri Lanka .......................................... 1 161 98% 1 089 98% 908 97%Total................................................ 2 120 87% 1 933 87% 1 691 87%
Proportion of women in senior positions is 0% (0%) and the number of women on the Board is 14% (0%).
Personnel costs per country
MSEK 2007 2006 2005
Sweden............................................................................ 190 166 156Belgium............................................................................ 36 33 29Czech Republic .................................................................. 17 14 12Germany ......................................................................... 39 40 43Mexico ............................................................................. 1 0 0Canada ............................................................................ 27 29 29USA................................................................................. 74 52 32China ............................................................................... 3 0 0Sri Lanka.......................................................................... 23 18 15Total ............................................................................... 410 352 316
HEXPOL 117
Gender distribution in company management2007-12-31 2006-12-31 2005-12-31
Distribution between men and women on the Company’s Board: Women ........................................................................... 1 0 0Men ................................................................................ 6 4 4Total ............................................................................... 7 4 4
Termination period for the President from the part of the employer is 24 months.
PARENT COMPANY
Average number of employees2007 2006 2005
Women ........................................................................... 2 2 2Men ............................................................................... 3 3 2Total ............................................................................... 5 5 4
Salaries, other remuneration and social security contributions
MSEK 2007 2006 2005
Salaries and other remunerationBoard and President .......................................................... 3 3 2Bonus and similar ............................................................. 3 0 0Other employees ............................................................... 4 2 2Total ............................................................................... 10 5 4
Social security contributions, pension commitments and employment taxBoard and President .......................................................... 3 2 2Other employees ............................................................... 2 1 1Total ............................................................................... 5 3 3
For pension commitments that are not guaranteed through pension insurance, capital insurance policies have been signed. No Board fees have been paid.
118 HEXPOL
Note 6 Fees and cost remuneration to auditors
GROUP
KSEK 2007 2006 2005
Ernst & YoungAudit assignment............................................................. 2 378 2 273 2 130Other assignments .......................................................... 691 603 436
Other auditorsAudit assignment............................................................. 0 0 0Other assignments .......................................................... 176 184 425
Total ............................................................................... 3 245 3 060 2 991
Audit assignment refers to the review of the Annual Report and the accounting records as well as the management bythe Board of Directors and President, other assignments that fall upon the Company’s auditors to perform and adviceor other assistance resulting from observations at such review or implementation of such other assignments.
Other items pertain to other assignments.
PARENT COMPANY
KSEK 2007 2006 2005
Ernst & YoungAudit ............................................................................. 200 196 190Other assignments........................................................... 146 118 292
346 314 482
Note 7 Financial income and expenses
GROUP
Amounts in MSEK 2007 2006 2005
Interest income ................................................................ 8 4 3Other financial income ....................................................... 1 4 6Financial income ............................................................. 9 8 9
Interest expense................................................................ -50 -37 -29Other financial expense ...................................................... -9 -10 -3Financial expense ............................................................ -59 -47 -32
Net financial items .......................................................... -50 -39 -23
PARENT COMPANY
Amounts in MSEK 2007 2006 2005
Other interest income and similar income itemsInterest income ................................................................ 0 0 0Interest income from Group receivables ............................... 1 1 1Currency gains ................................................................. 0 0 0
1 1 1
Interest expense and similar income itemsInterest expense................................................................ 0 0 0Interest expense for Group liabilities .................................... -15 -7 -4Currency losses................................................................. 0 0 0
-15 -7 -4
HEXPOL 119
Note 8 Tax
GROUP
Reported in the income statement
MSEK 2007 2006 2005
Current tax expenseTax expense for the period .................................................. -87 -48 -68Adjustment for tax attributable to prior years ........................ 3 0 0Total .............................................................................. -84 -48 -68
Deferred tax expenseDeferred tax pertaining to temporary differences.................... 10 0 -2Utilized/revaluation of loss carryforwards ............................. 5 0 0Total .............................................................................. 15 0 -2
Total reported tax expense ............................................. -69 -48 -70
Reconciliation of effective tax
MSEK 2007 2006 2005
Profit before tax ................................................................ 255 166 232
Tax according to applicable tax rate for the Parent Company ..... -71 -46 -65Effect of other tax rates for foreign subsidiaries ..................... 9 0 -5Non-deductible expenses ................................................... -10 -2 0Non-taxable income .......................................................... 0 0 0Revaluation of loss carryforwards/temporary differences ....... 0 0 0Tax attributable to prior years ............................................. 3 0 0Foreign tax ....................................................................... 0 0 0Total reported tax expense.............................................. -69 -48 -70
Deferred tax receivable/tax liabilities Deferred tax receivable/liability
MSEK 2007 2006 2005
Tangible assets ................................................................. -22 -20 -23Accounts receivable .......................................................... 2 2 0Provisions ........................................................................ 0 1 2Loss carryforwards............................................................ 6 5 4Others ............................................................................ -6 -22 -17Total .............................................................................. -20 -34 -34
PARENT COMPANY
MSEK 2007 2006 2005
Current tax ..................................................................... 5 2 1Deferred tax ................................................................... 0 0 0Total .............................................................................. 5 2 1
120 HEXPOL
Accumulated acquisition value Capitalized development Other intangible Goodwill expenditure assets Total
MSEK 2007 2006 2005 2007 2006 2005 2007 2006 2005 2007 2006 2005
Opening balance on 1 January .......... 835 891 773 9 8 7 6 4 3 850 903 783Acquisition ..................................... 260 16 2 0 262 0 16Investments .................................... 0 0 0 5 1 4 2 1 9 3 1IFRS adjustments............................. -10 0 0 -10Translation difference ...................... 37 -56 112 1 0 0 37 -56 113Closing balance on 31 December .... 1 132 835 891 16 9 8 10 6 4 1 158 850 903
Accumulated amortization Capitalized development Other intangibleGoodwill expenditure assets Total
MSEK 2007 2006 2005 2007 2006 2005 2007 2006 2005 2007 2006 2005
Opening balance on 1 January .......... -12 -11 -42 -8 -7 -6 -3 -2 -2 -23 -20 -50Amortization according to plan for the year . 0 0 -1 -1 -1 -1 -1 0 -2 -2 -1Acquisition ..................................... -1 0 -1 0 0IFRS adjustments............................. 33 0 0 33Translation difference ...................... 2 -1 -2 0 0 0 2 -1 -2Closing balance on 31 December .... -10 -12 -11 -10 -8 -7 -4 -3 -2 -24 -23 -20Carrying amount on 31 December ... 1 122 823 880 6 1 1 6 3 2 1 134 827 883
Note 9 Intangible fixed assets
HEXPOL 121
Note 10 Tangible fixed assets
GROUP
Land and buildings
Accumulated acquisition value
MSEK 2007 2006 2005
Opening balance on 1 January ............................................ 224 232 203Acquisition ....................................................................... 62 0 0Investments ..................................................................... 41 5 12Divestments and disposals ................................................. 0 0 0Internal reversals............................................................... 0 0 0Translation difference ........................................................ 2 -13 17Closing balance on 31 December .................................... 329 224 232
Accumulated depreciation
MSEK 2007 2006 2005
Opening balance on 1 January ............................................ -81 -75 -62Acquisitions ..................................................................... -8 0 0Depreciation according to plan for the year ........................... -9 -9 -8Divestments and disposals ................................................. 0 0 0Internal reversals............................................................... 0 0 0Translation difference ........................................................ -2 3 -5Closing balance on 31 December .................................... -100 -81 -75
Carrying amount, land and buildings ................................ 229 143 157
Machinery and equipment
Accumulated acquisition value
MSEK 2007 2006 2005
Opening balance on 1 January ............................................ 906 839 723Acquisitions ..................................................................... 107 0 8Investments ..................................................................... 123 117 54Divestments and disposals ................................................. -4 -1 -5Internal reversals............................................................... -12 0 -1Translation difference ........................................................ 16 -49 60Closing balance on 31 December .................................... 1 136 906 839
