1 SECOND QUARTER 2012 • Net sales fell by 15 percent compared with the year-earlier period, amounting to SEK 1,357 M (1,597). Shipped tonnage decreased by 11 percent. • The operating result declined to SEK 13 M (66) and the underlying operating result 1) amounted to SEK 7 M (43). • Profit after tax was SEK 0 M (44). • Earnings per share 2) amounted to SEK 0.01 (0.89). • Following the end of the quarter, BE Group signed a new three-year credit agreement with a possibility for a total extension of two years. The total credit facility amounts to SEK 1,400 M, including guarantee facilities. • Following the end of the quarter, a decision has been made to initiate a process to sell the operations in the Czech Republic. • Roger Johansson announced his resignation as President of BE Group, although he will continue in that capacity until January 1, 2013. The process of recruiting a successor has been initiated. THE FIRST SIX MONTHS OF 2012 • Net sales amounted to SEK 2,793 M (3,116), which is 10 percent lower than in the preceding year and shipped tonnage decreased by 6 percent. • The operating result weakened to SEK 48 M (111) and the underlying operating result 1) amounted to SEK 50 M (90). • Profit after tax was SEK 19 M (67). • Earnings per share 2) amounted to SEK 0.39 (1.35). 1) Operating result (EBIT) before non-recurring items, adjusted for inventory gains and losses. 2) Earnings per share are both before and after dilution. Interim report BE Group AB (publ) January – June 2012 Malmö, July 18, 2012 BE Group, listed on the Nasdaq OMX Stockholm exchange, is a trading and service company in steel and other metals. BE Group provides various forms of service for steel, stainless steel and aluminium applications to customers primarily in the construction and engineering sectors. In 2011, the Group reported sales of SEK 5.9 Bn. BE Group has about 900 employees in ten countries, with Sweden and Finland as its largest markets. The head office is located in Malmö, Sweden. Read more about BE Group at www.begroup.com. BE Group AB / Corp. Reg. No. 556578-4724 / Interim report January–June 2012
Interim report BE Group AB (publ)January – June 2012Malmö, July 18, 2012
Be Group,listedontheNasdaqOMXStockholmexchange,isatradingandservicecompanyinsteelandothermetals.BEGroupprovidesvariousformsofserviceforsteel,stainlesssteelandaluminiumapplicationstocustomersprimarilyintheconstructionandengineeringsectors.In2011,theGroupreportedsalesofSEK5.9Bn.BEGrouphasabout900employeesintencountries,withSwedenandFinlandasitslargestmarkets.TheheadofficeislocatedinMalmö,Sweden.ReadmoreaboutBEGroupatwww.begroup.com.
BE Group AB / Corp. Reg. No. 556578-4724 / Interim report January–June 2012 2
developments in the second quarter of 2012 Group Net sales fell by 15 percent compared with theprecedingyear,amountingtoSEK1,357M(1,597).Thedecline isexplainedbyan11percentagepointdecreaseintonnage,negativepriceandmixchangesaccounting for 3 percentage points and a negativecurrency effect accounting for 1 percentage point.However,incomparisonwiththefirstquarterof2012averagesalespricesroseby3percent. ConsolidatedgrossprofitamountedtoSEK179M(233), with a gross margin of 13.2 percent (14.6).Operatingprofit fell toSEK13M (66).Adjusted forinventory gains of SEK 6 M (23), the underlyingoperating profit amounted to SEK 7 M (43). Theweakeningof results isattributable to thedecline intonnage,combinedwithlowersalesprices.ThisistoacertainextentoffsetbygrossmarginimprovementsintheSwedishandFinnishoperations.Theprofitab-ilityimprovementmeasuresadoptedtowardstheendof 2011 have been implemented according to plan.Results were affected positively by savings ofapproximatelySEK13M,meaningthatthefulleffectof the measures was reached early in the secondquarter. The savings were to some extent counter-actedbytheinvestmentsmadetoextendcapacityinFinlandandtheestablishmentofaproductioncenterinPoland.TheannualcostfromtheseinvestmentsisestimatedtoSEK12M. Theoperatingmarginamounted to1.0percent(4.2) and the underlying operating margin was 0.5percent(2.7).
