1997Kalmar Industries

Å R S R E D O V I S N I N G

1

Kalmar will satisfy expectationsfor rational and economical materials

handling, based on customerneeds, by developing and marketing

self-propelled machinery

Mission statement

Kalmar is the world’s leading manufacturer of machinery andequipment for heavy materials handling, primarily containersand trailers.

The Group’s broad product range includes forklift trucks with a1 – 90 tonne lifting capacity for diverse handling, sideloadingforklift trucks, log handlers, container/trailer handlingequipment, empty/loaded container lift trucks, reachstackers,terminal tractors, straddle carriers and RTG cranes.

The Group operates a worldwide customer support networkwhich is responsible for service, spare parts, documentation,training and consulting.

Most of the Group’s manufacturing operations are based inSweden, Finland and the USA. Head office is in Ljungby insouthern Sweden.

Business concept

Annual and interim reports arepublished in Swedish and English andare available from:

Kalmar Industries, Information,SE-341 81 Ljungby.SwedenTel: +46 372 261 15, fax: +46 372 263 94E-mail info@kalmarind.se

In 1998 Kalmar Industries’ annual andinterim reports will also be available onthe company’s website:www.kalmarind.se.

Mission statement,Business concept 1

1997 in Review 2

Operations 3

Five Year Overview 5

Definitions 5

Chief ExecutiveOfficer’s Statement 6

Directors’ Report 9Statements for the financialyear 1997 9Structural Changes 10Financial Review 11Market Overview 14Customer segments 16Organisation and Management 18Personnel 19Production 20Product Development 21Quality and the Environment 21Medium & Heavy 22Terminal Systems 23Terminal Tractors 24Light & Sideloaders 25Customer Support 26Accounts 27Profit and Loss Account 27Balance Sheet 28Accounting Principles 31Notes to the Accounts 32Proposed Appropriation of Profits 43Auditors’ Report 44

The Kalmar Share 45

Board of Directors 48

Group Managementand Auditors 49

Addresses 50

Annual General Meetingand Financial Information 52

Contents

2

1997 19972) 1996 1996

Net sales (SEK m) 4,599 4,566 2,499

Items affecting comparability (SEK m) – 169 – –

Profit after net financial items (SEK m) 30 199 289 170

Return on equity after tax (%) 0 21 23

Earnings per share after full tax (SEK) 0.10 6,20 8.00 10.60

Dividends (SEK) 2.001) – 4.00

Debt/Equity Ratio (times) 1.01 1.06 0.57

Number of employees at year-end 3,272 3,296 1,634

1) As proposed by the board.2) Before items affecting comparability

Merger with Finnish company Sisu Terminal Systems(STS) creates potential synergy gains of SEK 100 – 150million which are likely to be fully realised in 1999.

Restructuring provision of SEK 120 million for aprogramme of measures to realise these synergies.

Introduction of a new organisational structure with fiveproduct lines. All production units are transferred overto the product lines.

Acquisition of the majority shareholding in Kalmar PacificLtd in Hong Kong.

24 per cent increase in orders received.

Launch of several new models which are expected tostrengthen Kalmar's position in the market.

Crisis in parts of Asia cuts profit by SEK 20 million.

1997 in Review

3

Operations

As the world’s leading manufacturerof machinery and equipment forheavy materials handling, the groupfocuses on machinery for handlingcontainers, trailers and other heavyunit loads.

Following the merger with Finnishcompany Sisu Terminal Systems(STS), Kalmar can now offer an un-rivalled range of products for heavymaterials handling.

The strategic core of this rangecomprises four types of products:

• front and sideloading mast lifttrucks with a 1 – 90 tonne capacityfor diverse handling, plus special lifttrucks for empty containers.

• reachstackers for handling emptyand loaded containers, trailers,demountables and other unit loads.

• straddle carriers and RTG cranesfor handling containers at large ter-minals.

• terminal tractors used in industryand at distribution and containerterminals for moving and positioningtrailers and containers.

that product line’s operations – every-thing from customer needs analysisand product development to produc-tion and marketing. The product linessell their products and provide after-market service through a network ofsales companies, agents and dealerswhich has expanded as a result ofthe merger. This structure aims toexploit the new opportunities arisingfrom the merger and ensure an evensharper focus on customers, greatercompetitiveness and a better positionin the market.

Medium & Heavy

The Group’s largest single productline, Medium & Heavy, has factoriesin Lidhult and Ljungby in Swedenand Tampere in Finland. Includingaftermarket sales, Medium & Heavyaccounted for 37 per cent of thegroup’s net sales in 1997.

This product line is responsible formast lift trucks with a 9 – 90 tonnelifting capacity, mast lift trucks forhandling and stacking empty con-tainers 3 – 8 high and reachstackersfor handling empty containers, loadedcontainers and trailers. Kalmar’sContChamp reachstacker leads thisparticular field throughout the world.

The products are marketed undertwo brand names: Kalmar and Sisu.

Kalmar – world leader in its field

The Group also manufactures anumber of special products for hand-ling applications in the engineeringsector, for military purposes (high-speed trucks) and for handling timberin the pulp and paper industry and atsawmills.

These products are marketedunder the brand names of Kalmar,Sisu, Ottawa and Magnum. There arecurrently over 60,000 machines in usein more than 130 countries.

The Group operates through aworldwide network of sales com-panies, agents and dealers. It hasmanufacturing units in Sweden,Finland and the USA and a welldeveloped aftermarket organisationin all strategic markets.

Business organisation1997 saw the group being restructur-ed as a result of the merger with STS.While there was some overlap be-tween the two companies’ productranges and organisation, the mergerresulted in a broader product rangeand market, thus strengtheningKalmar’s presence in the globalmarketplace.

The group’s four previous productlines were joined by a fifth. Further-more, the product lines are now alsoresponsible for manufacturing theproducts in their range. Each productline is headed by a Vice Presidentwho is responsible for all aspects of

4

Terminal SystemsWith factories in Tampere and Lidhult,this product line is responsible for anumber of different products. In-cluding aftermarket sales, TerminalSystems accounted for 21 per centof the group’s net sales in 1997.

The products comprise straddlecarriers, RTG cranes, terminaltractors for the European market,high- speed trucks and log handlers.

The products are generally market-ed under the Sisu brand name.

Operations

Terminal Tractors

This product line’s operations areconcentrated in the USA, with manu-facturing based in Ottawa (Kansas)and White Oak (Texas). Includingaftermarket sales, Terminal TractorsUSA accounted for 19 per cent of thegroup’s net sales in 1997.

The products are marketed undertwo brand names – Ottawa (a ter-minal tractor intended primarily forthe North American market) andMagnum (which can be customisedfor different types of handling anddifferent markets).

Light & Sideloaders

This product line is responsible foraround 20 frontloading and side-loading models of mast lift truck witha capacity of 1.2 – 10 tonnes, electriclift trucks, diesel lift trucks, LPG lifttrucks and hydrostatic lift trucks, allof which are manufactured infactories in Ljungby and Härnösandin Sweden. Including aftermarketsales, Light & Sideloaders accountedfor 20 per cent of the group’s netsales in 1997.

The products are marketed underthe Kalmar brand name.

Customer Support

This product line is responsible forcomponents and customer service.Components service covers spareparts, replacement units and largecomponents, while customer serviceinvolves training, inspections, work-shop service/repairs, on- site serviceand service agreements. This productline’s turnover is not accounted forseparately, but is instead included inthe other product lines’ invoicedsales figures.

The product line has three strategicCustomer Support Centres in Sweden,Finland and the USA staffed by atotal of 180 employees. Kalmar pro-vides service through its own salescompanies and a global distributionnetwork.

Net sales byproduct line 1997

Medium& Heavy 37 %

Light &Sideloaders

20 %

TerminalSystems 21 %

TerminalTractors 19 %

Other 3 %

5

Five Year Overview

Group beforemerger

1997 19972) 1996 1996 1995 1994 1993

Orders received 5,196 4,200 2,228 2,345 1,817 1,691Backlog of orders 1,545 936 518 754 561 427

Net sales 4,599 4,566 2,499 2,222 1,683 1,569Export ratio, % 88 88 83 84 89 94Operating profit before depreciation 213 383 457 270 291 198 80

Operating profit after depreciation 68 237 329 191 243 174 55Profit after net financial items 30 199 289 170 242 165 33

Net profit for the year 2 145 188 135 170 115 33

Operating margin, % 1.5 5.2 7.2 7.6 10.9 10.3 3.6Profit margin, % 0.7 4.3 6.3 6.8 10.9 9.8 2.1Assets employed as of 31 December 2,009 1,814 1,060 877 531 585

Assets employed, average 1,912 1,814 1,003 644 534 569Return on assets employed, % 4 12 18 19 38 33 10

Capital employed as of 31 December 1,943 1,845 1,017 874 575 602Capital employed, average 1,894 1,845 955 659 588 581Return on capital employed, % 4 13 19 21 40 31 9

Shareholders’ equity as of31 December 943 880 637 554 423 310

Shareholders’ equity, average 912 880 586 476 367 294Return on shareholders’ equityafter tax, % 0 21 23 36 29 11

Rate of capital turnover, times 2.4 2.5 2.5 3.4 3.2 2.8Equity/assets ratio, % 33 33 45 40 46 33

Interest coverage ratio, times 1.6 5.2 6.2 7.3 12.6 9.4 2.6Net debt 851 789 323 279 99 275Debt/equity ratio, times 1.01 1.06 0.57 0.58 0.36 0.94

Investments in fixed assets 194 296 193 289 32 31

Number of employees asof 31 December 3,272 3,296 1,634 1,491 1,149 1,134

Earnings per share, SEK 0.10 6.20 8.00 10.60 13.30 8.20 2.60

Shareholders’ equity per share, SEK 40.10 37.40 49.80 43.30 33.00 24.20Dividends per share, SEK 2.001) – – 4.00 4.00 3.00 –Price per share, SEK,as of 31 December 128 113 110 84 –

Dividend yield, % 1.6 3.5 3.6 3.6 –

Number of shares (thousand) 23,507 23,507 12,795 12,795 12,795 12,795

1) As proposed by the Board.2) Before items affecting comparability

Definitions

Operating marginOperating profit afterdepreciation in relation tonet sales.

Profit marginProfit after net financial itemsin relation to net sales.

Assets employedTotal assets less cash, bankdeposits, interest-bearinginvestments and receivables,and non-interest-bearingcurrent liabilities.

Return on assets employedOperating profit afterdepreciation in relation toaverage assets employed.

Capital employedShareholders’ equity plusinterest-bearing liabilities.

Return on capital employedProfit after net financial itemsplus interest expenses inrelation to average capitalemployed.

Return on shareholders’ equityNet profit after tax in relationto average shareholders’ equity.

Rate of capital turnoverNet sales in relation to averageassets employed.

Equity/assets ratioShareholders’ equity plusminority interests in relationto total assets.

Interest coverage ratioProfit after net financial itemsplus financial expenses inrelation to financial expenses.

Net debtInterest-bearing liabilities minusliquid funds and interest-bearing investments andreceivables.

Debt/equity ratioInterest-bearing liabilities inrelation to shareholders’ equityplus minority interests.

Earnings per shareNet profit after full tax inrelation to the total numberof shares.

Dividend yieldDividends in relation to priceper share as of 31 Dec.

SEK million pro forma pro forma pro forma

6

Chief Executive Officer’s Statement

Twice the sizeThe group is now almost twice thesize it was a year ago. Even after justa few months I perceive the newgroup as much stronger than at thesame time last year. While formalapproval of the deal came late in theyear, the pooling method of mergeraccounting used when merging thetwo companies means that the newgroup is to be accounted for asthough the merger had taken placeon 1 January 1997. As such, thisannual report covers a full financialyear for the new group. Furthermore,we have restated some parts of the1996 accounts to reflect the newstructure, thus facilitating year-on-year comparisons.

The year in review

The climate in which the group oper-ated during 1997 took a turn for boththe better and the worse. The expec-ted uncertainty and irregularity in themarket which I referred to last springwas unfortunately very much in evi-dence, yet there have been manygood points.

The year got off to a relativelypoor start in the first quarter. Thedrop in demand for reachstackersand container straddle carriers in theautumn of 1996 reflected an impacton volumes at the beginning of 1997.However, April saw demand pickingup and orders really taking off,resulting in better performance.October brought the economic crisisin Southeast Asia which led to thecollapse of the Asian tiger economiesat the end of the year. This resultedin some machinery not beingdelivered as planned and someorders being cancelled.

Ottawa and Magnum terminaltractors, which are manufactured inthe USA and sold mainly in NorthAmerica, tend to follow demandcycles for heavy trucks. Demandpicked up once again during the yearand sales have edged up a few percent, primarily in the USA.

The Group's performance was notsatisfactory. This was largely due tosqueezed margins and developmentsin those parts of Asia in crisis. Duringthe last two months of the year theturmoil in Asia cut profit by aroundSEK 20 million.

Tougher competitionCustomer Support did not fare as wellduring the year as in 1996, largelydue to a drop in project orders andtough competition primarily in theEuropean and Swedish markets. Thisproduct line’s contribution to totalturnover was lower compared to1996, which is due to the mergerwith STS where aftermarket salesaccounted for a smaller share ofturnover.

Nevertheless, the aftermarket isstill a key growth area for the groupand the year saw substantial invest-ments in strengthening our positionthere. A new aftermarket informationsystem was brought on line inTampere and a new CustomerSupport Centre was set up in Kansasduring the autumn of 1997.

Competition has increased in allour markets, which has put pricesunder pressure. This has resulted in aneed for more efficient manufacturingand distribution, which will be easierto achieve as a result of the mergerwith STS.

The merger with Sisu Termi-

nal Systems (STS) marks

the beginning of a new era

for the company, its em-

ployees and the industry.

The deal, which was ap-

proved by two Extra-

ordinary General Meetings

during the autumn of 1997,

means that the world’s two

leading manufacturers of

container and trailer hand-

ling equipment have

merged to form a single

major player in the world

market.

While Kalmar Industries

is still listed on the Swedish

Stock Exchange, it has

found in Partek a strong

Finland-based industrial

majority shareholder. We

have now created the right

conditions to become the

world’s leading container

and trailer handling com-

pany. For customers this

means that Kalmar will be

the very best partner in the

field, in terms of both pro-

duct range and accessibility.

