INTERIM REPORT Q3 2013

INTERIM REPORT Q3 2013 23 OCTOBER 2013

Q3 Employee Address

OLA ROLLÉN President and Chief Executive Officer

1. NET SALES AND EARNINGS

2. MARKET DEVELOPMENT

3. SEGMENT INFORMATION

4. M&A, ORDERS AND PRODUCT

RELEASES

5. SUMMARY

Net sales and earnings

Overview Q3 2013

Organic growth of 5 per cent

• Solid growth in Americas supported by construction

sector in U.S. and strong demand in South America;

EMEA improved largely due to increased demand from

infrastructure-related activities; Asia reported a mixed

quarter

• Geosystems – accelerated organic growth supported by

an improving European construction market and

increased uptake of new products

• Metrology – aerospace segment continues to grow but

demand from customers in automotive sector weakened

in both EMEA and NAFTA

• PP&M – continues to expand despite tough comparison

numbers from Q3 2012; organic growth of 7 per cent

• SG&I – continues to suffer from downturn in defence

segment and reports negative growth

Strong profitability

• Gross margin of 57 per cent & EBIT margin of

22 per cent in MT

• Strong cash flow & rapid deleveraging

4 HEXAGON INTERIM REPORT 1 JANUARY – 30 SEPTEMBER 2013

0%

5%

10%

15%

20%

25%

0

100

200

300

400

500

600

700

Seasonality in profit (MT)

• Seasonal pattern continues (Q1 & Q3 weak, Q2 & Q4 strong)

• Hexagon recorded best Q3 EBIT margin ever

5

EBIT 1

Net Sales

EBIT Margin %

MEUR

HEXAGON INTERIM REPORT 1 JANUARY – 30 SEPTEMBER 2013

Key figures Q3 2013

MEUR Q3 2013 Q3 2012 Change %

Net sales 576.6 578.1 51)

Operating earnings (EBIT1) 118.4 115.4 3

Operating margin, % 20.5 20.0 0.5

Earnings before taxes, excl. non-recurring items 109.9 103.4 6

Non-recurring items 2) -14.9 - n.a.

Earnings before taxes 95.0 103.4 -8

Net earnings 76.4 83.7 -9

Net earnings, excl. non-recurring items 89.0 83.7 6

Earnings per share, EUR 0.21 0.24 -13

Earnings per share, excl. non-recurring items 0.25 0.24 4

6

1) Adjusted to fixed exchange rates and a comparable group structure (organic growth); organic growth for the core business MT was 5 per cent

2) The non-recurring items relate to Other Operations, a write-down of the Blom investment and a cost reduction programme in MT


Divestment of Other Operations & cost measures


Divestment of Other Operations and Blom:

• EBP divested in July

• Negotiations on-going about Swepart

• Transactions estimated to generate a capital loss (non-cash) of

8.8 MEUR

The majority of the restructuring (6.1 MEUR) relates to:

• Metrology – acceleration of cost programme announced in Q2

• SG&I – cutbacks in defence related business

However, cost efficiency savings were also implemented in Geosystems and

PP&M

Total annual (cash) savings of approximately 15 MEUR

• About 200 employees affected worldwide

• Additional savings in administration (reductions in external

consultant usage, travel and IT expenses, etc.)

• Full effect expected as of Q2 2014

Other

Operations

(6.8 MEUR) Restructuring

(6.1 MEUR)

Other

(2.0 MEUR)

Non-recurring items

Other

Operations

and Blom

(8.8 MEUR)

Restructuring

(6.1 MEUR)

Key figures first nine months of 2013

8

MEUR Q1-Q3

2013

Q1-Q3

2012

Change %

Net sales 1,798.0 1,751.0 51)

Operating earnings (EBIT1) 371.0 351.3 6

Operating margin, % 20.6 20.1 0.5

Earnings before taxes, excl. non-recurring items 344.4 311.8 10

Non-recurring items 2) -14.9 - n.a.

