Bufab AB

Earnings Release • Feb 21, 2017

Year-end report 2016

Healthy growth and improved operating margin. Acquisition of Montrose Holdings Ltd. 2016 Bufab's best year to date.

Fourth quarter of 2016

• Net sales rose by 14 percent to SEK 699 million (612). Organic growth was 4 percent
• Order intake was significantly higher than net sales
• Operating profit rose to SEK 53 million (38) and the operating margin rose to 7.6 percent (6.2)
• Earnings per share declined to SEK 0.22 (0.49), because of an item affecting comparability for tax. Adjusted earnings per share rose to SEK 0.85 (0.49)

Full-year 2016

• Net sales rose by 16 percent to SEK 2,847 million (2,458) Organic growth was 4 percent
• Order intake was higher than net sales
• Operating profit rose to SEK 272 million (197) and the operating margin to 9.5 percent (8.0)
• Earnings per share rose to SEK 4.29 (3.27) and adjusted earnings per share to SEK 4.92 (3.27)
• Net sales, operating profit and profit after tax were all the highest on record for Bufab
• The Board of Directors proposes raising the dividend for 2016 to SEK 2.00 (1.70) per share

		Quarter 4			Jan-Dec	Δ
SEK millions	2016	2015	%	2016	2015	%
Order intake	744	618	20	2,887	2,463	17
Net sales	699	612	14	2,847	2,458	16
Gross profit	205	167	23	828	677	22
Gross margin, %	29.4	27.4		29.1	27.5
Operating expenses	-152	-129	18	-556	-480	16
Operating profit	53	38	39	272	197	38
Operating margin, %	7.6	6.2		9.5	8.0
Profit after tax	8	19	-55	163	125	31
Adjusted profit after tax	32	19	74	187	125	50
Earnings per share, SEK	0.22	0.49	-55	4.29	3.27	31
Adjusted earnings per share, SEK	0.85	0.49	74	4.92	3.27	50

THE GROUP IN BRIEF (FOR DEFINITIONS, SEE PAGE 18)

Operating profit, SEK

OPERATING MARGIN

CEO'S OVERVIEW

During the fourth quarter, net sales rose by 14 percent. The increase was partly due to organic growth in most markets and partly to a good contribution from our acquisitions, which all performed well.

As previously in the year, we saw a substantially stronger gross margin compared with the preceding year, primarily thanks to purchasing savings. On the other hand, our operating expenses were high during the quarter, in part owing to non-recurring acquisition-related expenses of SEK 6 million. Of these, SEK 3 million referred to an increased additional purchase price for one of our acquisitions, which has developed far better than expected. Despite these expenses, we achieved a considerable improvement of operating margin, and operating profit rose by 39 percent.

Both Sweden and International improved their net sales and operating profit. The strong development in Sweden was particularly gratifying. The segment achieved its best result for three years despite a weak SEK and moderate growth in the industry. Operating profit in the segment rose by 58 percent. Segment International also developed in the right direction, but was burdened in the quarter by slightly high operating expenses.

All in all, we are satisfied with development during the fourth quarter and for 2016 as a whole. A robust increase in net sales, operating profit, net profit and cash flow meant Bufab reported its best earnings ever. This development is no accident, but the result of purposeful work in line with the growth strategy we established in 2012.

Our long-term efforts to develop the competence and working methods in our sales organisation have resulted in increased market shares and thereby growth, despite unimpressive industry demand. We have successfully compensated for weak European currencies and a strong USD through higher prices and through systematisation and professionalisation of purchasing procedures. In this way, we have significantly strengthened our gross margin during

the year. These efforts have also helped to lower tied-up working capital and thus strengthened cash flow.

The acquisition of Montrose Holdings Ltd in the UK in December is our fourth acquisition in two years and shows that our acquisition strategy is continuing to generate results. The acquired companies are developing well, work well with the other subsidiaries and made a strong contribution to Bufab's earnings trend and cash flow during the year. We are continuously evaluating additional acquisition opportunities. As a result of a healthy cash flow in 2016 and an increased credit line, we have the financial capacity for more acquisitions.