7

Product leader in the worldmarket

1997 saw Kalmar launching new im-proved machines in several of itsproduct ranges, along with a com-pletely new driver environment, theSpirit Delta, for the machinery manu-factured in Sweden – all of which hascombined to confirm the group’sposition as a product leader in theworld market.

Production in Sweden grappledwith delivery problems which had anegative impact on turnover. Theseproblems were gradually overcomeduring the year, and deliveries arenow running to schedule.

The limited inflow of orders duringthe autumn of 1996 led to some re-dundancies in the Swedish productionunits during the spring of 1997. How-ever, most of the employees con-cerned were reinstated in May. Pro-duction in Finland was restructuredduring the spring, leading to the lossof around 100 jobs – some throughredundancies, others throughoutsourcing.

Strategic developmentThe merger with STS is part of anatural move towards larger playersin the global market and has resultedin the group now enjoying the leadingposition as worldwide supplier ofcontainer and trailer handling equip-ment. We are also in a better positionto defend ourselves against evertougher competition. Our focus onthis market has become sharper andwe have managed to spread our risk,primarily through the major expan-sion of our operations in NorthAmerica.

Although STS and Kalmar formerlycompeted in the same market, manycustomers will reap the rewards ofdealing with a single large partner.For instance, the new group won amajor order from Turkey for 35Kalmar ContChamps and 43 Sisuterminal tractors in December. Themarket synergies extend beyondcoordination and a highly effectivedistribution network to give thegroup access to new groups ofcustomers with its new expandedrange of products.

STS’ terminal tractors have openedup major new opportunities rightacross the US market where Kalmarhas traditionally been strongest as asupplier of port equipment. Corre-spondingly, terminal tractors mayfind new customers in markets whereKalmar has a strong position assupplier of reachstackers.

In the aftermarket, the coordinationof spare parts and service has resultedin greater effectiveness and addedvalue for customers. This is an areawith many interesting challenges andopportunities – all of which arecurrently being explored by Kalmar’smarketing organisation.

As for products, we have succeed-ed in bringing together four top inter-national products with prominentpositions on the market: medium-heavy and heavy mast lift trucks,reachstackers, straddle carriers andterminal tractors. It is these productswhich form the basis of Kalmar’snew five-product line structure:Medium & Heavy, Terminal Systems,Terminal Tractors, Light & Sideloadersand Customer Support.

The new structure builds on thefoundations previously laid byKalmar, with one major difference –each product line is now also re-sponsible for manufacturing its pro-ducts. This structure is a platform forgreater efficiency and control overthe entire product flow, right fromdevelopment through to delivery.The new structure has been in placesince December 1997 and has beendeveloped gradually throughout thegroup. The new group managementteam was also announced in Decem-ber and aims to achieve a dynamicmix of Swedish and Finnishmanagerial excellence.

8

Chief Executive Officer’s Statement

Threats andopportunities

While Kalmar has now entered amore stable industrial phase, increas-ing competition, the economic pro-blems in parts of Asia and fluctuatingexchange rates represent both threatsand opportunities.

Although increasing competitionhas taken the form of greater pressureon prices, the group is in a better po-sition to deal with this since themerger with STS. Our strategic pro-ducts lead the market and local com-petition and price pressure applymostly to the smaller machines inour range.

The crisis in parts of Asia, whichhas resulted in a drop in demand forKalmar’s products, has been offset bya strong market presence in otherparts of the world.

Those parts of Asia in turmoil ac-counted for 11 per cent of the group’snet sales in 1997. While none of uswould like to speculate about thefuture of the region at this point, wecan state that the group was affectedat an early point. This was presumablybecause the investments in questionrelate to infrastructure projects whichare directly affected by economicdownturns. Conversely, there isnormally a time-lag before economicupturns translate into demand forKalmar’s products.

Most of our business in Asia is deno-minated in USD and the weak localcurrencies in the crisis-stricken areashave created price pressure with theresult that there is little will to investin the type of products sold byKalmar. However, most of our com-petitors are based in Europe and arein a similar position

Outlook for 1998While there has been slight economicgrowth in Western Europe, the USAhas enjoyed a strong economy for along period. Growth in Asia droppedoff in 1996 but picked up at the be-ginning of 1997, however the eco-nomic turmoil at the end of the yearhas already had an impact onKalmar’s operations. Although, it isdifficult to gain an overview of theconsequences of the rapid change inthe economic climate, the group is ina good position to launch an offen-sive, not least in the aftermarket.

1998 will see the continuation ofour extensive restructuring pro-gramme which will involve con-centration and relocation of someareas of production. We have nowreached a point where we canidentify new structures and, as such,have made a provision to cover thenon-recurring costs to be incurred in1998. It is currently difficult to assessjust when we will benefit from theSEK 100 – 150 million synergiesarising from the merger, but thesewill have some impact during 1998and will filter through in full in 1999.There is considerable potential to

create a new efficient group, and1999 will see our customers andshareholders reaping the rewards ofthe increased competitiveness resul-ting from the merger.

Finally, I would like to extend mythanks to all our employees andothers who have had to work extrahard on account of all the changesand uncertainty during the past year.While there is still some way to go,we now have to look to the futureand see the opportunities which areopening up. The changes will bringopportunities to develop, not onlyfor the new group but also for eachand every one of us.

Ljungby, 20 March 1998

Jonas SvantessonPresident and CEO

9

Directors’ Report (Org no 55 60 88-1657)

Bracketed figures are pro forma 1996.

Orders received totalled SEK 5,196million, an increase of 24 per cent on1996. Net sales amounted to SEK4,599 million (4,566), 88 per centof which was generated in marketsoutside Sweden. In comparableoperations net sales were unchanged,while orders received increased by23 per cent.

Operating profit totalled SEK 68million after a restructuring provisionof SEK 120 million and transactioncosts of SEK 49 million relating to themerger with Sisu Terminal Systems.Operating profit before itemsaffecting comparability was SEK 237million (329), which was 28 per cent

down on 1996. The restructuringprovision will cover measures to beimplemented in 1998.

Profit after net financial itemsamounted to SEK 30 million (289),giving a profit margin of 0.7 per cent(6.3). Before items affecting compara-bility, profit after net financial itemstotalled SEK 199 million with a profitmargin of 4.3 per cent. Net financialitems amounted to SEK 38 million(40).

DividendsThe Board proposes that a dividendof SEK 2.00 per share (4.00) be paid.

Outlook for 1998

Given recent economic develop-ments, the prospects for Kalmar tofurther strengthen its market positionare good. The company had a

Statements for the financial year 1997.

Orders received and order backlogper quarter, SEK m

healthy level of orders in hand at thebeginning of the year and lowdemand from crisis-hit parts of Asiawas compensated for by othermarkets.

The merger with STS has createdconsiderable synergy potential worthbetween SEK 100 – 150 million, someof which could be realised during1998 with the full impact being felt in1999. However, these synergies canonly be realised through a number ofone-off measures, the cost of whichwill be covered by the restructuringprovision which was charged against1997 profit.

0

200

400

Backlog, SEK m

Orders received, SEK m

600

800

1000

1200

1400

1600

0

200

400

600

800

1000

1200

1400

1600

July-SeptApril-JuneJan-March Oct-Dec

10

Directors’ Report

Merger between KalmarIndustries AB (Kalmar) andSisu Terminal Systems (STS)On 8 October 1997 Kalmar IndustriesAB and Partek Oyj Abp signed anagreement to merge Kalmar andPartek’s subsidiary Sisu TerminalSystems.

Prior to the merger, Kalmar re-duced its share capital by redeemingevery tenth share at a price of SEK200 per share in cash. As this offerwas accepted by 99.8 per cent ofshare-holders, the number of sharesin the company fell by just under 10per cent to 11.5 million.

The merger with STS took placethrough Kalmar making a directedshare issue to Partek in return for allof the shares in STS. As a result,

Partek now holds 51 per cent of the23.5 million shares in Kalmar andSTS is a wholly owned subsidiary ofKalmar.

The pooling method of mergeraccounting was used for the mergerwith STS and, as such, the con-solidated accounts have been pre-pared as though the merger tookplace on 1 January 1997. Theaccounts for 1997 therefore reflectthe performance of the new groupover one whole year. Partek’sconsolidated profit and loss accountwill include STS only, whose opera-ting profit was FIM 95 million. Thepro forma 1996 figures tie in withthose which were previously re-ported in the information pack sentto Kalmar’s shareholders prior to theExtraordinary General Meeting of24 October 1997, except that theinterest effects of the redemptionprice of SEK 255 million have not

Structural Changes

been charged against 1996 profits.The payment to shareholders wasmade at the end of 1997 and hastherefore had a minimal effect on1997 figures. The information packsent to shareholders assumed thatSTS’ accounts would be translatedon the basis of SEK 1.50 to FIM 1.0.Ultimately the year-end accountsused the actual average exchangerates for 1997 and 1996. A moredetailed documentation has beenprepared for the year-end accountsthan in the information pack.

Kalmar acquired a further 25 percent of the shares in Kalmar PacificLimited in Hong Kong during theyear, with the result that it is now themajority shareholder in the company.UK company International PortEquipment Limited was also acquiredduring the year.

11

1997 19971) 1996 1996

Profit margin, % 0.7 4.3 6.3 6.8Earnings per share, SEK 0.10 6.20 8.00 10.60Return on capital employed, % 4 13 19 21

Return on shareholders’ equity after tax, % 0 21 23

See page 5 for definitions.

Bracketed figures are pro forma 1996.

1) Before items affecting comparability

pro forma

Summary

The group reported a profit after netfinancial items of SEK 30 million aftera restructuring provision of SEK 120million and transaction costs of SEK49 million relating to the merger withSisu Terminal Systems. Profit after netfinancial items before items affectingcomparability was SEK 199 million(289).

The group’s profit margin droppedto 0.7 per cent or 4.3 per cent (6.3)before items affecting comparability.Net profit totalled SEK 2 million(188). The tax charge for the year wasSEK 23 million (49) and earnings pershare fell to SEK 0.10 (8.00).

The return on capital employedwas 4 per cent or 13 per cent beforeitems affecting comparability. Thereturn on shareholders’ equity aftertax was 0 (21) per cent.

Net sales and ordersreceived

Net sales totalled SEK 4,599 million(4,566) for the year. During 1997 thegroup acquired 25 per cent of theshares in Kalmar Pacific Limited inHong Kong to add to its existing 26per cent stake, thus becoming themajority shareholder. UK companyInternational Port Equipment Limitedwas also acquired. Net sales gene-rated by these acquisitions totalled

Financial Review

Profitability

SEK 49 million net of intra-groupsales. The economic crisis in partsof Asia resulted in some orders beingpushed back and others cancelled,which had an impact on net salesduring November and December.

The group won a good numberof new orders – many of them verylarge – totalling SEK 5,196 million, a24 per cent increase on 1996.

Prices dropped during the year onaccount of ever tougher competition.

Profit

The group reported an operatingprofit of SEK 68 million and an ope-rating margin of 1.5 per cent afteritems affecting comparability or 5.2per cent (7.2) before items affectingcomparability. Operating profitbefore items affecting comparabilitywas SEK 237 million (329), whichwas 28 per cent down on 1996. Thisdrop is attributable to lower prices inthe market and costs incurred as aresult of production problems. Thenet impact on profit of the Asiancrisis is estimated at SEK 20 million.

Changes in exchange rates duringthe year push up operating profit bySEK 9 million.

0

3

9

6

12

18

21

24

1996pro forma

1997

Return on shareholders' equity after tax, %

15

Return on capital employed, %

0

25

75

50

100

150175200

SEK m

1996pro forma

1997* 1997**

225

Operating margin, %

125

Operating profit after depreciation, SEK m

* Before items affecting comparability** After items affecting comparability

Operating margin, %

250

300325

275

0

2,5

7,5

5

10

1517,5

2022,5

12,5

25

30

27,5

32,5

35350

Profit and profit margin

12

Directors’ Report

Capital structure

Quarterly Operating Profit, SEK m*

0

15

45

30

60

75

90

105

SEK m

96/1 96/2 96/3 96/4 97/1 97/2 97/3 97/4

0

100

300

200

400

600

700

800

Net debt, SEK m

1996pro forma

1997

900

Equity ratio, %

0

10%

30%

20%

40%

50%

60%

500

Net debt, SEK m

Equity ratio, %

* Before items affecting comparability

Depreciation increased by SEK 17million to SEK 146 million (129) forthe year.

The merger with STS resulted incosts of SEK 49 million, most of whichrelated to Finnish transfer tax andconsultancy fees. The SEK 120 millionrestructuring provision will covernon-recurring costs which the groupwill incur in 1998 when implementingmeasures to ensure that it realises thesynergy potential to be derived fromthe merger with STS. Most of thesecosts relate to staff redundancies andfixed asset write-downs. Some of thetotal synergy potential of SEK 100-150 million will be realised during1998, with the full impact filteringthrough in 1999.

The share of profits in associatedcompanies totalled SEK 1.2 million(2.4).

Net financial items totalled SEK 38million (40). Financial exchangegains amounting to SEK 0.5 million(5.3) are included in net financialitems. December saw KalmarIndustries AB raising a loan of SEK300 million for redeemed shares andtransaction costs relating to themerger with STS.

Profit after net financial items wasSEK 30 million (289). The profitmargin was 0.7 per cent (6.3). Profitafter net financial items excludingitems affecting profitability was SEK199 million and the profit margin 4.3per cent.

The tax charge for the year was SEK23 million (48). Most of this relates tocompanies in Sweden, Finland andthe USA.

Balance sheetTotal assets rose by 7 per cent to SEK2,962 million (2,759) or 7 per centduring the year. The main reason forthe increase in total assets wasdelayed deliveries during the autumnwhich resulted in late payment fromcustomers. Inventories increased dueto delayed letter of credits mainlyfrom customers in South East Asia.Acquisitions during the year in-creased total assets by SEK 50 million.Properties were written down by SEK47 million as part of the restructuringprovision.

Capital employed increased bySEK 98 million during the year andtotalled SEK 1,943 million (1,845) atthe year-end. Rate of capital turnoverwas 2.4 times (2.5).

Accounts payable totalled SEK 365million (398) at the year-end.

The net book value of machineryand equipment at the year-end wasSEK 412 million (380). The rentalfleet of lift trucks amounted to SEK169 million (159).

13

Financing and liquidityThe equity/assets ratio at the year-end was 3.4 per cent (32.9). Net debtincreased by SEK 62 million to SEK851 million (789).