sales by sales channel BE Group’s sales are conducted through threechannels: inventorysales,servicesalesanddirectsales. Of total net sales for the second quarter,shipments from Group facilities accounted for 82percent (82), which is broken down as follows:inventory sales 52 percentage points (53) andservicesales30percentagepoints(29).
sales trend by product area Netsalesofcommercialsteelfell16percenttoSEK989M(1,181).Shipped tonnagedecreasedby12percent.Overall,commercialsteelaccountedfor73percent (74) of BE Group’s net sales. The sales
net sales 2011 1,597
net sales 2012 1,357
Operating profit 2011 66
Inventorygains -23
Underlying operating profit 2011 43
Tonnage-,price-,mix-andgrossmargineffects -37
Changesinoverheads,etc. 1
Underlying operating profit 2012 7
Inventorygains 6
Operating profit 2012 13
neT sAles And eARnInGs TRend In THe second QUARTeR
(seK M)
-25
25
50
75
100
-50
0 0
50
100
150
200
Operating result (EBIT), SEK MQuarter and rolling 12 months
EBIT uEBIT
4 4 1 21 2 332
2010EBIT R12 uEBIT R12
2011 2012
0.0
0.5
1.0
1.5
2.0
0.0
2.0
4.0
6.0
8.0
Net sales, SEK BnQuarter and rolling 12 months
Quarter
44 1 21 2 32 3
2010R12
2011 2012
BE Group AB / Corp. Reg. No. 556578-4724 / Interim report January–June 2012 3
price for commercial steel declined by 5 percentcompared with the year-earlier period. However,comparedwiththefirstquarterof2012,theaveragesalespricerose3percent. BEGroup’ssalesofstainlesssteeldeclinedby15percentandamountedtoSEK230M(271).Thedecline is explained by sales prices that were 9percent lower and tonnage that decreased by 7percentcomparedwiththeprecedingyear.Comparedwiththefirstquarterof2012,salespricesroseby2percent.Theproportionofnetsalesrepresentedbystainlesssteelamountedto17percent(17).
sales by customer segment IIn the second quarter, OEM customers and theirpartners accounted for the largest share of sales,48 percent (52); project customers for 24 percent(23);pre-processingcompaniesfor18percent(16);andretailersfor10percent(9).
Business areas Business Area Sweden Improvedsaleswasnoted,comparedwiththefirstquarter, measured in terms of tonnage shippeddaily. Within the different customer segments,developmentamongcustomersintheconstructionsector has been somewhatmore stable than thatamongindustrialcustomers. Comparedwith thepreceding year, net salesdecreased11percenttoSEK666M(748).Shippedtonnagedeclinedby7percentandthesalespricefellby5percent.Comparedwiththefirstquarterof2012,thesalespricerose1percent. Theoperating resultweakened toSEK17M(32),withanoperatingmarginof2.5percent(4.3).
Thedeclineinprofitisprimarilyattributabletolowersales.Negative results fromBEGroupProduktion(formerRTS)andLecorStålteknikintheamountofSEK 4M (positive 1) affected the operating profitnegatively. Other parts of the business area’soperations continued to showapositiveoperatingmargintrendinrelationtothemostrecentquarters.Adjustedforinventorygains,theunderlyingoperatingprofitwasSEK12M(24).
