powering new possibilities

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powering new possibilities

Annual Repor t 2007

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C O N T E N T S

Company presentation 1 Year in shor t

2 Message from the CEO 4 Powder Metallurgy industry 6 Automotive industry

8 Business area Components 11 Business area Consumables 14 Powering innovation from powder 16 Powering growth from powder

18 Powering cost savings from powder

20 Powering time-to-market efficiencies from powder 22 Powering security-of-supply from powder

24 Powering environmental improvements from powder 28 Human resources

29 Risk management 30 Operational excellence 34 Höganäs share

36 Corporate Governance Repor t

Financial information 42 Directors’ report 46 Appropriation of profits

47 Accounts, comments and notes 90 Audit report

91 Five-year overview, quarterly data and definitions

92 Board of Directors

94 Corporate management 96 Addresses

97 Annual General Meeting

This annual report was produced in co-operation with ID kommunikation ab.

Photography: Claes Westlin, Klas Andersson, Pro Photo, Lasse Strandberg and David Thibel.

Illustration: Ebbe Bredberg Printing: Holmbergs, Malmö.

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Year in short

Vision

To make metal powder solutions the first choice Mission

Höganäs offers metal powder solutions that create new business and profitable growth for its partners and customers Business idea

Höganäs is the world’s leading supplier of metal powder technology. Metal powders from Höganäs facilitate designing- in high-value properties into components and consumables whilst ensuring lowest total manufacturing costs. Höganäs’

aim is to support optimised manufacturing of metal-powder based components and consumables. This powers products and systems being delivered to market in a rapid, reliable and cost-effective manner.

Financial targets

• Long term operating margin of 15 per cent

• Return on capital employed of 20 per cent

• Annual growth of 6 to 8 per cent over a business cycle

2007 2006

Net sales, MSEK 5 838 5 123

Operating margin, % 10.4 11.8

Income before tax, MSEK 562 525

Net income, MSEK 431 402

Equity/assets ratio, % 53.3 51.5

Return on capital employed, % 15.9 15.5

Average number of employees 1 563 1 579

• Good growth in both business areas, Components and Consumables, in all regions

except the US and Japan, where the domestic markets were weak.

• In Japan as well as China, sales were up to high-end segments but were down to low-end segments.

• Unprecedented volatility in metal prices, particularly in Q2-Q3, leading to a very strong first half of the year in terms of results and a weaker second half-year.

• US Dollar and Japanese Yen currency rate depreciation put pressure on Höganäs’ profit.

• The second half of the year was characterised by price increase negotiations.

• The Board of Directors is proposing a cash dividend of SEK 6.25 per share (6.25), plus an

additional payment to shareholders of SEK 15 per share through a redemption procedure, implying a total pay-out to shareholders of MSEK 740.

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Alrik Danielson, Höganäs CEO and President.

Financial results

Net Sales amounted to 5 838 MSEK and operating profit reached 607 MSEK, one per cent higher than in 2007.

Cash flow from operations reached 482 MSEK during the year. This result was achieved in a year of extreme turbulence in metal prices and currency rates. Not only were all of Höganäs’ relevant metals very volatile, the weakening of the US Dollar and the Japanese Yen against the Swedish Kronor had a significant and negative impact on the Group’s result. Changes in demand patterns were also significant, with weaker development in North America and Japan balanced against good growth in South America, Europe and the rest of Asia. The teams at Höganäs managed to overcome many of these difficulties and delivered a good result during 2007.

Market development

With a very strong start and finish of the year, the demand for Höganäs products improved and sales volumes increased with 5 per cent compared to 2006. During the year Höganäs strength- ened its leadership in the market place by increasing its focus on direct customers as well as helping them support their customers. Throughout Europe, demand for Höganäs metal powders was very strong throughout the year. In North America, Höganäs increased volumes despite of a contracting marketplace. The market developed favourably in South America, where a new atomising plant for Höganäs iron powders is being built to meet market demand.

In Asia the volume development was positive, especially in India and China. As the Chinese market develops in sophis- tication, market opportunities for Höganäs increase. Höganäs volumes were positive in Korea but volumes were slightly below 2006 in Japan. As for the automotive industry, Höganäs main- tained its position and is the leading powder supplier in the key regions of Asia and Europe.

Working the value chain

In 2007 we intensified our efforts to create market opportunities for metal powders. The focus for all of our teams is on enabling customers and their customers to benefit from the advantages of metal powders and increasing its usage.

The over-riding aim is to realise the business advantages gained by ‘Design it with powder’ from the start. Höganäs has initiated and supported many innovative new projects (see pages 14-27). We know that by working more closely together throughout the value chain we can create more profitable business.