We have worked intensively with developing and implementing "Bufab Best Practice": working methods, processes and systems for sales, sourcing, quality and logistics. The main aim of this work is to improve growth, efficiency and sustainability, as well as to offer a better development for recently acquired companies. In parallel, we are rolling out the Group's new ITsystem, which is now fully implemented at the majority of our subsidiaries. These initiatives are supported by training courses at the Bufab Academy.

We can thus look back on a successful 2016. Going into 2017, we see challenges in the prevailing exchange rates as well as a trend towards rising commodity prices. On the other hand, we hope to continue to increase our market share. We also witnessed a healthy order intake during the fourth quarter, which bodes well for the beginning of 2017.

Against this background, we aim to continue in the same direction and remain confident that we can achieve a favourable development also in the future.

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 24 countries. The head office is located in Värnamo, Sweden, and Bufab has about 1,000 employees. Bufab's net sales for the past 12 months amounted to SEK 2.9 billion and the operating margin was 10 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 amounted to SEK 744 million (618) and was significantly higher than net sales.

Net sales rose by 14 percent to SEK 699 million (612). The Group's organic growth was +4 percent, comprising +4 percent for segment Sweden and +3 percent for segment International.

The underlying demand is considered unchanged, and the market share as higher than in the yearearlier period.

Gross margin strengthened during the quarter, year-on-year, due to a consistent effort to improve purchasing, a positive business mix and higher gross margins in the acquired companies.

Operating profit rose to SEK 53 million (38), equal to an operating margin of 7.6 percent (6.2). The operating margin increased as a result of a higher gross margin, but was negatively affected by higher operating expenses. These were, in turn, a result of slightly high costs in the segment International, primarily for strengthening the sales organisation, and of non-recurring acquisitionrelated expenses of SEK 6 million in segment Other. About half of the latter cost is due to a revaluation of the additional purchase price for an acquisition that has performed significantly better than expected.

Exchange-rate fluctuations impacted operating profit negatively by SEK 2 million, volumes positively by SEK 6 million, price/cost mix and other factors positively by SEK 3 million and acquisitions positively by SEK 8 million.

JANUARY – DECEMBER

Order intake was SEK 2,887 million (2,463), which was higher than net sales.

Net sales rose by 16 percent to SEK 2,847 million (2,458). The Group's organic growth was +4 percent, +1 percent for segment Sweden and +5 percent for segment International.

Underlying demand is considered unchanged, and the market share as higher than in the year-earlier period.

Gross margin strengthened during the year, primarily due to purchasing cost savings, higher customer prices and also to higher gross margins in the acquired companies.

Operating profit rose to SEK 272 million (197), equal to an operating margin of 9.5 percent (8.0).

Exchange-rate fluctuations had a negative impact of SEK 11 million on operating profit, volume had a positive impact of SEK 25 million, the price/cost mix and other factors a positive impact of SEK 13 million and acquisitions a positive impact of SEK 48 million.

FINANCIAL ITEMS AND TAX

The Group's net financial items were SEK -8 million (-9) for the fourth quarter. During the quarter, exchange-rate differences had a negative impact of SEK -1 million (-3) on net financial items. For the full year, net financial items amounted to SEK -21 million (-26) and exchange-rate differences had a positive effect of SEK 5 million (-5).

The Group's profit after financial items was SEK 45 million (29) for the fourth quarter and SEK 251 (171) for the full year.

Tax expense was SEK -37 million (-10) for the fourth quarter, and SEK -88 million (-46) for the full year. The high tax expense in the fourth quarter is attributable to the additional tax of SEK 24 million in Bufab AB (publ) for disallowed deductions for certain interest expenses from previous financial years. Refer also to Note 1 in the Consolidated Income Statement.

CASH FLOW, WORKING CAPITAL AND FINANCIAL POSITION

		Quarter 4	Jan-Dec
SEK millions	2016	2015	2016	2015
Operating profit	53	38	272	197
Depreciation/amortisation and impairment	11	9	43	35
Other non-cash items	1	0	1	-1
Changes in working capital	-22	19	-18	-5
Cash flow from operations	43	66	298	226
Investments excluding acquisitions	-15	-14	-31	-32
Operating cash flow	28	52	267	194

Operating cash flow amounted to SEK 28 million (52) for the period. The year-on-year decrease resulted from a rise in working capital in 2016 compared with a reduction in 2015. The increase in working capital in 2016 is attributable to a higher inventory level. Operating cash flow for the full year was SEK 267 million (194).

