Annual General Meeting, April 15, 2004

The Annual General Meeting of Sapa AB will be held on Thursday,

April 15, 2004, at 3 p.m., at the IVA Conference Centre (Wallenberg

Hall), Grev Turegatan 16, Stockholm, Sweden. Registration will

commence at 2 p.m.

Financial reporting dates in 2004

Interim report, January-March, 2004 April 15, 2004

Interim report, January-June, 2004 July 15, 2004

Interim report, January-September, 2004 October 18, 2004

Preliminary report on 2004 operations February 2005

2004 Annual Report March 2005

Shape

Shape is the Sapa Group’s magazine and is published twice a

year in eight languages for, among others, customers, shareholders,

analysts, journalists, and employees.

www.sapagroup.com

The website contains information about the Group, its operations

and markets, as well as financial information and press releases.

Sapa AB

Humlegårdsgatan 17, Box 5505, 114 85 Stockholm, Sweden

Phone: +46 8-459 59 00. Fax: +46 8-459 59 50

info@sapagroup.com www.sapagroup.com

This Annual Report is also available in Swedish.

Denna årsredovisning finns även i en svensk version.

Annual Report 2003

Sapa A

nnual Report 2

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Ehernstråhle &

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Headquarters

Sapa AB Visiting address:Humlegårdsgatan 17Box 5505114 85 Stockholm, SwedenPhone: +46 8 459 59 00Fax: +46 8 459 59 50www.sapagroup.com e-mail: info@sapagroup.com

Austria

RC Neuherz GmbH Pirching 90 8200 Gleisdorf Phone: +43 3112 73 66 - 0 Fax: +43 3112 73 66 - 6

Belgium

Sapa Building System(Headquarters)Industrielaan 178810 LichterveldePhone: + 32 51 729 666Fax: + 32 51 729 647

Sapa RC System NVIndustriezone 113400 LandenPhone: +32 11 69 03 11Fax: +32 11 83 20 04

Remi Claeys Aluminium NVKortemarkstraat 528810 LichterveldePhone: +32 51 72 97 11Fax: +32 51 72 21 26

Sapa RC Profiles SAKortemarkstraat 528810 LichterveldePhone: +32 51 72 98 11Fax: +32 51 72 54 41

Canada

Sapa Inc (Sales office)Unit # 380 1090 Homer StreetVancouver, BC V6B 2W9Phone: +1 604 874 6063Fax: +1 604 874 6061

China

Sapa Heat Transfer(Shanghai) Ltd1111 Jiatang HighwayJiadingShanghai 201 807Phone: +86 21 5954 1111Fax: +86 21 5954 3111

Sapa Profiles (Shanghai) Ltd1019 Jiatang HighwayJiadingShanghai 201 807Phone: +86 21 5954 6500Fax: +86 21 5954 2880

Czech Republic

RC System CZ s ro Josefa Capka 3235 272 01 Kladno-Sitná Phone: +420 312 66 00 63 Fax: +420 312 66 00 63

Denmark

Sapa Mass TransportationRolshøjvej8500 GrenåPhone: +45 86 32 61 00Fax: +45 86 32 66 63

Sapa Profiler A/SRolshøjvej8500 GrenåPhone: +45 86 32 61 00Fax: +45 86 32 66 63

Estonia

Sapa Profiilid AS(Sales office)Kadaka tee 310621 TallinnPhone: +372 6 512 991Fax: +372 6 512 990

Finland

Sapa Profiilit Oy(Sales office)Sinikalliontie 18A02630 EspooPhone: +358 9 867 82 80Fax: +358 9 867 828 20

France

Sapa Building Systems SNCZone Industrielle du CampDessert Nord83488 Puget Sur ArgensPhone: +33 498 11 20 50Fax: +33 494 81 55 10

Sapa Lacal SNCZA du GarricBP 681 450 Le GarricPhone: +33 563 80 20 20Fax: +33 563 80 20 29

Sapa Profiles Albi SNCBP 9, ZA du Garric – Valderiès81450 Le GarricPhone: +33 563 80 10 10Fax: +33 563 80 10 11

Sapa Profilés Puget SAZone Industrielle du CampDessert Nord83488 Puget Sur ArgensPhone: +33 498 11 20 00Fax: +33 494 45 23 44

Germany

RC Automotive GmbHHalle 9Leverkuserstrasse 6542897 RemscheidPhone: +49 2191 362 54-0Fax: +49 2191 362 54-25

Remi Claeys System Ekonal GmbH Ringstraße 29-31 42553 Velbert Phone: +49 20 53 42 1- 0 Fax: +49 20 53 42 12 49

Sapa Aluminium Profile GmbHPostfach 2380Industriestrasse 1077613 OffenburgPhone: +49 781 50 60Fax: +49 781 506 66

Sapa Vertrieb GmbH (Sales office)Grossenbaumer Weg 640472 DüsseldorfPhone: +49 211 436 130Fax: +49 211 436 133 00

Lithuania

UAB Sapa ProfiliaiDauksos 5-444280 KaunasPhone: +370 37 337 181Fax: +370 37 337 179

Netherlands

Sapa Aluminium BVPostbus 1029600 AC HoogezandPhone: +31 598 319911Fax: +31 598 393673

Sapa Plus BVGouden Rijder 15Postbus 4124870 AK Etten-LeurPhone: +31 76 501 33 52Fax: +31 76 502 24 50

Norway

Sapa Profiler A/S (Sales office)Postboks 4615501 HaugesundPhone: +47 52 70 33 00Fax: +47 52 70 33 20

Sapa Profiler AS (Sales office)Postboks 332001 LillestrømPhone: +47 638 921 00Fax: +47 638 921 20

Poland

Sapa Aluminium Sp.zo.o.ul. Graniczna 64/6693 428 LodzPhone: +48 42 683 63 00Fax: +48 42 683 63 03

Sapa Aluminium Sp.zo.o.ul. Kopernika 1864 980 TrzciankaPhone: +48 67 35 25 105Fax: +48 67 35 25 205

Sapa System Sp.zo.o.ul. Trakt Lubelski 16604 790 WarsawPhone: +48 22 612 67 99Fax: +48 22 872 11 79

Portugal

Sapa Portugal SAAlto da Bela VistaApartado 62736-901 CacémPhone: +351 214 27 23 00Fax: +351 214 26 55 21

South KoreaSapa Heat Transfer Korea (Sales office) 11 fl. Youone Building 75-95 Seosomoon-Dong Jung-Ku Seoul, 100-110 Phone: +82 2756 9124/5 Fax: +82 2319 99 71

Spain

Sapa Perfiles SL (Sales office)c/ Solsonés, 2 Edif. PrimaMuntadas Esc. B 3a Pl. Ofc. B3Poligono Mas Blau - El Prat de Llobregat08820 Barcelona Phone: +34 93 374 16 98Fax: +34 93 370 87 37

Sweden

Sapa AutomotiveMetallvägen574 81 VetlandaPhone: +46 383 941 00 Fax: +46 383 101 85

Sapa Heat Transfer AB612 81 FinspångPhone: +46 122 838 00Fax: +46 122 833 99

Sapa Industriservice AB612 81 FinspångPhone: +46 122 800 00Fax: +46 122 838 88

Sapa Industriservice ABBox 13730 50 SkultunaPhone: +46 21 782 00Fax: +46 21 704 39

Sapa Lackering ABNydalavägen 16574 35 VetlandaPhone: +46 383 76 23 00 Fax: +46 383 173 09

Sapa Profilbockning ABBrudabäcksvägen574 35 VetlandaPhone: +46 383 76 21 50 Fax: +46 383 76 21 60

Sapa Profiler ABMetallvägen574 81 VetlandaPhone: +46 383 941 00Fax: +46 383 154 35

Sapa Profiler AB, division SystemMetallvägen574 81 VetlandaPhone: +46 383 942 00 Fax: +46 383 76 19 80

Sapa Technology612 81 FinspångPhone: +46 122 170 00Fax: +46 122 124 87

Switzerland

Sapa Aluminium Profile AG(Sales office)Felsenrainstrasse 18052 ZürichPhone: +41 1 303 02 03Fax: +41 1 303 01 65

Turkey

RC System Turkiye AS Vatan Cad. Avrasya Ip Merkezi6 Kat. 5 Daire 28 Caglayan, Istanbul Phone: +90 212 296 70 30 Fax: +90 212 296 70 31

UK

Sapa Building Systems LtdAlexandra WayAshchurchTewkesburyGloucestershire GL20 8NBPhone: +44 1684 85 35 00Fax: +44 1684 85 18 50

Sapa Pressweld LtdSpinnaker Park, Spinnaker RoadGloucester GL2 5DGPhone: +44 1452 502 502Fax: +44 1452 503 503

Sapa Profiles LtdSaw Pit Industrial EstateTibshelfAlfretonDerbyshire, DE55 5NHPhone: +44 1773 872 761Fax: +44 1772 874 389

Sapa Profiles LtdTewkesbury RoadCheltenhamGloucestershire GL51 9DTPhone: +44 1242 69 92 00 Fax: +44 1242 51 33 04

USSapa Inc.7933 N.E. 21st AvenuePortland, Oregon 972 11Phone: +1 503 972 1404Fax: +1 503 972 1406

Addresses

1 The year in brief2 Message from the CEO4 The Sapa share6 This is Sapa8 40 years of entrepreneurial spirit9 Goals, business concept, strategy and core values

10 Sapa’s products, markets and competitors14 Organisation and control model16 Research and development18 Environment, work environment and our employees20 The past year22 Board of Directors’ Report24 Consolidated income statements25 Comments on the income statements26 Consolidated balance sheets27 Comments on the balance sheets28 Consolidated cash flow statements29 Comments on the cash flow statements30 Parent Company32 Supplementary disclosures43 Definitions44 Proposed disposition of earnings45 Audit Report46 Board of Directors48 Board work during 200349 Articles of Association50 Senior Executives52 Six-year summary53 Addresses

Sapa develops, manufactures and markets value-added profiles, profile-based building systems and heat-exchange strip in the lightweight materialaluminium and is the world’s leading independentmanufacturer of such products. Sapa’s business concept is based on close cooperation with its customers, who are primarily located in Europe,North America and Asia.

The largest customer segments are the construction, transport, domestic and office, andengineering sectors.

As of 2004, Sapa is organised into three core operations: Profiles, Building System and Heat Transfer. The Sapa share is listed onStockholmsbörsen’s O-list.

^

I

Earnings per share increased by SEK 2.65 to SEK 10.50 (7.85)

Profit after tax increased by 34 per cent to MSEK 383 (285)

Net sales rose by 6 per cent to MSEK 11,803 (11,090)

Operating margin rose to 5.4 per cent (4.4)

Profitability improved – return on capital employed 11.5 per cent (9.0)

The Board proposes an increase in dividend to SEK 6.25 (5.50)

2003 2002

Net sales, MSEK 11 803 11 090Operating profit, MSEK 641 483Profit before tax, MSEK 559 427Net profit for the year, MSEK 383 285Operating margin, % 5.4 4.4Earnings per share, SEK 10.50 7.85Cash flow after investments, MSEK1 475 5911 Excluding acquisitions/divestments of subsidiaries

The year in brief

2

Today, Sapa is among the market leadersin both extruded aluminium profiles andclad aluminium strip for the automotiveindustry with annual sales of approxi-mately SEK 12 billion and slightly lessthan 8,000 employees in Europe, the US,and Asia. Sapa is quite clearly a youngcompany that has developed – and con-tinues to develop – at a rapid pace. Overthe years, Sapa has operated in variousownership environments – owned by itsfounders, as a subsidiary of Gränges andElectrolux, as a listed company without,and now with, a clear principal owner.

Regardless of the ownership environ-ment, the trend has been strongly positiveover time, which I believe can be ascribedto two factors:

• A strong corporate culture and businessmodel, in which it has been possible tocombine short-term profitability andlong-term growth.

• A sustainable and balanced strategy.Our corporate culture is based on theextensive decentralisation of decision-making powers to the individual operatingcompanies and a proximity to the customerexpressed through strong knowledge ofour customers’ own processes, a highcapacity for problem solving and anattractive level of service.

The strategy over the past 40 yearshas involved successive market conquests,

with establishments in turn inScandinavia, Western Europe, Easternand Central Europe, the US and now Asia.In recent years, value-added operationsand manufacture of components have beengiven substantially increased resources,meaning that customer proximity has beenstrengthened, while the company has beenable to attract new customer categories.

A high level of productivity and the besttechnology in well-invested plants havecontributed to both a high return and Sapa’sfavourable reputation in the industry.

Development of value over time

The Company’s share is listed onStockholmsbörsen’s O-list and has enjoyedcontinued favourable development. During2003, the share price rose from SEK 160to SEK 176.50, an increase of 10 per cent,added to which is a dividend of SEK 5.50,giving a total value growth of 14 per cent.The combined value growth since theCompany’s listing in 1997, including rein-vested dividends, is 115 per cent. Thiscorresponds to 12 per cent per year.During the same period, an investment inthe General Index provided a 4-per cent annual return, including dividends.

Markets – weak in Europe, improved

in the US and strong in Asia

The market for aluminium profiles in

Europewas affect-

ed by the weakeconomy in the industrial and construc-tion sectors and is estimated to haveremained unchanged in terms of volumesduring 2003. Consequently, Sapa is thoughtto have retained its market share in Europe,since our volumes in comparable profilecompanies in Europe remained at approx-imately the same levels as in 2002. Thereare positive signs for 2004 and activitiesin our European profile plants in early2004 have improved considerably com-pared with 2003. During the latter half of2003, the North American aluminium pro-file market was affected positively by theeconomic stimulation measures in the US. Primarily, residential construction hasdeveloped well and, during the final quar-ter of 2003, activities in the transport sec-tor were also strengthened. For the profileindustry, 2004 is expected to be a strongeryear than 2003. Sapa’s profile volumes inNorth America rose by 7 per cent during2003, which exceeds the increase in themarket as a whole by a considerablemargin, thereby indicating a continuingrise in market share.

The market for clad heat-exchangestrip for the automotive industry wasfavourable during 2003. Aluminium con-tinues to capture market shares from other

It feels correct to begin my comments on 2003 with a reminder that it was 40 years ago that Nils Bouveng and Lars Bergenhem started SkandinaviskaAluminiumprofiler AB in Vetlanda,Sweden – the first building block in whatis today the international Sapa Group.

Message from the CEO

3

materials and the number of heat exchang-ers per car is increasing. Sapa’s geograph-ic positioning with production and salesalso in China is favourable and our totalvolume increased by 15 per cent during2003. Continued growth is forecast for2004, although at a somewhat lower level.

Patient improvement process

and bold investments

During 2003, we continued efforts tostrengthen our profile and heat-exchangestrip business both operationally andtowards to the market. Rationalisationmeasures have been implemented inmost companies. At the same time, wehave invested in our profile fabricationoperations and in new plants in new mar-kets, such as in Lithuania and China. Inthis way, we continue the geographicrepositioning process that has been underway for several years, increasing the shareof sales and production in markets withhigher growth and lower cost levels.Improved logistics is another prioritisedarea that has given favourable results inthe form of reduced inventories.

Major investment projects are underway, with the expansion of capacity inHeat Transfer operations in China and theupgrading/improvement of press efficien-cy at the newly acquired Remi ClaeysAluminium (RCA) in Belgium, to which Iwill return with more details later.

Our component-manufacturing oper-ations in Poland are expanding rapidlyand, during 2003, we recruited some 100employees, bringing our total workforce inPoland to slightly more than 500.

Halfway through the year, Sapaacquired European competitor RCA inBelgium with annual sales of nearly MEUR300 or SEK 2.6 billion. This representsSapa’s largest and most significant acqui-sition to date. RCA’s operations are approx-imately equally divided between aluminiumprofiles, building systems and aluminiumtubing and considerably strengthen Sapa’spositions in continental Europe. The pro-file and tubing operations are now man-aged as independent operating units, withthe profile operations using the Sapaname, while the tubing operations haveretained the RCA name. RCA’s building-systems operations have become the coreof Sapa Building System, which, duringthe year, was defined as the Group’s thirdcore operation alongside Profiles and HeatTransfer. Sapa’s existing building-systemsoperations in Scandinavia, the UK, Poland,France and Portugal are now combinedwith RCA’s companies in Belgium, France,Germany and the Czech Republic to form

Europe’s third largest player.Gradually utilising our local market

positions and creating a pan-Europeanorganisation will be a demanding task.Coordinating the product range, improvinglogistics, developing project expertise andimproving profitability are high on theagenda for the coming years. During 2004,the headquarters for Building System willbe established at RCA’s existing premisesin Lichtervelde, Belgium, thus acquiring acentral location in Europe.

Continued improvement in profits

We can derive satisfaction from the factthat the strong increase in profits reportedin 2002 continued in 2003. Earnings pershare improved by 34 per cent to SEK10.50 and have consequently more thandoubled since 2001. Excluding goodwillamortisation, earnings per share amountedto SEK 12.20. In total, volumes, measuredin tonnes, increased by 15 per cent, ofwhich RCA accounted for 11 percentagepoints and organic growth for 4, the lattergenerated by Heat Transfer and Profiles inNorth America. Pre-tax profits increasedfrom MSEK 427 to MSEK 559. Operatingmargin improved to 5.4 per cent (6.0 percent, excluding goodwill amortisation) andreturn on capital employed increased tonearly 12 per cent, compared with 9 percent in 2002.

Cash flow before corporate acquisi-tions amounted to MSEK 475, entailing astrong balance sheet, with an equity/assetsratio of 42 per cent and a favourableinterest-coverage ratio, even after theacquisition of RCA for SEK 1.4 billion.

We were pleased by a favourabledevelopment in the Heat transfer compa-nies in Sweden and China and withinother operations in the Benelux countries,Poland, the US, and France, while opera-tions in Germany and Portugal did not liveup to expectations.

Outlook for 2004

We are likely to see an improvement inindustrial conditions in Europe, althoughnot a particularly strong one. Conditionsin the building sector will probably remainfragmented, but are viewed as favourablein Eastern Europe, notably in the new EUmember countries. In the US we havealready witnessed a considerableimprovement in economic conditions,which we believe will continue during2004. The strong growth in Asia isexpected to be sustained.

For Sapa, this economic scenarioshould permit improved organic growth inEurope. Profiles in the US should be able

to look forward to a positive development.Heat Transfer’s growth should be able tocontinue at a favourable level. As hasalready been mentioned, Building Systemis expected to face a relatively unchangedmarket in Europe during 2004.

Already in 2003, the acquisition ofRCA contributed positively to Sapa’s earnings per share and this contribution is expected to increase during 2004.Investments conducted in France willgradually provide positive effects on earnings.

On the whole, increased sales andcontinued improvements in earnings andreturn are expected. Despite somewhathigher investments than in 2003, cashflow is expected to be strong, permittingcontinued favourable growth in dividends.

Priorities

Our long-term focus on value creationthrough a combination of organic growthand strategic acquisitions remainsunchanged. The weak economic trend of the past three years has meant that wehave not been able to achieve all of ourambitious financial objectives, primarilywithin profile operations, even though wesharply improved our earnings and prof-itability in 2002 and 2003, following thedownturn in 2001.

With the acquisition of RCA and otherinvestments in recent years, we havedoubled the size of our profile and heat-exchange strip operations since 1998.Our market positions have improved andinternal improvement projects have beenconducted within the Group. Now, withthe help of an expected improvement indemand, we will be able to take furthersteps towards fulfilling the Group’s financialobjectives, thus being able to maintain anattractive dividend level.

Improved utilisation of capacity throughhigher volumes must go hand in handwith the effective control of margins andcosts. I am convinced that the Group’sskilful workforce will be able to manage this.

Stockholm, February 2004

Staffan BohmanPresident and CEOstaffan.bohman@sapagroup.com

4

The Sapa share

Share price development

The share price rose by 10 per cent during2003. Stockholmsbörsen’s All Share Indexrecovered some of its decline from 2000-2002 and rose by 30 per cent during2003, returning to its 1997 level. Since itslisting in May 1997, the Sapa share hasrisen by 78 per cent, compared to a 17-per cent increase in the All Share Indexduring the same period.

The share’s value growth, includingreinvested dividends, was 14 per centduring 2003, and amounts to 115 percent since the original listing in 1997. TheAll Share Index, including dividends, hasincreased by 31 per cent during the sameperiod.

The highest closing price during theyear was SEK 178, and the lowest closingprice was SEK 139. The final price paidduring 2003 was SEK 176.50, correspon-ding to a market value of SEK 6.5 billion,compared with a market value of SEK 5.9billion at year-end 2002.

Dividend policy

Sapa AB’s Board of Directors adopted anew dividend policy on February 6, 2004.

“The Board’s long-term dividend poli-cy is based on the Company’s strategy ofcontinued value-generating investmentsand company acquisitions and on the rel-evant capital structure, given the risk pro-

file of the investments.The dividend policy applicable up to

now was primarily based on the net profitfor the year. Future dividend proposals willpay greater consideration to balancesheet strength and forecasted cash flows,allowing the Company to maintain anoptimum capital structure with regard tothe aforementioned factors.”

Dividend

The Board of Directors propose anincreased dividend to SEK 6.25 per share(5.50) for the fiscal year 2003. This corre-sponds to a yield of 3.5 per cent on theshare’s closing price of SEK 176.50 onDecember 30, 2003.

Owners

Sapa had 16,111 shareholders at year-end 2003. 24.6 per cent of the shares are held by Swedish shareholders and75.4 per cent by foreign. The company’slargest shareholder at year-end was ElkemASA of Norway, with 73.1 per cent of totalshares outstanding. The second largestowner was AMF Pension with 5.5 per cent,followed by Investment AB Öresund with4.1 per cent and AMF Pension fonder with3.0 per cent.

% of shares

Number out-Owners Dec 31, 2003 of shares standing

Elkem ASA 26 679 343 73.1AMF Pension 1 999 000 5.5Investment AB Öresund 1 495 300 4.1AMF Pension Fonder 1 081 200 3.0HQ Fonder 791 583 2.2Repurchases of own shares 706 030 1.9AFA Försäkring 598 391 1.6Andra AP-fonden 401 077 1.1SEB fonder 345 450 0.9Orkla ASA 197 600 0.5

The Sapa share was listed on Stockholmsbörsen (Stockholm Exchange)on May 21, 1997, when the company was distributed to the shareholdersof Electrolux. The share has been listed on the Exchange’s O-list sinceJuly 1, 2003, after listing during the first half of the year on Attract 40 – most traded companies on the O-list. Shareholders’ equity amounts toMSEK 3,880, distributed among 37.2 million shares. Each share has one vote.