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The over-riding aim is to realise the business advantages gained by

‘Design it with powder’

from the start.

Progress, innovation

and turbulence

M E S S A G E f R O M T H E C E O

Material supplier

Höganäs

Customer System supplier

OEM

Final consumer

Create value

Capture value Concept

Vision: To make metal powder solutions the first choice System

Mission: Höganäs offers metal powder solutions that create new business and profitable growth for its partners and customers

Product

Business: Metal powders, mixes & services

Höganäs business model

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Service and product developments

2007 was also the year in which Höganäs introduced Vendor Managed Inventory (VMI) services to improve customer service levels and reduce stock levels. By year’s end, the first major customers had implemented the system (see page 23) and more are scheduled to join in 2008. The extremely high metal prices experienced during the year has led Höganäs to develop more cost effective powders than those with high contents of alloying metals, such as nickel. Several new high-performance, low-cost powders are now ready for launch.

Five regions supported by two global processes and three corporate staff functions

A lot of focus was given to boosting Höganäs’ operational excellence during 2007. Manufacturing process improvements as well as other operational excellence efforts provided a positive and considerable effect to Höganäs operational costs and year- end result. The main improvements were made within the areas of productivity and reduced energy consumption (see pages 30–33). As important, the Höganäs Group is now organised in five regions with full profit and loss accountability

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supported by two global processes and three corporate staff functions (see page 28). This new Group structure will increase Höganäs’ local responsiveness, decrease its overall cost of doing business as well as improve its focus on realising new market, product and process possibilities.

Outlook 2008

The financial turbulence that began in autumn 2007 and has continued in 2008 renders forecasts for the immediate future highly uncertain. One likely scenario is that weaker market progress in North America will persist in 2008.

The trend towards smaller and more fuel-efficient cars in North America will continue to restrain the growth of press powder. Positive progress of the European and South American powder markets will slow somewhat. Growth in Asia will continue. Metal prices and exchange rates are expected to remain volatile in 2008, which may have a short-term effect on profit performance.

Höganäs, 31 January 2008 Alrik Danielson

President and CEO

The Höganäs Group is organised in five regions. Höganäs entities are indicated.

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Powder Metallurgy industry

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The global Powder Metallurgy (PM) industry represents some 70% of Höganäs’ sales. Höganäs supplies high-value metal powders that are formed into final or near-net shaped components in the processes of component manufacturers. They then supply components via system or assembly manufacturers, or directly to Original Equipment Manufacturers (OEMs).

In addition to the PM industry, Höganäs metal powders are used in the welding, brazing, surface coating, chemical and metallurgical processing industries primarily by:

• Producers of welding, filter and friction consumables

• Users of brazing, cutting and coating technologies

• Producers of food and feed enrichment

These segments are monitored by the Consumables business area, which contributes about 30% of Höganäs’ sales.

>5 billion USD worth of components per year PM technology has grown faster than all other metal forming technologies for component manufacturing since its intro- duction more than fifty years ago. In 2007, the global PM industry delivered close to one million tons at an estimated annual value of over five billion USD. However, continued increasing metal prices and intensive competition have negatively impacted suppliers active in the PM industry during 2007.

This is why Höganäs actively seeks to work in close customer partnerships to help its customers strengthen their offerings.

Impact of volatile metal prices

During 2007, there was record high volatility for metals in general, especially nickel. Nickel, molybdenum and copper are alloying elements that are widely used in the PM industry.

These metals add excellent property values and are easy to process. During the last few years, the heavy price increases

on these metals have had a negative impact on the competitiveness of high performance press powders compared to other technologies. This has accelerated the ongoing transformation into new alloying systems, which are more in line with the traditional steel industry. These alloying systems are based on lower cost elements such as chrome, manganese and silicon. Typically, these require more sophisticated methods to process in powder form for competitive production.

Well positioned to support customers

Höganäs introduced a product line based on low cost materials already in the 1990s. The activity level to increase the usage of these materials in commercial production is now very high and this will in turn lead to an increased competitiveness for these powder technologies over the coming years. Höganäs’ experience with these materials means it is well positioned to work in close collaboration with customers to help them effectively manage the process transformation. This is one way Höganäs adds value and helps differentiate its customers’ offerings.

Increasing production volumes to existing customers Production volume growth occurs primarily when metal powder-based components penetrate more and new application areas in the products, assemblies and systems of existing OEM customers. The automotive industry provides an example of these growth dynamics. PM components have been gaining increased market shares in more vital automotive application areas, such as valve train mechanisms, transmission parts, fuel injection systems, turbo chargers and steering assemblies. Together with customers and OEMs, Höganäs works actively to identify potential application areas for new PM components and consumables as well as to optimise their manufacture.

