Bufab AB

Annual Report • Feb 9, 2018

Year-end report 2017

Strong growth and increased profit. Bufab acquires Kian Soon in Singapore.

Fourth quarter of 2017

• Net sales rose by 18 percent to SEK 828 million (699), of which 14 percent was organic
• Order intake increased by 16 percent and was higher than net sales
• Operating profit (EBITA) rose to SEK 72 million (55), corresponding to an operating margin of 8.7 percent (7.9)
• Earnings per share were SEK 1.39 (0.22)
• Kian Soon Mechanical Components was acquired

Full-year 2017

• Net sales rose by 12 percent to SEK 3,201 million (2,847), of which 8 percent was organic
• Order intake increased by 13 percent and was higher than net sales
• Operating profit (EBITA) rose to SEK 311 million (277), corresponding to an operating margin of 9.7 percent (9.7)
• Earnings per share were SEK 5.61 (4.29)
• The Board of Directors proposes raising the dividend to SEK 2.25 (2.00) per share

THE GROUP IN BRIEF

	Quarter 4		Δ	Jan-Dec		Δ
SEK millions	2017	2016	%	2017	2016	%
Order intake	863	744	16	3,256	2,887	13
Net sales	828	699	18	3,201	2,847	12
Gross profit	238	205	16	917	828	11
	28.7%	29.4%		28.6%	29.1%
Operating expenses*	-166	-150	11	-606	-551	10
	20.0%	21.5%		18.9%	19.4%
Operating profit (EBITA)*	72	55	31	311	277	12
	8.7%	7.9%		9.7%	9.7%
Operating profit	69	53	30	304	272	12
	8.3%	7.6%		9.5%	9.6%
Profit after tax	53	8	520	213	163	31
Adjusted profit after tax	53	32	62	213	187	14
Earnings per share, SEK	1.39	0.22	532	5.61	4.29	31
Adjusted earnings per share, SEK	1.39	0.85	63	5.61	4.92	14

*For definitions, see page 18, definitions of key figures.

1 of 22 0 100 200 300 400 0 25 50 75 100 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Rolling 12 months Quarter

Quarter Rolling 12 months

SALES GROWTH +18%

OPERATING MARGIN (EBITA)

8.7%

CEO's overview

Sales in the fourth quarter rose 18 percent, driven primarily by organic growth. The gross margin remained under pressure from higher raw material prices and was lower than in 2016. However, the margin recovered somewhat from the third quarter, mainly as a result of the price increases we implemented. Our ambition is to continue with these in 2018. Despite a lower gross margin, the strong growth generated a sharp increase in operating profit and an improved operating margin.

Segment International performed very well during the quarter. Sales climbed 20 percent, the gross margin increased and costs declined as a percentage of sales. Both the operating profit and the margin thus increased sharply. The improvement occurred across a broad front – in addition to contributions from acquisitions, we noted favourable growth and improved earnings in most markets.

Segment Sweden also displayed robust growth. The gross margin was somewhat stronger than in the preceding quarter but significantly lower than in 2016. While we see the results of the price increases we have implemented, we also see a clear need to implement further such measures. Despite this, growth in combination with a maintained cost level resulted in an improved operating profit and an operating margin in line with last year.

Thus, the quarter marked a positive end to 2017. A key factor was the favourable development of

industrial demand during the year. In parallel, we could clearly see that our strategy was delivering results. We captured market shares in nearly all markets – a result of a systematic focus on the sales organisation over many years. We continued to strengthen our purchasing organisation and supplier base. We made two additional valuegenerating acquisitions during the year and are continuously looking for new opportunities. Kian Soon, which was acquired during the quarter, also strengthens our position in a strategically important region, Southeast Asia. And last but not least, we have strengthened what we call Bufab Best Practice: our shared values, work methods, processes and IT systems. This will help us drive continuously improved precision, efficiency and sustainability in our operations.

There is no shortage of challenges. For instance, we have to compensate for higher raw material prices using price increases and further streamlined purchasing processes. But we see even more opportunities. The strong development of industrial demand in 2017 was kept up during the latter part of the year, which was also evident in a favourable order intake in the last quarter. This is a positive signal as we head into 2018. Against this backdrop, we are continuing to work toward our "Leadership" target, which implies that we will be the preferred choice for customers, suppliers, acquisition candidates and talents in our industry in 2020.

Jörgen Rosengren President and CEO

About Bufab

Bufab AB (publ), Corporate Registration Number 556685-6240, is a trading company that offers its customers a full-service solution as Supply Chain Partner for sourcing, quality control and logistics for C-Parts (screws, nuts, etc.). Bufab's Global Parts ProductivityTM customer offering aims to improve productivity in the customers' value chain for C-Parts.

2 of 22 Bufab was founded in 1977 in Småland and is an international company with operations in 27 countries. The head office is located in Värnamo, Sweden, and Bufab has about 1,100 employees. Bufab's net sales for the past 12 months amounted to SEK 3.2 billion and the operating margin was 9.7 percent. The Bufab share is listed on Nasdaq Stockholm, under the ticker "BUFAB". Please visit www.bufab.com for more information.