Accumulated depreciation
MSEK 2007 2006 2005
Opening balance on 1 January ............................................ -538 -504 -430Acquisitions ..................................................................... -36 0 0Depreciation according to plan for the year ........................... -59 -57 -50Divestments and disposals ................................................. 4 1 4Internal reversals............................................................... 10 0 0Translation difference ........................................................ -11 22 -28Closing balance on 31 December .................................... -630 -538 -504
Carrying amount, machinery and equipment ................... 506 368 335
122 HEXPOL
Note 11 Long-term receivables and other receivables
Long-term receivables
MSEK 2007 2006 2005
Others ............................................................................ 2 2 2Other long-term receivables ........................................... 2 2 2
Other current receivables
MSEK 2007 2006 2005
Others ............................................................................ 26 20 16Other receivables ............................................................ 26 20 16
Distribution of depreciation for the year
MSEK 2007 2006 2005
Production costs ............................................................... 64 63 54Selling costs ..................................................................... 0 0 0Administration costs .......................................................... 4 4 4Product development costs ................................................ 1 1 1Others ............................................................................ 1 0 0Total ............................................................................... 70 68 59
PARENT COMPANY
MSEK 2007 2006 2005
Land and buildingsOpening land acquisitions ................................................... 1 1 0Opening building acquisitions................................................ 4 4 0Building acquisitions for the year ......................................... 0 0 5Closing accumulated acquisition value.............................. 5 5 5
Opening depreciation ......................................................... 0 0 0Depreciation for the year ................................................... 0 0 0Closing accumulated depreciation......................................... 0 0 0Closing carrying value, land and buildings......................... 5 5 5
Taxable value, buildings ...................................................... 1 1 1Taxable value, land ............................................................ 1 1 1Total .............................................................................. 2 2 2
Equipment, tools, fixtures and fittingsOpening value.................................................................... 1 1 1Closing accumulated acquisition value.............................. 1 1 0
Opening depreciation.......................................................... -1 -1 -1Depreciation for the year ................................................... 0 0 0Closing accumulated depreciation ................................... -1 -1 -1
Closing carrying amount, equipment ................................ 0 0 0
HEXPOL 123
Note 13 Prepaid expenses and accrued income
GROUP
MSEK 2007 2006 2005
Prepaid leasing costs ........................................................ 2 0 0Accrued income ................................................................ 2 4 2Accrual expenses .............................................................. 3 0 2Others ........................................................................... 11 5 2Total ............................................................................... 18 9 6
PARENT COMPANY
MSEK 2007 2006 2005
Prepaid acquisition expenses ............................................... 0 0 1Others ............................................................................ 0 0 0Total ............................................................................... 0 0 1
Note 14 Shareholders’ equity
Changes in the number of shares
Number 2007 2006 2005
Opening balance on 1 January ............................................ 100 100 100Closing balance on 31 December .................................... 100 100 100
Note 12 Accounts receivables
Age distribution of accounts receivables
MSEK 2007 2006 2005
Not due ........................................................................... 232 203 194Due, 1-60 days ................................................................ 109 91 85Due, more than 60 days .................................................... 3 5 5Accounts receivables....................................................... 344 299 284
Provisions for bad debt losses
MSEK 2007 2006 2005
Opening balance ............................................................... -3 -2 -2Acquired operations .......................................................... -4 0 0Provision for the year ......................................................... -7 -1 0Actual losses ................................................................... 6 0 0Closing balance .............................................................. -8 -3 -2
124 HEXPOL
Note 16 Provisions
MSEK 2007 2006 2005
Provisions for pensions (interest-bearing) .............................. 7 7 6Provisions for pensions (non-interest-bearing) ........................ 3 2 2Provisions ...................................................................... 10 9 8
Changes in provisions
Amounts in MSEK 2007 2006 2005
Opening balance on 1 January ............................................ 9 8 7Provisions for the year ....................................................... 1 1 1Closing balance on 31 December .................................... 10 9 8
Note 17 Other liabilities
Other current liabilities
MSEK 2007 2006 2005
Liabilities pertaining to employees ........................................ 0 0 0Others ............................................................................ 10 9 14Current liabilities ............................................................ 10 9 14
Note 15 Interest-bearing liabilities
Long-term liabilities
MSEK 2007 2006 2005
Hexagon AB...................................................................... 1 294 826 806Long-term liabilities ......................................................... 1 294 826 806
Current liabilities
Amounts in MSEK 2007 2006 2005
State of Ohio..................................................................... 1 0 0Geauga Country, USA ......................................................... 3 0 0Sko FIN, Czech Republic .................................................... 1 0 0Locabel leasing, Czech Republic ........................................... 4 2 4SEB, Mexico ..................................................................... 83 0 0Hexagon AB...................................................................... 0 0 0Short-term portion of loans ................................................ 0 0 0Current liabilities ............................................................ 92 2 4
HEXPOL 125
Note 18 Accrued expenses and prepaid revenues
GROUP
MSEK 2007 2006 2005
Maintenance contracts, prepaid income ............................... 0 0 2Personnel-related expenses................................................. 64 48 38Prepaid expenses ............................................................. 12 9 6Bonus to customers........................................................... 6 1 1Others ............................................................................ 7 3 4Total ............................................................................... 89 61 51
PARENT COMPANY
MSEK 2007 2006 2005
Accrued salary-related expenses ......................................... 6 2 2Accrued consulting fees ..................................................... 0 0 0Accrued acquisition expenses ............................................. 0 0 0Others ............................................................................ 1 0 0Total ............................................................................... 7 2 2
Note 19 Operational leasing
Terminable leasing payments amount to
MSEK 2007 2006 2005
Within one year ................................................................ 9 9 6Between one and five years................................................. 9 18 9Longer than five years ........................................................ 0 0 0Total ............................................................................... 18 27 15
Leasing expenses
MSEK 2007 2006 2005
Minimum leasing fees......................................................... 2 0 6Total ............................................................................... 2 0 6
126 HEXPOL
Note 20 Pledged assets and contingent liabilities
Pledged assets
MSEK 2007 2006 2005
Company chattel mortgages................................................ 0 0 0Blocked funds ................................................................... 0 0 0Total ............................................................................... 0 0 0
Contingent liabilities
MSEK 2007 2006 2006
Guarantee to the benefit of associated companies .................. 4 4 4Indemnity bonds for bank guarantee .................................... 0 0 0Total ............................................................................... 4 4 4
Note 21 Group companies
Parent Company’s holdings of shares and participations in Group companies
MSEK Value in the Parent Company
Subsidiaries Registered Proportion 2007 2006 2005office of equity
Gislaved Gummi AB................................... Gislaved, Sweden 100% 101 101 101Megufo AB .............................................. Gislaved, Sweden 50%Stellana AB.............................................. Laxå, Sweden 100% 29 29 29Elastomeric Engineering Co Ltd................... Sri Lanka 99,6%1 58 58 58Elastomeric Technologies Ltd...................... Sri Lanka 100%Elastomeric Tools & Dies Ltd ...................... Sri Lanka 100%2
Hexagon Polymers Compounding HQ Sprl ..... Belgium 100% 469 469 469Hexagon Polymers Compounding Sprl .......... Belgium 100%Hexagon Polymers Compounding s. r. o ....... Czech Republic 100%Hexagon Polymers Compounding NC Inc ...... USA 100% 75 75 75Stellana U.S. Inc. ..................................... USA 100% 4 4 4Hexagon Polymers Compounding (Qingdao) Co., Ltd..................................... China 100% 41 41Hexagon Polymers Compounding S.A de C.V. Mexico 100%GoldKey Processing Inc. ............................ USA 100% 361Hexagon Polymers Gaskets (Qingdao) Co., Ltd China 100% 28 Stellana (Qingdao) Co., Ltd......................... China 100% 5Thona Canada BV ..................................... Netherlands 100% 166Hexagon Polymers Compounding ULC.......... Canada 100%Hexagon Polymers Compounding GmbH ....... Germany 100%
Total carrying amount in the Parent Company ............................. 1 337 777 736
1 Gislaved Gummi AB holds 200 shares included in this ownership. The remaining 0.4 percent of the shares are held by external parties.2 Elastomeric Technologies Ltd. holds 69.6 percent and Elastomeric Engineering Company Ltd. holds 30.4 percent of the shares.