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Innovative powder design

The performance and value of PM components often relates directly to the metal powder from which they are made. As such, growth of the PM industry is heavily reliant upon the development of new and improved metal powders.

Metal powder technology development efforts made at Höganäs are channeled towards solutions offering higher performance and strength. This is achieved by increasing density through powder manipulation and additives as well as by adopting cost effective alloying systems.

New segments and applications

A broad number of industry segments already specify powder based metal components. However, across most segments, PM has tremendous opportunities to increase its market share against competing technologies. In some instances, powder technology adds specific characteristics to the products that cannot be created in a cost effective manner by other production routes. One example is components with three-dimensional electromagnetic properties produced with Höganäs Somaloy^® Technology. For many other applications, metal powder is a substitution technology driven by opportunities to produce high-quality components at lower total costs.

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Automotive industry

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The global automotive industry accounts for some 60% of Höganäs’ total annual sales. So understanding, forecasting and adapting to the needs of companies active in this industry is critical to adding value in the supply chain.

Höganäs focuses its work on realising improvements in the areas of power train, body and chassis.

Restructuring of the value chain

The automotive industry is a consumer-oriented business operating in a highly competitive environment. It is expected to produce exciting new designs, reduce costs and meet increasingly strict environmental and safety standards.

Consequently, the industry views its relationship with industries that can offer technical excellence as a critical success factor. It expects its suppliers to be innovative in addressing issues such as weight reduction, cost reduction and structural strength. Weight is important because of its major impact on fuel efficiency and, as a consequence, the environmental impact of the vehicle. With no changes to the drive train, a ten per cent weight reduction results in a 3–5% fuel savings.

Financial pressures have led to rationalisations, closures and exits of suppliers during the last years. The common strategy of automotive OEMs has been to delegate greater responsibilities to their suppliers and there are many examples of assembly and component manufacturers offering greater levels of support in the supply chain to secure product sales. Suppliers are increasingly focused on selected product areas in order to minimise their indirect costs as well as focus their business and development efforts. However, some European suppliers have had success in seeking technological competence to compensate for high cost, making respectable margins.

Global sourcing

Global sourcing is sought in the automotive industry and countries such as India and China are offering opportunities for competitive production. However, local sourcing is often more important in practice, mainly due both to logistical and strategic reasons. Companies must balance their cost considerations with a desire for consumers to see them as domestic producers.

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Components from powder are used in the engine, transmission, exhaust system, body and chassis as well as various mechanisms.

Environmental considerations

All forms of road transport result in about 12% of all man-made emissions of greenhouse gases. Environmental regulations, especially in California and the European Union, constitute a strong challenge to traditional automotive technologies. The development of hybrid vehicles and those powered by fuel cells is on-going but technology and infrastructure considerations are likely to constrain mass

production until 2020. As a result, today’s focus is mainly on modifying existing petrol and diesel engines to allow for renewable fuels, such as ethanol and bio-diesel. Höganäs is very active in these developments, two examples being new heat resistant material solutions necessary in the valve chain systems as well as electromechanical material solutions for electrical systems intended to optimise fuel economy.

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The strength of components made from powder can easily be improved by alloying elements. Today, powder-based components frequently meet the mechanical properties of those from more time-consuming and expensive steel manufacturing processes. As the PM industry increases its usage of more cost effective alloying elements, like chrome, it becomes even more competitive.

About Components

Höganäs leads in developing and introducing new cost effective powder grades to market. The Components business area accounts for some 70% of Group sales. Nearly 75% of this comes from sales to the automotive industry. The main customers are component manufacturers supplying either directly to OEMs or via system or assembly manufacturers.

Examples of recent customer activities from the Compo- nents business area can be found on pages 15–23.

Markets

Höganäs is present with production and sales offices in all key regions of the world where components are produced. From a global perspective, North America is still the single largest market for Components. However, more intense global competition, the flattening of the global supply base and the emergence of Asia as a powerful competitor are acting as forces of global change.

In 2007, volumes for Höganäs were positive in the Americas. Whilst domestic car sales and production declined year on year in North America, South America delivered strong growth. In Europe, the market for components delivered another solid performance in 2007 and Höganäs had another successful year with good growth. As has been the case for several years now, 2007 provided continued positive progress and healthy growth for Höganäs and the markets in Asia during 2007, especially Malaysia. The same is true for China and India, which remain high growth potential markets.

