BE GROUP

Annual Report

2019

The year in brief 1
Message from the President 2
About BE Group 3
Vision, business idea and values 5
Financial targets 6
History 7
Business Area Sweden & Poland 8
Business Area Finland & Baltics 10
Market 12
The share 13
Board of Director’s report 15
Sustainability report 22
Financial statements 27
- Consolidated 27
- Parent Company 32
- Accounting principles 37
- Notes 45
Appropriation of earnings 73
Auditor’s report 74
Group Management 77
Board of directors and auditors 78
Corporate governance report 80
Alternative Performance Measures 85
Multi-year summary 86
Financial definitions 87
Annual General meeting 88
Addresses 89

Pages 15-73 comprise the formal Annual Report and have been reviewed by the Company’s Auditors.

BE Group is a trading and service company in steel, stainless steel and aluminium. Customers mainly operate in the manufacturing and construction industries in Sweden, Finland and the Baltic States, where BE Group is one of the market’s leading actors.

THE YEAR IN BRIEF

Net sales decreased by 9% to SEK 4,359 M (4,803)
The underlying operating result amounted to SEK 94 M (117)
The operating result amounted to SEK 88 M (132)
Result after tax amounted to SEK 50 M (80)
Cash flow from operating activities increased to SEK 200 M (86), of which SEK 78 M is an effect of IFRS 16
Earnings per share amounted to SEK 3.87 (6.13)
Peter Andersson started as CEO and President in October
A new three-year credit agreement was signed with an option for extension
Decision was taken regarding investments in production equipment in Norrköping, totalling approximately SEK 60 M, and an extension of existing rental agreement
The Board of Directors proposes that no dividend (1.75) will be paid for the financial year of 2019

NET SALES

UNDERLYING OPERATING RESULT 1)

1) Operating result (EBIT) before items affecting comparability (see Note 7 and 8) and adjusted for inventory gains and losses (deductions for gains and additions for losses).

Key data	2019	2018	Change
Tonnage, thousands of tonnes	340	377	-10%
Net sales, SEK M	4,359	4,803	-9%
Operating result, SEK M 1)	88	132	-33%
Operating margin, %	2.0	2.8	-0.8%
Underlying operating result 2)	94	117	-20%
Result after tax, SEK M	50	80	-38%
Result per share, SEK	3.87	6.13	-37%
Return on capital employed excl. IFRS 16. %	5.6	9.4	-3.8%
Net debt excl. IFRS 16. SEK M	373	440	-15%
Net debt/equity ratio excl. IFRS 16. % 2)	40	49	-9%
Cash flow from operating activities, SEK M	200	86	133%
Average number of employees	652	668	-2%

1) The operating result 2018 was impacted by items affecting comparability of SEK -12 M (-52), of which, SEK 4 M was attributable to the release of part of the provision related to maintenance of the warehouse in Malmö and SEK -16 M was attributable to the exit from the operations in Prerov, Czech Republic.
2) Part of BE Group’s alternative performance measures which you can read more about in Alternative performance measures and Financial definitions.

The comparative figures for 2018 are prepared according to previous accounting principles regarding leasing (IAS 17).

Sales by business solution, SEK M	2019	2018	%
Inventory sales	1,856	2,047	-9%
Production service sales	1,956	2,151	-9%
Direct sales	547	605	-10%
Total	4,359	4,803	-9%
Sales by product area, SEK M	2019	2018	%
---	---	---	---
Long steel products	1,572	1,683	-7%
Flat steel products	1,727	1,869	-8%
Stainless steel	752	872	-14%
Aluminium	207	229	-10%
Other	101	150	-33%
Total	4,359	4,803	-9%

"The work of developing BE Group into a long-term profitable and successful company is continuing in a more challenging market"

OUR IMPROVEMENT WORK CONTINUES

When we sum up 2019, we note that the work of developing BE Group into a long-term profitable and successful company is continuing in a more challenging market. We have focused on our main markets Sweden and Finland, which has given us a possibility to partly fend off the slowdown in the market that began after the first quarter.

When we develop the company, it is important to preserve the customer focus that has always been a part of BE Group's backbone. During the year, we have continued the work of improving the offering to our customer segments and streamlining our processes. Some particularly important areas in this process continue to be our purchasing, inventory management and digitalization. In the latter part of the year, we also added development of our sales work.

The work to improve the units that are the furthest from our financial targets was intensified during the year and will continue going forward.

Strong cash flow and continued focus on efficiency improvements and investments

The financial downturn that began after the first quarter continued and was amplified in the second half of the year. This means that focus on improved profitability and taking market shares continues to be prioritized. The previously communicated investments in Norrköping, amounting to around SEK 60 M in total, are proceeding according to plan and will strengthen the Group's competitiveness.

The weaker operating result was compensated by a decrease in working capital, which resulted in a strong cash flow during the year. At the same time, continuous capacity adjustments together with effects of previously implemented structural measures have meant that the number of employees continues to drop.

Challenging year for both business area Sweden & Poland and Finland & Baltics

The main explanation for the decline was an economic slowdown in the manufacturing industry. The decline in Sweden was somewhat larger than in Finland and is due to greater dependence on the automotive industry and the manufacture of heavy construction equipment. In Finland, the general decline was also somewhat compensated by a strong shipbuilding industry. Our market shares have marginally decreased in Sweden and marginally increased in Finland, which in total provides unchanged market shares.

Sales for business area Sweden & Poland decreased by 11 percent during the year and the underlying operating result amounted to SEK 79 M compared to SEK 104 M last year.

Sales for business area Finland & Baltics decreased by 6 percent during the year and the underlying operating result amounted to SEK 65 M compared with SEK 68 M in the previous year.

Organization

BE Group's organization continues to be divided into two business areas, Business Area Sweden & Poland and Business Area Finland & Baltics. The former split into business units Production and Distribution was discontinued at year-end and the respective companies are operated as one business unit from 2020. The purpose of this change is to create an organization where every company is developed based on its own unique market position and to reduce the number management layers between our customers and the Group Management Team. With this decentralized organization, our subsidiaries are provided the possibility of acting more independently and decisions are made as close to the business as possible. The companies can work just like entrepreneurs, with a mandate to make the most effective decisions with a focus on their particular customers, businesses and profitability.

With fewer decision-making levels, the Group Management Team can be kept to a few people, who utilize insights, synergies and economies of scale. The final result will be an efficient company where both subsidiaries and Group can more quickly adapt to market changes, at the same time as the relationship with our customers will be further strengthened.

Focus going forward

The prevailing uncertainty in the world regarding what consequences of the spread of Covid-19 (coronavirus) will result in is currently significant and it may strengthen the economic slowdown we have already seen. In light of this, the Board of Directors of BE Group has decided to withdraw the previously communicated proposal to the Annual General Meeting concerning dividend.

Looking forward, we see that our continued focus on cost control and determined improvement work will strengthen the Group. With focus on our customer, we are continuing on the road to our vision to be the most professional, respected and successful steel service company in our markets.

Lastly, I would like to express our gratitude to our customers who continue to give us their trust and to all of our employees who do excellent work. Without you, it would not be possible! Let's look forward to an exciting 2020 together.

Peter Andersson
President and CEO

ORGANIZATION

BE Group’s organization is divided into two Business areas: Business area Sweden & Poland and Business area Finland & Baltics. The former split into business units Production and Distribution were discontinued at the end of the year and the national organizations are, as from January 1 2020, operated as their own business units under each Business area.

Business area Sweden & Poland

The business area includes the Group's operations in Sweden consisting of the companies BE Group Sverige and Lecor Stålteknik (prefabricated steel constructions for building and industrial projects), as well as the Polish operation BE Group Poland. The operations consists of warehouse and production facilities in Malmö, Norrköping, Trebaczew (Poland) Kungälv (Lecor) and local sales offices at several locations in Sweden. BE Group Sverige also owns 50 percent of the company ArcelorMittal BE Group SSC AB, a steel service center where thin plates are cut and slit.

Business area Finland & Baltics

The business area includes the Group's operations in Finland and the three Baltic States. The operations in Finland consist of production and warehousing facilities in Lapua, Lahti and Turku and sales offices at several locations. The operations in the Baltics consists of warehousing and sales units in Tallinn, Riga and Kaunas.

CUSTOMERS

BE Group’s customer base is divided into two main segments: the construction industry and the manufacturing industry. By dividing the customers in different segments, the offering is more efficiently adjusted for the customers’ different needs and conditions.

Construction industry

The construction industry has four subsegments:

Steel structure suppliers with a need for beams, construction tubes, bars and heavy plates. The steel is often cut to length, drilled or painted.
Regional construction companies with a need for reinforcing products, steel for foundations and construction steel.
Nationwide building enterprises with a need for reinforcing products, steel for foundations and construction steel.
Building material chains, which consists of building material retailers and steel resellers, with a need for mainly reinforcement but also construction steel.

Manufacturing industry

In the manufacturing industry, there are three subsegments that all largely buy from BE Group's whole product range:

Subcontractors, subsuppliers, mechanic workshops and businesses with project-oriented service and maintenance to for example the process industry.
Local and regional steel resellers.
OEM customers (Original Equipment Manufacturer), industrial companies with manufacturing of products under their own brand.

BUSINESS SOLUTIONS

BE Group’s role is to compensate for the gap between steel producers' delivery capacity and steel consumers' needs.

In general, the individual steel producers provide a limited selection of products, often in larger order quantities and with relatively long lead times. However, many steel consumers seek a single coordinated supply of several different products in smaller quantities with short delivery times. Purchasing is then normally conducted via a steel service company, where BE Group is one of the leading producer-independent alternative in its markets.

BE Group's sales to customers take place in three different ways: Inventory sales, Production service sales and Direct sales. The Company also has an increased focus on developing new sales channels through digitalized processes and offerings such as web-based e-commerce, EDI and digital notifications.

Production service sales

Production service sales comprise customer solutions where BE Group provides everything from the purchasing of raw material to customized processing of the product and logistics optimized to the customer's operations.

BE Group refines the products through, for example, cutting, drilling, slitting, thermal cutting or surface treatment according to customer specifications. BE Group also has the ability to use the material in an efficient manner, which means that there is less scrap.

Inventory sales

Inventory sales mean that BE Group sells and distributes materials from its own warehouses and ensures the customer's material flow by the products being delivered in the quantities and at the times that suit the customer's needs. By stocking a broad product range, BE Group can offer the customers a high level of service at competitive prices. The key is in efficient inventory management and planning.

Direct sales

Direct sales mean that BE Group sells and delivers large volumes of materials to customers directly from the production of the steel and aluminium mills.

BE Group will find the right product with the right quality and the right price on behalf of the customer. The company can do this through its presence in key producer markets, an efficient purchasing organization and a size that provides negotiating power in relation to the producers.

PRODUCTS AND SERVICE

Products

BE Group’s product range comprises a large number of products divided into the following product categories: Long steel products, Flat steel products, Reinforcement steel, Engineering steel, Stainless steel and Aluminium. Visit www.begroup.com and each country’s website for a more detailed description of the products.

Production service

BE Group offers production service of steel, stainless steel and aluminium with production resources in cutting, drilling, slitting, thermal cutting, blasting and painting. The production service offering comprises various processes in which steel and other metals are processed to meet customers' specific requirements.

Advice and services

BE Group also offers material advice, logistics solutions and timesaving. IT services that include web-based e-commerce, EDI, digital notifications and electronic invoices.

VISION, BUSINESS IDEA AND VALUES

VISION

BE Group shall be the most professional, successful and respected steel service company in our markets.

BUSINESS IDEA

BE Group is an independent efficient distributor of steel, stainless steel, aluminium and value adding services to Nordic manufacturing and construction companies.

CORE VALUES

BE Group has a strong corporate culture that is based on sound and ethical business principles. These values address how we act towards one another as employees, as well as towards customers, suppliers and others with whom we come into contact.

Dynamic

Innovative
Action-oriented

In a fast-moving environment, we need to be dynamic and continuously question how we operate and do things. We need to be innovative and seek for new ways and possibilities with curiosity.

To make things happen, we need to carry out rapid testing and be disciplined in our implementation.

Transparent

Performance
Leadership

Being transparent and sharing is critical in order to be able to learn from each other, expand our knowledge and find areas to improve.

Transparency also includes having clear targets and an agreement on expectations and performance. We encourage clear communication and immediate feedback.

Sustainable

Environment
People
Profitability

The only way to be successful in the long-term is to be a sustainable company. This needs to be considered in every decision we make, both daily and strategically.

We need to minimize the impact that our business has on the environment. It is everyone's responsibility that we treat each other fairly and with respect.

Sustainable also includes being profitable. This is necessary in order to be able to invest in improved technology and secure our long-term operations.

FINANCIAL TARGETS AND OUTCOME

Earnings in BE Group shall be used to develop the business and generate returns for the owners. The Board of Directors of BE Group has therefore set three financial targets that should be achieved for earnings to be considered adequate. Over time, the goal completion can vary depending on various phases in the Company's development and the current business cycle.

Sales growth that exceeds the market growth

To measure growth in BE Group's markets, the market statistics that the company receives for the distribution markets in Sweden and Finland are used. By comparing tonnage growth year on year in this data, the growth in the market is estimated. BE Group's growth is measured in delivered tonnes in the Swedish, Finnish and Baltic markets. For Sweden, deliveries for the joint venture Arcelor-Mittal BE Group SSC AB are included. The target is to grow more than the market.

Outcome

The market is estimated to have decreased by -9.4 percent (0.9) compared to 2018. BE Group had a negative growth of -7.1 percent (2.1) during the year. It is primarily the flat products in the Swedish operations and long and flat products in the Finnish operations that contributed to BE Group's tonnage decreasing less than the market as a whole.

A profit margin of at least 5 percent

Profit margin is defined as the underlying operating margin (uEBIT%) in the past 12 months. The target level is set to at least 5 percent measured over a longer period of time. This corresponds to approximately SEK 218 M in underlying operating result (uEBIT) at current sales. The underlying operating result, i.e. the operating result excluding the impact of inventory gains or losses and items affecting comparability, is used to put focus on how the operating activities perform and develop.

Outcome

The underlying operating margin amounted to 2.1 percent (2.4) for 2019.

At least 15 percent return on capital employed

As a measure of return, return on capital employed excl. IFRS 16 is used, defined as operating result excl. IFRS 16 in the past 12 months divided by the average capital employed excl. IFRS 16 (equity and interest-bearing liabilities). The target level is set to at least 15 percent considering the prevailing capital structure and interest rates. The measure is calculated based on recognized operating profit, i.e. including inventory gains and losses and items affecting comparability, to put focus on the actual returns to the owners.

Outcome

The return on capital employed decreased to 5.6 percent (9.4) during the year. The reason is mainly that the operating result has decreased due to declining sales volumes and inventory losses. The diagram also illustrates an adjusted return where items affecting comparability have been excluded.

GROWTH GREATER THAN MARKET

UNDERLYING OPERATING MARGIN

RETURN ON CAPITAL EMPLOYED >15%

19th century

In 1868, Starckjohann & Co was founded by Peter Starckjohann in Viborg, Finland.

In 1885, Bröderna Edstrand was founded by Hans and Jöns Edstrand in Malmö, Sweden.

Both of the companies are trading companies active in their national markets. Bröderna Edstrand initially also sell products like bricks, paper and technical oils, but over the years, business is increasingly concentrated on steel and metals.

20th century

In 1937, Bröderna Edstrand inaugurates the group's head office on Spadegatan in Malmö.

At the beginning of the 1960s, Bröderna Edstrand is a corporate group with around 2,500 employees and the company is listed on the Stockholm Stock Exchange in 1974.

In 1976, Starckjohann takes the first steps in what we call production service today.

In 1979, Bröderna Edstrand have sales in excess of SEK 1 billion for the first time.

In 1988, Bröderna Edstrand is acquired by Trelleborg AB and after four generations of ownership, the Edstrand family leaves the company.

In the 1990s, the company establishes units in Denmark, Poland, Latvia and Lithuania. In parallel, Starckjohann Steel expands through the acquisition of the company Mercantile and establishment in Estonia.

In 1999, Nordic Capital becomes the majority shareholder in Bröderna Edstrand and Starckjohann Steel. The two companies, including subsidiaries in the countries around the Baltic Sea, now form one group.

21st century

In the 21st century, the Group's European expansion continues with establishments in the Czech Republic and Slovakia.

In 2004, Trelleborg sells its remaining shares in the Group.

In 2006, BE Group's share is relisted on the Stockholm Stock Exchange and the Group takes the mutual name BE Group AB.

In 2008, BE Group forms, together with ArcelorMittal, the joint venture ArcelorMittal BE Group SSC AB.

In 2010, the Group acquires Lecor Stålteknik in Kungälv.

In 2016 – 2018, the Group exits the operations in Czech Republic, Slovakia and Eskilstuna in Sweden.

In 2017, 80 years after the opening of the office at Spadegatan, the Group moves the head office to Krangatan in Malmö.

Business Area Sweden & Poland accounted for 51 percent (52) of the Group's net sales in 2019. The business area includes the Group's operations in Sweden consisting of the companies BE Group Sverige and Lecor Stålteknik, as well as the Polish operations BE Group Poland. The roughly 2,000 customers in the construction and manufacturing industries receive deliveries from warehouse and production facilities in Malmö, Kungälv and Norrköping in Sweden and Trebaczew in Southern Poland. In addition to these facilities, BE Group Sweden has local sales offices at additional six locations. The size and needs of the customers vary widely; the ten largest customers account for about 22 percent of the business area's sales. Local presence, a high level of service and good understanding of customers are prerequisites for serving the market. The competitors in the market include SSAB-owned Tibnor and Stena Stål, which is a part of the Stena Group.

BE Group owns 50 percent of the company ArcelorMittal BE Group SSC AB in Karlstad, a steel service center where thin sheets are cut and split. The company is a modern Steel Service Center for processing of thin sheets with sales of SEK 814 M (838) in 2019.

Lecor Stålteknik offers finished prefabricated steel deliveries to construction projects, as well as bridges and industrial frames. The operations had sales of SEK 64 M (116) in 2019.

Sales and business performance

Net sales for the year decreased by 11 percent compared to last year, amounting to SEK 2,209 M (2,476). Operating result amounted to SEK 73 M (123). Adjusted for inventory gains and losses and items affecting comparability of SEK -5 M (19), the underlying operating result amounted to SEK 79 M (104).

The result weakened mainly due to the declining sales volumes and tonnage decreased by 10 percent compared to 2018. Lecor Stålteknik delivered a result of SEK -11 M (-6). The joint venture ArcelorMittal BE Group SSC AB is reported in accordance with the equity method, with the participation in earnings for the year amounting to SEK 3 M (4).

Continued development

In 2019, focus was on continuing to serve our customers in a dynamic manner, which contributed to dampening the effects of the economic decline. Many things have fallen into place internally, but the work of strengthening our margins will also continue in 2020. This will be achieved through active work to increase and clarify the values we create and price them correctly, but also by streamlining the purchase processes.

Key data1)	2019	2018	%
Shipped tonnage, thousands of tonnes	168	187	-10%
Net sales, SEK M	2,209	2,476	-11%
Operating result (EBIT), SEK M	73	123	-41%
Operating margin, %	3.3	5.0	-1.7%
Underlying operating result (uEBIT), SEK M2)	79	104	-24%
Underlying operating margin, %	3.6	4.2	-0.6%
Investments, SEK M	17	16	6%
Average number of employees	340	338	0.6%

1) In the result, the intra-group expenses invoiced from the Parent Company have been eliminated. The effects regarding IFRS 16 have been reported under Parent Company & consolidated items and have not been allocated to the business areas.
2) Included as a part of BE Group's alternative performance measures, see also Alternative performance measures.

SALES

OPERATING RESULT (EBIT)

UNDERLYING OPERATING RESULT1)

1) Underlying operating result (uEBIT) is the reported operating result (EBIT) before items affecting comparability and adjusted for inventory gains and losses (deductions for gains and additions for losses). See also Alternative performance measures.

In 2019, the business area accounted for a total of 49 percent (48) of the Group's net sales. The business area consists of the Group's operations in Finland and the three Baltic States. The operations in Finland consist of production and warehousing facilities in Lapua, Lahti and Turku and sales offices in nine locations. The operations in the Baltic States comprise warehousing and sales units in Tallinn, Riga and Kaunas.

In the Finnish market, the company has around 2,800 customers and the ten largest customers account for 12 percent of the business area's sales. Focus is on delivering value-creating services to both the construction and manufacturing industries. BE Group Finland operates a steel service center for thin sheets processing in-house, which results in a higher share of sales of these products compared with business area Sweden & Poland. The primary competitors are Tibnor, Kontino and Flinkenberg.

In the Baltics, the market is more fragmented and conditions vary substantially between Estonia, Latvia and Lithuania, but BE Group generally has a strong position in the market.

Sales and business performance

Net sales for the year decreased by 6 percent compared to last year and amounted to SEK 2,157 M (2,299). The operating result amounted to SEK 65 M (81) and, adjusted for inventory gains and losses of SEK 0 M (13), the underlying operating result amounted to SEK 65 M (68). The decline is largely attributable to the weaker volume development in the Finnish distribution business.

Continued development

Demand during the year was generally weaker both in the construction and the manufacturing industries. Steel prices were stable over the year. Extensive focus is now on improving profitability in the Finnish distribution operations and the Baltic operations. As before, the goal is to offer the best customer experience in our industry by providing value-creating solutions to every customer and segment that we focus on.

Key data 1)	2019	2018	%
Shipped tonnage, thousands of tonnes	173	190	-9%
Net sales, SEK M	2,157	2,299	-6%
Operating result (EBIT), SEK M	65	81	-20%
Operating margin, %	3.0	3.5	-0.5%
Underlying operating result (uEBIT), SEK M 2)	65	68	-4%
Underlying operating margin, %	3.0	2.9	0.1%
Investments, SEK M	7	18	-61%
Average number of employees	301	304	-1%

SALES

OPERATING RESULT (EBIT)
SEK M

UNDERLYING OPERATING RESULT

1) Underlying operating result (uEBIT) is the reported operating result before items affecting comparability and adjusted for inventory gains and losses (deductions for gains and additions for losses). See also Alternative performance measures.

MARKET FOR STEEL SERVICE COMPANIES

BE Group and other steel distributors play an important role in the value chain. They bridge the gap between steel producers' delivery capacity and steel consumers' needs. The individual steel producers provide a limited selection of products, often in large quantities and with relatively long lead times. However, many steel consumers seek a single coordinated supply of several different products in smaller quantities with short delivery times. Purchasing is then normally conducted via a steel service company, where BE Group is one of the leading producer-independent suppliers.

STEEL MARKET OUTLOOK

In its "Economic and Steel Market Outlook 2020-2021 – Quarter 1, 2020" from January 30, 2020, Eurofer states that the current downturn of the manufacturing sector in the EU is not likely to bottom out in the very short-term. Major risk factors are escalating trade wars between the US and several of its main trading partners (mostly China, despite the trade agreement signed on 15 January 2020 that has eased frictions) and persistent uncertainty regarding the final Brexit deal to be agreed by the end of 2020. These factors are set to weigh on trade conditions during 2020, and may even lead to a further deterioration in business sentiment and seriously hamper investment growth.

Market conditions are expected to improve slightly from the third quarter of 2020, although risks related to import distortions and continued global overcapacity are likely to continue undermining the stability of the EU steel market.

The outlook from Eurofer was published before the outbreak of Covid-19 (coronavirus) and its potential consequences has therefore not been taken into account.

EU steel weighted industrial production (SWIP) index EU28 economic indicators

Year-on-year change in %	2015	2016	2017	2018	E 2019	F 2020	F 2021
Construction	+1.6%	+0.4%	+4.3%	+4.8%	+3.8%	+0.8%	+0.8%
Mechanical engineering	+0.1%	+0.7%	+4.9%	+3.7%	-0.3%	+0.6%	+1.5%
Automotive	+7.5%	+5.2%	+3.7%	+0.6%	-5.9%	+1.0%	+2.8%
Domestic appliances	+4.3%	+1.5%	+3.7%	-0.8%	-1.4%	-0.1%	+1.3%
Metal goods	+2.2%	+2.4%	+5.0%	+1.8%	-1.3%	-0.1%	+1.5%

Source: Eurofer "Economic and Steel Market Outlook 2020-2021 – Quarter 1 2020"

COMPETITORS

BE Group is one of the market's leading actors in both Sweden and Finland. A significant competitor in these markets is Tibnor. Other competitors are for example Stena Stål in Sweden and Kontino and Flinkenberg in Finland.

Amounts in SEK M

Company	Sales	Change 2018/2019	Operating profit	Operating margin
BE Group	4,359	-9%	88	2.0%
Tibnor	9,149	8%	30	0.3%
Stena Stål 1)	2,319	-1%	41	1.8%

1) Information refers to the financial year September 2018 to August 2019.

Total turnover of BE Group shares in 2019 was 4.5 M shares with a combined value of SEK 183 M, representing an average turnover of 18,073 shares or SEK 0.7 M per trading day. On the year's last trading day, December 30, 2019, the market price for the BE Group share was SEK 35.90 The highest price paid in 2019 was SEK 46.80 and the year's lowest price paid was SEK 34.70. At the end of the year, BE Group's total market capitalization was SEK 467.1 M.