HEXPOL 127
Note 22 Cash-flow statement
Interest paid and received
MSEK 2007 2006 2005
Interest received ............................................................... 9 8 9Interest paid ..................................................................... -59 -47 -32
Adjustments for non-cash items
MSEK 2007 2006 2005
Depreciation ..................................................................... 70 68 59Provisions......................................................................... 1 1 1Assets divestment ............................................................. 0 1 1Total ............................................................................... 71 70 61
Acquisition of operations
MSEK 2007 2006 2005
Net cash outflowGoldKey Processing Inc....................................................... 350 0 0Stellana US....................................................................... 0 0 25Total ............................................................................. 350 0 25
Note 23 Events after closing day
As of 23 April 2008, the Company changed name to HEXPOL AB.
128 HEXPOL
Auditors’ report on restated historical financial statements
We have audited the financial statements for
HEXPOL AB (publ) on pages 102-127, which
comprise the consolidated balance sheets as of
31 December 2007, 2006 and 2005 and the con-
solidated income statements and cash flow state-
ments for the financial years then ended, the
parent company’s balance sheets as of 31 December
2007, 2006 and 2005 and the parent company’s
income statements and cash flow statements for
the financial years then ended and a summary
of significant accounting policies and other
explanatory notes.
The Board of Directors’ and CEO’s responsibility The Board of Directors and CEO are responsible for the
preparation and the fair presentation of the financial
statements in accordance with law, International
Financial Reporting Standards IFRS as adopted by
the EU, other applicable supplementary regulation
and the requirements of the Prospectus Directive
implementing EC Regulation 809/2004. This respon-
sibility includes designing, implementing and main-
taining internal control relevant to prepare and
appropriately present the financial statements that
are free from material misstatement, whether due
to fraud or error.
Auditors’ responsibilityOur responsibility is to express an opinion on these
financial statements based on our audit. We conducted
our audit in accordance with FAR SRS’s proposed
RevR 5 Examination of Prospectuses. This recom-
mendation requires that we have planned and
performed the obtain reasonable assurance that
the financial statements are free from material
misstatements.
An audit in accordance with FAR SRS’s proposed
RevR 5 Examination of Prospectuses involves perfor-
ming procedures to obtain audit evidence corrobora-
ting the amounts and disclosures in the financial
statements. The audit procedures selected depend
on our assessment of the risks of material misstate-
ments, whether due to fraud or error. In making
those risk assessments, we consider internal control
relevant to the company’s preparation and presenta-
tion of the financial statements as a basis for designing
audit procedures that are applicable under those
circumstances but not for the purpose of expressing
an opinion on the effectiveness of the company’s
internal control. An audit also involves evaluating
the accounting policies applied and the reasonableness
of the significant accounting estimates made by the
Board of Directors and CEO and evaluating the
overall financial statement presentation.
We believe that our audit gives us a reasonable basis
for our opinion.
OpinionIn our opinion the consolidated financial statements
for the financial years 2007, 2006 and 2005 (the last
year as comparative) give a true and fair view of the
HEXPOL 129
group’s financial position as of 31 December 2007,
2006 and 2005 (the last year as comparative) and
the group’s financial performance and cash flows for
the financial years then ended in accordance with
International Financial Reporting Standards IFRS
as adopted by the EU.
In our opinion HEXPOL AB’s (publ) financial state-
ments for the financial years 2007, 2006 and 2005
give a true and fair view of the company’s financial
position as of 31 December 2007, 2006 and 2005 and
the company’s financial performance and cash flows
for the financial years then ended in accordance
with the annual accounts act (1995:1554) (Sw: års-
redovisningslagen) and the recommendations of the
Swedish Accounting standards Board (Sw: Redovis-
ningsrådet) RR 32:06.
Malmö 22 May 2008
Ernst & Young AB
Ingvar Ganestam
Authorized Public Accountant
Stefan Engdahl
Authorized Public Accountant
130 HEXPOL
HEXPOL 131
1 Through companies.
2 For each multiple of ten class A or class B shares held on the record date for right to share dividend, one share of the correspondingclass of HEXPOL shares will be received.
Melker SchörlingBorn in 1947, B.Sc. Econ.Chairman and Member of the Board since 2007Other assignments/positions: Chairman and Member of the Board of Hexagon AB, Melker Schörling AB,
AarhusKarlshamn AB, Securitas AB, Melker Schörling Tjänste AB and Edeby-Ripsa Skogsförvaltning
AB. Member of the Board of H&M Hennes & Mauritz AB and Mexab Holding AB. Deputy Member of
the Board of Hasta AB and Hasta Holding AB.
Directorships completed in the past five years: Chairman and Member of the Board of Securitas
Systems AB (currently Niscayah Group AB), Mexab Förvaltnings AB, Konverta AB, AarhusKarlshamn
Sweden AB, Attendo Holding AB. Member of the Board of ASSA ABLOY AB and Noxys Invest AB.
Hexagon shareholding: 11 812 500 class A shares and 50 415 654 class B shares, through Melker
Schörling AB2.
Georg BrunstamBorn in 1957, M.Sc. Industrial and Mechanical EngineeringPresident and CEO and Member of the Board since 2007Other assignments/positions: Various directorships within the HEXPOL Group. Member of the
Board of Nibe Industrier AB, DIAB Group AB, AB Wilh Becker and Båstadtennis & Hotell AB.
Directorships completed in the past five years: CEO of Nolato AB with subsidiaries.