Ownership structure, %

■ Foreign shareholders 75.4▼ Swedish institutions 13.6● Swedish mutual funds 6.5✖ Swedish private individuals 4.5

Ownership per country, %

■ Norway 73.7▼ Sweden 23.8● Others 2.5

■

▼

✖ ●

■

▼

●

5

Share trading

The average number of shares traded pertrading day during 2003 was 9,459, com-pared to 57,613 during 2002. During theyear, 2.36 million shares were traded, corresponding to 6.3 per cent of the totalnumber of shares.

Share repurchase

During 2003, Sapa has exercised themandate from the Annual General Meetingto repurchase up to 10 per cent of out-standing shares. Approximately 0.5 percent were repurchased, corresponding to203,700 shares, increasing the company’sown holdings to 706,030 shares, or 1.9 per cent.

Part-ownership programme

A five-year options programme for seniorexecutives was introduced in 1997, provid-ing a free annual allocation of call optionsand opportunities to acquire call optionsat market price. The options provide rightsto acquire existing shares and, according-ly, no dilution effect is created for existingshareholders. The following options havebeen allocated:

Year Number Exercise Exerciseallocated of options price, SEK year

1998 311,180 200 20031999 205,200 150 20042000 173,000 225 20052001 178,881 185 2006

Options allocated in 1998 expired at novalue during 2003. Sapa implemented apart-ownership programme in 1998 forGroup employees, divided between619,450 convertible debentures and84,100 warrants. The programme extendsthrough July 30, 2004. The conversionprice and subscription price are both SEK136. During 2003, 14,500 convertible

debentures were converted into newlyissued shares. At year-end 2003, therewere 58,400 convertible debentures and79,950 call options outstanding.

The personnel options programme forsome 60 Senior Executives that wasapproved by a Special General Meetingon February 6, 2002 resulted in the issue

of 700,000 options with an exercise priceof SEK 188. The options were allocatedfree of charge and extend through March2005.

3 000

6 000

9 000

12 000

100

150

200

250

97 98 99 00 01 02 03

Sapa shareSapa share (incl. div.)

Affärsvärlden General Index

Number of shares traded, 000s/month(including after-hours trading)

70

Sou

rce:

SIX

Number of shares Change inNumber of Debentures Number of holdings of Total Totalregistered converted, registered own shares holdings of shares

shares exercised shares during own shares outstandingon Jan 1 warrants on Dec 31 the year on Dec 31 on Dec 31

2002 36 629 408 538 250 37 167 658 440 830 502 330 36 665 3282003 37 167 658 14 500 37 182 158 203 700 706 030 36 476 128

At year-end 2003, there were 58,400 outstanding convertible debentures, 79,950 warrants and 700,000personnel options. At full conversion/exercise, they would increase the number of shares outstanding to37,314,478. However, based on the principles of RR 18, the dilution effect would amount to an increaseof only 72,582 shares.

Per-share data 2003 2002

Earnings per share, SEK 10.50 7.85Earnings per share after dilution 10.50 7.80Share price at year-end, SEK 176 160Highest share price, SEK 178 180Lowest share price, SEK 139 144Change in share price during the year, % 10 11Dividend, SEK1 6.25 5.50Yield, % 3.5 3.4Dividend/profit, % 60 71P/E ratio, multiple 16.8 20.4Shareholders’ equity per share (net worth), SEK 106.40 105.80Share price/shareholders’ equity per share, % 165 151Registered shares, millions 37.2 37.2Number of shares outstanding, millions 36.5 36.7

1 Board of Directors’ proposal

Financial analystsThe following financial analysts monitored Sapa during 2003:

Enskilda Securities Anders Trapp +46 8 522 297 57 anders.trapp@enskilda.se Hagströmer & Qviberg Johan Dahl +46 8 696 18 51 johan.dahl@hagqvi.com Kaupthing Bank Hampus Engellau +46 8 791 47 82 hampus.engellau@kaupthing.se Swedbank Markets Mats Larsson +46 8 585 925 42 mats.larsson@foreningssparbanken.se

6

This is Sapa

ProfilesSapa is one of the world’s leading suppliers within extrusion andvalue-added manufacturing of aluminium profiles. The form andfunction of profiles can be varied for use in a virtually unlimitednumber of applications. Over the past 10 years, demand for alu-minium profiles in Europe has increased by an average of 3.6 percent annually. During the same period, growth by Sapa Profileshas averaged nearly 12 per cent annually. Production and value-added operations are conducted at plants in 11 countries.

Important events during 2003

• Acquisition of Remi Claeys Aluminium of Belgium, which

has annual sales of approximately SEK 2.6 billion and about

1,100 employees.

• Decision regarding new organisation to be introduced in 2004,

with Building System as a separate area of responsibility.

• Major order from Ikea with a value of MSEK 400.

• Decision on a vertical anodising plant in Sweden,

an investment of MSEK 195.

Heat TransferSapa is one of the world’s leading manufacturers of aluminiumheat-exchange strip for the automotive industry. Heat-exchangestrip is, among others, used to produce different types of radia-tors for passenger cars and trucks. The products are manufac-tured at plants in Sweden and China. Over the past 10 years,Heat Transfer has experienced a sharp increase in demandattributable to a growing number of heat exchangers in vehiclesand demands on reduced weight.

Important events during 2003

• Record-high volume deliveries both for Swedish and Chinese

operations.

• Investment project at the production plant in Shanghai doubling

capacity.

• Acquisition of remaining 4.05 per cent of shares from minority

ownership interests in Sapa Heat Transfer (Shanghai) Ltd.

Net salesMSEK 9,554

81%

Tonnes delivered252,300 tonnes

77%

Number of employees6,720

86%

Share of Sapa

Net salesMSEK 1,995

17%

Tonnes delivered74,100 tonnes

Number of employees660

23% 8%

Share of Sapa

7

Our customers

Sapa is supplier to a large number of

customer groups whose activities follow

different business cycles. Profiles has

customers in many different sectors of

industry. Heat Transfer’s customers

consist mainly of suppliers to the

automotive industry.

Asia and rest of the world 4%

Scandinavia 21%

Western Europe 43%

Eastern Europe 6%

North America 12%

UK 14%

Our markets

Sapa’s customers operate in a large

number of geographical markets, which

contributes to a favourable spread of risk.

Construction industrywindow, door

and curtain wall(facade) systems

41%

Transport industry

cars, trucks,trains, ships

26%

Domestic and office appliances

8%

Other end products e.g. ladders,boat masts,

bicycle frames11%

Engineering industry

e.g. telecom8%

Retailers6%

Profiles83% of sales

40%

11%

10%8%

8%

6%15%1%

1%

Heat Transfer17% of sales

Sweden Denmark Poland UK Germany Netherlands Belgium France Portugal US China

Profile extrusion ● ● ● ● ● ● ● ● ●

Rolling ● ● ●

Tube welding ● ●

Anodising ● ● ● ● ● ● ● ● ●

Painting ● ● ● ● ● ● ● ●

Fabrication1 ● ● ● ● ● ● ● ● ●

Remelting ● ● ● ● ●

Building systems ● ● ● ● ●

Sales ● ● ● ● ● ● ● ● ● ● ●

Die production ● ● ● ● ● ● ●

1 Fabrication

Sales offices Estonia Finland Canada Lebanon Lithuania Norway Switzerland Slovakia Spain South Korea Czech Republic Turkey

Bending Hydroforming Melt welding Friction Stir WeldingCNC-processing

Today, Sapa is the world’s third largestmanufacturer of aluminium profiles, withspecial focus on the development of cre-ative aluminium solutions that offer cus-tomers an added value.

How has Sapa advanced from noth-ing to its present position of global lead-ership in 40 years?

Sapa spirit

It started in Vetlanda, Sweden in 1963. A few years earlier in the US, Sapa’s twofounders had recognised the businesspotential of aluminium profiles and con-ducted on-site studies of cost-effectiveand competitive production methods. Theybrought their insights home to Sweden,where they knew that customers hadstarted placing entirely new demands on

their suppliers of aluminium profiles. Speedand flexibility were the catchwords. Thelargest competitor at that time wasGränges.

The Sapa spirit was instilled in thecompany from the start. The employeeswere involved to an extent that wasunique in those days and, right from thestart, Sapa worked in close co-operationwith its customers. The company kept itspromises, with profitability as its guidinglight. The courage of the two entrepreneurs,their feeling for the market and sales and,in particular, their total confidence in theindividual have been important factors inthe company’s success.

Some milestones

After a long period of steady organic

growth, a large step forward was taken in1976, when Sapa was sold to Grängesand the profiles operations of both com-panies were merged. Sales and labourforce both doubled.

Gränges, in turn, was acquired byElectrolux in 1980, which triggered thestart of rapid international expansion ofthe profile operations. In 1997, Electroluxmade a decision to spin off Gränges toits shareholders, and Gränges became anindependent public company.

During the next few years, Grängesstreamlined its operations. The aluminiumprofile operations became the backboneof the organisation and, as a result, thename of the Group was changed to Sapain 2000. Today, Sapa is an internationalcompany specialised in value-added alu-minium profiles, building systems andaluminium heat-exchange strip, with 7,800 employees in 25 countries.

Today’s challenge

There is no doubt that a very large part of Sapa’s success lies in its corporateculture, and different ownership relationsthrough the years have preserved, nur-tured and developed this culture. Ourcontinued success will depend on ourability to combine the Sapa spirit with the collective strength of our internationalgroup.

Sapa celebrated its 40th anniversary during 2003. Not a particularlyremarkable age for an industrial company. Sapa is rather the exceptionfrom the Swedish industrial tradition. We are one of only a few com-panies established in Sweden after World War II with the inherentstrength to develop into a global company.

40 years of entrepreneurial spirit

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The first components for this 53-tonne heavy press were delivered in March 1963. The officialinauguration was held two months later, in May.

Goals

To offer an attractive investment forexisting and potential shareholdersby offering favourable value growthand increased dividends. Sapa shallbe an attractive, environmentally conscious, ethical and equal-oppor-tunity employer. This is a prerequisitefor our ability to create added valuefor our customers and shareholders.

Sapa’s goals over a business cycle

–Annual growth of 10% (of which 6% organic growth and 4% via acquisitions)

–Operating margin (EBIT) of 8%–Return on capital employed (ROCE)

of 18%–Return on equity (ROE) of 18%–Net margin of 5%

Business conceptStrategy

Business concept

To offer the market innovative, value-enhancing solutions based on profilesand strip in the lightweight materialaluminium.

Strategy

Sapa shall be perceived as the mostattractive partner through a combi-nation of innovation, business know-how and cost effectiveness.

Profitable growth shall beachieved by co-operating closely withcustomers to develop new applica-tions and create added value. Costand capital efficiency in all aspects ofoperations will secure Sapa’s com-petitiveness. Good organic growth iscomplemented by strategic acquisi-tions of companies that furtherstrengthen our market positions.

Core values

Entrepreneurial spirit

To recognise the opportunities in a business venture and have theability to make it profitable, whilerecognising the risk. Sapa supportsand encourages the entrepreneurialspirit of its employees.

Innovative focus

To identify intelligent solutions toproblems and opportunities. Thisinnovative focus must be based on an innovative and creative work environment.

Commitment

To maintain a constant commitmentby all Sapa employees that enablesthem to meet the demands of ourcustomers and other stakeholders.

Customer-orientation

To realise that everything we do is based on customer orientation.Meeting customer and marketdemands is the only way to demon-strate the true commercial value ofour operations.

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Goals over a 5-year Outcome

Financial goals business cycle average 2003

Growth, % 10 11 1 14.0

Operating margin, % 8 6 5.4

Return on capital employed (ROCE), % 18 14 11.5

Return on equity (ROE), % 18 15 10.0

Net margin 5 4 3.21Sapa Group’s present structure.Growth is measured based on value-added to minimise the effects of fluctuating raw-material prices

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Aluminium is the basic material for Sapa’sthree core operations: Profiles, BuildingSystem and Heat Transfer. Historically,growth in demand for aluminium productshas exceeded GDP-growth. During thepast decade, demand in Europe increasedby an average of 3.6 per cent annually.Sapa’s growth during the same periodhas significantly exceeded underlyingmarket growth, averaging 10 per centannually over the past 10 years. There isa distinct correlation between aluminium

consumption and industrial growth. Theworld’s highly industrialised countrieshave a significantly higher per-capita consumption of aluminium and the higherthe proportion of value-added industry,the greater the demand for aluminiumproducts. As a result, Sapa sees signifi-cant growth potential in Eastern Europeand Asia, both of which represent strate-gic markets for Sapa. There are alsoregional differences in demand patterns.In southern Europe, for example, alumini-um is used more widely for building com-ponents such as windows, doors and building facades, compared with theScandinavian countries.Aveiro Stadium in Portugal. Building systems from Sapa for Euro 2004.

Sapa’s products markets and competitors

Asia and rest of the world 4%

Scandinavia 21%

Western Europe 43%

Eastern Europe 6%

North America 12%

UK 14%

Sapa is a supplier to a large number of customer groups whose operations follow different business cycles. Profiles has customers in many different sectors of industry, ranging from small local com-panies to large global groups. Heat Transfer has fewer customersconsisting mainly of suppliers to the automotive industry. Sapa’s customers are also dispersed over a large number of geographical markets, which contributes to a favourable spread of risk.

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Consumption of aluminium profiles inEurope during 2003 amounted to 2.4 mil-lion tonnes, largely unchanged comparedwith 2002; consumption in North America(the US and Canada) amounted to 1.7 mil-lion tonnes, the same level as 2002. Themarket shares of Sapa Profiles in Europevary from slightly less than 50 per cent inSweden to 5 per cent in Germany. Sapa’smarket share in North America is 2.5 percent.

The global market for heat-exchangestrip amounted to about 0.5 million tonnesin 2003, of which Sapa Heat Transfer’sshare was about 15 per cent.

The transport industryaccounts for about 26 percent of Sapa’s sales.Passenger cars and heavy

vehicles (trucks and busses) account fornearly 90 per cent of Sapa’s sales to thetransport industry. The remaining 10 percent consists of deliveries to MassTransportation, which in Sapa’s case, per-tains to boats and trains. The transportindustry has been the largest end-user ofaluminium products for many years, andthe percentage of aluminium in transportvehicles continues to increase at theexpense of heavier materials. The per-centage of aluminium in a passenger cartoday amounts to about 14 per cent, cor-responding to 130 kg. This percentage isexpected to increase to 150 kg over thenext five years. Other sectors of the trans-port industry are also expected to show asimilar trend, resulting in much fastergrowth in demand for aluminium productsthan demand from the transport industryin general. Sapa supplies both extrudedand rolled products to the transport industry.Examples of products from Sapa Profilesinclude engine components, roof racks,seat rails, side-panels for trains and shipdecks. Sapa Heat Transfer produces stripfor heat exchangers used in radiators andair conditioning units.

The construction industryaccounts for about 41 percent of Sapa’s sales. Theuse of aluminium in the

construction industry shows favourablegrowth. Over the past decade, demand inEurope has increased by an average ofabout 3 per cent annually. Aluminium ishighly suitable as a construction materialbecause of its low weight, great strengthand limited maintenance requirements.Aluminium extrusion technology also sup-ports a high degree of flexibility in archi-tectural solutions and designs. Sapaworks actively with architects and design-ers to support the use of aluminium pro-files in the construction industry and todevelop new solutions. Applications forthe construction industry, so-called build-ing systems, are used for many differentpurposes, mainly windows, doors andfacades. Other applications include con-servatories, balcony railings, ceilings andshutters. Sapa conducts developmentand sales activities for building systemsin most of the countries where we haveoperations and also offers a broad andlocally adapted product range. Sapa’sown building systems account for about50 per cent of Sapa’s total sales to theconstruction industry. Effective in 2004,Building System is organised as a sepa-rate area of responsibility.

The engineering industry,which accounts for 8 percent of Sapa’s sales, is alsoa rapid-growth market for

applications of aluminium profiles. Thepercentage of value-added aluminiumprofiles is increasing constantly, and Sapahas and will continue to increase itscapacity for profiles fabrication, includingbending, joining, drilling, milling andassembly of input components. Thelargest growth potential lies in electronics,exemplified by applications in power sup-ply, including transformers and switch-

boards, and in telecommunications, areasin which Sapa supplies value-added aluminium profiles for cooling and heatconduction in base stations for mobiletelecommunications. Other productsinclude applications for robots and trans-port systems.

Domestic and Office hasbecome an increasinglyimportant market for Sapaduring recent years,

accounting for 8 per cent of total sales.The furniture industry sees aluminium pro-files as a modern material that offersopportunities to create timeless products,an area in which extrusions also provideflexibility in function and design. Otherapplications include shower cabins, flexi-ble interior fitting systems, loudspeakers,stands for electronic equipment andsolariums.

Retailers account for 6 percent of Sapa’s sales. Most ofthe products are relativelystandardised aluminium pro-

files with a low value-added margin.

Other end products, whichaccount for 11 per cent ofsales, comprise niche mar-kets for products such as

ladders, boat masts and bicycle frames.Sapa’s ability to work in close co-opera-tion with customers in this sector to cre-ate new, improved and more effectivesolutions is important.

Furniture or art? The art is in its creation. Sapa aluminium profiles in STING from Blå Station.

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Market and competitors

For a long time, most markets in WesternEurope have had, and still have, a pro-duction overcapacity for aluminium pro-files and rolled aluminium products. At the same time, the markets in WesternEurope and the US havefaced increased competi-tion from exports fromlow-cost countries in Asia and Eastern Europe.This confirms the accuracyof Sapa’s strategy toincrease the value-addedcontent of its products,work in close co-operationwith customers, utilisethe Group’s full technicalresources and cost-opti-mise the Group’s produc-

tion resources. Despite several structuraltransactions during recent years, the alu-minium profile industry is fragmented,with only a few major suppliers and alarge number of small and midsize play-ers. As a result, there is still significantpotential for more structural transactions,both in Europe and the US. From havingbeen basically a local business, profileoperations have become increasinglyglobal as customers have grown andexpanded geographically. The complexityof the products has also increased, andcustomers are now demanding that sup-pliers take part in the developmentprocess. These increased demands aredriving structural change in the industrywith the goal of achieving synergy effectsfocused mainly on production, R&D andmarketing. Producers of aluminium profilesare either integrated in large industrialgroups, that often have their own produc-tion of aluminium metal or, as in the caseof Sapa, independent companies that buy

aluminium metal as their input goods.With an annual production capacity of335,000 tonnes, Sapa is the world’s thirdlargest manufacturer of aluminium profilesand the largest independent manufactur-er. Alcoa of the US, with a productioncapacity of about 950,000 tonnes, is the

Sapa is the US market’s largest supplier of specially manufactured bicycle frames. Sapa extruded and fabricated both the mainframe and the mounted saddle for the Bigha bike.

Sapa profiles are used in parts and compo-nents such as fuel-distribution pipes, enginebearings, roof racks, dashboard panelling, seatrails, airbag housings, air charge pipes, seat-back frames for Volvo cars and other brands.

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Production capacity, tonnes

Sapa Profiles in the new generationof loudspeaker housings and loud-speaker stands from Sony.

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largest manufacturer. Norsk Hydro is sec-ond with 670,000 tonnes, followed byAlcan of Canada, which acquired a major-ity shareholding in Pechiney of France in2003, increasing their combined produc-tion capacity to 330,000 tonnes. The totalproduction capacity of the five largestmanufacturers corresponded to slightlymore than 60 per cent of consumption inEurope and North America in 2003.

Although the overall market for rolledproducts is also characterised by signifi-cant overcapacity, this does not hold trueof Sapa Heat Transfer, which has chosento specialise in the niche market for heat-exchange strip used in heat exchangers,primarily for the automotive industry. The

market for heat-exchange strip, which wasalso characterised in the past by pricepressure due to overcapacity, has estab-lished a better balance between supplyand demand during recent years throughcutbacks in production capacity and othermeasures.

Sapa Heat Transfer is the world’sthird largest player in the heat-exchangestrip sector. Its main competitors in termsof size are Corus, Alcan, Hydro and Alcoa,all of which are integrated aluminiumcompanies. The five largest manufacturersaccount for a combined total of approxi-mately 75 per cent of global production.

Sapa building systems in glass roof panels that rise from the flat, naturally grass-covered roof.

Sapa’s profiles in wind shelters inNottingham, England.

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Largest manufacturers ofheat-exchange strip, tonnes

Radiators, evaporators, air-intakecoolers and condensers – all withheat-exchange strip from Sapa.

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This increased scope of operations, com-bined with the greater size of buildingsystems operations, has placed newdemands on the organisation. Accordingly,a decision was made in 2003 to introducea new organisational structure, effective in2004, with Building System as a separatecore operation.

Building System

The acquisition of Remi Claeys Aluminiumprovided geographic and market positionsthat, combined with Sapa’s existing oper-ations, place Sapa among Europe’s threelargest suppliers of building systemsbased on aluminium profiles. The mergedbuilding operations have doubled thescope of Sapa’s building systems opera-tion. The geographic coverage was alsoincreased significantly, since only a fewgeographical markets were overlapped.As a result, Building System gained strongmarket positions, particularly in the Beneluxcountries, France and Germany.

The addition of Remi Claeys System

provides Sapa’s building systems opera-tion with such an extensive scope thatSapa is now able to improve its utilisationof the Group’s size and commonresources by strengthening the coordina-tion of activities between the companies.

The markets for building systems are,by their nature, mainly local, since theyare governed by local regulations andbuilding standards. During recent years,however, a growing international regulato-ry code, driven primarily by the European

Union, has increased demands on inter-national coordination. A new and coordi-nated organisational structure providesSapa with greater business opportunitiesthrough improved potential to developtechnical solutions and products adaptedto a larger and broader European market.It also creates better potential for syner-gies within purchasing, marketing, salesand IT.

The objective is that Sapa BuildingSystem, through the new organisation, willfurther strengthen its positions and createopportunities to grow both within existingmarkets and in new geographic regions.The goal is to provide the market aseffectively as possible with well developedsystems and products, thereby offering a tangible added value for the customer – a strong business partner for the con-struction industry.

Sapa has acquired four aluminium profile companies over the past fiveyears, doubling total sales volumes. Three of the acquired companieshave comprehensive operations in building systems. The acquisition ofRemi Claeys Aluminium, Sapa’s largest acquisition to date, increasedSapa’s net sales by 20 per cent and doubled the scope of its buildingsystems operations.

Organisationand control model

Sapa’s acquisitions 1999-2003

1999 – Intexalu of France (profiles) and Aluvar (building systems)2000 – Anodil of Portugal (profiles and building systems)

Anodizing of the US (profiles)2003 – Remi Claeys Aluminium of Belgium (profiles, building systems

and welded tubing)

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The new organisation

Sapa’s new organisation has three coreoperations: Sapa Profiles, Sapa BuildingSystem and Sapa Heat Transfer. To man-age the geographic spread within Profilesand optimise utilisation of the Group’smanagement resources, the responsibilityfor Sapa Profiles has been divided amongfour members of the Group management.To support the development of importantcustomer segments, Profiles has twoStrategic Business Segments, SapaAutomotive and Sapa Mass Transportation.