Share capital and voting rights

At December 31, 2019, the share capital in BE Group was SEK 260.2 M (260.2) allocated among 13,010,124 shares, each with a quotient value of SEK 20.00. Under the Articles of Association, minimum share capital in the Company is SEK 150,000,000 and maximum share capital SEK 600,000,000, with a minimum of 10,000,000 and a maximum of 40,000,000 shares. Each share carries one vote and there is only one class of shares.

Ownership structure

At the end of 2019, BE Group had 4,768 shareholders, compared to 5,151 at the end of the previous year. AB Traction and Svedulf Fastighets AB were the two largest owners. Other major owners are listed in the table. At the end of the year, the proportion of Swedish institutional ownership (legal entities) totalled 68 percent and foreign ownership was 7.5 percent.

Dividend and dividend policy

According to BE Group's dividend policy, the Group shall distribute at least 50 percent of profit after tax, over time. BE Groups financial positions and future outlook shall be taken into account in determining the payment of dividends. The Board of Directors proposes that no dividend (1.75) will be paid for the financial year of 2019.

Shareholder contacts

CFO Christoffer Franzén is responsible for contacts with shareholders. Press releases issued by BE Group are distributed via Cision and are made available on the Group's website at www.begroup.com in connection with publication. Information on the BE Group share is updated continuously on the Group's website.

Per share data

SEK unless otherwise stated	2019	2018
Earnings per share	3.87	6.13
Earnings per share after dilution	3.87	6.13
Equity per share	71.05	68.67
Proposed dividend per share	–	1.75
Market price, December 30. latest price paid	35.90	35.95
Market capitalization, December 30. SEK M	467.1	467.7

Largest shareholders December 30, 2019

Shareholders	Number of share	Capital and votes (%)
AB Traction	2,902,526	22.3
Svedulf Fastighets AB	2,646,399	20.3
Försäkringsaktiebolaget, Avanza Pension	919,463	7.1
The Pure Circle AB	642,285	4.9
Nordea Livförsäkring Sverige AB	246,947	1.9
Skandinaviska Enskilda Banken AB, WBIMY	209,040	1.6
Ålandsbanken i ägares ställe	148,751	1.2
Ridderstråle, Carl-Erik	145,846	1.1
Old Mutual International IOM Ltd	145,809	1.1
Nordea Bank ABP, Nordea Bank AB	143,838	1.1
Total, 10 largest shareholders	8,150,904	62.6
BE Group’s holding of treasury shares	26,920	0.2
Other shareholders	4,832,300	37.2
Total number	13,010,124	100

Shareholder structure, December 30, 2019

Holding	Number of shareholders	Number of shares	Capital and votes (%)
1 – 500	3,845	360,883	2.8
501 – 1,000	361	273,768	2.1
1,001 – 2,000	227	333,928	2.6
2,001 – 5,000	185	580,861	4.4
5,001 – 10,000	61	430,483	3.3
10,001 – 20,000	36	522,649	4.0
20,001 – 50,000	27	851,934	6.6
50,001 – 100,000	10	749,739	5.8
100,001 – 500,000	12	1,795,206	13.8
500,001 – 1,000,000	2	1,561,748	12.0
1,000,001 – 5,000,000	2	5,548,925	42.6
Total	4,768	13,010,124	100

Shareholdings per country, December 30, 2019

Sweden	92.5%
Luxembourg	1.8%
USA	1.7%
Finland	1.3%
Isle of man	1.1%
Others	1.6%
Total	100%

Shareholder category, December 30, 2019

Other Swedish legal entities and persons	53.7%
Swedish physical persons	24.0%
Fund management companies	1.2%
Insurance companies and pension institutions	10.7%
Foreign ownership	7.5%
Pension foundations	1.7%
Non-categorized legal entities and persons	1.2%
Total	100%

Share price development January 2016 – December 2019

ISIN code: SE0001852211 Ticker on NASDAQ Stockholm Exchange: BEGR Source: WebfinancialGroup

BOARD OF DIRECTORS' REPORT

Development over the year

Operations

BE Group AB (publ), Corp. Reg. No. 556578-4724, which is listed on the Nasdaq Stockholm exchange, is a trading and service company in steel, stainless steel and aluminium. BE Group offers efficient distribution and value-adding production services to customers primarily in the construction and manufacturing industries. In 2019, the Group reported sales of SEK 4.4 billion. BE Group has approximately 650 employees, with Sweden and Finland as its largest markets. The head office is located in Malmö, Sweden. Read more about BE Group at www.begroup.com.

Alternative performance measures

BE Group has defined a number of alternative performance measures. The alternative performance measures that BE Group considers to be significant are underlying operating result, net debt, working capital and capital employed. Under Alternative performance measures, you can read more about how these are calculated.

Market and business environment

In Europe (EU28), 159.4 million tons of raw steel were produced in 2019, according to the World Steel Association, which is the global trade association for the steel mills. This is a decrease by -4.9 percent compared with 2018. Germany is responsible for the greatest decrease and produced 39.7 million tons of raw steel, which corresponds to a decrease of -6.5 percent. In December, BDS, the trade association for the German warehouse keepers, announced that the total inventory balance was the lowest in 20 years. This is considered to be due to falling prices, mainly during the second half of 2019, which caused the warehouse keepers to be hesitant. For large product groups, such as hot- and cold-rolled steel, less than half of the import quotas to the EU were used. The information BE Group has regarding the development of the Swedish distribution market shows a negative market growth of -5.3 percent and the information on the Finnish market shows a negative market growth of -6.7 percent.

Group structure and organization

The Group consists of two business areas, Sweden & Poland and Finland & Baltics, with a business focus on the Group's main markets. Parent Company & consolidated items include the Parent Company, Group eliminations and also parts of the Group's operations undergoing restructuring, BE Group Czech Republic, BE Group Slovakia, BE Group Produktion Eskilstuna and RTS Estonia. The restructuring of these operations are in all material aspects completed.

Net sales and business performance

During 2019, consolidated net sales decreased by 9 percent compared to last year, amounting to SEK 4,359 M (4,803). Tonnage in business areas Sweden & Poland decreased by 10 percent compared to last year while Finland & Baltic delivered 9 percent lower than last year. Price and mix effects had a negative impact on net sales of 1 percent which was partly compensated by positive currency effects of 2 percent. Inventory losses of SEK -6 M (27) affected the period.

Gross profit amounted to SEK 605 M (669), with a gross margin of 13.9 percent (13.9). Adjusted for inventory gains and losses and items affecting comparability, the gross margin increased to 14.0 percent (13.4).

The operating result amounted to SEK 88 M (132), which is mainly explained by a negative organic growth of 10 percent and a decrease in net sales of 9 percent. Sales and administration expenses were SEK 10 M lower than last year. Adjusted for inventory gains and losses and items affecting comparability, the underlying operating result amounted to SEK 94 M (117). The operating margin amounted to 2.0 percent (2.8) and the underlying operating margin was 2.1 percent (2.4).

Business area Sweden & Poland

Business area Finland & Baltics

In 2019, the business area accounted for a total of 49 percent (48) of the Group's net sales. The business area consists of the Group's operations in Finland and the three Baltic States Estonia, Latvia and Lithuania. Net sales for the year decreased by 6 percent compared to last year, amounting to SEK 2,157 M (2,299). The operating result amounted to SEK 65 M (81) and, adjusted for inventory gains and losses, the underlying operating result decreased to SEK 65 M (68). In the result, the intra-group expenses invoiced from the Parent Company have been eliminated.

Parent Company & consolidated items

Parent Company & consolidated items include the Parent Company, Group eliminations and also parts of the Group's operations undergoing restructuring. The effects regarding IFRS 16 were reported under Parent Company & consolidated items and have not been allocated to the two business areas.

Parent Company

Sales for the Parent Company, BE Group AB (publ), amounted to SEK 97 M (108) during the period and derived from intra-Group services. These intra-Group services mainly include licensing fees regarding the subsidiaries' use of the BE Group brand and central expenses for IT, Finance and Purchasing, etc. These expenses are distributed and invoiced to all subsidiaries in the Group. In the result follow-up of the business areas, these intra-group expenses were eliminated. Out of the total costs for the Parent Company, of SEK 53 M (58), SEK 39 M (43) was distributed to the subsidiaries.

The operating result amounted to SEK 44 M (50). Net financial items amounted to SEK -3 M (2). The result before tax amounted to SEK 48 M (85) and the result after tax was SEK 38 M (69). At the end of the year, Parent Company equity amounted to SEK 642 M (626). Investments in the Parent Company amounted to SEK 0 M (1). At the end of the year, cash and equivalents in the Parent Company amounted to SEK 145 M (71).

Net financial items and tax

Consolidated net financial items amounted to SEK -16 M (-16) and net interest accounted for SEK -22 M (-12), of which SEK -11 M (-) is related to leasing according to IFRS 16. Tax amounted to SEK -22 M (-36). Result after tax amounted to SEK 50 M (80) including items affecting comparability of SEK 0 M (-12). As the Group's profitability improves the capitalized deferred tax assets referring to loss carryforwards are utilized. The deferred tax asset has decreased during the year, amounting to SEK 21 M (33).

Cash flow

Cash flow from operating activities increased to SEK 200 M (86), of which SEK 78 M is an effect of the implementation of IFRS 16. The cash flow from investing activities amounted to SEK -37 M (-32). Cash flow after investments thereby amounted to SEK 163 M (54).

Capital, investments and return

At the end of the period, consolidated working capital amounted to SEK 549 M (572) and average working capital tied-up was 13.1 percent (11.7). Of the year's investments, totalling SEK 25 M (35), investments in intangible assets accounted for SEK 0 M (2) and investments in tangible assets for SEK 25 M (33). The return on capital employed excl. IFRS 16 decreased in comparison to last year and amounted to 5.6 percent (9.4).

Financial position and liquidity

At the end of the period, consolidated cash and equivalents, including overdraft facilities, were SEK 318 M (208) and consolidated interest-bearing net debt excl. IFRS 16 amounted to SEK 373 M (440). At the end of the period, equity totalled SEK 922 M (892) and the debt/equity ratio improved to 40 percent (49).

A new three-year credit agreement was signed with Skandinaviska Enskilda Banken. The facility amounts to SEK 825 M and matures in July 2022 with an option for extension by another two years.

Employees

BE Group considers the employees to be the Group's most important resource. They are the face towards customers and suppliers and it is therefore important that everyone who works at BE Group contributes to the company being perceived as an economically, socially and ethically responsible company. It is the people at BE Group who make things happen and make it possible for the company to keep its promises. The corporate culture is based, among other things, on what BE Group has defined as its core values. These values act as guidance in the day-to-day work of everyone within BE Group. They address how the employees behave towards one another, as well as towards customers, suppliers and others with whom they come into contact. These are: Dynamic, Transparent and Sustainable. Read more in Vision, Business Idea and Values.

The number of employees amounted to 639 compared to 667 at the same time last year and the average number of employees during the year amounted to 652 (668).

Environmental policy and environmental work

BE Group is working with environmental issues as an integrated part of its operations. With its position between steel producers and customers, it is in the area of transport in particular that BE Group is able to help lessen the environmental impact. In addition, BE Group works continuously to improve its own facilities' energy consumption, emissions and waste management.

Overarching environmental policy

A comprehensive environmental policy forms the basis of BE Group's environmental work. The policy states that BE Group shall:

As a minimum comply with current environmental legislation and requirements from local authorities.
Be economical in the use of energy and natural resources.
Work to decrease the amount of waste and emissions from the facilities.
Identify opportunities to make adjustments benefiting the environment when making investments and changes in processes and facilities.
Maintain a high level of awareness on environmental issues through ongoing training.
Document and communicate environmental work to employees and provide open and objective information to external stakeholders.

BE Group is engaged in operations at two sites in Sweden for which environmental permits are required. In Finland, operations in one site require environmental permits. Group companies have obtained special permits to engage in operations in the countries where such permits are required. All operations within the Group, with the exception of Lecor Stålteknik, are certified under the ISO 14001 environmental management system.

Risks and risk management in BE Group

BE Group's profits and financial position are affected by a large number of factors. Several of these are beyond the Company's own control. The Group operates in several countries and is therefore exposed to various risks as a consequence of differences in legislation, regulations and guidelines. Risk management within the Group is guided by established policies and procedures that are revised by the Board of Directors and/or Group Management on an ongoing basis. The most important risks and factors of uncertainty for BE Group can be divided between:

Market risks (economic and steel price trend)
Operational risks (suppliers, customers, contractual relationships, personnel, product liability, legal and environmental liability)
Financial risks (currency risk, interest risk, refinancing risk and credit risk)
Sustainability-related risks (environment, health and safety, human rights and corruption)

Market risks

Economic trend

BE Group has a large number of customers in different industries and is therefore affected by the general economic climate. A weak economic trend increases the risk of lower demand for the Group's products, resulting in lower sales revenues. In addition, a weaker economy can lead to low inventory turnover, falling prices and inventory losses on existing inventories. BE Group's strategy regarding inventory levels is to warehouse products based on estimated customer demand. The various companies in BE Group strive to maintain a level of inventory turnover suited to the market and local conditions of each company. The operational control of inventory levels is exerted by means of targets for the number of inventory days.

Steel price trend

The steel industry is influenced by economic developments. As a consequence, steel price trends are volatile and are affected by the balance between the production offering and demand for steel at the different points along the value chain. Steel prices affect BE Group such that higher market prices provide a greater contribution towards covering the Group's costs given a constant gross margin. The steel price trend also affects final sales prices for products held in inventory, which for BE Group entails a financial impact in the form of inventory gains and losses. To limit these inventory effects, BE Group is working actively to reduce the number of inventory days while maintaining its level of service towards customers. Consequently, falling steel prices have a negative impact on BE Group's operations and earnings, while increased prices have a positive impact.

The table below shows the estimated effect on underlying operating result of changes in steel prices and sold tonnage. The sensitivity analysis is based on the outcome for 2019 and assumes a constant underlying gross margin.

	Change	Operating result effect
Steelprice	+/-5 %	+/-23 MSEK
Tonnage	+/-5 %	+/-25 MSEK

Operational risks

Suppliers

BE Group's product range consists of materials from several different suppliers. The Group strives to establish relations with the best steel producers and to maintain sustainable, long-term cooperation. To safeguard access to materials on each individual occasion, the Group seeks to always maintain relations with several suppliers in each product group. Over the year, BE Group has cooperated with more than 500 suppliers. Before establishing new business relationships and entering into agreements, suppliers' capacity to meet BE Group's demands in terms of finance, quality, logistics, the environment and other aspects is ascertained.

In BE Group's assessment, it is not dependent on any single supplier and all major suppliers are considered fully replaceable, so disruption to deliveries by any one of them does therefore not entail long-term consequences for operations. In 2019, the largest single supplier accounted for 17 percent (21) of the Group's purchases. Combined, the ten largest suppliers accounted for 54 percent (56) of the Group's total purchasing. BE Group is exposed to the risk that deliveries from suppliers could be substantially delayed in the event of interrupted production, capacity shortage or transport issues, outside the control of BE Group. This can mean loss of income and/or more expensive actions to meet our commitments to customers.

Customers

BE Group's operations are conducted in several different markets and to numerous customer categories. The ten largest customers accounted for 13 percent (13) of total sales in 2019. BE Group has a large number of customers in different industries and consequently, a good risk diversification. The Company actively works to manage credit risks (see Note 31 for further information) by setting credit limits and focusing on collecting overdue receivables.

Increased direct deliveries from steel producers

Users of steel have mainly two sources of purchases: directly from steel producers or from trading and service companies. Traditionally, many large-scale users have bought directly from producers, while small and medium-sized users have often made use of trading and service companies. There is, however, a risk that producers will try to extend their direct sales, reducing the use of trading and service companies as agents.

Contractual relations

The Group is custom to rely primarily on its good and often long-term relations with customers and suppliers, and on the normal practices that have been established between the parties. There are specific agreements with some of BE Group's larger customers and suppliers.

Human Resources

BE Group depends on competent employees for its future development and success. The ability to recruit, retain and develop qualified employees and to be an attractive employer is important. The effect on the operations would be negative if key individuals were to quit and without it being possible to recruit suitable replacements. BE Group has compiled a number of values that reflect the spirit of the Group and pervade its management. BE Group's commercial competence is continuously developed through training and recruitment. Training efforts include broad programs aimed at many employees, as well as specialized solutions for individuals.

Product liability

In the event of defect products, some of the products that BE Group sells could cause personal injury or other harm, thereby incurring a risk of claims for damages in accordance with the product liability laws of the country concerned. BE Group has taken out the conventional liability insurance policies on its operations.

Legal

Since BE Group maintains operations in several countries, the Group is exposed to different laws, regulations, agreements and guidelines, as well as to changes in the stipulations within these. Among other things, regulations include trade restrictions, such as customs duties and tariffs, requirements for import and export licenses, restrictions on movements of capital and tax regulations. In all commercial operations, disputes may arise as a consequence of differences of opinion on issues of responsibility and interpretations of contract terms. From a risk perspective, BE Group is not dependent on any individual commercial agreement that could significantly limit the Group's operations.

Environmental legislation and responsibility for the environment

BE Group's operations are subject to legislation pertaining to the environment, as well as regulations on emissions to the atmosphere and water, waste management and the workplace environment. BE Group could become liable for environmental damage caused by operations conducted, or that have previously been conducted by the Company. According to Swedish law, certain environmental liability is not subject to limitations of time. It cannot be ruled out that operations such as those that are conducted, or have been conducted, by BE Group could lead to liability for environmental impacts that do not appear until much later.

Financial risks

For an account of financial risks, see Note 31.

Sustainability-related risks

For an account of sustainability-related risks, see the Sustainability Report.

Share-related information

Ownership structure

The BE Group share has been listed on the Nasdaq Stockholm Exchange since the end of 2006. At the end of the financial year, BE Group had 4,768 shareholders, compared to 5,151 at the end of last year. AB Traction and Svedulf Fastighets AB were the two largest owners with 22.3 percent and 20.3 percent of the shares, respectively. Information regarding other major owners is available under The Share. At the end of the year, the proportion of institutional ownership (legal entities) totalled 68 percent and foreign ownership was 7.5 percent.

At the end of the year, the four members of Group Management (Peter Andersson, Daniel Fäldt, Sandra Eriksson and Lasse Levola) together held 5,700 shares in BE Group. At the same time, the company's directors together held 2,983,808 shares, including shares in close association. The disclosures regarding shareholdings in BE Group for the Board of Directors and Group Management refers to own and physically related owned shares, endowment insurance and legally owned shares which directly or indirectly is controlled by the person or its relatives.

BE Group held 26,920 treasury shares at the close of 2019.

Share capital, shares outstanding and rights

The registered share capital amounted to 13,010,124 (13,010,124) common shares on December 31, 2019. Each share has a quotient value of SEK 20.00 (20.00). According to the Articles of Association, minimum share capital in the Company is SEK 150,000,000 and maximum share capital SEK 600,000,000, with a minimum of 10,000,000 and a maximum of 40,000,000 shares. Share capital is determined in Swedish kronor.

All shares convey equal rights to a percentage of the Company's net assets, profits and any surplus upon liquidation. Each share carries one vote and there is only one class of shares. There is no limit to the number of votes a shareholder may cast at the Annual General Meeting or with respect to transfer of shares. The Company is aware of no agreements between shareholders which may limit the right to transfer shares.

Further information about the BE Group share is provided on www.begroup.com.

Authorization to the Board of Directors

The Annual General Meeting resolved to authorize the Board of Directors, on one or several occasions and not later than the 2020 Annual General Meeting, to make decisions regarding the transfer of treasury shares for the purpose of financing smaller corporate acquisitions. Transfers of at most 26,920 shares, corresponding to the company's existing holding of treasury shares, may deviate from shareholders' preferential rights. Transfers may be applied as payment of all or part of the purchase consideration in the acquisition of companies or operations or parts of companies or operations, in which case the payment shall correspond to the assessed market value of the shares. Alongside share transfers, payment may be effectuated through capital contributed in kind or by setting off claims against BE Group. Transfers may also be made on cash payment through sales on the Nasdaq Stockholm Exchange at a price within the price interval registered at any given time - that being the interval between the highest bid price and lowest asking price at the time of sale. The Board of Directors shall have the right to decide on other conditions for the transfer. However, the conditions shall be market-based.

During the year, no treasury shares were transferred and BE Group held 26,920 treasury shares, corresponding to 0.2 percent of the share capital, which was acquired for a total amount of SEK 21 M.

Dividend and dividend policy

According to BE Group's dividend policy, the Group will distribute at least 50 percent of profit after tax, over time. BE Groups financial positions and future outlook shall be taken into account in determining the payment of dividends. The Board of Directors proposes that no dividend (1.75) will be paid for the financial year of 2019.

Corporate governance

The Corporate Governance Report is presented on pages 80-83.

Remuneration principles for senior executives

The 2019 Annual General Meeting adopted guidelines for executive remuneration. The policies apply to remuneration and other terms of employment for the individuals who, while the policies are in effect, are members of Group management for BE Group.

Group management consisted of four persons during 2019: the President and CEO, the CFO, Business Area Manager for Finland & Baltics and the Group Sourcing Director.

The policies apply for agreements entered in accordance with Annual General Meeting resolutions and to amendments to existing agreements made after this date. The guidelines are reviewed annually.

The guidelines mainly state that remuneration for senior executives shall consist of fixed base pay, variable remuneration, pension benefits and other benefits. Total remuneration shall be market-based. Fixed pay shall be individual and differentiated based on the individual's responsibilities and performance and set annually. Variable remuneration shall be related to the degree of meeting the annual predetermined, well-defined goals and shall amount to a maximum of 50 percent of fixed salary.

Pension is to be defined contribution-based and correspond to a maximum of 30 percent of fixed annual salary.

Where notice of termination is issued by BE Group, fixed salary and severance pay shall not exceed an amount equivalent to 12 months' fixed pay.

The actual remunerations agreed during the year are detailed in Note 3.

Remuneration principles for senior executives proposed by the Board of Directors for the Annual General Meeting 2020

The Board of Directors of BE Group AB (publ) ("BE Group") proposes that the annual general meeting 2020 resolves on the following guidelines for executive remuneration.

The individuals who are members of the group management of BE Group during the period of which these guidelines are in force, fall within the provisions of these guidelines. The guidelines are forward-looking, i.e. they are applicable to remuneration agreed, and amendments to remuneration already agreed, after adoption of the guidelines by the annual general meeting 2020. These guidelines do not apply to any remuneration decided or approved by the general meeting.

The guidelines' promotion of BE Group's business strategy, long-term interests and sustainability

BE Group is a trading and service company in the steel and metal industry. Customers mainly operate in the construction and manufacturing industries in Sweden, Finland and the Baltic States, where BE Group is one of the market's leading actors. With extensive expertise and efficient processes in purchasing, logistics and production, BE Group offers inventory sales, production service and direct deliveries to customers based on their specific needs for steel and metal products. BE Group's vision is to be the most professional, successful and respected steel service company in the markets where the company is active. A prerequisite for the successful implementation of BE Group's business strategy and safeguarding of its long-term interests, including its sustainability, is that the company is able to recruit and retain qualified personnel. The objective of BE Group's guidelines for executive remuneration is therefore to offer competitive remuneration on market terms, so that competent and skillful personnel can be attracted, motivated and retained. These guidelines enable the company to offer the executive management a competitive total remuneration. For more information regarding the company's business strategy, please see www.begroup.com.

Types of remuneration, etc.

The remuneration shall be on market terms and may consist of the following components: fixed cash salary, variable cash remuneration, pension benefits and other benefits. Additionally, the general meeting may – irrespective of these guidelines – resolve on, among other things, share-related or share price-related remuneration.

Fixed cash salary

The fixed cash salary for the senior executives within BE Group shall be individual and differentiated on the basis of the individual's responsibility and performance, and shall be determined annually.

Variable cash remuneration

The variable cash remuneration shall be based on predetermined, well-defined and measurable financial criteria for the group and the relevant business area and may amount to not more than fifty (50) percent of the total fixed cash salary during the measurement period for the criteria. The criteria for variable cash remuneration shall mainly relate to the group's and the business area's respective underlying operating result and, in addition, individual criteria may be established. The criteria shall be designed so as to contribute to BE Group's business strategy and long-term interests, including its sustainability, by for example being linked to the business strategy or promoting the senior executive's long-term development within BE Group. The satisfaction of criteria for awarding variable cash remuneration shall be measured over a period of one year.

Pension benefits

For the CEO and other senior executives, pension benefits shall be premium defined. Variable cash remuneration shall not qualify for pension benefits. The pension premiums for premium defined pension shall amount to not more than 30 percent of the fixed annual cash salary.

Other benefits

Other benefits may include, for example, life insurance, health and medical insurance, company cars and housing allowance. Such benefits may amount to not more than 10 per cent of the fixed annual cash salary.