Average working capital in relation to net sales during the past 12 months was 36.5 percent (36.3). The ratio was negatively impacted by the acquisition of Apex Stainless at the end of 2015, by an increase in tied-up inventory and higher operating receivables but positively affected by increased operating liabilities. Excluding this acquisition, average working capital in relation to net sales during the past 12 months would have amounted to 34.0 percent (35.5).

On 31 December 2016, the Group's net debt totalled SEK 839 million (884). Net debt decreased, despite the two acquisitions carried out during the year. On 31 December 2016, the debt/equity ratio was 65 percent (75).

In December 2016, Bufab negotiated a new financing agreement with the company's principal lender. The agreement runs until December 2019 and concerns a SEK 1,300 million (1,035) credit facility.

Segment Sweden

Fourth quarter

Order intake amounted to SEK 256 million (224) and significantly exceeded net sales.

Net sales rose by 7 percent to SEK 233 million (218). Organic growth was +4 percent. Underlying demand during the period is estimated to be slightly improved. As in previous quarters, growth was burdened by customer relocation of production from Sweden to other countries, primarily Eastern Europe, corresponding to nearly 1 percent of the segment's sales, which benefits segment International's sales. The market share in Sweden is estimated to be slightly better.

Gross margin rose to 32.0 percent (28.2). The improvement is due to a positive business mix and to purchasing cost savings.

Operating profit was SEK 30 million (19), equal to an operating margin of 12.9 percent (8.7). Exchange-rate fluctuations affected operating profit negatively by SEK 3 million, volumes positively by SEK 3 million, price/cost mix and other factors positively by SEK 10 million and acquisitions positively by SEK 1 million.

January–December

Order intake was SEK 980 million (932) and exceeded net sales.

Net sales increased by 3 percent to SEK 968 million (937). Organic growth was +1 percent. Growth in the year was burdened by slightly more than 1 percentage point by customer relocation of production to primarily Eastern Europe. Underlying demand during the period is estimated to be unchanged and the market share slightly improved.

Gross margin rose to 30.5 percent (28.7). The improvement is primarily due to purchasing cost savings but also to higher customer prices.

Operating profit was SEK 130 million (108), equal to an operating margin of 13.4 percent (11.5). Exchange-rate fluctuations had a negative impact of SEK 8 million on operating profit, volumes a positive impact of SEK 4 million, price/cost mix and other factors a positive impact of SEK 23 million and acquisitions a positive impact of SEK 3 million.

		Quarter 4	Δ	Jan-Dec	Δ
SEK millions	2016	2015	%	2016	2015	%
Order intake*	256	224	14	980	932	5
Net sales*	233	218	7	968	937	3
Gross profit	75	62	21	295	269	10
Gross margin, %	32.0	28.3		30.5	28.7
Operating expenses	-45	-43	4	-165	-161	3
Operating profit	30	19	58	130	108	21
Operating margin, %	12.9	8.7		13.4	11.5

*Pertains to net sales and order intake from external customers

Segment International

Order intake was SEK 488 million (394) and significantly exceeded net sales.

Net sales rose by 18 percent to SEK 466 million (393). Organic growth was +3 percent, primarily due to higher market shares in most markets. Customers' production relocations from Sweden to mostly Eastern Europe also had a positive impact of nearly 1 percentage point on the segment's sales. Underlying demand is deemed to be slightly weaker the year-on-year.

Gross margin rose to 28.8 percent (27.5). Just over half of the improvement is attributable to purchasing cost savings and almost half to the acquired company's higher gross margin.

Operating profit rose to SEK 37 million (30), equal to an operating margin of 8.0 percent (7.6). The operating margin during the quarter was burdened by high operating expenses. Exchange-rate fluctuations had an impact of SEK 0 million on operating profit, volumes a positive impact of SEK 3 million, price/cost mix and other factors a negative impact of SEK 3 million and acquisitions a positive impact of SEK 7 million.