Loans, which are denominatedmainly in SEK, increased by SEK 300million in connection with the re-demption of shares and the paymentof the transaction costs incurredduring the merger with STS. Loansto the manufacturing companies inFinland and the USA are denominatedin FIM and USD. These loans arelong term. Pension liabilities totalledSEK 113 million (226). Most of thepension liabilities in STS have beenredeemed in favour of more advan-tageous financing. Most of the group’sloans are locked into fixed interestperiods of no more than six months.

The year 2000 problemAll group companies are currentlyworking on adapting their businesssystems, products, productionfacilities and communications andsecurity systems for the year 2000.Under the current programme, pro-ducts have already been adapted tomeet the requirements being madebefore the new millennium, whileother systems and procedures arelikely to be ready during the firstquarter of 1999.

Parent Company

Kalmar Industries AB does not manu-facture or sell products, but insteadserves as a holding company for theGroup. From 1998 onwards costsrelating to the group managementwill be accounted for through theparent company.

1997 1996 1996

Equity/assets ratio, % 33.4 32.9 44.9Debt/equity ratio, % 1.01 1.06 0.57Net debt, SEK m 851 789 323Cash and bank, SEK m 77 98 59Interest coverage ratio, times 1.6 6.2 7.3

pro forma

Investments

Investments in tangible assets ex-cluding acquisitions amounted toSEK 176 million (286), of which SEK62 million (72) on the lift truck rentalfleet. The year’s largest single invest-ment was the construction of theCustomer Support Centre in Ottawawhich cost around SEK 8 million.

Exchange rates andcurrency hedging88 per cent (88) of the group’s netsales was generated in markets out-side Sweden. The group’s productionunits are based in Sweden, Finland,the USA and – to a lesser extent – inEstonia. Around half of the materialsused in the Swedish and Finnishplants are purchased outside theNordic countries. Sales companiesare invoiced in their own currencies.The production units’ net exchangerate exposure (payments less receiptsin each currency) is hedged sixmonths ahead. The net flow isgreatest in USD.

Equity in the US manufacturingcompany has been hedged by SisuTerminal Systems Oy. Otherwise,shareholders’ equity has not beenhedged.

14

Demand for the group’s productstends to follow regional economiccycles around the world, but is alsoaffected by the world economy as awhole.

At the same time container ports,Kalmar’s most important customersegment, continue to represent ahighly dynamic world market sector.

Around 70 per cent of Kalmar’sproduct range and turnover relatesdirectly to machinery for handlingcontainers, trailers and other heavyunit loads or similar handling at ter-minals and in transport systems. Thisis particularly the case for Medium &Heavy, Terminal Systems andTerminal Tractors USA.

Europe

The geographical market for smallmast lift trucks with a capacity of upto 16 tonnes, sideloaders, four-wayreach trucks and log handlers isbased in the Nordic countries andthe rest of Europe. The aftermarketis also strongest here, with much ofCustomer Support’s sales being gene-rated in this area.

North AmericaThe USA has enjoyed a strong andwell-balanced economy for manyyears. Demand for Kalmar’s products,on the other hand, has fluctuatedfrom a peak year in 1995 to a weaker1996 and a more normal 1997. Kalmarstrengthened its position in the NorthAmerican market during 1997 andexpects to increase orders receivedfrom this market in 1998.

Asia

The Asian economy picked up some-what at the beginning of the year,having dropped back in 1996. Thesummer of 1997 heralded the firstwarning signals from Japan, with theeconomies of Southeast Asia andSouth Korea becoming ever moreturbulent during the autumn.

While demand for Kalmar’s pro-ducts was relatively strong during thefirst half of 1997, the autumn broughtwith it a certain degree of caution inthe market culminating in November’sdanger signals when a number oforders were cancelled and investmentplans were put on hold.

The depreciation of the Asian cur-rencies has resulted in a consid-erable drop in demand from theregion along with price pressurearising from greater competition.

Growth markets

The merger with STS has created theright conditions for a much greaterpresence in growth markets such asSouth America and Eastern Europe.While turnover in Eastern Europeincreased during 1997, paving theway for greater aftermarket sales, theSouth American market held steadyat 1996 levels. Sales in these growthmarkets often follow irregularpatterns but the need for increasedhandling capacity is considerable.

The container handlingmarket

Container handling is by far andaway Kalmar’s most importantmarket. Over the last ten years thissegment has seen stable and increas-ing demand, particularly from AsiaPacific. While 1996 marked a breakin this positive trend, the first half of1997 brought something of a re-covery. However, this recovery sub-sided at the end of the year bringinglower demand, fewer new ordersand some cancellations and part-cancellations of orders in hand.

Market Overview

Directors’ Report

15

The most important demand factorsfor this segment are developments inworld trade, the container freightmarket and the need for port capacity.Statistics for 1997 indicate that long-term growth trends in containertraffic are by and large holding steady,as is the need for port capacity. Theproblems in parts of Asia have hadquite an impact over the last quarter,but at the same time volumes inEurope and the USA have increased.

The economic crisis of confidencein parts of Asia primarily affects in-vestment in, for example, property.Falling exchange rates make theregion’s manufacturers more com-petitive and thus open up more ex-port opportunities. Falling demandcan result in price pressure fromcompeting manufacturers but mostof these are on much the samefooting as Kalmar in terms ofexchange rates.

94 95 96 97

0

50

100

150

200

2000* 2000**

* Forecast September 1997

** Forecast December 1997

Growth in container handling portsprojected to 2000, million TEUs

Asia Pacific

Europe

North America

Other countries

Source: Ocean Shipping Consultants Ltd

Net sales by market area in 1996

Net sales by market area in 1997

Asia Pacific,11 %

Other, 12 %

TheNordiccountries,21 %

Rest ofEurope,18 %

NorthAmerica,27 %

Germany,6 %

UK, 5 %

Asia Pacific,15 %

Other, 11 %

TheNordiccountries,21 %

Rest ofEurope,19 %

NorthAmerica,21 %

Germany,8 %

UK, 5 %

A long-term crisis of confidence inAsia is likely to result in investorsturning to Eastern and Central Europewhose economies are picking upspeed. Such a move is expected toincrease demand for handling capa-city in northern Europe and theBaltic States.

Forecasts suggest a minor drop inPacific traffic, which will slightlyreduce the need for handling capa-city on the US West Coast. However,the US market remains strong andforecasts show an increase in demandfor handling capacity.

16

Ports/terminals/containerhandlingThe group’s most important marketsegment is global container handlingat coastal ports, container parks andinland rail and river terminals. It isthis segment that buys Kalmar’s con-tainer handling machinery: straddlecarriers, RTG cranes, container lifttrucks, reachstackers and terminaltractors.

Demand in this segment is deter-mined primarily by world trade, thecontainer freight market and theneed for port capacity. Although themarket is global, it is also local in sofar as there are a number of localmanufacturers supplying equipmentsimilar to Kalmar’s. Furthermore,every geographical market has itsown specific requirements.

As there are no clear-cut officialstatistics for this type of equipment,each player must rely on its ownmarket expertise to measure thescope and growth of the market.Given that Kalmar has enjoyed a

leading position in this market sincethe very beginnings of containerhandling and that it has workedclosely with heavyweight customersand other players, the group’s know-ledge of requirements and demand isextensive.

The last five years have seen anincrease in the number of manufac-turers worldwide producing equip-ment similar to Kalmar’s. This beingthe case, the merger with SisuTerminal Systems has provided newopportunities for the group tostrengthen its position worldwide.

Timber, pulp and paperForklifts and log handlers are usedfor a wide variety of operations andare the most common option whereoperators need flexible solutions forlifting and transporting products overshort distances.

Timber, pulp and paper is oneof Kalmar’s largest single marketsegment and the group’s productsare used in sawmills and the forestindustry to handle raw, sawn andprocessed timber products, and in

Directors’ Report

Customer segments

the pulp and paper industry to handlepulp wood, pulp bales and rolls ofpaper. As production volumes inthese industries are large, the numberof lift trucks used is high. The degreeof automation in handling (storageand loading) is still relatively low inthe segment, partly because theforklift has proven both economicaland effective.

Kalmar believes that forklifts andlog handlers will be able to maintaintheir position as a handling solutionin this market also in the future.However, it should be noted that thismarket sees major fluctuations inboth demand and profitability, whichdoes, of course, affect demand forforklifts. Demand drops off quicklyduring downturns while upswingsare often characterised by a time-lagbefore customers buy new equip-ment. The companies in this marketare highly dependent on exports andoperate in an extremely competitiveinternational market. Most customersare based in Finland, Germany,North America, Russia and the BalticStates.

17

Other industryThis market segment comprises thewide variety of other industriesrequiring equipment to lift loadsexceeding two tonnes. Kalmar’scustomers are based mainly in theNordic countries and the otherEuropean countries north of theAlps. Russia and other EasternEuropean countries are alsoimportant markets.

Heavy industry (such as iron andsteel works, the cement and stoneindustry and the heavy constructionindustry) is an important market forKalmar throughout Europe. Thegroup’s heaviest lift trucks have acapacity of 18 – 90 tonnes and aresold throughout the world, whilesmaller lift trucks sell primarily toindustries in the Nordic countries.

Industrial output worldwide – andin Europe and Sweden in particular –determines demand for Kalmar’sproducts in this market. However,there is considerable potential in

Russia and other Eastern Europeancountries which will gradually trans-late into demand as these economiesgenerate sufficient industrial growthand build up their infrastructure. Thisprocess is being hampered by adegree of instability and the slowrate of general economic growth,except in those countries whichborder Western Europe. It is thoughtthat continued industrial restructuringin Eastern Europe will result in a 3 –5 per cent annual increase in pro-duction over the next few years.

Overview of products,customers and markets

Mast lift trucks, electric 1.2 – 8 tonne

Mast lift trucks, diesel 3 – 8 tonne

Sideloaders, diesel 3 – 10 tonne

4-way reach trucks, electric 3 – 10 tonne

Mast lift trucks, diesel/LPG 9 – 18 tonne

Mast lift trucks, diesel 20 – 52 tonne

Mast lift trucks, empty container 4 – 8 high

Reachstackers, loaded container

Reachstackers, empty container

Reachstackers, others

Straddle Carriers

RTG cranes

Terminal tractors, Sisu

Terminal tractors, Ottawa

Terminal Tractors, Magnum

Log handlers

High Speed mast trucks

Gen

eral

indu

stry

Hea

vy in

dust

ry

Pul

p an

d pa

per

Saw

mill

s

Ste

el a

nd Iro

n

Con

cret

e

Dis

trib

utio

n

Con

tain

er t

erm

inal

s

Con

tain

er p

orts

Em

pty

cont

aine

r te

rmin

als

Inla

nd t

erm

inal

s

Mili

tary

pur

pose

18

November marked not only the re-structuring of the group but also theintroduction of a new group manage-ment team comprising both Swedishand Finnish members. The restruc-turing programme has resulted ingreater responsibility for the vicepresidents of the various productlines who are now fully responsiblefor production within their own pro-duct line while continuing to worktogether as shown in the diagram.

The five product lines and salescompanies work in a matrix. All the

production units have been transfer-red over to the product lines with theexception of units which manufacturespecialist components. Central func-tions for finance, information, per-sonnel, projects and purchasing pro-vide support for the group as a wholewhile the strategic coordination ofthe product lines is managed byspecific resources being set aside forbusiness, technical and productiondevelopment.

Directors’ Report

Organisation and Management

At the year-end the group had eightfactories and sold its products through18 sales companies. Some of thesesales companies, which increased innumber as a result of the merger withSisu Terminal Systems, are set tomerge in the future. The company isrepresented by agents in over 50countries.

The sales companies and areamanagers are responsible for thegroup’s geographical markets togetherwith the vice presidents of the fiveproduct lines.

ProductionSales companiesThrough own sales companiesAgents

ProductionSales companiesThrough own sales companiesAgents

BusinessDevelopment

Technical andProductiondevelopment

Components

CustomersupportStrategy

Marketing

Productdevelopment

Production

Purchase

Light/SideloadersStrategy

Marketing

Productdevelopment

Production

Purchase

Heavy/MediumStrategy

Marketing

Productdevelopment

Production

Purchase

TerminalSystemsStrategy

Marketing

Productdevelopment

Production

Purchase

TerminalTractors USAStrategy

Marketing

Productdevelopment

Production

Purchase

President and CEO

Executive Vice President

Project

Finance

Personnel

Communication

Sales/Distribution

19

The group employed an average of3,240 (3,354) persons in 1997. Duringthe year staff numbers fell by 24persons so that the group had 3,272(3,296) employees at the year-end.Most employees are based in Sweden,Finland and the USA.

The acquisition of the majorityshareholding in Kalmar Pacific Ltd inHong Kong and of UK company In-ternational Port Equipment Ltd in-creased the staff numbers by 80persons while cuts in Finland re-duced figures by 83 employees.

Kalmar’s personnel policy is under-going a number of changes, the start-ing point for which is: ”We believe inpeople”. The policy itself is based ontrust, encouragement to take theinitiative and so on. All employees

are to attend group developmentsessions to ensure that they canadopt a proactive approach to thisprocess.

More and more of our business isbeing developed and run in projectform. As such, a project work modelhas been produced for the entiregroup and 60 or so employees haveundergone full training as projectmanagers.

A management/leadership develop-ment programme got underwayduring the year with the aim of gra-dually increasing management skillsthroughout the group.

The Finnish side of the businessimplemented a management trainingprogramme within the framework of”Partek Competence”. In the USA thefoundations have been laid forextensive changes during 1998.

The new production structureresulted in negotiations on changesin the workforce at the productionunits affected by plans to transfersome parts of production betweenSweden and Finland.

Personnel

20

The group hasproduction unitsin Sweden,Finland, the USAand Estonia.Around 80 per

cent of the group’s employees workin production: approximately 1,200in Finland, 1,100 in Sweden, 300 inthe USA and 50 in Estonia.

The Finnish operation was restruc-tured at the beginning of 1997 whichled to staff cuts affecting around 100employees. Capacity utilisation wassomewhat lower than in 1996 due tofewer new orders at the end of 1996and the beginning of 1997. However,the market subsequently picked upand capacity utilisation increased forthe rest of the year.

In Sweden some products havebeen moved between productionunits to concentrate and streamlineproduction.