Sapa’s organisation is structured tocombine a broad control area comprisingall operating units, with Strategic BusinessSegments to support the development ofimportant customer segments and pro-vide better utilisation of the Group’s com-mon resources.

In addition to the President and CEO,Group management includes representa-tives of the three core operations andGroup functions. The operating units inthe three core operations report directly toGroup management. An organisation withshort decision-making channels will ensurethat managers in the operating unitsreceive support in the business process

and effective access to the Group’s col-lective resources.

Decentralised responsibility hasalways been a catchword for Sapa, and it applies strongly also to the new organi-

sation. Responsibility for business opera-tions and the detailed strategy lies withthe local company managers, which com-plies with the fundamental approach thathas characterised Sapa through the years,that values are created in the local oper-ating units. The realisation that local con-ditions vary and change quickly has builtup a firm conviction that a large part ofdecision-making should be conductedlocally. Current trends, however, are shift-ing toward a more global business world,which places new demands on theorganisation, with greater coordination ofmarketing and sales, development opera-tions and production resources.

Sapa Heat Transfer produces aluminium heat-exchange strip for the automotive industry.

CNC-processing of air coolers for thetelecom industry at Sapa’s fabricationplant in Finspång, Sweden.

Testing of windows based on buildingsystems from Sapa RC System inLichtervelde, Belgium.

Sapa Technology is financed by the differ-ent companies within the Sapa Group. Thisprovides the R&D operations with a formof close partnership between the operatingunits and Sapa Technology. The structure,in turn, ensures that R&D operations haverelevance to the market and that all employ-ees work toward the same objectives.

Outside the laboratory’s doors…

Sapa’s fundamental concept is to createadded value for its customers. Accordingly,Sapa Technology plays an important role

in the technical salesprocess in

the field. This involves entering businessdiscussions with customers at an earlystage, preferably in the initial planningphase. It is also a question of creating afruitful dialogue with the customer’s engi-neers and designers.

This helps to create a clear under-standing of the customer’s problems andchallenges, which enables Sapa to focusits R&D work on efforts that quickly yieldpractical results in the marketplace.

… and inside

The specialists at Sapa Technology haveexcellent resources at their disposal.Sapa’s R&D centre is well equipped. It

contains laboratories for

metallurgy, corrosion, chemical analysesand mechanical testing. Comprehensiveresources are also available for simula-tions both in computers and differenttypes of laboratory equipment. Amongother facilities, Sapa Technology has pilotplants for the simulation of soldering, cor-rosion and cooling.

Sapa Technology also conductsextensive programmes of co-operationwith universities and research institutes,with particular emphasis on more long-term activities.

In the following sections, we describe some current projects that Sapa Technology is involved in today.

Bending profiles is a delicate art

Bending complex aluminium profiles isa form of processing

The centre for Sapa’s R&D operations is situated in Finspång, Sweden.Sapa Technology has 45 specialists with backgrounds primarily in mate-rials technology, engineering physics and chemistry. About 10 of themare Doctors of Technology. Sapa Technology’s principal function is toprovide support for the Group’s operations, in terms of both existing and new businesses.

Research and Development with close ties to business operations

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Sapa Technology optimises the usage of material for FSW-welded side panels, which will be supplied to BombardierTransportation for new underground metro cars for London.

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with a growing demand from customers.Bending creates special design ques-tions. What happens to the profile geom-etry? How is the material strength affect-ed? Sapa Technology is on the cuttingedge of technology to provide answers tothese types of questions and has for thispurpose developed computer pro-grammes that make it easier to simulatewhat happens during different types ofbending. The work is conducted in closeco-operation with Sapa Profilbockning inVetlanda, Sweden, which specialises inbending and other shaping of aluminiumprofiles.

Development of the hydroformingprocess, a method that creates differentcross-sections over the length of a bentprofile, is an important spin-off from SapaTechnology’s basic research work onshaping aluminium profiles. Sapa hasundeniably a spearhead expertise inbending and shaping profiles.

Perfect cooling

The favourable heat-conduction propertiesof aluminium are utilised in the telecomindustry, for example. Different types ofelectronic components often generatevery large quantities of heat, which mustbe conducted effectively.

Sapa has many years of practicalexperience as a manufacturer of profilesfor heat conduction applications. SapaTechnology has extensive resources thatcan be used to monitor the variouschanges that occur in an aluminium pro-

file when it is exposed to heat. Via com-puter simulation and wind tunnels, theflow of heat can be analysed in detail.With this background information, Sapa isable to offer customers an optimallydesigned product.

New opportunities in Friction Stir Welding

Joining aluminium profiles is yet anotherimportant stage of value-added process-ing. Friction Stir Welding (FSW) is a highlyeffective joining alternative. FSW, an areain which Sapa has developed sophisticat-ed skills, has revolutionised the use ofaluminium profiles in many ways. Themethod produces a virtually invisiblewelding seam with higher strength andsealing against penetration than tradition-al melt welding. It also provides improvedflatness across the structure, which supports the production of much widerpanels for applications in the railway and ship-building industries, for example.

Sapa Technology works continuouslyon further development of the method,including efforts to increase the weldingspeed and, in turn, productivity, and thedevelopment of new FSW applications.

Continued development in

Heat-exchange strip

R&D activities for Sapa Heat Transfer’sheat-exchange strip represent an impor-tant part of Sapa Technology’s work inthis area. Activities are often focused onthe specific properties of the metal and

processes applied to achieve these prop-erties.

Current projects include the develop-ment of new aluminium alloys that fulfilconstantly changing and increasing cus-tomer demands. Other important effortsare focused on improvements in thematerial’s soldering properties that willenable customers to increase the efficien-cy of their production processes and, inturn, achieve greater cost effectiveness.

The work is conducted in close co-operation with Sapa Heat Transfer’s keycustomers as part of determined effortsto offer solutions that can be integratedeasily in the customer’s productionprocess.

A material of the future

It was only slightly more than 100 yearsago that industrial-scale production ofaluminium was made possible.Accordingly, this is a young technologyand much remains to be discovered anddeveloped. Sapa Technology has spear-head skills and expertise that will contin-ue to enable Sapa to meet the futuredemands of its customers and offer a dis-tinct added value.

Chambers for testing the effects of corrosion.

Cross-section of a friction-stir-welded seam.

Heat simulation of a cooling profile.

Welding seam between tube and strip loopin a car radiator.

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It is Sapa’s policy to conduct operationsin a safe and responsible manner withrespect to people’s health and the envi-ronment. We regard sustainable develop-ment as a basic requirement for futuregrowth. These issues are thereforeassigned the same high priority as, forexample, growth and profitability.

The policy is based on a set of val-ues and principles:

• All of our industrial operations shall becharacterised by a long-term responsi-bility for people and the environment,with an economic utilisation ofresources. The goal is to utilise the besttechnologies available.

• We shall capitalise on our entrepreneur-ial spirit and creativity to find alternativesolutions that lead to fewer work-relat-ed injuries, reduced effects on the envi-ronment and lower consumption of rawmaterials and energy.

• Naturally, we shall adhere to existinglegislation and regulations, although ourtargets extend beyond the legal require-ments.

• As a fundamental part of Sapa’s envi-ronment, health and safety efforts, anumber of key figures are measuredand evaluated continuously and treatedwith the same importance and attentionas financial key figures.

• We shall train and educate our employ-ees so that all personnel can contributeactively to environment, health andsafety work, which is a basic require-ment for continued development andimprovement.

• The internal and external informationthat we produce for employees, cus-tomers, shareholders and other stake-holders shall be characterised by open-ness and accuracy.

Sapa’s policy for the environment, healthand safety has been adopted by Sapa’sGroup management. Formal responsibilityfor the policy lies with the local companymanagement, and it is each companymanager’s responsibility to apply the policy locally.

Environmental management system

Sapa’s Environmental, Health and SafetyCouncil handles Group-wide environmen-tal issues and serves as a platform forcoordinating and communicating environ-mental work internally and for the infor-mation of investors and the media. Withinthe framework of this Council, knowledgeand experience is exchanged to promotehighly functional and effective develop-ment of our environmental work. Sapa’sEnvironmental Platform, one of the

Council’s tools, is an internal report ofevery Group company’s processes, opera-tions subject to permits and programmesof measures. The report includes statisticsthat show actual emissions to air, soil andwaterways. An estimate is also made ofthe total carbon dioxide effect of theoperations. The report, which is updatedannually, was distributed for the first timein 2001 and enables the Group to quanti-fy and monitor concrete goals. It is also atool for benchmarking and spread of bestpractice.

All Group units in Sweden and agrowing number of units outside Swedenare certified in accordance with the envi-ronmental management system ISO 14001.

Continuous improvement work

Through efforts to continuously upgradeour production plants with new technolo-gies, we are able to reduce the impact ofour operations on the external environ-ment and improve the work environment.During 2003, a decision was made toinvest in a new vertical anodising plant inVetlanda, Sweden. This is not a directenvironmental investment but, supportedby new technology, it will generate signifi-cant favourable effects on both the exter-nal and internal environment.

Sapa devotes a great deal of attention to questions concerning the environment. Our environmental work is focused on the impact of Sapa’soperations on the external environment, but also the internal work envi-ronment in our plants, which, in turn, affects the health and safety of our employees. In 2002, Sapa’s Environmental Council, which was estab-lished in 1999, expanded its mandate to include Health and Safety. Thework within the Council is conducted in a work group with representa-tives from the entire Group.

With focus on the environmentwork environment and our employees

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Sapa in Denmark reduced the effectsof its emissions into waterways during2003 by switching to alternative anodis-ing chemicals, which also created certainfinancial advantages.

The production processes alwaysgenerate a certain amount of scrap, whichis recovered and recycled through re-melt-ing. Although the re-melting process isenergy efficient, reduced production scrapwould lower Sapa’s energy consumption,lower the environmental impact andreduce operating costs. Accordingly, con-tinuous efforts to enhance the efficiencyof the production processes by reducingthe amount of scrap form a priority itemon the agenda. One example is SapaHeat Transfer’s large upgrade investmentin Finspång, Sweden, which was placedin full-scale operations during the year,corresponding well to expectations interms of a higher production yield.

The basic material in Sapa’s productsis the lightweight material aluminium, andproduct applications are therefore, by theirnature, energy efficient. This means thatan end-product saves more than it con-sumes. For example, an aluminium appli-cation for a car, which compared with atraditional application using a heaviermaterial, thanks to its lower weight, pro-vides energy savings several times duringthe lifespan of the car. Aluminium can berecycled without any loss in the material’sproperties. The energy required to re-meltthe material amounts to only 5 per centof that used to produce new aluminium.Sapa produces new raw materials by re-melting process waste metals, but alsosupplements the process with scrapmetal procurements. Re-melting is bothprofitable and energy efficient.

Health and Safety

A well functioning company must have agood work environment. The health andsafety of employees is a key factor. All

industrial operations involve some risks,and accidents and incidents will alwaysoccur, but we believe that pro-active pre-ventive work can eliminate virtually all ofthese. The importance we assign to thiswork was underlined by the fact thatHealth and Safety was included as a fixeditem on the agenda for the Board ofDirectors during 2003. The monthly acci-dent and incident report shows a largespread between best and worst in theGroup, and a substantial potential forimprovement. During 2003, the Groupreported 28 accidents and/or incidentsper million working hours, compared with30 during 2002. We are not at all satis-fied with this figure, but a significantimprovement was noted during the latterpart of 2003.

Our employees

Sapa strives to be an attractive employer.To achieve our goal, we must succeed inefforts to recruit, retain and develop highlyqualified employees.

The recruitment process is ongoingcontinuously. An important part of the pro-gramme is to market and create the knowl-edge that Sapa is an interesting employerwith good development opportunities. Wesupport these efforts by actively partici-pating in labour market days at collegesand universities. During 2003, Sapa wasrepresented in Linköping, Uppsala andStockholm. By sponsoring secondaryschools and university colleges as well asdoctoral projects, we establish Sapa’sname and increase knowledge about theopportunities offered by aluminium.

Employees of Sapa shall be stimu-lated and afforded personal developmentopportunities. For this reason, Sapa conducts both Group-wide and local programmes for employee training andeducation.

Sapa Academy is the Sapa Group’sinternal training and career development

programme that was established to createa forum for training management person-nel and future managers. The programmeincludes both general and Sapa-specificareas. During 2003, 25 employees gradu-ated from Sapa Academy, which wasfounded in the spring of 2000. Sincethen, 124 Sapa employees have attendedthe Academy.

Continuous training programmes are

conducted in several Group subsidiaries.

Sapa’s first Group-wide intranet waslaunched during 2003. This tool is intend-ed to increase all employees’ understand-ing of our operations, core values andgoals, create a sense of belonging andsupport the transfer of knowledge. Theintranet also offers an internal job centrewhere vacancies throughout the Groupare published. Sapa works actively to pro-vide employees with alternative jobopportunities in the Group. Exchanges ofpersonnel between operating units offerfavourable opportunities for individualdevelopment, while also contributing tothe transfer of knowledge.

During 2003, Sapa sponsored a project called “SNS project for promotingwomen in business”, which was conduct-ed by the Centre for Business and PolicyStudies. Internally, the project has initiallyincluded Sapa’s companies in Sweden,where women account for only 16 of 182management positions, or 9 per cent.This could be compared with the femaleshare of employees, which is 21 per cent.Sapa’s goal is to increase the share offemale managers.

Ulrika Molander is a member of Sapa Profiler AB’s management team. Ulrika was Sapa’s first female plant manager.

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Strong improvement in profit

Consolidated net sales in 2003 amountedto MSEK 11,803 (11,090), an increase of6 per cent. Sales were impacted nega-tively by translation effects due to thestrengthening of the Swedish krona.Excluding exchange-rate effects, consoli-dated net sales increased by 11 per cent.Net sales were also negatively affectedby the weakening of the US dollar in rela-tion to European currencies, which result-ed in a lower aluminium metal price and,in turn, lower sales prices. RCA, whichwas acquired on June 23, contributedapproximately MSEK 1,250 to net sales.

Delivered volumes of aluminiumproducts increased by 15 per cent, of

which RCA accounted for 11 percentagepoints. Profiles in Europe was affected bythe weak economy and, in terms of vol-umes, the market was largely unchanged.Profiles in Poland showed favourable vol-ume growth and increased value-addedoperations. The markets in the Beneluxcountries and France were among thosethat performed relatively well, particularlyin the construction sector. A sharp declinewas noted in the construction market inPortugal. Sapa Profiles in Europe is believedto have defended its overall market share.

Despite virtually unchanged volumesin the North American profiles market,Sapa Inc. increased its market sharesthrough an increase in volumes amount-

ing to nearly 7 per cent. The private hous-ing market was strong, impactedfavourably by prevailing low interest rates,while the commercial construction sectorremained weak.

Demand for heat-exchanger materialswas strong in all markets, and Sapa HeatTransfer reported favourable volumegrowth during the year. Heat Transfer’soperations in China benefit from stronggrowth in the local automotive market andvolumes increased by 38 per cent.

Operating profit rose by 33 per centto MSEK 641 (483). Exchange-rate effectsfrom translations to SEK had a negativeeffect of MSEK 37, corresponding to 8 percent. Excluding exchange-rate effects,

A continued sharp improvement in operating profit was seen in 2003.Earnings per share increased by 34 per cent to SEK 10.50 (7.85). Belgiangroup Remi Claeys Aluminium (RCA) was acquired during 2003 for apurchase price of MEUR 156, Sapa’s largest acquisition to date. Despitethe acquisition of RCA, the Sapa Group has a strong financial position,with a debt/equity ratio of 0.54 and an equity/assets ratio of 42 percent at year-end 2003.

The past year

Operating profit, MSEK1, 2

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0302010099981 Sapa, present structure2 Excluding non-recurring items, see page 52.

21

operating profit increased by 40 per cent.The operating margin continued to improveand increased to 5.4 per cent (4.4), andreturn on capital employed rose to nearly12 per cent. Profit development for RCAwas well in line with expectations, and allRCA business units made positive contri-butions to profit. Profiles in Poland report-ed a favourable earnings development, asdid Profiles in the US, which reported asignificant improvement in earningsdenominated in USD. Heat Transfer alsoshowed a favourable development inearnings. The difficult market conditions inPortugal led to a sharp decline in earningsby Sapa Portugal, where an action pro-gramme is now in progress to restoreprofitability to a satisfactory level.

The financial net for the year amount-ed to an expense of MSEK 81 (expense:56). The acquisition of RCA, which initiallyincreased net debt with MSEK 1,400, ledto an increase of MSEK 24 in interestexpenses during 2003. Despite theacquisition, the Group’s net debt at year-end 2003 was only MSEK 2,100 (1,088).The favourable level of net debt is to alarge extent due to the strengthening ofthe Swedish krona, but a strong cash flowalso helped to amortise net debt.

Profit before tax increased by 31 percent to MSEK 559 (427). After taxexpenses of MSEK 175 (142), correspon-ding to 31 per cent (33), net profit for theyear amounted to MSEK 383 (285).Earnings per share rose to SEK 10.50(7.85), an increase of 34 per cent.

New business

Sapa Profiler AB booked another largeorder from Ikea during 2003. Valued atMSEK 400, it is the largest order in SapaProfiler’s 40-year history. During the pastdecade, Sapa’s co-operation with Ikeahas been successively strengthened andintensified. Surface treated aluminiumprofiles from Sapa are used in the sup-

porting design of a completely new interi-or design product line that will be intro-duced by Ikea in its 2004 catalogue. Theorder doubles Sapa’s sales to Ikea.

Sapa also booked an important orderfrom Sony during the year. The order pro-longs the existing co-operation betweenSony and Sapa. Value-added aluminiumprofiles from Sapa with a special surfacefinish will be used as components for thenew generation of loudspeaker housingsand loudspeaker stands. The componentswill be produced and delivered by Sapain Poland, which is the only aluminiumprofile manufacturer in Europe certified inaccordance with the Sony Green PartnerCertificate.

Active investments

Sapa’s largest acquisition to date wascompleted in 2003. Remi Claeys Aluminium,one of Europe’s largest producers of alu-minium profiles, aluminium profile basedsystems and welded aluminium tubing,strengthens and complements Sapa’spositions in the areas of profiles, buildingsystems and heat-exchanger materials.The acquisition also strengthens Sapa’smarket positions, particularly in theBenelux countries, France and Germany.

Sapa continued to expand its busi-ness operations in China during 2003with the start-up of a unit for fabrication ofaluminium profiles in Shanghai. The oper-ations were started at year-end 2003 andwill initially employ some 20 persons. Theexpansion is a part of Sapa’s strategy togrow also outside Europe. China is astrategic market with substantial growthpotential.

Sapa has been represented inLithuania since 1998 through a salesoffice. During 2003, the Group’s presencein this interesting growth market wasstrengthened by a decision to establish a unit for the production of componentsbased on aluminium profiles. Several of

Sapa’s customers are establishing pro-duction operations in Lithuania, and Sapahas elected to follow them by starting itsown production unit. The operations areexpected to begin during the first quarterof 2004 and will initially employ about 20persons.

Sapa Heat Transfer Shanghai initiatedan investment project in the beginning of2003 that will double its productioncapacity to about 20,000 tonnes per yearwhen completed. In the beginning of2004, another decision was announcedto further increase the capacity of SapaHeat Transfer Shanghai. An investment of MSEK 132 will be implemented withintwo years that will increase the compa-ny’s annual capacity to 44,000 tonnes. Inthe first quarter of 2003, Sapa becamethe sole owner of all shares through itsacquisition of the remaining 4.05-per centminority shareholding in the company.

In November 2003, a decision wasmade to invest MSEK 195 in a verticalanodising plant at Sapa Profiles in Vetlanda,Sweden. The market for anodised alumi-nium profiles has shown favourable growthfor several years. The investment willmeet increased customer demands onquality and service. Investments in a newand modern surface treatment techniquewill generate a sharp improvement inoperating efficiency, as well as significantimprovements in the work environment.The new plant is expected to be placedin operation during the first half of 2006,when production at the existing plants willbe transferred gradually to the new facility.

Cash flow after investments, excl. acquisitions/divestments, MSEK

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22

Board of Directors’ Report

Sapa AB Board of Directors’ ReportRegistered company number 556001-6122

Sapa is an international industrial groupthat develops, manufactures and marketshighly processed aluminium profiles andheat exchanger strip made of aluminium.Operations are focused on industrial sec-tors that have good growth potential anda high degree of technology and knowl-edge.

During 2003, Sapa has been organ-ised in accordance with the core opera-tions Profiles and Heat Transfer. To supportthe development of important customersegments, Profiles includes the strategicbusiness segments Sapa Automotive andSapa Mass Transportation. Building System,that formed the third Strategic BusinessSegment is, effective 2004, organised asa separate area of responsibility andforms Sapa’s third core operation. This isa consequence of the acquisition of RemiClaeys Aluminium, which resulted in asubstantial increase in the scope of Sapa’sbuilding-systems operations. The man-agers of the companies in the areas ofresponsibility report directly to the GroupManagement.

The Parent Company, Sapa AB, com-prises Group Management and Groupfunctions that support the areas ofresponsibility with centralised services infinancing, control, accounting, taxation,legal matters and communications. TheParent Company provides tools and serv-ices for various forms of benchmarkingand conducts Group-wide research anddevelopment through Sapa Technology.

On commission from Sapa AB, SapaIndustriservice AB provides transport andlogistics services, mechanical design andmaintenance work and construction oncontract. The company also handles com-mon infrastructure matters for the industri-al sites in Finspång and Skultuna, inSweden. More than half of the company’snet sales originate from customers out-side the Sapa Group.

Sapa AB is a part-owned subsidiaryof Elkem Sweden AB, which is part of theElkem Group of Norway. The parent com-pany of that group is Elkem ASA, whichhas its registered offices in Oslo.

AcquisitionsOn June 23, 2003, 62.41 per cent of theshares in Belgian group Remi ClaeysAluminium (RCA) were acquired. Followinga public bidding procedure, the remainderof the shares were acquired during thelatter half of the year. Sapa paid MEUR76 for the shares in RCA, which hasentailed goodwill of approximately MEUR20, to be amortised over 20 years. Theacquired capital employed in RCA, includ-ing goodwill, amounts to MEUR 156, andthe acquired net debt to slightly morethan MEUR 80.