Hexagon shareholding: -
Board of Directors, seniormanagement and auditorsBoard of Directors
Independent in Independent in relation to the relation to the
Audit Remuneration Company and Company’s major Number of Number ofYear of birth Nationality Elected Committee Committee management shareholders A shares B shares
Melker Schörling
Chairman of the Board1947 Swedish 2007 Chairman Yes No 11 812 500 50 415 6541
Georg Brunstam
President and CEO1957 Swedish 2007 No No – –
Maths-Olov Sundqvist 1950 Swedish 2007 Yes No – 40 000 0001
Alf Göransson 1957 Swedish 2007 Yes No – –
Malin Persson 1968 Swedish 2007 Yes Yes – –
Ulrik Svensson 1961 Swedish 2007 Chairman Member Yes No – –
Jan-Anders E. Månson 1952 Swedish 2008 Yes Yes – –
132 HEXPOL
1 For each multiple of ten class A or class B shares held on the record date for right to share dividend, one share of the correspondingclass of HEXPOL shares will be received.
Maths-Olov SundqvistBorn in 1950, EconomistMember of the Board since 2007Other assignments/positions: Member and Chairman of the Board as well as CEO of AB Skrindan.
Chairman and Member of the Board of Landmärke Norra Europa AB. Member of the Board of Hexagon AB.
Directorships completed in the past five years: Chairman and Member of the Board as well as CEO of
WOW Flooring AB and Industrihuset Dubben AB. Chairman and Member of the Board of Fastighetsaktie-
bolaget Östersund-Storsjön, Barb AB, Motboken 2 AB, Motboken 3 AB, Motboken 11 AB and Motboken 12 AB.
Member of the Board and CEO of AB Släden and Högfors Bruk AB. Member of the Board of Investment AB
Öresund, Fabege AB, SIS Ägarservice AB, Kjell Jonsson i Östersund AB, Östersunds Test and Friskvård AB
and Fabös Kristianstad AB.
Hexagon shareholding: 40 000 000 Class B shares through companies1.
Alf GöranssonBorn in 1957, B.Sc. Business AdministrationMember of the Board since 2007Other assignments/positions: Member of the Board, CEO and President of Securitas AB. Member of
the Board of Loomis AB and Axel Johnson Inc., USA. Chairman of the Lund Institute of Technology.
Directorships completed in the past five years: Member of the Board and CEO of NCC AB and
various directorships within the NCC Group. Member of the Board of Välinge Flooring Technology AB,
Välinge International AB, Altima AB and the Stockholm Chamber of Commerce.
Hexagon shareholding: -
Malin PerssonBorn in 1968, M.Sc. Industrial Engineering and ManagementMember of the Board since 2007Other assignments/positions: CEO and President of Volvo Technology. Member of the Board of Volvo
Technology AB, Volvo Lastvagnar AB, Volvo Technology Transfer AB, KCI Konecranes Plc., Universeum
AB. Partner in Acanthis AB.
Directorships completed in the past five years: Chairman and Member of the Board of Elicit AB.
Member of the Board of Green Cargo AB, Volvo Maroc SA, Volvo Mobility Systems AB and Sweden-China
Trade Council Economic Association.
Hexagon shareholding: -
Ulrik SvenssonBorn in 1961, Degree in Business AdministrationMember of the Board since 2007Other assignments/positions: CEO of Melker Schörling AB. Member of the Board of AarhusKarls-
hamn AB, Securitas Systems AB (currently Niscayah Group AB), Loomis AB and ASSA ABLOY AB.
Directorships completed in the past five years: Chairman and Member of the Board and CEO of
MS Karl Invest AB. Member of the Board of Securitas Direct AB, ESML Intressenter AB, ESML Intres-
senter Holding AB and ESML Intressenter Topholding AB.
Hexagon shareholding: -
Jan-Anders E. Månson Born in 1952, M.Sc. and Ph.D. TechnologyMember of the Board since 2008Other assignments/positions: Vice President École Polytechnique Fédérale de Lausanne.
Chairman of the Board of AISTS. Member of the Board of Konstruktions-Bakelit AB, CSEM SA,
DECISION SA, EELCEE SA and FIT.
Hexagon shareholding: -
HEXPOL 133
1 For each multiple of ten class A or class B shares held on the record date for right to share dividend, one share of the correspondingclass of HEXPOL shares will be received.
Georg BrunstamBorn in 1957, M.Sc. Industrial and Mechanical EngineeringPresident and CEO, employed in 2007Other assignments/positions: Various directorships within the HEXPOL Group. Member of the Board
of Nibe Industrier AB, DIAB Group AB, AB Wilh Becker and Båstadtennis & Hotell AB.
Directorships completed in the past five years: Various directorships within Nolato AB with subsidiaries.
Previous positions: President of Nolato AB 2003-2007. CEO of Trelleborg Engineered Systems within
Trelleborg AB and member of Trelleborg’s Group Management 1997-2003. CEO of Trioplast AB 1992-
1997 and senior positions within Perstorp AB 1983-1992.
Hexagon shareholding: -
Anders Lyrheden Born in 1965, B.Sc. Business AdministrationCFO, employed in 2006Other assignments/positions: Various directorships within the HEXPOL Group.
Directorships completed in the past five years: Various directorships within the Mölnlycke
Healthcare Group. Member of the Board of Sälöknapp AB.
Previous positions: CFO at Mölnlycke Healthcare AB 2004-2005, Business Area
Controller Mölnlycke Healthcare AB 2001-2004, Financial Manager at Nolato Plastteknik AB 1995-2001.
Hexagon shareholding: 750 Class B shares1.
Lars-Åke BylanderBorn in 1965, TechnicianHead of the Gaskets and Profiles product areas, employed in 2000Other assignments/positions: Member of the Board and CEO of Gislaved Gummi AB. Member of the
Board of Anicho Invest AB, Cue Dee Produkter AB and MEGUFO AB.
Previous positions: Marketing Manager Gislaved Gummi AB 2000-2004, Business Area Manager
Forsheda AB (TI Group) 1997-2000, Sales Manager Forsheda AB 1994-1997, Sales Engineer Forsheda AB
1990-1994.
Hexagon shareholding: 1 550 Class B shares1.
Tracy GarrisonBorn in 1967, B.Sc. ChemistryHead of Compounding NAFTA, employed in 2002Previous positions: Vice President of Thona North America 2002-2004. Sales Director North America,
Rhein Chemie Corporation 1999-2002. Management assignments, including Regional Accounts and
Senior Sales, Technical and Quality Insurance Management at: Elastochem Inc., MA Hanna Rubber
Compounding and Colonial Rubber Works Inc. 1990-1999. Cooperative Education, Research and
Development, Colonial Rubber Works Inc.1985-1990.
Hexagon shareholding: -
Peter KrukBorn in 1968, M.Sc. Engineering PhysicsHead of the Wheels Product Area, employed in 2007Other assignments/positions: Member of the Board and CEO of Stellana AB.
Previous positions: General Manager at Large AC Motors, ABB Automation Technologies AB,
Machines 2006-2007. Vice President Marketing & Sales, ABB Automation Technologies AB, Robotics
2003-2006. Senior positions within ABB Group 1996-2001.
Hexagon shareholding: 300 Class B shares1.