Foreign employments

For employments governed by rules other than Swedish, pension benefits and other benefits may be duly adjusted for compliance with mandatory rules or established local practice, taking into account, to the extent possible, the overall purpose of these guidelines.

Criteria for awarding variable cash remuneration, etc.

The remuneration committee shall prepare, monitor and evaluate matters regarding variable cash remuneration. After the measurement period for the criteria for awarding variable cash remuneration has ended, it shall be determined to which extent the criteria have been satisfied. Evaluations regarding fulfilment of financial criteria shall be based on established financial information for the relevant period. Remuneration to the CEO shall be resolved by the Board of Directors. Remuneration to other senior executives shall be resolved by the CEO, after consulting the remuneration committee.

Variable cash remuneration can be paid after the measurement period has ended or be subject to deferred payment. The Board of Directors shall have the possibility, under applicable law or contractual provisions, to in whole or in part reclaim variable remuneration paid on incorrect grounds (claw-back).

Employment term and termination of employment

The notice period may not exceed twelve months if notice of termination of employment is made by the company. Fixed cash salary during the period of notice and severance pay may together not exceed an amount equivalent to the fixed cash salary for twelve months for the CEO and other senior executives. The period of notice may not exceed six months without any right to severance pay when termination is made by the executive.

Salary and employment conditions for employees

In the preparation of the Board of Directors' proposal for these remuneration guidelines, salary and employment conditions for employees of the company have been taken into account by including information on the employees' total income, the components of the remuneration and increase and growth rate over time, in the remuneration committee's and the Board of Directors' basis of decision when evaluating whether the guidelines and the limitations set out herein are reasonable.

The decision making process to determine, review and implement the guidelines

The Board of Directors has established a remuneration committee. The committee's tasks include preparing the Board of Directors' decision to propose guidelines for executive remuneration. The Board of Directors shall prepare a proposal for new guidelines at least every fourth year and submit it to the general meeting. The guidelines shall be in force until new guidelines are adopted by the general meeting. The remuneration committee shall also monitor and evaluate programs for variable remuneration for the executive management, the application of the guidelines for executive remuneration as well as the current remuneration structures and compensation levels in the company. The members of the remuneration committee are independent of the company and its executive management. The CEO and other members of the executive management do not participate in the Board of Directors' processing of and resolutions regarding remuneration-related matters in so far as they are affected by such matters.

Derogation from the guidelines

The Board of Directors may temporarily resolve to derogate from the guidelines, in whole or in part, if in a specific case there is special cause for the derogation and a derogation is necessary to serve the company's long-term interests, including its sustainability, or to ensure the company's financial viability. As set out above, the remuneration committee's tasks include preparing the Board of Directors' resolutions in remuneration-related matters. This includes any resolutions to derogate from the guidelines.

The Board of Directors' preparation and resolutions in business related to salaries and other terms of employment for senior executives

Due to its small size, the Board found it suitable not to appoint a remuneration committee during 2018. This decision was made at the 2018 statutory meeting. Salaries and other terms of employment, pension benefits and the bonus system for the CEO and immediately subordinate managers were handled by the Chairman of the Board in dialogue with the CEO. The Chairman of the Board reported back to the Board who drafted the executive remuneration policies to propose to the Annual General Meeting for resolution. The Board has also been tasked with monitoring and assessing variable remuneration programs for senior executives that were ongoing or terminated during the year and with monitoring and assessing the application of the guidelines for remunerations for senior executives.

The Board decided to reintroduce the remuneration committee at the Board meeting in October 2019. The assignment of the Remuneration Committee is to address matters related to salaries and other terms of employment, pension benefits and the bonus system for the CEO and the managers reporting directly to him. The Committee makes decisions regarding the remuneration of senior executives other than the CEO, based on proposals by the CEO.

Provisions of the Articles of Association on appointment and discharge of directors and amendment of the Articles of Association

There are no provisions in the Articles of Association on appointment and discharge of directors and amendment of the Articles of Association. In accordance with the provisions in the Companies Act, directors are elected by the Annual General Meeting for the period extending until the close of the first Annual General Meeting after that at which they were elected, and amendments to the Articles of Association are determined by the Annual General Meeting in accordance with the regulations set out in the Companies Act.

Contingent liabilities

Consolidated contingent liabilities amounted to SEK 13 M (14).

Significant events after the end of the financial year

The prevailing uncertainty in the world regarding what consequences of the spread of Covid-19 (coronavirus) will result in is currently significant and poses a risk to virtually every company in the world.

BE Group's Board of Directors decided on March 16, 2020, to withdraw the previously communicated proposal to the Annual General Meeting concerning dividend of SEK 1.75 per share, in total approximately SEK 23 M. The Board's decision was taken in light of the prevailing conditions around the world with the insecurities about the possible future economic effects related to the outbreak of Covid-19 (coronavirus).

BE Group is initiating a process to centralize warehouse and production operations in Sweden to the site in Norrköping. The intention, related to this change, is to close the warehouse in Malmö which will affect approximately 15 employees. The one-off cost is approximately SEK 35 M and will be charged to the first quarter 2020. The centralization also leads to cost savings of approximately SEK 15 M per year.

No other significant events have taken place after the end of the period.

Accounting principles

As of January 2005, the consolidated accounts are prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Commission for application within the European Union. A more detailed explanation of accounting principles is available under "Accounting principles".

Appropriation of earnings

The Board of Directors' proposal for the appropriation of earnings is detailed under Appropriation of Earnings and in note 24.

SUSTAINABILITY REPORT

BE Group's sustainability work is based on the ambition to create corporate social responsibility, which permeates the entire business.

BE Group is working to limit the organization's environmental impact and is striving to be an economically, socially and ethically responsible actor. The sustainability work is based on creating corporate social responsibility, which permeates the entire business and this sustainability report applies to the Group and all wholly owned subsidiaries.

The overall guidelines come from the Group. Beyond them, each country follows the laws and rules that exist in the respective country, such as those concerning labor law and union organizations, and have local certifications and standards, as well as more specific guidelines for areas, such as travel, entertainment and cars.

BE Group has a team working with sustainability issues, comprised of representatives from the Group Management Team, HR and HSEQ from Sweden and Finland. The team discusses current issues in the focus areas deemed especially important for the Group. BE Group are using the UN Global Compact's 10 principles as a base in the sustainability work and to identify the prioritized focus areas.

In order to create further transparency and a clearer direction, an effort will be initiated in 2020 in the Group Management Team, which will look at the business based on the global sustainable development goals in Agenda 2030.

BE Group's key stakeholders

In both the long term and in the daily work, BE Group affect and are affected as a company by various stakeholders, including these key stakeholders:

Stakeholder	Expectations on BE Group	Example of dialogue
Customers	BE Group shall add value to all customer segments in accordance with its business model and acts with responsiveness to customer needs and in a manner that promotes trust, strengthening relations with existing customers and attracting new ones.	Dialogue is conducted for example through personal interaction, daily contacts, trade fairs, customer surveys and the website.
Employees	BE Group shall act responsibly both internally and externally to attract, develop and retain competent employees. Our core values guide us in how we behave towards one another in our day-to-day work.	Dialogue is conducted for example in everyday discussions, workplace meetings, employee surveys, union collaboration, internal training, incident follow-up, performance and guidance talks.
Shareholders	BE Group is to generate value for its shareholders through responsible and profitable company based on the Group's business model and strategies for profitability.	Dialogue is conducted for example through the Annual General Meeting, annual reports, sustainability reports, interim reports, the website and investor meetings.
Suppliers	BE Group shall add value by providing efficient distribution, warehousing, pre-processing services and knowledge about our markets. The Group strives to strengthen sustainability work among suppliers through dialogue and by setting requirements.	Dialogue is conducted for example through personal interaction, daily contacts, quarterly meetings and cooperation projects.
Society	BE Group wants to contribute to positive social development by generating job opportunities in its own operations and among partners. BE Group shall be an open and easily accessible actor that communicates with the greatest possible transparency within the regulatory framework regarding market-sensitive information.	Dialogue is conducted for example through study visits, collaborative projects, networks and sponsorship.

Focus areas

BE Group has identified a number of areas that are especially important for the Group and they are divided into three focus areas: the People, the Operations and the Environment.

The Operations

BE Group is a trading and service company that offers efficient distribution and value-generating production service in steel, stainless steel and aluminum to the construction and manufacturing industries in Europe. The Group offers efficient distribution through coordination in purchasing, transportation and warehousing.

BE Group plays an important role in the value chain. The company compensates for the gap between steel producers' delivery capacity and steel consumers' needs. In general, the individual steel producers provide a limited selection of products, often in large quantities and with relatively long lead times. However, many steel consumers seek a single coordinated supply of several different products in smaller quantities with short delivery times. Purchasing is then normally conducted via a steel service company, where BE Group is one of the leading producer-independent alternative in its markets. BE Group creates value to its customers through efficiency and coordination of sourcing, transportation and warehousing of a wide selection of commercial steel, engineering steel, stainless steel and aluminum.

BE Group strives to be a reliable partner to its business partners, suppliers and customers. BE Group complies with rules and laws that apply in the respective countries in which the Group have operations and this is complemented by the Code of Conduct.

BE Group's Code of Conduct details the Group's responsibilities towards its business partners, owners, employees and society. The Code addresses issues of business ethics, anti-corruption, child labor, equality, work environment, career issues and competence development. The ethical guidelines included in the Code of Conduct cover all employees in BE Group and every unit manager is responsible for ensuring that the employees are familiar with and follow them.

BE Group requires honesty and integrity from all of the units in BE Group and expects the same from all business relationships, such as customers, suppliers and partners. BE Group works against all forms of corruption, including bribes and all kinds of compensation to agents, suppliers and partners must accordingly be based solely on relevant products and services. More information on this is available in the Code of Conduct and in the Code of Conduct for Suppliers, both of which are available on the website.

Focus

BE Group strives to be a reliable partner to its business partners, suppliers and customers. This is achieved by ensuring that everyone in the organization is aware of BE Group's Code of Conduct and complies with it, and also adopts the Group's values. BE Group also strives to develop and maintain a transparent and responsible dialog with its stakeholders.

Examples of steering documents/activities

Code of Conduct

Core Values – Dynamic, Transparent, Sustainable

Internal control, such as for example audits of the environmental and quality work

Customer surveys

Supplier evaluations

Code of Conduct for suppliers

Certificates and standards, such as ISO 9001

The People

BE Group’s corporate culture is based on what is defined as the Group’s core values. These values act as a guide in the day-to-day work of everyone within BE Group. They address how to behave towards one another, as well as towards customers, suppliers and others they come into contact with. The core values are Dynamic, Transparent and Sustainable.

In addition to the values, BE Group has leadership principles that are common to the entire Group. They must create uniformity and clarity regarding the expectations of how the managers should be and act to contribute to creating a good working environment and a successful company.

BE Group strive to create and be an attractive workplace where everyone is treated with equal respect and dignity and encourage a culture with equal opportunities and diversity. All of the workplaces shall be free from harassment and discrimination.

All workplaces must be safe and pleasant. In 2019, the Group’s focus continued to be on highlighting and improving the safety at the workplaces through the project Safety First. After having audited all of BE Group’s workplaces in 2018, trainings for managers and employees were held at all of the companies in the Group in 2019. A Safety First policy has been adopted with a zero vision regarding workplace accidents, where the basic idea is that all accidents can be prevented. Safety must come first at all times.

The Group has had a whistle-blower policy for several years, which means that all employees have the possibility to anonymously report when they see problems, inaccuracies, illegal behavior or improprieties with regard to BE Group’s interests or the individuals’ lives and health.

BE Group conducts a Group-wide employee survey once a year. The goal is to introduce a more systematic and transparent approach and to ensure that the strengths and improvement areas are known to the company. The results are presented by department and are used in a process where every group can work on preparing an action plan for the improvement areas established.

Focus

BE Group seeks to work for a safe, inclusive and healthy workplace, where the values are the base of how one acts. This is achieved by working for a good and safe working environment where accidents, injuries and illness are prevented, that the values are complied with and that the right expertise and knowledge are present in the company. BE Group strives to ensure diversity and equal opportunities.

Examples of steering documents/activities

Safety First
Code of Conduct
Core Values, Dynamic, Transparent, Sustainable
Leadership principles
Performance reviews
Employment surveys
Educations and competence development
Whistle-blower policy

The Environment

BE Group actively works with environmental issues as an integrated part of the operations and the foundation of the environmental work is a Group-wide environmental policy. This has been developed to make it simple for all employees to understand how they can reduce our environmental impact in their day-to-day tasks. The units then work locally with the environmental issues linked to the operations. Here, focus is on continuously improving its own facilities' energy consumption, emissions and waste management.

The majority of the operations are certified according to the international environmental standard ISO 14001. During 2019, operations in Lithuania was certified according to ISO 14001 and the operation not yet certified is Lecor Stålteknik.

In the processing chain from the steel producers to the customers, it is at the producer level that the majority of carbon dioxide emissions take place. With its position between steel producers and customers, it is in the area of transport in particular that BE Group is able to help reduce the environmental impact. According to BE Group's estimates, the Group's facilities account for around 1 percent of the total carbon dioxide emissions in the value chain, the transports to and from the facilities account for around 5 percent and the remaining 94 percent originates from the producer level.

Since 2013, BE Group has made calculations of carbon dioxide emissions according to the recommendations in the Greenhouse Gas Protocol, GHG Scope 1-2. Calculations indicate a decrease in emissions by around 60 percent per ton of delivered steel compared with the base year of 2013. Carbon dioxide emissions from in-house operations were reduced through increased use of fossil-free energy carriers, such as electricity, biogas and district heating. The facilities within BE Group are also working to streamline energy consumption. Consumption is affected by the delivery volumes and production activities (material processing and service), which are most energy intensive. Warehousing in itself is less energy intensive.

The objective is that as much of the material as possible is to be sent by train or boat and, where this is not possible, the transports are made by truck. Less than half of the transports are today made by road and the Group is actively working to find transport companies that have an explicit and deliberate sustainability and environmental focus. The transports are increasingly made by trucks powered by diesel with an add-mixture of non-fossil HVO/BiO components and today, there are also a few trucks powered by biogas. The units in Sweden and Finland have together with the transport companies begun to gather more detailed data for current fuel consumption. The goal is to obtain more knowledge of the emissions and how the company can affect them from an environmental perspective.

BE Group's own operations cause only limited emissions. Emissions primarily originate from the production units in Malmö, Norrköping and Turku where operations such as painting and blasting are carried out. The purification of solvents (VOCs) from painting facilities and dust from blasting and cutting equipment is efficient and is continuously followed up.

Residual materials in BE Group's operations are principally metals, wood and cardboard. These are sorted and recycled to the greatest possible extent. The Group also carefully follows up the work of its recycling service providers. Steel production is a heavy and energy-intensive industry. At the same time, the life expectancy of steel structures is long and the recycling rate is high compared with many other materials.

Focus

BE Group works in a goal-oriented way to limit its environmental and climate impact. This is achieved by an overall environmental policy and that every company then works with the measures that are relevant to the operations.

Examples of steering documents/activities

Estimations of carbon dioxide emissions
Mapping of transportations
Use of fossil-free energy carriers
Recycling of residual materials
Certificates and standards, such as ISO 14001 and REACH

NET SALES, GROUP

OPERATING RESULT, GROUP (EBIT)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Amounts in SEK M	2019	2018

Result for the year	50	80
Other comprehensive income
Translation differences	31	21
Hedging of net investments in foreign subsidiaries	-36	-15
Tax attributable to items in other comprehensive income	8	4
Items that will not be reclassified to profit/loss for the period	–	–
Total other comprehensive income	3	10
Comprehensive income for the year attributable to Parent Company shareholders	53	90

The comparative figures for 2018 are prepared according to previous accounting principles regarding leasing (IAS 17).

CONSOLIDATED BALANCE SHEET

Amounts in SEK M	Note	2019	2018
ASSETS
Non-current assets
Intangible assets
Goodwill	12	566	563
Other intangible assets	13	7	6
		573	569
Tangible assets	14	89	111
		89	111
Right of use assets	15	540	-
		540	-
Participations in joint ventures	17	110	113
		110	113
Financial assets
Other securities held as non-current assets	18	0	0
Non-current receivables		0	0
		0	0
Deferred tax assets	25	21	33
		21	33
Total non-current assets		1,333	826
Current assets
Inventories
Goods for resale	20	642	651
		642	651
Current receivables
Accounts receivable		387	470
Tax receivables		6	11
Other receivables		33	23
Prepaid expenses and accrued income	21	18	29
		444	533
Cash and equivalents
Cash and equivalents		168	108
		168	108
Total current assets		1,254	1,292
TOTAL ASSETS		2,587	2,118

The comparative figures for 2018 are prepared according to previous accounting principles regarding leasing (IAS 17).

Amounts in SEK M	Note	2019	2018
EQUITY AND LIABILITIES
Equity	22
Share capital		260	260
Other capital contributions		251	251
Translation reserve		44	41
Retained earnings including result for the year		367	340
Equity attributable to Parent Company shareholders		922	892
Non-current liabilities
Non-current interest-bearing liabilities	26, 31	536	543
Non-current leasing liabilities	15	449	-
Provisions	23	0	0
Deferred tax liabilities	25	44	44
Total long-term liabilities		1,029	587
Current liabilities
Current interest-bearing liabilities	26, 27, 31	6	5
Current leasing liabilities	15, 27	92	-
Accounts payable		398	468
Tax liabilities		0	0
Other liabilities		66	69
Accrued expenses and deferred income	28	73	76
Provisions	23	1	21
Total current liabilities		636	639
TOTAL EQUITY AND LIABILITIES		2,587	2,118

The comparative figures for 2018 are prepared according to previous accounting principles regarding leasing (IAS 17).

CHANGES IN CONSOLIDATED EQUITY

Amounts in SEK M	Share capital	Other capital contributions	Translation reserve	Retained earnings	Total equity
2018
Equity, opening balance, January 1, 2018	260	251	31	260	802
Result for the year	-	-	-	80	80
Other comprehensive income	-	-	10	-	10
Comprehensive income for the year	-	-	10	80	90
Equity, closing balance, December 31, 2018	260	251	41	340	892
Amounts in SEK M	Share capital	Other capital contributions	Translation reserve	Retained earnings	Total equity
---	---	---	---	---	---
2019
Equity, opening balance, January 1, 2019	260	251	41	340	892
Result for the year	-	-	-	50	50
Dividend	-	-	-	-23	-23
Other comprehensive income	-	-	3	-	3
Comprehensive income for the year	-	-	3	27	30
Equity, closing balance, December 31, 2019	260	251	44	367	922

The comparative figures for 2018 are prepared according to previous accounting principles regarding leasing (IAS 17).

CONSOLIDATED CASH FLOW STATEMENT

Amounts in SEK M	Note	2019	2018

Operating activities
Operating result		88	132
Adjustment for non-cash items	29	106	42
Interest paid/received and other financial items		-23	-13
Income tax paid/received		-2	-16
Cash flow from operating activities before changes in working capital		169	145

Cash flow from changes in working capital
Increase (-)/decrease (+) in inventories		16	-34
Increase (-)/decrease (+) in operating receivables		94	6
Increase (+)/decrease (-) in operating liabilities		-79	-31
Cash flow from operating activities		200	86

Investing activities
Acquisitions of intangible assets	13	0	-2
Acquisitions of tangible assets	14	-25	-32
Divestments of tangible assets		1	2
Other cash flow from investing activities		-13	-
Cash flow from investing activities		-37	-32

Cash flow after investments		163	54

Financing activities
Dividend		-23	-
Loans raised		552	-
Amortization of loan liabilities		-555	-10
Amortization of leasing liabilities acc. to IFRS 16	15	-78	-
Cash flow from financing activities		-104	-10

Cash flow for the year		59	44
Cash and equivalents at January 1		108	61
Translation differences in cash and equivalents		1	3
Cash and equivalents at December 31		168	108

The comparative figures for 2018 are prepared according to previous accounting principles regarding leasing (IAS 17).

INCOME STATEMENT – PARENT COMPANY

Amounts in SEK M	Note	2019	2018

Net sales	1	97	108
		97	108
Administrative expenses		-53	-58
Other operating income and expenses	6, 7	0	0
Operating profit/loss	3, 4, 13, 14	44	50

Profit/loss from participations in Group companies	5	5	20
Other interest income and similar profit/loss items	8	17	18
Interest expense and similar profit/loss items	9	-25	-36
Profit/loss after financial items		41	52

Appropriations		7	33
Profit/loss before tax		48	85

Tax	10	-10	-16
Profit/loss for the year		38	69

STATEMENT OF COMPREHENSIVE INCOME – PARENT COMPANY

Amounts in (SEK M)	2019	2018

Profit/loss for the year	38	69

Other comprehensive income	-	-
Comprehensive income for the year	38	69

BALANCE SHEET – PARENT COMPANY

Amounts in SEK M	Note	2019	2018
ASSETS
Non-current assets
Intangible assets
Capitalized expenditure for development work and similar	13	1	1
		1	1
Tangible assets
Equipment, tools, fixtures and fittings	14	0	1
		0	1
Financial assets
Participations in Group companies	16	868	872
Interest-bearing receivables from Group companies	19	28	98
		896	970
Deferred tax receivable	25	18	27
Total non-current assets		915	999
Current assets
Current receivables
Current interest-bearing receivables from Group companies	19	194	81
Receivables from Group companies		50	112
Tax receivables		3	2
Other receivables		4	4
Prepaid expenses and accrued income	21	1	1
		252	200
Cash and equivalents		145	71
		145	71
Total current assets		397	271
TOTAL ASSETS		1,312	1,270

Amounts in SEK M	Note	2019	2018

EQUITY AND LIABILITIES
Equity	22
Restricted equity
Share capital		260	260
Statutory reserve		31	31
		291	291

Non-restricted equity
Share premium reserve		240	240
Profit brought forward		73	26
Profit/loss for the year		38	69
		351	335

Total equity		642	626

Non-current liabilities
Non-current interest-bearing liabilities	26, 31	536	531
Provisions		0	0
		536	531
Current liabilities
Current interest-bearing liabilities	31	-	-
Current interest-bearing liabilities to Group companies		108	70
Accounts payable		1	2
Liabilities to Group companies		16	28
Other liabilities		2	5
Accrued expenses and deferred income	28	7	8
Provisions		-	0
		134	113

TOTAL EQUITY AND LIABILITIES		1,312	1,270

CHANGES IN EQUITY – PARENT COMPANY

Amounts in SEK M	Share capital	Statutory reserve	Share premium reserve	Profit brought forward	Profit/loss for the year	Total equity
2018
Equity, opening balance, January 1, 2018	260	31	240	27	-1	557
Profit/loss brought forward from previous year	-	-	-	-1	1	-
Total transactions reported directly in Equity	-	-	-	-1	1	0
Profit/loss for the year	-	-	-	-	69	69
Other comprehensive income	-	-	-	-	-	-
Comprehensive income for the year	-	-	-	-	69	69
Equity, closing balance, December 31, 2018	260	31	240	26	69	626
Amounts in SEK M	Share capital	Statutory reserve	Share premium reserve	Profit brought forward	Profit/loss for the year	Total equity
---	---	---	---	---	---	---
2019
Equity, opening balance, January 1, 2019	260	31	240	26	69	626
Profit/loss brought forward from previous year	-	-	-	69	-69	-
Total transactions reported directly in Equity	-	-	-	69	-69	-
Profit/loss for the year	-	-	-	-	38	38
Other comprehensive income	-	-	-	-	-	-
Comprehensive income for the year	-	-	-	-	38	38
Dividend				-22		-22
Equity, closing balance, December 31, 2019	260	31	240	73	38	642

CASH FLOW STATEMENT – PARENT COMPANY

Amounts in SEK M	Note	2019	2018

Operating activities
Operating result		44	50
Adjustment for non-cash items	29	1	7
Interest paid/received and other financial items		-2	-2
Income tax paid/received		–	0
Cash flow from operating activities before changes in working capital		43	55

Cash flow from changes in working capital
Increase (-)/decrease (+) in operating receivables		-1	-1
Increase (+)/decrease (-) in operating liabilities		-5	5
Cash flow from operating activities		37	59

Investing activities
Acquisitions of tangible assets		–	-1
Lending to subsidiaries		28	45
Dividend from subsidiaries		16	–
Dividend to shareholders		-23	–
Cash flow from investing activities		21	44

Financing activities
Net change in borrowing/lending in cash pool		19	-61
Loans raised		552	–
Amortization of loan liabilities		-555	-15
Cash flow from financing activities		16	-76

Cash flow for the year		74	27
Cash and equivalents at January 1		71	44
Cash and equivalents at December 31		145	71

ACCOUNTING PRINCIPLES

Amounts stated in millions of SEK (SEK M) unless specified otherwise.

BE Group AB (publ), company registration number 556578-4724, is a Swedish limited liability company. The registered office is in Malmö, Sweden.

Consolidated accounting principles

Compliance with legislation and standards

The consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB) and the interpretations issued by the IFRS Interpretations Committee (IFRIC) as approved by the Commission of the European Communities for application in the European Union. The Group also applies the Swedish Financial Reporting Board's recommendation RFR 1 Supplementary accounting rules for groups.