The Group in brief

FOURTH QUARTER

Order intake was SEK 863 million (744), which was higher than net sales. Net sales rose by 18 percent to SEK 828 million (699). The Group's organic growth was +14 percent, comprising +15 percent for segment Sweden and +13 percent for segment International.

Underlying demand is considered to be distinctly higher and the market share higher compared with the corresponding period in 2016.

Kian Soon Mechanical Components Pte. Ltd. in Singapore, with annual sales of about SEK 105 million, was acquired during the quarter. See page 16 for more information.

The gross margin was 28.7 percent (29.4) and was lower compared with the preceding year, mainly on account of rising purchasing prices in recent quarters.

EBITA rose to SEK 72 million (55), equal to a margin of 8.7 percent (7.9).

Compared with the preceding year, exchangerate fluctuations impacted operating profit positively by SEK +2 million, volumes positively by SEK +27 million, the price/cost/mix/other negatively by SEK -20 million and acquisitions positively by SEK +8 million.

JANUARY-DECEMBER

Order intake was SEK 3,256 million (2,887), which was higher than net sales. Net sales rose by 12 percent to SEK 3,201 million (2,847). The Group's organic growth was +8 percent, comprising +9 percent for segment Sweden and +7 percent for segment International.

Underlying demand is considered higher in both segments compared with the corresponding period in 2016 and the market share is assessed to have increased in both segments.

The gross margin was slightly lower compared with the preceding year, mainly due to rising purchasing prices during the year.

EBITA rose to SEK 311 million (277), equal to a margin of 9.7 percent (9.7).

Compared with the preceding year, exchangerate fluctuations impacted operating profit positively by SEK +1 million, volumes positively by SEK +66 million, the price/cost/mix/other negatively by SEK -50 million and acquisitions positively by SEK +17 million.

FINANCIAL ITEMS AND TAX

The Group's net financial items amounted to SEK -4 million (-8) for the fourth quarter, of which exchangerate differences accounted for SEK +1 million (-1). For the full year, net financial items amounted to SEK -25 million (-21), of which exchange-rate differences accounted for SEK -2 million (+5). The Group's profit after financial items was SEK 65 million (45) for the quarter and SEK 279 (251) for the full year.

The tax expense for the quarter was SEK -12 million (-37). For the full year, the tax expense was SEK -65 million (-88). The high tax expense in the fourth quarter of 2016 is attributable to an additional tax of SEK 24 million in Bufab AB (publ) for disallowed deductions for certain interest expenses from previous financial years. See also Note 1 in the Consolidated Income Statement.

CASH FLOW, WORKING CAPITAL AND FINANCIAL POSITION

		Quarter 4		Jan-Dec
SEK millions	2017	2016	2017	2016
Operating profit	69	53	304	272
Depreciation/amortisation and impairment	11	11	43	43
Other non-cash items	3	1	2	1
Changes in working capital	4	-22	-105	-18
Cash flow from operations	87	43	244	298
Investments excluding acquisitions	-29	-15	-61	-31
Operating cash flow	58	28	183	267

Operating cash flow amounted to SEK 58 million (28) for the quarter. The improved cash flow is due mainly to reduced tied-up capital of SEK 26 million. The deterioration in cash flow for the full year is attributable to a rise in working capital in the form of trade receivables and inventories, driven in turn by growth. Operating cash flow for the full year was SEK 183 million (267).

Average working capital in relation to net sales improved to 35.4 percent (36.2). Excluding the acquisition of Apex Stainless Fasteners Ltd, average working capital in relation to net sales improved to 32.9 percent (34.0).

On 31 December 2017, the Group's net debt totalled SEK 1,015 million (839). Despite positive operating cash flow, net debt increased due to acquisitions carried out, payment of additional purchase considerations, share repurchases and dividends paid over the past 12 months. On 31 December 2017, the debt/equity ratio was 72 percent (65).

Segment International

Fourth quarter

Order intake was SEK 568 million (488), which was higher than net sales.

Net sales rose by 20 percent to SEK 560 million (466). Organic growth amounted to 13 percent, which was due to distinctly higher underlying demand compared with the corresponding period in the preceding year and increased market shares.

The gross margin was 29.3 percent (28.8). Higher raw material prices were compensated by, among other things, price increases.

EBITA totalled SEK 54 million (38), equal to a margin of 9.7 percent (8.2).

Compared with the preceding year, exchange-rate fluctuations impacted operating profit positively by SEK +2 million, volumes positively by SEK +18 million, the price/cost/mix/other negatively by SEK -11 million and acquisitions positively by SEK +7 million.

January-December

Order intake was SEK 2,172 million (1,907), which was higher than net sales.

Net sales rose by 14 per cent to SEK 2,144 million (1,880). Organic growth was 7 percent, primarily due to higher market shares in most markets and higher underlying demand compared with the corresponding period in the preceding year.

The gross margin was 29.1 percent (29.1).

