Note 1 – Operating segments

BE Group is a trading and service company in steel, stainless steel and aluminium. Customers are primarily in the manufacturing and construction industries. Since customers’ needs vary widely, BE Group offers different sales solutions: inventory sales, production service sales, and direct sales. The cooperation between BE Group and a particular customer can comprise of one or more of these sales solutions.

BE Group’s basic products are of a similar nature, regardless of the customers or markets to which they are distributed. Part of BE Group’s strategy is also to further process materials at its own production facilities through various types of production services, which in some cases result in completed components being delivered straight into customers’ production lines.

BE Group’s risks and opportunities differ between the different geographical markets to which its products are distributed. For that reason, BE Group has chosen geographical areas as its primary segments.

The operating structure and internal reporting to Group management and the Board of Directors are therefore based primarily on reporting of geographical business areas. Each segment´s result, assets and liabilities include operating items attributable to the ongoing activities of the segment.

The allocation of operating capital per segment is based on the location of the business and includes items directly attributable and items that can be allocated by segment in a reasonably reliable manner. Operating capital allocated by segment comprises tangible assets, goodwill and other intangible assets, participations in joint ventures, deferred tax assets and working capital less deferred tax liability and provisions. Financial assets and liabilities have not been divided by segment but are reported as other assets/liabilities. Capital expenditures for the segment include investments in intangible and tangible assets.

The financial information per segment is based on the same accounting principles as those that apply for BE Group. The Group is using a number of Alternative performance measures (see tab Alternative performance measures for more information). One of those is the underlying operating result which is the operating result adjusted for items affecting comparability and inventory gains and losses. These represent the difference between the cost of goods sold at acquisition cost and the cost of goods sold at replacement value. BE Group applies an internal calculation model. The model has not been reviewed by the Company’s auditors. Internal prices between BE Group’s segments are based on the principle of “arm’s-length transactions”, that is, transactions between parties that are mutually independent, thoroughly informed and have an interest in the transactions. Prices of goods are based on current purchase prices plus an internal markup margin.

Data on products, services and geographical regions

BE Group consists of two business areas – Sweden & Poland and Finland & Baltics. BE Group’s other operations are gathered within Parent Company and consolidated items.

Sweden & Poland

Business area Sweden & Poland includes BE Group´s operations in Sweden, which are conducted under the name BE Group Sverige AB and Lecor Stålteknik AB and the operations in Poland under the name BE Group Sp.z o.o.. BE Group Sverige AB offers sales and distribution of BE Group’s products, such as commercial steel, stainless steel and aluminium. In addition to distribution of materials, production service is also provided, whereby the Company processes materials in various ways to meet specific customer requirements. Examples include cutting to length, shot blasting, painting, drilling and cutting in various forms. The Company provides additional services including advanced logistics solutions and material advisory services. In addition, BE Group Sverige AB owns 50 percent of the thin plate processing company ArcelorMittal BE Group SSC AB. Lecor Stålteknik AB provides steel construction solutions to customers in the Swedish construction sector and the polish operation are providing production services to Polish and Nordic customers.

Finland & Baltics

Business area Finland & Baltics includes BE Group’s operations in Finland, which are conducted under the name BE Group Oy Ab, and the operations in the Baltic States under the names BE Group AS, Estonia, BE Group SIA, Latvia and UAB BE Group, Lithuania. Sales and distribution of BE Group’s products, such as commercial steel, stainless steel and aluminium, are offered in all operations. In Finland, production services are also provided on a large scale. Examples include cutting to length, shot blasting, painting, drilling and cutting in various forms. In addition, the company in Finland offers its customers logistics solutions, advisory services and financing of working capital.

Parent Company & consolidated items

Parent Company & consolidated items include the Parent Company, Group eliminations and also parts of the Group’s operations undergoing restructuring (BE Group Czech Republic, BE Group Slovakia, BE Group Produktion Eskilstuna and RTS Estonia) are reported under Parent Company & consolidated items. BE Group Produktion Eskilstuna has been reported under Parent Company and Group items since the fourth quarter of 2017.

The restructuring of these operations, approved by the Board of BE Group partly in the first quarter of 2016 and partly in the second quarter of 2017, are largely completed.

Group

Sales per product group	2017	2016
Long steel Products	1,436	1,260
Flat steel Products	1,673	1,434
Stainless steel	801	722
Aluminium	212	194
Other	226	260
Total	4,348	3,870
Sales by country based on customer’s domicile	2017	2016
Sweden	2,170	1,895
Finland	1,756	1,509
Other countries	422	466
Total	4,348	3,870
Tangible, intangible and financial assets by country	2017	2016
Sweden	490	505
Finland	296	304
Other countries	9	14
Total	795	823