BE Group again delivered a strong quarter thanks to continued high steel prices and good cost control. The operating margin rose to 10.0%, which is by far the best that has been delivered for the first quarter since the stock exchange listing in 2006.

Compared to the corresponding quarter in 2021, net sales increased by 68 percent and the underlying operating result increased to SEK 180 M (68). Rising steel prices led to inventory gains of SEK 4 M (18) and the operating result increased to SEK 184 M (86).

The war in Ukraine and steel price trends

The war in Ukraine is terrible. It entails great human suffering and mass destruction of buildings and infrastructure. The restoration of the damage will require a lot of effort, both in terms of labor and materials, and this, together with increased defense spending worldwide, will make steel both sought-after and expensive.

Russia and Ukraine are major producers of iron ore and other input materials and European producers import part of their need for coal from Russia. In addition, a large part of Europe’s gas comes from Russia. The war has affected and will continue to affect the European steel market through sharp price increases, among other things. There is absolutely a risk that radically increased prices could lead to investments being postponed. Less demand can then compensate for the decreased supply due to the absence of materials from Russia and Ukraine.

About 10% of BE Group’s total steel purchases in 2021 came from Russian-controlled steel producers and BE Group immediately ceased orders and payments to companies subject to global sanctions.

We are carefully monitoring developments and reviewing what can be done proactively to ensure the delivery of steel and to safeguard our capacity to support our customers in these challenging times.

Acquisition of assets of the Hercules Rebar

On March 25, BE Group announced the signing of the agreement to acquire the assets of Hercules Rebar from Hercules Grundläggning AB, a subsidiary of NCC. The acquisition strengthens BE Group’s reinforcement offering in Sweden and entails production and storage capacity being added close to our Norrköping facility. The acquisition includes machinery, inventory, personnel and rental agreement for the rebar site and a multi-year cooperation agreement on reinforcement with NCC. Transfer of possession will take place in the second quarter.

Future outlook

The external situation makes it hard to predict the future. What we know is that steel prices will remain high in the second quarter and, in the short term, we do not see any decline in demand. This means that there are good possibilities for BE Group to deliver a significantly improved second quarter compared to the first quarter this year.

In addition to carefully monitoring developments and keeping our ears very close to the ground, BE Group will continue to build on a good and long-term profitable company and to create a stable foundation for the future. The primary focus at the moment is to secure deliveries of steel and, consequently, our ability to support our customers.

Peter Andersson
President and CEO