EBITA amounted to SEK 203 million (179), equal to a margin of 9.5 percent (9.5).

Compared with the preceding year, exchange-rate fluctuations impacted operating profit positively by SEK +3 million, volumes positively by SEK +41 million, the price/cost/mix/other negatively by SEK -34 million and acquisitions positively by SEK +14 million.

	Quarter 4		Δ	Jan-Dec		Δ
SEK millions	2017	2016	%	2017	2016	%
Order intake	568	488	16	2,172	1,907	14
Net sales	560	466	20	2,144	1,880	14
Gross profit	164	134	23	623	547	14
	29.3%	28.8%		29.1%	29.1%
Operating expenses	-110	-96	15	-420	-368	13
	19.6%	20.6%		19.6%	19.6%
Operating profit (EBITA)	54	38	42	203	179	11
	9.7%	8.2%		9.5%	9.5%

Net sales, SEK millions Operating profit (EBITA) SEK

SHARE OF TOTAL SALES

Segment Sweden

Fourth quarter

Order intake was SEK 295 million (256), which was higher than net sales.

Net sales rose by 15 percent to SEK 268 million (233). Organic growth amounted to 15 percent, which was due to higher underlying demand compared with the corresponding quarter in the preceding year and increased market shares.

The gross margin declined to 29.4 percent (32.0). The decline was attributable to rising purchasing prices in recent quarters.

However, the lower gross margin was offset by a maintained cost level despite higher sales. EBITA therefore totalled SEK 35 million (31), equal to a margin of 13.1 percent (13.3).

Compared with the preceding year, exchange-rate fluctuations impacted operating profit by SEK 0 million, volumes positively by SEK +9 million, the price/cost/mix/other negatively by SEK -5 million and acquisitions by SEK 0 million.

January-December

Order intake was SEK 1,089 million (980), which was higher than net sales.

Net sales rose by 9 percent to SEK 1,057 million (968), of which 9 percent was organic. The high organic growth was a result of increased market shares and improvements in underlying demand.

The gross margin declined to 29.5 percent (30.5). The decline was attributable to rising purchasing prices in recent quarters.

EBITA amounted to SEK 139 million (131), equal to a margin of 13.2 percent (13.5).

Compared with the preceding year, exchange-rate fluctuations impacted operating profit negatively by SEK -2 million, volumes positively by SEK +24 million, the price/cost/mix/other negatively by SEK -15 million and acquisitions positively by SEK +1 million.

	Quarter 4		Δ	Jan-Dec	Δ
SEK millions	2017	2016	%	2017	2016	%
Order intake	295	256	15	1,089	980	11
Net sales	268	233	15	1,057	968	9
Gross profit	79	75	6	312	295	6
	29.4%	32.0%		29.5%	30.5%
Operating expenses	-44	-44	0	-173	-164	5
	16.4%	18.9%		16.4%	16.9%
Operating profit (EBITA)	35	31	13	139	131	7
	13.1%	13.3%		13.2%	13.5%

Net sales, SEK millions Operating profit (EBITA), SEK millions

Consolidated Income Statement

		Quarter 4		Jan-Dec
SEK millions	2017	2016	2017	2016
Net sales	828	699	3,201	2,847
Cost of goods sold	-590	-494	-2,284	-2,019
Gross profit	238	205	917	828
Distribution costs	-122	-104	-446	-398
Administrative expenses	-43	-44	-166	-156
Other operating income	10	10	32	32
Other operating expenses	-13	-14	-33	-34
Operating profit	69	53	304	272
Profit from financial items
Interest income and similar income items	2	1	1	7
Interest expense and similar expense items	-6	-9	-27	-28
Profit after financial items	65	45	278	251
Tax on net profit for the period Note 1	-12	-37	-65	-88
Profit after tax	53	8	213	163

Note 1 Items affecting comparability in the period	Quarter 4		Jan-Dec
SEK millions	2016	2016	2017	2016
Additional tax for previous financial years	-	-24	-	-24
Total items affecting comparability with effect on profit after tax	0	-24	0	-24

Statement of Comprehensive Income

	Quarter 4		Jan-Dec
SEK millions	2017	2016	2017	2016
Profit after tax	53	8	213	163
Other comprehensive income
Items that cannot be reclassified to profit or loss
Actuarial gains and losses, net after tax	-1	-2	-1	-2
Items that may be reclassified subsequently to profit or loss
Translation differences / Currency hedging net after tax	25	-4	11	18
Total other comprehensive income	24	-6	10	16
Total comprehensive income	77	2	223	179
Total comprehensive income attributable to:
Parent Company shareholders	77	2	223	179

Earnings per Share

	Quarter 4		Jan-Dec
SEK	2017	2016	2017	2016
Earnings per share	1.39	0.22	5.61	4.29
Weighted number of shares outstanding, thousands	37,776.1	38,110.5	37,978.7	38,110.5
Diluted earnings per share, SEK	1.39	0.22	5.61	4.29
Weighted number of shares outstanding after dilution, thousands	37,776.1	38,110.5	37,978.7	38,110.5
Adjusted earnings per share, SEK	1.39	0.85	5.61	4.92