Fourth quarter January - December

Order intake was SEK 1,907 million (1,531) and exceeded net sales.

Net sales rose by 24 percent to SEK 1,880 million (1,521). Organic growth was +5 percent, due primarily to higher market shares.

Gross margin rose to 29.1 percent (27.6). The acquired companies have a higher gross margin, which accounted for almost half of the increase. The remaining improvement is attributable to purchasing cost savings.

Operating profit rose to SEK 175 million (119), equal to an operating margin of 9.3 percent (7.8). Exchange-rate fluctuations had a negative impact of SEK 6 million on operating profit, volumes a positive impact of SEK 21 million, the price/cost mix and other factors a negative impact of SEK 3 million and acquisitions a positive impact of SEK 44 million.

	Quarter 4		Δ	Jan-Dec		Δ
SEK millions	2016	2015	%	2016	2015	%
Order intake*	488	394	24	1,907	1,531	25
Net sales*	466	393	18	1,880	1,521	24
Gross profit	134	108	24	547	419	31
Gross margin, %	28.8	27.5		29.1	27.6
Operating expenses	-97	-78	24	-372	-300	24
Operating profit	37	30	24	175	119	47
Operating margin, %	8.0	7.6		9.3	7.8

*Pertains to net sales and order intake from external customers

Consolidated Income Statement

		Quarter 4	Jan-Dec
SEK millions	2016	2015	2016	2015
Net sales	699	612	2,847	2,458
Cost of goods sold	-494	-445	-2,019	-1,781
Gross profit	205	167	828	677
Distribution costs	-104	-88	-398	-341
Administrative expenses	-44	-40	-156	-138
Other operating income	10	8	32	35
Other operating expenses	-14	-9	-34	-36
Operating profit	53	38	272	197
Loss from financial items
Interest income and similar income items	1	0	7	1
Interest expenses and similar expenses	-9	-9	-28	-27
Profit after financial items	45	29	251	171
Tax on net profit for the period Note 1	-37	-10	-88	-46
Profit after tax	8	19	163	125

Note 1 Items affecting comparability in the period		Quarter 4		Jan-Dec
SEK millions	2016	2015	2016	2015
Additional tax for previous financial years	-24	-	-24	-
Total items affecting comparability with effect on profit after tax	-24	0	-24	0

Statement of Comprehensive Income

		Quarter 4	Jan-Dec
SEK millions	2016	2015	2016	2015
Profit after tax	8	19	163	125
Other comprehensive income
Items that cannot be reclassified to profit or loss
Actuarial gains and losses, net after tax	-2	-	-2	-
Items that may be reclassified subsequently to profit or loss
Translation differences / Currency hedging net after tax	-4	-26	18	-32
Other comprehensive income after tax	-6	-26	16	-32
Total comprehensive income	2	-7	179	93
Total comprehensive income attributable to:
Parent Company shareholders	2	-7	179	93

Earnings per share

		Quarter 4	Jan-Dec
SEK	2016	2015	2016	2015
Earnings per share	0.22	0.49	4.29	3.27
Weighted number of shares outstanding, thousands	38,110.5	38,110.5	38,110.5	38,110.5
Diluted earnings per share, SEK	0.22	0.49	4.29	3.27
Weighted number of shares outstanding after dilution, thousands	38,110.5	38,110.5	38,110.5	38,110.5
Adjusted earnings per share	0.85	0.49	4.92	3.27

Consolidated Balance Sheet

SEK millions	31 Dec 16	31 Dec 15
ASSETS
Non-current assets
Intangible assets	1,037	955
Property, plant and equipment	132	138
Financial assets	22	26
Total non-current assets	1,191	1,119
Current assets
Inventories	920	856
Current receivables	621	571
Cash and cash equivalents	122	107
Total current assets	1,663	1,534
Total assets	2,854	2,653
EQUITY AND LIABILITIES
Equity	1,297	1,183
Non-current liabilities
Non-current liabilities, interest-bearing	884	840
Non-current liabilities, non-interest bearing	111	72
Total non-current liabilities	995	912
Current liabilities
Current liabilities, interest-bearing	76	151
Current liabilities, non-interest-bearing	486	407
Total current liabilities	562	558
Total equity and liabilities	2,854	2,653