Production of electric lift trucks wasmoved to Kalmar Hernöverken whileparts of the heavy mast lift truckrange were moved from Lidhult toLjungby. The new Spirit Delta cabwas brought fully on line at Ljungbyduring the first half of the year. Theconsiderable teething problems re-sulted in delivery problems for mostof the old Kalmar range.

Capacity utilisation at the US pro-duction units in Ottawa and WhiteOak was higher than in 1996. Delive-ries ran to schedule without anymajor disruptions. The Ottawa factorycompleted a major project whichaimed to improve internal logistics,lead times and productivity onassembly lines. Most of the projectwas dedicated to a completely newfactory layout and a new powdercoating plant.

Velsa Oy in Kurikka, Finland,specialises in developing and manu-facturing cabs for various types ofmachinery. Around 40 per cent of itsoutput goes to other group compa-nies. Velsa is one of the three largestcab manufacturers in Scandinaviaand has 280 employees. Its productsare marketed under the name ofVelsafe.

Directors’ Report

Production

AS Finmec in Tallinn, Estonia, manu-factures welded components and has60 employees. All of its output issupplied to Kalmar’s factories inTampere.

The new production structurearising from the merger with STSmeans that Swedish production ofterminal tractors and toplift attach-ments will be moved to Tampere,while cab production will be con-centrated at Velsa Oy. Productionof forklift trucks and cylinders inTampere will be transferred toLjungby. This streamlining processwill lead to substantial productivityincreases. Negotiations about thechanges are currently underwaywith the various unions.

20

21

The group’s quality, working environ-ment and environmental programmesare carried out in parallel as there isconsiderable overlap between theseareas.

Kalmar’s quality work is at diffe-rent stages across the group, withmost plants being ISO 9001 certified.During the year the production unitsin Ottawa, Lidhult and Härnösandwere ISO 9001 certified while thesales company Peinemann Kalmar inthe Netherlands was ISO 9002 certi-fied. The factory in Ljungby is likelyto be ISO 9001 certified in 1998, as isVelsa Oy in Kurikka.

Kalmar’s environmental work ex-tends to products’ environmentalfeatures as well as the internal andexternal working environment atproduction units. During the year

Kalmar’s environmental policy wassupplemented with guidelines on theworking environment and the delega-tion of environmental responsibilityto the appropriate head of unit. Asystem for internal checks on theworking environment was developedduring the year and is set to be intro-duced in 1998.

The group’s environmental workhas met the targets set. For example,the Swedish plants started using anew paint system which reduces theneed for repainting as well as lowe-ring paint consumption and solventemissions. A new powder coatingplant was brought on-line in theOttawa factory for the same reasons.

Work has continued on developingmore environmentally friendly pro-ducts. In the first instance Kalmar is

Quality and the Environment

tackling exhaust, noise and otheremissions from the products when inuse. Launched during the year,Kalmar’s new hydrostatic lift truck ismuch more environmentally friendlyin these respects. The launch of theSpirit Delta environment is also amajor step forward in terms ofdrivers’ working environment.

Kalmar is the world’s leading manu-facturer of machinery for heavymaterials handling, particularlycontainers and trailers.

Kalmar has achieved this positionby focusing on two key factors: lead-ing the way technically and provi-ding a local service, both of whichgive it a competitive edge. As such,Kalmar has plans to build on thisposition.

Research and developmentexpenditure is charged to operatingexpenses as costs are incurred.

In 1997 several important develop-ment projects resulted in new pro-ducts which were received very posi-tively in the market, confirmingKalmar’s position as a market leader:

– The third generation KalmarContChamp (market leader)

– Rotating sidelift attachment forhandling empty containers (first of itskind)

Product Development

– Spirit Delta® – a brand new driver’senvironment with unique ergonomicfeatures (pioneering in the industry)

– Hydrostatic lift truck, with a 5 – 8tonne lifting capacity (pioneering inthe industry)

– Upgrade package for old machin-ery (important aftermarket product)

– Special models from TerminalTractors (to meet new customerneeds)

– New powerful log handler, witha 9 tonne lifting capacity (growingneed for half bundle handling)

– New drive system for RTG cranes(first in the industry, alternatingcurrent traction is expected to be thenew industry standard)

– A new compact mast lift truck,with an 18 – 25 tonne lifting capacity,for steel handling and other applica-tions (growing need for compactsolutions)

22

Directors’ Report

Net salesNet sales for this product line totalledSEK 1,699 million (1,799).

Products

Medium & Heavy is the group’slargest single product line and hasproduction units in Lidhult, Ljungbyand Tampere. Including aftermarketsales, the product line accounted for37 per cent of the group’s net salesfor the year.

All Kalmar mast lift trucks have beenequipped with the new Spirit Delta®

driver’s environment which waslaunched at the beginning of the year.

The marketDemand for the product line’s pro-ducts was, on the whole, strongduring the year, with the Europeanmarket holding steady at 1996 levelswhile the US market surged. Havingdropped back in 1996 after manyyears of healthy growth, the productline’s inflow of new orders recoveredin 1997 to almost match the peak re-corded in 1995 in terms of numbers.

The crisis in Asia had a majorimpact on demand towards the endof the year.

Production

Production at the factories in bothFinland and Sweden enjoyed highcapacity utilisation throughout theyear. Deliveries from the Swedishfactories were rather irregular duringthe first half of the year on accountof disruptions due to the launch ofnew products. These problems weregradually ironed out and deliverieswere running to schedule during theautumn.

The new production structurearising from the merger with STSmeans that Swedish production ofterminal tractors and toplift attach-ments will be moved to the Tamperefactory while the Tampere productionof forklift trucks and cylinders will betransferred to Ljungby.

The factories in Tampere andLidhult are ISO 9001 certified, whilethe Ljungby factory is likely to becertified in the autumn of 1998.

Customer needsThe product line’s customers com-prise the following: steel works, ironworks, the concrete industry, sawmills, the pulp and paper industry,the engineering sector and goodsterminals. Container and trailer hand-ling products are also bought by cus-tomers at inland terminals, containerparks, and container ports and ter-minals.

Market position

In general, the heavier the loadbeing handled and the greater thedegree of specialised handling re-quired, the stronger the position ofKalmar in the world market.

Kalmar leads the European marketfor all products in this product line.

Mast lift trucks with a capacity of28 – 52 tonnes have a strong positionworldwide, as has the reachstackerrange for handling containers, trailers,demountables etc.

Product development

New reachstackers for handlingloaded containers (the third genera-tion Kalmar ContChamp and a newgeneration of Sisu reachstacker)were launched during the spring of1997. A brand new reachstacker witha sidelift attachment for handlingempty containers was launched atthe same time under the Sisu brandname. All three new products weremet with enthusiasm in the market,strengthening Kalmar’s leadingposition worldwide for handlingboth empty and loaded containers.

Medium & Heavy

22

0

SEK m

1996Pro forma

600

300

900

1500

1800

1200

2100

1997

The product line is responsible formast lift trucks with a 9 – 90 tonnelifting capacity, mast lift trucks forhandling and stacking empty con-tainers 3 – 8 high and reachstackersfor handling both empty and loadedcontainers and trailers. Kalmar’sContChamp reachstacker is the lea-ding product of its type worldwide.The products are marketed undertwo brand names: Kalmar and Sisu.

Net sales forMedium & Heavy

23

Net sales

Net sales for this product line totalledSEK 953 million (974).

ProductsTerminal Systems produces a varietyof products comprising: straddlecarriers, RTG cranes, terminal tractorsfor the European market, high-speedtrucks and log handlers. These pro-ducts are manufactured in factoriesin Tampere and Lidhult. Including

Market positionStraddle carriers and RTG cranes arethe main handling system used in alllarge container ports. Straddle carriersystems are used predominantly inEurope and on the East Coast of theUSA. RTG systems are used in South-east Asia, on the US West Coast andin South America. Kalmar’s positionin the market is strong and its pro-ducts are at the cutting edge oftechnology.

For ten years Sisu has been theleading brand of straddle carrierworldwide and has a 50 per centshare of this market.

Kalmar’s Sisu log handlers leadthe way in Europe in terms of bothtechnology and sales. The com-petitors are generally local manu-facturers in Scandinavia.

Product development

The fifth generation Sisu straddlecarrier was very well received in themarket and the technical solutionsused have made Kalmar the marketleader.

In 1997 Sisu RTG cranes weresupplied with a new cutting- edgecontrol system for alternating currenttraction, confirming Kalmar’s positionas a pioneer in this area.

1997 also saw the launch of a newmore powerful version of Sisu’sterminal tractor.

The market

The market for straddle carriers isglobal with stable annual demandexcept for occasional peak years.The turmoil in parts of Asia did nothave a material impact on new ordersduring the year.

Demand for RTG cranes increasedin Europe and North and SouthAmerica while the economic crisis inparts of Asia had a negative impacton new orders towards the end ofthe year.

ProductionProduction capacity utilisation infactories in Finland and Sweden washigh during the year and deliveriesran to schedule.

The reorganisation of the produc-tion lines in Tampere has increasedefficiency.

The new production structuremeans that Swedish production ofterminal tractors and toplift attach-ments is to be transferred to Tamperewhile Tampere’s production of fork-lift trucks and cylinders is to betransferred to Medium & Heavy inLjungby.

Production at both factories is ISO9001 certified.

Terminal Systems

Net sales forTerminal Systems

23

0

SEK m

19971996pro forma

600

300

900

1500

1800

1200

2100

aftermarket sales, Terminal Systemsaccounted for 21 per cent of thegroup’s net sales for the year. Theproducts are marketed mainly underthe Sisu brand name.

Customer needsStraddle carriers, RTG cranes andterminal tractors are used mainly inports and terminals which handlecontainers. Individually and together,they make for a flexible handlingsystem which is highly efficient attransporting, stacking and handlingcontainers and trailers. Straddlecarriers and terminal tractors are alsoused in heavy industry for handlingunit loads.

High-speed trucks are speciallydesigned for high speeds on roads,eliminating the need for additionaltransport equipment.

Log handlers are used for handlingpulpwood, primarily in the pulp andpaper industry, and sawn timber inmedium-sized and large sawmills.

24

Directors’ Report

Net salesNet sales for this product line totalledSEK 869 million (625).

Products

Terminal Tractors concentrates itsoperations in North America, withmanufacturing based in Ottawa(Kansas) and White Oak (Texas).Including aftermarket sales, thisproduct line accounted for 19 percent of the group’s net sales duringthe year.

The products are marketed undertwo brand names: Ottawa (primarilyfor the North American market) andMagnum (largely for export markets).

Customer needs

This product line’s main customersare ports, intermodal terminals, roadterminals and industry.

Market position

The two brands – Ottawa andMagnum – have a combined share ofover 50 per cent of the world market.North America is the world’s largestmarket for handling at distributionterminals, road terminals, railwayterminals and in industry. With itsOttawa range Kalmar beat off stiffcompetition from domestic compe-titors to win three large orders fortractor fleets.

Product developmentThe product line’s Industrial Marke-ting Project was carried out duringthe year with the aim of increasingthe use of terminal tractors as aneffective logistics solution.

New special models were launchedin the Magnum range which includeda rotatable driver’s seat and a two-man cab.

Terminal Tractors

Net sales forTerminal Tractors

The marketThe North American market develop-ed well during the year with a sub-stantial increase in demand and thusa recovery from the poor year of1996. Demand for the product line’sproducts tends to follow demand forheavy trucks of over 16 tonnes andthe strong US market means thatthere is considerable growth poten-tial for this product line.

Developments in parts of Asia areexpected to have an impact onexports.

Production

Production at the US factories enjoysa high degree of capacity utilisationand deliveries have run to schedulewithout any major disruptions.

The Ottawa factory completed amajor project which aimed to improveinternal logistics, lead times andassembly productivity. Most of theproject was dedicated to a completelynew factory layout and a new powdercoating plant.

The Ottawa factory was ISO 9001certified in December 1997.

24

0

SEK m

19971996pro forma

600

300

900

1500

1800

1200

2100

25

Net sales

Net sales for this product line totalledSEK 930 million (1,047).

Products

Light & Sideloaders comprises some20 frontloading and sideloading mastlift truck models, electric lift truckswith a 1.2 – 8 tonne lifting capacity,diesel lift trucks with a 3 – 8 tonnelifting capacity and LPG lift truckswith a 4 – 10 tonne lifting capacity.

Including aftermarket sales, thisproduct line accounted for 20 percent of the group’s net sales duringthe year. The products are marketedunder the Kalmar brand name.

Customer needs

Frontloading mast lift trucks are usedfor all sorts of handling in almost alltypes of industry and are frequentlyused for extremely intensive hand-ling in multi-shift environments.

Sideloading mast lift trucks areused for handling long goods in in-dustry and warehouses. The electriclift trucks are used for stock manage-ment and production and operateeffectively in confined spaces.

Market position

Kalmar’s electric lift trucks sell mainlyin the Scandinavian market. The 3 –8 tonne diesel lift trucks sell inScandinavia, northern Europe,France, the UK and the USA. Side-loaders sell primarily in WesternEurope, with Germany, France andthe UK as the largest markets.

Kalmar is a market leader inScandinavia for trucks with a liftingcapacity of 4 – 8 tonnes. The newproducts launched during 1997 havestrengthened this position considera-bly.

Product developmentWith its completely new approachto the driver’s environment, the SpiritDelta® was launched during the firstquarter of 1997 and made a majorbreak-through, thus strengtheningKalmar’s total product concept.

Kalmar’s new ”intelligent” hydro-static lift trucks with a 4 – 8 tonnecapacity were launched towards theend of the year. This solution is

Light & Sideloaders

Net sales forLight & Sideloaders

based on the development of existinghydrostatic technology which drawson electronic controls to give thetruck better precision, safety, effi-ciency and environmental features.It has been very well received in themarket and has strengthened Kalmar’sposition in this highly competitivesegment.

The market

The market for this product line’s lifttrucks tends to follow industrial out-put trends in Western Europe anddemand has been stable. Demandwas weak in the important paper andpulp industry in Scandinavia during1997, reflecting the state of the worldmarket in this sector.

The economic turmoil in parts ofAsia has not had any impact on thisproduct line’s performance.

ProductionWhile production is based in Ljungbyand Härnösand in Sweden, around75 per cent of output is exported.Both factories enjoyed high utilisationcapacity during the year. The newSpirit Delta® driver’s environmentbrought some production teethingproblems.

