The President´s address to the Annual Meeting

Dear shareholders,
Ladies and gentlemen.

Despite the fact that the last six months have been turbulent to say the least, 2008 was a good year for Nolato – one of our best ever, in fact.

Nolato Medical – our business area which works with medical technology and pharmaceuticals customers – grew by 20%, doubling its sales many times over in just a few years, and with excellent profitability.
Nolato Telecom – which develops and manufactures products for applications such as mobile phones – enjoyed high, even levels of capacity during the year, growing by a full 35%.

Nolato Industrial, however, reported a significant drop in demand during the second six months – not least from the automotive industry – which had a negative impact on both sales and earnings.
Overall, for the entire Group, this means that our sales rose by 17% to just over SEK 2.8 billion, with operating income (EBITA) increasing by 18% to SEK 240 million. This is the best ever operating income in Nolato’s 70-year history.
Earnings per share stood at SEK 6.77.
If we also take 2008 into account, we can see that this was a year we can all be proud of!
For much of the year we benefitted from positive market conditions, although this quickly became a global recession towards the end of the year – a recession which naturally also affects Nolato – but I would like to come back to this point later on.

First, let me describe the Nolato Group in a little more detail. Thanks to our expertise and our far-reaching specialist knowledge, we are able to offer our customers high-tech development and manufacturing.
Our products and product systems are based on various polymer materials such as plastic, silicone and rubber, often combined with each other or with other materials.
This forms the basis of the first part of our business mission.
The second half of our business mission summarises our customer offering:
- many years of experience,
- in-depth expertise,
- early involvement in projects,
- advanced project management
And last but not least:
- detailed knowledge of every customer’s specific requirements.

All this in order to achieve our vision:
“To be the customer’s first choice.”

But what do we do in purely concrete terms? Let me begin by showing you this schematic diagram.
Here we can see that Nolato can be involved throughout virtually the entire process.
We support our customers when developing new products. We produce prototypes, manufacture components and parts and also buy these in from other suppliers. We paint, print, assemble and test.
We then deliver our products to system manufacturers who assemble everything together with other components or we deliver our units direct to the end-customer.

Operationally, Nolato is divided into three business areas:
-Nolato Medical,
-Nolato Telecom and
-Nolato Industrial.
Specialisation then enables each business area to focus on its specific customer segment with its own particular needs and requirements.

Nolato Medical’s customers operate within medical technology and the pharmaceuticals industry.
Here, a thorough understanding of complex medical processes and expertise in risk analysis, quality assurance and traceability are extremely important.
Production takes place in clean rooms, with strictly controlled conditions in terms of airflow, humidity and particle contamination.
The biggest operational area within Nolato Medical is developing and manufacturing medical devices. Nolato is the Scandinavian market leader within this field, with customers including Novo Nordisk, Astra Tech, AstraZeneca, Coloplast, Gambro and Phadia.

With the acquisition of Cerbo in 2007, Nolato Medical also became a market leader in terms of primary pharmaceutical packaging, i.e. the packaging which comes into direct contact with the medicine – otherwise known as “pill containers”.
This includes manufacturing both a range of standard products and customer-specific (and often more advanced) packaging with features such as built-in drying agents.
Nolato Medical’s third operational area is a little more specialised, dealing with products manufactured through dipping in liquid latex.
As well as breathing bags, these products include catheter balloons used in heart surgery – a product for which Nolato is a world leader.
Nolato Medical has a number of production units, including here on the Bjäre Peninsula.
We also operate a successful production unit in Hungary which, incidentally, I am delighted to say was named Supplier of the Year 2008 by Astra Tech.

A key milestone was reached during 2008 when Nolato Medical started production in China. Through close cooperation with our existing Beijing unit, we were able to start production just a few months after deciding to set up in this market. Products for Coloplast’s Chinese unit are among the items manufactured here.