Consolidated Statement of Changes in Equity

SEK millions	31 Dec 16	31 Dec 15
Equity at beginning of year	1,183	1,147
Comprehensive income
Profit after tax	163	125
Other comprehensive income
Items that will not be reclassified in profit or loss
Actuarial loss / profit on pension obligations, net after tax	-2	-
Items that may be reclassified in profit or loss
Translation differences / Currency hedging net after tax	18	-32
Total comprehensive income	179	93
Transactions with shareholders
Dividend to shareholders	-65	-57
Total shareholder transactions	-65	-57
Equity at end of period	1,297	1,183

Consolidated Cash Flow Statement

	Quarter 4		Jan-Dec
SEK millions	2016	2015	2016	2015
Operating activities
Profit before financial items	53	38	272	197
Depreciation/amortisation and impairment	11	9	43	35
Interest and other finance income	0	0	0	0
Interest and other finance expenses	-8	-5	-27	-23
Other non-cash items	1	0	1	-1
Income tax paid	-32	-7	-74	-38
Cash flow from operating activities before changes in working capital	25	35	215	170
Changes in working capital
Increase (-)/decrease (+) in inventories	-38	-16	-35	-3
Increase (-)/decrease (+) in operating receivables	20	41	-32	-3
Increase (+)/decrease (-) in operating liabilities	-4	-6	49	1
Cash flow from operating activities	3	54	197	165
Investing activities
Acquisition of property, plant and equipment	-14	-10	-29	-25
Company acquisition *	-41	-307	-69	-393
Acquisition of intangible assets	-1	-4	-2	-7
Cash flow from investing activities	-56	-321	-100	-425
Financing activities
Dividend paid	-	-	-65	-57
Increase (+)/decrease (-) in borrowings	45	274	-21	300
Cash flow from financing activities	45	274	-86	243
Cash flow for the period	-8	7	11	-17
Cash and cash equivalents at beginning of period	128	103	107	128
Translation differences	2	-3	4	-4
Cash and cash equivalents at end of period	122	107	122	107

*See page 16-17 for more information.

The Group's Segment Reporting

			2015	2016						Accumulated
Sweden SEK millions	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	2015	2016
Net sales	251	262	206	218	244	272	219	233	937	968
Gross profit	73	75	60	62	72	82	66	75	269	295
Gross margin, %	28.9	28.5	29.2	28.3	29.6	30.3	30.1	32.0	28.7	30.5
Operating expenses	-43	-40	-36	-43	-40	-42	-38	-45	-161	-165
Operating profit	30	35	24	19	32	40	28	30	108	130
Operating margin, %	11.9	13.2	11.8	8.7	13.2	14.6	12.6	12.9	11.5	13.4

	2015				2016						Accumulated
International SEK millions	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4		2015	2016
Net sales	358	399	371	393	474	491	449	466	1,521		1,880
Gross profit	100	109	102	108	138	144	131	134		419	547
Gross margin, %	28.0	27.4	27.5	27.5	29.1	29.4	29.3	28.8		27.6	29.1
Operating expenses	-73	-78	-70	-78	-91	-94	-90	-97		-300	-372
Operating profit	27	31	32	30	47	50	41	37		119	175
Operating margin, %	7.4	7.8	8.5	7.6	9.8	10.2	9.1	8.0		7.8	9.3

	2015					2016		Accumulated
Other* SEK millions	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	2015	2016
Net sales	-	-	-	-	-	-	-		-	-
Gross loss	-3	-3	-3	-3	-4	-4	-3	-4	-11	-15
Operating expenses	-5	-5	-1	-8	-4	-4	0	-10	-19	-18
Operating loss	-8	-8	-4	-11	-8	-8	-3	-14	-30	-33
Operating margin, %	-	-	-	-	-	-	-	-	-	-