The Parent Company applies the same accounting principles as the Group except in the cases stated in the section "Parent Company accounting principles."

Significant accounting principles applied

Other than the exceptions explained in detail, the accounting principles set out below have been applied consistently to all periods presented in BE Group's financial statements. The accounting principles applied in the consolidated accounts have also been applied consistently by the individual companies within the Group.

Changes in accounting principles

Changes to accounting principles necessitated by new or amended IFRS-rules

The Group applied IFRS 16 for the first time. The nature and effect of the changed accounting principles as a result of the application of the new standard have been described under the heading IFRS 16 – Leases. There is a new interpretation, see below description regarding IFRIC 23, from IFRS IC and a number of changes of standards and interpretations that are applicable for the first time in 2019. The new interpretation and amendments have not entailed any significant effect on the consolidated financial statements.

IFRS 16 – Leases

From January 1, 2019, IFRS 16 Leases replaced the earlier standard IAS 17 Leases and associated interpretations IFRIC 4, SIC 15 and SIC 27. IFRS 16 means that leases that have previously been reported as operating leases directly in the income statement are now reported as assets and liabilities in the balance sheet with associated reporting of costs for amortization and interest.

Upon the effective date of the standard, the Group applied the modified retroactive transition method, which means that the accumulated earnings effect of the transition to IFRS is recognized in the retained earnings in the opening balance at January 1, 2019. Comparative information in earlier periods is not presented.

The Group's leasing portfolio mainly consists of real estate, vehicles, machinery and other equipment used in the operations. As a result of the transition, the Group's total assets increased due to additional right of use (ROU) assets and lease liabilities. The lease charges that were previously recognized straight-line as other external expenses have been replaced by amortization costs on ROU assets and interest on the lease liability. The lease charge is divided between repayment of the lease liability and payment of interest.

At the transition, all remaining lease charges for earlier operating leases are present valued with the Group's marginal loan interest rate. The transition effect on the balance sheet at January 1, 2019, means that ROU assets arose in an amount of SEK 565 M and lease liabilities in an amount of SEK 565 M. The effect in retained earnings at the transition to IFRS 16 has not entailed any material impact for BE Group.

There are exemptions for recognition of the right of use asset and leasing liability for leases of minor value and contracts of a duration of no more than 12 months. The Group has chosen to not apply the exemption rules.

The table below presents the reconciliation between commitments regarding operating leases according to IAS 17 as of December 31, 2018 and the lease liability as of January 1, 2019 according to IFRS 16. The weighted average marginal loan interest rate as of January 1, 2019 was 2 percent.

	SEK M
Commitments for operating leases at December 31, 2018	617
Discounting with application of the Group's marginal interest on loans	-50
Other adjustment	-2
Lease liability at January 1, 2019	565
Liabilities for finance leases at January 1, 2019	18

IFRIC 23 – Uncertainty over Income Tax Treatments

IFRIC 23 clarifies how companies are to assess the manner in which a transaction is to be measured and recognized when there are uncertainties in income tax. The Group applied the new guide as of January 1, 2019. IFRIC has not had any impact on the reporting in the Group.

New IFRS-rules that have not yet begun to be applied

A number of new standards and interpretations will not enter into effect until future financial years and have not been applied in advance in the preparation of these financial statements. None of the IFRS or IFRIC interpretations that have not yet entered into effect are expected to have any material impact on the Group.

Conditions applied to Parent Company and consolidated financial statements

Functional currency and reporting currency

The functional currency of the Parent Company is SEK and this is also the reporting currency of the Parent Company and the Group. Consequently, the financial accounts are presented in SEK. All amounts are rounded off to the nearest million unless otherwise stated.

Valuation principles

Assets and liabilities are reported at historical cost with the exception of certain financial assets and liabilities, which are reported at fair value. Financial assets and liabilities recognized at fair value consist of derivative instruments. Fixed assets and disposal groups held for sale are reported at their carrying amount or fair value less sales expenses, whichever is lowest.

Assessments and estimates

Preparation of the financial statements in accordance with IFRS requires management making assessments, estimations and assumptions that affect the application of the accounting principles and the figures reported for assets, liabilities, revenues and expenses. The estimates and assumptions are based on historical experience and other factors that seem reasonable under current conditions. The results of these estimates and assumptions are then used to assess the carrying amount of assets and liabilities not otherwise evident from other sources. The actual outcome may deviate from these estimations and assessments. The estimations and assessments are reviewed regularly. Changes in estimations are reported in the period in which they are made if they only affect that period, or in the period in which they are made and future periods if they affect both the period concerned and future periods.

Management's assessments in connection with application of IFRS that have significant effect on the financial statements and estimates that may cause material adjustments to the financial statements of subsequent years are described in greater detail in Note 33, Significant estimates and assessments.

Basis for consolidation

Subsidiaries

The Parent Company BE Group AB (publ) directly or indirectly owns all shares and votes in its subsidiaries and therefore has a controlling influence over these.

In the consolidated accounts, subsidiaries are reported in accordance with the acquisition method. The method entails acquisitions of subsidiaries being viewed as transactions through which the Group indirectly acquires the subsidiary's assets and assumes its liabilities and contingent liabilities. Consolidated cost is determined by means of an acquisition analysis in connection with the transaction. The acquisition analysis determines, in part, the cost of the holdings or operations and, in part, the fair value of the identifiable assets, liabilities and contingent liabilities assumed on the date of acquisition. Possible transaction fees due to the acquisition of a subsidiary are reported directly in the profit/loss for the period, except for transaction fees that arose prior to January 1, 2010. The latter has been included in the cost. Subsidiaries' financial accounts are included in the consolidated accounts from the point of acquisition and until the Group no longer has a controlling influence.

Payment in connection with the acquisitions does not include payments settling prior business transactions. Settlements of this type are made against profit/loss for the period. The classification and accounting of business acquisitions that took place before January 1, 2004 has not been reassessed in accordance with IFRS 3 in connection with the determination of the consolidated opening balance sheet on January 1, 2004 in accordance with IFRS.

Joint venture

For purposes of accounting, joint ventures are companies for which the Group has joint control over operational and financial management through a contractual arrangement with one or more parties. Interests in joint ventures are consolidated using the equity method of accounting. The equity method entails the value of holdings in joint ventures reported in the consolidated accounts being equivalent to the Group's share of the joint ventures' shareholders' equity, as well as consolidated goodwill and any other consolidated surplus or deficit. In consolidated profit/loss for the period, "Participations in earnings of joint venture" is reported as the Group's share of a company's earnings adjusted for any impairment, amortization or reversals of acquired surpluses or deficits. These shares in earnings less any dividends received from joint ventures comprise the main change in the carrying amount of interests in joint ventures. Any discrepancy at the point of acquisition between the cost of the holding and the owning company's share of the identifiable assets and liabilities of the joint venture is reported in accordance with the same principles that apply for acquisitions of subsidiaries.

Transactions eliminated on consolidation

Intra-group receivables and liabilities, income and expenses and unrealized gains or losses arising from intra-group transactions between Group companies are eliminated in full when preparing the consolidated accounts. Unrealized gains and losses arising from transactions with joint ventures are eliminated to a degree corresponding to the Group's ownership of those companies, however, unrealized losses are eliminated only to the extent that there is no indication that any impairment should be recognized.

Foreign currency

Transactions in foreign currencies

Transactions in foreign currencies are translated into the functional currency corresponding to the exchange rate in force on the transaction date. The functional currency is the currency of the primary economic environment in which the Group's companies carry out their business. Monetary assets and liabilities in foreign currencies are translated at the exchange rate in effect on the balance sheet date. Exchange differences arising from translation are recognized against profit/loss for the period. Non-monetary assets and liabilities recognized at their historical costs are translated at the exchange rate applicable at the time of the transaction. Exchange differences referring to operating assets and liabilities are recognized in the operating result, while exchange rate movements referring to financial assets and liabilities are recognized in net financial income.

Foreign businesses' financial statements

Assets and liabilities in foreign operations, including goodwill and other Group surplus and deficit values, are translated from the foreign operations' functional currency to the Group's reporting currency. Translation is applied at the exchange rate in effect on the balance sheet date. Income and expenses in a foreign operation are translated at an average exchange rate approximating the currency exchange rates applicable on the relevant transaction dates. Translation differences arising in connection with the translation of a foreign net investment and accompanying effects of hedges of net investments are recognized under other comprehensive income and are accumulated in an equity component entitled separate translation reserve. Non-current internal loans are considered to form part of the net investment in the foreign operation. On the sale of a foreign operation, the accumulated translation differences attributable to the operation are recognized, less any currency hedging against profit/loss for the period.

Classification

Non-current assets and liabilities essentially consist of amounts that are expected to be recovered or paid later than 12 months after the balance sheet date. Current assets and current liabilities essentially consist of amounts that are expected to be recovered or paid within 12 months of the balance sheet date.

Intangible assets

Goodwill

Consolidated goodwill consists of acquired goodwill and goodwill arising in connection with investments in subsidiaries. Goodwill represents the difference between the cost of the business combination and the fair value of acquired assets, assumed liabilities and contingent liabilities. After the acquisition, goodwill is reported at cost less any impairment losses. Goodwill is distributed to cash generating units and is tested at least once annually to determine possible impairment needs; see Note 12 Goodwill.

Other intangible assets

Customer relations consist of acquired assets that have been identified in the acquisition analysis in connection with the acquisition of shares in subsidiaries. At the time of acquisition, customer relations are valued at fair value, which is considered to be equivalent to the cost. After the acquisition, customer relations are recognized at cost less accumulated amortization and impairment losses.

Computer programs and licenses are reported at cost less accumulated amortization and impairment. Costs incurred for internally generated goodwill and internally generated brands are recognized against profit/loss for the period when the cost is incurred. Additional expenditures for capitalized intangible assets are recognized as assets on the Balance Sheet only when they increase the future economic benefit associated with the specific asset. All other expenditures are expensed as they are incurred.

Amortization principles for customer relations and other intangible assets

Amortization is recognized in profit/loss for the period on a straight-line basis over the estimated useful life of the asset. Intangible assets which can be amortized are amortized from the date on which they are available for use. The useful lives of assets are reassessed on an ongoing basis, although at least once per year.

The estimated useful lives are:

Useful life

	Group	Parent Company
Licenses	3–10 years	3–10 years
Software	3–10 years	3–10 years
Customer relationships	6–10 years	-
Other intangible assets	3–10 years	-

Tangible assets

Tangible assets are recognized in the Group at cost less accumulated depreciation and any impairment. The cost includes the purchase price plus expenses directly attributable to the asset in order to put it in place and make it appropriate for use in accordance with the purpose of the acquisition. Examples of directly related expenses included in the cost of an asset are expenses for shipping, handling, installation, legal title, consultant services and legal services.

Additional expenditures are only added to the cost if it is probable that the future economic benefits associated with the asset will flow to the Company and the cost can be measured reliably. All other subsequent expenses are expensed in the period they arise.

Depreciation principles for tangible assets

Depreciation is recognized on a straight-line basis over the estimated useful life of the asset. Land is not depreciated. The useful lives and residual values of assets on an annual basis at the least.

Useful life

	Group	Parent Company
Buildings	15–50 years	-
Plant and machinery	3–15 years	-
Equipment, tools, fixtures and fittings	3–10 years	3–10 years

Impairment of tangible and intangible assets as well as holdings in a joint venture

IAS 36 is applied to identify impairments for assets other than financial instruments reported according to IAS 39, deferred tax assets reported according to IAS 12 and inventories reported according to IAS 2. Assets held for sale and disposal groups are tested in accordance with IFRS 5. The carrying amounts for the exempted assets are measured according to the respective standards.

If there is any indication of impairment, the asset's recoverable amount is estimated. The asset's recoverable amount is the highest of the value in use and fair value minus selling expenses. In measuring value in use, future cash flows are discounted at the pre-tax rate that shall reflect current market assessments of risk-free interest and the risks specific to the asset. In the event that the asset's carrying amount exceeds the recoverable amount, the carrying amount is impaired down to the recoverable amount. Impairments are charged against profit/loss for the period.

Impairment testing of goodwill is carried out annually, regardless of whether an indication of an impairment requirement exists or not. Impairment losses on assets within the scope of IAS 36 are reversed if there is both indication that the impairment no longer exists and there has been a change in the assumptions on which the recoverable amount was measured. A reversal is only made to the extent that the asset's carrying amount does not exceed the carrying amount that would have been reported if no impairment had taken place. However, impairments of goodwill are not reversed.

Inventories

Inventories are measured at the lower of cost and net sales value. The cost of inventories includes expenses incurred to acquire inventory assets and transport them to their current site and condition. The cost figure is based on weighted average prices. The cost of manufactured goods and work in progress includes a reasonable share of indirect expenses based on normal capacity. Net sales value is the estimated selling price in current operations less the estimated expenses to make the asset ready for sale and to effect a sale. Net sale value is estimated based on estimates of the current market price.

Provisions

Provisions differ from other liabilities in the uncertainty that prevails regarding the time of payment or the amount required to settle the obligation. Provisions are recorded in the Balance Sheet when the Group has an existing legal or informal obligation as a result of an event occurring and when it is likely that an outflow of financial resources will be required to settle the obligation and a reliable estimate of the amount can be made. Provisions are made in the amount corresponding to the best estimate of that required to settle present obligations on the balance sheet date. If the payment date has a significant effect, provisions are calculated through discounting of the expected future cash flow at a pre-tax interest rate that reflects current market assessments of the time value of money and, where applicable, the risks associated with the liability.

Financial instruments

Financial instruments that are reported in the balance sheet include receivables, liquid funds and accounts payable.

A financial asset or financial liability is recognized in the balance sheet when the company becomes party to the instrument's contractual terms. Accounts receivable are recognized in the balance sheet once the invoice has been sent, which normally occurs in connection with delivery of the Group's goods and services and the associated transfer of risk. Liabilities are recognized once the counter party has completed its task and there is a contractual obligation to pay, even though an invoice may not yet have been received. A financial asset or part thereof is derecognized when the contractual rights are realized, mature or are no longer under the company's control. The same also applies for parts of a financial asset. A financial liability or part thereof is derecognized in the balance sheet when contractual obligations are met or otherwise extinguished. The same applies for part of a financial liability. Purchases and sales of financial assets are recognized using trade date accounting. The trade date is the date the company enters into a contractual obligation to buy or sell the asset. A financial asset and a financial liability are offset and the net amount recognized in the balance sheet only when the company has a legally enforceable right to set off the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. At initial recognition, financial instruments are classified based on the purpose for which the instrument was acquired, which affects subsequent measurement. The measurement categories BE Group uses are as follows.

Classification and measurement of financial instruments

Amortized cost – financial assets

The Group only classifies its financial assets as assets recognized at amortized cost when the following requirements are met:

the asset is included in a business model where the goal is to collect contractual cash flows, and
contractual terms give rise to cash flows at specific times that only consist of principal and interest on the outstanding principal.

Cash and cash equivalents and accounts receivable are recognized at amortized cost.

Accounts receivable

Accounts receivable are amounts attributable to customers for goods sold in the operating activities. Accounts receivable generally fall due for payment within 30-60 days and all accounts receivable have therefore been classified as current assets. Accounts receivable are initially recognized at fair value. The Group holds accounts receivable for the purpose of collecting contractual cash flows and therefore measures them at subsequent recognition times at amortized cost with application of the effective interest method. The Group's method for the calculation of impairment losses/provisions for accounts receivable is described below.

Other receivables

In addition to accounts receivable, there are also non-current receivables and some other receivables recognized at amortized cost. The receivables are classified as current receivables if they fall due for payment within 12 months of the reporting date; otherwise they are classified as non-current receivables.

Amortized cost – financial liabilities

All of the Group's financial liabilities are measured at amortized cost after the initial recognition. Liabilities measured at amortized cost are comprised of interest-bearing liabilities, accounts payable and other liabilities. Financial liabilities are classified as current liabilities if they fall due for payment within 12 months of the reporting date; otherwise they are classified as non-current liabilities.

Impairment of financial assets

The Group evaluates the anticipated future credit losses related to investments in debt instruments recognized at amortized cost. At each reporting date, the Group recognizes a provision for anticipated credit losses. The measurement of the anticipated credit losses reflects an objective and probability-weighted amount that is determined by evaluating an interval of possible outcomes; the time value of money and reasonable and verifiable information that is available without unnecessary costs or efforts on the balance sheet date for earlier events, current conditions and forecasts of future financial conditions.

The Group applies the simplified method for the calculation of anticipated credit losses on accounts receivable. This method means that anticipated losses during the entire term of the receivable are used as the starting point for accounts receivable. See Note 31 for more information on the impairment model.

Hedge accounting

In order to fulfill the requirements on hedge accounting in accordance with IAS 39, there must be a clear link to the hedged item. Moreover, the hedging must effectively protect the hedged item, the hedging documentation must be drawn up and the effectiveness must be quantifiable. Upon entering into the transaction, the Group documents the relationship between the hedge instrument and the hedged item, as well as the Group's objective for the risk management and the risk management strategy regarding the hedge. The Group also documents its assessment, both when the hedge is initiated and thereafter on an on-going basis, of whether the instruments used in the hedging transactions have been and will continue to be effective in counteracting changes attributable to the hedged items.

Investments in foreign subsidiaries (net assets including goodwill) have been hedged for currency risk to a certain extent through borrowing in the same currency as the investments. At the close of the period, these currency loans are entered at the rate applicable on the balance sheet date and the effective portion of the period's exchange rate differences are recognized in other comprehensive income. The accumulated changes are classified as translation reserves in equity; the ineffective part is recognized in net financial items in the income statement and accordingly affects the profit or loss for the period. Accumulated gains and losses in equity are reclassified to the income statement when foreign operations are divested in part or in whole.

Warranties

A warranty provision is recognized when an agreement has been made including stipulations of future commitments that are deemed likely to materialize.

A warranty provision may also be recognized when the underlying products or services are sold. The provision is based on historical data concerning warranties and consideration of possible outcomes in relation to the probabilities associated with the outcomes. However, such warranty commitments do not represent a significant item in the Group's financial statements.

Onerous contracts

A provision for an onerous contract is recognized when anticipated benefits that the Group expects to receive from a contract are less than the unavoidable expenses to fulfill the obligations as set out in the contract.

Revenues

The Group generates revenues from the sale of goods. There is normally a performance commitment in the form of goods in contracts with customers for finished products. Revenue is recognized at the time when control over the asset has been transferred to the customer. To assess when control is transferred, the transfer of risks and benefits is the indicator assigned the greatest importance in the Group for determining when control has been transferred to the customer. The time at which control over the goods is transferred to the customer thereby depends mostly on what freight terms are stated in the customer contract.

The Group takes into account variable compensation in the form of volume discounts when the transaction price is determined. The revenue from the sale of goods is recognized based on the price in the contract less estimated volume discounts. Historical data is used to estimate the discounts' anticipated value and the revenue is only recognized to the extent that it is very likely that a material reversal will not arise. A liability (which is included in the item Accrued expenses and deferred income) is recognized for anticipated volume discounts in relation to the sales up to the balance sheet date.

A receivable is recognized when the goods have been delivered as the compensation at this time is certain since only the passing of time is required before payment is made. No financing component is deemed to exist at the time of sale as the credit period is normally 30-60 days.

Since the Group's performance commitment originates from contracts that have an original anticipated term of less than one year, information is not provided on the transaction price for unfulfilled performance commitments.

The Group's commitment to repair or replace defective products in accordance with normal guarantee rules is recognized as a provision. Guarantee commitments beyond this do not occur.

It happens that the Group sells goods with a right of return. For these contracts, a repayment liability (which is included in the item Other liabilities) and an asset for the right to receive back the product from the customer (included in Other current assets) are recognized for goods the Group expects to receive in return. In order to assess the scope of the returns, historical data is used at a portfolio level at the time of sale. As the scope of the returns have been stable in recent years, it is very probable that a material reversal of the recognized revenues will not occur. The validity of the assumption and the estimated amount of returns are revalues at each balance sheet date.

Employee benefits

Short-term employee benefits

Short-term employee benefits such as wages and salaries, including bonuses, paid leave, sick leave and social security benefits are recognized in the period in which the employee has performed services in exchange for the benefit.

Pensions

The Group's pension agreements are mainly defined contribution plans. The defined benefit plan for retirement pensions and survivors' pensions for white collar employees in Sweden are secured through an insurance policy provided by Alecta. According to a statement (UFR 3) from the Swedish Financial Reporting Board, this is a multiple-employer defined benefit plan. The Company has not had access to information that would permit recognition of the plan as a defined benefit which is why the pension plan in accordance with ITP is secured through insurance with Alecta such as a defined contribution plan.

Under a defined contribution plan, the enterprise pays fixed contributions into a fund (a separate legal entity) and has no further legal or constructive obligation to make further payments. The pension expense to be recognized in the period is the contribution payable in exchange for service rendered by employees during the period.

Termination benefits

When the Company terminates employment, benefits to the employee are recognized as an ongoing expense for as long as the employee performs work for the Company. When the employee is immediately discharged from duty, the entire benefit amount is immediately recognized as an expense.

Provisions are recognized in connection with terminations only if the Company is demonstrably obligated to terminate employment prior to the normal date or when compensation is offered to encourage voluntary departure and it is likely that the offer will be accepted and that the number of employees who will accept the offer can be reliably estimated.

Financial income and expenses

Financial income and expenses consist mainly of interest income on bank balances, receivables and fixed income securities, interest expense on loans, exchange differences and allocated transaction expenses for raised loans.

Transaction expenses for raised loans and credits are accrued over the life of the loans and credits by applying the effective interest method.

Tax

Income taxes are recognized in profit/loss for the period except where an underlying transaction is recognized directly in other comprehensive income, whereupon the related tax effect is likewise recognized in other comprehensive income. Current tax is tax to be paid or refunded in the current year, which includes adjustment of current tax attributable to previous periods. Deferred tax assets are measured using the balance sheet method based on temporary differences between the carrying amount of an asset or liability and its tax value on assets and liabilities. Deferred tax assets are measured based on how temporary differences are expected to even out and applying the tax rates and regulations that have been enacted or announced at the balance sheet date.

Temporary differences are not taken into consideration for consolidated goodwill.

Deferred tax assets pertaining to deductible temporary differences and loss carryforwards are recognized only if it is considered probable they will result in lower tax payments in the future.

Leases

The Group as lessee

Upon entering an agreement, the Group determines if the agreement is, or contains, a lease based on the substance of the agreement. An agreement is, or contains, a lease if the agreement transfers the right to decide over the use of an identified asset for a certain period of time in exchange for compensation.

Lease liabilities

At the start date for a lease (i.e. the date when the underlying asset becomes available for use), the Group recognizes a lease liability corresponding to the present value of the lease payments that are paid during the leasing period. The leasing period is determined as the interminable period together with periods to extend or cancel the agreement if the Group is reasonably certain of exercising the options. The leasing payments include fixed payments (less any discounts and the like in connection with the signing of the lease to be obtained), variable lease charges that depend on an index or a price and amounts expected to be paid according to residual value guarantees. The leasing payments also include the exercise price for an option to buy the underlying asset or penalties that are payable upon termination in accordance with a termination option if such options are reasonably certain to be used by the Group. Variable lease charges that do not depend on an index or a price are recognized as an expense in the period to which they are attributable.

For the calculation of the present value of the leasing payments, the Group uses the implicit interest rate in the agreement if it can easily be established and otherwise, the Group's marginal borrowing rate as of the start date for the lease is used. After the start date of a lease, the lease liability increases to reflect the interest rate on the lease liability and decreases by the paid lease charges. The value of the lease liability is also restated as a result of modifications, changes to the leasing period, changes in leasing payments or changes in an assessment to buy the underlying asset.

Right of use assets

The Group recognizes right of use (ROU) assets in the statement of financial position at the start date for the lease. ROU assets are valued at cost less accumulated amortization and any impairment losses, and adjusted for revaluations of the lease liability. The cost of ROU assets includes the initial value that is recognized for the attributable lease liability, initial direct expenses, and any advance payments made at or before the start date for the lease less any discounts and the like received in connection with the signing of the lease.

On condition that BE Group is not reasonably certain that the Group will assume ownership of the underlying asset at the end of the lease, the ROU asset is amortized straight-line over the leasing period. For the leases where the Group is reasonably certain of assuming ownership, the ROU asset is amortized over the underlying asset's useful life, as follows.

Useful life

	Group
Buildings	15–50 years
Cars	3–15 years
Equipment, tools, fixtures and fittings	3–10 years
Other	3–10 years

Applied accounting principles regarding leases before 2019

Leases are classified in the consolidated accounts as financial or operating leases. BE Group is the lessee in all leases.

Operating leasing agreements

Leases of assets where the lessor retains the financial risks and rewards normally associated with ownership of the asset are classified as operating leases. Lease payments related to operating leases are recognized as an expense in the Income Statement on a straight line basis over the lease term. Incentives received in connection with the signing of a new agreement are recognized in profit/loss for the period on a straight line basis over the lease term. Variable payments are recognized as an expense in the periods in which they arise.