Consolidated Balance Sheet

SEK millions	31 Dec 17	31 Dec 16*
ASSETS
Non-current assets
Intangible assets	1,134	1,037
Property, plant and equipment	164	132
Financial assets	23	22
Total non-current assets	1,321	1,191
Current assets
Inventories	1,093	920
Current receivables	740	621
Cash and cash equivalents	120	122
Total current assets	1,953	1,663
Total assets	3,274	2,854

EQUITY AND LIABILITIES

Equity	1,416	1,297
Non-current liabilities
Non-current liabilities, interest-bearing	1,080	884
Non-current liabilities, non-interest bearing	102	75
Total non-current liabilities	1,182	959
Current liabilities
Current liabilities, interest-bearing	55	76
Current liabilities, non-interest-bearing	621	522
Total current liabilities	676	598
Total equity and liabilities	3,274	2,854

*Restated. See the section "Accounting policies" on page 15 for further information.

Consolidated Statement of Changes in Equity

SEK millions	31 Dec 17	31 Dec 16
Equity at beginning of year	1,297	1,183
Comprehensive income
Profit after tax	213	163
Other comprehensive income
Items that will not be reclassified in profit or loss
Actuarial loss / profit on pension obligations, net after tax	-1	-2
Items that may be reclassified in profit or loss
Translation differences / Currency hedging net after tax	11	18
Total comprehensive income	223	179
Transactions with shareholders
Issued call options	3	-
Repurchase of own shares	-31	-
Dividend to shareholders	-76	-65
Total transactions with shareholders	-104	-65
Equity at end of period	1,416	1,297

Consolidated Cash Flow Statement

	Quarter 4		Jan-Dec
SEK millions	2017	2016	2017	2016
Operating activities
Profit before financial items	69	53	304	272
Depreciation/amortisation and impairment	11	11	43	43
Interest and other finance income	-	-	-	-
Interest and other finance expenses	-4	-8	-25	-27
Other non-cash items	3	1	2	1
Income tax paid	-5	-32	-68	-74
Cash flow from operating activities
before changes in working capital	74	25	256	215
Changes in working capital
Increase (-)/decrease (+) in inventories	-57	-38	-142	-35
Increase (-)/decrease (+) in operating receivables	-1	20	-79	-32
Increase (+)/decrease (-) in operating liabilities	62	-4	116	49
Cash flow from operating activities	78	3	151	197
Investing activities
Acquisition of property, plant and equipment	-29	-14	-61	-29
Company acquisitions including additional purchase considerations*	-97	-41	-132	-69
Acquisition of intangible assets	-	-1	-	-2
Cash flow from investing activities	-126	-56	-193	-100
Financing activities
Dividend paid	-	-	-76	-65
Call options	-	-	3	-
Repurchase of own shares	-	-	-31	-
Increase (+)/decrease (-) in borrowings	63	45	142	-21
Cash flow from financing activities	63	-45	38	-86
Cash flow for the period	15	-8	-4	11
Cash and cash equivalents at beginning of period	103	128	122	107
Translation differences	2	2	2	4
Cash and cash equivalents at end of period	120	122	120	122

*See page 16 under "Acquisitions" for more information.

The Group's Segment Reporting

			2016				2017
International SEK millions	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Net sales	474	491	449	466	536	541	507	560
Gross profit	138	144	131	134	156	155	148	164
	29.1%	29.4%	29.3%	28.8%	29.2%	28.1%	29.2%	29.3%
Operating expenses	-90	-93	-89	-96	-101	-105	-104	-110
Operating profit (EBITA)	48	51	42	38	55	50	44	54
	10.1%	10.4%	9.4%	8.2%	10.3%	9.2%	8.7%	9.6%

		2016					2017
Sweden SEK millions	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Net sales	244	272	219	233	279	282	228	268
Gross profit	72	82	66	75	86	81	66	79
	29.6%	30.3%	30.1%	32.0%	30.9%	28.9%	28.9%	29.4%
Operating expenses	-40	-42	-38	-44	-45	-44	-40	-44
Operating profit (EBITA)	32	40	28	31	41	37	26	35
	13.2%	14.7%	12.6%	13.3%	14.8%	13.2%	11.4%	13.1%

			2016				2017
Other SEK millions	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Net sales	-	-	-	-	-	-	-	-
Gross profit	-4	-4	-3	-4	-4	-1	-5	-5
Operating expenses	-4	-4	0	-10	-2	-7	4	-12
Operating profit (EBITA)	-8	-8	-3	-14	-6	-8	-1	-17
	-	-	-	-	-	-	-	-

			2016				2017
Group SEK millions	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Net sales	718	762	668	699	815	823	735	828
Gross profit	206	223	194	205	238	232	209	238
	28.6%	29.3%	29.0%	29.4%	29.2%	28.2%	28.4%	28.7%
Operating expenses	-134	-140	-127	-150	-147	-154	-139	-166
Operating profit (EBITA)	72	84	67	55	91	78	70	72
	10.0%	10.9%	10.0%	7.9%	11.1%	9.5%	9.5%	8.7%