25

0

SEK m

19971996pro forma

600

300

900

1500

1800

1200

2100

26

Net salesThe net sales generated by thisproduct line is not accounted forseparately but is instead included inthe other product lines’ net salesfigures.

Products

Customer Support is responsible forcomponent service; spare parts, re-placement units and large compo-nents and customer service; training,upgrading and inspection, workshopservice and repairs, on-site service,tools and service agreements.

The product line has three strategicCustomer Support Centres in Sweden,Finland and the USA which arestaffed by a total of 180 employees.The Customer Support Centre inOttawa in the USA moved into itsnew building during the autumn,allowing Kalmar to meet customerneeds more efficiently. Worldwide,Kalmar also provides service via itssales companies and a globalnetwork of agents.

The market

More than 60,000 Kalmar machinesare used around the world by around30,000 customers, with each yearseeing the delivery of 3,500 newmachines. This is Customer Support’smain market.

The merger with STS has strengthe-ned the product line’s positionworldwide.

Product developmentCustomer Support develops what areknown as upgrade products, the aimof which is to transfer new techno-logy to machines already in use. Thisfacilitates handling and ensuresgreater cost efficiency.

The market

The merger with STS has providedthe opportunity to coordinate twoalready well developed and effectiveaftermarket organisations with con-siderable specialist expertise. Thereis also the potential to create cost-effective solutions which add valuefor customers.

Customer Support

This product line’ssales are, of course,dependent on salesof new products,with recent years’high volumes lead-ing to higher aftermarket sales in theglobal market. There are signs thatdemand for reconditioning and up-grade solutions is increasing, parti-cularly for larger equipment.

During the year the product linechanged its name from ProductSupport to Customer Support tohighlight Kalmar’s customer-centredapproach and its ability to offercustomers total solutions to meettheir need for materials handlingequipment.

Directors’ Report

27

SEK million Note 1997 1996 1996 1997 1996

Net sales 1, 4 4,598.8 4,566.1 2,498.6 6.2 3.1Cost of goods sold -3,684.6 -3,603.7 -1,899.0 0.0 0.0

Gross profit 914.2 962.4 599.6 6.2 3.1

Selling expenses -437.1 -408.7 -284.3Administrative expenses -216.2 -200.8 -115.4 -6.7 -6.8Research and development expenses -34.8 -34.1 -11.8Items affecting comparability -168.7 0.0 0.0 -38.4 0.0Profit from interests in associated companies 1.2 2.4 2.4Other operating income 9.7 7.4 0.2Other operating expenses -0.7 0.0 0.0

Operating profit 2,3,5,6,7,8 67.6 328.6 190.7 -38.9 -3.7

Result from financial investments

Result from participations in group companies 225.2 -27.7Result from participations in associated companies 2.1 0.0Interest income 9.6 12.1 4.1 8.3 12.3Interest expenses -47.9 -55.6 -27.3 -2.9 -6.4Exchange rate differences 0.5 5.3 3.3 0.0 -3.3Other financial items 0.0 -1.2 -0.6 0.0 -1.1

Profit after net financial items 9,10,11 29.8 289.2 170.2 193.8 -29.9

Appropriations

Group contributions received 17 12.6 104.0Group contributions paid 1, 17 0.0 -49.8 0.0 -3.7 0.0Tax allocation reserve -2.4 0.0

Profit before tax 29.8 239.4 170.2 200.3 74.1

Tax on profit for the year 12 -22.7 -48.6 -32.0 -3.0 0.0Minority interests in profit for the year -4.7 -3.2 -3.2

Net profit for the year 2.4 187.6 135.0 197.3 74.1

Group Parent company

Profit and Loss Accounts

Accounts

pro forma

28

SEK million pro forma

Assets Note 31 Dec 97 31 dec 96 31 dec 96 31 Dec 97 31 dec 96

Fixed assets

Intangible assets

Patents and similar rights 13 5.5 6.0 0.0Goodwill 13 133.8 122.1 51.8

Total intangible assets 139.3 128.1 51.8

Tangible assets

Buildings, land and land improvements 14 306.8 345.2 102.8Machinery and technical assets 14 306.2 314.9 212.5Equipment, tools, fixtures and installations 14 106.1 65.2 49.8Construction in progress and advance payments 14 5.1 37.1 29.6

Total tangible assets 724.2 762.4 394.7

Financial assets

Participations in associated companies 15 3.7 8.3 8.3 2.8 1.9Participations in group companies 16 626.4 332.4Other long-term securities holding 0.9 0.0 0.0Other long-term interest-bearing receivables 15 55.0 66.1 0.0Other long-term receivables 0.1 0.9 0.9Receivables from group companies 17 233.9 105.6

Total financial assets 59.7 75.3 9.2 863.1 439.9

Total assets 923.2 965.8 455.7 863.1 439.9

Current assets

Inventories

Raw materials 331.6 327.3 176.1Work in progress 205.6 151.6 74.4Finished goods 426.2 339.2 302.5Advance payments to suppliers 1.5 1.5 0.0

Total inventories 964.9 819.6 553.0

Current receivable

Accounts receivable 17 842,9 743,7 325,7Bills receivable 8,6 6,6 6,6Receivables from associated companies 12,3 15,6 15,6Prepaid tax 9,5 29,8 29,8Other receivables 53,3 37,7 20,1Other interest-bearing receivables 16,9 11,9 0,0Prepaid expenses and accrued income 18 53,3 30,0 12,5 2,2 0,6Receivables from group companies 47,0 57,7

Total current receivables 996,8 875,3 410,3 49,2 58,3

Short-term investments 12,2 0,2 0,0

Cash and bank 65,2 97,7 58,6 0,1 0,0

Total current assets 2 039,1 1 792,8 1 021,9 49,3 58,3

Total assets 2 962,3 2 758,6 1 477,6 912,4 498,2

Group Parent company

Accounts

Balance Sheet

29

SEK million pro forma

Shareholders’ equity and liabilities Note 31 Dec 97 31 Dec 96 31 Dec 96 31 Dec 97 31 Dec 96

Shareholders’ equity 19

Share capital 293.8 293.8 159.9 293.8 159.9Restricted reserves 460.8 293.5 196.9Share premium reserve 105.4 0.0Statutory reserve 0.0 146.0

Total restricted equity 754.6 587.3 356.8 399.2 305.9

Unrestricted reserves 185.8 105.2 144.7Profit/loss brought forward -55.8 14.7Net profit for the year 2.4 187.6 135.0 197.3 74.1

Total unrestricted equity 188.2 292.8 279.7 141.5 88.8

Total shareholders’ equity 942.8 880.1 636.5 540.7 394.7

Minority shareholding 45.9 27.6 27.6

Untaxed reserves

Accrual fund 20 33.6 31.2

Total untaxed reserves 33.6 31.2

Provisions

Provisions for pension andsimilar commitments 113.3 226.4 77.7Provisions for deferred tax liabilities 21 43.7 66.9 52.4Other provisions 22 123.9 49.3 20.4

Total provisions 280.9 342.6 150.5

Long-term liabilities

Overdraft facility 23 203.6 270.9 270.9Other interest-bearing liabilities 17, 24 578.0 384.7 5.4Other liabilities 2.1 0.9 0.9Other long-term interest-bearing liabilities 24 300.0 0.0Liabilities to group companies 17 29.3 71.3

Total long-term liabilities 783.7 656.5 277.2 329.3 71.3

Current liabilities

Accounts payable 17 364.9 398.2 168.0Bills payable 1.9 0.8 0.8Tax liability 6.9 3.4 3.4 2.5 0.0Accrued expenses and prepaid income 25 325.3 266.9 124.7 2.0 0.8Advances from customers 54.9 36.0 12.1Other interest-bearing liabilities 104.9 82.8 27.2Other liabilities 50.2 63.8 49.6 0.6 0.2Liabilities to group companies 3.7 0.0

Total current liabilities 909.0 851.9 385.8 8.8 1.0

Total shareholders’ equity and liabilities 2,962.3 2,758.7 1,477.6 912.4 498.2

Pledged assets 26 34.9 225.8 None None None

Contingent liabilities 26 347.5 393.5 343.2 40.7 15.9

Group Parent company

30

SEK million 1997 1996 1997 1996

Funds provided

Profit after net financial items 29.8 170.2 193.8 -29.9

+ Depreciation and write-downs charged against profit 192.6 78.7+/- Investment income -1.1 -0.7+/- Tax excluding deferred tax -45.6 -21.0 -3.0 0.0+/- Minority interests in profit for the year -4.7 -3.2+/- Adjustments for other items not affecting cash flow -7.8 -0.7

Funds provided by operations for the year 163.2 223.3 190.8 -29.9

Change in working capital (excluding liquid assets)

Change in inventories -145.3 -31.9Change in current receivables -121.5 43.5 9.1 90.4Change in current liabilities 57.1 -83.4 7.8 -28.8Change in short-term investments -12.0 0.0

-221.7 -71.8 16.9 61.6

Disposals of tangible assets 28.7 45.2Reduction in financial assets 15.6 0.0Share issue and other capital from shareholders 375.5 0.0 255.2 0.0Increase in minority shareholding 18.3 27.6Group contributions received 12.6 104.0Increase in provisions net of deferred tax 0.0 5.0Increase in long-term liabilities 127.2 33.9 258.0 41.3

Total funds provided from operations 506.8 263.2 733.5 177.0

Funds utilized

Investments in intangible assets -18.5 -4.4Investments in tangible assets -176.0 -188.5Investments in financial assets (notes 15, 16 & 17) 0.0 -1.4 -423.2 -125.9Decrease in provisions net of deferred tax -38.5 0.0Group contributions paid -3.7 0.0Dividends and similar payments to shareholders -306.3 -51.1 -306.5 -51.1

Total funds utilized -539.3 -245.4 -733.4 -177.0

Net change in liquid assets -32.5 17.8 0.1 0.0

Group Parent company

Accounts

Source and Application of Funds Statement

31

GeneralIn 1997 Kalmar modified its basis of accounting in linewith Sweden’s new EU-harmonised Financial ReportingAct. The main impact has been on the layout of the profitand loss account and balance sheet. Kalmar’s 1996 figureshave been restated using the new basis of accounting toimprove comparability. The new rules have had a mini-mal impact on the company’s valuation policies. Kalmarapplies the recommendations of the Swedish FinancialAccounting Standards Council, which largely mirror thoseof the International Accounting Standards Committee.

Consolidated accounts

The consolidated accounts comprise the parent company,Kalmar Industries AB and all other companies in whichKalmar Industries own more than 50 per cent of the votingrights, directly or indirectly, and associated companies forwhich the Group owns a minimum of 20 per cent andmaximum of 50 per cent of the voting rights.

The pooling method has been applied to the mergerwith Sisu Terminal Systems Oy (STS), which means thatthe consolidated accounts have been prepared as if themerger had taken place on 1 January 1997. The 1997figures therefore reflect the new group’s performanceover a full financial year. To aid year-on-year comparisons,pro forma accounts for 1996 have been prepared as if themerger had taken place on 1 January 1996. These proforma figures have been prepared on the same basis asthose included in the information pack sent to Kalmar’sshareholders prior to the Extraordinary General Meetingof 24 October 1997, except that the interest effect of theredemption price of SEK 255 million has not been chargedagainst 1996 profits. The payment to shareholders was notmade until the end of 1997 and has therefore had a minorimpact on 1997 profits. In the information pack sent toshareholders the accounts for STS were translated at anexchange rate of SEK 1.50 to FIM 1, but the accounts pre-sented here have applied the actual exchange rates for1996 and 1997. A more detailed basis has been used forthe pro forma accounts presented here than for those inthe information pack sent to shareholders.

Other subsidiaries have been consolidated using theacquisition method, while associated companies havebeen consolidated using the equity method.

Kalmar Industries translates the accounts of foreignsubsidiaries using the current method, which means thatall assets and liabilities are translated at year-end ex-change rates while all profit and loss account items aretranslated at the average exchange rates over the year.Translation differences arise on account of differencesbetween the average exchange rates used for the profitand loss account and the year-end exchange rates usedfor the balance sheet, and on account of differencesbetween the year-end exchange rates used to translatenet investments from year to year. All translationdifferences are included directly in equity.

STS has hedged its net investment in its US subsidiary bytaking out loans denominated in USD. In the consolidatedaccounts these loans have been translated at the year-endrate, with the translation differences arising included inequity to the extent that it corresponds to translationdifferences included in equity during the year for thatsubsidiary.

Deferred taxWhen preparing the group balance sheet, untaxed re-serves are divided into a deferred tax liability portionreported under long-term liabilities and an equity portionreported under restricted reserves. Deferred tax assetsand liabilities also arise on differences between the valuesof assets and liabilities for tax and accounting purposes.Deferred tax assets may be included in the accounts onlywhere it is likely that they can be utilised within the fore-seeable future. Deferred tax liabilities are calculated at thecurrent tax rate in each country. Changes in deferred taxliabilities on account of alterations to these tax rates areincluded in the year’s tax charge.

Foreign currency receivables and liabilities

Receivables and liabilities denominated in foreigncurrencies are translated at the exchange rates on theclosing day, except where they have been hedged, inwhich case the relevant forward rates are used.

Exchange gains and losses attributable to the translationof loans are reported under interest income/expense.

The group hedges a significiant proportion of projectedsales in foreign currencies through forward rate agree-ments. Such forward transactions are offset against theprofit from the hedged sales as it is received.

InventoriesInventories are valued at the lower of cost and netrealisable value on a first-in/first-out basis (FIFO).Adequate depriciation has been made to account forobsolescence.

Research and development

Research and development expenditure is charged tooperating expenses as costs are incurred.

Fixed assets and depreciation

Fixed assets are accounted for at their orginal purchasevalue less deductions for accumulated depreciationaccording to plan. Yearly depreciation percentages arebased on calculated economic lifetimes. For machineryand inventories, depreciation percentages of 5 – 33 percent are applied; for buildings, the rate is 1.5 – 6 per cent.Goodwill is written off at 5 – 20 per cent per annum.Thisrate of depreciation is based on the longterm strategicsignificance of each acquisition to the Group. Patents andsimilar rights are amortised at a rate of 10 – 20 per centper annum.

Accounting Principles

32

Note 1. Intra-group transactions – Partekgroup

The parent company is a subsidiary of the Finnishcompany Partek Oyj Abp which holds 51 per cent of itsshares. The year saw the following transactions betweenthe group and other Partek companies:

1997 1996Sales to Partek companies 78.5 65.4Purchases from Partek companies 16.4 5.0

The group contribution 1996 was paid to Sisu Oy.