Financial leasing agreements

Leases of assets where the financial risks and rewards normally associated with ownership of the asset are transferred to BE Group are classified as finance leases. The lease asset is recognized as a tangible asset, with the same depreciation rates applied as for tangible assets, while the future obligation to pay lease fees to the lessor is recognized as a liability in the Balance Sheet. Leased assets are depreciated according to the same principles that apply to other assets of the same type. Future lease obligations are apportioned between non-current and current liabilities. Minimum lease payments are apportioned between the finance charge and amortization of the outstanding liability. The interest expense is allocated over the leasing period so that every reporting period is charged with an amount corresponding to a constant periodic rate of interest on the remaining balance of the liability. Variable payments are recognized as an expense in the periods in which they arise.

Segment reporting

An operating segment is a component of the Group that conducts business operations from which it can derive revenues and incur expenses, including intra-group transactions and whose operating result is reviewed regularly by the Group's senior executives as a basis for the allocation of resources to the segment and the assessment of its results. Independent financial information shall also be available for components of the Group defined as segments. BE Group has defined the concept of "senior executives" as Group Management.

The Group's primary basis for identifying segments is geographical areas. The Internal management is based primarily on reporting and follow-up of returns from the Group's geographical areas. The geographical areas are grouped by country or group of countries, based on similarities with regard to risks and returns. For additional information on operating segments, please see Note 1 Operating segments.

Earnings per share

The calculation of earnings per share is based on the profit for the period within the Group which is attributable to the Parent Company's shareholders and on the weighted average number of outstanding shares during the year. In calculating earnings per share before and after dilution, the average number of shares is adjusted to take into consideration the effects of the Share Savings program.

Cash Flow Statement

The Cash Flow Statement is prepared using the indirect method. Reported cash flow covers only transactions that result in incoming and outgoing payments.

Parent Company accounting principles

The Parent Company has prepared its Annual Report in accordance with the annual accounts act (1995:1554) and the Swedish Financial Reporting Board's recommendation RFR 2 Accounting for legal entities (Sept. 2012). Published statements by the Swedish Financial Reporting Board for listed companies are also applied. RFR 2 means that the Parent Company, in the annual report for the legal entity, must apply all EU-approved IFRS and statements as far as this is possible within the framework of the Swedish law on the safeguarding of pension commitments and taking the connection into account between reporting and taxation. The recommendation specifies exemptions and additions to IFRS that shall be made.

Classification and presentation

The Parent Company's Income Statement and Balance Sheet are prepared in accordance with the model detailed in the Annual Accounts Act, while the report on comprehensive profit/loss, Statement of Changes in Equity and the Statement of Cash Flows are based on IAS 1 Presentation of Financial Statements and IAS 7 Statement of Cash Flows respectively. The differences in the Income Statement and Balance Sheet of the Parent Company compared with the consolidated accounts mainly involve the reporting of financial revenues and expenses, assets and equity.

Participations in subsidiaries

Participations in subsidiaries are reported in the Parent Company in accordance with the cost method. This means that transaction expenses are included in the carrying amount of holdings in subsidiaries. In the consolidated accounts, transaction expenses are charged directly against profit/loss when they are incurred. Anticipated dividends from subsidiaries are recognized when the Parent Company has the sole right to decide the amount of the distribution and the Parent Company has decided on the size of the distribution before the subsidiary published its financial statements. Dividends received from Group companies are recognized in their entirety as income in the Income Statement.

Shareholder contributions

Shareholders' contributions paid are reported as an increase in shares and participations in Group companies, to the extent that impairment is not required. In the receiving Company, shareholder contributions are reported directly in equity.

Financial instruments

In accordance with the rules in the Swedish Financial Reporting Board's recommendation RFR 2 and the connection between accounting and taxation, the rules on financial instruments and hedge accounting in IAS 39 are not applied in the Parent Company as a legal entity. In the future, IAS 39 will continue to be applied only to the consolidated accounts. Financial assets in the Parent Company are measured at cost less impairment losses, if any and current financial assets are measured at the lower of cost and fair value. Liabilities that do not constitute derivative liabilities are measured at the accrued cost. Possible derivative assets are measured in accordance with the lower of cost and fair value, while contingent derivative liabilities are measured according to the highest value principle.

Taxes

Untaxed reserves in the Parent Company are recognized including deferred tax liability. Untaxed reserves are apportioned in the consolidated accounts between deferred tax liability and equity.

Leasing

The rules regarding recognition of leases according to IFRS 16 are not applied in the Parent Company. This means that lease charges are recognized as expenses straight-line over the leasing period, and that ROU assets and lease liabilities are not included in the Parent Company's balance sheet. Identification of a lease is, however, done according to IFRS 16, meaning that an agreement is, or contains, a lease if the agreement transfers the right to decide over the use of an identified asset for a certain period of time in exchange for compensation.

Financial guarantees

The Parent Company's financial guarantee contracts consist of guarantees on behalf of subsidiaries. A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment as contractually agreed. The Parent Company applies RFR 2 p. 72, which is an easing of regulations compared to the rules in IAS 39 with regard to financial guarantee contracts issued on behalf of subsidiaries. The Parent Company recognizes financial guarantee contracts as provisions in the Balance Sheet when it has an obligation for which payment will probably be required to achieve settlement.

Group contributions in the Parent Company

Group contributions paid or received are reported as appropriations.

Financial liabilities

Financial liabilities primarily comprise liabilities to credit institutions. Liabilities to credit institutions are initially valued at amounts received, less any setup fees, and are then valued at the accrued acquisition value. Interest expenses are reported on a rolling basis in the Income Statement. Capitalised set-up fees are reported directly against the loan liability to the extent that the loan agreement's underlying loan guarantee has been utilised, and are periodised in the Income Statement (under Other financial expenses) over the contractual term of the loan. If a loan agreement is terminated or otherwise ceases to obtain at a point in time prior to the end of the original contractual term, capitalised set-up fees are taken up as income. If a current agreement is renegotiated during the contractual term, any additional fees in connection with the renegotiation are periodised over the remaining contractual term of the loans.

Notes

Note 1 – Operating segments
Note 2 – Costs divided by type of expense
Note 3 – Employees, personnel costs and executive remuneration
Note 4 – Auditors' fees and reimbursements
Note 5 – Profit/loss from participations in Group companies
Note 6 – Other operating income
Note 7 – Other operating expenses
Note 8 – Financial income
Note 9 – Financial expenses
Note 10 – Taxes
Note 11 – Earnings per share
Note 12 – Goodwill
Note 13 – Other intangible assets
Note 14 – Tangible assets
Note 15 – Lease agreements
Note 16 – Participations in Group companies
Note 17 – Participations in joint ventures
Note 18 – Other securities held as non-current assets
Note 19 – Interest-bearing receivables, group companies
Note 20 – Inventories
Note 21 – Prepaid expenses and accrued income
Note 22 – Equity
Note 23 – Provisions
Note 24 – Appropriation of earnings
Note 25 – Deferred tax assets and tax liabilities
Note 26 – Pledged assets and contingent liabilities
Note 27 – Current interest-bearing liabilities
Note 28 – Accrued expenses and deferred income
Note 29 – Supplementary disclosures to cash flow statement
Note 30 – Related-party transactions
Note 31 – Financial risk management
Note 32 – Investment commitments
Note 33 – Key estimates and assessments
Note 34 – Significant events after balance sheet date

NOTE 1 - OPERATING SEGMENTS

2019	Sweden & Polen	Finland & Baltics	Parent Company & consolidated items	Group
External sales	2,207	2,152	0	4,359
Internal sales	2	5	-7	-
Net sales	2,209	2,157	-7	4,359
Participation in earnings of joint venture	3	-	-	3
Underlying operating result	79	65	-50	94
Inventory gains/losses	-6	-	-	-6
Items affecting comparability	-	-	-	-
Operating result	73	65	-50	88
Net financial items				-16
Profit/loss before tax				72
Taxes				-22
Profit/loss for the year				50
Underlying operating margin	3.6%	3.0%	neg	2.1%
Operating margin	3.3%	3.0%	neg	2.0%
Shipped tonnage (thousands of tonnes)	168	173	-1	340
Operating capital	754	538	560	1,852
Investments	17	7	1	25
Depreciation/amortization of tangible/intangible assets	13	16	0	29
Depreciation of right of use assets	-	-	84	84
Other non-cash flow items	-2	3	-8	-7
Total non-cash flow items	11	19	76	106
2018	Sweden & Polen	Finland & Baltics	Parent Company & consolidated items	Group
---	---	---	---	---
External sales	2,466	2,290	47	4,803
Internal sales	10	9	-19	-
Net sales	2,476	2,299	28	4,803
Participation in earnings of joint venture	4	-	-	4
Underlying operating result	104	68	-55	117
Inventory gains/losses	15	13	-1	27
Items affecting comparability 1)	4	-	-16	-12
Operating result	123	81	-72	132
Net financial items				-16
Profit/loss before tax				116
Taxes				-36
Profit/loss for the year				80
Underlying operating margin	4.2%	2.9%	neg	2.4%
Operating margin	5.0%	3.5%	neg	2.8%
Shipped tonnage (thousands of tonnes)	187	190	0	377
Operating capital	749	581	2	1,332
Investments	16	18	1	35
Depreciation/amortization of tangible/intangible assets	13	18	7	38
Other non-cash flow items	1	2	1	4
Total non-cash flow items	14	20	8	42

1) During 2018, the result was impacted by items affecting comparability totaling SEK -12 M, of which, SEK -16 M was attributable to the exit from the business in Czech Republic and SEK 4 M was attributable to the release of part of the provision related to maintenance of the warehouse in Malmö.
The effects regarding IFRS 16 have been reported under Parent Company & consolidated items and have not been allocated to the two business areas. The comparative figures for 2018 are prepared according to previous accounting principles regarding leasing (IAS 17).

BE Group is a trading and service company in steel, stainless steel and aluminium. Customers are primarily in the construction and manufacturing industries. Since customers' needs vary widely, BE Group offers different sales solutions: inventory sales, production service sales, and direct sales. The cooperation between BE Group and a particular customer can comprise of one or more of these sales solutions.

BE Group's basic products are of a similar nature, regardless of the customers or markets to which they are distributed. Part of BE Group's strategy is also to further process materials at its own production facilities through various types of production services, which in some cases result in completed components being delivered straight into customers' production lines.

BE Group's risks and opportunities differ between the different geographical markets to which its products are distributed. For that reason, BE Group has chosen geographical areas as its primary segments.

The operating structure and internal reporting to Group management and the Board of Directors are therefore based primarily on reporting of geographical business areas. Each segment's result, assets and liabilities include operating items attributable to the ongoing activities of the segment.

The allocation of operating capital per segment is based on the location of the business and includes items directly attributable and items that can be allocated by segment in a reasonably reliable manner. Operating capital allocated by segment comprises tangible assets, goodwill and other intangible assets, participations in joint ventures, deferred tax assets and working capital less deferred tax liability and provisions. Financial assets and liabilities have not been divided by segment but are reported as other assets/liabilities. Capital expenditures for the segment include investments in intangible and tangible assets.

The financial information per segment is based on the same accounting principles as those that apply for BE Group. The Group is using a number of alternative performance measures (see Alternative performance measures for more information). One of those is the underlying operating result which is the operating result adjusted for items affecting comparability and inventory gains and losses. These represent the difference between the cost of goods sold at acquisition cost and the cost of goods sold at replacement value. BE Group applies an internal calculation model. The model has not been reviewed by the Company's auditors. Internal prices between BE Group's segments are based on the principle of "arm's-length transactions", that is, transactions between parties that are mutually independent, thoroughly informed and have an interest in the transactions. Prices of goods are based on current purchase prices plus an internal markup margin.

Data on products, services and geographical regions

BE Group consists of two business areas – Sweden & Poland and Finland & Baltics. BE Group's other operations are gathered within Parent Company and consolidated items.

Sweden & Poland

Business area Sweden & Poland includes BE Group's operations in Sweden, which are conducted under the name BE Group Sverige AB and Lecor Stålteknik AB and the operations in Poland under the name BE Group Sp.z o.o.. BE Group Sverige AB offers sales and distribution of BE Group's products, such as commercial steel, stainless steel and aluminium. In addition to distribution of materials, production service is also provided, whereby the Company processes materials in various ways to meet specific customer requirements. Examples include cutting to length, shot blasting, painting, drilling and cutting in various forms. The Company provides additional services including advanced logistics solutions and material advisory services. In addition, BE Group Sverige AB owns 50 percent of the thin plate processing company ArcelorMittal BE Group SSC AB. Lecor Stålteknik AB provides steel construction solutions to customers in the Swedish construction sector and the polish operations are providing production services to Polish and Nordic customers.

Finland & Baltics

Business area Finland & Baltics includes BE Group's operations in Finland, which are conducted under the name BE Group Oy Ab, and the operations in the Baltic States under the names BE Group AS, Estonia, BE Group SIA, Latvia and UAB BE Group, Lithuania. Sales and distribution of BE Group's products, such as commercial steel, stainless steel and aluminium, are offered in all operations. In Finland, production services are also provided on a large scale. Examples include cutting to length, shot blasting, painting, drilling and cutting in various forms. In addition, the company in Finland offers its customers logistics solutions, advisory services and financing of working capital.

Parent Company & consolidated items

Parent Company & consolidated items include the Parent Company, Group eliminations and also parts of the Group's operations undergoing restructuring; BE Group Czech Republic, BE Group Slovakia, BE Group Produktion Eskilstuna and RTS Estonia. The restructuring of these operations are in all essence completed.

The effects regarding IFRS 16 have been reported under Parent Company & consolidated items and have not been allocated to the two business areas.

Group

Sales by business area and product group	Sweden & Poland		Finland & Baltics		Parent company & consolidated items		Total
	2019	2018	2019	2018	2019	2018	2019	2018
Long steel products	1,013	1,096	560	587	-1	0	1,572	1,683
Flat steel products	665	730	1,062	1,139	0	0	1,727	1,869
Stainless steel	370	418	382	423	0	31	752	872
Aluminium	76	88	136	135	-5	6	207	229
Other	85	144	17	15	-1	-9	101	150
Total	2,209	2,476	2,157	2,299	-7	28	4,359	4,803

Sales by country based on customer's domicile	2019	2018
Sweden	2,156	2,431
Finland	1,872	1,935
Other countries	331	437
Total	4,359	4,803
Tangible, intangible and financial assets by country	2019	2018
Sweden	476	476
Finland	286	308
Other countries	10	9
Total	772	793

Parent company

Sales of intra-group services by country based on domicile of subsidiary	2019	2018
Sweden	46	50
Finland	42	45
Other countries	9	13
Total	97	108

NOTE 2 – COSTS DIVIDED BY TYPE OF EXPENSE

The specification of costs divided by type of expense refers to items included in the Income Statement under cost of goods sold, selling expenses, administrative expenses and other operating expenses.

Group	2019	2018
Material costs	3,437	3,763
Salaries, other remuneration and social security expenses	393	396
Other external costs	328	476
Depreciation, amortization and write-downs 1)	113	38
Other operating expenses	4	6
Total	4,275	4,679

1) In depreciation, amortization and write-downs 2019, SEK 84 M is associated with amortization on right of use assets related to IFRS 16.

NOTE 3 – EMPLOYEES, PERSONNEL COSTS AND EXECUTIVE REMUNERATION

In this note, amounts are given in SEK thousands unless otherwise stated.

Average number of employees	2019	of whom men	2018	of whom men
Parent Company
Sweden	11	54%	10	51%
Total in the Parent Company	11	54%	10	51%
Subsidiaries
Sweden	301	83%	309	83%
Finland	262	95%	263	94%
Estonia	17	71%	20	68%
Latvia	12	74%	11	70%
Lithuania	10	80%	10	76%
Poland	39	95%	29	92%
Czech Republic	-	-	16	68%
Total for subsidiaries	641	88%	658	86%
Group total	652	87%	668	86%

Specification of gender distribution in Group management

	2019	2018
Gender distribution, Group management	Percentage women	Percentage women
Parent Company
Board	20%	18%
Other senior executives	25%	25%
Group
Board	10%	10%
Other senior executives	13%	11%

Salaries, other remuneration and social security expenses

Group	2019	2018
Salaries and remunerations	294,514	294,914
Pension expense, defined-contribution plans	35,936	36,484
Social security contributions	62,579	64,689
	393,029	396,087
Parent Company	2019
---	---	---
	Salaries and remunerations	Social security expenses
Parent Company	12,490	7,845
(of which, pension expenses)1)		(3,218)

1) Of the Parent Company's pension expenses, 1,614 (1,473) KSEK refers to senior executives. There are no outstanding pension commitments.

Salaries and other remunerations distributed between the Parent Company and its subsidiaries and between senior executives and other employees 1)

	2019		2018
	Senior executives2)	Other employees	Senior executives2)	Other employees
Parent Company	6,994	5,496	7,641	4,458
(of which, bonuses, etc.)	(-)	(-)	(967)	(215)
Subsidiaries	7,352	270,094	6,488	271,227
(of which, bonuses, etc.)	(406)	(3,632)	(314)	(7,675)
Group total	14,346	275,590	14,129	275,685
(of which, bonuses, etc.)	(406)	(3,632)	(1,281)	(7,890)

1) Salaries and other remuneration include base salary and supplementary vacation pay.
2) Senior executives include Board members, members of Group Management and company presidents.

Defined benefit plans

Pension obligations for retirement pensions and family pensions for white-collar employees in Sweden are secured through an insurance policy provided by Alecta. According to a statement (UFR 10) from the Swedish Financial Reporting Board, this is a multiple-employer defined benefit plan. The Company has not had access to information that would permit recognition of its proportional share of the plan's commitments, plan assets and costs that meant that the plan could not be recognized as a defined-benefit plan. The ITP 2 pension plan secured through insurance provided by Alecta is accordingly recognized as a defined contribution plan. The premium for the defined-benefit retirement pension and family pension is calculated individually, depending on salary, already earned pension and anticipated remaining period of service. Anticipated fees for the next reporting period for ITP 2 insurance subscribed with Alecta amounts to SEK 7.6 M (5.6).

The collective funding ratio is comprised of the fair value of Alecta's assets as a percentage of insurance obligations computed according to Alecta's actuarial assumptions, which do not accord with IAS 19. The collective consolidation level shall normally be allowed to vary between 125 and 155 percent. If Alecta's collective consolidation level is below 125 percent or exceeds 155 percent, action should be taken with the aim of creating conditions for the consolidation level to return to the normal interval. In the event of low consolidation, one action may be to raise the agreed price for new subscription and expansion of existing benefits. In the event of high consolidation, one action may be to introduce premium reductions. At the end of 2019, Alecta's surplus expressed as the collective funding ratio amounted to 148 percent (142).

Defined contribution pension plans

The Group has defined contribution pension plans for employees in Sweden for which expenses are fully paid by the companies. Pension plans in Finland and other countries are treated as defined contribution plans. For defined contribution plans, pension contributions are paid to a pension insurance company and recognized as an expense in profit and loss for the accounting period in which they occur. There are defined contribution plans in other countries for which the expenses are paid partially by the subsidiaries and partially by employee contributions. Payments are made regularly to these plans according to plan rules.

Executive remuneration

Total remuneration to the President and CEO and other senior executives consists of base pay, variable remuneration, pension and other benefits. These remuneration components are based on the guidelines for executive remuneration adopted by the 2019 Annual General Meeting, which are detailed in the Board of Directors' Report.

The following tables provide details of actual remunerations and other benefits paid in financial years 2019 and 2018 to Board members, the President (who is also the CEO) and other senior executives. The latter are those individuals who, alongside the President and CEO, are members of Group Management.

Remunerations and benefits 2019	Basic salary 5)/ Board fee	Variable remuneration	Others benefits	Pension expenses	Other remuneration	Total	Pension commitments
Chairman of the Board
Jörgen Zahlin 1)	310	–	–	–	–	310	–
Directors
Carina Andersson	210	–	–	–	–	210	–
Lars Olof Nilsson	280	–	–	–	–	280	–
Petter Stillström 1)	400	–	–	–	–	400	–
Mikael Sjölund	210	–	–	–	–	210	–
President and CEO
Anders Martinsson 2)	2,210	–	69	573	–	2,852
Peter Andersson from 3)	610	–	23	148	–	781	–
Other senior executives 4)	4,695	–	326	1,295	–	6,316	–
Total	8,925	–	418	2,016	–	11,359	–
Recognized as an expense in the Parent Company	6,994	–	216	1,614	–	8,824	–

1) Jörgen Zahlin was elected Chairman of the Board at the Extraordinary General Meeting in September, 2019, succeeding Petter Stillström, who remains as Member of the Board.
2) Anders Martinsson acted as CEO until September 30, 2019.
3) Peter Andersson started as CEO on October 1, 2019.
4) Other senior executives consist of three persons.
5) Basic salary also include supplementary vacation pay.

Remunerations and benefits 2018	Basic salary/Board fee	Variable remuneration	Others benefits 6)	Pension expenses	Other remuneration	Total	Pension commitments
Chairman of the Board
Petter Stillström	460	–	–	–	–	460	–
Directors
Charlotte Hansson 1)	70	–	–	–	–	70	–
Carina Andersson 2)	140	–	–	–	–	140	–
Lars Olof Nilsson	280	–	–	–	–	280	–
Jörgen Zahlin	250	–	–	–	–	250	–
Esa Niemi 3)	70	–	–	–	–	70	–
Mikael Sjölund 4)	210	–	–	–	51	261	–
President and CEO
Anders Martinsson	2,364	624	289	751	20	4,048	–
Other senior executives 5)	4,253	426	492	1,166	3	6,340	–
Total	8,097	1,050	781	1,917	74	11,919	–
Recognized as an expense in the Parent Company	6,292	967	578	1,473	23	9,333	–

1) Charlotte Hansson withdrew from the Board of Directors in connection with the Annual General Meeting in April, 2018.
2) Carina Andersson became board member in connection with the Annual General Meeting in April, 2018.
3) Esa Niemi withdrew from the Board of Directors in connection with the Annual General Meeting in April, 2018.
4) Mikael Sjölund has during the year had a separate assignment for Lecor Stålteknik AB. This has not been related to his assignment at the Board.
5) Other senior executives consist of three persons.
6) Other benefits include supplementary vacation pay.

Detailed below are the agreed terms for remuneration to the Board, the President and CEO and other senior executives. For an account of guidelines approved by the Annual General Meeting, see the Board of Directors' Report.

Board remuneration

The Chairman and other Board members are paid Board member fees as resolved by the Annual General Meeting. The Annual General Meeting resolved that Board member fees totaling SEK 1,260 thousands (1,260) will be distributed among the Board members as follows: SEK 420 thousands (420) to the Chairman of the Board and SEK 210 thousands (210) to each of the remaining Board members who are not employees of the Company. In addition, remuneration of SEK 70 thousands (70) will be paid to the Chairman of the Audit Committé and SEK 40 thousands (40) for each of the other members of the Audit Committee. No fees are paid to members of the Remunerations Committee. Other remuneration has been paid in the form of taxable travel expense reimbursements.

Remuneration to the President and CEO

Remuneration

In accordance with a decision by the Board of Directors, remuneration to the President and CEO normally takes the form of base salary, variable remuneration, pension and other benefits. The base salary of the President and CEO amounted to SEK 2,160 M (2,364). For the President and CEO, maximum variable remuneration payable is 50 percent of base salary. Potential bonus payments and the size of them are related to targets defined in advance and set by the Board.

Term of notice and severance pay

The President and CEO has a 9-month period of notice in the event of termination by the company and six months upon resignation. During the term of notice, the President and CEO is entitled to full pay and other benefits of employment, regardless of whether there is a duty to work or not. Members of Group management are not entitled to severance pay.

Pension benefits

In addition to benefits in accordance with the National Income Replacement Pension Act, pension contributions are made corresponding to 30 percent (30) of fixed annual salary plus vacation pay, which constitutes pensionable pay. BE Group AB's commitment is limited to paying the annual premium. Pension rights are not conditional on future employment.

Remunerations for other senior executives of the Parent Company and Group

Remuneration

Remuneration consists of base salary, variable remuneration, pensions and other benefits. The maximum variable remuneration payable to other senior executives is 30 percent of base salary. Whether or not bonuses are distributed and bonus amounts are determined by the CEO based on fulfillment of financial and individual targets.

Term of notice and severance pay

Other senior executives have a period of notice of up to 12 months when notice of termination is issued by BE Group. The senior executives are required to give six months' notice when resigning. During the term of notice, the senior executives are entitled to full pay and other benefits of employment. Members of Group management are not entitled to severance pay.

Pension benefits

For other senior executives, contribution-defined pension solutions are applied. BE Group's commitment is limited to paying the annual premium. Pension rights are not conditional on future employment. Pensionable pay consists of fixed annual salary plus average bonus for the past three years.

Remuneration Committee

Please see the Corporate Governance Report for more information about BE Group's preparation and decision process regarding executive remuneration.

