CEO’s Statement Aggressive Transactions Pave the Way for Future Earnings Growth In many respects, 2005 was a record year for Hexagon, when net sales were MSEK 9,637, after organic growth of 12 per cent in the year, while our share price more than doubled. Operations were concentrated and Hexagon further secured its market position. The past year was significant to Hexagon, notably because we conducted several major restructuring measures. We enhanced our business through a number of aggressive transactions, and consolidated our world-leading market positioning in selected segments. As a consequence, Hexagon is now an even more high-technology corporation with a higher growth rate, more value-added and higher gross margins. In December 2004, Hexagon launched Vision 2008 – a strategic plan that runs until year-end 2008. Briefly, Vision 2008 implies Hexagon continuing to focus its operations on metrology and polymers, two strategic businesses where we see substantial opportunities. There are good prospects to further increase our market shares in both segments by starting up on new geographical markets, and moving into new applications. Our objective is that net sales within metrology and polymers will exceed MSEK 15,000, with a minimum operating margin of 15 per cent before year-end 2008. The aim is to create healthy long-term value growth for our shareholders. For those of us working towards realizing the strategic plan, 2005 marked a breakthrough. • We divested the Hexagon Automation business area, which generated some 30 per cent of consolidated net sales in 2004. • We acquired Leica Geosystems, further enhancing Hexagon’s position as a world-leading high-technology corporation within multidimensional metrology. • We successfully listed Hexagon on the SWX Swiss Exchange in Zurich. • In our current structure, we increased Hexagon’s annual turnover pace by 50 per cent to MSEK 12,000. • Our market capitalization grew from below MSEK 6,000 to over MSEK 16,000. To create the right conditions for robust future earnings growth, Hexagon increased its exposure to the world’s growing economies and sectors in the year, i.e. those geographical regions and sectors where growth rates are higher than global GDP growth. Moreover, we reduced our exposure to the Western engineering sector, which is facing increased competition from low-cost countries. Hexagon enjoys good prospects of achieving higher margins in new sectors and emerging economies. Overall, we made significant progress towards Vision 2008 in the year. In 2004, the Hexagon Metrology and Hexagon Polymers business areas had aggregate net sales of some MSEK 4,500. At year-end 2005, annualized net sales in these segments had passed MSEK 11,000 and organic growth was 13 per cent. Consolidated earnings before tax grew by 30 per cent to MSEK 705, despite the fact that in 2005, we did not match in time, divestments with acquisitions. We divested the Hexagon Automation business area on 1 July, and consolidated Leica Geosystems on 14 October, implying that for three and a half months, our earnings capacity was temporarily impaired. The adoption of IFRS affected year-2005-earnings in several respects. In comparison with previous regulatory standards, earnings were adversely affected in terms of restructuring measures and other expenses related to acquisitions, simultaneous with earnings being positively affected by goodwill amortisation no longer being accounted. With the successes of 2005 under our belts, in 2006, we’re well-equipped to take another big step towards Vision 2008. In the Hexagon Measurement Technologies business area, we’re working on the continued successful integration of Leica Geosystems, and to secure the acquisition synergies we have promised. We will also develop new measurement methods and launch new high-technology multidimensional metrology products in the year. “Hexagon will continue to focus its business on metrology and polymers, two strategic operations where we see substantial opportunities.” HEXAGON ANNUAL REPORT 2005