Nolato is well suited to the medical field, with its demanding development work, high levels of production technology and strict demands in terms of quality, safety and traceability. These products have long lifespans, often ten years or more.
This market is also less sensitive to economic conditions and is continuing to show steady growth as the world’s population grows older and demands for a better quality of life increase.
Trends such as care increasingly taking place in the home and thus a demand for improved functionality and attractive design also benefit Nolato.

2008 was another excellent year for Nolato Medical.
Sales totalled SEK 632 million, thus accounting for 22% of the Group’s entire sales.
Operating income increased by 21% compared with the previous year to SEK 92 million, representing 34% of the Group’s total operating income.

Our second business area, Nolato Telecom, has sales and technology centres in Europe and Asia, but the majority of its production is carried out in China. Operations focus mainly on the mobile phone market and, in simple terms, relate to the part of the mobile phone which the user sees.
A mechanical module consisting of electronics, a battery, an antenna and software are then added to create a working mobile phone.
The mobile phone sector features an advanced level of technology, with extremely short development times and a lifespan of just 12-15 months for most models.
There are also strict demands in terms of adapting quickly in line with varying production volumes, which are controlled entirely by how well an individual model sells. This is affected not only by technical functionality, design and price, but also at least as much by the “hype factor” or the “coolness” if you like which those responsible for marketing succeed in creating for the phone.
In other words, the market is extremely consumer-driven.
During 2008 we started production for RIM, who are best known for the BlackBerry brand. The start-up process ran according to plan, with excellent levels of growth during the year.

Nolato Telecom also carries out a number of other activities. Nolato Converting produces self-adhesive, laminated tapes for sealing, shock absorbing and decoration. These are delivered on reels, ready for the customer to use in final assembly.
These products can be found in mobile phones produced by manufacturers such as Nokia and Sony Ericsson, and in the new Apple iPhone. The development work is carried out in close cooperation with our customers around the world, while production takes place in China.
At today’s Board meeting, we decided to expand this operation, starting to produce these adhesive tapes in Chennai in southeast India. Chennai is currently the most important area in the world when it comes to manufacturing mobile phones.
Shielding components from electromagnetic induction – EMI – is a basic requirement for all electronics manufacturing, and it is within this field that Nolato Silikonteknik operates.
In recent years, our operations have shifted from carrying out the actual EMI application to focusing on the development and production of shielding materials.
We then license our applications expertise, supplying just the materials themselves.

Nolato Telecom also manufactures components for fixed-line telephony and base stations. This takes place in Sweden, but is now carried out on a smaller scale.

Nolato Telecom was our biggest business area in 2008, with sales of just over SEK 1.2 billion and operating income of SEK 119 million.
These figures represented rapid growth and an increase in profitability compared with the previous year. Production levels remained high and new product start-ups were generally extremely successful.
During 2008, Nolato Telecom accounted for 44% of the Group’s sales and earnings.


Our third business area, Nolato Industrial, works in a fragmented and diversified market, and enjoys a strong position in the Nordic region and in parts of Central Europe.
In contrast to our other two business areas, where the various activities are closely linked to one another, Nolato Industrial’s business concept is based on strong, individual entrepreneurial companies which create local business opportunities.
Since these companies are based in Europe, they feature a high a degree of automation and a flow-oriented organisation in which each employee contributes towards cost-effectiveness through a high level of personal commitment.
Advanced technology, teamwork based on management by objective, continual improvement and a decentralised approach are the key to our competitiveness.
Our customers here include companies such as Electrolux, Husqvarna, IKEA, Kinnarps and Lindab.


It is within Nolato Industrial that we have felt the effects of the current economic downturn the most.
At the turn of the half-year, demand dropped off from the automotive industry – which accounts for around 30% of the business area’s sales – and the other industrial segments then followed suit in quick succession.
As soon as the first indications appeared, we started to reduce capacity to remain one step ahead, i.e. acting rather than reacting.
As a result, every company within the business area has reduced its number of employees. Unfortunately, we were also forced to continue to make cut-backs during the first quarter of this year, and we now have around 35% fewer employees at the business area’s Swedish units than we had last summer.

