Franklin Electric Co Inc, USA

Pump Industry Analyst

February 2007

Cardo AB, Sweden

Franklin Electric Co Inc, USA

COMPANY WATCH

Key Figures (SKr million) Three months ended 31.12

Key Figures (US$ million) Three months ended 31.12

2006

2005

Net Sales Of Which: Wasterwater Technology Pulp & Paper

2551

2404

703 217

692 231

Operating Earnings Of Which: Wasterwater Technology Pulp & Paper

270

53

93 25

86 45

Net Earnings Inflow of Orders Of Which: Wasterwater Technology Pulp & Paper

187

34

2306

2109

649 189

597 186

Year ended 31.12 2006

2005

Net Sales Of Which: Wasterwater Technology Pulp & Paper

8556

7880

2466 686

2317 658

Operating Earnings Of Which: Wasterwater Technology Pulp & Paper

598

239

253 54

225 59

Net Earnings

401

147

8840

7990

2567 720

2362 679

Inflow of Orders Of Which: Wasterwater Technology Pulp & Paper

COMMENT For Cardo’s Wastewater Technology Solutions division, with its corporate ABS brand, full year inflow or orders were up 9% to SKr2567 million. Eastern Europe, Latin America and Asia showed the highest growth rates, which is in line with Cardo’s strategy of growing outside the well established European

6

markets. Cardo says that the operation in Brazil showed a very good volume trend, and positive growth was generated in Asia during the year. Cardo’s Pulp & Paper Solutions division, with its Scanpump and Lorentzen & Wettre operations, saw order inflow increase by 5% on 2005 levels. ■

Net Sales

2006

2005

147.9

105.7

Cost of Sales

97.9

66.5

Gross Profit

50.0

39.2

Selling and Admin Expenses

27.7

19.1

Operating Income

22.3

20.0

Net Income

14.1

13.4

Year ended 31.12 2006

2005

Net Sales

557.9

403.4

Cost of Sales

366.4

260.6

Gross Profit

191.6

142.8

Selling and Admin Expenses

102.5

70.8

Operating Income

89.1

70.1

Net Income

57.0

46.0

COMMENT Franklin Electric’s sales for fiscal year 2006 were a record US$557.9 million from continuing operations, an increase of US$154.5 million or 38% compared to 2005 sales of US$403.4 million. Incremental sales in 2006 related to acquisitions were about US$86 million or 21% of prior year sales. The majority of the sales growth from acquisitions resulted from the purchase of the Little Giant Pump Co which took place in April 2006. R Scott Trumbull, chairman and chief executive officer, said that in the North American Water Systems sales region, they have established the broadest network of distributor relationships in their industry, pump sales are growing rapidly and gaining market share and that Franklin Electric is also introducing a new generation

of submersible pumps and jet pumps. However Franklin Electric also highlighted a number of areas of concern as it enters 2007. The company believes that the integrated pump OEM customers have stockpiled Franklin Electric’s 4-inch submersible motors in response to last year's sales policy announcement that they it will principally sell directly to distributors in 2007 and beyond. These inventory stockpiles could represent up to a two-month supply of 4inch submersible motors in North America and could be sold off during the first half of 2007. Franklin Electric cautions that this submersible motor de-stocking combined with the competitive reaction to its pump market share gains, may result in unusual market place volatility during the first part of 2007. ■