Senior executives
134 HEXPOL
Carsten Rüter Born in 1971, M.Sc. EngineeringHead of Compounding Technology, employed in 1997Previous positions: Vice President Technology Hexagon Polymers Compounding 2004-2005,
Technical Director at Thona Belgium 1997-2004.
Hexagon shareholding: -
Ralph WolkenerBorn in 1971, Master of Business AdministrationHead of Compounding Europe & Asia, employed in 1997Previous positions: Vice President Marketing at Hexagon Polymers Compounding 2004-2005,
Marketing Director at Thona Belgium 1997-2004.
Hexagon shareholding: -
AuditorsAuthorized Public Accountants Stefan Engdahl and Gunno Rydberg, both active
at Ernst & Young AB and members of FAR SRS, have been auditor and deputy
auditor of HEXPOL during the period covered by the historical financial informa-
tion, meaning from 2005 up to an including the first quarter of 2008 (Gunno Ryd-
berg as of June 2005). At Extraordinary General Meetings held on 2 April 2008
and 21 April 2008, respectively, the registered accounting firm Ernst & Young AB,
with Authorized Public Accountant Ingvar Ganestam as auditor-in-charge and
Authorized Public Accountant Stefan Engdahl, respectively, with Authorized
Public Accountant Johan Thuresson as deputy auditor, both active at Ernst &
Young AB and members of FAR SRS, were elected for the current year up to the
end of 2011. All auditors can be reached at the following address:
Ernst & Young AB, Box 7850, SE-103 99 Stockholm.
Ingvar GanestamBorn in 1949. Authorized Public Accountant and member of FAR SRS.Other audit assignments: Alfa Laval AB, Lindab International AB, Nolato AB, the IKEA Group, the
Bergendahls Group and AB Tetra Pak.
Stefan EngdahlBorn in 1967. Authorized Public Accountant and member of FAR SRS.Other audit assignments: ITAB Shop Concept AB, KABE AB, XANO Industri AB and Liljendahlsbolagen.
HEXPOL 135
Ordinary remuneration for the period up to the 2009 Remuneration for
Board Member Annual General Meeting committee work Total remuneration
Melker Schörling, Chairman 400 000 – 400 000
Georg Brunstam, President and CEO – – –
Maths-Olov Sundqvist 200 000 – 200 000
Alf Göransson 200 000 – 200 000
Malin Persson 200 000 – 200 000
Ulrik Svensson 200 000 150 000 350 000
Jan-Anders E. Månson 200 000 – 200 000
Total 1 400 000 150 000 1 550 000
Other information regarding the Boardof Directors and senior executivesFor all members of HEXPOL’s Board of Directors
and senior management, the office address is
Skeppsbron 3, SE- 211 20 Malmö.
The Extraordinary General Meeting of HEXPOL
on 28 December 2007 and the Extraordinary General
Meeting held on 2 April 2008 resolved to elect a Board
of Directors comprising Melker Schörling (Chair-
man), Georg Brunstam, Maths-Olov Sundqvist,
Alf Göransson, Malin Persson, Ulrik Svensson and
Jan-Anders E. Månson. The aforementioned Board
was re-elected at the 2008 Annual General Meeting
for the period until the close of the 2009 Annual
General Meeting.
HEXPOL’s Board of Directors is adjudged to fulfil
the Nordic Exchange’s requirement concerning
independence in relation to HEXPOL and its mana-
gement and to major shareholders. When arriving
at this judgement, independence in relation to major
shareholders has been assessed in relation to Hexagon’s
owners, since immediately after the proposed spin-off,
HEXPOL will have the same circle of owners as
Hexagon.
No member of the HEXPOL Board or senior executive
has been convicted in fraud-related court cases during
the past five years. None of these persons has been
involved in a bankruptcy, liquidation or bankruptcy
administration during the same period. Nor has any
of them been the subject of accusations or sanction
by public authorities, or prohibited by a court to be
a member of a company’s administration, manage-
ment or control body or from having a leading posi-
tion or overriding function with a company during
the past five years.
No Board member or senior executive has any private
interest that could conflict with HEXPOL’s interests.
In the future, some of the Board members and senior
executives could directly or indirectly gain financial
interests in HEXPOL through shareholdings in the
Company resulting from their current shareholdings
in Hexagon.
There are no familial relationships between Board
members or senior executives. No company in the
HEXPOL Group has entered into an agreement
with a Board member or a senior executive concer-
ning benefits accruing after completion of the
assignment.
Remuneration of the Board of Directors The Chairman and Members of the Board of Directors
receive director fees in accordance with resolutions
of General Meetings. Special fees are paid for work
Remuneration of the Board of Directors
SEK
136 HEXPOL
Remuneration 2007 Estimated remuneration 2008
Fixed salary Variable Pension Fixed salary Variable PensionSEK remuneration1 costs remuneration1 costs
CEO 333 000 – – 4 000 000 3 700 0002 1 600 000
Other members
of Group Management 9 360 000 2 615 000 1 225 000 10 200 000 3 380 000 1 200 000
(six persons)
Total 9 693 000 2 615 000 1 225 000 14 200 000 7 080 000 2 800 000
1 Pertains to maximum outcome.2 SEK 1 700 000 of this amount is a fixed bonus to be paid at the listing of the company, for which amount
reservations have been made in 2007.
Remuneration of management
on the Audit Committee. No director fees are payable
to the CEO and President.
Up to the Extraordinary General Meeting 2 April
2008, no fees were paid to Board Members for work
on HEXPOL’s Board of Directors. As a Group company
within the Hexagon Group, the Company up to and
including December 2007 had a Board of Directors
that only comprised employees within the Group,
whose job description included Board assignments.
The remuneration of HEXPOL’s current Board of
Directors was resolved by the Extraordinary General
Meeting held on 2 April 2008. The members elected
by the Meeting were appointed for the period until
the close of the 2009 Annual General Meeting and
the fee pertains to the period that ends then. For
information on director fees and the allocation
among the Board Members, refer to the table on
the preceding page.
Remuneration, etc., of senior executives
General principles for remuneration ofHEXPOL’s Group ManagementRemuneration of the CEO and President as well as
other members of the Group Management comprises
basic salary, variable remuneration, other benefits
and pension. The total remuneration must be compe-
titive in the market to ensure that the HEXPOL
Group is able to attract and retain competent senior
executives. The variable portion of the salary shall
be connected to the Group’s profit trend in terms of
what the particular individual can affect and be
based on individually established goals. The variable
remuneration shall be maximized in relation to the
basic salary. Variable remuneration, with the limita-
tions pursuant to applicable pension commitments,
shall not be pensionable. Pension benefits shall be
based on either defined-benefit or defined-contribution
plans, or a combination of such plans, with individually
set retirement ages, although not lower than 60 years.
The Board’s Remuneration Committee is responsible
for preparing matters involving the remuneration of
members of Group Management, and of other mana-
gement levels if the Committee so decides. The Com-
mittee reports its proposals to the Board of Directors,
which decides on the matters. For further information
refer to Corporate Governance on page 139.
For information on the remuneration paid to Group
Management in 2007 and estimated remuneration
for 2008, refer to the table below.
HEXPOL 137HEXPOL
Incentive programmeCurrently, no incentive programmes are in effect
within HEXPOL. As a matter of principle, however,
the Board of Directors takes a positive view of offe-
ring the Company’s employees an opportunity to
participate in incentive programmes. The Board of
Directors of HEXPOL is studying the prerequisites
for issuing a proposal concerning an incentive
programme at an appropriate time.