RCA is one of Europe’s largest pro-ducers of aluminium profiles, systemsbased on aluminium profiles and weldedaluminium tubing. Operations are locatedprimarily in the Benelux countries, Franceand Germany. The RCA group’s sales for2003 amounted to approximately MEUR280 and the group has slightly less than1,100 employees. Remi Claeys Aluminium’soperations suit Sapa’s strategic focus welland complement the Group’s positions inthe areas of profiles, building systemsand heat-exchanger materials. The acqui-sition also strengthens Sapa’s marketposition, primarily in the Benelux countries,France and Germany. RCA is consolidatedeffective June 23 and contributed approx-imately MSEK 1,250 to the Sapa Group’ssales during 2003.

During the first quarter, the remaining4.05-per cent minority shareholding inSapa Heat Transfer (Shanghai) Ltd wasacquired. The purchase price amountedto MSEK 6.3, compared with a book valuefor the minority interest of MSEK 4.2.

Investments

Total new and replacement investmentsamounted to MSEK 352 (303). For thecorresponding period, depreciation(excluding goodwill amortisation) amount-ed to MSEK 420 (385). During the year,an upgrading of RCA’s large press wascommenced. A logistics project at one ofthe French companies was completed.Sapa Profiles increased its fabricationcapacity through investments in Polandand China. In addition, the process ofestablishing a unit in Lithuania for themanufacturing of components based onaluminium profiles was begun.

Repurchase of sharesWithin the framework of the repurchasingprogramme, 203,700 shares were repur-chased during the year. At the end of theyear, the number of repurchased sharestotalled 706,030, at an average repur-chase price of approximately SEK 161.The repurchased shares correspond to 1.9 per cent of the total number ofshares. At the end of the year, the num-ber of shares outstanding was 36,476,128.

Research and development

Research and development efforts atSapa are normally conducted as projectswhereby the Group’s collective know-howis utilised through collaboration betweenspecialists with differing expertise andexperience. These projects are plannedand organised in close co-operation withthe local subsidiaries. For problems requir-ing greater specialisation and resourcesthan the local companies are able to offer,the Group maintains a central researchand development unit, Sapa Technology,in Finspång. There, 45 employees con-duct research and development related tothe composition, structure and propertiesof the material. These individuals have aunique know-how in advanced metallurgy,physics and chemistry and about ten ofthem have post-graduate research degrees.Research work, which is among othersconducted in co-operation with universities,university colleges and research institu-tions helps to advance our positions with-in significant areas of development. Thecollaboration between the local Sapacompanies and Sapa Technology con-tributes to the development of new prod-ucts and manufacturing processes, and tothe improvement of existing solutions andapplications. Sapa Technology also playsan important role in the technical salesprocess. For further information on Sapa’sresearch and development work, seepages 16-17.

Environment

During the year, the Parent Company,Sapa AB, conducted operations subject topermits through Sapa Industriservice AB.Permits are held for oil flotation (purifica-tion of oil-polluted water), and the evapo-ration and ultra-filtration of oil and water

23

emulsions. The purified aqueous phase isdrained off into the watercourse. The nec-essary permits exist. During the year,operations were conducted within theframework for applicable permit decisions.No major environmental investments areexpected to be necessary during 2004.Sapa’s active environmental work isdescribed on pages 18-19.

Changed accounting principles for pension commitments

Effective 2004, Sapa AB applies theSwedish Financial Accounting StandardsCouncil’s recommendation RR29“Employee Benefits” in its consolidatedaccounting. The regulations are based onIAS 19. Effective January 1, 2004, thenon-recurring effect of this change willreduce the Group’s shareholders’ equityby MSEK 59, after taking the tax effectinto account. The change of accountingprinciple will have no material effect onpension costs for 2004.

Transition to IFRS

Effective 2005, the Sapa Group’s reportingwill be conducted in accordance with the International Financial ReportingStandards (IFRS – formerly IAS).Consequently, the 2004 Annual Reportwill be the last to be prepared in accor-dance with the Swedish FinancialAccounting Standards Council’s recom-mendations. Based on what is knowntoday, accounting principles will primarilybe affected by the reporting of financialinstruments, resulting in more financialinstruments being reported at their fairvalue and in sharper requirements forhedge accounting. These changes mayaffect key figures such as earnings pershare and equity/assets ratio.

Sapa is currently reviewing its report-ing procedures to be able to gather thedata necessary for IFRS accounting,including the information required forcomparative figures in interim reports andthe 2005 Annual Report. Since March2003, a steering committee, headed bythe Group Vice President Accounting andControl, and a number of working groupshave been involved with these issues.This work is expected to be completedduring the first half of 2004.

Dividend and dividend policyThe Board of Directors proposes that adividend of SEK 6.25 per share (5.50) bepaid for the 2003 fiscal year. The propos-al is based on a new dividend policyadopted by the Board of Sapa AB onFebruary 6, 2004.

“The Board’s long-term dividend poli-cy is based on the Company’s strategy ofcontinued value-generating investmentsand company acquisitions and on the rel-evant capital structure, given the risk pro-file of the investments.

The dividend policy applicable up tonow was primarily based on the net profitfor the year. Future dividend proposals willpay greater consideration to balancesheet strength and forecasted cash flows,allowing the Company to maintain anoptimum capital structure with regard tothe aforementioned factors.”

Financial objectives and conditions

Sapa has established long-term, financialobjectives for both growth and profitability.The ambition is that these objectivesshould be achieved as averages over abusiness cycle. In addition, a number offinancial conditions have been defined.

Objective over a Outcomebusiness cycle 2003

Growth, % 10 14Operating margin, % 8 5.4Net margin, % 5 3.2ROCE, % 18 11.5ROE, % 18 10.0

OutcomeConditions 2003

Interest-coverage ratio, multiple Min. 3.0 5.8Debt/equity ratio, multiple Max. 1.0 0.54EBITDA/ interest net, multiple Min. 6.5 16.8Net debt/EBITDA, multiple Max. 3.0 1.87Equity/assets ratio, % Min. 30 42

Growth is measured on value added

Financial risk management is describedunder Supplementary disclosures, Note 2.

Outlook for 2004

We are likely to see an improvement inindustrial conditions in Europe, althoughnot a particularly strong one. Conditionsin the building sector will probably remainfragmented, but are viewed as favourablein Eastern Europe, notably in the new EU

member countries. In the US we havealready witnessed a considerable improve-ment in economic conditions, which webelieve will continue during 2004. Thestrong growth in Asia is expected to besustained.

Given this scenario, sales and earn-ings are expected to continue to improveduring 2004.

(MSEK) Note 2003 2002

Net sales 3 11 802.8 11 089.7Cost of goods sold 15, 16, 17 -9 299.1 -8 982.4

Gross profit 2 503.7 2 107.3

Selling expenses 15, 16, 17 -1 075.3 -904.9Administrative expenses 15, 16, 17 -781.4 -735.6Other operating revenues 8 7.3 24.7Other operating expenses 8 -13.8 -8.5

Operating profit 640.5 483.0

Result from financial investments: 10Interest income and similar items 35.7 60.8Interest expense and similar items -117.0 -116.8

Profit after financial items 559.2 427.0

Tax on profit for the year 12 -174.8 -141.9Minority share of profit for the year -1.0 0.0

Net profit for the year 13 383.4 285.1

Earnings per share 14 10.50 7.85Earnings per share after dilution 14 10.50 7.80

Consolidated income statements

24

Comments on the income statements

25

Net salesNet sales increased by slightly more than6 per cent to MSEK 11,803 (11,090). The translation effects resulting from thestronger Swedish krona affected net salesnegatively by about 5 per cent. The largesttranslation change was against the USdollar and the Chinese renminbin, whichhad an average exchange rate against thekrona that was almost 17 per cent lowerduring 2003. The UK pound weakened by9 per cent, while the euro remained mainlyunchanged. Structural changes comprisingthe acquisition of Remi Claeys Aluminium(RCA) at the end of June 2003, and ofPressweld in November 2002 contributedto an increase in net sales of approximately12 per cent. Volume increases in compa-rable units contributed to the increase innet sales by nearly 4 per cent. The weak-ening of the US dollar against Europeancurrencies resulted in the price for alu-minium metal in euros being approxi-mately 13 per cent lower than in the preceding year, which affected net salesnegatively by about 5 per cent.

Operating profit

Operating profit increased by 33 per centto MSEK 641 (483), corresponding to anoperating margin of 5.4 per cent (4.4).Currency effects when translating toSwedish kronor had a negative effect ofMSEK 37. Operating profit was chargedwith depreciation of MSEK 420 (385) andgoodwill amortisation of MSEK 63 (64).The decrease in goodwill amortisation is adirect effect of the exchange rate for theUS dollar. Goodwill amortisation on RCAled to profit being charged with approxi-mately MSEK 5. RCA and Heat Transferenjoyed a favourable profit developmentand contributed to the improvement inprofits. Sapa Inc. improved its profits con-siderably in local currency, although thisdid not achieve full impact at the Grouplevel due to the weakening of the dollar.Compared with the preceding year,Sapa’s profile operations in Portugal hada negative profit development, caused bya difficult market situation. The Group’svalue-added margin continued to improveand amounted to slightly more than 50per cent (47), a result of Sapa’s strategyto increase its processing operations.

Value added per employee increased byslightly less than 1 per cent, or 4 per centadjusted for translation effects. Profitabilityimproved markedly and return on capitalemployed amounted to 11.5 per cent (9.0).

Profit after financial items

Profit after financial items improved by 31 per cent to MSEK 559 (427). Netfinancial items, which were negative inthe amount of MSEK 81 (neg: 56), werecharged with financing costs of approxi-mately MSEK 24 from the acquisition ofRCA, which initially increased net debt byslightly more than MSEK 1,400. Adjustedfor the acquisition of RCA, net debtdecreased by slightly more than MSEK300 as the result of a strong cash flow,but also of translation effects caused bythe stronger Swedish krona. Net financialitems for 2002 included positive exchange-rate effects of MSEK 10 on financial debts,while the equivalent figure for 2003 was anegative exchange-rate effect of MSEK 1.

Net profit and tax expense

Net profit increased by 34 per cent toMSEK 383 (285). The tax cost amountedto MSEK 175 (142), corresponding to atax rate of 31 per cent (33). The lower taxrate is primarily due to profits in compa-nies with a low tax burden and the utilisa-tion of loss carry forwards previously nottaken into account. Permanent non-deductible costs, primarily goodwill amor-tisation, had a negative effect of approxi-mately 7 percentage points (7) on the taxrate. Earnings per share rose by SEK 2.65to SEK 10.50 (7.85). Earnings per shareare calculated on the basis of the averagenumber of shares outstanding during theyear, which amounted to 36.6 millionshares (36.3). After dilution, earnings pershare amounted to SEK 10.50 (7.80).Dilution, calculated in accordance withRR18, was 0.07 million shares (0.10).Return on shareholders’ equity increasedto 10 per cent (7.5).

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Excluding non-recurring items

26

Consolidated balance sheets

ASSETS (MSEK) Note 2003 2002

Fixed assetsIntangible fixed assets 15 1 017.6 1 001.2

Tangible fixed assets 16, 17Land and buildings 1 153.4 1 016.7Machinery and equipment 1 712.3 1 568.2Construction in progress and advances to suppliers 76.5 40.8

2 942.2 2 625.7

Financial fixed assets 12, 20, 21 187.2 27.1

Total fixed assets 4 147.0 3 654.0

Current assetsInventories, etc.Inventories 22 1 793.6 1 423.3 Advances to suppliers 46.2 44.2

1 839.8 1 467.5Current receivablesAccounts receivable, trade 23 2 395.0 1 935.6Other receivables 24 244.3 243.0

2 639.3 2 178.6

Cash and bank balances 594.0 747.2

Total current assets 5 073.1 4 393.3

Total assets 9 220.1 8 047.3

SHAREHOLDERS’ EQUITY AND LIABILITIES (MSEK)Note 2003 2002

Shareholders’ equity 6, 25Share capital 929.6 929.2Restricted reserves 899.2 600.5Unrestricted reserves 1 667.5 2 063.9Profit for the year 383.4 285.1

Total shareholders’ equity 3 879.7 3 878.7

Minority interests 3.8 4.1

ProvisionsProvisions for pensions and similar commitments 26 402.6 366.0Provisions for taxes 12 345.0 252.7Other provisions 27 80.3 62.5

Total provisions 827.9 681.2

Long-term liabilities 28Liabilities to credit institutions 1 058.2 402.7Bonds and debenture loans 28 513.4 667.8Interest-free liabilities 0.2 0.2

Total long-term liabilities 1 571.8 1 070.7

Current liabilitiesLiabilities to credit institutions 29 719.8 398.3Accounts payable, trade 30 1 537.8 1 449.6Other interest-free liabilities 31 679.3 564.7

Total current liabilities 2 936.9 2 412.6

Total shareholders’ equity and liabilities 9 220.1 8 047.3

Assets pledged 32 126.6 22.1Contingent liabilities 33 49.5 40.2

Assets and capital employedDuring the year, total assets increased byMSEK 1,173 and amounted at year-end toMSEK 9,220 (8,047). Currency-exchangeeffects in the translation to Swedish kronorresulted in a reduction of approximatelyMSEK 800. Capital employed amountedto MSEK 5,983 (4,970), an increase ofwhich about MSEK 1,320 was attributableto the consolidation of RCA. At the sametime, translation effects reduced capitalemployed by approximately MSEK 580.Investments remained at a low level,MSEK 352 (303), compared with depreci-ation (excluding goodwill amortisation) ofMSEK 420 (384). The increase wasattributable to RCA. At year-end, workingcapital amounted to MSEK 2,188, com-pared with MSEK 1,577 for the precedingyear. The increase was largely due to RCAand reduced supplier credits, while, at thesame time, translation effects decreasedworking capital. At year-end, goodwillamounted to MSEK 910 (906). The year’sacquisitions increased goodwill by MSEK192, while translation effects reducedgoodwill by MSEK 125, in addition to theyear’s amortisation of MSEK 63.

Financing

The Group has a strong financial position,which has been achieved through contin-ued strong cash flow from operations anda low investment level relative to depreci-ation. The Group’s total interest-bearingloans, including pension liabilities of MSEK403 (366), amounted to MSEK 2,694(1,835). The increase is attributable to the

acquisition of RCA, which initially increasednet debt by approximately MSEK 1,400.

Of the Group’s confirmed loan frame-works of MSEK 1,423 (1,844), MSEK 559(0) had been utilised at year-end.Approved overdraft facilities amounted toMSEK 289 (411), of which MSEK 20 (18)had been utilised. At the closing date, theaverage maturity for long-term interest-bearing loans, including loan frameworksbut excluding pension liabilities, was 3.6years. The Group’s interest-bearing netdebt, including pension liabilities, amount-ed to MSEK 2,100 (1,088) at year-end.

Distribution of net debt(MSEK) 2003 2002

Liquid funds -594 -747Current liabilities 720 398Pension provisions 403 366Other long-term liabilities 1 572 1 071

Net debt 2 100 1 088

The debt/equity ratio increased to 0.54(0.28) at year-end, which can be com-pared with the Group’s long-term restric-tion of its debt/equity ratio to 1.0. Theincreased debt/equity ratio was a directconsequence of the acquisition of RCAand, during the year, was, at its highest,0.65. Following that, a marked reductiontook place.

Shareholders’ equity

At year-end, shareholders’ equity amount-ed to MSEK 3,880 (3,879). The year’sprofit increased shareholders’ equity byMSEK 383 (285). During the year, a dividend of MSEK 201 (182) was paid to

shareholders, corresponding to SEK 5.50per share (5.00). Translation differenceshad a negative effect of MSEK 150 (202).Hedge accounting of foreign net assetsoffset translation effects by MSEK 329(401). The substantial transfers betweenunrestricted and restricted reserves isattributable to the weakening of the USdollar, while the unrealised positive resultsof the hedge accounting were not credit-ed to unrestricted reserves. During theyear, shares were repurchased in anamount corresponding to MSEK 33 (72),which decreased the Group’s sharehold-ers’ equity. Conversion of convertibledebentures and exercise of call optionsincreased the Group’s shareholders’ equi-ty by MSEK 2 (73). The equity/assets ratioamounted to 42 per cent (48).

27

Comments on the balance sheets

Net debt, MSEK

0

1 000

2 000

3 000

4 000

5 000

030201009998

TotalChanges in Group Share Restricted Unrestricted shareholders’ shareholders’ equity (MSEK) Note capital reserves reserves equity

Shareholders’ equity, January 1, 2002 915.7 609.7 2 450.8 3 976.2Translation differences - -162.3 -39.7 -202.0Profit for year - - 285.1 285.1Transfers between restricted and unrestricted reserves - 93.4 -93.4 -Dividend 13 - - -182.3 -182.3Repurchase of own shares 25 - - -71.5 -71.5Conversion of debentures 13.5 59.7 - 73.2

Shareholders’ equity, December 31, 2002 929.2 600.5 2 349.0 3 878.7

Translation differences - -129.0 -20.6 -149.6Profit for year - - 383.4 383.4Transfers between restricted and unrestricted reserves - 426.1 -426.1 -Dividend 13 - - -201.5 -201.5Repurchase of own shares 25 - - -33.3 -33.3Conversion of debentures 0.4 1.6 - 2.0

Shareholders’ equity, December 31, 2003 25 929.6 899.2 2 050.9 3 879.7

Debt/equity ratio, %

0

20

40

60

80

100

120

030201009998

(MSEK) Note 2003 2002

OperationsOperating profit 640.5 483.0Depreciation 483.4 448.2Other items not affecting cash flow -7.5 -84.8

1 116.4 846.4

Interest received 27.7 48.0Interest paid -100.8 -115.1Taxes paid -130.7 -100.9

-203.8 -168.0

Change in working capitalInventories 59.5 117.0Accounts receivable 14.7 112.5Other current receivables -11.4 -86.7Accounts payable -194.8 35.8Other current operating liabilities 31.7 -29.7

-100.3 148.9

Cash flow from operations 812.3 827.3

InvestmentsInvestments in intangible assets 15 -32.3 -20.8Investments in tangible assets 16 -319.6 -282.1Sale of fixed assets 15, 16 19.5 50.5Acquisition/divestment of subsidiaries 18 -649.1 -32.5Financial fixed assets 20 -4.5 16.6

-986.0 -268.3

Cash flow after investments -173.7 559.0

Financing operationsExercise of options 25 - 0.6Repurchase of shares 25 -33.3 -71.5New loans 773.9 290.6Amortisation of loans -12.9 -41.1Increase/decrease in current financial liabilities -470.2 -806.7Dividend payments 13 -201.5 -182.3

56.0 -810.4

Cash flow for the year -117.7 -251.4Liquid funds, January 1 747.2 1 027.0Translation difference -35.5 -28.4Liquid funds, December 31 594.0 747.2

Consolidated cash flow statements

28

Comments on the cash flow statements

29

Operating cash flowThe Group’s cash flow remained strongduring 2003. Operating cash flow (seetable below) amounted to MSEK 684(742). The contribution from operationsincreased by MSEK 270, which was pri-marily attributable to the stronger operat-ing profit. Increased need for workingcapital had a negative effect of MSEK100 (pos: 149). This increased need forworking capital was not only the result ofgrowth – working capital also increased inrelation to net sales, primarily due to rela-tively lower operating liabilities.Investments remained at a relatively lowlevel. New and replacement investmentsamounted to MSEK 352 (303), corre-sponding to approximately 84 per cent(79) of depreciation, excluding goodwillamortisation.

Acquisitions of subsidiariesDuring the year, Belgian group RemiClaeys Aluminium (RCA) was acquired.The acquisition affected the year’s cashflow negatively in an amount of MSEK643 through the purchase price for theshares of MSEK 694 and deduction forliquid funds in RCA at the time of acquisi-tion, which amounted to MSEK 51. At thetime of acquisition, RCA had financialdebts of MSEK 760 and pension liabilitiesof MSEK 22.

The remaining minority holding of4.05 per cent of the shares in Sapa HeatTransfer (Shanghai) Ltd were acquiredduring the year. This affected cash flowthrough the purchase price for the sharesof MSEK 6.3.

Operating cash flow, MSEK

0

200

400

600

800

1 000

030201009998

Investments, MSEK

0

200

400

600

800

1 000

030201009998

Operating cash flow analysis (MSEK) 2003 2002

Operating revenues 11 803 11 090Operating expenses -10 679 -10 159Profit before depreciation and amortisation 1 124 931Items not affecting cash flow -8 -85Operating surplus 1 116 846Change in working capital -100 149New and replacement investments -352 -303Sale of fixed assets 20 50Operating cash flow 684 742Financial fixed assets -5 17Interest paid/received -73 -67Income tax paid -131 -101Cash flow after investments, excluding acquisitions 475 591Acquisitions of subsidiaries -649 -32Cash flow after investments -174 559

Other items not affecting cash flow (MSEK) 2003 2002

Participations in earnings of associated companies -6.1 -2.8Profit/loss from divestment and scrapping of plants 17.5 -16.6Change in provisions -1.1 -42.4Calculated financial cost of pensions liability -17.8 -23.0

Total -7.5 -84.8

Parent Company

Income statements

(MSEK) Note 2003 2002

Net sales 3 534.4 527.3Cost of goods sold 15, 16 -393.8 -388.3

Gross profit 140.6 139.0

Selling expenses 15, 16 -2.5 -1.0Administrative expenses 15, 16 -161.8 -154.8Other operating revenues 8 8.7 11.9Other operating expenses 8 - -

Operating loss -15.0 -4.9

Profit from financial investments 10Profit/loss from participations in Group companies - -9.0Interest income and similar items 267.9 302.0Interest expense and similar items -101.4 -97.4

Profit after financial items 151.5 190.7

Appropriations 11 -85.9 -16.2Tax on profit for year 12 -20.7 -51.9

Net profit for the year 44.9 122.6

Balance sheets

ASSETS (MSEK) Note 2003 2002

Fixed assetsIntangible fixed assets 15 0.4 1.6

Tangible fixed assets 16Land and buildings 120.0 120.4Machinery and equipment 62.6 67.6Construction in progress and advances to suppliers 1.3 2.9

183.9 190.9Financial fixed assetsParticipations in subsidiaries 19, 20 3 252.9 2 543.2Interest-bearing receivables from subsidiaries 1 999.8 -Interest-free receivables from subsidiaries 780.6 1 035.9Deferred tax receivables 12 11.4 8.9Other long-term receivables - 0.1

6 044.7 3 588.1

Total fixed assets 6 229.0 3 780.6

Current assetsInventories, etc.Raw materials and consumables 13.3 12.5Work in progress on contract 16.6 19.7

29.9 32.2Current receivablesAccounts receivable, trade 47.6 34.7Interest-bearing receivables from subsidiaries 1 933.3 1 033.7Interest-free receivables from subsidiaries 286.1 115.5Other receivables 24 42.1 52.7

2 309.1 1 236.6

Cash and bank balances 180.7 440.2

Total current assets 2 519.7 1 709.0

Total assets 8 748.7 5 489.6

30

TotalShare shareholders’

Changes in Parent Company’s Share premium Statutory Unrestricted equity, shareholders’ equity (MSEK) Note capital reserve reserve reserves January 1

Shareholders’ equity, January 1, 2002 915.7 2.7 183.1 2 087.6 3 189.1Group contribution, net after tax effect - - - -97.1 -97.1Profit for year - - - 122.6 122.6Dividend 13 - - - -182.3 -182.3Repurchase of own shares 25 - - - -71.5 -71.5Conversion of debentures 13.5 59.7 - - 73.2

Shareholders’ equity, December 31, 2002 929.2 62.4 183.1 1 859.3 3 034.0

Group contribution, net after tax effect - - - 48.5 48.5Profit for year - - - 44.9 44.9Dividend 13 - - - -201.5 -201.5Repurchase of own shares 25 - - - -33.3 -33.3Conversion of debentures 0.4 1.6 - - 2.0

Shareholders’ equity, December 31, 2002 25 929.6 1 64.0 183.1 1 717.9 2 894.61 Share capital: 37,182,158 shares at a nominal value of SEK 25 per share.