Business Area Finland Initially, demand was at the same level as in thepreceding quarter but then weakened during thelatter part of the quarter. Compared with thepreceding year, net sales fell 18 percent andamountedtoSEK473M(574).Shippedtonnagefell12 percent and sales prices in EUR declined by 6percent.Incomparisonwiththefirstquarterof2012,salespricesroseby3percent. The operating profit decreased to SEK 18 M(44),with an operatingmargin of 3.7 percent (7.7).TheunderlyingoperatingprofitamountedtoSEK18M(29).Thedeclineintheresult isprimarilyattribut-abletothelowertonnage. TheextendedfacilityinLapuawasbroughtintooperationat thestartof thequarter.Thedegree towhich the added production service capacity isutilized will gradually increase over the year. ThetotalinvestmenthasamountedtoSEK16M. In accordance with his employment contract,BusinessAreaManagerMatti Tiira has decided toretire and is succeeded from the start of July byLasse Levola, former head of marketing for thebusinessarea.
0
2
4
6
8
10
12
0
2
4
6
8
10
12
4 4 1 21 23 322010
Quarter R12
Average sales prices, SEK/kgQuarter and rolling 12 months
2011 2012
0
25
50
75
100
125
150
0
100
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300
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500
600
Tonnage, thousands of tonnesQuarter and rolling 12 months
4 4 1 21 2 332
2010Quarter R12
2011 2012
BE Group AB / Corp. Reg. No. 556578-4724 / Interim report January–June 2012 4
Business Area CEE The operations in the Baltic States and Slovakiacontinuedtoshowstablegrowthduringthequarter.InPolandandtheCzechRepublic,saleswerelowerthan in the preceding year. Net sales for the busi-nessareaasawholedeclinedby22percenttoSEK239 M (307) as a consequence of a decline inshippedtonnageby17percentandlowersalesprices.Themarketsituationwascharacterizedbycontinuedsubstantialpricepressure,which impactedmarginsnegatively,whilesalespriceswere6percent lowerthan in the year-earlier period. Compared with thefirstquarterof2012,theaveragepricelevelroseby5percent,primarilythroughashiftintheproductmix. The operating loss amounted to SEK 12 M(profit 1) due to decreased sales and weakenedmarginsinthePolishandCzechoperations.Adjustedforinventorygains,theunderlyingoperatinglosswasSEK13M(profit1). The negative operating result for the quartercorrespondsentirelytotheresultsofthePolishandCzech operations. The restructuring of the Polishbusinessasastreamlinedproductionoperationwascompletedduringthequarter.Capacityutilizationatthenewproduction facility inTrebaczewwillgradu-allyincreaseovertheyear.ThetotalinvestmenthasamountedtoSEK14M. Following the end of the quarter, as a conse-quenceoftheweakperformanceinCzechRepublicforaprolongedtime,theBoardofDirectorsdecidedtoinitiateadivestmentprocessoftheCzechoperations.
Net financial items and tax ConsolidatednetfinancialitemsforthesecondquarteramountedtoanexpenseofSEK13M(9),ofwhichthenetinterestexpenseaccountedforSEK9M(9).Onanannualbasis,thenetinterestexpensecorre-sponds to 4.2 percent (4.4) of interest-bearing netdebt,whichaveragedSEK825M (817) during thequarter. The tax expense for the period amounted toSEK0M(13).
Cash flow CashflowafterinvestmentswasanegativeSEK34M(52).Theimprovementismainlyexplainedbyalowerlevelofinvestment.Cashflowfromoperatingactivitieswas negative in the amount of SEK 16 M (15).Comparedwiththeprecedingyear,thelowerearningsleveliscompensatedbyalowerbuild-upofworkingcapital from the start of the year. Cash flow frominvestingactivitiesamountedtoanegativeSEK18M
(37),whilecashflowfromfinancingactivitiesamountedto a negativeSEK14M (3), ofwhichdividends toshareholdersamountedtoSEK12M(-).
capital, investments and returnAttheendoftheperiod,consolidatedworkingcapitalamounted toSEK493M(569)andworkingcapitaltied-upwas9percent(8). Of the investments of SEK 18 M (37) madeduring thequarter, investments in intangibleassetsaccountedforSEK3M(7)andrelatetothedevelop-ment of the Group’s IT platform. Investments intangible assets amounted to SEK 15 M (30) andmainlyinvolvedproductionequipmentinFinland. Thereturnoncapitalemployedwas3percent(15).