Terms of employment for senior executives, etc.The company and the CEO have agreed on a period
of notice of 24 months, with entitlement to ordinary
salary, if the employment is terminated by the com-
pany. If the employment is terminated by the CEO,
a period of notice of six months applies. The period
of notice for other senior executives varies from
three to 12 months. Ordinary salary is paid during
the notice period. The employment contract for CEO
Georg Brunstam does not contain any clauses impe-
ding the CEO from engaging in competitive opera-
tions after his employment has ceased. Further, it
should be noted that the clauses in the employment
contracts of certain senior executives impeding them
from engaging in competitive operations after their
employment has ceased, and in the employment
contracts of certain other senior employees in
HEXPOL’s subsidiaries, could possibly be regarded
as invalid, since separate compensation is not pay-
able for the said commitments.
HEXPOL 139
Corporate governance Responsibilities of the Board of DirectorsThe Board is responsible for determining the overall
objectives for the Company’s operations, developing
and monitoring the Company’s overall strategy, deci-
sions concerning major company acquisitions, divest-
ments and investments, and continuous monitoring
of operations during the year. The Board is also
responsible for continuous evaluation of the Company’s
management, the presence of effective systems for
monitoring and internal control of the Company’s
operations and financial position and for the Group’s
organizational structure and administration pursuant
to the Swedish Companies Act (2005:551). The Board
of Directors also appoints the Chief Executive Officer,
as well as the Audit Committee and Remuneration
Committee, and decides on the salary and other
remuneration to be paid to the Chief Executive
Officer. The Board of Directors shall meet at least
five times annually, in addition to statutory meeting,
with at least one meeting including a visit to one of
the Groups operations. The Company’s auditors
must attend at least one Board meeting.
Procedural rules and instructions forthe Board of DirectorsThe activities of the Board of Directors and the
division of duties between the Board and Group
Management are governed by the procedural rules
and instructions for the Board of Directors, which
have to be adopted annually by the Board of Directors
at the statutory meeting held after the Annual
General Meeting. In accordance with the procedural
rules and instructions, the Board of Directors shall
decide upon, among other things, the Group’s overall
strategy, business and profitability targets, signifi-
cant organizational changes as well as major com-
pany acquisitions and investments in real estate.
The Board of Directors shall also establish parameters
for the Group’s operations by approving the Group’s
budget. The procedural rules and instructions include
instructions for the CEO, an instruction for financial
reporting and instructions for the Audit and Remune-
ration Committee. These are addressed and adopted
once annually.
CommitteesThe Board of Directors has appointed an Audit
Committee with the assignment to prepare, on behalf
of the board, issues relating to the procurement and
remuneration of auditors, to follow up the work of
the auditors and the Company’s internal control
system, to monitor the current risk situation, to
follow up the external audit and the Company’s
financial information, and other issues that the
Board assigns the Committee to prepare. The Audit
Committee shall continuously meet with HEXPOL’s
auditors and continuously report to the Board of
Directors. The Committee has no decision-making
authority; its mandate is to present its conclusions
and proposals to the Board of Directors for decision.
The Board has appointed Ulrik Svensson as member
and chairman of the Audit Committee for the period
up to the 2009 Annual General Meeting.
In accordance with the Swedish Code of Corporate
Governance, the Board of Directors must establish
an Audit Committee comprising at least three Board
Members. At present, the Company’s Audit Committee
has only one member.
The Board of Directors has also formed a Remuneration
Committee in order to address all matters pertaining
to salaries, bonuses, options, pensions and other
forms of remuneration to Group Management and
also to other management levels, if the Board of
Directors so decides. The Committee has no decision-
making authority; its mandate is to present its
conclusions and proposals to the Board of Directors
for decision. The Board has appointed Melker Schörling
as chairman and Ulrik Svensson as member of the
Remuneration Committee for the period up to the
140 HEXPOL
2009 Annual General Meeting. Information concerning
remuneration of the Board of Directors and manage-
ment is presented on page 135-137.
Swedish Code of Corporate GovernanceThe Swedish Code of Corporate Governance (“the
Code”) is to be applied by all companies listed on the
OMX Nordic Exchange Stockholm as of 1 July 2008.
HEXPOL intends to apply the Code as of the date
at which its shares are listed on the OMX Nordic
Exchange Stockholm. In cases where a specific rule
is not being complied with, HEXPOL will explain
such non-compliance in accordance with the Code.
Internal controlHEXPOL’s Board of Directors is responsible for
that the Group has effective internal control and
shall continuously evaluate where the future risks
that could affect operations exist. The system for
internal control comprises methods and activities for
safeguarding assets, verifying the correctness and
reliability of internal and external financial state-
ments and ensuring compliance with established
guidelines. In addition, external parties are to be
commissioned to diagnose risks and controls within
functional areas that are inherently associated with
high risk, such as the Group’s major IT functions
and internal bank. The principal components of the
internal control include a distinct frame of reference
for the Board of Directors and its committees, a
distinct organizational structure with a documented
delegation of decision-making authority from the
Board to Group Management, the expertise of employees,
as well as number of Group policies, procedures and
parameters. The delegation of decision-making autho-
rity is documented in attestation provisions, which
provide clear instructions to managers at all levels.
The Board of Directors has also formulated a process
for evaluating the Group’s need to introduce an in-
ternal audit function. The basis of the Board’s asses-
ment is the consideration whether such a function
would facilitate fulfilment of objectives by the Board
and create shareholder value by adding an objective
analysis of how the Board and Group Management
manage risks and monitor operations. On the basis
of the evaluation made, no special internal audit
function has been deemed necessary. The Board of
Directors’ evaluation will continue to be made annually
as part of the Corporate Governance process
within the Group.
Information policyHEXPOL’s Board has adopted an information policy,
whose aims include ensuring that the Company fulfils
the requirements concerning information disclosure
to the stock market. HEXPOL’s financial and other
communication activities must always comply with
the OMX Nordic Exchange Stockholm’s regulations,
generally acceptable behaviour in the stock market
and other relevant regulations and legal obligations
to which HEXPOL may be subject. Communication
activities shall also be designed to create a flow of
uniform actions between the Company, the employees
and the business environment. In addition, commu-
nication activities shall make possible an exchange
of ideas within the organization and contribute to
enhancing the quality of the Company’s communica-
tion efforts.
The policy establishes the distribution of responsibi-
lity for information matters and stipulates who may
represent the Company as a spokesperson, who is to
determine what is to be regarded as price-impacting
information, how price-impacting information is to
be handled and the information content and method
to be used when communicating with players in
the financial market. The policy also includes pro-
cedures for the year-end report, interim reports,
Annual Report, Annual General Meeting, press
releases, press and telephone conference, meetings
with investors, Capital Market Days and the
Company’s website. Finally, the information policy
addresses communication in crisis situations and
in the event of information leaks.
Insider policy and insider registerHEXPOL’s Board of Directors has adopted an insider
policy, as a complement to the applicable insider
legislation in Sweden. The insider policy establishes
procedures for “closed periods”, meaning that trading
in financial instruments in HEXPOL is prohibited
HEXPOL 141
for a 30-day period prior to the disclosure of financial
reports, including the day of release. HEXPOL also
keeps an internal insider register, in accordance
with the instructions issued from time to time by the
Chief Executive Officer. This register shall include
information about all the people who work for the
Company that have access to insider information.