Balance sheets

SHAREHOLDERS’ EQUITY AND LIABILITIES (MSEK) Note 2003 2002

Shareholders’ equity 6, 25Share capital 929.6 929.2Share premium reserve 64.0 62.4Statutory reserves 183.1 183.1Profit brought forward 1 673.0 1 736.7Profit for the year 44.9 122.6

Total shareholders' equity 2 894.6 3 034.0

Untaxed reserves 12 127.0 41.1

ProvisionsProvision for pensions and similar commitments 26 184.2 188.3

Long-term liabilities 28Liabilities to credit institutions 717.2 344.2Bond and convertible loans 28 514.5 668.6Interest-bearing liabilities to subsidiaries 2 000.6 -Interest-free liabilities to subsidiaries 488.1 364.5

Total long-term liabilities 3 720.4 1 377.3

Current liabilitiesLiabilities to credit institutions 29 378.4 9.8Accounts payable, trade 33.3 42.4Interest-bearing liabilities to subsidiaries 424.8 441.0Interest-free liabilities to subsidiaries 905.4 280.4Other interest-free liabilities 31 80.6 75.3

Total current liabilities 1 822.5 848.9

Total shareholders’ equity and liabilities 8 748.7 5 489.6

Assets pledged 32 15.0 15.0Contingent liabilities 33 492.6 394.8

Cash flow statements

(MSEK) Note 2003 2002

OperationsOperating profit/loss -14.9 -4.9Depreciation 23.8 24.1Other items not affecting cash flow -13.1 -10.2

-4.2 9.0

Interest received 91.3 97.1Interest paid -84.2 -105.4Income tax paid -17.7 -4.8

-10.6 -13.1Change in working capital

Inventories 2.2 14.2Accounts receivable -12.9 17.2Other current receivables -21.3 69.2Accounts payable, trade -9.1 10.7Other current liabilities 1.7 -32.9

-39.4 78.4

Cash flow from operations -54.2 74.3

InvestmentsInvestments in tangible fixed assets 16 -15.8 -16.0Sale of fixed assets 16 0.3 0.9Acquisition of/capital contribution to subsidiaries 18, 20 -709.7 -40.7Divestment of subsidiaries - 32.6Change in financing of subsidiaries -274.7 515.3Financial fixed assets -2.4 -15.0

-1 002.3 477.1

Cash flow after investments -1 056.5 551.4

FinancingExercise of options 25 - 0.6Repurchase of shares 25 -33.3 -71.5New loans 611.3 280.0Amortisation of loans -6.4 -24.8Increase/decrease in current financial liabilities 426.9 -828.0Dividend paid 13 -201.5 -182.3

797.0 -826.0

Cash flow for the year -259.5 -274.6

Liquid funds, January 1 440.2 714.8Liquid funds, December 31 180.7 440.2

31

32

Supplementary disclosures

Note 1 Accounting and valuation principles

The Sapa Group applies the Annual Accounts Act and recommendations ofthe Swedish Financial Accounting Standards Council. The application of therecommendations that took effect in 2003 had no effect on the earnings orfinancial position of the Group in previous periods.

Consolidated accountsThe consolidated accounts comprise Sapa AB and all companies in whichthe Parent Company, directly or indirectly, holds more than 50 per cent ofthe voting rights or otherwise has a decisive influence. The consolidatedaccounts have been prepared in accordance with the acquisition methodwhereby a market evaluation is made of assets and liabilities in the acquiredcompany. The difference between the acquisition value of shares and themarket value of assets and liabilities constitutes consolidated goodwill.Goodwill is amortised based on individual assessments, but not over morethan 20 years. In cases where the amortisation period exceeds five years,this is because acquisitions have created a strong market position in themarkets involved. Companies acquired during the year are included in theconsolidated income statement as of the date of acquisition. Companiesdivested during the year are included in the consolidated income statementup to and including the date of divestment.

Foreign subsidiaries are classified as independent, meaning that theirbalance sheets are translated into Swedish kronor at the exchange rate onthe closing date and that their income statements are translated at the aver-age exchange rate for the year. Translation differences are credited/debiteddirectly to shareholders’ equity.

Associated companies are reported in the Group accounts in accordancewith the equity method. Associated companies are companies in whichSapa AB directly or indirectly holds at least 20 per cent of the voting rightsor in which Sapa otherwise exerts a considerable influence. Sapa’s share ofeach associated company’s earnings after financial items is included inGroup operating profit, and Sapa’s share of tax expense is included inGroup tax expense. The value of the participations in the balance sheetchanges with Sapa’s share of the associated companies’ earnings after taxreduced by dividends received. Undistributed earnings are reported amongrestricted reserves in Group shareholders’ equity.

Accounting for revenueSales revenue for products and services is reported as of the date of deliv-ery, in accordance with delivery terms and conditions. Net sales refers tosales reduced by special taxes on goods, returns and discounts. Profits andlosses on metal and currency forward contracts — which have been enteredinto for the purpose of hedging — are recognised with the transaction towhich the hedge pertains. Dividends are accounted for when the rights tothe dividends are deemed secure.

Other operating revenue and other operating expensesGains and losses that have arisen in connection with the divestment of realestate, shares and businesses are reported under these headings. Shares inthe earnings of associated companies, as well as exchange gains and loss-es on non-interest-bearing receivables and liabilities, are also included.

Intangible fixed assetsGoodwill is amortised based on individual assessments, but not exceeding20 years. The acquisition cost of licenses and costs of developing large ITsystems for internal use are capitalised if they are judged to be of value tothe company for many years. The amortisation period is a maximum of fiveyears. Customer-specific development costs are capitalised, but only whenthe cost is covered by the price for the product. Products are depreciatedover the life of the product, but not more than three years. Expenditure forgeneral research and development is expensed continuously and is includedin the income statements under administrative expenses. Straight-linedepreciation is applied.

Tangible fixed assetsTangible assets are reported at acquisition cost reduced by accumulateddepreciation. Capitalisation of interest occurs only in connection with majorinvestment projects, extending over a period of at least two years.Depreciation is based on the asset’s acquisition value and estimated usefullife, which is 5 to 15 years for machinery and equipment, 3 to 10 years forequipment, tools, and fixtures and fittings, 20 to 40 years for buildings, and15 to 20 years for land improvements. Straight-line depreciation is applied.

LeasingRecommendation RR6 of the Swedish Financial Accounting StandardsCouncil is applied in the consolidated accounts in the case of leasing con-tracts signed after the end of 1996. This does not, however, apply to theleasing of, for example, cars and office machinery of lesser value.

InventoriesInventories are valued at the lower of acquisition or net realisable value. Theacquisition value is calculated based on the first-in/first-out (FIFO) principleand includes share of indirect manufacturing costs of products in work andof finished products in inventory.

Receivables and liabilities in foreign currencyAll receivables and liabilities in foreign currency are valued at closing dayexchange rates, or at the forward-contract rate if they have been hedged.Forward contracts that hedge flows in which the receivable or payable hasnot yet arisen are not accounted for until the hedged receivable or payableis accounted for. Exchange rate differences for receivables from operationsand operating liabilities are included in “other operating revenue/expense,”while changes in exchange rates of interest-bearing receivables and liabili-ties are included in “financial net”. Exchange rate differences on loans andforward transactions raised to secure foreign net assets are reported directlyagainst shareholders’ equity after taking tax effects into consideration.

TaxesCurrent and deferred taxes are accounted for. Current taxes are based oneach company’s income tax return while deferred taxes reflect the tax effectof the difference between values stated in the accounts and values for pur-poses of taxation. The tax benefit of a loss carry forward is recognised onlyif it is likely that the allowance can be settled against future excess taxation.Otherwise, the tax benefit of a loss carry forward is recognised only by off-setting it against deferred tax liability in the same company. In the ParentCompany, deferred tax liabilities relating to untaxed reserves are reported aspart of the reported untaxed reserves.

PensionsMost of the companies in the Group have, within the framework of variousplans, undertaken pensions or are contributing to the costs of employees’pensions. The pension plans may be company-specific or common for anumber of companies. The common factor is that provisions for pensions,contributions to pension foundations and insurance premiums are based onactuarial calculations. Within the Sapa Group, locally applicable accountingprinciples for pensions are applied. Effective 2004, RR29 is applied. Theapplication of this recommendation will entail a change in the principleaccording to which pensions are reported.

Government grantsGovernment grants for the procurement of tangible fixed assets decreasethe reported value of the asset. Government grants relating to costs aretaken up as revenue in the same period as the costs they are intended tocompensate.

Cash flow statementsThe cash flow statements are prepared in accordance with the indirectmethod. Liquid funds refer to cash and bank balances.

Note 2 Financial risk management

Sapa is exposed to financial risks. These primarily comprise currency risks inconnection with export sales (transaction exposure) and the translation of for-eign net assets and earnings (translation exposure). In addition, Sapa isexposed to interest-rate risks in connection with the management of liquidityand debt, and metal risks regarding certain types of orders and unsold metal ininventories. Financial risks are handled in accordance with guidelines estab-lished by Sapa’s Board of Directors.

Organisation and operationsThe Group’s financial operations are coordinated through the Parent Company,Sapa AB. The Finance Department in Sapa AB serves as an internal bank forthe Group’s subsidiaries, which insure their financial risk in the Department.Virtually all financing of subsidiaries also takes place through Sapa AB. A largepart of the Group’s payment-flows and liquid funds are held in local andEuropean group accounts, which are administered by the Finance Department.

33

Market valuation of financial instrumentsFor disclosure purposes, financial instruments have been valued using spot orforward rates on the closing date and have been calculated according to thefollowing: The market value of currency forward contracts has been calculatedon the basis of the forward rate corresponding to the average duration. Themarket value of raw-material hedges has been determined in accordance withthe official closing rate at the second bell on the London Metal Exchange(LME) for the relevant duration. Currency swaps have been valued at the spotrate. No interest-rate derivatives have been used.

Transaction exposure and currency riskSapa maintains operations in Europe, the US and China. Production, primarilyfor local markets, takes place in 11 countries. In varying degrees, exports aremade from all countries in which the Group has production. However, exportsfrom euro countries go mainly to other countries within the EMU, reducing theGroup’s overall exchange-rate exposure. During 2003, sales within the EMUcountries corresponded to 33 per cent of the Group’s net sales. Sales to EMUcountries from Sapa companies outside the EMU amounted to 10 per cent ofnet sales, giving total sales in the EMU market of 43 per cent. As a whole, theEuropean market accounts for 84 per cent of the Group’s net sales.

The commercial net flow in currency after eliminating flows in the samecurrencies (transaction exposure) amounted to MSEK 2,011 in 2003. The tablebelow shows the distribution of currencies.

Transaction exposure, net per currencyCurrency MSEK % of total

DKK 199 9.9EUR 925 46.0GBP 160 8.0NOK 126 6.2USD -581 28.9Other 20 1.0

Total flow 2 011 100Negative amount denotes net purchase

The currency relationships that have the greatest impact on earnings pertainto EUR against USD and EUR and USD against SEK. Transaction exposure isminimised in accordance with the Group’s financial policy by hedging all con-tractual set-price flows for the future 12 months through forward contracts, withlonger order times evaluated individually. Forecasted flows are not hedged.

The Group’s actual exposure in USD is much smaller than shown in theabove table, which is based on the Company’s accounting for currency invoic-ing. Group companies can compensate for a metal price change denominatedin USD (based on the world price on the London Metal Exchange) by chargingthe customer a comparable price for metal. This occurs because the sales priceto the customer is denominated in the customer’s currency via a translation ofthe price of metal in USD as of the date of the order. The accounts then showan imbalance, with the purchase of metal denominated in USD but customerinvoicing in local currency. The pricing currency and the currency used wheninvoicing the customer thus differ, but the actual exposure is eliminated.

At year-end, a net sales value equivalent to MSEK 980 was hedged, com-pared with a market value equivalent to MSEK 978. At year-end, the average dura-tion for currency forward contracts regarding commercial flows was 3.1 months.

Outstanding currency forward contracts, net per currency, MSEK

AverageSales value, Unrealised Market duration

Currency net gain/loss value (months)

EUR 910.6 4.9 915.5 4.4USD -40.2 4.1 -36.1 3.9DKK 56.8 -10.9 45.9 3.3NOK 16.6 0.0 16.6 3.9GBP 33.0 -0.2 32.8 3.3Others 3.4 0.0 3.4 2.4

Total 980.2 -2.1 978.1 3.1

Negative amounts denote net purchases.

Translation exposureTranslation exposure pertains in part to the earnings in foreign units and inpart to net assets in foreign currency. Based on earnings in 2003, risk calcu-lated on a full-year basis may be estimated in the following amounts, whenthere is a change of one per cent in the value of a currency relative to SEK:

Operating profit, MSEK 2003

EUR 1.8USD, CNY 1.1Others 1.0

Total 3.9

During 2003, exchange-rate effects from the translation of foreign sub-sidiaries affected operating profit negatively in an amount of approximatelyMSEK 37 compared with exchange rates in 2002.

To the degree that it is possible given the capital structure, the transla-tion risk for foreign net assets is limited through financing in the same cur-rency with either loans or currency swaps. Currency options are not used. At year-end, Sapa’s foreign net assets amounted to MSEK 4,618.

Of this amount, MSEK 2,891 was hedged through loans and currencyswaps, meaning that MSEK 1,727 of the Group’s total shareholders’ equitywas subject to translation exposure. During 2003, translation differences affect-ed the Group’s shareholders’ equity negatively in the amount of MSEK 150.

Net assets, MSEK 2003

EUR 887GBP 431Others 409

Total 1 727

Refinancing risksRefinancing risk refers to the risk that refinancing of loans that fall due willbe difficult or costly. The objective is that the amount of long-term loans(including total confirmed loan frameworks) as a percentage of total interest-bearing liabilities, should not be less than 60 per cent. At the end of 2003this figure was 90 per cent. Long-term loans are defined as interest-bearingloans with a maturity of more than one year, and the objective is that these,with the exception of interest-bearing pension liabilities, should have anaverage maturity of between four and six years. At year-end, the averagetime to due date was 3.7 years (excluding liabilities pertaining to financialleasing). At year-end unutilised confirmed loan frameworks amounted toMSEK 864. At the same time, utilised confirmed loan frameworks amountedto MSEK 559. During the year, the Group issued two debenture loans, corre-sponding to MSEK 91.5 and secured a three-year loan of MEUR 15.

Maturity structure, interest-bearing long-term loans (excluding interest-bearing pension liabilities)Year MSEK

2005 1762006 2852007 1712008 502009 1422010 452011 -2012 92013 44

Total 922

Currency swapsAs an alternative to loans in foreign currencies, the Group has used currencyswaps. These are used to manage translation exposure in situations when thereis no loan requirement. At the end of 2003, the market value of outstandingcurrency swaps amounted to MSEK 2,169, compared with the nominal value ofMSEK 2,172.

34

Supplementary disclosures

Outstanding currency swaps, MSEK

Currency Nominal Market value Unrealisedvalue (Dec. 31, 2003) gain/loss

DKK -24.8 -24.8 0.0EUR -1 223.8 -1 228.6 -4.8GBP -109.7 -110.0 -0.3PLN -32.7 -29.9 +2.8USD -780.0 -774.6 +5.4Other currencies -1.0 -1.0 0.0

Total -2 172.0 -2 168.9 +3.1

Negative amounts in the first two columns indicate that the Group has a soldposition in the relevant currency.

Liquidity riskLiquidity risk is defined as the risk that the Group will be affected by increasedcosts due to lack of liquidity. The objective is that the Group’s liquidity reserve1

should amount to at least 80 per cent of outstanding unconfirmed short-termloans. At year-end, this figure was 110 per cent.

1 The Group’s liquidity reserve equals cash balance, plus short-term invest-ments, minus short-term borrowing, plus total confirmed unutilised loanagreements.

Interest-rate riskSapa’s financing sources primarily comprise equity, cash flow from currentoperations and borrowing. Interest-bearing loans entail the Group beingexposed to interest-rate risk. Interest-rate risk pertains to the risk thatchanges in interest rates may affect the Group’s interest net. The Group hasa six-month fixed-interest-rate period as a target. At the end of the year, theaverage fixed-interest-rate period in the loan portfolio was 6.2 months.

The table below shows Sapa’s interest-rate risk, that is, how the interestexpense in each currency, translated into SEK, would change with an instan-taneous 1-per cent shift in the yield curve for the remaining fixed-interestperiod.

Net debt, average interest rate and interest-rate risk per currency atyear-end, MSEK

Average Interest- 2003 % of total interest rate, % rate risk

EUR 1 200 57 2.8 9.8USD, CNY 802 38 2.7 4.3GBP 86 4 4.0 0.1Other currencies 12 1 3.7 3.2

Total net debt 2 100 100

Credit risk in financial instrumentsFinancial risk management involves exposure to credit risks, which occur inpart in connection with lending within the framework of liquidity manage-ment, and in part through receivables from banks. Liquid funds are investedonly in Government securities and in banks that are approved by the Group.The maximum possible credit risk for various counterparties is set in a spe-cial “counterparty” regulatory document. At year-end, the Group had nofixed-term investments outstanding. No losses arose in 2003 and no reser-vations were made at year-end. Credit risks are also present in accountsreceivable that are not covered under financial-risk management, but whichare dealt with in the course of operations.

Metal-price exposureSapa’s operations are affected by fluctuations in market prices on the LondonMetal Exchange (LME) and by the premiums for aluminium ingots. TheGroup acts to minimise exposure to these fluctuations through an estab-lished purchasing policy. The average price for aluminium metal in USD was5 per cent higher in 2003 than in 2002. However, the weakening of dollaragainst the euro, meant that the average metal price in EUR was 13 percent lower during the same period.

Within Profiles, the metal-price risk is hedged primarily by making pur-chases of aluminium in close conjunction with the setting of the customerprice of products. As a result, profile operations have a relatively low expo-sure to price fluctuations.

In Heat Transfer, sales contracts are hedged directly through “physical”purchases of metal or with the aid of forward contracts on the LME, whichoffset the effects of fluctuations in the price of aluminium. Unsold metal instock is also hedged through forward contracts on the LME. At year-end, the

net of these hedges entailed the Group having a sold position of 200 tonnesof aluminium on the LME with a market value of MUSD neg. 0.4. The unre-alised gain amounted to MUSD 0.5.

Note 3 Segment reportingBusiness segments are reported as primary segments and geographic areasare reported as secondary segments. The business segments Profiles andHeat Transfer are reported combined.

2003 2002Others Others

Profiles/ and Profiles/ andHeat elimi- Heat elimi-

(MSEK) Transfer nations Group Transfer nations Group

Net sales 11 549 254 11 803 10 840 250 11 090Depreciation 460 24 483 424 24 448Operating profit 665 -24 641 505 -22 483Investments 337 15 352 287 16 303Assets in operations 8 271 223 8 495 7 001 212 7 213Liabilities in operations 2 145 95 2 241 1 904 117 2 022

Assets in operations diverge from total assets by liquid funds and tax receivables.Liabilities in operations exclude financial liabilities and tax liabilities.

Net sales, assets and investments distributed by geographic market

Assets utilised Group Net sales in operations Investments(MSEK) 2003 2002 2003 2002 2003 2002

Scandinavia 2 520 2 673 2 394 2 582 117 157UK 1 682 1 725 831 897 22 31Rest of Western Europe 5 017 4 239 3 887 2 185 144 80Eastern Europe 734 542 223 159 20 13North America 1 358 1 514 826 1 011 23 17Asia 379 317 334 379 26 5Rest of world 113 80 - - - -

Total 11 803 11 089 8 495 7 213 352 303

Net sales distributed by geographic markets

Parent Company(MSEK) 2003 2002

Scandinavia 485 472UK 12 11Rest of Western Europe 25 33Rest of world 12 11

Total 534 527

Parent Company sales to subsidiaries amounted to MSEK 201.1 (194.9).Parent Company purchases from subsidiaries amounted to MSEK 2.9 (3.4).Purchases from other Group companies amounted to MSEK 155.1 (duringthe period September 1 to December 31, 2002, MSEK 57.6).

Note 4 Wages, salaries, other compensation and socialsecurity costs

2003 2002Wages, Social Wages, Social

salaries and security costs salaries and security costs other (of which, other (of which,

(MSEK) compensation pension costs) compensation pension costs)

Parent Company 136.1 61.1 135.1 61.8(18.1) 1 (18.8) 1

Subsidiaries 1 702.1 594.0 1 573.4 514.3(68.9) (72.1)

Group total 1 838.2 655.1 1 708.5 576.1(87.0) 2 (90.9) 2

1Of the Parent Company’s pension costs, MSEK 6.7 (4.5) relates to theBoard, President and Executive Vice President. The Company’s outstandingpension commitments to these persons amount to MSEK 8.6 (8.5).2Of the Group’s pension costs, MSEK 11.0 (8.2) relates to the Boards,Presidents and Executive Vice Presidents. The Group’s outstanding pensioncommitments to these persons amount to MSEK 27.7 (27.1).

