INTERIM REPORT 9M:2019

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INTERIM REPORT 9M:2019 January 1 – September 30, 2019  Net asset value on September 30, 2019, was SEK 100.7 billion, or SEK 231 per share, an increase during the first nine months 2019 of SEK 35 per share. Including reinvested dividend, net asset value increased by 21%.  The total return for the first nine months 2019 was 24% for the Class A shares as well as for the Class C shares, compared with 23% for the Stockholm Stock Exchange’s total return index (SIXRX).  Earnings per share during the first nine months 2019 were SEK 41.34 per share.  During the first nine months 2019 shares were acquired in Volvo, Class A for SEK 1.6 billion, in Skanska, Class B for SEK 0.4 billion, in Essity, Class B for SEK 0.3 billion, in Sandvik for SEK 0.3 billion and in SCA, Class B for SEK 0.2 billion. Furthermore shares were divested in, Essity, Class A for SEK 0.3 billion and SCA, Class A for SEK 0.1 billion.  On May 15 the exchangeable bond matured preceded by exchangeable holders calling for redemptions in 2019 worth SEK 4.1 billion. During the second quarter of 2019 the remaining shares in ICA Gruppen were sold.  The debt-equities ratio as per September 30, 2019, was 3%, a decrease since year-end of 4 percentage points.

VALUE PERFORMANCE Annual average change as per September 30, 2019 Total return Net asset value* 9M:2019 21% 1 year 0% 3 years 12% 5 years 12% 7 years 13% 10 years 12% *Including reinvested dividend.

Industrivärden C 24% 12% 14% 15% 16% 15%

Index (SIXRX) 23% 6% 10% 11% 13% 12%

AB INDUSTRIVÄRDEN (PUBL) REG NO 556043-4200 WWW.INDUSTRIVARDEN.NET

CEO’s message EXTERNAL FACTORS The global economy continues to slow, and GDP growth for the full year is expected to be approximately 3%. The rate of growth has clearly subsided during 2019, but with large variations between geographies and sectors. The global manufacturing industry has had more challenging conditions, while the service sector has performed relatively well. Recently signs of a continued slowdown have surfaced in Europe as well as Asia. Looking forward, growth expectations have also become dampened, and focus has once again been directed to the central banks’ actions. The historically low real interest rates have continued to buttress the stock market, which has performed relatively well. However, the weakened economic outlook combined with various areas of concern – such as greater trade barriers – has led to greater volatility as well as sector rotation between various industries. PORTFOLIO COMPANIES The market situation in the sectors in which our portfolio companies work has been strong for several years, but there are now clear signs of a lower level of activity and weaker outlooks going forward. Against this background, our portfolio companies have for some time taken measures to adapt operations to the prevailing market situation. In August Sandvik’s CEO, Björn Rosengren, announced that he will be leaving the company in early 2020. The process of recruiting a new CEO is ongoing. In September SCA announced that it had decided to expand its kraftliner capacity through an investment of SEK 7.5 billion in the Obbola paper mill. Another important future-oriented activity is Volvo’s new strategic alliance with Samsung on electromobility. At the end of September Ericsson announced that as a result of investigations by U.S. authorities into regulatory violations, the company has made a SEK 12 billion provision during the third quarter.

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INDUSTRIVÄRDEN 9M:2019

INDUSTRIVÄRDEN’S PERFORMANCE The first nine months of 2019 were characterized by a continued high level of investment activity in the equities portfolio. During the first half of the year we concluded our ownership position in ICA Gruppen which allowed us to lower our debt and has strengthened our flexibility. We have used this greater scope to act to increase our ownership in a number of our portfolio companies, among other things. Thus far during the year we have invested net amounts of SEK 1.6 billion in Volvo, SEK 0.4 billion in Skanska and SEK 0.3 billion in Sandvik. We have also taken advantage of a favorable market opportunity to carry out transactions in Essity and SCA, where most entailed shifting Class A shares for Class B shares in order to create scope to maneuver and increase our equity stakes over time. Net asset value at September 30, 2019, was SEK 100.7 billion, or SEK 231 per share. This corresponds to a 21% increase in net asset value during the first nine months of the year including reinvested dividend. At the end of the period the portfolio was worth SEK 104.4 billion and net debt was SEK 3.6 billion, corresponding to a debt-equities ratio of 3%. This means that the debt-equities ratio has decreased by 4 percentage points since the start of the year. During the first nine months of the year the total return for the Class A and Class C shares was 24%, respectively, compared with 23% for the return index (SIXRX). The longterm return is good – a performance that we are making a determined effort to strengthen over time. Stockholm, October 4, 2019 Helena Stjernholm CEO