Financial position and liquidity Followingtheendofthequarter,BEGroupsignedanewthree-yearcreditagreementwithSkandinaviskaEnskildaBankenandSvenskaHandelsbanken.ThetotalcreditfacilityamountstoSEK1,400M,includingguaranteefacilities,andmaturesinJuly2015,withapossibilityforatotalextensionoftwoyears. Attheendoftheperiod,consolidatedcashandequivalentswereSEK55M(92).At theendof thefirstsixmonthsoftheyear,theGrouphadunutilizedcreditfacilitiestotalingSEK368M. Consolidatedinterest-bearingnetdebtamountedtoSEK844M(851)attheendoftheperiod. At the end of the period, consolidated equitytotaledSEK808M (866),while thenetdebt/equityratiowas104percent(98).
Development in the first six months of 2012GroupComparedwiththeprecedingyear,consolidatednetsalesfell10percentinthefirstsixmonthsoftheyearandamountedtoSEK2,793M(3,116).Thedeclineisattributabletoadecreaseinshippedtonnageby6percentage points, negative price and mix effectsamounting to 3 percentage points and a negativecurrencyeffectof1percentagepoint. OperatingprofitdecreasedtoSEK48M(111).AdjustedforinventorylossesofSEK2M(gains25;also adjusted for non-recurring expenses), theunderlyingoperatingprofitwasSEK50M(90).Thedeclineinresultsisattributabletothelowersales. Theoperatingmarginweakenedto1.7percent(3.6) and the underlying operatingmargin was 1.8percent(2.9).
BE Group AB / Corp. Reg. No. 556578-4724 / Interim report January–June 2012 5
which the net interest expense accounted for SEK18 M (18). On an annual basis, the net interestexpensecorrespondsto4.5percent(4.3)ofinterest-bearingnetdebt,whichaveragedSEK808M(825)duringthefirstsixmonths. The tax expense for the first six monthsamountedtoSEK7M(26),equivalentto25percent(28)ofearningsbeforetax.
Cash flowDuring thefirsthalfof2012,cashflowafter invest-ments was negative in the amount of SEK 65 M(positive11).Cashflowfromoperatingactivitieswasnegative in theamount ofSEK31M (positive74).Theweakeningincashflowisattributabletothelowerresultandacertainincreaseinworkingcapital. CashflowfrominvestingactivitieswasanegativeSEK34M (63).Cashflow fromfinancingactivitieswas a negative SEK 25M (0), of which dividendspaidtoshareholdersaccountedforSEK12M(-).
organization, structure and employees Thenumberofemployeesamountedto896comparedwith924atthestartoftheyearand950atthecorres-ponding time last year. The average number ofemployeesduringtheperiodamountedto912(940). Duringthequarter,RogerJohanssonannouncedthathewouldberesigningasPresidentandCEOofBEGroup.However,hewillcontinueinthatcapacityuntil January 1, 2013. The process of recruiting asuccessorisinprogress.
contingent liabilities TheGroup’s contingent liabilities amounted to SEK112M,unchangedsinceDecember2011.
outlook Incomparisonwiththesecondquarter,thedemandisexpectedtobeonthesamelevelfortheremainderoftheyear,apartfromaseasonaldownturnduringthesummer.TheaveragesalespricesontheGroup’sproductsareassumed tobe lowerduring the thirdquarterincomparisonwiththesecondquarter.
neT sAles And eARnInGs TRend In THe FIRsT sIX MonTHs oF THe yeAR
Business areasBusiness Area SwedenBusinessAreaSwedenreportedsalesofSEK1,364M(1,488), a decrease of 8 percent that was mainlyattributabletoa5percentdeclineinshippedtonnage.OperatingprofitamountedtoSEK37M(49)andtheunderlying operating result to SEK 34M (45).Theweakenedresultisprimarilyattributabletothelowersales.
