Business Area Finland & Baltics
Lasse Levola
Business Area Manager Finland & Baltics
| Key data | 2016 | 2015 |
| Shipped tonnage, thousands of tonnes | 185 | 178 |
| Net sales, SEK M | 1,794 | 1,745 |
| Change, % | 2.9 | 1.7 |
| Operating result (EBIT), SEK M 1) | 68 | 21 |
| Operating margin, % | 3.8 | 1.2 |
| Underlying operating result (uEBIT), SEK M 2) | 54 | 30 |
| Underlying operating margin, % | 3.0 | 1.7 |
| Investments, SEK M | 3 | 9 |
| Average number of employees | 325 | 332 |
1) The operating result 2016 has been impacted negatively by restructuring costs of SEK -2 M related to the organizational change implemented during second quarter.
2) Included as a part of BE Group’s alternative performance measures, see also tab Alternative performance measures.
In 2016, the business area accounted for 46 percent (42) of BE Group’s net sales. The business area comprises of the Group´s operations in Finland and the three Baltic countries. The operations in Finland consists of production and warehousing facilities in Lapua, Lahti and Turku and sales offices in nine locations. The business area also includes the operations in the Baltic States, comprising of warehousing and sales units in Tallinn, Riga and Kaunas.
In the Finnish market, the Company has around 2,800 customers and the ten largest customers account for about 14 percent of the Company’s sales. Focus is on providing value-creating services mainly to the construction- and engineering industry. BE Group Finland is running its own steel service center for cutting and slitting of thin sheets and coils, which means a higher proportion of sale of these products than for Business Area Sweden & Poland. The primary competitors are Tibnor, Kontino and Flinkenberg.
In the Baltic countries, the market is more diversified and conditions vary substantially between Estonia, Latvia and Lithuania, but BE Group generally has a strong and growing position in the area.
Sales and business performance
Net sales rose by 3 percent compared with previous year amounting to SEK 1,794 M (1,745). The operating result improved to SEK 68 M (21) and, adjusted for inventory gains of SEK 16 M (-9) and non-recurring items of SEK -2 M (0), the underlying operating result increased to SEK 54 M (30). Shipped tonnage increased during the period by 4 percent compared with the previous year. Sales, measured in SEK, were also positively affected by currency effects, while the average price was slightly lower than the previous year. The positive price trend and higher underlying gross margin contributed to the significantly improved operating result.
Continued development
The demand during the year has been divided. The growth within the construction industry has been strong while the demand from the engineering industry has been week during most of the year. The industrial production started to increase during the later part of the year and contributed positively to the demand for steel. In the beginning of the year the steel prices recovered after the big decline in the end of 2015 and during the latter part of 2016 the prices continued to increase due to higher raw material prices and the import duties imposed by the EU. This means that the negative price trend which lasted for four years has been broken. The improved market sentiment has together with the positive effects in the wake of the merger between SSAB and Ruukki and the targeted sales efforts led to a strong growth compared with the year before.
The internal work with a new structure and organization has together with a targeted margin improvement led to stronger gross margin and a significantly improved operating result. This work will continue to benefit us during 2017. An agreement concluded between employers and trade unions within the finnish industry will most likely reduce the outsourcing of production and hence, will support the steel demand on the finnish market. Top of our agenda for 2017 will be, just as before, to offer the best customer experience in our industry by providing value-added solutions to every customer and segment we focus on. Overall, we are positive on achieving growth in 2017 in excess of the general market.
* The operating result in Q1 2016 has been impacted by restructuring costs of SEK -2 M.
* Underlying operating result (uEBIT) is the reported operating result before non-recurring items and adjusted for inventory gains and losses (deductions for gains and additions for losses). See also tab alternative performance measures.