Overview EQUITIES PORTFOLIO, SEPTEMBER 30, 2019

INDUSTRIVÄRDEN IN BRIEF Industrivärden conducts long-term value-creating asset management through active ownership. The operation is conducted in two main processes, investment and active ownership. Active ownership is exercised primarily through involvement in nomination processes for board elections, through board representation and through evaluation of company boards, CEOs and Executive Management. Industrivärden monitors its portfolio companies continuously and where necessary, by influencing the portfolio companies’ overall development through their respective boards. Through these measures Industrivärden contributes to the portfolio companies’ growth in value over time. Industrivärden’s long-term objective is to increase net asset value and thereby generate a return for the shareholders that exceeds the market’s required rate of return. Taking into account the risk profile of the portfolio’s investments, the shareholders are to be given a total return which over time is higher than the average for the Stockholm Stock Exchange. More information can be found at www.industrivarden.net.

Skanska 6.2 6%

SCA 6.1 6%

SSAB 1.2 1%

Övrigt 0.4 0% Sandvik 23.6 23%

Ericsson 6.9 7% Market value in SEK bn Share of portfolio in % Handelsbanken 18.7 18%

Volvo 21.9 21% Essity 19.3 18%

COMPOSITION OF EQUITIES PORTFOLIO AND NET ASSET VALUE 09/30/2019

9M:2019

Share of ownership, %

Portfolio companies Sandvik Volvo A Volvo B Essity A Essity B Handelsbanken A Ericsson A Ericsson B Skanska A Skanska B SCA A SCA B SSAB A Other Equities portfolio Interest-bearing net debt Net asset value Debt-equities ratio

Total return

Market value

No. of shares

Capital

Votes

Share of value, %

154,200,000 154,600,000 3,600,000 34,000,000 32,800,000 202,900,000 86,052,615 1,000,000 12,667,500 18,500,000 33,785,290 34,575,273 44,334,933

12.3

12.3

23

7.4

24.1

21

9.5

29.2

18

10.3

10.4

18

2.6

15.1

7

7.4

24.3

6

9.7

29.0

6

4.3

11.8

1 0 100

SEK M SEK/share 23,647 21,366 498 9,877 9,423 18,703 6,781 79 2,526 3,689 3,098 3,035 1,214 432 104,368 -3,629 100,739 3%

TR for the stock

SEK M

%

54

4,708

50

4,676

24 27 28

44

5,188

43

-215

16

201

14

1,990

14

1,448

3 1 240 -8 231

-88 120 18,028 Index:

INDUSTRIVÄRDEN 9M:2019

36 35 -1 3 2 46 46 31 30 -6 20 23

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Performance NET ASSET VALUE Net asset value on September 30, 2019, was SEK 100.7 billion, or SEK 231 per share, an increase of SEK 35 per share during the first nine months 2019. Including reinvested dividend, net asset value increased by 21%. The Stockholm Stock Exchange’s total return index (SIXRX) increased by 23% during the same period. During the last five- and ten-year periods, net asset value grew annually by 12%, for the respective periods, including reinvested dividend. The total return index (SIXRX) increased by 11% and 12%, respectively, during the same periods. Net asset value September 30, 2019 09/30/2019 Equities portfolio Interest-bearing net debt

12/31/2018

SEK bn 104.4

SEK/share 240

SEK bn 92.2

SEK/share 212

-3.6

-8

-6.6

-15

100.7

231

-0.4 85.2

-1 196

Adjustment exchangeable Net asset value

Development of net asset value, 10 years SEK M 120,000

Contribution analysis of equities portfolio 9M:2019 Essity

5.2

Sandvik

4.7

Volvo

4.7

Skanska

2.0

SCA

1.4

Ericsson SSAB Handelsbanken

Total return, SEK bn

0.2 -0.1 -0.2 -1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Performance of shareholdings, 3 years Annual average total return, % Class of shares SCA A* SCA B* Sandvik Volvo B Volvo A Essity A* Essity B* Ericsson A Ericsson B Total return index (SIXRX) SSAB A Skanska B Handelsbanken A

22 22 20 17 17 16 15 10 10 10 5 4 -3

*For calculation method, see page 9.