35

Wages, Salaries and other compensation distributed by country and byBoard members, Presidents, Executive Vice Presidents and other employees

2003 2002Board members, Board members,

President and Exec. President and Exec. Vice Presidents Other Vice Presidents Other

(MSEK) (of which, bonuses) employees (of which, bonuses) employees

Sweden 16.4 (2.4) 657.7 13.1 (2.0) 651.1Belgium 0.9 (0.1) 119.0 - ( -) -Denmark 1.8 (0.2) 54.7 1.6 (0.3) 58.2Finland 0.7 ( -) 3.7 0.6 ( -) 3.5France 7.1 (1.5) 216.5 6.7 (1.5) 189.0Lithuania - ( -) 0.9 - ( -) 0.6China 1.1 ( -) 14.8 1.0 (0.2) 13.7Czech Republic - ( -) 0.4 - ( -) -Switzerland - ( -) 3.1 - ( -) -Lebanon - ( -) 0.7 - ( -) -Netherlands 2.6 (0.7) 73.3 3.3 (0.4) 76.1Norway 1.2 ( -) 7.0 1.3 ( -) 5.8Poland 2.7 ( -) 31.7 0.9 ( -) 27.3Portugal 1.5 ( -) 94.2 2.1 ( -) 91.6Spain 1.4 (0.1) 0.3 - ( -) -UK 6.8 (0.3) 214.3 11.7 (1.7) 222.3Germany 5.4 (0.1) 79.7 2.2 (0.1) 67.7US 6.6 ( -) 207.9 6.5 ( -) 249.0Others1 - ( -) 2.1 - ( -) 1.6

Group total 56.2 (5.4) 1 782.0 51.0 (6.2) 1 657.5

Parent Company 11.4 (1.7) 124.7 8.9 (1.7) 126.2

1 Sales companies with five employees or less.

Note 5 Terms of employment for senior executivesCompensation to Board membersIn accordance with the decision by the Annual General Meeting, the mem-bers of the Board of Directors were paid a fixed fee of SEK 1,600,000 to bedistributed as decided by the Board. Per-Olof Eriksson, Chairman of theBoard of Directors, received a fee amounting to SEK 400,000. The remainderof the fee was divided equally between the external Board members. Boardmembers employed by the Sapa Group are not paid a fee.

President’s compensationStaffan Bohman’s fixed salary during 2003 was SEK 3,800,000. The profit-based salary for 2003 amounted to SEK 950,000 and was based mainly onthe trend of earnings per share. The variable salary segment can be a maxi-mum of 50 per cent of the fixed salary. Other benefits amounted to SEK180,000. Staffan Bohman’s holdings of call options received in prior yearsamounts to 12,000 and of personnel options allotted in prior years, to40,000. Staffan Bohman is also encompassed by the compensation pro-gramme, applicable from 2003, which is described in Note 6.

Staffan Bohman’s ordinary retirement age is 65, but he is entitled to earlyretirement with pension benefits from age 60. Pension benefits are accruedsuccessively and reach full accrual at age 60 and 65 respectively. Pensionablesalary comprises basic salary plus the average variable salary during thepast three years. In the event of early retirement between age 60 and 65,the pension benefit is equal to 70 per cent of salary corresponding to 100base amounts plus 35 per cent of exceeding salary. From age 65, the pen-sion benefits are paid in accordance with the ITP pension plan, with supple-ment for salary that exceeds 20 base amounts. This supplement comprises32.5 per cent of pension-qualifying salary between 20 and 30 base amounts,50 per cent between 30 and 100 base amounts, and 32.5 per cent on anyportion in excess thereof. The ITP plan is also reinforced with a disability-and family-pension for that salary segment exceeding 20 base amounts.Survivors’ pension amounts to approximately 74 per cent of retirement pen-sion. The premiums for policies undertaken to secure the pension commit-ments amounted in 2003 to SEK 4,442,335. The policies are irrevocable.

The notice-of-termination period applicable to the President’s employmentcontract is 24 months when notice is given by the Company, with salaryunchanged, which, however, shall be reduced in the amount of compensationreceived from a new employer. Staffan Bohman may not personally call for anotice-of-termination on the part of the Company. For a termination noticeinitiated by Staffan Bohman, a six-month notice-of-termination period applies.

Compensation for other senior executivesThe fixed salaries for the other five members of the Executive GroupManagement in 2003 amounted to SEK 9,772,505. The profit-based salarycomponents were mainly based on the trend of earnings per share. The overallbonus outcome was SEK 1,831,675. The retirement age for this group is 65,with two exceptions (age 60). For the Swedish executives, the Companypays pension premiums corresponding to the ITP level, or in accordance withthe main rule of income tax law. For the foreign-based executives in this group,the pension solutions consist of a combination of contributions-defined andbenefits-defined pensions. Pension premiums in 2003 amounted to SEK6,576,550. The pension benefits are irrevocable.

The notice-of-termination period is between 12 and 24 months whennotice is given by the Company. None of the respective executives may personally call for a notice-of-termination on the part of the Company.

The two foreign-based executives, who temporarily work and live inSweden, have had access to housing provided by Sapa AB.

Note 6 Share-related compensation for employees In February 2002, Sapa AB issued share options, “personnel options” tosenior executives and managers within the Group, a total of some 60 per-sons. The terms of the options extend through March 2005, with an exerciseprice of SEK 188. The options programme comprises 700,000 options.Exercise of the options is conditional on employment within the Sapa Groupat the time of exercise. The issue of the options entails no direct effect onreporting. The exercise of the options may entail social security costs for theGroup. The social security costs that may fall due on exercise are reportedas provisions based on the share price on the closing date in relation to theexercise price of the options. The cost is accrued over the term of theoptions. In cases where the share price on the closing date is lower thanthe exercise price, no provision for social security costs is reported. In 2003,these options did not affect either the balance sheet or the income state-ment. Sapa AB has a mandate from the Annual General Meeting to repur-chase own shares for the purpose of hedging the personnel options issued.

Effective 2003, share-related compensation programmes were replacedby a long-term bonus programme based on the Sapa Group’s averagereturn on capital employed over rolling three-year periods. The programmeaffects some 20 managers who have a direct impact on the Group’s earnings.The first payment can be made in 2006 and is conditional on employmentin the Sapa Group at the time of payment.

Note 7 Compensation paid to Group auditors and theircompanies

Group Parent Company(MSEK) 2003 2002 2003 2002

PricewaterhouseCoopersAuditing assignments 5.9 5.6 0.7 0.5Other assignments 5.5 6.0 3.3 3.6

11.4 11.6 4.0 4.1Other auditors

Auditing assignments 0.6 - - -

Auditing assignments include audits of the annual accounts and accountingrecords and management of the Company by the Board of Directors andPresident, as well as other auditing duties performed on behalf of the com-pany by the auditors, and guidance or other assistance deemed necessaryfrom the findings of such audits or other auditing duties. All other work per-formed on behalf of the company is classified as other assignments, prima-rily due-diligence work and tax consulting services.

Note 8 Other operating revenues and expensesGroup Parent Company

(MSEK) 2003 2002 2003 2002

Other operating revenue Share in the profits of associated companies 6.1 2.8 - -Royalties - - 7.7 8.7Capital gains from sale of real estate - 18.5 - -Insurance compensation - - 0.4 2.9Exchange-rate gains 1.2 3.4 0.6 0.3

Other operating expensesExchange-rate losses -13.8 -8.5 - -

36

Supplementary disclosures

Note 9 Operational leasing agreements

Pertaining to Pertaining to machinery buildings

Group 2003 (MSEK) and equipment and land

Leasing charges paid in 2003 50.2 25.8Contractual leasing charges due in2004 40.0 18.62005 26.6 14.32006 18.1 11.02007 6.6 10.22008 3.5 6.12009 and later 4.0 1.7

The tables cover charges for agreements which, for purposes of accounting,are treated as operational leasing.

Pertaining to Pertaining tomachinery buildings

Parent Company 2003 (MSEK) and equipment and land

Leasing charges paid in 2003 4.9 4.3Contractual leasing charges due in2004 4.7 2.92005 4.7 2.92006 1.8 2.92007 - 2.92008 - 3.02009 and later - -

Note 10 Results from financial investments

Group Parent Company(MSEK) 2003 2002 2003 2002

Results from participations in subsidiaries

Write-downs - - - -9.0Other interest income and similar items

Dividends from external securities 0.1 - - -Interest income 35.6 50,6 97.3 1 98.0 1

Exchange-rate gains - 10,2 170.6 204.0Interest expense and similar items

Interest expense -98.0 -93,8 -86.7 2 -80.2 2

Calculated financial costs of pension liabilities -17.8 -23,0 -8.9 -13.5Other financial expenses - - -5.8 -3.7Exchange-rate losses -1.2 - - -

Total -81.3 -56.0 166.5 195.61 Of which, interest income from subsidiaries MSEK 51.8 (52.8).2 Of which, interest expense to subsidiaries MSEK 23.5 (18.3).

Note 11 Appropriations

Parent Company (MSEK) 2003 2002

Depreciation in excess of/less than plan -37,6 2,0Allocation to/reversal of tax allocation reserve -48,3 -18,2

Total -85,9 -16,2

Group contributions received and granted are reported net after tax effects,directly against unrestricted equity.

Note 12 Tax on profit for year

Group Parent CompanyTax expense for the year (MSEK)2003 2002 2003 2002

Current tax -98.6 -45.6 -23.2 -53.2Deferred tax attributable to:Change in temporary differences for the year -76.2 -96.3 2.5 1.3

-174.8 -141.9 -20.7 -51.9

Taxes reported directly against shareholders’ equity, attributable to the hedging of foreign net assets, amounted to MSEK 51.7 (89.5). In the ParentCompany, tax effects of MSEK 18.9 (neg: 37.8), resulting from Group contri-butions, were reported directly against shareholders’ equity. The Group’s taxexpense for 2003 amounted to 31.3 per cent (33.2).

Relation between tax cost for the year and reported pre-tax profits:

Group Parent Company2003 2002 2003 2002

Applicable tax rate 30% 29% 28% 28%Non-deductible costs including goodwill 7% 7% 1% 2%Losses where deferred tax has not been taken into consideration -3% -1% - -Other -3% -2% 2% -Reported tax rate 31% 33% 31% 30%

The applicable tax rate is calculated on the basis of the nominal tax rates ineach country applied to the pre-tax profits of the local units.

Group Parent CompanyDeferred tax asset (MSEK) 2003 2002 2003 2002

Attributable to:Provisions 10.0 9.9 - -Difference between reported and tax values for other assets/liabilities 15.3 5.9 11.4 8.9Loss carry forwards 71.1 2.4 - -

96.4 18.2 11.4 8.9

Group Parent CompanyDeferred tax liability (MSEK) 2003 2002 2003 2002

Attributable to:Difference between reported and tax values for fixed assets 256.6 219.4 - -Tax allocation reserve 30.9 15.8 - -Provisions -9.4 -5.2 - -Difference between reported and tax values for other assets/liabilities 66.9 22.7 - -

345.0 252.7 - -

Deferred tax liability on the untaxed reserves of the Parent Company,totalling MSEK 127.0 (41.1), of which MSEK 55.3 (17.8) is surplus deprecia-tion and of which MSEK 71.7 (23.3) is tax allocation reserve, amounts toMSEK 35.6 (11.5).

At year-end 2002, the Group had unutilised tax loss carry forwardsamounting to MSEK 378 (50).

Of these, MSEK 210 (8) was taken into consideration, corresponding toMSEK 71 (2). In accordance with the Group’s accounting principles, the taxbenefit of a loss carry forward is recognised only if it is likely that is can beutilised in relation to future taxation.

37

Note 13 Dividend per shareAt the Annual General Meeting on April 15, 2004, a dividend for the 2003fiscal year of SEK 6.25 (5.50) per share will be proposed, corresponding toa total dividend of MSEK 227.9 (201.5).

Note 14 Earnings per shareDuring the year, the average number of shares outstanding was 36,591,467.Earnings per share are calculated on a profit of MSEK 383.4 (285.1) and36,591,467 shares (36,338,604). Earnings per share after dilution are calculated on a profit of MSEK 383.4 (285.4) and 36,664.049 shares(36,443,528). The calculation follows the principles contained in RR18.

Note 15 Intangible fixed assets Group Parent Company

2003 2002IT- Total Total IT- IT-

(MSEK) Goodwill systems Other 2003 2002 systems system

Acquisition value, January 1 1 123.7 156.9 23.9 1 304.5 1 433.2 6.0 6.0Acquisitions 209.0 35.0 72.0 316.0 19.4 - -Investments 0.5 21.1 10.7 32.3 20.8 - -Sales/scrappings - -0.2 -4.6 -4.8 -0.9 - -Reclassifications - 0.5 2.0 2.5 15.5 - -Translation differences -150.9 -4.0 -0.5 -155.4 -183.5 - -

Accumulated acquisition value, December 31 1 182.3 209.3 103.5 1 495.1 1 304.5 6.0 6.0

Depreciation, January 1 217.9 71.7 13.7 303.3 235.2 4.4 3.2Acquisitions 17.2 22.1 67.0 106.3 - - -Depreciation during year 63.2 33.4 7.0 103.6 87.0 1.2 1.2Sales/scrappings - -0.2 -4.6 -4.8 -0.7 - -Reclassifications - - - - 3.2 - -Translation differences -25.9 -2.5 -2.5 -30.9 -21.4 - -

Accumulated depreciation, December 31 272.4 124.5 80.6 477.5 303.3 5.6 4.4

Residual value, January 1 905.8 85.2 10.2 1 001.2 1 198.0 1.6 2.8Residual value, December 31 909.9 84.8 22.9 1 017.6 1 001.2 0.4 1.6

Since goodwill is normally attributable to the establishment of strong market positions, goodwill amortisation is included in sales costs. Goodwill amortisation variesbetween 5 and 20 years. The Group’s amortisation of intangible fixed assets is distributed by function, in accordance with the following: costs for goods sold ofMSEK 12.6 (11.2), sales costs of MSEK 72.4 (70.3) and administration costs of MSEK 18.6 (5.5). The Parent Company’s amortisation is attributable to administration.

Note 16 Tangible fixed assets

Equipment, Group 2003 Land and land Plant and tools, fixtures Construction Advances to Total Total(MSEK) improvements Buildings machinery and fittings in progress suppliers 2003 2002

Acquisition value, January 1 250.1 1 323.8 3 951.2 417.6 40.1 0.7 5 983.5 6 111.7Investments 7.1 39.9 131.6 30.5 109.9 0.6 319.6 282.1Acquisitions 47.5 251.2 1 128.9 90.1 3.5 - 1 521.2 107.0Sales/scrappings -0.7 -11.2 -119.6 -16.6 - - -148.1 -245.7Reclassifications 0.3 14.2 37.1 18.1 -71.5 -0.7 -2.5 -15.5Translation differences -15.9 -54.0 -129.7 -15.7 -6.0 -0.1 -221.4 -256.1

Accumulated acquisition value, December 31 288.4 1 563.9 4 999.5 524.0 76.0 0.5 7 452.3 5 983.5

Depreciation, January 1 28.2 529.0 2 494.1 306.5 - - 3 357.8 3 291.7Acquisitions 9.6 106.5 819.8 72.1 - - 1 008.0 43.4Sales/scrapings - -3.7 -92.3 -15.1 - - -111.1 -211.9Reclassifications - 0.7 1.4 -2.1 - - - -3.2Depreciation during year 2.8 50.3 276.7 49.9 - - 379.7 361.1Translation differences -1.2 -23.3 -90.1 -9.7 - - -124.3 -123.3

Accumulated depreciation, December 31 39.4 659.5 3 409.6 401.6 - - 4 510.1 3 357.8

Residual value, January 1 221.9 794.8 1 457.1 111.1 40.1 0.7 2 625.7 2820.0Residual value, December 31 249.0 904.4 1 589.9 122.4 76.0 0.5 2 942.2 2 625.7

Depreciation of tangible fixed assets is distributed by function, in accordance with the following: costs for goods sold MSEK 322.7 (312.7), sales costs MSEK 17.6 (16.0) and administration costs MSEK 39.4 (32.4).No interest expenses have been capitalised.

Taxation values and residual values of Swedish properties

2003 2002Taxation Residual Taxation Residual

(MSEK) value value value value

Buildings 207,6 214,7 202,2 218,0Land 44,0 27,2 43,7 27,6

Total 251,6 241,9 245,9 245,6

Taxation values include value of machinery in certain cases.

Equipment, Parent Company 2003 Land and land Write-up Plant and tools, fixtures Construction Total Total(MSEK) improvements of land Buildings machinery and fittings in progress 2003 2002

Acquisition value, January 1 16.0 13.3 251.8 291.8 60.7 2.9 636.5 625.3Investments 0.4 - 3.8 8.0 2.3 1.3 15.8 16.0Sales/scrappings - - - -2.8 -0.8 - -3.6 -4.8Reclassifications - - 1.5 1.4 - -2.9 - -Accumulated acquisition value, December 31 16.4 13.3 257.1 298.4 62.2 1.3 648.7 636.5

Depreciation, January 1 14.8 - 145.9 239.9 45.0 - 445.6 427.1Sales/scrapings - - - -2.6 -0.8 - -3.4 -4.4Depreciation during year 0.1 - 6.0 12.5 4.0 - 22.6 22.9Accumulated depreciation, December 31 14.9 - 151.9 249.8 48.2 - 464.8 445.6

Residual value, January 1 1.2 13.3 105.9 51.9 15.7 2.9 190.9 198.2Residual value, December 31 1.5 13.3 105.2 48.6 14.0 1.3 183.9 190.9

Depreciation of tangible fixed assets is distributed by function, in accordance with the following: costs for goods sold MSEK 17.9 (18.0), sales costs MSEK 0.0(0.0) and administration costs MSEK 4.7 (4.9).The tax assessment value of buildings is MSEK 130.4 (129.7) and of land, MSEK 33.5 (33.4). Tax assessment values include values of machinery in some cases.

38

Supplementary disclosures

Note 17 Financial leasing agreements

The Group’s tangible fixed assets include the following leasing objects heldin accordance with financial leasing agreements:

Accumulated Acquisition values depreciation

(MSEK) 2003 2002 2003 2002

Buildings and land 95.0 25.1 31.7 13.4Plant and machinery 216.4 5.0 121.6 1.6Equipment, tools, fixtures and fittings 14.5 4.4 9.4 3.1

Total 325.9 34.5 162.7 18.1

Future leasing charges have the following maturity times:

Nominal values Present values(MSEK) 2003 2002 2003 2002

Within one year 38.0 6.7 32.4 4.3Later than one year but within five years 106.4 25.1 93.9 18.6Later than five years 3.1 6.5 2.0 4.2

Total 147.5 38.3 128.3 27.1

The present value of future leasing charges is reported as a liability to creditinstitutions – partly as a current liability and partly as a long-term liability.

Note 18 Acquisitions and divestments of subsidiaries

Group 2003

AcquisitionsOn June 23, Sapa acquired 62.41 per cent of the shares in the Belgiancompany Remi Claeys Aluminium. During the third and fourth quarters, theremaining 37.59 per cent was acquired. Sapa paid MEUR 76.0 for theseshares, entailing goodwill of MEUR 19.8, to be amortised over 20 years. At the time of acquisition, Remi Claeys Aluminium’s net debt amounted toMEUR 80.1.

Total value of acquired assets and liabilities, purchase prices and effects onthe Group’s liquid funds are presented below:(MSEK)

Goodwill 189.7Other intangible fixed assets 17.9Tangible fixed assets 513.2Financial fixed assets 129.4Inventories 470.6Other current assets 650.8Minority -2.8Provisions -56.1Long-term liabilities -236.8Current liabilities -982.3

Total purchase price 693.6Liquid funds in the acquired company -50.8

Effects of acquisitions during the year on Group liquid funds 642.8

In March 2003, the remaining 4.05-per cent minority shareholding in SapaHeat Transfer (Shanghai) Ltd was acquired. The purchase price amounted toMSEK 6.3, compared with a book value for the minority interest of MSEK 4.2.

39

Note 19 Participations in Group companies

Parent Company 2003 Corporate Registered Number of Capital and Book value,Swedish Group companies Registration Number office participations voting rights, % MSEK

Finspongs Metallverks AB 556038-6293 Stockholm 72 000 100 / 100 8.6Feridale Ltd - Dublin, Ireland - 100 / 100 -

Sapa Holdings AB 556101-1668 Västerås - 100 / 100 -Sapa North America Inc. - Delaware, US - 100 / 100 -

Sapa Inc. - Oregon, Portland, US - 100 / 100 -Fintuna AB 556581-8860 Stockholm 1 000 100 / 100 0.1

Gränges Holding (Nederland) B.V. - Amsterdam, Netherlands - 100 / 100 -Gränges AB 556084-9191 Vetlanda 500 000 100 / 100 90.0

Sapa Aluminium Sp.z o.o. - Trzcianka, Poland - 100 / 100 -Sapa Heat Transfer AB 556002-6113 Finspång 300 000 100 / 100 163.0Sapa Industriservice AB 556392-7564 Finspång 8 000 100 / 100 -Sapa Lackering AB 556145-0536 Vetlanda 60 000 100 / 100 16.8Sapa Profiler AB 556366-7483 Vetlanda 500 000 100 / 100 200.0

Sapa Profilbockning AB 556241-9134 Vetlanda - 100 / 100 -Sapa Eesti AS - Tallinn, Estonia - 100 / 100 -UAB Sapa - Vilnius, Lithuania - 100 / 100 -

Sapa Recycling AB 556000-7881 Finspång 7 000 100 / 100 4.2Dormant companies - - - 100 / 100 1.7

484.4Foreign Group CompaniesGreyflag Ltd - Dublin, Ireland 110 000 002 100 / 100 1 069.7Sapa France S.A. - Puget sur Argens, France 410 492 100 / 100 118.2

Sapa Building System SNC - Puget sur Argens, France - 100 / 100 -Aluwar Pologne Sp.z o.o. - Warsaw, Poland - 90 / 90 -SARL P.A.O.I. - Saint Paul, Réunion Island - 65 / 65 -Compex E.U.R.L. - Pégomas, France - 100 / 100 -

Sapa Intexalu S.A. - Puget sur Argens, France - 100 / 100 -Sapa Industries SNC - Puget sur Argens, France - 100 / 100 -Sapa Profiles SNC - Le Garric, France - 100 / 100 -Sapa Lacal SNC - Le Garric, France - 100 / 100 -

Sapa Heat Transfer (Shanghai) Ltd - Shanghai, China - 100 / 100 144.4Lords Agriculture Machinery Ltd - Cheltenham, UK 500 000 50 / 50 6.6Portextral S.A. - Lisbon, Portugal 5 000 100 / 100 263.6

Anodil S.A. - Lisbon, Portugal - 100 / 100 -Equipacentro Lda - Lisbon, Portugal - 100 / 100 -Anodipol Lda - Pombal, Portugal - 100 / 100 -Novas Tecnologias em Alumino SA - Queluz, Portugal - 100 / 100 -Fipor Lda - Agueda, Portugal - 100 / 100 -Dialma Ltd - Maputo, Mozambique - 100 / 100 -

Remi Claeys Aluminium NV - Lichtervelde, Belgium 2 761 508 100 / 100 693.6Remi Claeys System NV - Landen, Belgium - 100 / 100 -Cuprocimique NV - Gent, Belgium - 100 / 100 -RC System Aleurope SA - La Chapelle D’Armentieres, France - 100 / 100 -Remi Claeys System Ekonal GmbH - Velbert, Germany - 100 / 100 -RCA Beheer BV - Breda, Netherlands - 100 / 100 -