Business Area FinlandBusinessAreaFinland’ssalesdecreasedby13percenttoSEK972M(1,120)asaconsequenceofadeclinein tonnageof9percent.OperatingprofitweakenedtoSEK43M(77)andtheunderlyingoperatingprofitwasSEK51M(62).TheweakenedresultisprimarilyattributabletothelowersalescombinedwithinventorylossesofSEK8M(gains15).
Business Area CEESales for the CEE business area declined by 11percent to SEK 510 M (571). Shipped tonnagedecreasedby4percent.OperatinglossamountedtoSEK 16 M (profit 4) and the underlying operatinglosstoSEK19M(profit2).Theweakenedresultisattributable to the lowersalescombinedwith lowermargins.
Net financial items and taxTheGroup’snetfinancialitemsforthefirsthalfoftheyearamountedtoanexpenseofSEK22M(18),of
BE Group AB / Corp. Reg. No. 556578-4724 / Interim report January–June 2012 6
Significant events after the end of the period Following the end of the reporting period, a newthree-yearcreditagreementwassigned.Inadditiona decision has beenmade to initiate a divestmentprocessoftheCzechoperations.
Related-party transactions No transactions tookplacebetweenBEGroupandrelated parties that had a material impact on thecompany’sfinancialpositionandresults.
2012 Annual General Meeting AtBEGroupAB’sAnnualGeneralMeeting(AGM)ofApril25,2012,AndersUllbergwasre-electedChair-man andRoger Bergqvist, Cecilia Edström,MaritaJaatinen and LarsOlof Nilssonwere re-elected asboard members. In addition, Petter Stillström waselected as a new board member. Board memberLarsSpongberghaddeclinedre-election. ThedividendofSEK0.25proposedbytheBoardwasapprovedbytheAGM. With the purpose of securing cover for socialsecurity contributions attributable toShareSavingsScheme2010andShareSavingsScheme2011,theAGMalsoresolved, inaccordancewiththeBoard’sproposal,toauthorizetheBoardtodecideononeormoreoccasionspriortothe2013AGMonthetransferof at most 80,000 treasury shares via the stockexchange. In accordance with the Board’s proposal, theAGMalsoresolvedtoauthorizetheBoardtodecideononeormoreoccasionspriortothe2013AGMonthe transfer of treasury shareswith the purpose ofenabling thefinancingofsmallercorporateacquisi-tions.Suchtransfermaydivergefromshareholders’preferentialrightstotheextentthisdoesnotexceedthenumberoftreasurysharesheldbyBEGroupatthe time of the Board’s decision and that are notneeded as matching or performance shares or tocover social security contributions in accordancewithcurrentsharesavingsschemes.Transfersmaybeappliedaspaymentofallorpartofthepurchase
consideration in the acquisition of companies oroperations or parts of companies or operations, inwhich case the payment shall correspond to theassessedmarketvalueoftheshares.Alongsidesharetransfers,paymentmaybeeffectuatedthroughcapitalcontributedinkindorbysettingoffclaimsagainstBEGroup. Finally, the Meeting resolved, in accordancewiththeBoard’sproposal,toauthorizetheBoardtodecide,ononeormoreoccasionsprior to thenextAGM,ontheissueofnewsharesintheCompanyforsettlement in cash, offset, or in kind, and with orwithout preferential rights for shareholders. Theauthorizationislimitedtoatmostfivemillionshares,corresponding to10percentof thesharecapital intheCompany. Additional informationon theBoardmembers,theAGMisavailablefromthecompany’swebsite.