During 2008, Nolato Industrial recorded sales of SEK 950 million and an operating income of SEK 59 million.
After three fairly good quarters, things suddenly came to a halt in the fourth quarter, which ended with zero earnings – a pattern which, unfortunately, I believe will be familiar to many.
Nolato Industrial accounted for 34% of the Group’s sales for the year and 22% of earnings.
However, there is some good news. During the year, we were able to secure a number of important new projects for future deliveries. We also believe that we are well-placed to continue winning new business and market shares in the future, despite the current economic downturn.
The weak krona also creates new export opportunities, or reasons for our customers to slow down the rate at which they move production away from Sweden.

For Nolato, ethics and social responsibility have always been high on the agenda, as have caring for our environment and long-term sustainable development.
Our guiding document within this area – Nolato’s Basic Principles – and our Code of Conduct and our environmental, quality and information policies have all been updated during the past year. This will enable us to meet today’s demands, whilst also continuing to build upon the philosophy and culture which have been Nolato’s trademark ever since it was founded more than seventy years ago.
Making our values accessible to all our employees is extremely important. We have therefore compiled a booklet entitled “The Nolato Spirit”, and I hope that you have received a copy today.
The booklet is available in the languages of all the countries where we currently operate.
We have also strengthened our sustainability work. As a result, we have increased the amount of information on sustainability and social responsibility in our Annual Report and on our website.
At the end of the year, Nolato had 3,839 employees – an increase of around 400 people compared with the previous year. Although we consider ourselves to be a Swedish company, around three quarters of our employees work abroad. This presents specific requirements in terms of communicating our core values to all our employees.
At the same time, we have the advantage of all our production facilities being run under our own management and in accordance with our own principles.
The Asian operations are run in accordance with the same rules and values as our European operations.
Information and communications about matters such as Nolato’s strategy, objectives and achieving these objectives are provided in virtually the same way as we are used to here in Sweden.

I began my address on a gloomy note, speaking about a deep recession – which is exactly what we are currently experiencing. But despite this, we believe that the conditions are good for continued growth within Nolato Medical.
We announced in the autumn that revised production start-up times for one of Nolato Telecom’s main customers would lead to lower capacity utilisation during the first half of 2009.
However, we have also built up a strong project portfolio for the second half of the year and beyond.
Within Nolato Industrial we are now feeling the effects of the recession even more than before. The automotive industry has slowed right down, and the downturn is now having an impact on virtually every industry.
Despite this, we still stand strong and the Nolato Group is well placed to face a slightly more austere future.
We have a low level of debt. Our net debt was reduced by SEK 219 million during 2008, standing at just SEK 95 million at the end of the year.
Our equity/assets ratio rose to 50% and we have ensured financing on favourable terms, thus creating the right conditions for making the most of our future business opportunities.
Our financial targets therefore remain the same, and we will continue to implement our overall strategic priorities in the form of customer focus, technology development and expertise in terms of project management and design.
We will also continue to grow Nolato Medical and try – via acquisitions – to boost the business area’s presence in Central Europe and North America.
Market shares are the key factor within both our other business areas.
And, of course, we will continue as before to focus on our cash flow.

So lastly I would like to add a few words about the interim report for the first quarter of 2009 which we published earlier today.
Sales totalled SEK 606 million, which is 12% lower than for the first quarter of last year.
Operating income dropped to SEK 16 million, with earnings per share of SEK 0.15.
We can take heart from the fact that we still have an extremely healthy cash flow and that, in the current financial climate, we are virtually debt-free.
Looking at our three business areas, we can see that Nolato Medical, with its excellent profitability, is continuing to show strong growth.
We should also be encouraged by the positive market growth and increased demand for Nolato Medical’s service offering.

Nolato Telecom’s sales and earnings dropped as forecast and in line with previously-announced figures.
During the quarter we succeeded in reinforcing our project portfolio for future deliveries.
Nolato Industrial is following the industry market trend, necessitating additional cut-backs.
Following this brief summary of our quarterly report, which has been presented this evening and is also available on our website, I would like to thank you for your attention.
Thank you!