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High power Components

from powder

B U S I N E S S A R E A C O M P O N E N T S

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Producer Head office Main markets Product type

Höganäs AB Sweden EU, USA, Asia Iron powder, high alloys

Hoeganaes Corporation USA USA, EU Iron powder, high alloys

QMP Canada USA, EU Iron powder

Kobelco Japan Asia, USA Iron powder

JFE Japan Asia Iron powder

Ametek USA USA High alloys

Daido Japan Japan High alloys

Global producers of metal powder for components Competitors

Global production of metal powders for components is heavily concentrated on seven major producers. Of these, Höganäs is the leader. Several of Höganäs’ major direct competitors are owned by raw material producers and have concentrated production strategies, progressively improving

their ability to develop product quality. Alongside surplus production capacity this means that, at present, many Höganäs products are exposed to competition. There are another 40 or so metal powder producers globally, the majority of which are based in China.

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2007 2006

Change, % 16 15

Operating income, MSEK 354 332

Assets, MSEK 3 799 3 840

Liabilites, MSEK 513 684

Capital expenditure on fixed assets, MSEK 130 171

Depreciation and amortisation, MSEK 207 218

Key indicators, Components Financial year 2007

The net sales of the Components business area in 2007 were MSEK 4 264 (3 673), a 16% increase year on year.

Global volumes grew by 4% in the year. Progress was positive in all major markets except Japan, which first went into growth during the fourth quarter.

Net sales and operating income, MSEK Components share of

Höganäs’ net sales

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Operating income was MSEK 354 (332). Thus, earnings increased by 7%. Operating margins were 8.3% (9.0) in the year, a reduction due to the inflationary effect of metal price surcharges on turnover. Income was adversely affected by the depreciation of the US Dollar and Japanese Yen in the year.

0 1000 2000 3000 4000 5000

0 100 200 300 400 500 600 700

2006 Net sales

2007 Operating income

Net sales Op.inc.

Share 73%

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Optimised Consumables

from powder

B U S I N E S S A R E A C O N S U M A B l E S

Metal powder is used as a consumable in various applications. For instance, iron, nickel and cobalt-based powder alloys are used as consumables in filters, brazing paste and thermal coating applications. Other areas include welding electrodes, friction material for brake pads, toners for printers and copy machines as well as additives in metallurgical and chemical processes. Iron powders also represent important ingredients in a number of food products to combat iron deficiency.

About the Consumables business area

Some 30% of Höganäs’ Group sales originate from its Consumables business area. This business area is far less dependant on the automotive industry as main customers are active in a broad range of industry sectors. They either operate as OEMs or deliver raw materials, components or systems to OEMs. Some recent customer activities from the Consumables business area can be found on pages 15–23.

Markets

The Consumables business area is present in all key market regions. Two of the main segments today are the welding and metallurgical industries. Both of these delivered continued growth in 2007, expecially in Asia, Europe and India.

The chemical as well as surface coating industries also represent key segments for Consumables. While the surface coating industry performed at the same growth levels in 2007 as previously, good possibilities exist for the industry’s future expansion, including the rising costs of raw metals.

Using surface coating technologies, metal powders are applied as a thin film coating to a product’s surface, thus reducing the usage of more expensive raw materials. This segment developed most favourably in Asia in 2007.

Metal powders used for food and feed enrichment by premixers, millers and bakers represent another segment for Consumables. In 2007, this segment delivered growth at the same levels as previously, with a slight increase in Asia (see case story, page 17). Offering its range of NutraFine^® iron powders, Höganäs takes a leading role in lobbying for national and international policies aimed at increasing the usage of iron fortification and enrichment in various foods.

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0 500 1000 1500 2000

0 50 100 150 200 250

2006 Net sales

2007 Operating income

Net sales Op.inc.

Net sales and operating income, MSEK

Share 27%

Competitors

From a global perspective, there are nine major producers of metal powders for consumables applications. Of these, Höganäs is amongst the leaders. As with Components, several of Höganäs’ major direct competitors have progressively

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Höganäs’ net sales

Dowa Japan Asia Iron powder

Wall Colmonoy USA USA, EU, Asia High alloys

Deloro Stellite USA USA, EU, Asia High alloys

Carpenter USA USA, EU High alloys

Global producers of metal powder for consumables

improved the quality of their products in recent years.

Coupled with surplus production capacity this means that many Höganäs products are exposed to competition today.

In total, there are around 60 producers of metal powders for consumables applications.

