We are building a stronger BE Group

Market development

It was another challenging year for the steel industry in 2015. Steel consumption remained on a level that the industry last saw at the beginning of the 2000s. The development of recent years with decreased domestic consumption in China and increased exports to Europe has challenged the European producers and the industry has experienced further price pressure. The risk to European producers of being forced out of business has increased markedly and increasingly stronger voices are being raised that European production of steel products needs to be protected by import duties and other trade barriers. Regardless of the outcome, it is my opinion that the industry will continue to change and that we will with high probability see more structural changes.

From structural changes, new opportunities always arise. As an independent partner to both producers and customers, BE Group has unique possibilities to act quickly and come stronger out of this change. After several years of negative development, it is pleasing to note that BE Group in a pressured market grew in our main markets Sweden and Finland. The structural changes that occurred on the market have opened opportunities, which together with active sales work, have yielded results. On the margin side, the initiatives taken contributed positively, but did not succeed in compensating for the negative price trend. Focus continues to be on the margins, which are extra important in a market with falling steel prices.

Financial position

In the second quarter, a rights issue was completed, which was oversubscribed and raised SEK 244 M for the Company. The proceeds were used to reduce the Company’s debt and strengthen liquidity. In connection with the rights issue, a new three-year credit agreement was signed with terms that are more favorable than before, entailing a lower financial cost for the company. In summary, BE Group has a stronger balance sheet and financing that provide conditions to further develop the Company.

Way forward

BE Group’s vision is to be the most professional, successful and respected actor in the industry. In order to achieve this, it is important to segment our business. During the year, we analyzed our business model and it is our conviction that our role as a strong, independent partner to both suppliers and customers is solid and creates unique customer value in the distribution of steel products. However, to be successful and reach an acceptable level of profitability, we need to further develop our distribution model, our production service offering and our purchasing processes.

The work now started has been gathered under the name BE Group 2.0. In the scope of this program, the organization will be changed to more clearly divide earnings responsibility between new business units for Distribution and Production Service. We are gathering the production units in Sweden and Poland into one business unit for better optimization between the units. Within BE Group 2.0, we have also started three projects in which we are working through our concept for Distribution, Production and Strategic Purchasing. These internal projects have the task of revising our current segmentation, our customer offering and our pricing criteria. With these initiatives, the work of building a successful BE Group has begun.

Market outlook

In our assessment, we will see a weak recovery in our main markets during the year, but in the work under way in BE Group 2.0, we assume that we will not get any help from the market. Consequently, we focus on the factors we can influence ourselves, such as expanding our customer base and taking market shares, as well as increasing the margins and becoming even more efficient.

Finally, I want to thank all of BE Group’s employees for your efforts over the past year. 2016 will be a year filled by challenges and together, we will build a stronger BE Group.

Anders Martinsson

President and CEO