100,000 80,000 60,000 40,000 20,000 0 -20,000 09

10 11 12 13 Equities portfolio

14

15

16 17 18 9M :19 Interest-bearing net debt

Ne t asset value

EQUITIES PORTFOLIO During the first nine months 2019 the value of the equities portfolio, adjusted for purchases and sales, increased by SEK 14.1 billion. On September 30, 2019 the equities portfolio was worth SEK 104.4 billion, or SEK 240 per share. The shareholdings in Essity, Sandvik and Volvo made a significant positive contribution to the equities portfolio’s value performance. On May 15 the exchangeable bond matured preceded by exchangeable holders calling for redemptions in 2019 worth SEK 4.1 billion. During the second quarter of 2019 the remaining shares in ICA Gruppen were sold. The transactions have not had any material impact on earnings.

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INDUSTRIVÄRDEN 9M:2019

CASH FLOW Investment activities During the first nine months 2019 shares were acquired in Volvo, Class A for SEK 1,598 M, in Skanska, Class B for SEK 351 M, in Essity, Class B for SEK 285 M, in Sandvik for SEK 273 M, and in SCA, Class B for SEK 215 M. Furthermore, Essity, Class A for SEK 288 M and SCA Class A, for SEK 98 M were divested. Dividend paid out The Annual General Meeting on April 17, 2019 approved the Board of Director’s proposed dividend of SEK 5.75 per share (5.50). The total dividend amounted to SEK 2 502 M (2 394). Dividends received During the first nine months 2019 dividends received amounted to SEK 4 093 M (3 764). Management cost The management cost during the first nine months 2019 was SEK 92 M (90), which on a yearly basis corresponds to 0.12% (0.11) of the equities portfolio’s value on September 30, 2019.

FINANCING Interest-bearing net debt Interest-bearing net debt amounted to SEK 3.6 (7.2) billion on September 30, 2019. The debt-equities ratio was 3% (7), and the equity ratio was 96% (93). The debt-equities ratio is calculated as interest-bearing net debt in relation to the market value of the equities portfolio. During the first nine months 2019 a new bond of SEK 1.0 billion was issued within the framework of the existing MTN program. The bond was issued primarily for refinancing and has a tenor of three years. No part of Industrivärden’s borrowings is conditional upon any covenants.

INDUSTRIVÄRDEN SHARE DATA The market prices for Industrivärden’s Class A and C shares on September 30, 2019, were SEK 221.40 and SEK 215.50, respectively. The corresponding market prices on December 31, 2018, were SEK 183.20 and SEK 179.20, respectively. The total return during the first nine months 2019 was 24%, respectively, for the Class A and C shares. The Stockholm Stock Exchange’s total return index (SIXRX) was 23% during the same period. The total return for Industrivärden’s shares over longer periods of time are shown in the table on page 1 and for specific years in the table below. Value performance the respective year

Interest-bearing net debt, September 30, 2019 Credit facility, SEK M

Utilized amount, SEK M

8,000 3,000

3,056 600 103 254 4,013

MTN-program Commercial paper Pension debt Other liabilities Total borrowing Less: Interest-bearing receivables Cash and cash equivalents Interest-bearing net debt

Total return 25%

Maturity 2020-2022

2014

2015

2016

Total return index (SIXRX)

167 217 3,629

SEK M 16,000

20%

12,000

15%

8,000

10%

4,000

5%

0

0% 2015

5% 0% -5% -10% -15%

Development of interest-bearing net debt, 5 years

2014

20% 15% 10%

2016

Interest-bearing net debt

2017

2018

9M : 19

Debt-equities ratio

2017

2018

9M :2 019

Industrivärden C

At the 2011 Annual General Meeting, a share conversion clause was added to the Articles of Association. Shareholders have the right at any time to request conversion of Class A shares to Class C shares. During the first nine months 2019, 117 shares were converted. Share structure, September 30, 2019 Share class