Note 2. Average number of employees

Number of employeespro forma

SEK million 1997 1996 1996Parent company

Sweden 1 1 1(of which men) 100% 100% 100%

Subsidiaries

Sweden 1170 1215 1208(of which men) 88% 88% 88%Other Nordic 1188 1287 14(of which men) 91% 90% 79%Rest of Europe 290 323 266(of which men) 76% 84% 82%North America 497 478 155(of which men) 85% 85% 83%Asia Pacific 90 46 17(of which men) 63% 63% 71%Elsewhere 4 4 3(of which men) 75% 75% 67%

Total subsidiaries 3239 3353 1663(of which men) 88% 88% 86%

Total group 3240 3354 1664(of which men) 88% 88% 86%

Note 3. Salaries, other compensationsand social benefits

pro forma

SEK million 1997 1996 1996Parent company

Salaries etc 2.0 2.0 2.0Social benefits 0.5 0.5 0.5(of which pensions) 0.3 0.3 0.3

Subsidiaries

Salaries etc 797.7 787.3 435.3Social benefits 254.4 212.9 146.9(of which pensions) 90.1 69.8 28.8

Group

Salaries etc 799.7 789.3 437.3Social benefits 254.9 213.4 147.4(of which pensions) 90.4 70.1 29.1

Total 1) 1,054.6 1,002.7 584.7

1) For both 1997 and 1996, SEK 0.3 million of the pensioncosts at the group and parent company relate to theBoard and President and CEO. The company’s out-standing pension liabilities in respect of these officersamount to SEK 0 million for both years.

The President and CEO and other senior executives areentitled to a standard service pension, based on paymentsat the maximum level that the company can chargeagainst taxable income.

Group pro forma

Accounts

Notes

33

Note 4. Net sales per operation and market

The group’s net sales was divided as follows:pro forma

SEK million 1997 1996 1996

Sweden 539 529 425Other Nordic 422 433 150Rest of Europe 1,307 1,470 911North America 1,226 940 339Asia Pacific 496 675 472Other markets 609 519 202

4,599 4,566 2,499

pro forma

SEK million 1997 1996 1996

Light & Sideloaders 930 1,047 1,047Medium & Heavy 1,699 1,799 1,452Terminal Systems 953 974 0Terminal Tractors USA 869 625 0Other 148 121 0

4,599 4,566 2,499

Note 5. Items affecting comparability

pro forma

SEK million 1997 1996 1996

Parent company

Consultancy fees for merger 13.3 0.0 0.0Finnish transfer tax 25.1 0.0 0.0

38.4 0.0 0.0

pro forma

SEK million 1997 1996 1996

Group

Restructuring provisions,write-downs of buildingsand land 47.0 0.0 0.0Restructuring provisions, other 73.0 0.0 0.0Consultancy fees for merger 13.3 0.0 0.0Finnish transfer tax 25.1 0.0 0.0Finnish pension provisions 10.3 0.0 0.0

168.7 0.0 0.0

Salaries, other compensations by country, type ofofficer and other employees

pro forma

SEK million 1997 1996 1996

parent company

SwedenBoard plus President and CEO 2.0 2.0 2.0(of which bonuses) 0.3 0.2 0.2Other employees 0.0 0.0 0.0

Subsidiaries

SwedenBoard plus President and CEO 0.6 0.6 0.0(of which bonuses) 0.0 0.0 0.0Other employees 284.7 286.7 284.2Other NordicBoard plus President and CEO 2.5 2.4 0.5(of which bonuses) 0.0 0.0 0.0Other employees 277.2 269.7 4.0Rest of EuropeBoard plus President and CEO 5.6 4.5 3.8(of which bonuses) 0.2 0.1 0.1Other employees 78.8 86.1 82.3North AmericaBoard plus President and CEO 5.2 7.4 3.5(of which bonuses) 0.3 0.0 0.0Other employees 122.7 114.4 47.2Asia PacificBoard plus President and CEO 2.3 1.5 1.1(of which bonuses) 0.1 0.3 0.3Other employees 13.3 9.1 3.8ElsewhereBoard plus President and CEO 2.4 2.8 2.8(of which bonuses) 0.0 0.0 0.0Other employees 2.4 2.1 2.1

Total subsidiariesBoard plus President and CEO 18.6 19.2 11.7(of which bonuses) 0.6 0.4 0.4Other employees 779.1 768.1 423.6

Total groupBoard plus President and CEO 20.6 21.2 13.7(of which bonuses) 0.9 0.6 0.6Other employees 779.1 768.1 423.6

The President and CEO received a salary and otherremuneration (including the benefit of a company car)totalling SEK 1,617,000, of which SEK 300,000 was per-formance-related.

The severance package due to the President and CEOin the event of notice being given by the company com-prises 24 months’ salary. The periods of notice agreedwith other senior executives run up to a maximum of 12months.

34

Note 8. Lease charges for operating leasespro forma

1997 1996 1996

Group

Assets held throughoperating leases None None NoneLease charges paidduring the year 50.0 40.0 37.0Agreed lease charges forfuture years: 1998 58.0

1999 46.02000 38.02001 14.02002 3.0

2003-2007 12.0Parent company

Assets held throughoperating leases None None NoneLease charges paidduring the year – – –Agreed lease charges forfuture years: – – –

Note 9. Result from participation ingroup companies

SEK million 1997 1996

Parent company

Dividends 225.2 0.0Gains/losses on disposals 0.0 -27.7

225.2 -27.7

Note 10. Result from other financial assetsand securities

SEK million 1997 1996

Parent company

Interest income, subsidiaries 7.6 9.8Interest income, other 0.7 2.5

8.3 12.3

Note 6. Depreciations according to plan

pro forma

SEK million 1997 1996 1996

Breakdown by class of asset:Patents and similar rights 1.6 0.7 0.0Goodwill 13.7 11.2 2.8Machinery and technical assets 73.2 68.1 49.8Equipment, tools, fixturesand installations 40.6 32.9 21.7Buildings and landimprovements 16.5 15.8 4.4

145.6 128.7 78.7

Breakdown by functionCost of goods sold 98.4 87.9 57.4Selling expenses 22.2 18.6 13.3Administrative expenses 24.4 21.6 8.0R&D expenses 0.6 0.6 0.0

145.6 128.7 78.7

The parent company has no tangible or intangible assets.

Note 7. Other operating income

SEK million 1997 1996 1996

Group

Property rentals, buildings in Finland 5.3 7.4 0.0Disposal of Climax operations in UK 4.4 0.0 0.0

9.7 7.4 0.0

Accounts

pro forma

35

Note 11. Other interest income/expensespro forma

SEK million 1997 1996 1996

Group

Interest income, other 8,4 9,8 4,1Interest income, groupcompanies 1,2 2,3 0,0

9,6 12,1 4,1

Parent company

Interest income, other 0,7 2,5

0,7 2,5

Group

Interest expenses, other 33,2 45,5 27,3Interest expenses, groupcompanies 14,7 10,1 0,0

47,9 55,6 27,3

Parent company

Interest expenses, subsidiaries 1,2 0,6Interest expenses, other 1,7 5,8

2,9 6,4

Note 12. Taxes

pro forma

SEK million 1997 1996 1996

Group

Tax payable 45,6 35,0 21,0Deferred tax -22,9 13,6 11,0

22,7 48,6 32,0

Parent company

Tax payable 3,0 0,0

3,0 0,0

The deferred tax charge for 1997 has been reduced bySEK 26 million on account of the restructuring provision.

Note 13. Intangible assets

pro forma

SEK million 971231 961231 961231

Patents and similar rights

Opening balance acquisition value 7.2 1.9 0.0Investments 3.5 5.2 0.0Disposals -0.4 0.0 0.0Reclassifications -2.0 0.1 0.0

Closing balance, accumulated acquisition value 8.3 7.2 0.0

Opening balance depreciations -1.2 -0.4 0.0Reclassifications 0.0 -0.1 0.0Depreciation for the year -1.6 -0.7 0.0

Closing balance, accumulated depreciations -2.8 -1.2 0.0

Net book value, 31 Dec 5.5 6.0 0.0

GoodwillOpening balance acquisition value 152.4 143.0 50.2Investments 15.0 4.4 4.4Reclassifications 10.4 5.0 0.0

Closing balance, accumulated acquisition value 177.8 152.4 54.6

Opening balance depreciations -30.3 -19.1 0.0Depreciations for the year -13.7 -11.2 -2.8

Closing balance, accumulated depreciations -44.0 -30.3 -2.8

Net book value, 31 Dec 133.8 122.1 51.8

36

Note 14. Tangible assetspro forma

SEK million 31 Dec 97 31 Dec 96 31 Dec 96

Buildings, land and land improvements

Opening balance acquisition value 414.7 389.4 123.2Investments 21.0 28.9 7.8Disposals 0.0 -12.1 -0.4Reclassifications 4.1 8.5 7.1

Closing balance, accumulated acquisition value 439.8 414.7 137.7

Opening balance depreciations -69.5 -53.1 -30.6Disposals 0.0 0.1 0.1Write-downs -47.0 0.0 0.0Reclassifications 0.0 -0.7 0.0Depreciations for the year -16.5 -15.8 -4.4

Closing balance acumulated depreciations -133.0 -69.5 -34.9

Net book value, 31 Dec 306.8 345.2 102.8

Tax assessmentBuildings 66.2 63.3 63.3Land 14.1 15.7 15.7

Tax assessment value refers to Swedish real estate.

Machinery and technical assetsOpening balance acquisition value 651.7 569.8 354.7Investments 85.4 129.2 78.6Disposals -28.7 -45.6 -43.5Reclassifications 0.2 -1.7 -2.3

Closing balance accumulated acquisitions value 708.6 651.7 387.5

Opening balance depreciations -336.8 -281.2 -135.0Disposals 13.1 11.0 9.8Reclassifications -5.5 1.5 0.0Depreciation for the year -73.2 -68.1 -49.8

Closing balance accumulated depreciations -402.4 -336.8 -175.0

Net book value, 31 Dec 306.2 314.9 212.5

Rental fleet (included in machinery and technical assets)

Opening balance acquisition value 234.0 196.5 196.5Investments 62.4 72.4 72.4Disposals -19.0 -34.9 -34.9

Closing balance accumulated acquisition value 277.4 234.0 234.0

Opening balance depreciations -75.2 -38.3 -38.3Disposals 4.9 4.3 4.3Reclassifications 3.5 0.4 0.4Depreciation for the year -41.8 -41.6 -41.6

Closing balance accumulated depreciations -108.6 -75.2 -75.2

Net book value, 31 Dec 168.8 158.8 158.8

Accounts

37

Note 15. Financial assets

Participations in associated companies, SEK million 31 Dec 97 31 Dec 96 31 Dec 96

Opening balance acquisition value 8.3 7.0 7.0Share of profit for the year 1.2 2.4 2.4Dividends -1.3 -1.1 -1.1Reclassifications* -4.5 0.0 0.0

Net book value, 31 Dec 3.7 8.3 8.3

* Kalmar Pacific Ltd became a subsidiary with effect from 1 April 1997

Shares % Par value Net bookheld holding (x 1,000) value

(SEK m)

Owned by parent company, 31 Dec 97

Peinemann Kalmar Container Handling BV 34 33.3 NLG 340 0.2Peinemann Kalmar Container Handling CV 30.3 NLG 220 1.4Hooogvliet, NetherlandsKalmar Espana SA, Madrid, Spain 4,900 49 ESP 4,900 0.3

1.9

Retained earnings at associated companies 0.9

Net book value for parent company, 31 Dec 2.8

Share of equity 0.9

Net book value for group, 31 Dec 3.7

Other long-term interest-bearing receivables 31 Dec 97 31 Dec 96 31 Dec 96

Opening balance acquisitions value 66.1 29.8 0.0Additions 0.0 39.2 0.0Repayments -20.1 -5.0 0.0Reclassifications 9.0 2.1 0.0

Net book value, 31 Dec 55.0 66.1 0.0

Equipment, tools, fixtures and installations 31 Dec 97 31 Dec 96 31 Dec 96

Opening blance acquisition value 164.5 108.2 34.4Investments 65.3 75.3 72.5Disposals -3.6 -17.5 -15.1Reclassifications 11.1 -1.5 1.3

Closing balance accumulated acquisition value 237.3 164.5 97.3

Opening balance depreciations -99.3 -70.5 -25.8Disposals 3.6 4.3 4.2Reclassifications 5.1 -0.2 0.0Depreciation for the year -40.6 -32.9 -21.7

Closing balance accumulated depreciations -131.2 -99.3 -43.3

Net book value, 31 Dec 106.1 65.2 49.8

Construction in progress

Opening balance acquisition value 37.1 25.2 9.4Investments 4.3 52.7 29.6Reclassifications -36.3 -40.8 -9.4

Closing balance accumulated acquisition value 5.1 37.1 29.6

pro forma

pro forma

38

Accounts

Note 16. Shares and participations in subsidiaries31 Dec 97

Opening balance acquisitions value 332.4Investments 266.1Capital contributions 27.6Reclassifications 0.3

Net book value, 31 Dec 626.4

Number Participations Net bookof shares % value

(Org. No: 55 60 88-1657) (SEK m)

The parent company’s holdings as of 31 Dec 1997

Kalmar LMV AB, Org. nr: 55 61 05-5467, Ljungby, Sweden 500,000 100% 181.9Kalmar Forwarding AB, Org. nr: 55 60 61-8604, Ljungby, Sweden 500 100% 0.1Kalmar LMV East Asia Pte Ltd, Singapore, Singapore 850,000 100% 3.0Kalmar Hebefahrzeuge Handelgesellschaft mbH, Klagenfurt, Austria 100% 1.0Kalmar Japan Ltd, Tokyo, Japan 100% 2.7Kalmar Hernöverken AB, Org. nr: 55 60 44-2625, Härnösand, Sweden 90,000 100% 2.8Kalmar LMV Sverige AB, Org. nr: 55 62 06-2116, Sollentuna, Sweden 20,000 100% 63.6AB Kalmar Industries Finans, Org. nr: 55 62 45-1822, Härnösand, Sweden 500 100% 36.8Kalmar LMV Förvaltnings AB, Org. nr: 55 60 51-6410, Härnösand, Sweden 1,250 100% 0.8Kalmar AC Inc, Dublin Ohio, USA 4,430 51% 29.3Kalmar Norge AS, Oslo, Norway 3,000 100% 4.4Kalmar Pacific Ltd, Hong Kong, Hong Kong 390,000 51% 11.1Kalmar Vermögensverwaltungsgesellschaft m b H, Hamburg, Germany 100% 33.6

Kalmar France S.A. Paris, France 100,000 100%Kalmar Inc, Dublin Ohio, USA 100 100%Kalmar Flurförderzeuge Vertriebs GmbH, Hamburg, Germany 100%Kalmar Handling Systems Ltd, Coventry, UK 100%Kalmar Ltd, Coventry, UK 5,300,000 100%

Sisu Terminal Systems Oy, Tammerfors, Finland 27,500 100% 255.3Sisu North America Inc., Longview Texas, USA 100%Sisu Terminal Systems (South Pacific) Pty Ltd, Melbourne, Australia 51%Sisu Terminal Systems (UK) Ltd, Warrington, UK 100%International Port Equipment Ltd, Warrington, UK 100%Sisu Terminal Systems GmbH, Landhut, Germany 100%Velsa Oy, Kurikka, Finland 100%AS Finmec, Maardu, Estonia 100%Sisu Terminal Systems (Sverige) AB, Göteborg, Sweden 100%Sisu Terminal Systems (Asia) Pte. Ltd, Singapore, Singapore 100%

626.4

Sisu Terminal Systems Oy was taken over in 1997. Other acquisitions were International Port Equipment Ltd and themajority stake in Kalmar Pacific Ltd.