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Financial year 2007

For Consumables, 2007 net sales were MSEK 1 574 (1 450), a year on year increase of 9%. Volumes increased by 5% over the year. Volume growth was driven by Europe, China and India. Operating income was MSEK 219 (197). Metal price increases exerted a significant positive earnings effect in the Key indicators, Consumables

2007 2006

Change, % 9 4

Operating income, MSEK 219 197

Assets, MSEK 1 348 1 214

Liabilites, MSEK 374 234

Capital expenditure on fixed assets, MSEK 46 48

Depreciation and amortisation, MSEK 63 60

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Dowa Japan Asia Iron powder

Wall Colmonoy USA USA, EU, Asia High alloys

Deloro Stellite USA USA, EU, Asia High alloys

Carpenter USA USA, EU High alloys

first half of the year; in the second half-year, the metal price downturn had a correspondingly negative effect. The depreciation of the US Dollar and the Japanese Yen also exerted a very negative impact on earnings. Nevertheless, operating margins were 13.9% (13.6) in 2007.

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Powering innovation from powder

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Delivering innovative products and systems to market first enables OEMs to secure larger market shares faster and retain them longer. To OEMs innovation can mean products and systems that cost less to produce, are more durable, weigh less, etc. Metal powders let OEM design engineers tailor shapes and properties to meet their specifications. This provides design engineers with many possibilities to create new or improved OEM products and systems.

Reinvesting in innovation

Höganäs annually reinvests some 2.5% of its net sales on innovation activities. These are aimed at developing new products and solutions, technical customer services and support as well as Höganäs’ internal process re-engineering.

Höganäs’ broad product port folio of base and custom- specific metal powders is proof of its effectiveness.

Höganäs R&D and Tech Centre

Höganäs R&D and Tech Centre staff members provide customers with development support and technical services.

Höganäs Tech Centres are fully equipped for metallographic investigations. Located in Sweden, the US (Pennsylvania) and China (Shanghai), these Centres are used to help customers with troubleshooting, develop process routes for new components and consumables as well as supply tailor- made test mixes.

Powder design

Powder design entails material characterization work, which is focused on improving powder properties such as flow characteristics, tool filling and mix stability. It is increasingly necessary to optimise and select the characteristics that are most important to the performance of individual components, which typically necessitates co-development with OEMs and component manufacturers. One example is Höganäs Somaloy^® Technology, which is a soft magnetic powder- based composite technology with three-dimensional (3D) magnetic properties for different electromagnetic applications.

Still in development in some markets, Höganäs is working alongside customers to develop solutions that are superior to conventional technologies.

C O M P O N E N T S C A S E

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Inside SEM’s innovative ignition system for natural gas engines.

SEM is one of the world’s leading producers of electronic ignition systems as well as control systems for car engines, natural gas engines and small engines.

A member of the Opcon Group and based in Sweden, SEM has been manufacturing ignition systems for the past 90 years. Its ignition systems for biogas and natural gas engines constitute a small but growing part of SEM’s total production. But during 2007, increased environmental demands have also led to increased interest for SEM’s biogas and natural ignition systems, especially from European OEMs. Now, thanks to a component employing Somaloy®Technology, SEM has extended its core ignition coil range to meet high voltage demands for high-performance natural gas engines. Somaloy is used in its six-cylinder natural gas engine. At 32 hp, it is the most powerful in the range and used particularly in articulated buses, heavy refuse trucks, dump and medium-duty trucks and heavy transit applications. At present, the main customer for SEM’s high-end product has been Cummings Inc. of the USA.

Winning the race in automotive.

New and emerging electrical solutions offer companies in the automotive industry possibilities to offer high-value products to the marketplace. This is because improved fuel economy and increased environmental concerns are enabling electrical solutions replacement of traditional mechanical and hydraulic systems. for end users, the key is being at the forefront of the technological possibilities.

Höganäs offers several informational services to support in this regard. One example from 2007 was a special seminar focused on the rapid developments taking place in electrical automotive applications whilst providing a glimpse of future possibilities. Jointly held in June 2007 by the UK Magnetic Society and Höganäs AB, it brought some 80 participants from 12 countries up to speed on new and emerging electrical solutions.

Integration boost production efficiencies for award winning part. Used in a transfer case on four wheel drive SUvs, this high torque transfer sliding case sleeve for automotive gearboxes won a 2007 award of excellence from the European Powder Met- allurgy Association for Höganäs’ customer Sintertech S.A.S. of france. A part of the federal Mogul Corporation, Sintertech’s component integrates what were formerly two separate functions. Its upper part serves as a sliding sleeve similar to what could be found in a standard manual transmission and its lower part is a ring gear, as in an automatic transmission planetary assembly. Traditionally, these were made out of two wrought steel forged parts (one sliding sleeve and one ring gear), with the sleeve press then subsequently fitted on the ring gear then welded onto it. Not anymore. Now Sintertech can produce the single integrated component much faster than they could using the multi-step process required for manufacturing the two wrought steel forged parts. In turn, this has enabled Sintertech to significantly lower its production costs.