RCS BV - Breda, Netherlands - 100 / 100 -Alupartners BV - Breda, Netherlands - 100 / 100 -

RC System Sp zoo - Wroclaw, Poland - 100 / 100 -RC System CZ Sro - Kladno-Sitna, Czech Republic - 100 / 100 -RC System SK Sro - Ivanka Pri Dunaji, Slovakia - 100 / 100 -RC System Turkiye AS - Istanbul, Turkey - 100 / 100 -La Guérite SA - Sevaz, Switzerland - 100 / 100 -RC Alufront Sarl - Sevaz, Switzerland - 75/ 50 -RC Neuherz GmbH - Gleisdorf, Austria - 100/100 -RC System SAL - Ashrafieh, Lebanon - 60 / 60 -RC Automotive GmbH - Remscheid, Germany - 80 / 80 -Remi Claeys Aluminium SA - Angers, France - 100 / 100 -Sapa RC Profiles NV - Mons-Ghlin, Belgium - 100 / 100 -Allease Ghlin SA - Mons-Ghlin, Belgium - 100 / 100 -Aleeurope Holding NV - Lichtervelde. Belgium 100 / 100 -Remi Claeys International Service NV - Lichtervelde, Belgium - 100 / 100 -

Sapa GmbH - Offenburg, Germany 5 100 / 100 83.5Sapa Aluminum Profile GmbH - Offenburg, Germany - 100 / 100 -Sapa Vertrieb GmbH - Düsseldorf, Germany - 100 / 100 -SARL Sapa Aluminium Profiles - Reichstett, France - 100 / 100 -Sapa Aluminium Profile AG - Zürich, Switzerland - 100 / 100 -

40

Supplementary disclosures

Corporate Registered Number of Capital and Book value,Note 19 continued Registration Number office participations voting rights, % MSEK

Sapa Holdings (Nederland) B.V. Amsterdam, Netherlands 18 100 / 100 0.2Sapa Nederland B. V. - Hoogezand, Netherlands 6 700 100 / 100 76.6

Sapa Aluminium B.V. - Hoogezand, Netherlands - 100 / 100 -Sapa Coating B.V. - Hoogezand, Netherlands - 100 / 100 -

Lichtgroep Beheer B.V. - Etten-Leur, Netherlands - 100 / 100 -Sapa Plus B.V. - Etten-Leur, Netherlands - 100 / 100 -Vormlicht B.V. - Etten-Leur, Netherlands - 100 / 100 -SARL Apollo France Diffusion - Nantes, France - 100 / 100 -

Sapa Perfiles S.L. - Madrid, Spain 9 999 100 / 100 1.4Sapa Profiler A/S - Grenaa, Denmark 100 000 100 / 100 58.8Sapa Profiler AS - Lillestrøm, Norway 2 000 100 / 100 2.2Sapa Profiilit Oy - Espoo, Finland 500 100 / 100 3.0Sapa Profiles (Shanghai) Ltd - Shanghai, China - 100 / 100 7.3Sapa Profily SRO - Ostrava, Czech Republic - 100 / 100 1.9Sapa System Sp.z o.o. - Warsaw, Poland 2 000 100 / 100 2.0Sapa UK Ltd - Cheltenham, UK 19 137 046 100 / 100 235.4

Gränges Products Ltd - Cheltenham, UK - 100 / 100 -Sapa Building System Ltd - Tewkesbury, UK - 100 / 100 -

Plan-it Teweksbury Ltd - Cheltenham, UK - 100 / 100 -Pressweld Ltd - Gloucester, UK - 100 / 100 -Sapa Financial Services Ltd - Cheltenham, UK - 100 / 100 -Sapa Profiles Ltd - Cheltenham, UK - 100 / 100 -Lords Agriculture Machinery Ltd - Cheltenham, UK - 50 / 50 -

2 768.5

Total, Group companies 3 252.9

Note 20 Financial fixed assets

Other Parent Company, Participations long-term Other Participations

Deferred in associated holdings of long-term Group in Group (MSEK) tax asset companies securities receivables total companies

Acquisition value, January 1 18.2 5.4 1.1 2.4 27.1 2 552.3Participation in net profit for year - 4.7 - - 4.7 -Purchases/capital contributions - - 2.1 2.4 4.5 9.8Acquisitions 54.7 71.3 5.7 0.6 132.3 699.9Divestments/instalments received - - - -0.1 -0.1 -Transfer between tax liability/asset 8.9 - - - 8.9 -Income statement 15.3 - - - 15.3 -Translation differences -0.7 -1.2 -0.4 -0.3 -2.6 -

Accumulated acquisition value, December 31 96.4 80.2 8.5 5.0 190.1 3 262.0

Write-down, January 1 - - - - - 9.1Acquisitions - - 2.9 - 2.9 -Write-downs for the year - - - - - -Translation differences - - - - - -

Accumulated write-downs, December 31 - - 2.9 - 2.9 9.1

Net value, January 1 18.2 5.4 1.1 2.4 27.1 2 543.2Net value, December 31 96.4 80.2 5.6 5.0 187.2 3 252.9

Note 21 Participations in associated companies

Corporate Registered Number of Capital and Book value,Group 2003 Registration Number office participations voting rights, % MSEK

Alural Ghlin SA - Mons-Ghlin, Belgium 32 500 50 / 50 7.3Boal International BV - Zh de Lier, Netherlands 450 001 25 / 25 71.0Ekonal Italia Srl - Bolzano, Italy 1 40 / 40 7.0Norca Heat Transfer - New York, US - 50 / 50 0.0

85.3Undistributed share of profit/loss in associated companies -5.1

Value calculated in accordance with equity method 80.2

41

Note 22 Inventories

Group(MSEK) 2003 2002

Raw materials and consumables 278.6 254.3Work in progress 621.1 604.1Finished goods 893.9 564.9

Total 1 793.6 1 423.3

Note 23 Accounts receivable, trade

Group(MSEK) 2003 2002

Of whichReceivables from associated companies 25.0 22.8

Note 24 Other receivables

Group Parent Company(MSEK) 2003 2002 2003 2002

Prepaid expenses 75.1 58.6 14.4 8.1Accrued interest income 10.6 2.8 3.7 2.8Other accrued income 8.0 3.1 2.8 1.9Tax receivables 35.1 68.5 13.0 34.7Other receivables 115.5 110.0 8.2 5.2

Total 244.3 243.0 42.1 52.7

Note 25 Shareholders’ equity

At January 1, accumulated translation differences amounted to MSEK 19.2and at December 31 amounted to negative MSEK 130.6. These were calcu-lated as of January 1, 1999, when RR8 took effect. Hedging of foreign netassets had a positive effect on translation differences in an amount of MSEK 328.7 (401.5). The Group’s restricted equity includes an equity-method reserve of MSEK 80.2 (5.4).

The number of registered shares at January 1, 2003 was 37,167,658.During the year, 14,500 convertible debentures were converted into shares.At December 31, 2003, the number of shares thus amounted to 37,182,158.At December 31, the Parent Company’s holdings of repurchased companyshares amounted to 706,030, of which 203,700 were repurchased during2003. The purchase value was MSEK 113.6, of which MSEK 33.3 during2003, has reduced unrestricted equity. The number of convertible deben-tures outstanding amounts to 58,400, corresponding to a 0.2 per centincrease in the number of shares at full conversion. In addition, there were79,950 outstanding warrants with rights to acquire newly issued shares, cor-responding to a dilution of 0.2 per cent at full subscription. The conversionand subscription rates are both SEK 136, with the programme durationextending until July 30, 2004.

Note 26 Provisions for pensions and similar commitments

Group Parent Company(MSEK) 2003 2002 2003 2002

Pension Registration Institute (PRI) pensions 339.3 331.6 165.5 167.5Other pensions 52.9 22.7 8.3 9.1Pension fund liabilities 10.4 11.7 10.4 11.7

Total 402.6 366.0 184.2 188.3

Effective 2004, Sapa AB applies recommendation RR29 of the SwedishFinancial Accounting Standards Council, “Employee benefits,” in the consoli-dated accounts. The regulations are based on IAS 19. Effective January 1,2004, the non-recurring effect of this change will reduce the Group’s share-holders’ equity by MSEK 59, after tax effects have been taken into account.The change in accounting principle will have no material effect on pensioncosts for 2004.

Note 27 Other provisions

Group Restructuring Guarantee Total Total (MSEK) reserve reserve Other 2003 2002

Balance, Jan. 1 20.4 10.5 31.6 62.5 108.0Provisions made during the year 4.8 - 7.6 12.4 21.5Acquisitions 26.1 0.9 11.5 38.5 -Provisions utilised during the year -23.4 -0.1 -9.4 -32.9 -67.0Currency-exchange difference -0.1 - -0.1 -0.2 0.0Balance, Dec. 31 27.8 11.3 41.2 80.3 62.5

The restructuring reserve at December 31 pertained, in part, to the divestmentof operations expected to be completed during 2004 and, in part, to remainingrental commitments from previously divested operations, where the commitmentextends for a maximum of four years. Other provisions relate to guaranteesand disputes where it is not possible to determine the point in time for anyoutflow of resources.

Note 28 Long-term liabilities

Of the Group's long-term liabilities, which amounted to MSEK 1,571.6 atyear-end 2003, MSEK 123 fall due for payment more than five years afterDecember 31, 2003.

Of the Parent Company's long-term liabilities, which amounted to MSEK 1,231.7 at year-end 2003, MSEK 89 fall due for payment more thanfive years after December 31, 2003.

Within the framework of a borrowing programme of MSEK 500, theParent Company took up two bond loans totalling MSEK 91.5 in 2003, whichfall due for payment more than five years after December 31, 2003. One of the bond loans was used to meet an amount of MEUR 5 that reachedmaturity and that was refinanced in the same amount. A subsidiary took upa loan of MEUR 15.

The Parent Company’s convertible loan of MSEK 7.9 carries an annualinterest corresponding to 12 months STIBOR less 0.5 percentage points. The convertible loan matures on July 30, 2004. During the year, 14,500 convertible debentures were converted into the same number of new shares.This corresponds to a reduction of the convertible debenture loan and anincrease in shareholders’ equity of MSEK 2.0.

The Parent Company has a total of MUSD 175 and MSEK 150 in over-draft facilities, which have a remaining duration of 3.6 years. At year-endMSEK 559 of these facilities had been utilised.

The total long-term liabilities of the Group and the Parent Company hada remaining term of 3.7 years as of December 31, 2003. The loans havefixed interest periods of one to 12 months.

Note 29 Liabilities to credit institutions

The Group’s total confirmed overdraft facilities amounted to MSEK 289 atyear-end 2003. The Parent Company’s total confirmed overdraft facilitiesamounted to MSEK 139 at year-end 2003.

Note 30 Accounts payable, trade

Group(MSEK) 2003 2002

Of whichLiabilities to Group companies 20.0 16.2Liabilities to associated companies 0.0 0.5

42

Supplementary disclosures

Note 31 Other interest-free liabilities

Group Parent Company(MSEK) 2003 2002 2003 2002

Advance payments from customers 23.3 19.1 4.6 9.1Income tax liability 57.1 55.8 - -Accrued expenses and prepaid revenues11 474.4 399.3 66.2 60.8Other liabilities 124.5 90.5 9.8 5.4

Total 679.3 564.7 80.6 75.3

1Of which Salaries and social security contributions 358.3 284.7 38.2 33.1Accrued interest expense 9.4 12.2 12.9 11.6Other accrued expenses 106.7 102.4 15.1 16.1

Note 32 Assets pledged

Group Parent Company(MSEK) 2003 2002 2003 2002

Assets pledged for own liabilities and provisionsPertaining to provisions for pensions and similar commitments

Real-estate mortgages 15.0 15.0 15.0 15.0Chattel mortgages 13.6 - - -

Pertaining to long-term liabilities to credit institutions

Real-estate mortgages - 7.1 - -Chattel mortgages 88.4 - - -

Pertaining to current liabilities to credit institutions

Real-estate mortgages 9.6 - - -

Total assets pledged 126.6 22.1 15.0 15.0

Note 33 Contingent liabilities

Group Parent Company(MSEK) 2003 2002 2003 2002

Other contingent liabilities 49.5 40.2 492.6 394.8Of which, for subsidiaries - - (471.0) (375.5)

Total contingent liabilities 49.5 40.2 492.6 394.8

Note 34 Average number of employees, etc.

Average number of employees2003 2002

Number of Of which, Number of Of which, employees women employees women

Sweden 2 287 21% 2 290 20%Belgium 444 11% - -Denmark 182 27% 191 27%Finland 11 45% 11 36%France 856 13% 788 12%Czech Republic 7 14% - -China 244 11% 231 11%Switzerland 6 17% - -Netherlands 217 8% 217 8%Norway 15 27% 15 27%Poland 460 9% 349 11%Portugal 717 27% 768 27%Spain 8 - - -UK 748 17% 680 15%Germany 226 17% 178 15%US 774 11% 797 11%Lithuania 6 33% 4 50%Lebanon 6 33% - -Others 1 15 44% 7 43%

Group total 7 229 17% 6 526 17%

Parent CompanySweden 403 20% 402 17%

Parent Company total 403 20% 402 17%1 Sales companies with five employees or less

Board members and Senior Executives2003

Proportion men

Group Board members 100%Presidents and other Senior Executives 93%

Parent CompanyBoard members 100%Presidents and other Senior Executives 91%

Parent CompanyAbsence due to sickness July 1, 2003 – December 31, 2003

Total absence due to sickness 4.5%- long-term sick leave as % of total absence due to sickness 62.4%- absence due to sickness, men 4.4%- absence due to sickness, women 4.8%- employees up to 29 years of age 3.9%- employees between 30 and 49 years of age 3.2%- employees older than 50 years of age 6.0%

43

Definitions

Capital employedTotal assets, reduced by liquid funds, operatingliabilities and other interest-free liabilities (includ-ing net of deferred tax).

Capital turnover rateNet sales relative to average capital employed.

Debt/equity ratioNet debt relative to shareholders’ equity.

Earnings per shareNet profit for the year divided by a weighted aver-age of outstanding shares during the year.

EBITDAOperating profit (EBIT) increased with deprecia-tion and amortisation.

Equity/assets ratioShareholders’ equity as a percentage of totalassets.

Financial netNet of interest income and interest expense,financial cost of pension liability and currency-exchange differences on interest-bearing receiv-ables/liabilities.

Interest-coverage ratioProfit after financial items, increased by interestexpense, relative to interest expense.

Interest netNet of interest income and interest expense,including financial cost of pension liability.

Net debtInterest-bearing liabilities, including pension pro-visions, reduced by liquid funds.

Net marginNet profit for the year as a percentage of netsales.

Operating marginOperating profit (EBIT) as a percentage of netsales.

Price/earnings ratio (P/E)Share price at year-end divided by earnings pershare.

Return on capital employed (ROCE)Operating profit as a percentage of average capi-tal employed.

Return on equity (ROE)Net profit for the year as a percentage of averageshareholders’ equity.

Shareholders’ equity per shareShareholders’ equity relative to the number ofshares outstanding at year-end.

Value-added marginNet sales less costs for materials in relation tonet sales.

YieldDividend proposed for the fiscal year in relation tothe share price at year-end.

44

Proposed disposition of earnings

According to the established Consolidated Balance Sheet, Group non-restricted equityamounts to MSEK 2,050.9.

Non-restricted equity in the Parent Company amounts to:

profit brought forward 1 672 995 998

profit for the year 44 939 626

SEK 1 717 935 624

The Board of Directors proposes:that shareholders receive a dividend of SEK 6.25 per share 227 914 550

and that the remainder be carried forward 1 490 021 074

SEK 1 717 935 624

The dividend is calculated on the basis of the number of outstanding shares at the signing of the Annual Report. The Parent Company’s holding of own shares amountedon that occasion to 715,830 and may increase up to the dividend record day.

The Income Statements and Balance Sheets are to be adopted by the Annual GeneralMeeting on April 15, 2004.

Stockholm, February 12, 2004

Per-Olof ErikssonChairman

Lars Axelhed Anders Carlberg Ole Enger Lennart Evrell

Leif Gustafsson Baard Haugen Kenneth Hertz Mats Qviberg

Staffan BohmanPresident and CEO

Our Auditors’ Report was issued on February 12, 2004.

Åke Danielsson Jörgen LindqvistAuthorised Public Accountant Authorised Public Accountant

45

Audit Report

We have audited the annual accounts, the consolidated accounts, the accountingrecords and the administration of the board of directors and the managing director ofSapa AB for the financial year. These accounts and the administration of the companyare the responsibility of the board of directors and the managing director. Our responsi-bility is to express an opinion on the annual accounts, the consolidated accounts andthe administration based on our audit.

We conducted our audit in accordance with generally accepted auditing standardsin Sweden. Those standards require that we plan and perform the audit to obtain rea-sonable assurance that the annual accounts and the consolidated accounts are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence support-ing the amounts and disclosures in the accounts. An audit also includes assessing theaccounting principles used and their application by the board of directors and the man-aging director, as well as evaluating the overall presentation of information in the annualaccounts and the consolidated accounts. As a basis for our opinion concerning dis-charge from liability, we examined significant decisions, actions taken and circumstancesof the company in order to be able to determine the liability, if any, to the company ofany board member or the managing director. We also examined whether any boardmember or the managing director has, in any other way, acted in contravention of theCompanies Act, the Annual Accounts Act or the Articles of Association. We believe thatour audit provides a reasonable basis for our opinion set out below.

The annual accounts and the consolidated accounts have been prepared in accor-dance with the Annual Accounts Act and, thereby, give a true and fair view of the com-pany’s and the group’s financial position and results of operations in accordance withgenerally accepted accounting principles in Sweden.

We recommend to the general meeting of shareholders that the income statementsand balance sheets of the parent company and the group be adopted, that the profit forthe parent company be dealt with in accordance with the proposal in the administrationreport and that the members of the board of directors and the managing director be discharged from liability for the financial year.

Stockholm, February 12, 2004

Åke Danielsson Jörgen LindqvistAuktoriserad revisor Auktoriserad revisor

(Authorised Public Accountant) (Authorised Public Accountant)

46

Per-Olof Eriksson (Born 1938)Chairman, Sapa AB. Elected to Board in 2001.Honorary Doctor of Technology.Chairman of the Boards of Thermia AB, ConsolisOy and Odlander, Fredrikson & Co. AB.Board member of SSAB, AB Volvo, AB Custos,Assa Abloy AB and Preem Petroleum AB.Holding in Sapa: 5,200 shares.

Lars Axelhed (Born 1941)Employee representative since 1995.Appointed by Union of Salaried Employees in Private Sector.Holding in Sapa: 1,152 shares and convertiblescorresponding to 1,500 shares.

Staffan Bohman (Born 1949)President and CEO of Sapa AB.Elected to Board in 1999.Chairman of the Board of the German-SwedishChamber of Commerce.Board member of Trelleborg AB, Atlas Copco ABand Sapa AB.Holding in Sapa: 75,000 shares and 175,000 options.

Lennart Evrell (Born 1954)President and CEO of Munters AB.Elected to Board in 2001.Holding in Sapa: 1,000 shares.

Leif Gustafsson (Born 1940)Director. Elected to Board in 1997.Board member of AB Custos and ElektrokopparSvenska AB.Holding in Sapa: 1,000 shares.

Baard Haugen (Born 1955)Senior Vice President, Corporate Development,Elkem ASA.Elected to Board in 2003.Holding in Sapa: -

Sapa’s Board of Directors

47

Anders Carlberg (Born 1943)CEO of Axel Johnson International AB.Elected to Board in 2001.Board member of Axel Johnson AB, Elkem ASA,SSAB, Beijer-Alma, Säki, among others.Holding in Sapa: -

Kenneth Hertz (Born 1965) Employee representative since 1999.Appointed by Swedish Trade UnionConfederation.Holding in Sapa: -

Åke Davidsson (Born 1959)Employee representative since 1999.Appointed by Union of Salaried Employees inPrivate Sector, deputy member.Holding in Sapa: 80 shares.

Ole Enger (Born 1948)President and CEO of Elkem ASA.Elected to Board in 2001.Board member of RepresentantskapetStorebrand.Holding in Sapa: -

Hans Norén (Born 1946)Employee representative since 1999.Appointed by Swedish Trade UnionConfederation, deputy member.Holding in Sapa: 25 shares.

Mats Qviberg (Born 1953)President of Investment AB Öresund.Elected to Board in 1998.Chairman of the Boards of Hagströmer & QvibergAB, Wihlborgs Fastigheter AB, Bilia AB andBostads AB Drott.Board member of AB Custos and SkiStar AB.Holding in Sapa: 5,000 shares.

Board work during 2003

Composition of the BoardSapa’s Board of Directors consists ofeight members elected by the AnnualGeneral Meeting, plus two members andtwo deputy members appointed by theemployees. The members elected by theAnnual General Meeting include threepersons who represent or have connec-tions to Sapa’s majority shareholderElkem ASA, and consequently four per-sons who are independent of this owner,in addition to the President, who is also amember of the Board.

Nominations for election to the Board

The Company has no NominationsCommittee appointed by the AnnualGeneral Meeting.

Nominations for membership on theBoard of Sapa AB are managed by theChairman in consultation with representa-tives of the Company’s three principalowners, which now represent more than85 per cent of all shares.

Board work during 2003

The Board held five ordinary meetingsduring 2003 and two special meetings bytelephone conference. One Board meet-ing was held at a subsidiary in connectionwith a major review of local operations.This involved a two-day visit to HeatTransfer and Profiles in Finspång, Sweden,during which Heat Transfer’s operations inChina were also discussed and SapaTechnology’s operations were presented.During the year, the Board dealt withauditing matters, as well as issues involv-ing the strategy and direction of theGroup’s business areas, corporate acqui-sitions, issues of remunerations to Groupemployees, profit-management systems,management and organisational changes,the work environment, follow-up calcula-tions pertaining to investments and theBoard’s internal working methods. Manyother issues were also dealt with by theBoard, and the above list is not exhaus-tive, nor does it include a qualitative eval-uation of the importance of the issues.

Board meetings follow an agenda,established in the Board’s work proce-dures, prepared in advance to ensure thatthe Board receives the financial and otherinformation necessary for performance of

its task. The Board’s work proceduresinclude guidelines for work performed bythe Board and instructions governing thedistribution of work between the Boardand the President.