Earnings before taxes 329.5 311.8 6

Net earnings 266.3 252.1 6

Net earnings, excl. non-recurring items 278.9 252.1 11

Earnings per share, EUR 0.75 0.71 6

Earnings per share, excl. non-recurring items 0.78 0.71 10

1) Adjusted to fixed exchange rates and a comparable group structure (organic growth); organic growth for the core business MT was 5 per cent

2) The non-recurring items relate to Other Operations, a write-down of the Blom investment and a cost reduction programme in MT


Cash flow

MEUR Q3

2013

Q3

2012

Q1-Q3

2013

Q1-Q3

2012

FY

2012

Cash flow from operations before changes in

working capital excluding taxes and interest

146.8 142.9 461.3 428.4 596.9

Taxes paid -20.0 -15.6 -51.9 -41.6 -57.2

Interest received and paid, net -7.1 -11.3 -22.6 -37.6 -45.3

Cash flow from operations before changes in

working capital

119.7 116.0 386.8 349.2 494.4

Change in working capital 28.7 13.8 -31.6 -19.8 2.9

Cash flow from operations 148.4 129.8 355.2 329.4 497.3

Ordinary investing activities -54.1 -45.2 -149.2 -120.8 -171.8

Operating cash flow 94.3 84.6 206.0 208.6 325.5


Operating cash flow increased 11 per cent in Q3 2013

0%

5%

10%

15%

20%

25%

30%

35%

Q3Q2Q1

2013

Q4Q3Q2Q1

2012

Q4Q3Q2Q1

2011

Q4Q3Q2Q1

2010

Q4Q3Q2Q1

2009

Q4Q3Q2Q1

2008

Working capital to net sales (on a rolling basis) Linear (Working capital to net sales (on a rolling basis))

10

Working capital to sales (rolling)


Consolidation of

Intergraph

Full impact from

recurring revenue Q4

“squeeze”

Q1

“backlash” Trend line

Back to

trend line

Currency effects as compared to EUR, Q3 and 9M 2013


Currency Movement Income-cost Profit impact Sales impact

CHF Weakened Negative

USD Weakened Positive

CNY Weakened Positive

EBIT, Q3 2013 -6.3 MEUR

Sales, Q3 2013 -28.5 MEUR

EBIT, 9M 2013 -9.7 MEUR

Sales, 9M 2013 -45.0 MEUR

• In Q3 2013, significant movements in JPY & BRL had negative F/X effect on net sales and

profit

• Looking at current exchange rates we expect a negative F/X effect on sales in Q4 of

approximately -4 per cent

Market development

NORTH AMERICA

28% (29)

Sales mix Hexagon MT Q3 2013 (Q3 2012)

13

42 per cent of sales outside Western Europe and North America


WESTERN EUROPE

30% (29)

SOUTH AMERICA

5% (4)

ASIA EXCL. CHINA

13% (14)

CHINA

15% (16)

EMEA excl. WESTERN EUROPE

9% (8)

14

Contributors to growth (descending order)

Q3 2012 578.1

Western Europe

South America

East Asia

Middle East

North America

China

U.S. Defence/Sequestration

Australia

Q3 2013 576.6

Analysis of organic growth1) per geographic region (MT)


1) Adjusted to fixed exchange rates and a comparable group structure (organic growth)

0 to 8% Negative >8%

Q3 business trends yoy

1) Sales per customer segment as of 31 December 2012 and sales by region as of Q3 2013

2) Asia, excluding China

Share of

sales 1)

W EU

30%

MEA

9%

NA

28%

SA

5%

CN

15%

ASIA 2)

13%

Surveying 21%

Power & Energy 20%

Aerospace & Defence 11%

Construction 11%

Public Safety & Security 10%

Automotive 10%

Manufacturing 9%

Other 8%

0 to 8% Negative >8%

TOTAL

= Shift in trend since previous quarter


EMEA market trends, Q3

16

Q3 Share of Group sales 40%

Growth, % Group MT

Net sales 6 5

• Customer demand in EMEA improved,

particularly in the construction sector

• Increased activity levels in Western Europe,

in particular Germany, Italy, UK and the

Nordic region whilst demand in France

continues to be weak

• Automotive and manufacturing sectors

experienced a decrease in demand but still

recorded growth in the quarter

• Activity in the Middle East, Eastern Europe

and Russia improved


Americas market trends, Q3

17


Growth, % Group MT

Net sales 6 6

• Mid single digit organic growth in the U.S.