NOTE 4 – AUDITORS' FEES AND REIMBURSEMENTS

Group	2019	2018
PwC
Audit assignments	2	2
Audit activities in addition to the audit assignment	–	–
Consultation on taxation	0	0
Other services	0	0
Total fees and compensation for expenses	2	2
Parent Company	2019	2018
PwC
Audit assignments	1	1
Audit activities in addition to the audit assignment	–	–
Consultation on taxation	–	–
Other services	0	0
Total fees and compensation for expenses	1	1

The total fee to PwC and its international network amounts to SEK 2 M (2) for the fiscal year 2019. The fee to the audit firm Öhrlings PricewaterhouseCoopers AB amounts to SEK 1 M (1).

NOTE 5 – PROFIT/LOSS FROM PARTICIPATIONS IN GROUP COMPANIES

Parent Company	2019	2018
Dividend	16	26
Write-down of shares in subsidiaries	-4	-4
Write-down of interest-bearing receivables from Group companies	-7	-2
Capital gain/loss due to divestment/liquidation of Group companies	–	–
Total	5	20

NOTE 6 – OTHER OPERATING INCOME

Group	2019	2018
Net movements in exchange rates on receivables/liabilities of an operating nature	1	–
Capital gains on sales of fixed assets	0	1
Rental income	–	3
Other	0	–
Total	1	4
Parent Company	2019	2018
---	---	---
Net movements in exchange rates on receivables/liabilities of an operating nature	–	0
Other	–	0
Total	–	0

NOTE 7 – OTHER OPERATING EXPENSES

Group	2019	2018
Net movements in exchange rates on receivables/liabilities of an operating nature	–	3
Restructuring expenses 1)	–	12
Other	4	3
Total	4	18
Parent Company	2019	2018
---	---	---
Net movements in exchange rates on receivables/liabilities of an operating nature	0	–
Restructuring expenses	–	–
Total	0	–

NOTE 8 – FINANCIAL INCOME

Group	2019	2018
Interest income from credit institutions	0	0
Other interest income	2	0
Net movements in exchange rates	8	–
Other	1	3
Total	11	3
Parent Company	2019	2018
---	---	---
Interest income, Group companies	17	18
Other interest income	–	–
Total	17	18

All interest income is attributable to financial assets measured at the amortized cost.

NOTE 9 – FINANCIAL EXPENSES

Group	2019	2018
Interest expense to credit institutions	11	12
Interest expense leasing acc. to IFRS 16	11	–
Other interest expense	0	0
Net movements in exchange rates	–	1
Other expenses	5	6
Total	27	19
Parent Company	2019	2018
---	---	---
Interest expense to credit institutions	11	12
Interest expense, Group companies	7	7
Net movements in exchange rates	7	17
Other expenses	–	–
Total	25	36

All interest expense is attributable to financial liabilities measured at amortized cost.

NOTE 10 – TAXES

Group	2019	2018
Current tax expense (–)/tax asset (+)
Tax expense/tax asset for the period	-11	-13
Adjustment of tax attributable to prior years	0	0
Total	-11	-13
Deferred tax expense (–)/tax asset (+)
Deferred tax attributable to temporary differences	–	–3
Deferred tax attributable to tax loss carryforwards	-10	-18
Deferred tax attributable to change in tax rate	–	-1
Deferred tax expense attributable to impairment of capitalized tax value attributable to tax-loss carryforwards	-1	-1
Others	–	–
Total	-11	-23
Total consolidated reported tax expense (–)/tax asset (+)	-22	-36
Parent Company	2019	2018
---	---	---
Current tax expense (–)/tax asset (+)
Tax expense/tax asset for the period	0	0
Adjustment of tax attributable to prior years	–	–
Total	0	0
Deferred tax expense (–)/tax asset (+)
Deferred tax attributable to tax loss carryforwards	-10	-16
Total	-10	-16
Total reported tax expense (–)/ tax asset (+) Parent Company	-10	-16

Reconciliation of effective tax
| Group | 2019 | 2018 |
| --- | --- | --- |
| Profit/loss before tax | 72 | 116 |
| Tax at prevailing rate for the Parent Company (21.4%) | -15 | -26 |
| Effect of different tax rates for foreign subsidiaries | 0 | 0 |
| Non-deductible expenses | -3 | -2 |
| Non-taxable revenues | 0 | 1 |
| Increase of loss carryforward
without corresponding capitalization of deferred tax | -4 | -8 |
| Taxes attributable to previous years | - | - |
| Share in earnings of joint venture | 1 | 1 |
| Other | -1 | -3 |
| Recognized effective tax | -22 | -36 |

Reconciliation of the effective tax rate for the Group is based on a weighted average of the nominal tax rates that apply to each of the companies within the Group included in continuing operations.

Reconciliation of effective tax	2019	2018
Parent Company
Profit/loss before tax	48	85
Tax at prevailing rate for the Parent Company (21.4%)	-10	-19
Non-deductible expenses	-3	-1
Non-taxable revenues	3	5
Other	0	-1
Recognized effective tax	-10	-16

Tax items recognized in other comprehensive income
| Group | 2019 | 2018 |
| --- | --- | --- |
| Current tax for currency risk hedging in foreign operations | 8 | 4 |
| Total tax in other comprehensive income | 8 | 4 |

Tax items recognized directly in equity
| Group | 2019 | 2018 |
| --- | --- | --- |
| Tax items recognized directly in equity | - | - |

NOTE 11 – EARNINGS PER SHARE

Group	2019	2018
Earnings per share before dilution (SEK)	3.87	6.13
Earnings per share after dilution (SEK)	3.87	6.13

The calculation of the numerator and denominator used in the calculation of earnings per share is detailed below.

Profit/loss for the year	2019	2018
Profit/loss for the year (SEK M)	50	80

Weighted average number of common shares outstanding before dilution (individual shares)
| | 2019 | 2018 |
| --- | --- | --- |
| Total ordinary shares at January 1 | 12,983,204 | 12,983,204 |
| Weighted common shares outstanding during the year, before dilution | 12,983,204 | 12,983,204 |

Weighted average number of common shares outstanding after dilution (individual shares)
| | 2019 | 2018 |
| --- | --- | --- |
| Weighted average ordinary shares outstanding, before dilution | 12,983,204 | 12,983,204 |
| Weighted common shares outstanding during the year, after dilution | 12,983,204 | 12,983,204 |

NOTE 12 - GOODWILL

Cash-generating units with goodwill

Goodwill	Sweden	Finland	Group total
Opening balance, January 1. 2018	314	238	552
Impairment	–	–	–
Exchange differences	–	11	11
Closing balance, December 31. 2018	314	249	563
Opening balance, January 1. 2019	314	249	563
Impairment	–	–	–
Exchange differences	–	3	3
Closing balance, December 31. 2019	314	252	566

Impairment testing

Cash generating units

The cash generating unit Sweden consists of the company BE Group Sverige AB, which is part of business area Sweden & Poland. The Finland cash generating unit consists of the company BE Group Oy Ab, which is a part of business area Finland & Baltics.

Recoverable amounts

Goodwill is tested for impairment at least once annually. This testing compares the recoverable amount with the carrying amount. Impairment testing was updated at December 31 and no impairment requirement in other cash-generating units was identified.

The recoverable amount of the cash generating units is determined by calculating their value in use. In calculating the value in use, a model is applied that is based on established business plans for 2020. These plans have then been adjusted so that any non-recurring effects or other exceptional effects are compensated with the aim of estimating a normalized cash flow. This has then been assumed to grow by 2 percent per year, which is expected to be in line with inflation.

For the calculation of value in use, estimated cash flows are discounted by a factor of 10.8 percent (10.8) before tax. The discount factor was determined using a model where the capital cost of the Company's equity is weighed together with the cost of the Company's interest bearing liability based on the debt/equity ratio. The cost of equity is assessed based on the risk-free interest rate, market and company-specific risk premium, and the Company's assessed Beta value, which is a measurement of how the Company's risk correlates to market risk. The Company has deemed that the same discount factor is applicable to all units in the Group.

Sensitivity analysis

A sensitivity analysis has been done where the variables included in the value-in-use model were changed and the effect on the recoverable amount was analysed. For the forecasted cash flow, growth, growth margin, working capital tied-up and investments are important factors. For the valuation, the discount rate is also an important parameter. For the model, investments have been assumed to be in line with depreciation and working capital tied-up is assumed to be in line with the outcome for 2019. The profit margin assumed in the model is also in line with the outcome for 2019. In the sensitivity analysis, the discount rate has been adjusted with +1 percent and growth has been adjusted with -1 percent, which shows that no further impairment requirements are needed. The sensitivity for lower underlying profit margins is slightly higher.

NOTE 13 – OTHER INTANGIBLE ASSETS

	Other intangible assets		Customer relations		Software and licenses		Total
Group	2019	2018	2019	2018	2019	2018	2019	2018
Accumulated cost
At January 1	4	5	34	34	148	145	186	184
Acquisitions	–	–	–	–	1	2	1	2
Disposals and scrappings	0	-5	-2	–	-4	–	-6	-5
Reclassification	–	3	–	–	2	–	2	3
Divested/liquidated operations	–	–	-32	–	–	–	-32	–
Exchange differences for the year	0	1	1	–	1	1	2	2
Total accumulated closing balance	4	4	1	34	148	148	153	186
Accumulated scheduled depreciation
At January 1	-2	-5	-26	-25	-144	-135	-172	-165
Disposals and scrappings	0	5	–	–	4	–	4	5
Reclassification	–	–	–	–	–	–	–	–
Divested/liquidated operations	–	–	26	–	–	–	26	–
Scheduled amortization for the year	0	-1	–	–	-2	-8	-2	-9
Exchange differences for the year	0	-1	-1	-1	-1	-1	-2	-3
Total accumulated depreciation	-2	-2	-1	-26	-143	-144	-146	-172
Accumulated impairment
At January 1	–	–	-8	-8	–	–	-8	-8
Divested/liquidated operations	–	–	8	–	–	–	8	–
Impairment losses for the year	–	–	–	–	–	–	–	–
Total accumulated impairment	–	–	–	-8	–	–	–	-8
Carrying amount at end of period	2	2	–	–	5	4	7	6
Amortization for the year is reported on the following lines in the income statement
Selling expenses	–	–	–	–	0	0	0	0
Administrative expenses	0	-1	–	–	-2	-8	-2	-9
Total	0	-1	–	–	-2	-8	-2	-9
Parent Company	2019	2018	2019	2018	2019	2018	2019	2018
---	---	---	---	---	---	---	---	---
Accumulated cost
At January 1	–	–	–	–	108	108	108	108
Acquisitions	–	–	–	–	–	–	–	–
Reclassification	–	–	–	–	1	–	1	–
Total accumulated closing balance	–	–	–	–	109	108	109	108
Accumulated scheduled depreciation
At January 1	–	–	–	–	-107	-100	-107	-100
Scheduled amortization for the year	–	–	–	–	-1	-7	-1	-7
Total accumulated depreciation	–	–	–	–	-108	-107	-108	-107
Carrying amount at end of period	–	–	–	–	1	1	1	1
Amortization for the year is reported on the following lines in the income statement
Administrative expenses	–	–	–	–	-1	-7	-1	-7
Total	–	–	–	–	-1	-7	-1	-7

NOTE 14 - TANGIBLE ASSETS

	Buildings and land		Plant and machinery		Equipment, tools, fixtures and fittings		New constructioning progress and advance payments for tangible assets			Total
Group	2019	2018	2019	2018	2019	2018	2019	2018	2019	2018
Accumulated cost
At January 1	19	21	537	507	162	159	4	14	722	701
Acquisitions	-	-	9	24	1	5	15	4	25	33
Disposals and scrappings	-	-2	-10	-15	-33	-6	-	-	-43	-23
Reclassification	-	-	-19	7	1	3	-5	-14	-23	-4
Exchange differences for the year	0	0	5	14	1	1	-	0	6	15
Total accumulated closing balance	19	19	522	537	132	162	14	4	687	722
Accumulated scheduled depreciation
At January 1	-17	-17	-440	-415	-149	-148	-	-	-606	-580
Disposals and scrappings	-	1	9	13	30	4	-	-	39	18
Reclassification	-	-	3	-2	-	-	-	-	3	-2
Scheduled depreciation for the year	-1	-1	-23	-24	-3	-4	-	-	-27	-29
Exchange differences for the year	-	-	-3	-12	-1	-1	-	-	-4	-13
Total accumulated depreciation	-18	-17	-454	-440	-123	-149	-	-	-595	-606
Accumulated impairment
At January 1	-	-	-2	-2	-3	-4	-	-	-5	-6
Disposals and scrappings for the year	-	-	0	-	2	1	-	-	2	1
Impairment losses for the year	-	-	-	-	-	-	-	-	-	-
Exchange differences for the year	-	-	0	0	0	0	-	-	-	-
Total accumulated impairment	-	-	-2	-2	-1	-3	-	-	-3	-5
Carrying amount at end of period	1	2	66	95	8	10	14	4	89	111
	Equipment, tools, fixtures and fittings
---	---	---
Parent Company	2019	2018
Accumulated cost
At January 1	2	1
Reclassifications	-1	-
Acquisitions	-	1
Total accumulated closing balance	1	2
Accumulated scheduled depreciation
At January 1	-1	-1
Scheduled depreciation for the year	-	-
Total accumulated depreciation	-1	-1
Carrying amount at end of period	0	1

NOTE 15 – LEASE AGREEMENTS

The Group has leases for real estate, vehicles, machinery and other equipment used in the operations. Leases of real estate and machinery generally have a leasing period of between three and 15 years, while that for vehicles and other equipment is generally between three and five years. The Group's obligations in leases are secured by the lessor's ownership.

Right of use assets

The table below presents the book value of the ROU assets and amortization per asset class and the financial year's additional ROUs.

2019	Buildings	Equipment, tools, fixtures and fittings
		Cars	Other	Total
Depreciation	-78	-4	-1	-1	-84
Closing balance, December 31, 2019	511	7	19	4	540

Additional ROUs during the 2019 financial year total SEK 40 M.

Lease liabilities

The table below presents the amounts recognized as lease liabilities in the consolidated balance sheet.

	2019
Non-current leasing liabilities	449
Current leasing liabilities	92
Total	541

The table below presents a maturity analysis regarding contractually undiscounted payments of the lease liabilities.

	2019
Maturity within 1 year	93
Maturity within 1-2 years	82
Maturity within 2-3 years	66
Maturity within 3-5 years	117
Maturity later than 5 years	228
Total	586

Earnings impact attributable to leases

The table below presents the amounts attributable to leases recognized in the consolidated income statement during the year.

Costs	2019
Depreciation of rights of use	84
Interest expenses for leasing liabilities	11
Total	95

The Group's total cash outflow attributable to leases amounted to SEK 89 M.

Uncommenced leasing commitments

The previously communicated machinery investment in Norrköping will be partially financed through leasing. The lease is expected to begin in the first half of 2020 and runs for 60 months. The lease liability at the start date of the lease is expected to amount to around SEK 18 M based on a 40-percent residual value and 60-month duration.

Lease fees for operational leasing 2018

	Group		Parent Company
	2018		2018
Lease fees, operational leasing	Minimum lease fees	Variable fees	Minimum lease fees	Variable fees
Buildings and land	92	-	2	-
Other	8	0	0	-
Total lease fees	100	0	2	-

Operational lease liabilities fall due for payment as follows:

	Group	Parent Company
Future maturities of minimum lease fees	2018	2018
Within one year	91	2
One to five years	288	6
Later than five years	238	–
Total	617	8

Financial leasing 2018

	Buildings and land	Plant and machinery	Total
Properties held under financial leases are included at a carrying amount of	1	17	18

Future minimum lease fees attributable to financial leasing fall due for payment as follows:

Group

Within one year	1	5	6
One to five years	–	11	11
Later than five years	–	2	2
Total future minimum lease fees	1	18	19
Amount representing interest	–	-1	-1
Total carrying value of lease liability	1	17	18

NOTE 16 – PARTICIPATIONS IN GROUP COMPANIES

Parent Company	2019	2018
Accumulated cost
At January 1	1,630	1,630
Acquisitions and capital contributions	–	–
Divestment and liquidation	–	–
Total accumulated cost	1,630	1,630
Accumulated impairment
At January 1	-758	-754
Divestment and liquidation	–	–
Impairment losses for the year	-4	-4
Total accumulated impairment	-762	-758
Carrying amount at end of period	868	872

Specification of the Parent Company and Group's holdings of investments in Group companies

Subsidiaries/Reg. No./Domicile	Participating interests	%	Carrying amount
BE Group Sverige AB, 556106-2174. Sweden	20,000	100	709
BE Group Oy Ab, 1544976-7. Finland	204,000	100	147
BE Group AS, 10024510. Estonia	40	100	0
BE Group SIA, 40003413138. Latvia	100	100	0
UAB BE Group, 211685290. Lithuania	100	100	–
BE Group Sp. z o.o, 0000006520. Poland	20,216	100	–
Lecor Stålteknik AB, 556584-6382. Sweden	1,000	100	12
BE Group Produktion Eskilstuna AB, 556788-2344. Sweden	5,000	100	–
RTS Eesti OÜ, 11657766. Estonia			–
			868
Acquisitions, capital contributions and impairments during the year	2019	2018
---	---	---
BE Group Sp. z o.o	–	-4
UAB BE Group	-4	–
	-4	-4

The impairments during the year is related to participations in Group companies.

NOTE 17 – PARTICIPATIONS IN JOINT VENTURES

BE Group owns 50 percent of ArcelorMittal BE Group SSC AB (company registration number 556192-8770, domiciled in Karlstad, Sweden). The interest in the joint venture company is reported in the consolidated accounts using the equity method, by which 50 percent of profit after tax for the joint venture company will be reported as a share in earnings included in the consolidated operating result of BE Group.

Earnings in joint venture ArcelorMittal BE Group SSC AB	2019	2018
Profit/loss before tax	6	11
Tax	-1	-2
Profit/loss after tax	5	9
Dividends received	5	9
Overview of income statements and balance sheets for the joint venture	2019	2018
Net sales	814	838
Operating result	7	12
Net financial items	-1	-1
Tax	-1	-2
Profit/loss for the year	5	9
	2019	2018
Non-current assets	195	200
Current assets excl. cash and equivalents	239	248
Cash and equivalents	6	2
Total assets	440	450
	2019	2018
Equity	274	279
Provisions	20	20
Interest-bearing liabilities	72	70
Other non-interest-bearing liabilities	74	81
Total equity and liabilities	440	450
Participations in joint ventures	2019	2018
Opening balance, cost	113	117
Dividends received	-5	-9
Share in earnings of joint venture	3	4
Rounding	-1	1
Carrying amount at year-end	110	113
Transactions with joint venture ArcelorMittal BE Group SSC AB	2019	2018
Receivables due from joint venture	-	-
Debts owed to joint venture	11	7
Sales to joint venture	-	-
Purchases from joint venture	90	98
Dividends received	5	9

Transactions with the joint venture are conducted at market prices and terms.

Impairment testing

Through BE Group Sverige AB, the Group is the owner of 50 percent of the shares in ArcelorMittal BE Group SSC AB and the value of the company's proportion was tested by the recoverable amount being compared with the carrying amount. The carrying amount consists of the book value.

The recoverable amount was estimated using a value in use based on cash flow forecasts for five years forward and an end value based on an annual rate of growth of 2 percent. Cash flows were calculated at present value with a discount rate of 11.5 percent before tax. The discount rate was determined based on the same methodology as in the testing of Goodwill (see Note 12) with the difference that the capital structure in joint ventures was used to weight together capital and interest expenses. The carrying amount is SEK 110 M.

NOTE 18 – OTHER SECURITIES HELD AS NON-CURRENT ASSETS

Group	2019	2018
Accumulated cost
At January 1	0	0
Divestments for the year	–	–
Exchange differences for the year	0	0
Carrying amount at end of period	0	0

NOTE 19 – INTEREST-BEARING RECEIVABLES, GROUP COMPANIES

Parent Company	2019	2018
Accumulated cost
At January 1	179	194
New receivables	57	72
Settled receivables	-15	-89
Impairment of receivables	–	-1
Exchange rate differences for the year	1	3
Carrying amount at end of period	222	179
Of which recognized as non-current	28	98
Of which recognized as current	194	81

NOTE 20 – INVENTORIES

Group	2019	2018
Inventories
Finished goods	321	329
Raw materials	307	303
Work in progress	14	19
Other	–	–
Total	642	651
Group	2019	2018
---	---	---
Obsolescence reserve, inventories
Carrying amount at January 1	-21	-24
Divested/liquidated operations	10	–
Translation difference	0	0
Change for the year	-4	3
Total obsolescence reserve, inventory	-15	-21

NOTE 21 – PREPAID EXPENSES AND ACCRUED INCOME

Group	2019	2018
Rent for premises	8	9
Insurance fees	4	4
Other items	6	16
Total prepaid expenses and accrued income	18	29
Parent Company	2019	2018
---	---	---
Other items	1	1
Total prepaid expenses and accrued income	1	1

NOTE 22 – EQUITY

Share capital and shares outstanding

Group	2019	2018
Issued capital at January 1	13,010,124	13,010,124
Issued capital at December 31	13,010,124	13,010,124

At December 31, 2019, registered share capital amounted to 13,010,124 (13,010,124) common shares. The quotient value per share is SEK 20.00 (20.00). Holders of common shares are entitled to dividends, the amount of which is set each financial year and shareholdings convey voting rights at the Annual General Meeting of one vote per share. All shares convey equal rights to the Company's remaining net assets.

Other capital contributions

Refers to capital contributions from shareholders. Includes share premium reserves transferred to the statutory reserve at December 31, 2005. Share premium reserve provisions are also reported as capital contributions as of January 1, 2006.

Reserves

Translation reserve

The translation reserve comprises of exchange differences arising from translation of the financial statements of foreign operations that have prepared their financial statements in a currency other than the currency in which consolidated financial statements are presented. The Parent Company and Group present their financial statements in Swedish kronor (SEK).

Hedging of net investments in foreign subsidiaries is also recognized in the translation reserve. This consists of exchange rate differences arising from the revaluation of liabilities recognized as hedging instruments of a net investment in a foreign operation. The amount is based on tax consequences.

Group	2019	2018
Carrying amount at January 1	41	31
Exchange rate difference for the year	31	21
Hedging of net investments in foreign subsidiaries	-36	-15
Tax attributable to hedging of net investment in foreign subsidiary	8	4
Carrying amount at end of period	44	41

A reclassification of SEK 7 M has occurred during 2019 regarding divested/liquidated operation.

Retained earnings including profit/loss for the year

Retained earnings including profit for the year include earnings in the Parent Company and its subsidiaries. This equity item includes prior provisions to the statutory reserve, excluding transferred share premium reserves.

Treasury shares

Group	2019		2018
	Number	Amount	Number	Amount
Balance at January 1	26,920	21	26,920	21
Closing balance at end of period	26,920	21	26,920	21

Acquisition of treasury shares are recognized directly in retained earnings.

Dividend

According to BE Group's dividend policy, the Group will distribute at least 50 percent of the consolidated profit after tax, over time. Dividends shall be distributed taking BE Group's financial position and prospects into account. In accordance with the decision taken at the Annual General Meeting in April 2019, dividend of SEK 1.75 was paid per share, corresponding to 29 percent of the result after tax for the financial year of 2018. The Board of Directors proposes that no dividend (1.75) will be paid for the financial year of 2019.

Parent Company

Restricted equity

Restricted reserves

Dividends that reduce restricted reserves are prohibited.

Statutory reserve

The purpose of the statutory reserve has been to save a portion of net profits not used to cover retained losses. The statutory reserve also includes the amount transferred to the share premium reserve prior to January 1, 2006.

Non-restricted equity

Retained earnings

Comprises of prior years' non-restricted equity after distribution of profits, if any. Combined with profit for the year, the total makes up non-restricted equity, which is the amount available for distribution to shareholders.

Share premium reserve

When shares are issued at a premium, that is, when more must be paid for the shares than their quotient value, an amount equal to the amount received in excess of the quotient value of the shares must be transferred to the share premium reserve. The amount transferred to the share premium reserve from January 1, 2006 is included in non-restricted equity.

NOTE 23 – PROVISIONS

Group	2019	2018
Restructuring costs	–	17
Other	1	4
Total	1	21
Of which:
Non-current	0	0
Current	1	21
Total	1	21
2019	Restructuring costs	Other
---	---	---
Carrying amount at January 1	17	4
New provisions	–	–
Amount used during the period	-17	-3
Carrying amount at end of period	–	1

Expected date of outflow of resources:

2020	–	1
2021–2024	–	–
Total	–	1

Parent Company

The Parent Company currently holds no provisions (0).

NOT 24 – APPROPRIATION OF EARNINGS

The Board of Director’s proposal for the appropriation of earnings

The Board of Directors proposes that no dividend (1.75) will be paid for the financial year of 2019.

