BE Group is on the right track

Statement from the CEO

In the third quarter, the business showed good growth and improved profitability compared to previous year, net sales increased by 15 percent. The underlying operating result improved by 22 percent, which is driven by organic tonnage growth, a favourable price trend, positive currency effects and continued profitability improvement in our production operations in Sweden and Poland. We also see that our focus on cost control combined with implemented structural measures is having an effect.

Steel prices that continued to increase during the quarter resulted in inventory gains of SEK 7 M, compared with inventory losses of SEK -3 M in the period previous year. Altogether, the operating result increased to SEK 33 M (19).

It is pleasing that we, after the period end, have reached an agreement with the landlord regarding maintenance of the warehouse in Malmö. As part of this, a new agreement with reduced rent is signed. The content of the agreement means that approximately SEK 4 M of the provision booked at the end of 2017 can be released in the fourth quarter of 2018.

Tonnage and sales growth

Demand in our main markets remains strong. During the quarter,

business area Sweden & Poland showed tonnage growth of 8 percent and an increase in sales of 20 percent. In business area Finland & Baltics, the tough competition is continuing mainly in thin sheets, which is a significant part of the business, at the same time that we are seeing a somewhat declining demand in the Baltics. Despite this, net sales increased in the quarter by 14 percent compared to last year. A continued price increase and volume trend increased the working capital during the quarter, which was partially compensated by the positive results development. However, this development resulted in a negative cash flow in the period, which we are expecting to be corrected in the fourth quarter.

Outlook

Demand in the next quarter is expected to be strong in the company’s main markets at the same time that the steel prices are expected to remain on the same level as those seen in the third quarter. Our ongoing improvement measures is continuing to strengthen the Group’s profitability.

Anders Martinsson
President and CEO

 

Bridge 2017-2018 operating result SEK M
Q1 Q2 Q3 Q4 Jan-Sep
Brygga resultatutveckling 2017–2018. MSEK Q1 Q2 Q3 Q4 jan-sep
Operating result 2017 Rörelseresultat 2017 46 -13 19 5 52
Reversal of inventory gains (-)/losses (+)
Återläggning lagervinster (-)/förluster (+)
-16 -8 3 -6 -21
Items affecting comparability Jämförelsestörande poster 42 10 42
Underlying operating result 2017
Underliggande rörelseresultat 2017
30 21 22 9 73
Change in sales Försäljningsförändring 13 22 20 55
Change in underlying gross margin
Underliggande bruttomarginalförändring
4 -7 -11 -14
Change in overhead costs Omkostnadsförändring 1 -10 -5 -14
Underlying operating result 2018
Underliggande rörelseresultat 2018
48 26 26 100
Reversal of inventory gains (+)/losses (-)
Återläggning lagervinster (+)/förluster (-)
7 12 7 26
Items affecting comparability Jämförelsestörande poster -16 -16
Operating result 2018 Rörelseresultat 2018 55 22 33 110
The “change in underlying gross margin” and “change in overhead costs” have been impacted by a total of SEK -12 M due to a provision for an anticipated bad debt and adjustment of inventory in the Baltics during Q2 2018.
Items affecting comparability in Q2 2018 is related to the exit of the operations in Prerov, Czech Republic, SEK -9 M is affecting the Group’s consolidated statement of comprehensive income while SEK -7 M refers to translation differences from previous fiscal years.