Ethical policyHEXPOL has adopted ethical guidelines for ensuring
that the Group upholds and promotes business
methods of the highest possible ethical standards.
HEXPOL supports and respects fundamental
human rights and accepts responsibility for observing
these rights wherever HEXPOL is active.
Environmental policyMatters involving the external environment,
sustainable development and health and safety are
integral parts of HEXPOL’s business operations.
HEXPOL must fulfil environmental requirements
pursuant to laws, ordinances and international
agreements. Decisions concerning operations that
affect the environment shall be guided by what is
ecologically motivated, technically possible and
financially viable. As part of HEXPOL’s environmental
policy, it is required that all subsidiaries implement
ISO 14001 and that operations subject to permit
requirements be conducted in accordance with current
regulations. The entire Group takes responsibility
for the environment, health and safety and each
employee plays an important role in these efforts.
Nomination Committee prior to the2009 Annual General Meeting HEXPOL’s 2008 Annual General Meeting resolved
that HEXPOL was to have a Nomination Committee
comprising four members representing the largest
shareholders in terms of voting power in the Company
at the start of the month of October. Information
concerning the members of the Nomination Commit-
tee shall be published no later than six months before
the Annual General Meeting. During the month of
October, the largest shareholder shall contact the
three other major shareholders and convene the
Nomination Committee. In connection with this, the
Nomination Committee shall from among its numbers
appoint a chairman of the Nomination Committee,
who must not be the Chairman of the Board. In the
event that a shareholder represented by a member
of the Nomination Committee ceases being one of
the major shareholders in HEXPOL, or that a member
of the Nomination Committee ceases being employed
by such a shareholder or, for some other reason, leaves
the Nomination Committee before the 2009 Annual
General Meeting, the Nomination Committee shall
be entitled to appoint another representative for the
major shareholders to replace such a member.
The Nomination Committee’s duties shall be to
prepare, prior to forthcoming General Meetings, the
election of Chairman of the Board and other members
of the Board, the election of chairman of the General
Meeting, election of auditors (where applicable), and
resolutions concerning fees and related matters. The
Nomination Committee shall hold the number of
meetings required to be able to perform its duties,
although at least one meeting per year.
Financial risk policyHEXPOL’s Board of Directors has adopted a financial
policy that specifies common guidelines, the organi-
zation and applicable mandates for financial activities,
as well as the overall strategy and management of
financial risk exposure and liquidity management
(cash management), for the Group. HEXPOL is mainly
exposed to financial risks pertaining to liquidity,
interest rates, financing, loans and exchange rates,
with the exchange rate risk as the predominant one.
Currency exposure results from the subsidiaries’
international trade and gives rise to continuous
exchange rate hedging of contracted and forecasted
currency flows. The overall objective of the Group’s
financial activities is to support the business opera-
tions by safeguarding financing/credit facilities and
efficient liquidity management at both the local and
the central level and to manage the financial risks to
which the Group is exposed. External financing and
the management of the Group’s financial risk expo-
sure is centralized to HEXPOL AB.
142 HEXPOL
HEXPOL 143
Articles of Association
Registered name Article 1
of the Company The registered name of the Company is HEXPOL AB. The Company is a public
company (publ).
Registered office of Article 2
the Board of Directors The registered office of the Board of Directors shall be in the municipality of Malmö,
Skåne County, Sweden
Operations Article 3
The object of the Company’s operations is to acquire, own and actively manage
shares in primarily industrial, retail and service companies. The Company shall
also own and manage securities, sell administrative services and conduct other
operations related to the above.
Shares Article 4
The Company’s share capital shall amount to not less than forty million Swedish
kronor (SEK 40,000,000) and not more than one hundred and sixty million Swedish
kronor (SEK 160,000,000).
The number of shares in the Company may not be fewer than twenty million
(20,000,000) and not exceed eight million (80,000,000).
The shares shall be issued in two series, designated Class A (A-shares) and Class B
(B-shares). If two classes of shares are issued, Class A shares may account for a
maximum of 50 per cent and Class B shares a maximum of 95.6 per cent of the
shares outstanding in the Company from time to time.
If the Company decides to issue new Class A or Class B shares through a cash
issue or an issue offsetting debt, holders of Class A or Class B shares shall have
preferential rights to the subscription of new shares of the same type in relation
to the number of shares already held (primary preferential right).
Shares not subscribed for on the basis of primary preferential rights shall be offered
for subscription to all shareholders (subsidiary preferential right). If the number
of shares offered on this basis is insufficient for subscription based on subsidiary
preferential rights, the shares shall be distributed in relation to the number of shares
already held and, insofar as this is not possible, by lottery.
144 HEXPOL
In the event that the Company decides that new shares of either Class A or Class B
alone shall be issued through a cash issue or an issue offsetting debt, all shareholders,
irrespective of whether they own Class A or Class B shares, shall have preferential
rights to the subscription of new shares in relation to the number of shares already
held.
If the Company decides to issue warrants or convertible debentures through a cash
issue or an issue offsetting debt, the shareholders shall have preferential rights to
subscribe for warrants as if the new issue applied to the shares that may be issued
on the basis of the warrants or with respect to convertibles as if the issue pertained
to the shares for which the convertibles will be exchanged.
The stipulations of above shall not constitute any infringement on the possibility to
make a decision regarding a cash issue or an issue offsetting debt with a deviation
from the shareholders’ preferential rights.
In the event of an increase in share capital through a bonus issue, new shares of
each series shall be issued in relation to the number of shares of the same series
already issued. In such cases, existing shares of a specific series carry entitlement
to new shares of the same series. The aforementioned stipulation shall not constitute
any infringement on the possibility, following the requisite amendment in the Articles
of Association, to issues shares of a new series through a bonus issue.
All shares shall carry equal rights to participation in the Company’s assets and profits.
Voting rights Article 5
Each Class A share entitles the holder to ten (10) votes and each Class B share entitles
the holder to one (1) vote at General Meetings.
Board of Directors Article 6
The Board of Directors shall consist of not fewer than five (5) and not more than
ten (10) members, with not more than two (2) deputies. The Board members are
elected by the General Meeting for the period until the end of the first Annual
General Meeting held after the Board members were elected.
Auditors Article 7
For the purpose of examining the Company’s administration by the CEO and the
Board of Directors and the Company’s financial accounts, one or two auditors, as well
as one or two deputy auditors, shall be elected by the General Meeting. A registered
accounting firm may be appointed the Company’s auditor or deputy auditor.
Notice Article 8
Notice convening a General Meeting shall be made by announcement in Dagens
Industri and in The Swedish Official Gazette (Sw. Post- och Inrikes Tidningar).
HEXPOL 145
Notice of the Annual General Meeting and of Extraordinary General Meetings conve-
ned to address amendments to the Articles of Association shall be issued not earlier
than six weeks and not later than four weeks prior to the Meeting. Notice of other
General Meetings shall be issued not earlier than six weeks and not later than two
weeks prior to the Meeting.