and Canada excluding defence

• Majority of growth came from the

infrastructure, power and energy segments

• Defence business contracted by -36 per

cent in the quarter

• Automotive sector recorded negative growth

but aerospace continues to grow

• South America reported another strong

quarter with double digit organic growth


Asia market trends, Q3

18


Growth, % Group MT

Net sales 4 4

• China recorded a mixed quarter where

automotive, aerospace, surveying, power and

energy segments saw increased demand;

however, the project-related (airborne

sensors and mining) businesses experienced

a weak quarter

• Rapidly expanding markets were: Malaysia,

Indonesia, Philippines, New Zealand, India

and Korea

• Growth was held back by Australia due to the

downturn in the mining sector


0

20

40

60

80

100

120

140

160

180

Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013

Share of sales Q3 2013

Index Q3 2008 = 100

Asia

28%

Americas

33%

EMEA

39%

Asia

Americas

EMEA

Total

19

Organic growth1) per geographic region (MT)



Segment information

Measurement Technologies (MT)

MEUR Q3

2013

Q3

2012

Change

%

Q1-Q3

2013

Q1-Q3

2012

Change

%

Net sales 566.1 565.2 51) 1,749.4 1,704.0 51)

Operating earnings (EBIT1) 122.3 120.0 2 382.5 361.7 6

Operating margin, % 21.6 21.2 0.4 21.9 21.2 0.7



-40

-30

-20

-10

0

10

20

30

40

50

60

Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3

2008 2009 2010 2011 2012 2013

Share of sales Q3 2013

Organic growth1) by application area (MT)


Metrology

31%

Technology

33%

Geosystems

36%

Total

22

%


0

10

20

30

40

50

60

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Q1-Q3

Q1-Q3 2013 57% (56)

Gross margin (MT) – annual data

GM %

Trend %


%

2015 Target

EBIT margin (MT) – quarterly data (12 month rolling)

EBIT 1, %


%

0

5

10

15

20

25

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

M&A, orders and product releases

Hexagon advances expansion into South America and mining industry

26

• Brazilian company with leading mine-management

software solutions for open-pit and underground mines

• Solutions complement Hexagon’s other offerings in

mining sector, specifically in 3D environments (cross-

sell opportunity)

• Opens doors to product integration opportunities to

better serve automation needs of additional segments

On 7 October, Hexagon signed an agreement to acquire Devex

Closure of the transaction is subject to customary

regulatory approvals; The company's turnover for 2012

amounted to approximately 35 million Brazilian Real


Hexagon extends market leadership in geospatial technologies

27

• Based in Sweden, serves international survey

companies and governmental organisations around the

world with hydrographic and topographic software and

systems to map land, coastal zones and seafloors

• Portfolio includes airborne bathymetric LiDAR

technology

• Enables Hexagon to expand into growing deep and

shallow water bathymetry and coastal topography

markets

On 8 October, Hexagon signed an agreement to acquire Airborne Hydrography AB


Listed in Oslo, a market leader in precise navigation

and positioning solutions for offshore industry

• Operate, maintain and control their own network of over

80 GNSS reference stations to ensure maximum

operational reliability

Synergies:

• Hexagon provides state-of-the-art, positioning technology

to Veripos, as well as future growth via our onshore

markets

• In turn, Hexagon can leverage Veripos’ world-class

infrastructure and strong position in the offshore market

immediately, rather than build such infrastructure in-

house

28

On 14 October, Hexagon made a public voluntary offer for Veripos


Shell standardising on Intergraph PP&M Software

• SmartPlant Cloud and SmartPlant suite of tools will be

used as the platform for consolidating engineering

information throughout the lifecycle – from EPCs,

vendors and other suppliers

• New approach of capital project data sharing will reduce

existing information barriers and raise efficiency and

data quality of project hand over

• Project expected to go into production end of

2013/early 2014

29

Shell taking industry lead in standardising on Intergraph PP&M’s suite of

tools for Plant Engineering, Design and Information Management of future

Capital Projects

“The value of Integrated Engineering Environment is the ability of all companies involved to

get high quality and accurate data at any time, in any place, as and when required.”

