The President's address to the AGM 2010

Dear shareholders, ladies and gentlemen.

2009 began much as 2008 ended. An unstable market with low levels of demand, and no-one who actually knew how serious the downturn would be.

We were prepared for a gloomy outlook, and we had therefore already carried out significant cost-cutting measures in autumn 2008. We now have the results for 2009.

Two difficult quarters were followed by two quarters which brought both growing belief in the future and higher levels of demand.

Of our three business areas, Nolato Medical escaped the downtrend unscathed and had another excellent year.

The industry is relatively insusceptible to market trends, and is growing in line with an aging population and an increasing share of what are known as “welfare diseases”.

We already knew in the autumn of 2008 that Nolato Telecom would experience a weak first half of the year but a stronger second half as a result of changes in its project portfolio.
With the majority of production being carried out in Asia, we were quickly able to reduce and adapt our resources and then build them back up again after the summer, when our new projects went into production.

Within Nolato Industrial, which generally follows the Northern European industrial business cycle, we struggled with a drop in demand up until the summer, after which demand was clearly more stable.
Here, too, we were forced to make significant cost savings, but by taking a firm grasp from the outset and with a real fighting spirit, our companies dealt with the downturn extremely well.
It is when times are tough that the benefits of a well-balanced group, which looks towards not just one customer segment but many, become clear.

Together, our three business areas have coped admirably with all the challenges that a recession brings.

The Group’s strong financial position has been a source of great security for our customers who, even when the market was at its most troubled, were always able to rely on Nolato and our commitment.

Naturally, this has also been a source of security for our employees and owners.

In actual fact, in some ways we are very much on our home turf during a recession. As a subcontractor, we are used to never allowing ourselves any extravagances. At the same time, creativity thrives in tough times. We focused even more sharply on eliminating anything that does not create value. We reviewed our costs once again and made additional process improvements. All this with a focus on customer value.

The fact that our customers appreciated our efforts is demonstrated not least by the awards we won in 2009. Nolato was named Supplier of the Year by Sony Ericsson, Astra Tech and SKF Mekan.
We are of course extremely proud and grateful, and have been spurred on to become even better.
As I mentioned previously, Nolato is now a well-balanced group with three business areas. The thing these business areas have in common is a breadth of expertise within polymer technology, project management and production efficiency. What distinguishes them is the specific and unique circumstances and requirements within their individual customer areas.

Let me briefly summarise our three business areas and what has happened over the course of the year. I would like to start with Nolato Medical. In this business area, we develop and manufacture medical devices and pharmaceutical packaging. Examples of products include components for pacemakers, incontinence products, blood purification systems, catheter balloons and primary pharmaceutical packaging.

In just a few years, Nolato Medical has grown from relatively regional operations to become a global player, with development, project management and production operations in Sweden, Hungary and China.

We have strengthened our resources even further during 2009, with the aim of being able to win an even bigger share of our customers’ development work and being able to deliver complete advanced system projects. As part of this ambition, we merged our companies in southern Sweden at the end of the year to form a bigger, more effective unit: Nolato MediTech. In addition, we have decided to increase our production capacity and create an additional 3,700 m² in Hörby, including two bigger clean rooms. This process is being followed with a great deal of interest by our customers, and is one of the reasons why we were invited to tender for ever larger system projects during the year.
We will also be bringing together our sales and project management resources in Hörby, as well as their management, all under one roof.

During the last 5-6 years, we have focused on building a broad and effective technology base within Nolato Medical. Now it is time to expand the business area geographically. We are therefore working on identifying suitable acquisitions in Central Europe and North America. This is a painstaking process, and we place great importance on finding companies that are a good business fit for Nolato. Furthermore, the price must of course be right.

In 2009, Nolato Medical accounted for 27% of the Group’s sales and 46% of its profit.

And so to Nolato Telecom.

Nolato Telecom is a leading developer and manufacturer for customers mainly within the mobile phone sector. Within this area we develop and manufacture mechanical modules – or, to put it a little more simply, the part of the mobile phone which the user sees. Electronics, a battery, an antenna and software are then added to the mechanical module to create a working mobile phone. We also manufacture small self-adhesive components that are die-cut on a supporting tape and delivered direct to customers’ production lines. Examples of applications include packaging, gaskets, connections, speaker protection and logos.

We also develop process solutions and material solutions for shielding electronics from electromagnetic disruption – EMI, or electromagnetic induction. It is thanks to this technology that we can, for example, use our laptops while flying without affecting the plane’s instruments.

Nolato Telecom also supplies components and subsystems for 3G and 4G network base stations. These operations are currently based in Kristianstad, but are gradually being transferred to our units in Asia.

Nolato Telecom’s market is driven by fashion trends, technology and a constant flow of new applications. The basic trends in terms of shape, materials and colour are set by a few design companies around the world. Sports shoes and watches lead the way, closely followed by furniture, clothing and mobile phones. Transferring these fashion trends to the design and style of a mobile phone in a cost-effective manner involves extremely high demands, not least on the actual production technology. As a result of this, we have developed Nolato Telecom from a traditional sub-supplier of plastic components into a developer of advanced mechanical systems with what we call “a significant cosmetic content”. This relates to visual and tactile qualities – the parts of a product that the consumer sees and touches.

We have combined this expertise and cutting-edge technology to create the Nolato ImageTech concept.
This enables us to produce both long and short runs of the most spectacular designs, effects and decorations, with a great degree of flexibility. For example, we can produce a special design for an individual group of customers or for a specific purpose. Here is one such special phone that has been produced for a French rugby team. Although it might not be easy to see how this particular design relates to rugby! Other examples include a special phone for a large sporting event, or for our very own Rögle ice hockey team.