Consolidated Key Figures

	Quarter 4		Δ	Jan-Dec		Δ
	2017	2016	%	2017	2016	%
Order intake, SEK millions	863	744	16	3,256	2,887	13
Net sales, SEK millions	828	699	19	3,201	2,847	12
Gross profit, SEK millions	238	205	16	917	828	11
EBITDA, SEK millions	79	64	24	347	315	10
Operating profit (EBITA), SEK millions	72	55	31	311	277	12
Operating profit, SEK millions	69	53	30	304	272	12
Profit after tax, SEK millions	53	8	520	213	163	31
Gross margin, %	28.7	29.4		28.6	29.1
Operating margin (EBITA), %	8.7	7.9		9.7	9.7
Operating margin, %	8.3	7.6		9.5	9.6
Net margin, %	6.4	1.2		6.7	5.7
Net debt, SEK millions	1,015	839	21
Debt/equity ratio, %	72	65
Net debt/EBITDA*, multiple	3.4	2.7
Working capital, SEK millions	1,212	1,055	15
Average working capital, SEK millions	1,142	1,038	10
Average working capital in relation to net sales, %	35.4	36.5
Equity/assets ratio, %	43	45
Operating cash flow, SEK millions	58	28	107	183	267	-31
Earnings per share, SEK	1.39	0.22	524	5.61	4.29	31

*Paid purchase prices have been charged in full to net debt while EBITDA has only been credited from the acquisition date.

For definitions, see page 18.

Parent Company Income Statement

		Quarter 4	Jan-Dec
SEK millions	2017	2016	2017	2016
Administrative expenses	-4	-2	-14	-11
Other operating income	2	1	6	5
Operating loss	-2	-1	-8	-6
Profit/loss from financial items
Interest expense and similar expense items	1	-1	0	-1
Loss after financial items	-1	-2	-8	-7
Appropriations	89	102	89	102
Tax on net profit/loss for the period	-18	-46	-18	-45
Profit after tax	70	54	63	50
Other comprehensive income	-	-	-	-
Total comprehensive income	70	54	63	50

Parent Company Balance Sheet

SEK millions	31 Dec 17	31 Dec 16
ASSETS
Non-current assets
Financial assets
Participations in Group companies	845	845
Total non-current assets	845	845
Current assets
Receivables from Group companies	166	183
Other current receivables	0	4
Cash and cash equivalents	1	1
Total current assets	167	188
Total assets	1,012	1,033
EQUITY AND LIABILITIES
Equity	872	913
Untaxed reserves	128	109
Non-current interest-bearing liabilities
Other non-current liabilities	-	-
Total non-current liabilities	0	0
Current non-interest-bearing liabilities
Other current liabilities	12	11
Total current liabilities	12	11
Total equity and liabilities	1,012	1,033

Other information

ACCOUNTING POLICIES

This interim report has been prepared pursuant to IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. The Parent Company's financial statements were prepared in accordance with the Swedish Annual Accounts Act, Chapter 9 and the Swedish Financial Reporting Board's recommendation RFR 2.

The accounting policies applied correspond to the accounting policies and measurement principles presented in the 2016 Annual Report. The 2016 Annual Report is available at www.bufab.com.

As of January 1, 2018, Bufab will apply IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers.

IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities. The Group's work during 2017 has shown that IFRS 9 will not have any material impact on the Group's financial statements.

IFRS 15 contains a single model for revenue recognition relating to customer contracts not covered by other standards. The Group's work during 2017 has determined that IFRS 15 will not have any material impact on the Group's financial statements, and no transitional effects will therefore arise.

As indicated under the heading "Acquisitions," an adjustment was made during the second quarter to the preliminary acquisition analysis relating to Montrose Holdings Ltd, thereby increasing the recognised goodwill and estimated additional purchase consideration by SEK 7 million. In accordance with IFRS 3, adjustments to the preliminary acquisition analysis have been recognised as of the acquisition date, and comparative figures for the 2016 financial year have therefore been restated. However, such restatements did not have any effect on recognised profit, earnings per share or consolidated equity.

RISKS AND RISK MANAGEMENT

Exposure to risk is a natural part of a business operation and this is reflected in Bufab's approach to risk management. The aim is to identify and prevent risks and to limit any loss or damage from these risks. The main risks to which the Group is exposed relate to the impact of the economy on demand. For further information, see Note 3 of the 2016 Annual Report.

SEASONAL VARIATIONS

Bufab has no significant seasonal variation in its sales, but sales over the year vary based on the number of production days in each quarter for customers.

RELATED-PARTY TRANSACTIONS

During the second quarter, the President and senior executives subscribed for call options within the framework of the long-term share-based incentive programme adopted at the Annual General Meeting under the terms outlined in more detail below.

REPURCHASE OF OWN SHARES

During the third quarter, the company repurchased 333,950 own shares corresponding to an acquisition price of SEK 31 million. In other respects, no other related-party transactions occurred during the year.