S E R v I C E S C A S E

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Powering growth from powder

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Powder metallurgy has been the fastest growing metal forming technology for some time now. However, more can be done to stimulate profitable growth.

Höganäs powering growth

Höganäs seeks to fuel further acceptance of PM technology amongst OEMs in order to stimulate profitable growth for its customers and itself. In part, this entails penetrating new industry segments and applications; where close cooperation between Höganäs and PM industry companies is essential.

Höganäs R&D, Tech Centres and powder design teams are key factors in its ability to penetrate and grow new market segments and applications. Establishing technical seminars that describe new possibilities to prospective OEM customers is another effective method for this purpose as they provide environments where design and manufacturing teams share experience and knowledge.

C O N S U M A B L E S C A S E

Growth of breakfast cereals in Asia Panang, Massaman, yellow, green and red Thai curry pastes are amongst the many Asian foods that are commonly found in many western homes today. And now western foods like breakfast cereals are making their way into homes in Asia. In 2007, Kellogg’s Thailand launched several cereals in Thailand as well as throughout Southeast Asia. Kellogg’s cereals use Höganäs Nutrafine® RS elemental iron powder for the purposes of iron fortification and enrichment. Just as the internationalisation of eating habits is not confined to curry pastes or breakfast cereals, Nutrafine® is also used in flour, infant cereals, pasta and many other foods.

Russian growth. Electrocontact is one of Russia’s largest PM component manufacturers. It regularly seeks to solve new PM applications and targets, those which provide business advantages to both Electrocontact and its end users, primarily active in Russia’s oil and automotive industries. In the last two years Electrocontact has become one of Höganäs’ most important and successful global partners for the implementation of Hipaloy applications. The first resulting component was a fuel pump seal ring for gas stations (far left); its production started at the end of 2006. Next was a spring plate for diesel engine fuel system (middle left). The component was successfully tested and approved by a Russian diesel engine maker in 2007 and its production will begin in 2008. Two more components using Hipaloy™ powders (middle and far right) include a central shaft bushing and support heel for immersed oil pumps used in the oil industry. The end user for these performed successful tests in 2007 and production of these components is also expected in 2008.

Proving the possibilities of PM to ZF Sachs. Since 2006 Höganäs Brazil has spoken to numerous local companies delivering automotive systems as well as assemblies about the possibilities gained when designing components for PM.

Zf do Brasil in Sao Paulo was one company approached by Höganäs.

Part of Zf Sachs - a globally active power train and chassis technology, development and systems partner – Zf do Brasil had no practical experience with PM. Knowing they would need a strong local component manufacture, Höganäs turned to Metaldyne Componentes Automotivos do Brasil ltda of São Paulo, whose extensive expertise in the automotive industry included power train components. At the time, Zf Sachs had been producing a clutch hub using an expensive machined process. So Metaldyne and Höganäs were given the chance to demonstrate the possibilities of PM for Zf Sachs. Over the span of the 15 months the team went from first contact, prototyping, testing and on through to production of the new PM-based clutch hub.

“The main focus for Metaldyne Brazil is to supply performance and low cost to our customers through engineered parts converted from casting, machining and forging processes or completely new designs.

In order to achieve our goals we need technology, process expertise and material knowledge. This is why the partnership with Höganäs is strategic to our success,” says Marco Pallini from Metaldyne Brazil.

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Powering cost savings from powder

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15% cost reductions now built into a Mahindra diesel engine.

A team involving OEM designers, engineers, component manufacturers as well as metallurgists partnered to convert integral cam shafts used in Mahindra diesel engines to PM during 2007. The result speaks for itself. In just 10 months they delivered a 15% overall cost reduction as well as a 21%

weight reduction for Mahindra’s 2.6 l diesel engine. The OEM team members were from the automotive business of the US $6 billion Mahindra Group. Created in 1994, Mahindra’s automotive business is the leader in utility vehicles in India and is among the top five tractor manufacturers in the world. Specialty Sintered Products Pty ltd. of India was the component manufacturer. And the engineers and metallurgists came from Alf Engineering of India as well as Höganäs India.

50% lower total costs for a KTM component. A component made from metal powder in- stead of other metal forming technologies provides OEMs with the possibility to realise cost savings between 20-30%.

Sometimes the cost savings can be even greater, as proven by KTM-Sportmotorcycle AG, Sinterteknik AB and Höganäs.

Based in Austria, KTM is Europe’s second largest sports motorcycle producer. Sinterteknik is a privately owned company that has been supplying metal powder components in Sweden since 1993. After being introduced to PM by Sinterteknik and Höganäs, KTM wanted to see if PM could deliver cost savings for an oil pump wheel common to several of its motorcycles. The component had previously been made from machining, which requires multiple processing stages and costs. Sinterteknik’s early prototypes met KTM’s demands for required densities and dimensional accuracy. And manufacturing the component using Höganäs metal powder delivered KTM with a 50% total cost reduction.