As well as a real focus on technological development, we also started production of laminated, self-adhesive products in Chennai in southeast India at the beginning of this year. Today, Chennai is the world’s largest and fastest-growing centre for mobile phones.

In 2009, Nolato Telecom accounted for 42% of the Group’s total sales and 44% of its profit.

Now let us leave Nolato Telecom and take a look at our third business area, Nolato Industrial.

Nolato Industrial is a market-leading developer and manufacturer of polymer products and product systems for industrial customers working within fields such as the automotive industry, white goods, gardening/forestry and furniture, as well as other selected customer areas. Within the business area, there are five units in Sweden and one in Hungary.

Nolato Industrial’s business concept is based on strong, individual entrepreneurial companies which create business opportunities both individually and in cooperation with each other. A high level of technological expertise and close customer cooperation are key ingredients.

Its competitiveness is based on geographical proximity to the customer, as well as a high degree of automation and production efficiency, all of which are essential for the survival of companies with production operations in Europe.

During the year, we have won a number of new projects and increased our market shares. These new projects have therefore gone some way towards compensating for the generally weak levels of demand.
The need for earlier and more in-depth involvement in product development is leading to customers reducing the number of suppliers.

This benefits larger companies, such as Nolato, who have significant development and technology resources and who can live up to customers’ increasingly high demands and expectations.
In 2009, the Nolato Industrial business area accounted for 31% of the Group’s sales and 10% of its profit.

And now for another area that is close to our hearts: Sustainable development and social responsibility.

Those of you who have followed Nolato over the years will know that the environment and ethics have always been important issues for Nolato, and that they are the cement in the corporate culture – the basic principles – that forms the backbone of our operations.

Sustainability and social responsibility are key features of all our operations. Not just in theory, but also in our everyday dealings with our customers, our suppliers and our employees. In order to be able to communicate our values and guidelines within this area more easily, we have brought these together in the publication “The Nolato Spirit”. This is based on Nolato’s Basic Principles, and in 2009 we went through the content with all our employees at all the Group’s units, both in Europe and in Asia.

Sustainability is also an important part of the practical work with customers’ products, in which these issues are becoming increasingly important. For example, we were involved in the development of a mobile phone in Sony Ericsson’s Green Heart range, which was manufactured from recycled plastic and painted using water-based paints.

We have also received excellent reactions from others in response to our sustainability work.
For example, the newspaper Veckans Affärer has included Nolato’s shares in its portfolio of ten companies which have a high environmental and ethical standard, and which are worth investing in.
In insurance company Folksam’s responsible enterprise index, which includes all 251 listed companies, Nolato was awarded a highly respectable 17th place in the most recent review!
For the last two years, we have followed an internationally recognised model for reporting our environmental work: GRI, the Global Reporting Initiative. In 2009 we stepped up our reporting, and now report in line with the second highest level.

We also signed up to the undertakings relating to human rights, the environment and anti-corruption measures included in the UN’s Global Compact in 2009. We are one of around 5,000 companies in the world who have signed up to this initiative. This was a simple step for us, as the UN’s Global Compact is almost identical to our own Basic Principles, so the way we see it is that the UN has finally signed up to Nolato’s Basic Principles. We would encourage more organisations to follow the UN’s example.

Our social responsibility can also be seen at local level. We support sporting events, sport for the disabled, an anti-bullying campaign and a number of other initiatives that work for a society built on ethically sound and fair values.

When I stood here a year ago, my speech was weighed down to some degree by black clouds and the fear that we were facing a long and deep recession. Although I cannot foretell the future, it feels today as if the warm rays of the sun are starting to shine on us again. There are still some clouds in the sky, and it will probably be a long and drawn-out process before demand has fully returned to the same levels as before the downturn. In terms of costs, we have adapted in line with current levels. At the same time, we are well prepared in case the recovery comes earlier or proves to be more powerful than expected.

We have a low level of debt. At the end of the year, our net debt was only SEK 40 million, giving an equity/assets ratio of 51% and providing both security and the scope to act in the future.
We also note that our share price is now considerably higher than at the time of our last Annual General Meeting.

So, before I finally touch upon the details of the interim report for the first quarter of 2010 which we published earlier today, it might be worth giving a summary of our strategies and plans for the immediate future.

These are fairly simple and straightforward: Nolato Medical will continue to strengthen its resources, with the aim of growing both organically and geographically through acquisitions. Nolato Telecom will continue to strengthen its customer offering through advanced technologies and applications, including within ImageTech. And Nolato Industrial will continue to offer its customers proximity to cost-effective technical solutions with highly-automated production.

All in all, I am confident about Nolato’s future. This confidence is further reinforced by today’s interim report entitled “Strong growth and healthy earnings”.

Group sales have risen by 23% to SEK 746 million. Operating income rose to SEK 63 million, compared with the SEK 16 million we reported for the same quarter at last year’s Annual General Meeting. And earnings per share were SEK 1.71, compared with 15 öre a year ago. Cash flow, however, was slightly lower than last year as a result of a temporarily higher need for working capital within Nolato Telecom.

If we look at the individual business areas, Nolato Medical continued to grow, with sales rising by 4% to SEK 186 million. At Nolato Telecom, a number of new mobile phone projects went into production, and sales were up 42% to SEK 320 million. And demand also rose at Nolato Industrial from the very low levels a year ago which, together with new projects, led to sales rising by 17% to SEK 241 million.

In other words, presenting this report is extremely pleasing. Nolato remains financially strong, giving us the freedom to grow and expand as we in the company’s management and Board see fit – and I am sure that you, our shareholders, are in agreement with us.

Few things can be more pleasing for a CEO, and with that I would like to thank you for your attention. Thank you!