Funds available

Share premium reserves	239,719,829	SEK
Retained earnings	72,651,044	SEK
Loss for the year	38,241,473	SEK
Total	350,612,346	SEK
Balance carried forward	350,612,346	SEK
Total	350,612,346	SEK

NOTE 25 – DEFERRED TAX ASSETS AND TAX LIABILITIES

2019

Group	Deferred tax assets	Deferred tax liabilities	Net
Intangible assets	–	-21	-21
Buildings and land	0	–	0
Machinery and equipment	–	-1	-1
Inventory	0	–	0
Accounts receivable	1	–	1
Other provisions	–	–	–
Interest-bearing liabilities	–	–	–
Loss carryforwards	19	–	19
Other 1)	1	-22	-21
	21	-44	-23
Offset	0	–	0
Net deferred tax liability	21	-44	-23

2018

Group	Deferred tax assets	Deferred tax liabilities	Net
Intangible assets	0	-21	-21
Buildings and land	0	0	0
Machinery and equipment	0	-2	-2
Inventory	0	0	0
Accounts receivable	1	–	1
Other provisions	0	0	0
Interest-bearing liabilities	0	–	0
Loss carryforwards	30	–	30
Other 1)	2	-21	-19
	33	-44	-11
Offset	0	0	0
Net deferred tax liabilities	33	-44	-11

1) Mostly related to a deferred tax liability in Estonia. In Estonia, the tax is paid first when the dividend is paid to the Parent Company.

2019

Parent Company	Deferred tax assets	Deferred tax liabilities	Net
Loss carryforwards	18	–	18
	18	–	18
Offset	–	–	–
Net deferred tax assets	18	–	18

2018

Parent Company	Deferred tax assets	Deferred tax liabilities	Net
Loss carryforwards	27	–	27
	27	–	27
Offset	–	–	–
Net deferred tax assets	27	–	27

Change of deferred tax in temporary differences and loss carryforwards

Group

2019	Carrying amount at beginning of period	Recognized in profit or loss	Recognized in equity 1)	Carrying amount at end of period
Intangible assets	-21	–	0	-21
Buildings and land	-2	2	–	0
Machinery and equipment	-2	1	–	-1
Inventory	0	0	–	0
Accounts receivable	1	0	–	1
Other provisions	0	–	–	0
Interest-bearing liabilities	2	-2	–	–
Loss carryforwards	30	-11	–	19
Other	-19	-2	–	-21
	-11	-12	0	-23

Group

2018	Carrying amount at beginning of period	Recognized in profit or loss	Recognized in equity 1)	Carrying amount at end of period
Intangible assets	-20	0	-1	-21
Buildings and land	-1	-1	0	-2
Machinery and equipment	-3	1	0	-2
Inventory	0	0	0	0
Accounts receivable	1	0	0	1
Other provisions	0	0	0	0
Interest-bearing liabilities	2	0	0	2
Loss carryforwards	49	-19	0	30
Other	-15	-4	0	-19
	13	-23	-1	-11

Change of deferred tax in temporary differences and loss carryforwards

Parent Company

2019	Carrying amount at beginning of period	Recognized in profit or loss	Recognized in equity	Carrying amount at end of period
Loss carryforwards	27	-9	–	18
	27	-9	–	18

Parent Company

2018	Carrying amount at beginning of period	Recognized in profit or loss	Recognized in equity	Carrying amount at end of period
Loss carryforwards	43	-16	–	27
	43	-16	–	27

Of the Group's capitalized deferred tax assets on tax loss carryforwards, assets of SEK 1 M (1) are limited to a period of five years. These assets refers to Poland.

Unrecognized deferred tax assets

In the balance sheet, deferred tax assets have not been recognized for tax loss carryforwards for a deferred tax value of SEK 2 M (2), which are attributable to the foreign subsidiaries. The unrecognized amounts are equivalent to the portion of such carryforwards considered unlikely to be utilizable against future taxable results.

NOTE 26 – PLEDGED ASSETS AND CONTINGENT LIABILITIES

Pledged assets to credit institutions

Group	2019	2018
Liens on assets	1,185	1,172
Property mortgages	–	–
Shares in subsidiaries	–	1,018
Total	1,185	2,190
Parent Company	2019	2018
Promissory notes receivable	329	326
Shares in subsidiaries	–	856
Total	329	1,182

Financial assets pledged as collateral

The Parent Company has promissory notes receivable from BE Group Sverige AB and BE Group Oy Ab pledged as collateral for external loan agreements. The carrying amount is equal to the amount reported as pledged collateral. Please see Note 31 Financial risk management with regard to significant terms and conditions of external loan agreements.

Contingent liabilities

Group	2019	2018
Guarantees	6	6
Other items	7	8
Total	13	14
Parent Company	2019	2018
Guarantee obligations for the benefit of subsidiaries	9	14
Total	9	14

The Parent Company provides a joint and several guarantee covering subsidiaries' payment of receivables to materials suppliers. In addition to these reported commitments, the Parent Company has also provided customary guarantees for subsidiaries' obligations to pay rent to property owners. Please see Note 15 for further information about lease agreements.

NOTE 27 – CURRENT INTEREST-BEARING LIABILITIES

Group	2019	2018
Overdraft facility
Credit limit	150	100
Unutilized part of credit limit	-150	-100
Utilized credit amount	–	–
Current leasing liabilities	92	–
Other current interest-bearing liabilities	6	5
Total current interest-bearing liabilities	98	5

Disclosures concerning collateral are provided in Note 26 Pledged assets and contingent liabilities

NOTE 28 – ACCRUED EXPENSES AND DEFERRED INCOME

Group	2019	2018
Accrued salaries	42	42
Accrued social security expenses	10	10
Bonuses to customers	3	4
Other items	18	20
Total accrued expenses and deferred income	73	76
Parent Company	2019	2018
Accrued salaries	1	2
Accrued social security expenses	1	1
Other accrued expenses	5	5
Total accrued expenses and deferred income	7	8

NOTE 29 – SUPPLEMENTARY DISCLOSURES TO CASH FLOW STATEMENT

Group	2019	2018
Interest paid and dividends received
Dividends received	–	–
Interest received	0	0
Interest paid	-22	-12
Adjustment for non-cash items
Depreciation, amortization and write-down of assets 1)	113	38
Unrealized exchange rate differences	–	–
Capital gain/loss on sale of fixed assets	0	2
Difference between participation in joint venture and dividends received	2	5
Provisions and other items not affecting liquidity	-9	-3
Total	106	42
Parent Company	2019	2018
Interest paid and dividends received
Dividends received	16	26
Dividends paid	-23	–
Interest received	17	18
Interest paid	-19	-20
Adjustment for non-cash items
Depreciation and write-down of assets	1	7
Unrealized exchange rate differences	–	–
Total	1	7

1) In depreciation, amortization and write-downs 2019, SEK 84 M is associated with amortization on right of use assets related to IFRS 16.

Reconciliation of debt

	Cash flow		Items not affecting cash flow
Group	31/12/18		Acquisitions	New lease agreements	Exchange rate differences	31/12/19
Overdraft facility	–		–	–	–	–
Factoring	0		–	6	–	6
Bank loan	530		–	–	–	6
Lease liability	18		-4	–	527	0
Total	548		-4	6	527	6
	Cash flow		Items not affecting cash flow
---	---	---	---	---	---	---
Group	31/12/17		Acquisitions	New lease agreements	Exchange rate differences	31/12/18
Overdraft facility	–		–	–	–	–
Bank loan	526	-13	–	–	17	530
Lease liability	13	-5	–	10	0	18
Total	539	-18	–	10	17	548

NOTE 30 – RELATED-PARTY TRANSACTIONS

Group

During the year, the Group had transactions with joint venture company ArcelorMittal BE Group SSC AB. See Note 17 for further details.

In other regards, no transactions have taken place between BE Group and related parties that have had a material impact on the Company's position and results.

See Note 3 for disclosures on remuneration and benefits paid to senior executives and Board members.

Parent Company

The Parent Company has decisive control over its subsidiaries (see Note 16) and has had the following transactions with related parties:

Parent Company’s transactions with subsidiaries	2019	2018
Sales of services	97	108
Purchases of services	-7	-7
Interest income	17	18
Interest expense	-7	-7
Dividend received (+)/paid (-)	16	26
Group contributions received(+)/paid (-)	7	33
Claims on related parties on balance day	271	291
Debt to related parties on balance day	-124	-98

NOTE 31 – FINANCIAL RISK MANAGEMENT

In its operations, BE Group is exposed to a number of financial risks. The management of these risks is regulated through the Group’s finance policy. The finance policy is established by the Board and provides a framework for BE Group’s management of the financial risks in its operations. BE Group maintains a centralized finance function that is responsible for identifying and managing the financial risks in accordance with the established policy.

The finance function reports to the President and CEO of BE Group.

BE Group’s ongoing operations cause a number of financial risks. These consist of market risk (currency and interest risk), refinancing risk (liquidity risk) and credit risk. The goals that have been established in the finance policy are stated under the respective heading below.

Market risk

Market risk is the risk that fluctuations in market rates, such as interest and exchange rates, will impact the Group’s profits or financial position.

Currency risk

By reason of its international operations, BE Group is exposed to currency risk through exchange rate fluctuations. BE Group’s currency exposure comprises both transaction exposure and translation exposure.

Transaction exposure

Transaction exposure arises when the Group conducts purchasing in one currency and sales in another, meaning that the transaction exposure is attributable to accounts receivable and payable. BE Group’s purchases are denominated mainly in SEK and EUR, while sales are denominated in local currency. BE Group’s objective is to minimize the short-term and long-term impact of movements in foreign exchange rates on the Company’s profit and equity. This is mainly achieved by matching revenues and expenses in business transactions with currencies other than SEK. When matching cannot be achieved, the Group sometimes utilizes forward contracts for currency hedging. All currency hedging is performed by the Group’s central finance function in the Parent Company. At year-end, BE Group had no outstanding forward contracts relating to transaction exposure.

During 2019, BE Group’s transaction exposure in EUR amounted to EUR 58 M (51), consisting of the difference between actual purchasing and sales in EUR. The Group mainly makes its purchases in EUR while sales are in local currency. The real effect of the transaction exposure affected operating profit/loss by SEK -1 M (-2). Based on income and expenses in foreign currency for 2019, it is estimated that a change of +/- 5 percent in the SEK against the EUR would give an effect of about +/- SEK 3 M in the operating result. On the balance sheet date, the Group had operating liabilities of EUR 0 M net and financial liabilities of EUR 43 M.

Translation exposure

As of the balance sheet date, net assets are allocated among the following currencies:

Amount	SEK M
SEK	486	53%
EUR	443	48%
Others	-7	-1%
Total	922	100%

When the net assets of foreign Group companies are restated in SEK, translation differences arise in connection with exchange rate fluctuations that affect consolidated equity. The Parent Company, BE Group AB, had until August 2019 loans in EUR to reduce translation exposure arising from the Finnish and Estonian operations, respectively. In the consolidated financial statements, hedge accounting was until then applied in accordance with the principles for hedging net investments in foreign currency.

In connection with the refinancing in 2019, the hedge was concluded. In the consolidated financial statements, hedge accounting was applied in accordance with the principles for hedging net investments in foreign currency until August 2019. The balances that remain in the reserve that originate from the hedging of the currency translation reserve from the hedging relationship where hedge accounting is no longer applied amount to a negative SEK -61 M. No hedge accounting has been applied in the Parent Company.

See also “Accounting principles” concerning management of hedge accounting for net investments.

Net investment in foreign operations	2019	2018
Carrying amount (bank loans)	–	441
Carrying amount in EUR	–	43
Hedging quota	–	1:1
Change in the loans carrying amount due to changes in exchange rates since January 1	–	18
Changes in value of the hedged item to determine effectiveness	–	18

The Group's earnings are affected by the currency rates used in the translation of the results of its foreign units. Based on conditions in 2019, it is estimated that a 5 percent strengthening of the SEK against the EUR would entail an effect of SEK -1 M on operating result in the translation of the earnings of foreign units.

Interest risk

Interest risk is attributable to fluctuations in market interest rates and their effect on the Group's loan portfolio. Consolidated interest-bearing liabilities are mainly subject to variable interest or short terms of fixed interest.

In accordance with the finance policy, BE Group works to minimize the effect on the Group's profit/loss before tax due to fluctuations in market interest rates. BE Group's objective is to maintain the average fixed rate term of one to twelve months. The fixed rate term was kept short during the year and was approximately one month (three) as of the balance sheet date.

At the end of the year, the total interest-bearing debt excl. IFRS 16 was SEK 542 M (548). Interest-bearing assets in the form of cash and bank balances amounted to SEK 168 M (108).

A change in interest rates of one percent would affect consolidated net financial items by approximately SEK +/- 5 M and consolidated equity by approximately SEK +/- 4 M. The sensitivity analysis has been conducted on the basis of current net debt at the end of the period.

The table below details the consolidated interest-bearing liabilities outstanding at December 31, 2018 and December 31, 2019.

Loan terms, maturity structure/fixed rate terms and fair value

		Nominal amount in original currency		Carrying amount (SEK M)		Fixed interest terms number of days		Maturity
(SEK M)		2019	2018	2019	2018	2019	2018	2019
Factoring	EUR M	1	–	6	–	–	–	2020-12-31
Financial lease, SEK	SEK M	–	2	–	2	–	–	2019-2022
Financial lease, EUR	EUR M	–	2	–	16	–	–	2019-2024
accrued interest				–	–
Total financial leasing liability				6	18
Of which, current liability				6	5
Parent Company 1)
Bank loan, SEK	SEK M	90	90	87	89	–	–	2022
Bank loan, EUR	EUR M	43	43	449	441	–	–	2022
accrued interest				0	–
Total interest-bearing liabilities, Parent Company				536	530
Of which, current liability				–	–
Total interest-bearing liabilities, Group				542	548
Of which, current liability				6	5

1) In addition to its external interest-bearing liabilities, the Parent Company has Group-internal liabilities amounting to EUR 4 M (4) and SEK 17 M. The recognized amount totals SEK 59 M (41). The liabilities mature on December 31, 2020 with interest rates based on three-month EURIBOR. There is no accrued interest on the balance sheet date. In addition to these liabilities, the Parent Company has interest-bearing liabilities related to the intra-group cash pool that amount to SEK 49 M (29) as per the balance sheet date. The interest applied in the cash pool is based on STIBOR T/N.

The recognized amount for interest-bearing liabilities constitutes a good approximation of the fair value.

Refinancing risk (liquidity risk)

BE Group is a net borrower and a refinancing risk arises in connection with the extension of existing loans and the raising of new loans. Access to external financing, which is affected by factors such as the general trend in the capital and credit markets, as well as the borrower's creditworthiness and credit capacity, may be limited and there may be unforeseen events and costs associated with this. The borrowing strategy focuses on securing the Group's borrowing needs, both with regard to long-term financing needs and day-to-day payment commitments. BE Group works to maintain satisfactory payment capacity by means of unutilized credit facilities and through active control of its working capital, which is the main item affecting the Group's liquidity.

Maturity structure, financial liabilities

Financial liabilities

	2019	2018
Maturity within 90 Days	410	513
Maturity within 91–180 Days	7	4
Maturity within 181–365 Days	24	8
Maturity within 1–5 years	560	543
Maturity later than 5 years	0	0
Total	1,001	1,068

The table above details the maturity structure for financial liabilities and shows the undiscounted future cash flows. BE Group has an overdraft facility of SEK 150 M, of which SEK 0 M had been utilized as of December 31, 2019, see Note 27. Of the financial liabilities that fall due for payment within one to five years, the largest part relate to the Parent Company's credit facility maturing in 2022.

Credit agreement

Current credit agreement with Skandinaviska Enskilda Banken was signed 2019 and have a maturity of three years with an option for extension of another 1+1 years.

The key figures measured are net debt/equity ratio and interest coverage ratio. The covenants are measured quarterly, and the interest coverage ratio is based on the trend over the past 12-month period. On the balance sheet date, the Group has unutilized credit facilities in an amount of SEK 236 M (including overdraft facilities).

Credit risk

When entering into new business relations and extending existing ones, BE Group makes a commercial assessment. The risk that payment will not be received on accounts receivable represents a customer credit risk. BE Group applies credit policies to manage this risk by limiting the outstanding credit extended and terms for various customers. Short credit terms and the absence of risk concentrations towards individual customers and specific sectors contribute to reducing credit risk in Business Area Sweden & Poland and Finland & Baltics.

The spread of risk among the customer base is satisfactory as no individual customer accounted for more than 5 percent (5) of sales in 2019. The ten largest customers combined accounted for about 13 percent (13) of sales.

Credit exposure arises in conjunction with placements of cash and cash equivalents and derivatives trading. BE Group manages the risk that a counterparty will default by selecting creditworthy counterparties and limiting the commitment per counterparty. In all material respects, the Group's credit exposure coincides with the carrying amount of each class of financial instrument.

Provision for accounts receivable 2019

In order to calculate anticipated credit losses, accounts receivable have been grouped based on credit risk characteristics and the number of days of delay. The anticipated credit loss levels are based on the customers' loss history. Historical losses are then adjusted to take into consideration current and prospective information about macroeconomic factors that can affect the customers' possibilities of paying the receivable. The historical loss level is adjusted based on the anticipated changes in these factors. Accounts receivable are written off when there is no reasonable expectation of repayment. Indicators that there is no reasonable expectation of repayment include that the debtor fails with the repayment plan or that contractual payments are more than 90 days delayed. Credit losses on accounts receivable are recognized as credit losses – net within the operating result. Reversals of amounts previously written off are recognized in the same line in the income statement.

	Not overdue		Overdues 1–30 days		Overdues 31–90 days		Overdues more than 90 days		Total
Group	2019	2018	2019	2018	2019	2018	2019	2018	2019	2018
Accounts receivable – gross	336	397	43	67	7	6	1	13	387	483
Loss	0	-1	0	-1	-2	0	-1	-12	-3	-13
Expected loss %	0%	0%	0%	1%	29%	2%	100%	89%	1%	3%
	2019	2018
---	---	---
Provision at January 1	13	19
Increase of loss reserve, change accounted for in income statement	1	2
Reversals of reserves	-2	-3
Realized losses	-1	-6
Exchange rate differences	0	1
Divested/liquidated operations	-8	-
Provision at December 31	3	13

Impairments

The Group has two kinds of financial assets that are in the application area for the model for anticipated credit losses:

Accounts receivable attributable to sales of goods
Cash and equivalents

Cash and cash equivalents are within the application area for impairments according to IFRS 9; the impairment that would come into question has been deemed immaterial. See above for information on anticipated credit losses regarding accounts receivable.

Valuation of financial assets and liabilities

In all material respects, fair value coincides with the carrying amount in the Balance Sheet for financial assets and liabilities. The total carrying amounts and fair value as per asset class are shown in the table below:

Group	Measurement category
A	Financial assets and liabilities valued at fair value via profit and loss for the period
B	Amortized cost
C	Financial assets available for sale
D	Financial liabilities measured at amortized cost
	Carrying value according to balance sheet
---	---
2019
Assets
Other securities held as non-current assets	0
Non-current receivables	0
Accounts receivable	387
Other receivables	33
Prepaid expenses and accrued income	18
Cash and equivalents	168
Liabilities
Non-current interest-bearing liabilities	536
Current interest-bearing liabilities	6
Accounts payable	398
Other liabilities	66
Accrued expenses and deferred income	73
	Carrying value according to balance sheet
---	---
2018
Assets
Other securities held as non-current assets	0
Non-current receivables	0
Accounts receivable	470
Other receivables	23
Prepaid expenses and accrued income	29
Cash and equivalents	108
Liabilities
Non-current interest-bearing liabilities	543
Current interest-bearing liabilities	5
Accounts payable	468
Other liabilities	68
Accrued expenses and deferred income	76

The assessment of the fair value of the financial assets and liabilities has been carried out in accordance with level 2, with the exception of cash and cash equivalents, which are valued in accordance with level 1. The Group also holds shares/participations in unlisted companies, which are included in the assessment category of "Financial assets valued at fair value via profit and loss for the period".

Risk management and insurance

The responsibility for risk management within BE Group lies with the Group's central finance function. The objective of these efforts is to minimize the total cost of the Group's loss risks. This is accomplished by continually improving loss prevention and loss limitation in operations and through a Group-wide insurance solution.

NOTE 32 – INVESTMENT COMMITMENTS

Substantial investment commitments within the Group refers to production investments in Norrköping totaling around SEK 60 M. Of the total investment, around SEK 34 M refers to investment in production equipment that is partly financed through leasing. The investment will be concluded during the first half of 2020 and will clearly strengthen the Group's competitiveness. For further information on leasing commitments, see Note 15.

BE Group has no other principal investments in progress, nor future investments regarding which the Board of Directors has made a clear commitment.

NOTE 33 – KEY ESTIMATES AND ASSESSMENTS

Certain assumptions about the future and certain estimates and assessments as of the balance sheet date are particularly significant to measurement of assets and liabilities in the balance sheet. According to management assessment, none of the asset and liability amounts reported are associated with risk that material adjustment will be required in the next year.

Impairment of goodwill

The value of recognized goodwill is tested at least once a year to determine whether the asset may be impaired. The test requires assessment of the value in use of the cash generating unit, or groups of cash generating units, to which the goodwill has been allocated. This in turn requires that the expected future cash inflows from the cash generating units must be estimated and a relevant discount rate determined to calculate the present value of cash inflows.

See Note 12 for a description of impairment testing and assumptions used in the process.

Assessment of the leasing period

BE Group determines the leasing period as the non-terminable leasing period, together with both periods covered by a possibility to extend the lease if the Group is reasonably certain of exercising the option and periods that are covered by a possibility to terminate the lease if the Group is reasonably certain of not exercising that option.

BE Group has leases that contain extension options and/or termination options. The Group assesses whether or not it will exercise the options with reasonable certainty. This means that the Group considers all relevant factors that create incentives for the Group to exercise an extension/termination option.

The Group makes a new assessment of the leasing period if a significant event occurs or if circumstances, which are within the Group's control, significantly affect its ability to exercise or not exercise an extension/termination option (e.g. in the event of substantial adaptations of a leased asset).

For additional information on the Group's leasing agreements, please see Note 15.

Inventories

The cost of inventory is tested upon each close of books against estimated and assessed future selling prices. In the judgment of BE Group's management, necessary impairments have been recognized based on the information available when the closing accounts were prepared.

Assessment of deferred tax assets and liabilities

Assessments are made to determine both current and deferred tax assets and tax liabilities, particularly with regard to deferred tax assets. The likelihood of the deferred tax assets being utilized to offset future taxable profits is hereby assessed. The fair value of these future taxable gains may deviate with regard to future business climate and earnings capacity or changed tax rules.

NOTE 34 – SIGNIFICANT EVENTS AFTER BALANCE SHEET DATE

At present there is a considerable uncertainty in the world regarding what consequences the spread of Covid-19 (coronavirus) will result in and that poses a risk for virtually all companies in the world.

No other significant events have taken place after the end of the period.

APPROPRIATION OF EARNINGS

The Board of Directors' proposal for the appropriation of earnings

The Board of Directors proposes to the Annual General Meeting that no dividend (1.75) be paid for the financial year 2019.

Funds available

Retained earnings	312,370,873	SEK
Profit for the year	38,241,473	SEK
Total	350,612,346	SEK
Balance carried forward	350,612,346	SEK
Total	350,612,346	SEK

The consolidated financial statements and the annual report were prepared in compliance with the International Financial Reporting Standards defined in Regulation (EC) 1606/2002 of the European Parliament and the Council of July 19, 2002 concerning application of International Financial Reporting Standards and generally accepted accounting principles and give a true and fair view of the financial position and performance of the Group and the Parent Company.

The Board of Directors' Report provides a true and fair view of the Parent Company and the Group's operations, financial position and performance and describes the significant risks and uncertainty factors relevant to the Parent Company and other BE Group companies.

The annual and consolidated accounts are subject to approval by the Annual General Meeting on April 29, 2020.

Malmö, March 19, 2020

Jörgen Zahlin
Chairman of the Board

Carina Andersson
Member of the Board

Lars Olof Nilsson
Member of the Board

Mikael Sjölund
Member of the Board

Petter Stillström
Member of the Board

Mikael Törnros
Employee Representative

Peter Andersson
President and CEO

Our Audit Report was submitted on March 19, 2020
Öhrlings PriceWaterhouseCoopers AB

Eva Carlsvi
Authorized Public Accountant

The information in the Annual Report is such that BE Group AB (publ) is required to publish pursuant to the Securities Markets Act. The information was submitted for publication on April 2, 2020.

AUDITOR'S REPORT

Unofficial translation

To the general meeting of the shareholders of BE Group AB (publ), corporate identity number 556578-4724.

Report on the annual accounts and consolidated accounts

Opinions

We have audited the annual accounts and consolidated accounts of BE Group AB (publ) for the year 2019 except for the statutory sustainability report on pages 22-26. The annual accounts and consolidated accounts of the company are included on pages 15-73 in this document.

In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of parent company and the group as of 31 December 2019 and its financial performance and cash flow for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 December 2019 and their financial performance and cash flow for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. Our opinions do not cover the statutory sustainability report on pages 22-26. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.