Höganäs powering cost savings

There are two ways that metal powder from Höganäs powers cost saving. For one, compared to all other metal forming technologies, producing components from metal powders typically offers significant cost saving. The main reason is that metal powder-based components can be produced to final or near-net shape dimensions with tight tolerances using fewer process steps. This delivers cost saving achieved through:

• Higher raw material utilisation

• Lower energy and labour requirements through the elimination of extensive machining operations

• Fewer processing steps needed for finished components The second way that Höganäs powers cost savings is the means by which Höganäs manages its own operational costs. Höganäs’ ability to counter price increases in raw material and energy through internal cost reductions helps ensure lowest total costs. Höganäs is dedicated to achieving continuous improvements in all aspects of its operations, see pages 30–33.

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Powering time-to-market efficiencies from powder

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Time-to-market is critical to the profitability of OEMs. The over-riding goal is to reduce total time from concept to full- scale production. In the automotive industry, for example, the design-to-start-of-production process is nearly 66%

shorter today than it was five years ago.

Höganäs powering time-to-market efficiencies Supplier timeframes are shorter than they have ever been in today’s hyper-competitive, fast-paced world. Shorter cycle times place tremendous pressure on assembly and component suppliers to quickly prototype and demonstrate the effectiveness of their designs to OEMs. Meanwhile, achieving high press productivity and availability are vital aspects of a component manufacturer’s business.

Collaborative engineering

Given this reality Höganäs actively seeks to enter value partnerships within the realm of collaborative engineering projects. The aim is to partner with component manufacturers, tooling and equipment suppliers as well as OEMs;

thereby forming multi-discipline teams to realise to-market efficiencies. In certain cases, Höganäs is prepared to offer technology-licensing agreements.

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NEW ABB servomotors take 75% less time to make. from its plant near Milan in Italy, ABB SACE line S is the only servomotor factory within the ABB Group that produces DC brushed, AC brushless and HDP AC in- duction servomotors. All stages, from product development to final assembly, are carried out at the factory. when developing a new generation of brushless servomotors with permanent magnets, the ABB team turned to Höganäs to implement Somaloy® Technology. Its main goals were to achieve “outstanding core technology” and “simpler assembly” using modular components to minimise production time. In the words of Giulio Secondo, R&D Manager for ABB Sace S.p.A, “The way we produce the new motor compared with the old one means that we can make substantial time savings. It takes about one quarter of the time with approximately the same cost for materials. And the new solution generates lower losses at high performance than the old motor.” Applications for the new servomotor series are within industrial automation, particularly for robotics requiring rigorous dynamics and precise positioning.

Alpha Sintered Metals realises new pos- sibilities for assembled cam shafts. Small engine camshafts have traditionally been made from machined cast iron. However, in recent years there has been a shift towards assembled camshafts that offer lower total weight, thus leading to reduced emissions.

Alpha Sintered Metals, Inc. (ASM) is one American component manufacturer well aware of these developments. Knowing the possibilities assembled camshafts for small engines presented them with, ASM decided to invest in new assembly equipment and its own engineering capabilities. ASM turned to North American Höganäs to partner on its first project, which was for one of North America’s leading small engine manufacturers. working closely from design to production, ASM and Höganäs delivered an assembly based on Astaloy CrM that offers significant cost savings, lower weight, lower inertia, improved fuel efficiency as well as reduced emissions compared to its cast iron predecessors. As important, the joint engineering team was able to go from design to finished assembly in just 14 months.

HUBE’s LCDs helps Samsung and LG win race to market. The fast-paced and growing lCD (liquid Crystal Display) industry strives to enable ever-higher resolution as well as definition qualities into OEM products.

located near Seoul in South Korea, HUBE Global is fairly new to the industry but has already helped Samsung and lG deliver improved products to market first.

Knowing metal powders and various acids could be used as an additive to make lCDs more accurate, HUBE turned to Höganäs. They demanded high purity iron powder with least impurities of calcium, copper, lead, nickel. They also needed to go from testing to production rapidly. with Höganäs support, HUBE improved their production process and delivered lCDs with better product characteristics to Samsung and lG — all in just 12 months.

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Powering security-of-supply from powder

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GKN reduces inventory costs by 50% and gains peace-of-mind.

GKN Sinter Metals is a leading producer of precision powder metal components and employs over 7,000 people at 30 locations on five continents. Given its focus on the automotive industry, GKN is very familiar with automated collaboration in the supply chain.