New issues totalling SEK 27.6 million were held by AB Kalmar Industries Finans, Kalmar Forwarding AB, KalmarNorge AS and Kalmar Vermögensverwaltungsgesellschaft mbH.

39

Note 17. Intra-group balances included in accounts receivable, long-terminterest-bearing receivables and accounts payable

pro forma

SEK million 1997 1996 1996

Group

Accounts receivable, group companies 55.5 6.1 0.0Total 55.5 6.1 0.0

Long-term interest-bearing liabilities, group companies 90.4 48.5 0.0Accounts payable, group companies 24.6 124.5 0.0

Total 115.0 173.0 0.0

Net amount owed to other Partek companies -59.5 -166.9 0.0

Parent company

Long-term receivables

Opening balance acquisition value 105.6 105.4Additional 128.3 0.2

Net Book value, 31 Dec 233.9 105.6

Long-term liabilitiesOpening balance acquisition value 71.3 30.3Settled liabilities -42.0Additional 41.0

Net Book value, 31 Dec 29.3 71.3

Group contributions

Received by parent company

Kalmar LMV AB 0.0 104.0AB Kalmar Industries Finans 9.9 0.0Kalmar LMV Sverige AB 2.7 0.0

12.6 104.0

Paid by parent company

Kalmar Hernöverken AB 3.7 0.0

3.7 0.0

Note 18. Prepaid expenses and accrued income

pro forma

MSEK 31 Dec 97 31 Dec 96 31 Dec 96

Group

Prepaid expenses 19.7 5.9 5.9Other accrued income 3.8 0.0 0.0Accrued interest income 0.5 0.4 0.0Other items 29.3 23.7 6.6

53.3 30.0 12.5

Parent company

Other items 2.2 0.6

2.2 0.6

40

Accounts

Note 19. Shareholders’ equity

Share capital Restricted Unrestrictedreserves reserves

Group

Opening balance 159.9 196.8 279.7Share redemption -15.9 -146.0 -93.4Share issue 149.8 105.4Dividends -51.2Capital from STS 294.7 58.0Transfers between restricted and unrestricted reserves 4.5 -4.5Net profit for the year 2.4Translation differences for the year 5.4 -2.8

Closing balance 293.8 460.8 188.2

Share capital Share Statutory Retainedpremium reserve earnings

reserve

Parent company

Opening balance 159.9 146.0 88.8Share redemption -15.9 -146.0 -93.4Share issue 149.8 105.4

Transfers to be approved by Annual General Meeting

Transfer to statutory reserveDividends -51.2

Net profit for the year 197.3

Closing balance 293.8 105.4 0.0 141.5

In 1997 the company’s share capital was reduced through the redemption of every tenth share at a price of SEK 200 incash. Thus a total of SEK 255.3 million was paid to shareholders and the number of shares in issue fell by 1,276,345 to11,518,665. Kalmar Industries AB subsequently issued 11,988,815 new shares to Partek Oy AB in payment for 100 percent of the shares in Sisu Terminal Systems Oy.

Note 20. Untaxed reserves

Parent company

SEK million 1997 1996

Accrual fund– For 1995 tax 3.3 3.3– For 1996 tax 27.9 27.9– For 1998 tax 2.4 0.0

33.6 31.2

Note 21. Provisions for deferred tax liabilitiespro forma

SEK million 1997 1996 1996

Untaxed reserves 74.8 72.0 58.5Other liabilities 0.7 1.2 0.2Other receivables (internal inventory gains) -5.8 -6.3 -6.3Restructuring provisions -26.0 0.0 0.0

43.7 66.9 52.4

41

Note 23. Overdraft facility

pro forma

SEK million 1997 1996 1996

Credit limit 303.5 375.9 375.9Unused portion -99.9 -105.0 -105.0

Utilized 203.6 270.9 270.9

Note 24. Other interest-bearing liabilities

pro forma

SEK million 1997 1996 1996

Group

Due after 1-5 years 474.3 321.5 5.4Due after 1-5 years, group companies 90.4 48.5 0.0Due after more than 5 years 13.3 14.7 0.0

578.0 384.7 5.4Parent company

Due after 1-5 years 300.0 0.0

300.0 0.0

Interest-bearing liabilities to group companies refer to financing from Corporate Treasury Partek Oyj Abp.

Pledged assets to credit institutepro forma

SEK million 1997 1996 1996

Group

Real estate mortgages 18.9 19.9 0.0

18.9 19.9 0.0

Note 25. Accrued expenses and prepaid incomepro forma

SEK million 1997 1996 1996

Group

Salaries 72.2 70.5 35.1Social benefits 40.9 39.7 23.7Accrued interest 3.3 12.1 0.0Accrued salaries 13.7 10.1 10.1Accrued expenses, supplies 76.5 58.4 16.8Others 113.3 70.4 33.3Prepaid income 5.4 5.7 5.7

325.3 266.9 124.7Parent company

Accrued interest 1.2 0.0Others 0.8 0.8

2.0 0.8

Note 22. Other provisions

pro forma

SEK million 1997 1996 1996

Cost of restructuring measures 73.0 0.0 0.0Guarantee commitments 50.6 47.4 20.4Other 0.3 1.9 0.0

123.9 49.3 20.4

42

Accounts

Note 26. Pledged assets and contingent liabilities

SEK million 1997 1996 1997 1996

Pledged assetsFor own liabilities and provisions

Real estate mortgages 18.9 19.9Others 11.2 11.2

Total 30.1 31.1 0.0 0.0

Other pledged assets

Real estate mortgages, Partek/STS 0.0 190.3Others 4.8 4.4

Total 4.8 194.7 0.0 0.0

Total pledged assets 34.9 225.8 0.0 0.0

Contingent liabilitiesGuarantees, pensions 1.7 2.3 1.7 1.6Guarantees, group companies 0.0 0.0 39.0 14.3Others 345.8 391.2

Total contingent liabilities 347.5 393.5 40.7 15.9

Group Parent companypro forma

43

The group has unrestricted shareholders’ equity of SEK 188.2 million. Allocations to restrictedreserves are not required. The following profits from the Parent Company are at the disposal ofthe Annual General Meeting:

Retained profit/losses brought forward SEK - 55,781,075Net profit for the year SEK 197,277,796

Total SEK 141,496,721

The Board and the President and CEO propose: To pay a dividend of SEK 2.00 per share to shareholders SEK 47,014,960 To be carried forward SEK 94,481,761

Ljungby, 10 February 1998

Gösta Bystedt Christoffer Taxell Christer GranskogChairman Vice Chairman

Ulf Magnusson Thomas Oldér Bengt Kvarnbäck

Dag Wersén Ann-Katrin Andersson Henrik Nymansson

Jonas SvantessonPresident and CEO

Our auditors’ report was submitted on 27 February 1998.

Thomas Thiel Alf SvenssonAuthorised Public Accountant Authorised Public Accountant

Proposed Appropriation of Profits

44

To the Annual General Meeting of Kalmar Industries AB (publ)Registered Number 556088-1657

We have audited the parent company and the consolidated financial statements, the accountsand the administration of the board of directors and the managing director of Kalmar IndustriesAB (publ) for 1997. These accounts and the administration of the Company are theresponsibility of the board of directors and the managing director. Our responsibility is toexpress an opinion on the financial statements and the administration based on our audit.

We conducted our audit in accordance with Generally Accepted Auditing Standards inSweden. Those standards require that we plan and perform the audit to obtain reasonableassurance that the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and their applicationby the board of directors and the managing director, as well as evaluating the overall presenta-tion of information in the financial statements. We examined significant decisions, actions takenand circumstances of the Company in order to be able to determine the possible liability to theCompany of any board member or the managing director whether they have in some other wayacted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Associa-tion. We believe that our audit provides a reasonable basis for our opinion set out below.

In our opinion, the parent company and the consolidated financial statements have beenprepared in accordance with the Annual Accounts Act and, consequently we recommend

that the income statements and the balance sheets of the parent Company and the Groupbe adopted, and

that the profit of the Parent Company be dealt with in accordance with the proposal inthe Administration Report.

In our opinion, the board members and the managing director have not committed any act orbeen guilty of any omission, which could give rise to any liability to the Company. We thereforerecommend

that the members of the board of directors and the managing director be discharged fromliability for the financial year.

Ljungby, 27 February 1998

Thomas Thiel Alf SvenssonAuthorised Public Accountant Authorised Public Accountant

Accounts

Auditors’ Report

45

The Kalmar Share

ListingKalmar Industries was first admitted to the Stockholm StockExchange on 11 July 1994. Since June 1995 its shares have beenquoted on the A-list.

Redemption of shares and new share issue

Prior to the merger with Sisu Terminal Systems (STS), Kalmar’sExtraordinary General Meeting of 25 November 1997 resolved toreduce its share capital as a consequence of the company’searlier offer to redeem every tenth share at a price of SEK 200 incash. This offer was accepted by 99.8 per cent of shareholderswhich meant that 1,276,345 shares were redeemed for a total ofSEK 255,269,000. The reduction in share capital thus amounted toSEK 15,954,312.50.

Payment for STS took the form of a directed share issue of11,988,815 shares to Partek Oyj Abp which thus became themajority shareholder with a 51 per cent stake in the group. Share capital

The company’s share capital is currently SEK 293,843,500 dividedinto 23,507,480 shares each with a par value of SEK 12.50. Allshares carry one vote at general meetings.

PerformanceKalmar’s share price climbed 13 per cent during the year fromSEK 113 at the beginning of January to SEK 128 at the year-end.The all-share index rose by 23.8 per cent during the same period.The share peaked at SEK 176 on 20 August having bottomed outat SEK 110 on 3 February. The market capitalisation of thecompany at the year-end was SEK 3,009 million.

Trading

An average of 54,973 shares were traded per day in 1997compared with 54,350 in 1996.

Aside from the private placing with Partek, a total of13,688,198 shares changed hands during the year, which isequivalent to 58 per cent of the total number of shares in thecompany at the year-end.

Changes in share capitalShare capital No of shares

7 Feb 91 new issue 159,875,125 6,395,005

8 Aug 91 new issue 159,882,625 6,395,305

23 Aug 91 conversion 159,937,625 6,397,505

11 May 94 split 159,937,625 12,795,010

27 Nov 97 redemption 149,983,312 11,518,665

27 Nov 97 private placing 293,843,500 23,507,480

Share price

100

90

110

120

130

140

150

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN1997 1998

FEB

160

170

(c) SIX Findata

The Share Affärsvärlden’s General index

SEK

46

The Kalmar Share

% of sharecapital

Shareholder No of shares & votesForeign shareholders:Partek 11,988,815 51.0Henderson 2,742,951 11.7Fidelity Fonder 137,750 0.6Unibank 110,070 0.5Foreign managers 2,036,447 8.7

Swedish shareholders:Sparbankens och Förenings-banken’s unit trusts 2,103,430 8.9Skandia 482,670 2.1SPP 397,400 1.7AMF sjukförsäkring AB 350,000 1.5Arbetsmarknadens Försäkrings AB 340,110 1.4Carlson Investment Mgt. 214,830 0.9AMF TFA Försäkrings AB 188,500 0.8Latour 180,000 0.8Wasa Försäkring 114,300 0.5

The company had around 3,300 shareholders.

Shareholder structure as at 31 December 1997

Shareholder structureThe directed issue of shares to Partek Oyj Abp means that Partekis now Kalmar’s majority shareholder, with a 51 per cent stake inthe group. Other than this transaction, the group’s sharestructure has remained stable, with only a few small changes.Henderson Adm Ltd has the second largest stake of 11.7 percent, with the largest Swedish shareholder being Sparbankernasunit trusts with a 7.6 per cent stake.

Holders of 1 – 1,000 shares now have a combined stake of 3.2per cent of share capital, which is down from 7.3 per cent. Asidefrom Partek, foreign investors account for 23.4 per cent of sharecapital.

The table of major shareholders includes investors which arelisted in VPC AB’s registers either under their own name orthrough trustees. Foreign shareholders are registered only undertheir trustees’ names and are therefore not identifiable in thesame way as Swedish investors in shareholder statistics. As such,there may be some foreign institutional investors among themajor shareholders.

