QMT News: July 2011
New financial plan has scenarios for growth - Hexagon CEO

Ola Rollén, CEO and president of Hexagon AB.  gave a bullish forecast  of company’s prospects for the next four years at a Capital Market day, held in Orlando, Florida on 6th June.   He outlined two possible scenarios for growth. with a  financial plan  stretching to 2015. It includes a sales target of 3.5 billion EUR and an EBIT margin target of 25 per cent.

Ola Rollén, said that  the sales target, in the first case scenario, is built upon the assumption that the measurement technologies market grows at approximately 8 per cent per year over the period up until 2015. He noted that Hexagon now has more than 30 per cent of its sales in emerging markets and about 40 per cent of its sales stems from growth technologies and claimed that Hexagon would, therefore, grow faster than its competitors. Such growth will be reached primarily by organic growth, but it also included  some acquisitions.

But in these times  of global economic uncertainty, it’s prudent to outline a less bullish alternative scenario, which is what he did. In this more negative case, Hexagon made the assumption of a recession during one year where volumes for the Group would drop by approximately 20 per cent. In this scenario, Ola Rollén said that Hexagon would make one, or more strategic acquisitions, to take advantage of the lower price expectations from potential sellers, commenting that Hexagon's experience is that prices could drop as much as 40 per cent in a recession. The view was that these acquisitions would compensate for the shortfall in revenue and Hexagon would still reach the targeted sales level of 3.5 billion EUR.

The targeted EBIT margin is 25 per cent also in this scenario.
However, Ola Rollén, qualified these projections by saying that the two scenarios were not the only possible outcomes. Different combinations of the two are conceivable, depending on the macro environment,.  Ola Rollén commented, "The outlook for our markets looks promising for the remainder of 2011 with a continued recovery in mature markets and structural growth in the emerging markets. For 2012 and beyond we will be more dependent on growth in emerging markets, as well as, our own ability to create new business opportunities since one cannot trust the mature markets to grow at similar rates as in the last 18 months. Our base case scenario is continuous growth over the next four years. Hexagon has, however, learned its lesson from the down-turn in 2009. We will therefore reduce leverage and prepare ourselves to be able to capitalise on any weakening in the marketplace by making strategic acquisitions at favourable price levels"
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