LONG-TERM SHARE-BASED INCENTIVE PROGRAMME

The 2017 Annual General Meeting resolved to adopt a long-term share-based incentive programme based on call options, comprising the CEO, senior executives and other key employees within the Group. The programme comprises a maximum of 350,000 call options, corresponding to approximately 0.9 percent of the total number of shares in the company. The purchase price for the call options has been set at SEK 10.01, corresponding to the market value of the options at the date of transfer. Each call option entitles the holder to acquire one share in Bufab during the period 15 May 2020 – 15 November 2020. The purchase price per share is SEK 120.40, corresponding to 115 percent of the volumeweighted average price paid for the company's share on Nasdaq Stockholm during the period 8 May 2017 – 12 May 2017.

To encourage participation in the programme, the Board of Directors has resolved on a subsidy in the form of gross salary additions to participants who remain as employees of the company in 2020, which may correspond to not more than the price paid for the call options. To hedge Bufab's delivery of shares, the Annual General Meeting also resolved to authorise the Board of Directors to repurchase a maximum of 350,000 shares in the company, and approved the transfer of a maximum of 350,000 of the company's repurchased shares to the participants of the programme.

ACQUISITIONS

The following acquisitions were made during 2015- 2017.

	Date	Net sales*	Employees
Flos BV	26 Feb 2015	160	52
Apex Stainless Holdings Ltd	26 Nov 2015	300	110
Magnetfabriken AB	2 Mar 2016	20	6
Montrose Holdings Ltd	5 Dec 2016	80	51
Thunderbolts Group Limited	24 May 2017	32	19
Kian Soon Mechanical Components Pte Ltd	1 Dec 2017	105	64

*Estimated annual net sales at the date of acquisition

Liabilities for conditional, not yet paid purchase considerations have been remeasured as a result of the positive performance of acquired companies and incurred a cost in the fourth quarter of 2017 of SEK 3 million. The amount is included in other operating expenses.

During the second quarter, the preliminary acquisition analysis for Montrose Holdings Ltd, presented in Note 35 of the 2016 Annual Report, was updated. The adjustment was the result of the receipt of information that confirmed the conditions prevailing on the acquisition date and entails an increase of both the estimated additional purchase consideration and recognised goodwill of SEK 7 million.

On 24 May 2017, Bufab acquired 100 percent of the shares in Thunderbolts Group Limited. Thunderbolts was founded in 1991 and through steady growth has developed into a significant supplier to the construction, manufacturing, marine and healthcare industries in the south of England. The purchase consideration was SEK 25 million, of which SEK 15 million has been paid unconditionally and the remaining SEK 10 million is subject to conditions. The conditional portion of SEK 10 million comprises 100 percent of the maximum outcome of the additional purchase consideration and is subject to the company's future earnings performance.

On 1 December 2017, Bufab acquired 100 percent of the shares in Kian Soon Mechanical Components Pte Ltd. Kian Soon was founded in 1977 and is one of the leading distributors in Southeast Asia. In addition to a head office in Singapore, the company has subsidiaries in Malaysia and Indonesia and an associated company in Thailand. The purchase consideration was SEK 136 million, of which SEK 93 million has been paid unconditionally and the remaining SEK 43 million is subject to conditions. The conditional portion of SEK 43 million comprises 100 percent of the maximum outcome of the additional purchase consideration and is subject to the company's future earnings performance.

Companies acquired in 2017 have added SEK 30 million to the Group's accumulated net sales since transfer. The net impact on accumulated operating profit was SEK 3 million and the effect on profit after tax was SEK 2 million. Transaction costs for both acquisitions amounted to SEK 3 million. These two acquisitions would have positively impacted the Group's net sales by an estimated SEK 137 million, operating profit by about SEK 15 million and profit after tax for the period by about SEK 10 million had they been implemented on 1 January 2017.

The amounts of the assets and liabilities included in the acquisitions according to the preliminary acquisition analysis were as follows:

Thunderbolts Group Limited	Carrying amount on acquisition date	Adjustment to fair value	Fair value
Intangible assets		6	6
Other non-current assets	0		0
Inventories	3		3
Other current assets	7		7
Cash and cash equivalents	7		7
Deferred tax liabilities		-1	-1
Other liabilities	-5		-5
Acquired net assets Goodwill	12	5	17 8
Purchase consideration*			25
Less: cash and cash equivalents in acquired operations			-7
Less: conditional purchase consideration			-10
Effect on the Group's cash and cash equivalents			8

Kian Soon Mechanical Components Pte Ltd	Carrying amount on acquisition date	Adjustment to fair value	Fair value
Intangible assets		19	19
Other non-current assets	4		4
Inventories	25		25
Other current assets	29		29
Cash and cash equivalents	15		15
Deferred tax liabilities		-3	-3
Other liabilities	-19		-19
Acquired net assets	54	16	70
Goodwill			66
Purchase consideration*			136
Less: cash and cash equivalents in acquired operations			-15
Less: conditional purchase consideration			-43
Effect on the Group's cash and cash equivalents			78

* The consideration is stated excluding acquisition expenses

The acquisition analyses above are preliminary. Goodwill arising in connection with the acquisitions is attributable to the knowledge accrued in the acquired companies and the established and consolidated market positions and the anticipated profitability related to it.