Significant risks and uncertainties BE Group’s profits and position are affected by alarge number of factors. The principal risks andfactorsofuncertaintycanbedividedintosectorandmarket risks, strategic and operational risks, andfinancial risks.Fluctuations ineconomic trendsandsteelprices,togetherwithchangesamongsuppliers,customersandpersonnelrepresentriskfactorsthataffect the Group’s financial performance and cashflow.Thefinancialrisksconsistofcurrency,interest-rate,refinancingandcreditrisks. Thefinancial riskexposure isexplained in the2011AnnualReport.Sincethen,therefinancingriskhasdecreasedsubstantiallyfollowingthesigningofthenewcreditagreement.Furthermore,nonewsignificantrisksoruncertaintieshavearisensincethatdate.
Accounting principles TheinterimreportispreparedinaccordancewithIAS34InterimFinancialReportingandtheSwedishAnnualAccountsAct.TheParentCompany’s interim reportis prepared in compliancewith theSwedishAnnualAccountsAct and the Swedish Financial ReportingBoard’srecommendationRFR2AccountingforLegalEntities. Refertothe2011AnnualReportfordetailsoftheGroup’saccountingprinciplesanddefinitionsofcertainterms.Theprinciplesappliedareunchangedinrela-tion to thoseapplied in theAnnualReport. In otherregards, the new standards and interpretations thathaveentered forceeffective fromthe2012financialyearhavehadnoeffectonthefinancialreporting.
BE Group AB / Corp. Reg. No. 556578-4724 / Interim report January–June 2012 7
Malmö, July 18, 2012BE Group AB (publ)
Anders Ullberg Roger Bergqvist cecilia edström Marita JaatinenChairman of the Board Director Director Director
lars olof nilsson Petter stillström Thomas Berg Kerry JohanssonDirector Director Employee Representative Employee Representative
Roger JohanssonPresident and CEO
This report has been reviewed by the company’s auditors.
Questions concerning this report may be directed to: PresidentandCEORogerJohansson,tel:+46(0)733188758,e-mail:[email protected]örnClementz,tel:+46(0)708690788,e-mail:[email protected]
The Board of Directors and the President provide their assurance that this interim report provides an accurate overview of the operations, position and earnings of the Parent Company and the Group, and that it also describes the principal risks and sources of uncertainty faced by the Parent Company and its subsidiaries.
BE Group AB / Corp. Reg. No. 556578-4724 / Interim report January–June 2012 8
Auditor's Report on Review of Interim Financial Information
IntroductionWehavereviewedtheinterimfinancialinformation(InterimReport)ofBEGroupAB(publ)asatJune30,2012,and thesix-monthperiodendingon thatdate.TheBoardofDirectorsand theCEOare responsible for thepreparationandpresentationofthisInterimReportinaccordancewithIAS34andtheAnnualAccountsAct.OurresponsibilityistoexpressaconclusiononthisInterimReportbasedonourreview.
Focus and scope of the reviewWeconductedourreviewinaccordancewith theStandardonReviewEngagements(SÖG)2410ReviewofInterimFinancialInformationPerformedbytheIndependentAuditoroftheEntity.Areviewconsistsofmakinginquiries,primarilyofpersonsresponsibleforfinancialandaccountingmatters,andapplyinganalyticalandotherreviewprocedures.Areviewhasanother focusand issubstantially less inscopethananauditconducted inaccordancewithISAandothergenerallyacceptedauditingpractices.Theproceduresperformedinareviewdonotenableustoobtainalevelofassurancethatwouldmakeusawareofallsignificantmattersthatmightbeidentifiedinanaudit.Therefore,theconclusionexpressedbasedonareviewdoesnotgivethesamelevelofassuranceasaconclusionexpressedbasedonanaudit.
other mattersTheInterimReportofBEGroupABasofJune30,2011andthesix-monthperiodthenendedhasnotbeenreviewed and the corresponding figures in the report as of June 30, 2012 and the six-month period thenendedhavethereforenotbeenreviewed.
