Reduced demand, mainly from the construction industry, led to a decrease in net sales of 31% during the second quarter to SEK 1,406 M (2,044). This, together with gross margins under pressure, led to a decrease in underlying operating result to SEK 33 M (291). Inventory losses amounted to SEK -7 M (22) and consequently the operating result amounted to SEK 26 M (313). However, the cash flow was strong and amounted to SEK 132 M (127) from operating activities, primarily by adapting inventory levels. For the first six months, cash flow amounted to SEK 358 M (235).

The reason for the weak result is, as in the last quarter, a decline in tonnage of 18% and a price reduction of 17% compared to the second quarter last year which pushed down the gross margin.

The Group´s main operations in Sweden and Finland has, as a consequence of changes in the surrounding world, lost significant turnover which led to the Group ending up on an unacceptably low profitability level. BE Group has increased focus on measures to enhance efficiency and margin. The ambition is that the company should be profitable regardless of the economic situation or factors from the surrounding world.

Outlook

Spot prices for long products fell somewhat in the second quarter and are expected to remain relatively stable from the current level in the third quarter. Flat products rose in the first quarter, peaking in April and then falling again. The price level in the third quarter is expected to be in line with the current price level, which is confirmed by analyst firms.

Demand in the third quarter is expected to overall be in line with the second quarter, adjusted for the holiday period. Given the tight market conditions, the gross margin is expected to remain under pressure.

Investment in the future

Decided investments are running according to plan and the fully automated saw and machining line for long products at BE Group’s Turku facility was finalized during the quarter.

In addition, decision has been made to invest in a transition to water-based paint at the Norrköping facility. The investment is of a minor nature but an important piece of the puzzle in our sustainability work. The investment leads to a significant increase in capacity, which strengthens the company’s offering in the form of shorter lead times. The project will be completed by the end of the year.

In May, it was announced that we had signed a cooperation agreement with SSAB regarding fossil-free steel for the Finnish market and in June, a new long-term credit agreement of SEK 775 M was signed with SEB. Different kind of investments, but nonetheless very important.

Peter Andersson
President and CEO