*Other includes unallocated costs

of a Group-wide nature

			2015				2016			Accumulated
Group SEK millions	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	2015	2016
Net sales	609	661	577	612	718	762	668	699	2,458	2,847
Gross profit	170	181	159	167	206	223	194	205	677	828
Gross margin, %	28.0	27.4	27.5	27.4	28.6	29.3	29.0	29.4	27.5	29.1
Operating expenses	-121	-123	-107	-129	-135	-141	-128	-152	-480	-556
Operating profit	49	58	52	38	71	82	66	53	197	272
Operating margin, %	8.0	8.8	9.0	6.2	9.9	10.8	9.8	7.6	8.0	9.5

Consolidated Key Figures

	Quarter 4		Δ	Jan-Dec		Δ
	2016	2015	%	2016	2015	%
Order intake, SEK millions	744	618	20	2,887	2,463	17
Net sales, SEK millions	699	612	14	2,847	2,458	16
Gross profit, SEK millions	205	167	23	828	677	22
EBITDA, SEK millions	64	47	36	315	232	36
Operating profit, SEK millions	53	38	39	272	197	38
Profit after tax, SEK millions	8	19	-55	163	125	31
Adjusted profit after tax, SEK millions	32	19	74	187	125	50
Gross margin, %	29.4	27.4		29.1	27.5
Operating margin, %	7.6	6.2		9.5	8.0
Net margin, %	1.2	3.1		5.7	5.1
Adjusted net margin, %	4.7	3.1		6.6	5.1
Net debt, SEK millions	839	884	-5
Debt/equity ratio, %	65	75
Net debt/ EBITDA*, multiple	2.7	3.8
Working capital, SEK millions	1,055	1,020	3
Average working capital, SEK millions	1,038	921	12
Average working capital in relation to net sales, %	36.5	36.3
Equity/assets ratio, %	45	45
Operating cash flow, SEK millions	28	52	-46	267	194	38
Earnings per share, SEK	0.22	0.49	-55	4.29	3.27	31
Adjusted earnings per share, SEK	0.85	0.49	74	4.92	3.27	50

*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	2016	2015	2016	2015
Administrative expenses	-2	-2	-11	-10
Other operating income	1	0	5	3
Operating loss	-1	-2	-6	-7
Loss from financial items
Interest expenses and similar expenses	-1	0	-1	0
Loss after financial items	-2	-2	-7	-7
Appropriations	102	66	102	66
Tax on net loss for the period	-46	-14	-45	-13
Profit after tax	54	50	50	46
Other comprehensive income	-	-	-	-
Total comprehensive income	54	50	50	46

Parent Company Balance Sheet

SEK millions	31 Dec 16	31 Dec 15
ASSETS
Non-current assets
Financial assets
Participations in Group companies	845	845
Total non-current assets	845	845
Current assets
Receivables from Group companies	183	178
Other current receivables	4	11
Cash and cash equivalents	1	0
Total current assets	188	189
Total assets	1,033	1,034
EQUITY AND LIABILITIES
Equity	913	927
Untaxed reserves	109	100
Non-current interest-bearing liabilities
Other non-current liabilities	-	-
Total non-current liabilities	0	0
Current non-interest-bearing liabilities
Liabilities to Group companies	-	-
Other current liabilities	11	7
Total current liabilities	11	7
Total equity and liabilities	1,033	1,034

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 2015 Annual Report. The 2015 Annual Report is available at www.bufab.com

RISKS AND RISK MANAGEMENT

Exposure to risk is a natural part of business activity, as 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 2015 Annual Report.

SEASONAL VARIATIONS

Bufab has no material seasonal variation, but sales throughout the year vary depending on the number of customer production days in each quarter.

RELATED-PARTY TRANSACTIONS

There were no related-party transactions during the period.

EMPLOYEES

The number of full-time employees in the Group as of 31 December 2016 was 1,020 (935), 57 of whom stem from the acquisition of Magnetfabriken AB and Montrose Holdings Ltd.

ORGANISATION

In January 2017, Bufab's Thomas Ekström resigned as CFO. He will remain in his position until 31 July 2017. Work has begun to recruit a replacement.