No. of shares

No. of votes

Capital, %

Votes, %

A (1 vote) C (1/10 vote) Total

268,183,340 167,026,537 435,209,877

268,183,340 16,702,653 284,885,993

61.6 38.4 100.0

94.1 5.9 100.0

Credit rating S&P Global Ratings has issued a credit rating on Industrivärden of A+/Stable/A-1. Exchangeable in ICA Gruppen’s stock On May 15, 2019 the SEK 4.4 billion exchangeable bond that was issued in 2014 based on ICA Gruppen’s stock matured. During the first half of 2019, exchangeable holders called for redemptions corresponding to SEK 4.1 billion, whereby shares in ICA Gruppen were delivered.

INDUSTRIVÄRDEN 9M:2019

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Other FINANCIAL CALENDAR Year-end report 2019: February 7, 2020 Annual report 2019: February 20, 2020 Interim report January-March: April 7, 2020 Annual General Meeting: April 24, 2020, in Stockholm Interim report January-June: July 7, 2020 Interim report January-September: October 6, 2020 CONTACT PERSONS Sverker Sivall, Head of Corporate Communication and Sustainability Phone: +46-8-666 64 19 E-mail: [email protected] Jan Öhman, CFO Phone: +46-8-666 64 45 E-mail: [email protected]

CONTACT INFORMATION AB Industrivärden (publ) Box 5403, SE-114 84 Stockholm, Sweden Registered office: Stockholm Reg. no.: 556043-4200 Switchboard: +46-8-666 64 00 [email protected] www.industrivarden.net TICKER CODES INDUC:SS, Bloomberg INDUc.ST, Reuters INDU C, NASDAQ PUBLICATION This information is such that AB Industrivärden is required to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the Head of Corporate Communication and Sustainability stated above, at 10:00 a.m. CET on October 4, 2019. This interim report has not been reviewed by the Company’s auditor.

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INDUSTRIVÄRDEN 9M:2019

Financial statements in brief GROUP 2019 July-Sep.

2018 July-Sep.

2019 Jan.-Sep.

2018 Jan.-Sep.

2018 Jan.-Dec.

0 -3,339 -28 -3,367

0 6,397 -20 6,377

4,093 14,015 -92 18,016

3,764 5,351 -90 9,025

3,764 -11,954 -121 -8,311

Financial items Income after financial items

-8 -3,375

-5 6,372

-23 17,993

-12 9,013

-19 -8,330

Tax Net income for the period

-

-

-

-

-

-3,375

6,372

17,993

9,013

-8,330

-7.75

14.64

41.34

20.71

-19.14

-3,375

6,372

17,993

9,013

-8,344

BALANCE SHEET as per end of period Equities Other non-current assets Total non-current assets

104,368 16 104,384

110,003 11 110,014

92,170 11 92,181

Cash and cash equivalents Other current assets Total current assets Total assets

217 177 394 104,778

120 401 521 110,535

786 273 1,059 93,240

Shareholders’ equity

100,633

102,499

85,142

2,359 27 2,386

2,174 62 2,236

2,170 36 2,206

1,654 105 1,759 104,778

5,523 277 5,800 110,535

5,394 498 5,892 93,240

3,905 1,560 -6,034 -569

3,635 2,525 -6,653 -493

3,492 3,252 -6,571 173

217

120

786

SEK M INCOME STATEMENT Dividend income Change in fair value of financial assets Management cost Operating income

Earnings per share, SEK STATEMENT OF COMPREHENSIVE INCOME Comprehensive income for the period

Non-current interest-bearing liabilities Non-current non interest-bearing liabilities Total non-current liabilities Current interest-bearing liabilities Other liabilities Total current liabilities Total shareholders’ equity and liabilities CASH FLOW Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities* Cash flow for the period Cash and cash equivalents at end of period * Of which, dividends of SEK 2,502 M (2,394) paid to shareholders.

INDUSTRIVÄRDEN 9M:2019

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GROUP, CONT. 2019 Jan.-Sep.