Rob Kretzers – EVP Shell Projects


Engineering owner/operator customer wins

Canadian Natural Resources, Ltd. (CNRL), O/O in

Calgary, AB, Canada

One of the largest independent crude oil and natural

gas producers in the world

• Chose Intergraph PDS, SmartPlant P&ID,

SmartPlant Instrumentation and SmartPlant

Foundation

Instituto Mexicano Del Petroleo, public research

organisation in Mexico City, Mexico that works closely

with O/Os

Center of research for the petroleum industry

• Extended partnership with purchase of

SmartPlant 3D, SmartPlant Fusion, and

SmartPlant Isometrics for upgrade of Pemex’s

Salamanca Refinery

HEXAGON INTERIM REPORT 1 JANUARY – 30 SEPTEMBER 2013 30

Toyo-Setal looked to SISGRAPH for help with increasing project efficiencies relating

to work in the pre-salt layer of the Santos Basin

Helping Toyo-Setal in pre-salt layer of the Santos Basin

• Several reasons motivated Toyo-Setal to replace

competitive software with SmartPlant for building an

FPSO including

• Tight schedule requirements

• High-quality expectations from Petrobras

• Trust in SISGRAPH services and support

31

“It’s extremely important for us to use intelligent tools with a high level of automation, and the

technology we were using wasn’t able to provide the efficiency we need. Having a partner like

SISGRAPH is crucial, as we can now rely on better and faster project delivery and support.”

Célia Manzoni, General Engineering Manager at Toyo-Setal Engenharia


Continued demand from China for Intergraph PP&M solutions

SINOPEC Engineering , EPC in Beijing, China

Leading engineering firm offering project

management services

• Renewed SmartPlant 3D, SmartPlant

Foundation, SmartPlant P&ID and SmartPlant

Instrumentation


Other deals in Q3, include:

• East China Engineer Science & Technology Co.

• Changsha Design and Research Institute of Ministry of Chemical Industry

• COOEC-Enpal Engineering Co.

• Jinan Petrochemical Design Institute

• China Petroleum Pipeline Engineering Corp.

Customer interest in recently launched MS50 strong and growing

Leica Nova MS50 MultiStation in high demand

• New category of instrument that combines laser

scanning, total station measurement, GNSS and

imaging in a single solution

• Over 400 instruments sold in the complete Leica Nova

family of solutions in first four months of availability

David Evans & Associates – firm in North America currently using

12 Leica Nova MS50 MultiStations and one of the first to invest in

the technology:

33

“With the Leica Nova MS50, we’re able to put laser scanning in our everyday workflow. Every

job, no matter how big or small, has the potential to include scanning components. The ability

to have that information right there in the field is powerful.”

Marcus Reedy, David Evans & Associates


Hexagon helping to map Southeast Asia

Leica GNSS Spider software used to manage

reference station networks for Indonesian

mapping agencies – Badan Informasi

Geospatial and Badan Pertanahan Nasional

• Provided Indonesia National Land Agency over

70 GNSS reference stations

• Shipped over 100 Leica Flexline total stations

to Department of Surveying and Mapping of

Malaysia


Chester County, PA coordinates multi-agency response

• First responders have access to

incidents, records and maps on laptops,

tablets and smartphones

• 44 police departments

• 57 fire departments

• 23 ambulance companies

• EdgeFrontier® software provides

seamless integration between CAD and

law enforcement records and public

safety agencies


Intergraph CAD software aids information-sharing, enabling single- and

multi-agency response

Continued focus and investments in mobile technologies

• Increased productivity in remote reporting, information

management, case investigation and crime analysis

36

City of Allen Police Dept, TX, USA selects inPURSUIT, Intergraph’s

field-based reporting and records management system

• Editing, validation and updating of enterprise GIS data in real time

from the field

Intergraph brings GIS to the field with Mobile Mapworks

• Downloadable app available from iTunes and Google Play

• Subscribing agencies receive an e-mail about the incident

and its location and access to an incident photo

Intergraph Mobile Alert – cloud-based service that enables public

reporting of incidents to authorities (e.g. streetlights, potholes)