So when Höganäs proposed using a vendor Managed Inventory (vMI) solution to automate its metal powder supply in order to proactively combat production fluctuations, they gave the matter serious consideration.

Prior to vMI, sales orders were received with no indication of future demand. This not only created the need for large inventories of safety stock at both GKN and Höganäs locations. Production was not optimised due to the need for frequent small panic runs. This meant lost production time as well as extra setup and overtime costs.

The system for GKN is quite simple. It sends inventory and forecast data electronically from GKN, comparing their future need with their current inventory level. It then uses agreed minimum and maximum levels to generate a plan for the amount and frequency of stock that needs to be produced. It is also very effective at allowing both GKN and Höganäs to reduce tied-up capital for managing in-house inventories. In fact, the first vMI solution enabled one GKN facility to reduce its inventory by 40% in one month’s time, which was soon further reduced to 50%. This initial success resulted in Höganäs partnering to implement the approach for four other GKN European facilities in 2007.

Transparently sharing regular forecast and inventory data means better planning, which not only eliminates costs for maintaining security stock as well as emergency production, logistic and supply. It means GKN significantly reduces costs and time for administrative work. And equally important, it offers GKN superb delivery security and greater peace-of-mind.

“we have built a closer partnership and cut out a lot of waste in our supply chain as a result. Höganäs provides us with a service that adds value to our business. In doing so they have become one of our pre- ferred suppliers,” says Heinold Goller, Global Applications Support, GKN Europe.

Today’s OEMs seek to secure timely deliveries, reduce tied-up capital and sub-manufacture where it is least costly to do so. This results in increasingly complex supply chains, greater demands for precision and increasing vulnerability to distur bances in the flow of goods.

Höganäs powering security-of-supply

Like Höganäs, many OEMs are global corporations operating on the principle of internationally equivalent supply, production as well as delivery routines and facilities. In part, security-of-supply means being absolutely certain that the production process will receive the right quantity of metal powder, manufactured to specified quality levels, delivered at the right time – all of the time. So ensuring the efficient supply of consistent high quality metal powder is the essential starting point. This results in OEMs placing additional demands on sub-suppliers like Höganäs, such as demonstrating stability of product quality with minimal variations in characteristics.

World class delivery precision

Höganäs meets all relevant quality standards and operates at world class delivery precision. Höganäs uses common standards to gauge quality in ensuring tolerances as well as keep pace with customer demands for traceability, repro- ducibility and low levels of variability.

S E R v I C E C A S E

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Powering environmental improvements from powder

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Safety, health and environmental regulations are increasing both in magnitude and number. To respond to govern- mental demands for enhanced environmental performance, Höganäs expects more and more OEMs to look for the most environmentally responsible components and processes available.

Höganäs powering environmental improvements PM is energy efficient and saves up to 50% of the energy consumed when producing comparable components from metal castings. Material utilisation is very high, at almost 100%, while other metal forming approaches generate up to 50% wastage. Even today’s rising raw metals and energy costs favor PM over all other metal forming technologies.

Resources consumption and environmental impact The company pursues reduced specific consumption of resources and environmental impact. Höganäs’ own production is largely based on recycled materials. About two thirds of the production is based on recycled scrap, the remaining one-third is from virgin iron ore.

Cutting emissions

Höganäs is conducting long-term activities to reduce emissions into the air. Emissions expressed as kilograms per ton of produced material have progressively been reduced since the mid-1980s. Höganäs utilises the ISO 14001-based environmental management system as a tool in its production facilities as well as to conduct the company’s environmental

issues in a systematic manner. All Höganäs facilities in Sweden, Belgium, England, the US, India and Brazil are currently ISO 14001-certified. Emissions of CO₂ is an unavoidable consequence of producing iron and steel because carbon is a part of the production process. Trading in CO₂ emission rights, which began in the EU in January 2005, is intended to reduce emissions. The emission rights are allocated free of charge in the pilot period of 2008–2012 and surpluses are saleable. Emission rights must be purchased when potential shortages arise. The trading system affects Höganäs plants in Halmstad and Höganäs in Sweden. The company requested emission rights for the period 2008-2012, in amounts con- sidered sufficient for this period.

Permits

Permits are mandatory for producing metal powder in all countries where Höganäs has manufacturing. These mainly regulate production volumes, airborne and waterborne emissions, noise and waste and apply for a predetermined period, or until further notice on all production facilities.

REACH in 2007

Höganäs is preparing for the new European regulation on chemicals management initiative called REACH (Registration, Evaluation and Authorisation of Chemicals), which com- menced in 2007. Being introduced throughout Europe, REACH imposes new duties on each organisation in the supply chain. In practice this means that all chemical substances that are manufactured or imported into the EU in quantities

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