Other messages to shareholders shall either be issued in the manner stated in the
preceding paragraph or be sent by post to shareholders to the address entered in the
share register.
To be entitled to participate in a General Meeting, shareholders shall, firstly, be
registered in the transcript of the entire share register pertaining to the conditions
prevailing five days prior to the Meeting and, secondly, notify the Company of their
intention to attend the Meeting not later than at 12 o’clock the day stipulated in the
notice convening the General Meeting. The latter mentioned day must not be a
Sunday, any other public holiday, a Saturday, Midsummer’s Eve, Christmas Eve or
New Year’s Eve and must not be earlier than five weekdays before the Meeting.
Opening of the Annual Article 9
General Meeting The Meeting shall be opened and directed by Chairman of the Board, or the officer
appointed specifically for this matter by the Board of Directors, until a chairman of
the Meeting has been elected.
Business of the Annual Article 10
General Meeting General Meetings shall be held at the location of the registered office of the Board of
Directors or in Stockholm.
The Annual General Meeting shall be held annually within six months following the
close of the financial year. The following items shall be addressed at the Annual
General Meeting:
1. Election of Chairman of the Meeting
2. Preparation and approval of the list of shareholders entitled to vote at the
Meeting
3. Approval of the agenda
4. Election of one or two minute-checkers
5. Determination of whether the Meeting has been duly convened
6. Presentation of the annual report and the auditors’ report and of the
consolidated financial accounts and the auditor’s report on the consolidated
financial accounts
7. Resolution regarding the adoption of the income statement and balance sheet
and of the consolidated income statement and consolidated balance sheet
8. Resolution regarding appropriation of the Company’s profits or losses as
shown in the balance sheet adopted by the Meeting
9. Resolution regarding the discharge of the members of the Board of Directors
and of the CEO from liability
146 HEXPOL
10. Determination of the number of members and deputy members of the Board
and, where applicable, the number of auditors and deputy auditors, to be
elected by the Annual General Meeting
11. Determination of the fees to the Board members, auditors and deputy auditors
12. Election of the members of the Board and, where applicable, deputy members
of the Board
13. Where applicable, election of one or two auditors and of one or two deputy
auditors
14. Other items to be addressed by the Meeting in accordance with the Swedish
Companies Act or the Articles of Association.
Financial year Article 11
The Company’s financial year shall be the calendar year.
CSD company Article 12
The Company is a CSD (central securities depository) company in accordance with
the Financial Instruments Act (1998:1479).
These Articles of Association were adopted at the Extraordinary General Meeting on 21 April 2008.
HEXPOL 147
148 HEXPOL
Head office:
HEXPOL AB (publ.)
Skeppsbron 3
SE-211 20 Malmö
Sweden
Tel: +46 (0)40 25 46 60
Fax: +46 (0)40 25 46 89
www.hexpol.com
HEXPOL Compounding:
Hexagon Polymers Compounding HQ Sprl
Gewerbestrasse 8
BE-4700 Eupen
Belgium
Tel: +32 87 59 61 50
Fax: + 32 87 59 61 69
www.hpc-hq.com
Hexagon Polymers Compounding GmbH
Ottostrasse 34
DE-41836 Hückelhoven
Germany
Tel: +49 24 33 9755 0
Fax: +49 24 33 97 55 99
www.hpc-de.com
Hexagon Polymers Compounding Sprl
Industriestrasse 36
BE-4700 Eupen
Belgium
Tel: +32 87 59 54 30
Fax: +32 87 74 44 73
www.hpc-be.com
Hexagon Polymers Compounding s.r.o
Sumperska 1344
CZ-78391 Unicov
Czech Republic
Tel: +420 585 004 011
Fax: +420 585 053 568
www.hpc-cz.com
Hexagon Polymers Compounding ULC
1635 Industrial Boulevard
Magog, Quebec J1X 5B3
Canada
Tel: +1 819 843 7802
Fax: +1 819 843 3501
www.hpc-ca.com
Hexagon Polymers Compounding NC Inc.
280 Crawford Road
Statesville, NC 28625
USA
Tel: +1 704 872 1585
Fax: +1 704 872 7243
www.hpc-us.com
Hexagon Polymers Compounding SA de CV
AV. Japon # 302
Parque Industrial San Fransisco
San Fransisco de Los Romo
Ags. CP 20304
Mexico
Tel: +52 449 139 3270
Fax: +52 449 139 3289
www.hpc-mx.com
Addresses
HEXPOL 149
Hexagon Polymers Compounding (Qingdao) Co., Ltd
899 Qingdao Middle Road
CN-266431 Jiaonan, Qingdao
China
Tel: +86 532 81731118
Fax: +86 532 81731119
www.hpc-cn.com
GoldKey Processing, Inc
14910 Madison Road
Middlefield, Ohio 44062
USA
Phone: +1 440 632 0901
Fax: +1 440 632 0929
www.goldkey-us.com
Gislaved Gummi AB
Box 522
SE-332 28 Gislaved
Sweden
Tel: +46 371 848 00
Fax: +46 371 848 88
www.ggab.se
HEXPOL Engineered products:
Stellana AB
Box 54
SE-695 22 Laxå
Sweden
Tel: +46 584 44 48 00
Fax: +46 584 44 48 90
www.stellana.se
Gislaved Gummi AB
Box 522
SE-332 28 Gislaved
Sweden
Tel: +46 371 848 00
Fax: +46 371 848 88
www.ggab.se
Stellana U.S. Inc.
999 Wells Street
Lake Geneva, WI 53147
USA
Tel: +1 262 348 5575
Fax: +1 262 348 5570
www.stellana.us
Stellana (Qingdao) Co., Ltd
899 Qingdao Middle Road
CN-266431 Jiaonan, Qingdao
China
Tel: +86 532 81731167
Fax: +86 532 81731128
www.stellana-cn.com
Elastomeric Engineering Co Ltd
51-54, IDB Industrial Estate
Horana
Sri Lanka
Tel: +94 34 226 1050
Fax: +94 34 226 2045
www.elastomericgroup.com
Hexagon Polymers Gaskets (Qingdao) Co., Ltd
899 Qingdao Middle Road
CN-266431 Jiaonan, Qingdao
China
Tel: +86 532 81731166
Fax: 86 532 81731006
www.hpg-cn.com
Elastomeric Technologies (Private) Ltd
371 Colombo Road
Piliyandala
Sri Lanka
Tel: +94 11 421 2722
Fax: +94 11 421 2758
www.elastomericgroup.com
Production: G-byrån AB, Anderstorp. www.g-byran.se
Art Director: Anders Ohrgren.
Layout: Anders Ohrgren and Lena Alexandersson.
Project Manager: Larz G Johansson.
Photo: Pelle Wahlgren/Studio Wahlgren, Anders Ohrgren and Larz G Johansson/G-byrån, and others.
Copywriting: HEXPOL AB and Swedbank AB.
Fonts: Eurostile och New Century Schoolbook.
Paper: cover Ensocoat, content G-print.
Print: Strokirk-Landstöms, Lidköping.
This is an environmentally-friendly printed matter. The Swan – The Nordic Ecolabel.
HEXPOL AB (publ), Skeppsbron 3, SE-211 20 Malmö, Sweden
Telephone +46 (0)40-25 46 60 · Fax +46 (0)40-25 46 89
www.hexpol.com
