“By working decentralized, the subsidiaries are given the possibility – just like entrepreneurs – of working independently with a mandate to make the most effective decisions with a focus on their particular customers, businesses and profitability.”
A CHALLENGING YEAR
As I sum up my first full year as the CEO of BE Group, I think that we have done pretty well. After a weak end to 2019, the new year, 2020, began a little brighter and the confidence in the future was positive. Then came Covid-19, and the surrounding world’s reactions to its rapid spread turned everything upside down. From one day to the next, some of our customers, mainly subcontractors to the automotive industry, lost 80 percent of their sales. At the same time, with one day’s notice, our single largest customer announced that they would be temporarily shutting down their entire business. Besides working with something that, at least for me, was completely new, preventing the spread of infection, a lot of energy was devoted to monitoring working capital and decreasing costs.
In total, sales decreased by 16%, but the underlying operating result improved slightly, amounting to SEK 96 M (94). Cash flow from operating activities was strong and increased to SEK 341 M (200) and at year-end, net debt was at a record low SEK 156 M (373).
At the beginning of the year, a new organizational structure was set, and the previous split into the business units production and distribution was removed and instead each company is operated as a business unit. The main purpose of this change was to create an organization where every company is developed based on its own unique market position and to reduce the number of management layers between the customers and the Group Management Team. The key words in this work have been sales culture and customer experience. By working decentralized, the subsidiaries are given the possibility – just like entrepreneurs – of working independently with a mandate to make the most effective decisions with a focus on their particular customers, businesses and profitability.
This change also means that the number of employees in the Parent Company was reduced and through fewer decision-making levels, the Group Management Team is kept to a few people, who utilize insights, synergies and economies of scale. All in all, we have made progress in creating an efficient company, where the subsidiaries and the Group can more quickly adapt to market changes at the same time that the relationships with the customers are further strengthened.
Steel price trend
Around mid-year 2020, steel prices bottomed out. Then they began to increase again. The background to this is a strong economy in Asia in 2020, with China as a net importer of steel for the first time in many years. At mid-year, the need for automotive products increased in Europe, but then the producers were cautious in their capacity expansion. The alternative of meeting the European need with imported steel was not possible since the surrounding world had greater needs and paid significantly more.
The limited supply led to long lead times, and in the autumn, the customers were forced to accept the rising prices. At the end of 2020, the need for steel increased further, and even though steel production had gained speed, today we see shortages in several material types, mainly related to the automotive industry. The shortages led to very rapid and large price increases for steel, as well as raw materials at the end of 2020 and the beginning of 2021. A lot of the steel price trend depends on what happens in China, and with a high political involvement, changes can take place very quickly.
Despite the pandemic, no compromises have been made on the implementation of the agenda of improvements we had for the year. Major projects, such as the investment in Norrköping, the centralization of warehouse and production operations to Norrköping together with the closure of the warehouse in Malmö, have been completed and will have a positive impact on 2021. At the same time, the restructuring in the Baltics is running according to plan and a new e-commerce portal will be launched in the spring 2021.
Focus in the future
In recent years, the Company made many major structural changes. In this respect, 2020 was no exception. The foundation has now been laid, but this does not mean that we are finished. The work of building a stable and long-term profitable company for the future is continuing, but instead of major structural changes, focus in the future will be on smaller, recurring improvements in every part of the Company. These improvements primarily concern our customers and their perception of doing business with BE Group.
Selling commercial steel is a bit like selling gasoline or potatoes: when the goods largely are standardized, the customer offering must be the sharpest and most attractive. Ultimately, this is a matter of expertise, availability, delivery accuracy and transports. Among our customers, all of this can be summarized in one concept – customer experience!
Finally, I would like to express a heartfelt gratitude to our customers, who continue to give us their trust, and to all of our employees, who have done extraordinary work in an extraordinary year. Without you, it would not be possible! Let’s together look forward to an exciting 2021.
President and CEO