2018 Jan.-Sep.

2018 Jan.-Dec.

85,142 17,993 -2,502 100,633

95,880 9,013 -2,394 102,499

95,880 -8,344 -2,394 85,142

217 167 2,359 1,654 3,629

120 391 2,174 5,523 7,186

786 177 2,170 5,394 6,601

2019 Jan.-Sep.

2018 Jan.-Sep.

2018 Jan.-Dec.

11,212 11,190 11,190

6,729 6,720 6,720

-4,991 -5,007 -5,007

Comprehensive income for the period

11,190

6,720

-5,021

BALANCE SHEET as per end of period Non-current assets Current assets Total assets

60,404 134 60,538

65,984 275 66,259

53,600 788 54,388

Shareholders’ equity Non-current liabilities Current liabilities Total shareholders’ equity and liabilities

54,921 2,386 3,231 60,538

57,974 2,236 6,049 66,259

46,233 2,206 5,949 54,388

SEK M CHANGES IN SHAREHOLDERS' EQUITY Opening shareholders’ equity as per balance sheet Comprehensive income for the period Dividend Closing shareholders’ equity as per balance sheet INTEREST-BEARING NET DEBT at end of period Cash and cash equivalents Interest-bearing assets Non-current interest-bearing liabilities Current interest-bearing liabilities Interest-bearing net debt

PARENT COMPANY SEK M INCOME STATEMENT Operating income Income after financial items Income for the period

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INDUSTRIVÄRDEN 9M:2019

Accounting policies and other comments ACCOUNTING POLICIES This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the EU, and the Swedish Annual Accounts Act. The Parent Company’s financial statements have been prepared in accordance with RFR 2 – Accounting for Legal Entities, and the Swedish Annual Accounts Act. New or amended IFRSs and IFRIC interpretations have not had any material effect on the Group’s or Parent Company’s earnings or financial position. ALTERNATIVE PERFORMANCE MEASURES The definitions of the alternative performance measures net asset value, debt-equities ratio, equity ratio, market value of the equities portfolio and interest-bearing net debt are provided in the 2018 Annual Report. These alternative performance measures are essential for understanding and evaluating an investment company’s business. TOTAL RETURN ESSITY AND SCA The total returns for Essity and SCA have been calculated as the respective companies share of the original company SCA’s total return before the split (based on share of value at the time of the split) and thereafter based on the value performance of the respective companies. The split was carried out on June 9, 2017, and the first day of trading in Essity shares was June 15, 2017. FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS In accordance with IFRS 13, financial instruments are measured at fair value according to a three level hierarchy. Classification is based on input data that is used in measuring the instruments. Instruments in Level 1 are valued according to quoted prices for identical instruments in an active market. Instruments in Level 2 are measured in a valuation model which uses input data that are directly or indirectly observable in the market. Instruments in Level 3 are measured using a valuation technique based on input data that are not observable in a market.

09/30/2019 Assets Equities Total assets

Liabilities Derivatives, etc. Total liabilities

Level 1

Level 2

Level 3

Total

103,936 103,936

0

432 432

104,368 104,368

Level 1

Level 2

Level 3

Total

-

-27 -27

-

-27 -27

No changes have been made between levels compared with the preceding year. RISKS AND UNCERTAINTIES The dominant risk in Industrivärden’s business is share price risk, i.e., the risk of a change in value caused by changes in share prices. A 1% change in the share price of the holdings in the equities portfolio as per September 30, 2019, would have affected its market value by approximately +/– SEK 1,000 M. Further information about risks and uncertainties are provided in the 2018 Annual Report. TAX In recent times, the value concentration in Industrivärden's equities portfolio has increased. During the second quarter of 2019 Industrivärden informed the Swedish Tax Agency about this fact, in order to clarify whether Industrivärden should be taxed as an investment company or a conventionally taxed company. During the third quarter, the Swedish Tax Agency announced that Industrivärden should continue to be taxed as an investment company. RELATED PARTY TRANSACTIONS During the first nine months 2019, dividend income was received from associated companies. EVENTS AFTER THE BALANCE SHEET DATE No significant events have occurred after September 30, 2019.

INDUSTRIVÄRDEN 9M:2019

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