Hexagon supports CET, São Paulo traffic engineering company

• CET will migrate to new I/CAD version

that supports more than 10,000 events

per day

• Will be integrated with a traffic light

maintenance system and resource and

material planning system

CET serves São Paulo transportation system – the largest in Brazil, one of

the most traffic-congested cities in the world


NovAtel contracts and orders

Novatel to deliver on a multi-million dollar contract

for Wide Area Augmentation System third-generation

reference receivers (WAAS G-III) by the U.S. Federal

Aviation Authority

• WAAS G-III is a critical component in modernizing

space-based augmentation systems to support new

GNSS frequencies and signals

First Customer Shipments of Real Time Kinematic

(RTK) Selective Availability Anti-Spoofing Module

(SAASM) Receiver

• Brings together positioning precision and anti-

spoofing protection for military applications


39

Foton Group, a Chinese company making trucks, buses and agricultural

machinery, is entering the passenger car market and has founded a new

production line in Beijing

Project includes:

• DEA Bravo HP Image automatic horizontal-arm systems (for sheet metal

inspection)

• DEA Toro horizontal arm CMM measuring machines (for dimensional inspection)

Foton Group places Hexagon Metrology order for new factory


Manufacturing growth opportunities in China

• Currently designing (and will eventually build) large

passenger aircraft with 150+ capacity, with the goal of

reducing China’s dependency on Boeing and Airbus

• To date, more than 20 Leica Laser Trackers have been

provided to COMAC


Comac, Commercial Aircraft Corporation of China

Government-owned aerospace manufacturer in Shanghai

Jabil Green Point factory

New Apple iPhone supplier in Wuxi, China

• An additional 10 Global CMM machines were provided to

JABIL Green Point this quarter to ensure the quality of Apple

mobile phone production

• Hexagon Metrology now has orders with two suppliers of

Apple products, Foxconn and Green Point

http://en.wikipedia.org/wiki/File:COMAC_Logo.jpg

Hexagon Metrology PC-DMIS Product Releases

41

Summary

Hexagon reports another strong quarter:

• 5 per cent organic growth in MT

• Gross margin of 57 per cent and 22 per cent

EBIT margin in MT

• Strong cash flow generation is rapidly strengthening

our balance sheet, opening up opportunities for

expansion going forward

Summary Q3 2013


Disclaimer

This presentation contains forward-looking statements. These forward-looking statements reflect the views of Hexagon's management as of the date of this presentation. The forward looking statements may involve risks and uncertainties, including technological advances in the measurement field, product demand and market acceptance, the effect of economic conditions, the impact of competitive products and pricing, foreign currency exchange rates and other risks. Please read our earnings reports and our most recent annual report for a better understanding of these risks and uncertainties. All of these forward-looking statements are based on estimates and assumptions made by Hexagon's management and are believed to be reasonable, but are inherently uncertain and difficult to predict. Actual results or experience could differ materially from the forward-looking statements. Hexagon disclaims any intention or obligation to update these forward-looking statements. It should also be noted that past performance is not a guide to future performance and that interim results are not necessarily indicative of the full year results.

THIS COMMUNICATION DOES NOT CONTAIN AN OFFER OF SECURITIES IN THE UNITED STATES OR ANY OTHER JURISDICTION; SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR EXEMPTION FROM REGISTRATION, AND ANY PUBLIC OFFERING OF SECURITIES TO BE MADE IN THE UNITED STATES OR ANY OTHER JURISDICTION WILL BE MADE BY MEANS OF FORMALLY DRAWN UP AND APPROVED PROSPECTUS.


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INTERIM REPORT Q3 2013