Comments on the report

Third quarter

The Group’s consolidated net sales for the period decreased by 19 percent compared to last year and amounted to SEK 859 M (1,057). The decline is explained by negative organic tonnage growth of -14 percent directly connected to the Finnish unit, negative price and mix effects of -2 percent, currency effects of -2 percent and closure of the Polish unit of -1 percent.

During the third quarter, the steel prices in Europe and the Nordic region continued to be negatively affected by low demand and a high share of imports. The Finnish operations was, however, continously negatively affected by lower efficiency since the transition to a new business system in the beginning of March. Thus, sales and tonnage significantly decreased during the quarter. Tonnage decreased by 26 percent, to compare with an estimated decrease of the Finnish market as a whole by approximately 7 percent. A number of measures have been implemented during the latter part of the quarter to stabilize operations and improving efficiency. The beginning of the fourth quarter indicates improved delivery capacity and higher efficiency. The measures implemented are assessed to provide favorable conditions for enhancing customer satisfaction and gradually regaining lost tonnage and market shares.

Tonnage in the Swedish operations increased by 1 percent driven by increased demand from OEM and the construction segment while demand from other industry segments continued to be weak.

The challenging market situation and, at the same time, decreased tonnage and increased costs related to the transition to a new business system in the Finnish operations contributed to gross profit decreasing to SEK 89 M (118) and led to a gross margin of 10.4 percent (11.1). The operating result amounted to SEK -30 M (5). Adjusted for items affecting comparability of SEK -7 M (8) and inventory gains and losses of SEK 0 M (-9), the underlying operating result amounted to SEK -23 M (6). The underlying operating margin for the period amounted to -2.7 percent (0.6).

During the quarter, BE Group conducted a rights issue that provided the company with gross proceeds of around SEK 143 M before issue costs of about SEK 8 M, of which about SEK 1 M constituted cash compensation for guarantors. Net proceeds thereby amounted to around SEK 135 M.

First nine months

During the first nine months, the Group’s net sales decreased by 17 percent compared to last year and amounted to SEK 3,009 M (3,634). This is explained by negative organic tonnage of -9 percent, negative price and mix effects of -4 percent, closure of the Baltic and Polish units of -3 percent and currency effects of -1 percent. Tonnage in the Swedish unit increased by 2 percent while the Finnish unit delivered -19 percent less. Gross profit amounted to SEK 315 M (435) and the gross margin amounted to 10.5 percent (12.0).

The operating result amounted to SEK -534 M (20), corresponding to an operating margin of -17.7 percent (0.5). Adjusted for items affecting comparability of SEK -470 M (-19) and inventory losses of SEK -3 M (-27), the underlying operating result amounted to SEK -61 M (66). During the period, the underlying operating margin amounted to -2.0 percent (1.8).

Items affecting comparability

In the second quarter, a review of the book value of BE Group’s assets was conducted as a result of the market environment and the continued high yield requirements from the market which puts pressure on the value of the assets. The impairment testing of goodwill and participations in shares in subsidiaries indicated that there was a need for a goodwill impairment of SEK -409 M to better calibrate with the current market situation. The impairment test has been carried out in accordance with the method described in the annual report. The company has conducted sensitivity analyses based on updated forecasts and assessed growth. Furthermore, assumptions have been updated regarding steel price development, operating margin, cost levels, working capital requirements, and investment needs. Impairment of goodwill resulted in the parent company to write-down its shares in the Swedish subsidiary  with SEK -234 M. The book value of the new business system was also reviewed. Certain functionality and configuration have not met the requirements and needed to be adjusted to increase efficiency, which led to a write-down of SEK -31 M. The write-downs have been recognized as items affecting comparability during the first nine months, see note 4.

During the period, the closure of the units in Arvika and Poland has been finalized and the restructuring has been completed in the Swedish and Finnish units. One-off costs of SEK -30 M are recognized as items affecting comparability during the first nine months, see note 4.