ACQUISITIONS

The following acquisitions were made during 2015- 2016.

	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

*Estimated annual net sales at the time of acquisition

Liabilities for conditional, not yet paid purchase considerations have been revaluated as a result of the positive performance of acquired companies and incurred an expense in the fourth quarter 2016 of SEK 3 million. This expense is recognised under other operating expenses in segment Other.

On 3 March 2016, Bufab AB (publ) acquired 100 percent of the shares in Magnetfabriken AB. Magnetfabriken AB was founded in 1992 and has since become one of the leading suppliers of magnets and magnet systems in the Nordic region. The purchase consideration was SEK 36 million, of which SEK 27 million has been paid unconditionally and the remaining SEK 9 million is subject to conditions. Of the conditional portion of SEK 9 million, SEK 5 million was paid in the third quarter. The conditional portion of SEK 9 million comprises about 57 percent of the maximum payment outcome. About half is dependent on the acquired company's earnings trend through April 2016 and approximately half to future earnings thereafter.

On 5 December 2016, Bufab AB (publ) acquired 100 percent of the shares in Montrose Holdings Ltd. Montrose Holdings Ltd is a British company that supplies C-class components to industrial customers, primarily based in the UK. The purchase consideration was SEK 89 million, of which SEK 59 million has been paid unconditionally and the remaining SEK 30 million is subject to conditions. The conditional portion of SEK 30 million comprises about 72 percent of the maximum payment outcome. It is primarily dependent on future earnings, with a smaller part dependent on improvements in the company's tied-up working capital.

Companies acquired in 2016 have added SEK 26 million to the Group's accumulated net sales since transfer. The net impact, after acquisition expenses, on accumulated operating profit was SEK 1 million and the effect on profit after tax was SEK 0 million. Acquisition costs for both these acquisitions amounted to SEK 4 million and are recognised in the item administrative expenses in segment Other. These two acquisitions would, after acquisition costs, have positively impacted the Group's net sales by an estimated SEK 104 million, operating profit by approximately SEK 8 million and profit after tax for the period by about SEK 5 million had they been implemented on 1 January 2016. The amounts of the assets and liabilities included in the acquisitions according to the acquisition analyses were as follows:

Magnetfabriken AB	Carrying amount on acquisition date	Adjustment to fair value	Fair value
Intangible assets		8	8
Other non-current assets	0		0
Inventories	3		3
Other current assets	2		2
Cash and cash equivalents	4		4
Deferred tax liabilities		-2	-2
Other liabilities	-2		-2
Acquired net assets	7	6	13
Goodwill			23
Purchase consideration*			36
Less: cash and cash equivalents in acquired operations			-4
Less: purchase consideration yet to be paid			-4
Effect on the Group's cash and cash equivalents			28

* The consideration is stated excluding acquisition expenses

Montrose Holdings Ltd	Carrying amount on acquisition date	Adjustment to fair value	Fair value
Intangible assets		10	10
Other non-current assets	1		1
Inventories	15		15
Other current assets	17		17
Cash and cash equivalents	19		19
Deferred tax liabilities	0	-2	-2
Other liabilities	-17		-17
Acquired net assets	35	8	43
Goodwill			46
Purchase consideration*			89
Less: cash and cash equivalents in acquired operations			-19
Less: purchase consideration yet to be paid			-30
Effect on the Group's cash and cash equivalents			40

* The consideration is stated excluding acquisition expenses

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

CONTINGENT LIABILITIES

In a judgment by the Court of Appeal on 8 November 2016, the Tax Agency's assessment notice was upheld and accordingly Bufab AB (publ) has been denied deductions for certain interest expenses. The tax effect of these deductions was SEK 24 million and has been previously reported as a contingent liability. Following the judgement, it has been reclassified and recognised as a tax expense in the fourth quarter 2016. Refer also to page 3 and page 7 in this Year-end report.

Otherwise, there were no significant changes to the company's contingent liabilities during the interim period.

2017 ANNUAL GENERAL MEETING

The Annual General Meeting of Bufab AB (publ) will be held in Värnamo, on 4 May 2017 at 2:00 p.m.