Major shareholdersThe register kept by the Swedish Securities Register (VPC)shows that the following companies, institutions and unit trustswere the company’s largest registered shareholders as at 30December 1997 and subsequently 31 January 1998 (takingaccount of known changes):

Holding Shares held % of shares

1 – 1,000 749,868 3.2

1,001 – 10,00060 3,374 2.6

10,001 – 50,000 1,008,237 4.3

50,001 – 100,000 1,040,097 4.4

100,001 – 500,000 5,509,866 23.4

500,001 – 1,000,000 1,261,363 5.4

1,000,001 – 13,334,675 56.7

Total 23,507,480 100.0

47

The merger and the key figuresThe pooling method of merger accounting was used for themerger with STS and, as such, the consolidated accounts havebeen prepared as though the merger took place on 1 January1997. The accounts for 1997 therefore reflect the performance ofthe new group over one whole year. Partek’s consolidated profitand loss account will include STS only, whose operating profitwas FIM 95 million. The pro forma 1996 figures tie in with thosewhich were previously reported in the information sent toKalmar’s shareholders prior to the Extraordinary GeneralMeeting of 24 October 1997, except that the interest effects ofthe redemption price of SEK 255 million have not been chargedagainst 1996 profits. The payment to shareholders was made atthe end of 1997 and has therefore had a minimal effect on 1997figures. The information sent to shareholders assumed that STS’accounts would be translated on the basis of SEK 1.50 to FIM1.0. Ultimately the year-end accounts used the actual averageexchange rates for 1997 and 1996.

Shareholdings by countryCountry % holding

Finland 51.0Sweden 25.6USA 9.9UK 7.4Luxembourg 1.4Canada 0.9Netherlands 0.7Denmark 0.5Switzerland 0.3France 0.2Others 2.1

2) Before items affecting comparability

1997 19972) 1996 1996

Profit after full tax (SEK m) 2 145 188 135

Eps after full tax (SEK) 0.10 6.20 8.00 10.60

Share price, 31 Dec (SEK) 128 113

Dividends (SEK) 2.001) – 4.00

Net sales 4,599 4,566 2,499

Equity (SEK m) 943 880 637

Net debt (SEK m) 851 789 323

Price/equity ratio (%) 319 227

Dividend yield (%) 1.6 3.5

1) As proposed by the Board

pro formaKey figures

48

Board of Directors

Gösta Bystedt, ChairmanResident in Lidingö. Born in 1929.Vice Chairman of AB Electrolux andAxel Johnson AB. Member of theboards of SKF, Atlas Copco AB andthe Federation of Swedish Industries,among others.Shares in Kalmar Industries: 16,600.

Christoffer Taxell,Deputy ChairmanResident in Turku. Born in 1948.President and CEO of Partek.Shares in Kalmar Industries: 0.

Christer GranskogResident in Helsinki. Born in 1947.Executive Vice President of Partek.Shares in Kalmar Industries: 0.

Ulf MagnussonResident in Stockholm. Born in 1934.Chief attorney at AB Electrolux.Member of the board of theStockholm Chamber of CommerceArbitration Institute.Shares in Kalmar Industries: 1,000.

Thomas OldérResident in Vellinge. Born in 1947.President and CEO of Svedala IndustriAB.Shares in Kalmar Industries: 1,600.

Bengt KvarnbäckResident in Stockholm. Born in 1945.Executive Vice President of AtlasCopco AB.Shares in Kalmar Industries: 0.

Jonas Svantesson,President and CEOResident in Helsingborg. Born in 1951.President and CEO of KalmarIndustries AB.Shares in Kalmar Industries: 2,000.

Dag WersénResident in Stockholm. Born in 1939.Attorney.Shares in Kalmar Industries: 0.

Union representatives

Permanent

Ann-Katrin AnderssonResident in Ljungby. Born in 1948.Union representative (SwedishFederation of Salaried Employees inIndustry and Services).Shares in Kalmar Industries: 200.

Henrik NymanssonResident in Hyltebruk. Born in 1952.Union representative (Swedish TradeUnion Federation).Shares in Kalmar Industries: 0.

Alternates

Jan AnderssonResident in Simlångsdalen. Born in1946.Union representative (SwedishFederation of Salaried Employees inIndustry and Services).Shares in Kalmar Industries: 100.

Agne FollinResident in Ryssby. Born in 1962.Union representative (Swedish TradeUnion Federation).Shares in Kalmar Industries: 0.

Gösta Bystedt ChristofferTaxell

ChristerGranskog

Thomas Oldér

Ann-KatrinAndersson

HenrikNymansson

Agne Follin Jan Andersson

JonasSvantesson

Ulf Magnusson Dag Wersén

BengtKvarnbäck

49

Jonas SvantessonBorn in 1951.President and CEO.Shares in Kalmar Industries: 2,000.

Raimo YlivakeriBorn in 1945.Executive Vice President.Shares in Kalmar Industries: 0.

Anne-Charlotte EggwertzBorn in 1951.Finance Director.Shares in Kalmar Industries: 0.

Olli IsotaloBorn in 1959.Vice president, Technology andProduction Development.Shares in Kalmar Industries: 0.

Sven-Eric PeterssonBorn in 1947.Vice president, CorporateCommunications.Shares in Kalmar Industries: 0.

Larsjöran RosénBorn in 1947.Vice president, Human Resources.Shares in Kalmar Industries: 300.

Matti SommarbergBorn in 1961.Vice president, BusinessDevelopment.Shares in Kalmar Industries: 0.

Ari AntilaBorn in 1954.Vice President, Customer Support.Shares in Kalmar Industries: 0.

Juhani LukumaaBorn in 1947.Vice President, Terminal Systems.Shares in Kalmar Industries: 0.

K G SalomonssonBorn in 1950.Vice President, Medium & Heavy.Shares in Kalmar Industries: 0.

Johnny StåhlBorn in 1949.Vice President, Light & Sideloaders.Shares in Kalmar Industries: 0.

Jorma TirkkonenBorn in 1951.Vice President, Terminal Tractors.Shares in Kalmar Industries: 0.

Auditors

Alf SvenssonAuthorised Public Accountant atKPMG Bohlins.Auditor for Kalmar since 1994.

Thomas ThielAuthorised Public Accountant atKPMG Bohlins.Auditor for Kalmar since 1992.

Deputy Auditors

Dan KjellqvistAuthorised Public Accountant atKPMG Bohlins.Deputy auditor for Kalmar since1994.

Göran AnderssonAuthorised Public Accountant atKPMG Bohlins.Deputy auditor for Kalmar since1994.

Group Management and Auditors

JonasSvantesson

LarsjöranRosén

Ari Antila

Juhani Lukumaa

Johnny Ståhl

MattiSommarberg

Jorma Tirkkonen K G Salomonsson

Anne-CharlotteEggwertz

Olli Isotalo

Raimo Ylivakeri

Sven-EricPetersson

50

Addresses

UK

Kalmar Limited.Siskin DriveGB-Coventry, CV3 4FJTel +44 1203 834 500Fax +44 1203 834 523

Sisu Terminal Systems (UK)Limited1030 Centre Park, Slutchers Lane,GB-Warrington WA1 1QRTel: +44 1925 651 200Fax: +44 1925 635 138Sisu Terminal Systems (UK) Limitedwill merge with Kalmar Limited in1998.

ESTONIA

AS FinmecVana-Narva mnt. 1CMaardu EE 0030EstoniaTel: +372 2 235 127Fax: +372 2 235 181

FRANCE

Kalmar France S.A.Z.I. Rue Luigi-GalvaniF-92167 Antony CédexTel +33 1 4674 1674Fax +33 1 4096 8141

SWEDEN

Kalmar Industries ABSE-341 81 LjungbyTel +46 372 260 00Fax +46 372 263 94E-mail info@kalmarind.se

Kalmar Last Maskin Verkstad ABSE-341 81 LjungbyTel +46 372 260 00Fax +46 372 263 90

Kalmar Hernöverken ABP.O. Box 1040SE-871 29 HärnösandTel +46 611 258 00Fax +46 611 227 75

Kalmar LMV Sverige ABP.O. Box 177SE-191 23 SollentunaTel +46 8 623 98 50Fax +46 8 92 74 35

Sisu Terminal Systems (Sverige) ABTheres Svenssons gata 4,Lundbystrand,SE-417 55 GothenburgTel: +46 31 779 01 00Fax: +46 31 779 01 09Sisu Terminal Systems (Sverige) ABwill merge with Kalmar LMV SverigeAB in 1998.

© DiskArt™ 1988

© DiskArt™ 1988 AUSTRALIA

Sisu Terminal Systems (SouthPacific) Pty LtdLevel 1/58 Clarke StreetSouthbankVictoria 3006AustraliaTel: +61 3 9645 7980Fax: +61 3 9645 7960

BRAZIL

Sisu Terminal Systems do BrasilLtda.Rua Capitao Francisco de Almeida,695CEP 08740-300São PauloBrasilienTel: +55 11 470 2236Fax: +55 11 470 2234

FINLAND

Sisu Terminal Systems OyP.O. Box 387FIN-33101 TampereTel: +358 3 265 8111Fax: +358 3 265 8616

Velsa OyP.O. Box 23FIN-61301-KurikkaFinlandTel: +358 6 451 0111Fax: +358 6 214 5350

51

HONG KONG

Kalmar Pacific LimitedRm 1501-04, Prosperity Center77-81 Container Port RoadHong Kong-Kwai Chung, N.T.Tel +852 2944 8383Fax +852 2944 9966

JAPAN

Kalmar Japan Ltd.3-23-12, Daini Yamauchi Bldg.Nishi-Shimbashi Minato-kuTokyo, 105-0003, JapanE-mail kalmarj@blue.ocn.ne.jpTel +81 3 547 23 791Fax +81 3 547 23 794

NETHERLANDS

Peinemann Kalmar C.V.P.O. Box 635NL-3190 An HoogvlietTel +31 10 295 6464Fax +31 10 295 6469

NORWAY

Kalmar Norge A/SP.O. Box 114, AlnabruNO-0614 OsloTel +47 2232 1440Fax +47 2232 1505

SINGAPORE

Kalmar South East Asia Pte. Ltd.No. 2 Gul Street 4, JurongSingapore 629234Tel +65 865 3880Fax +65 865 3881

SPAIN

Kalmar España, S.A.C/Alcarria, 5Poligono Industrial de CosladaE-28820 Madrid CosladaTel +34 1 671 2950Fax +34 1 671 5697

GERMANY

Kalmar FlurförderzeugeVertriebs GmbHReichsbahnstraße 72DE-22525 HamburgTel +49 40 547 305-0Fax +49 40 547 305 19

USA

Kalmar Inc.21 Engelhard DriveCranbury, NJ 08512-9527USATel +1 609 860 0150Fax +1 609 860 0224

Kalmar ACP.O: Box 917Dublin OH 43017-6917USATel +1 614 798 3600Fax +1 614 798 2166

Kalmar Inc.Miami Office777 Brickell AvenueMiami, FL 33131-2803USATel +1 305-379-6200Fax +1 305-379-8822

Kalmar Inc.West Coast Office504 53rd Avenue East #ATacoma, WA 98424-2701USATel +1 253 922 3474Fax +1 253 922 3530

Sisu North America Inc.415 East Dundee StreetOttawa, Kansas 66067USATel +1 913 242 2200Fax +1 913 242 6117

MagnumDivision of Sisu North America Inc.1301 Cherokee TraceWhite Oak, Texas 75693USATel +1 903 759 5490Fax +1 903 297 8166

Ottawa TruckDivision of Sisu North America Inc.415 East Dundee StreetOttawa, Kansas 66067USATel +1 913 242 2200Fax +1 913 242 6117

Kalmar ACP.O. Box 917Dublin OH 43017-6917USATel +1 614 798 3600Fax +1 614 798 2166

AUSTRIA

Kalmar HebeFahrzeugeHandelgesmbHErnst-Diez-Straße 6,A-9029 KlagenfurtTel +43 463 717 88Fax +43 463 717 22

Produced by: AdEra Syd AB, Ljungby

Printed by: Markaryds Grafiska

MILJÖMÄRKT

341 115TRYC K SA K

52

Annual General Meeting

Notice is hereby given that the company’s AnnualGeneral Meeting will be held at 1.15 pm on Friday 17April 1998 at Kalmar’s recreation hall, Långgatan 14,Ljungby, Sweden.

Attendance

To attend and vote at the Annual General Meeting,shareholders must:

be listed in the share register kept by the SwedishSecurities Register (VPC) by Tuesday 7 April 1998,

and notify the company of their intention toattend by midday on Tuesday 14 April 1998.

VPC registrationThe company’s register of shareholders is kept by VPC.Shares in Kalmar are registered either in the name of theshareholder or of the shareholder’s trustee. Only sharesregistered in the name of the shareholder are listed in theshare register in the name of the shareholder. Thoseshareholders with shares registered in the names oftrustees are entitled to attend the AGM provided that theirshares are re-registered in their own name by Tuesday 7April 1998. Trustees will normally provide assistance withre-registration for a fee.

Notification of intention to attend

Shareholders may notify the company of their intention toattend the meeting as follows:

– By phone: +46 372 261 15

– By fax: +46 372 263 94

– By post: Secretariat, Kalmar Industries AB,341 81 Ljungby, Sweden

and should state their:

– Name

– Personal identification number/companyregistration number

– Address and telephone number.

Annual General Meeting and Financial Information

Dividends

It is proposed that only those shareholders listed in theregister of shareholders on Wednesday 22 April 1998receive dividends. If the Annual General Meeting adoptsthe Board’s proposal, dividends will be paid through VPCon Wednesday 29 April 1998.

Change of address

With the exception of physical persons whose registereddomicile is Sweden, all shareholders must notify VPC ofany change of address. All shareholders who havechanged their name or account number must notify theappropriate administrative body thereof without delay.All shareholders with shares registered in the name of atrustee should notify their trustee of any change of name,address or account number without delay. A special formfor such notification is available from Swedish banks.

Financial informationThis annual report is automatically distributed toshareholders and to others upon request. A preliminaryreport on the first quarter of 1998 will be presented at theAnnual General Meeting. Interim reports will be publis-hed as follows in 1998:

– 28 April Interim report for the first quarter– 21 August Interim report for the second quarter– 30 October Interim report for third quarter

The annual report and interim reports are published inboth Swedish and English and are available from:

Information Dept, Kalmar Industries AB, 341 81Ljungby, Sweden Tel: +46 372 261 15, Fax: +46 372 263 94E-mail: info@kalmarind.se

In 1998 Kalmar Industries’ annual and interim reportswill also be available on the company’s website:www.kalmarind.se.

Kalmar Industries AB (publ), SE-341 81 LjungbyTel +46 372-260 00, Fax +46 372-263 90

@Hugin 1998. All rights reserved.

97Table of Contents

Overview

Summary 1997

Key figures

Report of the Board of Directors

Income Statement

Balance Sheet

Cash Flow Analysis

Notes

Shareholders Policy

Kalmar Industries

1997Kalmar Industries

Å R S R E D O V I S N I N G

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