Remuneration issues and incentive programmes

The Board appointed a remunerationscommittee in 2001 that comprised theChairman, the President and AndersCarlberg during 2003. The committee for-mulates general guidelines related toremuneration issues (salary, bonus, bene-fits) for the Group’s senior executives andincentive programmes both for theGroup’s senior executives and otheremployees. With regard to members ofGroup management, the remunerationcommittee annually conducts individualreviews of the current situation andmakes adjustments as deemed motivat-ed. The President does not participate indiscussions of questions that concern hisown terms of employment. The Board iscontinuously informed of the remunera-tion committee’s work and resolves allissues that are presented to the Board.Minutes are kept of the remunerationscommittee’s meetings. The Group appliesthe so-called “grandfather principle,”whereby decisions regarding an employ-ee’s terms of employment and remunera-tion are reached in consultation betweensupervisors at the employee’s two closestsuperior-management levels.

With regard to the Group’s pensioncommitments, the committee has decid-ed that contributions-defined pensionsolutions shall be applied for all newemployment contracts.

The President’s salary is determinedby the full Board in the absence of thePresident. In connection with this, thework of the President during the past yearis discussed and evaluated.

Audit and reporting issues

The Board has decided not to appoint anaudit committee among its own mem-bers. Instead, it has decided that mattersrelated to audits and the auditors are ofsuch importance that they should be han-dled and decided on by the Board as awhole. This is facilitated by the relative

ease with which the Group’s structure canbe overviewed and the similarity of itsvarious operations. This favours opportuni-ties to form views regarding the auditingissues arising within the Group and topenetrate these in depth. The Board hasalso decided that its size and the previ-ous experiences of its members and theirexpertise permit concentrated andinsightful discussions on auditing mattersthat arise.

Questions related to audit fees areaddressed by the Board prior to finaldecisions by the Annual General Meeting.At the Board meeting in conjunction withthe annual audit, the auditors submit areport of their audit work, observationsbased on their audit of the ParentCompany and the Group and their evalu-ation of the Company’s internal controls.The auditors also participate in a Boardmeeting during the autumn and conductdetailed discussions with the Boardregarding audit issues of a principalnature as well as eventual problems andrisks that may arise during their examina-tions of the accounts during the year.

Auditors

PricewaterhouseCoopers AB, withAuthorised Public Accountants: ÅkeDanielsson and Jörgen Lindqvist, andDeputy Auditors Björn Irle and AgnetaBrevenhag.

48

49

Articles of Association

Sapa Aktiebolag (publ)Registered company number 556001-6122

§ 1 The name of the company is SapaAktiebolag (publ).

§ 2 The Board of Directors of the compa-ny shall have its registered office in themunicipality of Stockholm.

§ 3 The objects of the company are -directly or indirectly through subsidiaries -to produce, process and sell metals,mainly aluminium, as well as products inplastic, to conduct trade with and recov-ery of scrap, to acquire and administerreal and moveable estate, and to carry onother activities that are compatible withthe operations listed above.

§ 4 The share capital of the companyshall be not less than SEK eight hundredmillion (800,000,000) and not more thanSEK three billion two hundred million(3,200,000,000).

§ 5 The shares shall have a nominalvalue of SEK twenty-five (25) each.

§ 6 The Board of Directors shall, in addi-tion to those members who pursuant toSwedish law may be appointed by a bodyother than the General Meeting of share-holders, consist of not less than four andnot more than eight directors with notmore than three deputy directors. Thedirectors, and deputy directors, shall beelected at the Annual General Meeting ofshareholders for the period up to andincluding the next Annual GeneralMeeting of shareholders.

§ 7 Two auditors and two deputy auditorsor one firm of chartered public account-ants, shall be appointed to examine thecompany’s annual accounts, financialstatements and the administration of thecompany by the Board of Directors andthe President.

§ 8 Notice of General Meeting of share-holders shall be given through advertisingin the Post- & Inrikes Tidningar (OfficialSwedish Gazette) and in SvenskaDagbladet.

§ 9 In order to be entitled to participate ina General Meeting of shareholders,Shareholders must be registered in atranscript of the share register relating tothe facts which were recorded ten daysbefore the General Meeting of sharehold-ers and must give notice to the companynot later than the day mentioned in thenotice convening the General Meeting ofshareholders, before 4 p.m. This day mustnot be a Sunday, any other public holiday,a Saturday, Midsummer Eve, ChristmasEve or New Year’s Eve and must not fallearlier than the fifth weekday prior to theGeneral Meeting of shareholders.

§ 10 The Chairman of the Board ofDirectors, or the person appointed by theBoard of Directors, shall open and presideover the General Meeting of shareholdersuntil such time as a chairman is electedfor the General Meeting of shareholders.

§ 11 The General Meeting of shareholdersshall be held in Stockholm or in Vetlanda.The Annual General Meeting shall be heldnot later than six months after the expira-tion of each financial year. At the Annual General Meeting of share-holders the following matters shall bedealt with: 1. Election of chairman to preside over

the Meeting. 2. Preparation and approval of a voting list. 3. Election of two persons to check the

minutes. 4. Approval of the agenda.5. Examination of whether the Meeting

has been properly convened.6. Presentation of the annual report and

the auditor’s report of the company,as well as the consolidated accountsand the auditor’s report of the group.

7. Resolutions with respect to a) adoption of the income statement and

the balance sheet of the companyand the consolidated income state-ment and the consolidated balancesheet,

b) appropriation of the company’s profit or loss according to the balancesheet adopted,

c) discharging of the members of theBoard of Directors and the managingdirector from liability.

8. Determination of the number of members of the Board of Directorsand deputy members to be appointedby the Meeting.

9. Determination of fees for the Board ofDirectors and the auditors.

10. Election of directors and deputy directors of the Board of Directors.

11. Election, as applicable, of auditorsand deputy auditors.

12. Any other matter to be dealt with bythe Meeting according to the SwedishCompanies Act.

§ 12 At the General Meeting of share-holders, each person entitled to vote mayvote for the full number of shares ownedor represented by him.

§ 13 The company’s financial year shallbe the calendar year.

§ 14 Those shareholders who on theestablished record day are entered in theshareholders’ register or in a registercomplying with the Swedish CompaniesAct, chapter 3 § 12, are consideredauthorised to receive dividends, and incase a bonus issue is made, to receivenew shares as well as to exercise prefer-ential right to participate in share issues.

Senior executives

Kåre Wetterberg (Born 1949)Executive Vice President, respon-sible Sapa’s Strategic BusinessSegments and Profiles in China.Employed since 1974.Holding in Sapa: 710 shares,47,050 options and convertiblescorresponding to 1,500 shares.

Staffan Bohman (Born 1949)President and CEO of Sapa AB.Employed since 1999.Chairman of the Board of the German-Swedish Chamber of Commerce.Board member of Trelleborg AB, Atlas Copco AB and Sapa AB.Holding in Sapa: 75,000 shares and 175,000 options.

Francois Coëffic (Born 1951)Group Vice President, respon-sible for Building System and Profiles in France, Portugaland Spain.Employed since 1990.Holding in Sapa: 1,060 sharesand 62,300 options.

50

Derek Phillips (Born 1944)Group Vice President, respon-sible for Business and Management Development.Employed since 1996.Holding in Sapa: 33,250 optionsand convertibles corresponding to 5,000 shares.

Arne Rengstedt (Born 1951)Group Vice President, respon-sible for Profiles in Scandinavia,the Baltic States and EasternEurope.Employed since 2002.Holding in Sapa: 20,000 options.

Bo Askvik (Born 1958)Group Vice President, Finance and Administration.Employed since 1997.Holding in Sapa: 7,000 shares and 26,000 options.

51

Robin Greenslade (Born 1946)Group Vice President, responsible for Profiles in the UK, the Beneluxcountries, Germany and the US.Employed since 1977.Holding in Sapa: 1,000 shares and 57,050 options.

Gabriella Ekelund (Born 1975)Communications Manager.Employed since 1999.Holding in Sapa: -

Magnus Wittbom (Born 1958)Group Vice President, respon-sible for legal affairs and insurance.Employed since 1995.Holding in Sapa: 27,750 optionsand convertibles correspondingto 5,000 shares.

Stefan Thorheim (Born 1957)Group Vice President,Accounting and Control.Employed since 1986.Holding in Sapa: 2,100shares and 15,000 options.

Michael Mononen (Born 1958)Group Vice President, responsible for Heat Transfer.Employed since 1983.Holding in Sapa: 22,000 options.

52

Six-year summary

Six-year summary

MSEK 2003 2002 2001 2000 1999 1998

Income Statements, excluding non-recurring itemsNet sales 11 803 11 090 15 168 15 395 12 220 10 249Operating profit 641 483 531 893 789 589Financial items -81 -56 -219 -188 -89 -63Profit after financial items 559 427 312 705 700 526Taxes -175 -142 -129 -239 -237 -169Minority interests -1 0 0 1 15 2

Net profit for the year 383 285 183 467 478 359

Balance sheetsFixed assets 4 147 3 654 4 111 5 732 3 721 2 757Current assets 4 479 3 646 3 942 6 096 4 564 3 370Liquid funds 594 747 1 027 572 518 448

Total assets 9 220 8 047 9 080 12 400 8 803 6 575

Shareholders’ equity 3 880 3 879 3 976 3 467 2 754 2 510Interest-bearing liabilities and provisions 2 694 1 835 2 760 4 709 2 334 1 519Interest-free liabilities and provisions 2 646 2 333 2 344 4 225 3 715 2 546

Total shareholders’ equity and liabilities 9 220 8 047 9 080 12 400 8 803 6 575

Key ratios, excluding non-recurring itemsOperating margin, % 5,4 4,4 3,5 5,8 6,5 5,7Capital turnover rate, multiple 2,1 2,1 2,1 2,4 2,8 3,0Return on capital employed, % 11,5 9,0 7,5 14,1 18,1 17,0Return on shareholders’ equity, % 10,0 7,5 4,8 15,2 18,6 16,0Net margin, % 3,2 2,6 1,2 3,0 3,9 3,5Equity/assets ratio, % 42 48 44 28 31 38Debt/equity ratio, multiple 0,54 0,28 0,44 1,19 0,66 0,43Interest-coverage ratio, multiple 5,8 4,7 2,2 4,1 7,2 7,1Net debt, MSEK 2 100 1 088 1 733 4 137 1 817 1 071Capital employed, MSEK 5 983 4 970 5 714 7 609 4 885 3 614New and replacement investments, MSEK 352 303 595 829 877 661Average number of employees 7 229 6 526 8 888 9 118 7 611 6 520

Average number of shares, 000s 36 591 36 339 36 617 36 617 36 617 36 617Earnings per share, SEK 10,50 7,85 5,00 12,75 13,00 9,80Earnings per share after dilution, SEK 10,50 7,80 4,95 12,50 12,80 9,60Shareholders’ equity per share, SEK 106,40 105,80 108,75 94,70 75,20 68,50Cash flow per share, SEK 1 13,00 16,30 8,70 -7,20 -3,30 -0,50Proposed dividend per share, SEK 6,25 5,50 5,00 5,00 4,75 3,751 After investments, excl. acquisitions/divestments

Key ratios, including non-recurring itemsOperating margin, % 5,4 4,4 5,5 8,0 6,5 6,4Return on capital employed, % 11,5 9,0 11,7 19,3 18,1 19,0Return on shareholders’ equity, % 10,0 7,5 12,3 25,0 18,6 17,7Net margin, % 3,2 2,6 3,1 5,0 3,9 3,9Interest-coverage ratio, multiple 5,8 4,7 3,4 5,6 7,2 7,9

Earnings per share, SEK 10,50 7,85 12,75 21,05 13,00 10,90Earnings per share after dilution, SEK 10,50 7,80 12,60 20,70 12,80 10,70

Non-recurring items2001: Capital gains from sales of Eurofoil and Autoplastics, write-down of goodwill for Autoplastics and provisions for closures and restructuring measurestotalling MSEK 301 before tax and MSEK 284 after tax.2000: Capital gain and surplus funds from SPP totalling approximately MSEK 330 before tax and MSEK 302 after tax.1998: Non-recurring gain of MSEK 69 before tax and MSEK 40 after tax from sale of Gränges Metall.

Quarterly data during most recent three years

The Sapa Group present structure03:4 03:3 03:2 03:1 2003 02:4 02:3 02:2 02:1 2002 01:4 01:3 01:2 01:1 2001

Net sales, MSEK 3 176 3 034 2 834 2 758 11 803 2 689 2 642 2 937 2 821 11 090 2 735 2 718 3 022 3 126 11 600Operating profit, MSEK 169 151 169 151 641 132 114 136 101 483 14 60 137 162 373Operating margin, % 5,3 5,0 6,0 5,5 5,4 4,9 4,3 4,6 3,6 4,4 0,5 2,2 4,5 5,2 3,2Deliveries, tonnes 86 060 84 560 79 050 76 790 326 460 69 870 69 190 75 300 70 660 285 020 63 030 63 760 72 870 77 990 277 650

2

Headquarters

Sapa AB Visiting address:Humlegårdsgatan 17Box 5505114 85 Stockholm, SwedenPhone: +46 8 459 59 00Fax: +46 8 459 59 50www.sapagroup.com e-mail: info@sapagroup.com

Austria

RC Neuherz GmbH Pirching 90 8200 Gleisdorf Phone: +43 3112 73 66 - 0 Fax: +43 3112 73 66 - 6

Belgium

Sapa Building System(Headquarters)Industrielaan 178810 LichterveldePhone: + 32 51 729 666Fax: + 32 51 729 647

Sapa RC System NVIndustriezone 113400 LandenPhone: +32 11 69 03 11Fax: +32 11 83 20 04

Remi Claeys Aluminium NVKortemarkstraat 528810 LichterveldePhone: +32 51 72 97 11Fax: +32 51 72 21 26

Sapa RC Profiles SAKortemarkstraat 528810 LichterveldePhone: +32 51 72 98 11Fax: +32 51 72 54 41

Canada

Sapa Inc (Sales office)Unit # 380 1090 Homer StreetVancouver, BC V6B 2W9Phone: +1 604 874 6063Fax: +1 604 874 6061

China

Sapa Heat Transfer(Shanghai) Ltd1111 Jiatang HighwayJiadingShanghai 201 807Phone: +86 21 5954 1111Fax: +86 21 5954 3111

Sapa Profiles (Shanghai) Ltd1019 Jiatang HighwayJiadingShanghai 201 807Phone: +86 21 5954 6500Fax: +86 21 5954 2880

Czech Republic

RC System CZ s ro Josefa Capka 3235 272 01 Kladno-Sitná Phone: +420 312 66 00 63 Fax: +420 312 66 00 63

Denmark

Sapa Mass TransportationRolshøjvej8500 GrenåPhone: +45 86 32 61 00Fax: +45 86 32 66 63

Sapa Profiler A/SRolshøjvej8500 GrenåPhone: +45 86 32 61 00Fax: +45 86 32 66 63

Estonia

Sapa Profiilid AS(Sales office)Kadaka tee 310621 TallinnPhone: +372 6 512 991Fax: +372 6 512 990

Finland

Sapa Profiilit Oy(Sales office)Sinikalliontie 18A02630 EspooPhone: +358 9 867 82 80Fax: +358 9 867 828 20

France

Sapa Building Systems SNCZone Industrielle du CampDessert Nord83488 Puget Sur ArgensPhone: +33 498 11 20 50Fax: +33 494 81 55 10

Sapa Lacal SNCZA du GarricBP 681 450 Le GarricPhone: +33 563 80 20 20Fax: +33 563 80 20 29

Sapa Profiles Albi SNCBP 9, ZA du Garric – Valderiès81450 Le GarricPhone: +33 563 80 10 10Fax: +33 563 80 10 11

Sapa Profilés Puget SAZone Industrielle du CampDessert Nord83488 Puget Sur ArgensPhone: +33 498 11 20 00Fax: +33 494 45 23 44

Germany

RC Automotive GmbHHalle 9Leverkuserstrasse 6542897 RemscheidPhone: +49 2191 362 54-0Fax: +49 2191 362 54-25

Remi Claeys System Ekonal GmbH Ringstraße 29-31 42553 Velbert Phone: +49 20 53 42 1- 0 Fax: +49 20 53 42 12 49

Sapa Aluminium Profile GmbHPostfach 2380Industriestrasse 1077613 OffenburgPhone: +49 781 50 60Fax: +49 781 506 66

Sapa Vertrieb GmbH (Sales office)Grossenbaumer Weg 640472 DüsseldorfPhone: +49 211 436 130Fax: +49 211 436 133 00

Lithuania

UAB Sapa ProfiliaiDauksos 5-444280 KaunasPhone: +370 37 337 181Fax: +370 37 337 179

Netherlands

Sapa Aluminium BVPostbus 1029600 AC HoogezandPhone: +31 598 319911Fax: +31 598 393673

Sapa Plus BVGouden Rijder 15Postbus 4124870 AK Etten-LeurPhone: +31 76 501 33 52Fax: +31 76 502 24 50

Norway

Sapa Profiler A/S (Sales office)Postboks 4615501 HaugesundPhone: +47 52 70 33 00Fax: +47 52 70 33 20

Sapa Profiler AS (Sales office)Postboks 332001 LillestrømPhone: +47 638 921 00Fax: +47 638 921 20

Poland

Sapa Aluminium Sp.zo.o.ul. Graniczna 64/6693 428 LodzPhone: +48 42 683 63 00Fax: +48 42 683 63 03

Sapa Aluminium Sp.zo.o.ul. Kopernika 1864 980 TrzciankaPhone: +48 67 35 25 105Fax: +48 67 35 25 205

Sapa System Sp.zo.o.ul. Trakt Lubelski 16604 790 WarsawPhone: +48 22 612 67 99Fax: +48 22 872 11 79

Portugal

Sapa Portugal SAAlto da Bela VistaApartado 62736-901 CacémPhone: +351 214 27 23 00Fax: +351 214 26 55 21

South KoreaSapa Heat Transfer Korea (Sales office) 11 fl. Youone Building 75-95 Seosomoon-Dong Jung-Ku Seoul, 100-110 Phone: +82 2756 9124/5 Fax: +82 2319 99 71

Spain

Sapa Perfiles SL (Sales office)c/ Solsonés, 2 Edif. PrimaMuntadas Esc. B 3a Pl. Ofc. B3Poligono Mas Blau - El Prat de Llobregat08820 Barcelona Phone: +34 93 374 16 98Fax: +34 93 370 87 37

Sweden

Sapa AutomotiveMetallvägen574 81 VetlandaPhone: +46 383 941 00 Fax: +46 383 101 85

Sapa Heat Transfer AB612 81 FinspångPhone: +46 122 838 00Fax: +46 122 833 99

Sapa Industriservice AB612 81 FinspångPhone: +46 122 800 00Fax: +46 122 838 88

Sapa Industriservice ABBox 13730 50 SkultunaPhone: +46 21 782 00Fax: +46 21 704 39

Sapa Lackering ABNydalavägen 16574 35 VetlandaPhone: +46 383 76 23 00 Fax: +46 383 173 09

Sapa Profilbockning ABBrudabäcksvägen574 35 VetlandaPhone: +46 383 76 21 50 Fax: +46 383 76 21 60

Sapa Profiler ABMetallvägen574 81 VetlandaPhone: +46 383 941 00Fax: +46 383 154 35

Sapa Profiler AB, division SystemMetallvägen574 81 VetlandaPhone: +46 383 942 00 Fax: +46 383 76 19 80

Sapa Technology612 81 FinspångPhone: +46 122 170 00Fax: +46 122 124 87

Switzerland

Sapa Aluminium Profile AG(Sales office)Felsenrainstrasse 18052 ZürichPhone: +41 1 303 02 03Fax: +41 1 303 01 65

Turkey

RC System Turkiye AS Vatan Cad. Avrasya Ip Merkezi6 Kat. 5 Daire 28 Caglayan, Istanbul Phone: +90 212 296 70 30 Fax: +90 212 296 70 31

UK

Sapa Building Systems LtdAlexandra WayAshchurchTewkesburyGloucestershire GL20 8NBPhone: +44 1684 85 35 00Fax: +44 1684 85 18 50

Sapa Pressweld LtdSpinnaker Park, Spinnaker RoadGloucester GL2 5DGPhone: +44 1452 502 502Fax: +44 1452 503 503

Sapa Profiles LtdSaw Pit Industrial EstateTibshelfAlfretonDerbyshire, DE55 5NHPhone: +44 1773 872 761Fax: +44 1772 874 389

Sapa Profiles LtdTewkesbury RoadCheltenhamGloucestershire GL51 9DTPhone: +44 1242 69 92 00 Fax: +44 1242 51 33 04

USSapa Inc.7933 N.E. 21st AvenuePortland, Oregon 972 11Phone: +1 503 972 1404Fax: +1 503 972 1406

Addresses

1 The year in brief2 Message from the CEO4 The Sapa share6 This is Sapa8 40 years of entrepreneurial spirit9 Goals, business concept, strategy and core values

10 Sapa’s products, markets and competitors14 Organisation and control model16 Research and development18 Environment, work environment and our employees20 The past year22 Board of Directors’ Report24 Consolidated income statements25 Comments on the income statements26 Consolidated balance sheets27 Comments on the balance sheets28 Consolidated cash flow statements29 Comments on the cash flow statements30 Parent Company32 Supplementary disclosures43 Definitions44 Proposed disposition of earnings45 Audit Report46 Board of Directors48 Board work during 200349 Articles of Association50 Senior Executives52 Six-year summary53 Addresses

Sapa develops, manufactures and markets value-added profiles, profile-based building systems and heat-exchange strip in the lightweight materialaluminium and is the world’s leading independentmanufacturer of such products. Sapa’s business concept is based on close cooperation with its customers, who are primarily located in Europe,North America and Asia.

The largest customer segments are the construction, transport, domestic and office, andengineering sectors.

As of 2004, Sapa is organised into three core operations: Profiles, Building System and Heat Transfer. The Sapa share is listed onStockholmsbörsen’s O-list.

^

I

Annual General Meeting, April 15, 2004

The Annual General Meeting of Sapa AB will be held on Thursday,

April 15, 2004, at 3 p.m., at the IVA Conference Centre (Wallenberg

Hall), Grev Turegatan 16, Stockholm, Sweden. Registration will

commence at 2 p.m.

Financial reporting dates in 2004

Interim report, January-March, 2004 April 15, 2004

Interim report, January-June, 2004 July 15, 2004

Interim report, January-September, 2004 October 18, 2004

Preliminary report on 2004 operations February 2005

2004 Annual Report March 2005

Shape

Shape is the Sapa Group’s magazine and is published twice a

year in eight languages for, among others, customers, shareholders,

analysts, journalists, and employees.

www.sapagroup.com

The website contains information about the Group, its operations

and markets, as well as financial information and press releases.

Sapa AB

Humlegårdsgatan 17, Box 5505, 114 85 Stockholm, Sweden

Phone: +46 8-459 59 00. Fax: +46 8-459 59 50

info@sapagroup.com www.sapagroup.com

This Annual Report is also available in Swedish.

Denna årsredovisning finns även i en svensk version.

Annual Report 2003

Sapa A

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