Shareholders wishing to have a matter dealt with at the Meeting may send their proposal to the Board via styrelsen@bufab.com not later than 16 March 2017.

Notice of the 2017 AGM will be available at Bufab's website as of 6 April 2017 at www.bufab.com.

The Board of Directors proposes a dividend of SEK 2.00 (1.70) per share for 2016, corresponding to a total dividend of SEK 76 million (65). The proposed record date is 8 May 2017 and the expected payment date for dividends is 11 May 2017. It is proposed that the share be traded without dividend entitlement as of 5 May 2017.

AUDIT REVIEW REPORT

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

FINANCIAL REPORTING DATES

Annual Report

Week beginning March 27

Interim report for the first quarter of 2017

27 April 2017

Interim report for the second quarter of 2017 (semi-annual report)

19 July 2017

Interim report for the third quarter of 2017 26 October 2017

Year-end report 2017 9 February 2018

Värnamo, 21 February 2017

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

Adjusted profit after tax Profit after tax adjusted for items affecting comparability

Operating margin, % Operating profit as a percentage of net sales for the period

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

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 recognised also 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
2016, percentage points	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

		Quarter 4			Jan-Dec
2015, percentage points	Group	Sweden	International	Group	Sweden	International
Organic growth	4	-5	10	3	-4	9
Currency translation effects	0	0	0	2	0	4
Acquisitions	11	0	19	7	0	12
Recognised growth	15	-5	29	12	-4	25

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
	2016	2015	2016	2015
EBITDA	64	47	315	232
Other non-cash items	1	0	1	-1
Changes in inventory	-38	-16	-35	-3
Changes in operating receivables	20	41	-32	-3
Changes in operating liabilities	-4	-6	49	1
Cash flow from operations	43	66	298	226
Investments excluding acquisitions	-15	-14	-31	-32
Operating cash flow	28	52	267	194

EBITDA

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

	Quarter 4			Jan-Dec
	2016	2015	2016	2015
Operating profit	53	38	272	197
Depreciation/amortisation and impairment	11	9	43	35
EBITDA	64	47	315	232

Working capital

Because Bufab is a trading company, operating 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
	2016	2015
Current assets	1,663	1,534
Less: cash and cash equivalents	-122	-107
Less: current non-interest-bearing liabilities	-486	-407
Working capital on balance-sheet date	1,055	1,020

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
	2016	2015
Non-current interest-bearing liabilities	884	840
Current interest-bearing liabilities	76	151
Less: cash and cash equivalents	-122	-107
Less: Other interest-bearing receivables	0	0
Net debt on balance-sheet date	839	884

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
	2016	2015	2016	2015
Net sales (A)	699	612	2,847	2,458
Profit after tax (B)	8	19	163	125
Items affecting comparability	24	-	24	-
Adjusted profit after tax (C)	32	19	187	125
Net margin, % (B/A)	1.2	3.1	5.7	5.1
Adjusted net margin, % (C/A)	4.7	3.1	6.6	5.1

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
	2016	2015	2016	2015
Weighted number of shares outstanding, thousands (A)	38,110.5	38,110.5	38,110.5	38,110.5
Profit after tax, SEK millions (B)	8	19	163	125
Adjusted profit after tax, SEK millions (C)	32	19	187	125
Earnings per share, SEK (B/A)	0.22	0.49	4.29	3.27
Adjusted earnings per share, SEK (C/A)	0.85	0.49	4.92	3.27

CONFERENCE CALL

A conference call will be held on 21 February 2017 at 10:00 a.m. CET. Jörgen Rosengren, President and CEO, and Thomas Ekström, 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 555566, UK: 08444933800, Sweden: 0850336434, or the US: 16315107498. Conference code: 51490510.

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

Thomas Ekström CFO and IR Director +46 370 69 94 01 thomas.ekstrom@bufab.com

This information is such that Bufab AB (publ) is obliged to disclose in accordance with the EU's Market Abuse Regulation. The information was submitted for publication by the aforementioned contacts on 21 February 2017 at 8:00 a.m. CET.

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