Strong cash flow despite decreased demand

Demand decreased rapidly during the year, mainly from the construction industry, while material prices fell. This led to a 23 percent decline in net sales and pressured gross margins, resulting in an underlying operating margin of 0.6 percent. Focus during the year has been on working with costs, taking market shares and securing a positive cash flow. For the full-year cash flow from operating activities increased from SEK 204 M to SEK 491 M, which has created a finacially strong position. On the cost side, implemented rationalizations are expected to give an annual savings effect of at least SEK 50 M.

To fully understand the 2023 earnings, one has to look back to February 2022 when Russia launched its full-scale invasion of Ukraine. Material prices doubled virtually overnight and began a continuous decline over 18 months from May of that same year. In such a situation, regardless of what you as a warehouse keeper did, it´s easy to always be one step behind.

Steel price trend

The year was spared major events in the surrounding world that affected European steel prices, which consequently were guided by supply and demand, not crisis management. Different steel products developed differently. Long products are largely consumed by the construction sector, which experienced a sharp decline, at the same time that the costs of raw materials and energy fell in the first half of the year. Altogether, this caused spot prices to drop in the first half of the year and they did not recover until late autumn and then only marginally. Flat products mainly go to the industrial sector and therefore had better demand than long products. A large proportion is sold through distributors and steel service centers, which buy only when their inventories are low, contributing to more uneven demand and causing spot prices to fluctuate both a little up and a little down but ultimately making a clear drop over the year.

The market in Sweden mostly has monthly, quarterly and half-yearly agreements, which means that the price trend is somewhat different than on the continent, where spot prices are applied to a greater extent. We usually see a delayed market response. The general view at the moment is that things have bottomed out on the continent, keeping in mind that they had a significantly weaker economy than in northern Europe.

Digitalization and e-commerce

Bröderna Edstrand, as it was formally known, launched its first e-commerce portal as early as 2000. Essentially comprising an order form with manual reception and order writing. I can imagine that it was being at the forefront! In an interview, the CEO at the time said, “Saying that e-commerce will change the trading business is an incredible exaggeration”. After many subsequent updates, a proper overhaul was made and, in the spring of 2021, a completely new portal was launched.

In 2023, tonnage in this sales channel increased by more than 50 percent and total sales amounted to about SEK 225 M. Customers can order at any time and, through a more efficient flow and administration, BE Group can offer a competitive price. This is good for everyone and customers often say that the portal is the broadest and most user-friendly in the industry.

Outlook and focus in the future

2024 has begun relatively strongly. However, a reasonable assumption is that the construction sector will continue to be under pressure throughout the year with tough competition for the projects that are under way in spite of it all. The industrial sector is judged to be somewhat more stable.

BE Group’s employees are creative and dedicated and everyone is aware that it is now necessary more than ever to fight for each individual deal and to sell as much as possible at sound margins. This, together with cost rationalizations will in the long term lead to a stronger BE Group. At the same time, we have to ensure that all the improvements and investments made in recent years come to good use.

In conclusion, I would like to express my warm gratitude to our customers who repeatedly and sometimes in the third or fourth generation entrust us with their business, our owners who believe in us and our employees who strive daily to make BE Group a better and stronger company.

Peter Andersson
VD och koncernchef