In addition to the net impact on the Group's cash and cash equivalents of SEK 86 million relating to the acquisition of Thunderbolts and Kian Soon, a total of SEK 46 million was paid during the year in additional purchase considerations for previous acquisitions.

EMPLOYEES

The number of full-time employees in the Group as of 31 December 2017 was 1,119 (1,020), 19 and 64 of whom stem from the acquisition of Thunderbolts Group Limited and Kian Soon Mechanical Components Pte Ltd., respectively.

CONTINGENT LIABILITIES

There were no significant changes to the company's contingent liabilities during the interim period.

2018 ANNUAL GENERAL MEETING

The Annual General Meeting of Bufab AB (publ) will be held in Värnamo, on 26 April 2018 at 1:30 p.m.

The Notice of the 2018 AGM will be available on Bufab's website as of 26 March 2018 at www.bufab.com.

The Annual Report for 2017 will be published no later than 5 April 2018. To order a hard copy of the annual report, e-mail investor.relations@bufab.com.

The Board of Directors proposes a dividend of SEK 2.25 (2.00) per share for 2017, corresponding to a total dividend of SEK 85 million (76). The proposed record date is 30 April 2018 and the expected payment date for dividends is 4 May 2018. It is proposed that the share be traded without dividend entitlement as of 27 April 2018.

AUDIT REVIEW

This interim report has not been examined by the company's auditors.

FINANCIAL REPORTING DATES

Interim report for the first quarter of 2018 26 April 2018

Interim report for the second quarter of 2018 19 July 2018

Interim report for the third quarter of 2018 25 October 2018

Year-end report 2018 8 February 2019

Värnamo, 9 February 2018

Jörgen Rosengren President and CEO

Definitions of key figures

Gross margin, %

Gross profit as a percentage of net sales for the period

EBITDA

Operating profit before depreciation, amortisation and impairment

Operating profit (EBITA)

Gross profit less operating expenses.

Adjusted profit after tax

Profit after tax adjusted for items affecting comparability

Adjusted net margin, %

Adjusted profit after tax as a percentage of net sales during the period

Net debt

Interest-bearing liabilities less cash and cash equivalents and interest-bearing assets, calculated at the end of the period

Debt/equity ratio, %

Net debt divided by equity, calculated at the end of the period

Net debt/EBITDA, multiple

Net debt at the end of the period divided by adjusted EBITDA in the last twelve months

Operating expenses

Total distribution costs, administrative expenses, other operating income and other operating expenses excluding depreciation, amortisation and impairment of acquisition-related intangible assets

Working capital

Total current assets less cash and cash equivalents less current non-interest-bearing liabilities, calculated at the end of the period

Average working capital

Average working capital calculated as the average of the past four quarters

Average working capital in relation to net sales, %

Average working capital as a percentage of net sales in the last twelve months

Equity/assets ratio, %

Equity as a percentage of total assets, calculated at the end of the period

Operating cash flow

Operating profit adjusted for depreciation/amortisation, impairment and other non-cash items less changes in working capital and investments

Earnings per share

Profit after tax for the period divided by the average number of common shares

Adjusted earnings per share

Adjusted profit after tax for the period divided by the average number of common shares

Performance measures not defined in accordance with IFRS

Bufab uses certain performance measures not defined in the rules for financial reporting adopted by Bufab. The purpose of these performance measures is to provide a better understanding of the performance of the operations. It should be pointed out that these alternative performance measures, as they are defined, are not fully comparable with other companies' performance measures with the same name.

Organic growth

Because Bufab has operations in many countries with different currencies, it is essential to provide an understanding of the company's performance without current effects when translating foreign subsidiaries. In addition, Bufab has an important strategic objective in carrying out value-generating acquisitions. For these reasons, growth is also recognised excluding currency effects when translating foreign subsidiaries and excluding acquired operations within the term Organic growth. This performance measure is expressed in percentage points of last year's net sales.

		Quarter 4			Jan-Dec
2017, %	Group	Sweden	International	Group	Sweden	International
Organic growth	14	15	13	8	9	7
Currency translation effects	-1	0	-1	0	0	1
Acquisitions	5	0	8	4	0	6
Recognised growth	18	15	20	12	9	14

		Quarter 4			Jan-Dec
2016, %	Group	Sweden	International	Group	Sweden	International
Organic growth	4	4	3	4	1	5
Currency translation effects	2	0	3	0	0	0
Acquisitions	8	3	12	12	2	19
Recognised growth	14	7	18	16	3	24

Operating cash flow

In order to improve its total cash flow, Bufab continuously measures the cash flow generated by operations in all its companies. This is expressed as Operating cash flow and defined below.

