Reconstruction

Information to customers and suppliers.

The company board/MD has on May 19th from Jonkoping district court granted the application to initiate a reconstruction for the following companies within Proton Finishing. The reconstruction is aimed primarily to provide long-term profitable companies with short-term default notice to address its liquidity shortage (reconstruction = restoration).

- Proton Finishing AB
- Proton Finishing Forsheda AB
- Proton Finishing Anderstorp AB
- Proton Finishing Eskilstuna AB
- Proton Finishing Industripulver AB
- Proton Finishing Huskvarna AB
- Proton Finishing Bankeryd AB
- Proton Finishing Hillerstorp AB
- Proton Finishing Markaryd AB

It is also important to clarify that the application regarding the reconstruction does not affect Proton Technology or Proton Finishing Bröndby in Denmark. Announced reconstruction does not either affect any of the other business areas within the Proton Group. In connection with the district court granted the Proton Finishing applications for reconstruction, the court approved the companies’ proposal for reconstruction administrator.

Ackordscentralen Borås AB
Yxhammarsgatan 27
SE-50331 Borås
www.ackordscentralen.se

Stefan Thorvaldsson	Johannes Håfström
Direct line; +46 33-22 28 56	Direct line; +46 33-22 28 57
,

Background

The reason why the board/MD decided to apply for reconstruction is a liquidity shortage as a result of the sharp slump. The outcome for the last few months shows that the trend of the weak sales continues. This has led to the company's financial situation has become strained and that a liquidity shortage has arisen. In the view of the business cycle, our sales pace since September declined by 50-60%. We have simultaneously undertaken a number of different programs with powerful cost reduction and a dramatic reduction in staff as a result. We have since September -08 implemented dramatic personnel cuts and have until April reduced our total costs equivalent -4.1 million per month. After ongoing redundancies on full capacity, the costs will be further reduced by approximately -2.0 million per month. Overall, the company has in total put around 160 people on notice within the business. Since September a number of other activities have been initiated to reduce costs. In April, the level of other expenses has been reduced by approximately -2.5 million compared to September. The company has reduced its total costs applicable to sales and administration with a total amount of -700 thousand Swedish kronor per month after reaching full effect in August. There is no doubt that strong actions are implemented throughout the entire operation. However, it is important to clarify that we are working within a process industry which in principle requires energy and costs around the clock to be able maintain the operation. In an extremely rapid cyclical deceleration, we have not been able to synchronize our cost of conversion within the same short period of time.

Future

The owner/Proton Industries have released pre-restructuring cash to ensure that funds are available during and for reconstruction. On the basis of all actions taken within the company and the fact that the companies continue to take market shares the Board of directors/MD, and advisers see great opportunities to achieve the long-term viability of the business, so it is in the company' interest to apply for reorganization. The company has during the recent months shown a poor financial performance, but all activities will simultaneously show a forecasted profit with a positive cash flow generated during the last quarter of 2009.

Customers and suppliers

I understand that both customers and suppliers are concerned with what a reconstruction means, but we hope for continued trust and understanding of the necessity of the actions we are forced to take. I want to emphasize that the meaning of a reconstruction is not the equivalent of bankruptcy. We are now facing an exhausting period where our primary mission is to protect you as a supplier and customer. You must know your safe with PROTON as a business partner, and be confident in our commitment. We will continuously inform you as an important suppliers or customers of the company's forward operating and development during the reconstruction. We expect that the business will generally be continued as usual during the reconstruction. It is my utmost belief that we as a company will solve our short-term liquidity problems, while we create a long-term and sustainable economy for the future.

Magnus Biesse

Proton Finishing AB
Managing Director
Telefon +46 370 656200
+46 370 65 62 02 direct line
+46 73 370 36 66 mobile