Interim report January – June 2016

Significant investments in technology and capacity
Significant investments in technology and capacity

  · Net sales increased by 17 % to 307.6 (262.0) MSEK
  · Operating income amounted to 4.1 (23.5) MSEK
  · Net income amounted to 9.8 (16.7) MSEK
  · Earnings per share amounted to 0.47 (0.82) SEK
  · 28 (23) systems were delivered in the period
  · Order intake amounted to 15 (17) EBM systems

For the second quarter:

  · Net sales amounted to 147.7 (150.6) MSEK
  · Operating income amounted to -4.8 (19.7) MSEK
  · Net income amounted to 1.5 (12.4) MSEK
  · 14 (14) EBM systems were delivered in the second quarter
  · Order intake amounted to 9 (7) systems

Significant investments in technology and capacity

The Arcam Group continues to grow and during the first six months the increase
in sales was 17%. Sales for the period increased to 307.6 (262.0) MSEK and
trailing twelve month sales amounts to 621.7 (490.0) MSEK. Operating income for
the period was 4.1 (23.5) MSEK and trailing twelve month operating income
amounts to 30.7 (49.0) MSEK.

In the first 6 months we increased our delivery pace and we delivered 28 (23)
EBM systems. The last twelve months we thus delivered 56 systems. Our metal
powder manufacturer AP&C more than doubled its order intake compared to the same
period 2015. In May we decided to add significant capacity by building a new
powder manufacturing plant in Montreal.

We continue to pursue and develop our long-term strategy to industrialize the
EBM technology and simultaneously developing the metal powder manufacturing and
contract manufacturing business. We invest significantly in technology,
marketing and manufacturing capacity to meet our customers’ demands and growing
expectations on productivity and reliability.

Business status

During the second quarter we delivered 14 EBM systems and the majority went to
customers in the implant or the aerospace industry. The demand for EBM systems
is driven by how quickly our customers in the aerospace and implant industry are
moving towards production, a process that is dependent on both technical and
commercial factors. In the period we received 9 new orders and the order book by
the end of the quarter amounts to 14 systems. One of our new clients is the US
based implant manufacturer Exactech. They produce EBM implants via a contract
manufacturer since 2010 and they have decided to build its own manufacturing
operation and placed an order of 2 EBM systems.

During the quarter Arcam Q10plus and Arcam Q20plus were launched. The new
systems are a significantly enhanced generation of the Arcam Q-series EBM
systems for Additive Manufacturing. Arcam Qplus offers up to 25% higher
productivity with significantly improved surface finish and precision. With
Qplus Arcam also introduces Arcam xQam™, an X-ray based function for high
precision auto-calibration and improved beam control.

To meet the growing demand for AP&C’s high quality titanium powder for Additive
Manufacturing, we continue to add significant capacity by building a new powder
manufacturing plant. During the second quarter a new powder reactor was taken
into account. Thus AP&C now has 6 reactors in operation, and we plan to have 8
reactors operating in our present plant Montreal by the end of this year. In May
we also decided to increase further the capacity by building a new powder
manufacturing plant outside Montreal, Canada. The investment is initially for 23
MCAD and we have through an agreement with Investissement Quebec received a
total of 11.5 MCAD in loans and grants, of which 10 MCAD in interest-free loans
and 1.5 MCAD in grants. The new facility will provide manufacturing redundancy,
short term capacity increase and long term expansion capability. The new
capacity increase follows on significant growth in 2015 and 2016 and a surge in
demand for AP&C’s high quality titanium powders for additive manufacturing. With
the present build-out AP&C will reach a capacity of at least 750 tons per year.
The new plant will be built in modules and can in the long run be extended so
that we reach a combined total capacity of over 1,200 tons per year in both
production plants.

Since February our contract manufacturer DiSanto has a new management. The
business continues to be burdened by weak sales for implants made with
traditional technology. In the period several new customer projects for EBM
manufactured implants have been added. Revenues from this part of the business
is increasing but is still not compensating for the weak sales within
traditionally manufactured implants. Hence, we have in the period written down
the parent company holding in DiSanto with 28 MSEK. This has no effect on the
consolidated numbers for the group.

Strengthened organization

During the first half of the year, we strengthened our sales and support
organization in Germany, Italy and in the USA with new sales people in the field
and a strengthened sales management.

A new sales office in Stuttgart will initially drive sales in Germany and in the
future also serve as a local support office. The operation is led by Peter Jain,
who has a solid background in the machine tool industry.

On the important Italian market, we have strengthened the organization with
local management where our former agent Fausto Asvisio now works full time for
us. The office in Turin is responsible for sales and service and is working
close to our important customers in Italy.

With 14 machines in order, a stable aftermarket and a fast growing market for AM
metal powders we are well positioned for a positive development in 2016.

Mölndal, July 21, 2016

Magnus René, President and CEO

This report contains information that Arcam AB is obliged to make public
pursuant to the EU Market Abuse Regulation. The information was submitted for
publication at 08.30 CEST on July 21, 2016.

Telephone conference with CEO Magnus René and CFO Johan Brandt

July 21, 2016 at 2.00 p.m. (CEST)

Phone number to the conference:

SE: +46 8 566 426 90
UK: +44 203 008 98 19
US: +1 855 753 22 35

Link to presentation:

Arcam Q2 conference
call (http://event.onlineseminarsolutions.com/r.htm?e=1210170&s=1&k=C8B472C5FFE9
D 
6FFC37F8577CB44D4D3)
For further information:

Magnus René, CEO and President, Arcam
Cell: 46 702 79 89 99 or 1 781 266 6957
E-mail: magnus.rene@arcam.com
Arcam Group provides cost-efficient Additive Manufacturing solutions for
production of metal components. Arcam’s Electron Beam Melting (EBM®) technology
offers design freedom combined with excellent material properties and high
productivity. Arcam is, through its solution orientation and comprehensive
product offering, an innovative partner for advanced manufacturing, primarily
for the aerospace and medical industries. Arcam offers EBM systems through Arcam
AB in Sweden, powder metals through AP&C in Canada and implant contract
manufacturing through DiSanto in the U.S.The company is listed on Nasdaq
Stockholm and the Head Office is located in Mölndal, Sweden.

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Arcam AB • Krokslätts Fabriker 27A • SE-431 37 Mölndal, Sweden • 46-31-710 32 00
• www.arcam.com