	Quarter 4			Jan-Dec
SEK millions	2017	2016	2017	2016
EBITDA	80	64	347	315
Other non-cash items	3	1	2	1
Changes in inventory	57	-38	-142	-35
Changes in operating receivables	-1	20	-79	-32
Changes in operating liabilities	62	-4	116	49
Cash flow from operations	87	43	244	298
Investments excluding acquisitions	-29	-15	-61	-31
Operating cash flow	58	28	183	267

EBITDA

EBITDA is an expression of operating profit before depreciation, amortisation and impairment. The key figure is defined below.

		Quarter 4	Jan-Dec
SEK millions	2017	2016	2017	2016
Operating profit	69	53	304	272
Depreciation/amortisation and impairment	11	11	43	43
EBITDA	80	64	347	315

EBITA

Bufab's growth strategy includes the acquisition of companies. For the purpose of illustrating the underlying operation's performance, management has chosen to monitor EBITA (operating profit before depreciation, amortisation and impairment of acquired intangible assets). The key figure is defined below.

	Quarter 4		Jan-Dec
SEK millions	2017	2016	2017	2016
Operating profit	69	53	304	272
Depreciation, amortisation and impairment of intangible assets	3	2	7	5
EBITA	72	55	311	277

Operating expenses

Operating expenses is an expression of operating expenses before depreciation, amortisation and impairment of acquired intangible assets. The key figure is defined below.

	Quarter 4		Jan-Dec
SEK millions	2017	2016	2017	2016
Distribution costs	-122	-104	-446	-398
Administrative expenses	-44	-44	-166	-156
Other operating income	10	10	32	32
Other operating expenses	-13	-14	-33	-34
Depreciation, amortisation and impairment of intangible assets	3	2	7	5
Operating expenses	-166	-150	-606	-551

Working capital

Because Bufab is a trading company, working capital represents a large share of the balance sheet's value. In order to optimise the company's cash generation, management focuses on the local company's development, and thereby the entire Group's development, of working capital as it is defined below.

	31 Dec	31 Dec
SEK millions	2017	2016
Current assets	1,953	1,663
Less: cash and cash equivalents	-120	-122
Less: current non-interest-bearing liabilities excluding liabilities for additional purchase prices	-621	-468
Working capital on balance-sheet date	1,212	1,055

Net debt

Net debt is an expression of how large the financial borrowing is in the company in absolute figures after deductions for cash and cash equivalents. The key figure is defined below.

	31 Dec	31 Dec
SEK millions	2017	2016
Non-current interest-bearing liabilities	1,080	884
Current interest-bearing liabilities	55	76
Less: cash and cash equivalents	-120	-122
Less: other interest-bearing receivables	0	0
Net debt on balance-sheet date	1,015	839

Adjusted profit after tax and adjusted net margin

In order to show Bufab's profit after tax adjusted for items affecting comparability, the adjusted profit after tax and adjusted net margin are reported in the calculation below.

	Quarter 4		Jan-Dec
SEK millions	2017	2016	2017	2016
Net sales (A)	828	699	3,201	2,847
Profit after tax (B)	53	8	213	163
Items affecting comparability	-	24	-	24
Adjusted profit after tax (C)	53	32	213	187
Net margin, % (B/A)	6.4	1.2	6.7	5.7
Adjusted net margin, % (C/A)	6.4	4.7	6.7	6.6

Adjusted earnings per share

In order to show Bufab's earnings per share adjusted for items affecting comparability, the adjusted earnings per share is reported in the calculation below.

	Quarter 4		Jan-Dec
	2017	2016	2017	2016
Weighted number of shares outstanding, thousands (A)	37,776.1	38,110.5	37,978.7	38,110.5
Profit after tax, SEK millions (B)	53	8	213	163
Adjusted profit after tax, SEK millions (C)	53	32	213	187
Earnings per share, SEK (B/A)	1.39	0.22	5.61	4.29
Adjusted earnings per share, SEK (C/A)	1.39	0.85	5.61	4.92

CONFERENCE CALL

A conference call will be held on 9 February 2018 at 9:00 a.m. CET. Jörgen Rosengren, President and CEO, and Marcus Andersson, CFO, will present the results. The conference call will be held in English.

To participate in the conference, use any of the following dial-in numbers: +44 1452 555 566, UK 08 444 933 800, Sweden 08 503 364 34 or the US 163 151 074 98. Conference code: 7899484.

Please dial in 5–10 minutes ahead in order to complete the short registration process.

CONTACT

Jörgen Rosengren CEO +46 370 69 69 01 jorgen.rosengren@bufab.com

This information is such that Bufab AB (publ) is obliged to disclose in accordance with the EU's Market Abuse Regulation and the Swedish Securities Market Act. The information was submitted for publication by the aforementioned contacts on 9 February 2018 at 7:30 a.m. CET.

Bufab Holding AB (publ) Box 2266 SE-331 02 Värnamo, Corp. Reg. No. 556685-6240 Tel: +46 370 69 69 00 Fax +46 370 69 69 10 www.bufab.com