We therefore recommend that the general meeting of shareholders adopts the income statement and balance sheet for the parent company and the group.

Our opinions in this report on the annual accounts and consolidated accounts are consistent with the content of the additional report that has been submitted to the parent company's audit committee in accordance with the Audit Regulation (537/2014) Article 11.

Basis for Opinions

We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements. This includes that, based on the best of our knowledge and belief, no prohibited services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided to the audited company or, where applicable, its parent company or its controlled companies within the EU.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.

Our audit approach

Audit scope

We designed our audit by determining materiality and assessing the risks of material misstatement in the consolidated financial statements. In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the group operates.

Materiality

The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as a whole. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Key audit matters

Key audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these matters.

Key audit matter
How our audit addressed the Key audit matter

Key audit matter	How our audit addressed the Key audit matter
Valuation of intangible assets
With reference to Note 12.
The value of goodwill with indefinite useful lives amounts to MSEK 566 as at 31 December 2019. In accordance with IFRS, management is to annually execute an impairment text.
No impairment requirement was identified by management in conjunction with this testing as at year end closing.

Certain of the assumptions and judgments made by management refer to future cash flows and the circumstances are complex and have a major impact on the calculation of the value in use. This applies, in particular, to the assessment of the future growth rate, profit margins, working capital tied up, investments and the discount rate. Changes in these assumptions could lead to a change in the reported value of intangible assets and goodwill. | In our audit, we have assessed the calculation models applied by management and have concluded that the most important assumptions in the models agree with the company's budgets and strategic plan.
In our audit we have focused on determining if impairment requirement exists for intangible assets.

We have also taken a position as regards the reasonability of company management's assumptions and judgments. This has been carried out through an analysis of how well previous years' assumptions have been achieved, and effects of any possible adjustments in assumptions compared with the previous year due to changes arising as a result of the development of the operations and external factors.

We have also executed independent sensitivity analyses to test the safety margin for the cash-generating units in order to determine the extent of changes required in key variables before an impairment requirement would arise.

We have also assessed the correctness in the related disclosures in the Annual Report. |
| Inventory- valuation and existence
With reference to Note 20. | |
| The group reports inventories at a value of SEK 642 million.
The inventory reporting is based on the number of articles, either in the physical inventory or as goods in transit, based on the weighted average cost model applied by the Group also considering write down effects for obsolescence or slow moving inventory.

This is an essential area for the financial statements and also due to the fact that the accounting of these assumptions involve, to a certain degree, complex calculations and judgments on behalf of management. | We have assessed documentation for the routines of physical stock count procedures at the inventory site in order to ensure the existence of the inventory articles. In addition, we have also executed independent inventory counts against reported inventory levels in the inventory system and against the Group's physical stock counts to ensure that the reported articles exist.

We have also evaluated the mathematical calculation model applied to the pricing of inventory according to the weighted average costs method. As support for our audit, specific data analyses have been performed to focus the audit on the inventory articles of specific interest, which were then subject for further examination measures against supporting documentation.

Furthermore, we have also performed an analysis and testing of the group's impairment model for obsolete and slow moving articles through control calculations applied to the group's calculation models and assumptions. |

Other Information than the annual accounts and consolidated accounts

This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1-14, the sustainability report on pages 22-26, pages 77-79 and 85-88. The Board of Directors are responsible for this other information.

Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information.

In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated.

If we, based on the work performed concerning this information, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Board of Director's and the Managing Director

The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.

In preparing the annual accounts and consolidated accounts, The Board of Directors and the Managing Director are responsible for the assessment of the company's and the group's ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intend to liquidate the company, to cease operations, or has no realistic alternative but to do so.

The Audit Committee shall, without prejudice to the Board of Director's responsibilities and tasks in general, among other things oversee the company's financial reporting process.

Auditor's responsibility

Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.

A further description of our responsibility for the audit of the annual accounts and consolidated accounts is available on Revisorsinspektionen's website: www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor's report.

Report on other legal and regulatory requirements

Opinions

In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Director's and the Managing Director of BE Group AB (publ) for the year 2019 and the proposed appropriations of the company's profit or loss.

We recommend to the general meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Director's and the Managing Director be discharged from liability for the financial year.

Basis for Opinions

We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.

Responsibilities of the Board of Director's and the Managing Director

The Board of Directors is responsible for the proposal for appropriations of the company's profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company's and the group's type of operations, size and risks place on the size of the parent company's and the group's equity, consolidation requirements, liquidity and position in general.

The Board of Directors is responsible for the company's organization and the administration of the company's affairs. This includes among other things continuous assessment of the company's and the group's financial situation and ensuring that the company's organization is designed so that the accounting, management of assets and the company's financial affairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors' guidelines and instructions and among other matters take measures that are necessary to fulfill the company's accounting in accordance with law and handle the management of assets in a reassuring manner.

Auditor's responsibility

Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:

has undertaken any action or been guilty of any omission which can give rise to liability to the company, or
in any other way has acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.

Our objective concerning the audit of the proposed appropriations of the company's profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company's profit or loss are not in accordance with the Companies Act.

A further description of our responsibility for the audit of the administration is available on Revisorsinspektionen's website: www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor's report.

The auditor's opinion regarding the statutory sustainability report

The Board of Directors is responsible for the statutory sustainability report on pages 22-26, and that it is prepared in accordance with the Annual Accounts Act.

Our examination has been conducted in accordance with FAR's auditing standard RevR 12. The auditor's opinion regarding the statutory sustainability report. This means that our examination of the statutory sustainability report is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinion.

A statutory sustainability report has been prepared.

Öhrlings PricewaterhouseCoopers AB, was appointed auditor of BE Group AB (publ) by the general meeting of the shareholders on the 25 April 2019 and has been the company's auditor since the 7 May 2015.

B.Sc. (Eng), Finland

Number of shares

The information regarding Board members' and Group Management's holding of shares and other financial instruments in BE Group refers to the conditions as per 31 December 2019 and includes own and closely associated natural persons' holdings, as well as holdings by legal persons that are directly or indirectly controlled by the person or its closely associated persons. For CEO, information regarding potential essential shareholdings or partnerships in companies that BE Group has significant business relations with is also included. For updated shareholding, please see our website, www.begroup.com

BOARD OF DIRECTORS AND AUDITORS

Jörgen Zahlin

Chairman
Born 1964
Member of the Board since 2013 (Chairman since 2019)

Other assignments

President and CEO in OEM International. Chairman and board member in a number of companies within the OEM Group

Previous experience

Active in the OEM Group since 1985. President since 2000 and CEO since 2002

Education

Engineer

Number of shares

6 000

Carina Andersson

Member
Born 1964
Member of the Board since 2018

Other assignments

Board member of Beijer Alma, Gränges, Systemair and Detection Technology

Previous experience

Leading positions at Sandvik, Ramnäs Bruk and Fagersta Stainless among others

Education

Mining Engineer

2 000

Lars Olof Nilsson

Member
Born 1962
Member of the Board since 2006

Other assignments

Partner Evli Corporate Finance AB. Chairman of the Board of Kaptensbacken (own company) and NSS Group AB. Board member of JLL Treasury Support AB and JLL Transaction Services AB

Previous experience

Positions within the Trelleborg Group, including as CFO and Head of Group Finance and Head of Group Business Development

Education

B.Sc. Economics, Umeå University

Number of shares

3,282

Mikael Sjölund

Member
Born 1971
Member of the Board since 2016

Other assignments

Owner of Kvarnsvik, as well as President of Effso Construction AB. Board member of Airteam A/S (within Ratos AB) and Libitum AB

Previous experience

Deputy CEO Imtech Nordic AB, Purchasing Manager at Skanska Sverige AB, Head of Strategic Sourcing at Skanska Norden as well as various senior positions within Skanska

Education

Bachelor's degree in engineering

Number of shares

5,000

Shares in close association

15,000

AUDITORS
Öhrlings PricewaterhouseCoopers AB

Petter Stillström

Member
Born 1972
Member of the Board since 2012

Other assignments

President and board member of AB Traction.
Chairman of the Board of Nilörngruppen and OEM International. Also board member within Traction Group and private holding companies

Previous experience

Active within corporate finance, AB Traction since 1999 and its President since 2001

Education

Master's degree in Economics, Stockholm University

Number of shares

50,000 (via endowment insurance)

Shares in close association

2,902,526

Mikael Törnros

Employee Representative Born 1972
Member of the Board since 2016

Other assignments

Purchasing Coordinator at BE Group Sverige AB.
Trade chairman of Union members in BE Group's office in Malmö and Gothenburg. Process- and quality specialist Product & Supply.

Previous experience

Experience in purchasing and logistics, project planning, production in the manufacturing industry since 1998.

Number of shares

Photo: Charlotte Carlberg Bärg

Eva Carlsvi

Authorized Public Accountant,
Öhrlings PricewaterhouseCoopers AB
Born 1968

Auditor-in-Charge for the Company since 2015

This Corporate Governance Report has been prepared as an independent document in relation to the Annual Report. Information in accordance with Chapter 6, Section 6 of the Annual Accounts Act, Paragraphs 3-6, can be found in the Board of Director's Report's sections on share-related information and corporate governance in the Annual Report.

Operations and governance of BE Group

BE Group AB (publ) is a Swedish limited liability company listed on Nasdaq Stockholm. Governance of BE Group is based on the Swedish Companies Act and Annual Accounts Act, Nasdaq Stockholm's rules and regulations, the Swedish Code of Corporate Governance (the "Code"), BE Group's Articles of Association and other relevant regulations. Information on the Company's operations is available on the Company's website, www.begroup.com.

Shareholders exercise their decision-making rights at the Annual General Meeting (as well as at possible extraordinary meetings), which is the Company's highest decision-making authority. The Board of Directors and the Chairman of the Board of Directors are appointed by the Annual General Meeting while the President is appointed by the Board of Directors.

The Company's accounts as well as the administration of the Board of Directors and the President are reviewed by auditors appointed by the Annual General Meeting. The Annual General Meeting adopts principles for the appointment of the Nomination Committee, which formulates proposals to the Annual General Meeting prior to the election and setting of fees for the Board of Directors and auditors. In addition to laws, regulations and the Code, BE Group applies internal governance instruments such as a code of conduct and information policy.

Shareholders

Ownership and share capital

On December 31, 2019, BE Group's share capital amounted to SEK 260,202,480 allocated among 13,010,124 shares. All shares in the Company convey equal rights in every respect. At the end of the year, BE Group had 4,768 shareholders. The Company's largest shareholders were AB Traction, Svedulf Fastighets AB, Avanza Pension, The Pure Circle AB and Nordea Livförsäkring Sverige AB. The proportion of foreign ownership totalled 7,5 percent. At the end of the year, the Company held 26,920 treasury shares (0.2 percent of share capital). More information on the ownership structure of BE Group is available at www.begroup.com.

Annual General Meeting

The Annual General Meeting considers resolutions regarding: dividends, adoption of the Income Statement and Balance Sheet, discharge of liability for Board members and the President, election of Board members, the Chairman of the Board of Directors and auditors, approval of fees to the Board members and auditors, adoption of executive remuneration guidelines, and, when applicable, adoption of principles for appointing the Nomination Committee. At the Annual General Meeting, shareholders have the opportunity to ask questions about the Company. All Board members, management and the auditors are normally present at the meeting to answer such questions.

The 2019 Annual General Meeting was held on April 25 in Malmö, Sweden. At the Annual General Meeting, 3,905,183 shares were represented, divided among 26 shareholders who participated in person or through a proxy. The shares represented corresponded to 30,1 percent of the total number of shares in BE Group.

The Annual General Meeting re-elected Board members Petter Stillström, who was also elected as the Chairman of the Board of Directors, Carina Andersson, Lars Olof Nilsson, Jörgen Zahlin and Mikael Sjölund. The accounting firm Öhrlings PricewaterhouseCoopers AB was re-elected as the auditor for the Company.

Some of the Annual General Meeting's other resolutions were that:

in accordance with the proposal by the Board of Directors, to pay a dividend of SEK 1.75 per share for financial year 2018;
to pay Board fees totaling SEK 1,260,000, of which an unchanged SEK 420,000 was to the Chairman of the Board of Directors and SEK 210,000 each to the other members elected by the Annual General Meeting. The Annual General Meeting decided that remuneration for work in the audit committee shall be paid in an amount of SEK 150,000;

to adopt guidelines for remuneration of senior executives, which primarily entail that salaries and other remuneration conditions for management shall be market-based and that variable remuneration should be at most 50 percent of fixed salary. Where notice of termination is issued by BE Group, fixed salary during the period of notice shall not exceed an amount equivalent to at most 12 months' fixed salary;
to authorize the Board of Directors, on one or several occasions and not later than the 2020 Annual General Meeting, to make decisions regarding the transfer of treasury shares for the purpose of financing smaller corporate acquisitions.

Extraordinary General Meeting

The Extraordinary General Meeting was held on September 18 in Malmö, Sweden. At the Extraordinary General Meeting, 3,867,042 shares were represented, divided among 6 shareholders who participated in person or through a proxy. The shares represented corresponded to 29,8 percent of the total number of shares in BE Group.

The Extraordinary General Meeting decided in accordance with the proposal to elect Board member Jörgen Zahlin as new Chairman of the Board.

The Board and Committee fees that were resolved by the Annual General Meeting on 25 April 2019 shall continue to apply and shall as between Petter Stillström and Jörgen Zahlin, as applicable, be allocated pro rata in relation to their respective terms as Chairman of the Board during the time from the Annual General Meeting 2019 until the end of the next Annual General Meeting.

Nomination Committee

As resolved by the Annual General Meeting, the Nomination Committee must consist of four members, who, in addition to the Chairman of the Board of Directors, shall include representatives for each of the three largest shareholders in the Company in terms of voting rights, as of August 31 each year. The names of the three shareholder representatives and the shareholders they represent shall be announced as soon as the Nomination Committee has been appointed and at least six months before the Annual General Meeting. Unless the members agree otherwise, the member who represents the largest shareholder in terms of voting rights shall be Chairman of the Nomination Committee. If a member of the Nomination Committee resigns before the process is complete, a substitute nominated by the same shareholder may take that member's place. If a significant change takes place in the Company's ownership structure after August 31, rules are in place regarding how the composition of the Nomination Committee can be changed. Prior to the 2020 Annual General Meeting, the Nomination Committee consists of Petter Stillström (AB Traction), chairman, Jörgen Zahlin, (Chairman of the Board of BE Group), Alf Svedulf, private incl. companies and Johan Ahldin, The Pure Circle AB.

The Nomination Committee is tasked with: submitting to the Annual General Meeting its nominations for Chairman of the Board of Directors and other Board members accompanied by a justified statement regarding the proposal, proposing fees for the Board of Directors and the auditors and any remuneration for committee work, proposing auditors and nominating an individual to serve as the chairman of the Annual General Meeting. The Nomination Committee is also charged with assessing the independence of Board members in relation to the Company and major shareholders.

When preparing its proposal for the Board of Directors before the Annual General Meeting 2019, the Nomination Committee applied the following diversity policy. As a whole, the Board of Directors must have an appropriate combined competence and experience for the activities that are conducted to be able to identify and understand the risks that the business entails. The Nomination Committee strives to achieve diversity on the Board. The objective of the diversity policy is that the Board of Directors shall consist of members with varying industry experience, competence, geographical background and with a varying educational and professional background, which together contribute to an independent and critical questioning of the Board, and an even gender distribution shall be sought. The Annual General Meeting decided to appoint Board members in accordance with the Nomination Committee's proposal, which means that five members were elected, of which one woman and four men. As far as the Nomination Committee's ambitions of a more even gender distribution are concerned, it has not been possible to achieve this, but the Nomination Committee's continued ambition is to create a more even gender distribution on the Board.

As a basis for its proposals to the 2020 Annual General Meeting, the Nomination Committee assessed whether the Board of Directors has a suitable composition and meets the requirements on the Board of Directors imposed by the Company's operations, position and conditions in other regards. The assessment was based on material including relevant sections of the evaluation of the Board's work performed under the Chairman's guidance.

The Board of Directors and its work

Composition

Under the Articles of Association, the Board of Directors of BE Group must consist of at least three and no more than ten Board members elected by the Annual General Meeting for a term that lasts until the end of the next Annual General Meeting. Over the year, the Board of Directors of the Company consisted of five members elected by the 2019 Annual General Meeting: Jörgen Zahlin (Chairman as from the Extraordinary General Meeting on September 18, 2019), Carina Andersson, Lars Olof Nilsson, Mikael Sjölund and Petter Stillström, as well as employee representative Mikael Törnros. Please refer to the Annual Report for a more detailed presentation of the Board members. All members are independent in relation to BE Group and executive management. With the exception of Petter Stillström, all Board members are considered independent in relation to BE Group's principal owners.

From Group Management, the President and the CFO normally attend Board meetings and report on the Group's development. Apart from the members of the Board of Directors, other officers of BE Group and external parties participated in Board meetings to present reports on particular issues. The Company's CFO served as the secretary of the Board in 2019.

Rules of procedure of the Board of Directors

The Board of Directors is appointed by BE Group's shareholders to have ultimate responsibility for the Group's organization and administration of the Group's interests. At the statutory Board of Directors meeting directly following the Annual General Meeting, the Board of Directors adopted rules of procedure that closely regulates its work and responsibility as well as the special work tasks that are the responsibility of the Chairman of the Board.

The Chairman of the Board, Jörgen Zahlin, leads the Board's work and monitors the operation through a continuous dialogue with the President. Through monthly reports and Board meetings, the Board of Directors obtains information about BE Group's economic and financial status. Prior to every Board meeting, the Chairman and the President review those issues that shall be addressed at the meeting. Documentation for the Board's handling of the issues is sent to the Board members approximately one week before every Board of Directors meeting. The Board of Directors has also established sets of instructions for the President and for financial reporting to the Board of Directors and has adopted other special policies.

The Board has an Audit Committee. The members of the committee are appointed annually by the Board of Directors at its statutory meeting following its election by the Annual General Meeting. Instructions to the Committee is included in the rules of procedure of the Board of Directors.

Work of the Board of Directors in 2019

During 2019, the Board of Directors held twelve meetings, of which 5 per capsulam. According to the rules of procedure, the Board of Directors shall meet on five occasions per year, in addition to its statutory meeting. Additional meetings shall be held as necessary. One of the meetings during the year is regularly held at one of BE Group's operative units. The table provides a report of attendance by Board members at the four meetings prior to the Annual General Meeting and the five meetings after the Annual General Meeting. As shown, attendance at Board meetings during the year was excellent.

The Board of Directors, attendance 2019

	Elected	Atten-dance	Committee work	Atten-dance	Board-fees	Fee audit-committee	Independent from the company & companies management	Independent of larger owners
Jörgen Zahlin, chairman 1)	2013	12 of 12	Audit Committee	6 of 6	270,000	40,000	Yes	Yes
Petter Stillström 2)	2012	12 of 12	Audit Committee	6 of 6	360,000	40,000	Yes	No
Carina Andersson	2018	12 of 12			210,000		Yes	Yes
Lars Olof Nilsson	2006	12 of 12	Audit Committee	6 of 6	210,000	70,000	Yes	Yes
Mikael Sjölund	2016	12 of 12			210,000		Yes	Yes
Mikael Törnros (E)	2018	11 of 12

1) Jörgen Zahlin became Chairman of the Board member in connection with the Extraordinary General Meeting in September, 2019.
2) Petter Stillström resigned as Chairman of the Board in connection with the Extraordinary General Meeting in September, 2019 and remains as Member of the Board.

Evaluation of the Board of Directors' work

The Chairman ensures that the Board of Directors and its work are evaluated annually and that the result of the evaluation is passed on to the Nomination Committee. The evaluation is made by the Board of Directors itself using a questionnaire where their work within a number of areas are judged. The Chairman of the Board summarizes the evaluation used as the base for a discussion within the Board of Directors regarding the development of the Board of Directors' work. The purpose is to examine how the Board of Directors' work can be more efficient and to clarify potential need of additional skills in the Board of Directors.

Audit Committee

The Audit Committee meets prior to every reporting date and where there is a need for additional meetings. The committee prepares a number of questions for the Board of Directors' decision and supports the Board of Directors in its work to carry out its responsibility within the areas, auditing and internal control as well as to quality-assure BE Group's financial reporting, which requires that the Company have a satisfactory organization and appropriate processes.

Each year, the Company's auditors formulate a proposed audit policy and present this to the Audit Committee. Once the proposal has been reviewed and commented on by the Committee, a final proposal is submitted for approval by the Board of Directors. The work is focused on assuring the quality and accuracy of financial accounting and reporting, internal financial control efforts, as well as the Group's compliance with applicable regulations. In addition, the Audit Committee has recurring contact with the Company's auditor with the purpose of generating an ongoing exchange of information and to assess the auditor's efforts. The Committee may establish guidelines concerning what services, other than auditing services, which BE Group may procure from the auditor.

The Audit Committee consists of Lars Olof Nilsson (Chairman), Petter Stillström and Jörgen Zahlin and meets the requirements imposed in terms of expertise in accounting or auditing. The work of the Committee is regulated by a special set of instructions adopted by the Board of Directors as part of its agenda.

The Audit Committee met six times in 2019. Meetings of the Audit Committee are minuted and reported orally at Board meetings.

Remuneration Committee

Due to its small size, the Board found it suitable not to appoint a remuneration committee during 2018. This decision was made at the 2018 statutory meeting. Salaries and other terms of employment, pension benefits and the bonus system for the CEO and immediately subordinate managers was handled by the Chairman of the Board in dialogue with the CEO. The Chairman of the Board reported back to the Board who drafted the executive remuneration policies to propose to the Annual General Meeting for resolution. The Board has also been tasked with monitoring and assessing variable remuneration programs for senior executives that were ongoing or terminated during the year and with monitoring and assessing the application of the guidelines for remunerations for senior executives.

The Board decided to reintroduce the remuneration committee at the Board meeting in October 2019. The assignment of the Remuneration Committee is to address matters related to salaries and other terms of employment, pension benefits and the bonus system for the President and the managers reporting directly to him. The Committee makes decisions regarding the remuneration of senior executives other than the President, based on proposals by the President.

The members of the Remuneration Committee is the Chairman of the Board Jörgen Zahlin and Petter Stillström. The work of the Committee is regulated by a special set of instructions adopted by the Board of Directors as part of its agenda. The meeting of the Remuneration Committee is reported orally at a Board meeting.

Board remuneration

The fees for the Board members elected by the Annual General Meeting are determined by the Annual General Meeting on the basis of the Nomination Committee's proposal. Employee representatives to the Board of Directors do not receive Board members' fees. In accordance with a resolution by the 2019 Annual General Meeting, a fee of SEK 420,000 was paid to the Chairman of the Board for the period extending from the 2019 Annual General Meeting until the 2020 Annual General Meeting. The other Board members were each paid SEK 210,000 for the same term of office. In addition, the members of the Audit Committee were paid fees totaling SEK 150,000, of which SEK 70,000 was paid to the Chairman of the Committee and SEK 40,000 each to the other two members.

The Board and Committee fees that were resolved by the Annual General Meeting on April 25, 2019, shall continue to apply and shall as between Petter Stillström and Jörgen Zahlin, as applicable, be allocated pro rata in relation to their respective terms as Chairman of the Board during the time from the Annual General Meeting 2019 until the next Annual General Meeting.

Group management

Group management of BE Group have during 2019 consisted of the President and CEO, the CFO, the Business Area Manager for Finland & Baltics and the Group Sourcing director. The President leads operations within the parameters set by the Board of Directors. BE Group's Group management meets continuously under the leadership of the President in order to follow-up the operations and discuss Group-wide issues and also to formulate proposals for a strategic plan, business plan and investment documentation that the President thereafter presents to the Board of Directors for a decision. A more detailed presentation of Group management is provided in the Annual Report.

Auditors

At the 2019 Annual General Meeting, the auditing firm Öhrlings PricewaterhouseCoopers AB was reelected to be the auditor for a period of one year. Eva Carlsvi, Authorized Public Accountant, is the Auditor-in-Charge.

The auditor maintains regular contact with the Audit Committee and Group Management. The auditor works according to an audit plan, into which the opinions of the Board of Directors have been incorporated, and has reported its observations to the Board of Directors. Reports have been submitted during the progress of the audit and in connection with the adoption of the 2019 Year-end Report. The auditor also participates in the Annual General Meeting and outlines the audit process and the observations in an audit report. Remuneration to auditors is paid based on calculations in accordance with agreements that have been made. Information regarding remuneration in 2019 is provided in Note 4 of the Annual Report.

Board of Directors' report regarding internal control

The purpose of internal control of financial reporting is to provide reasonable assurance regarding quality and reliability in the external financial reporting and to ensure that the reports are prepared in accordance with accepted accounting standards, applicable laws and provisions and other requirements for listed companies. To ensure this, the Company had the COSO (Committee of Sponsoring Organizations of the Treadway Commission) framework as a starting point.

Internal control function

The Board of Directors and the Audit Committee follow up BE Group's assessment of internal control by means including discussions with BE Group's auditors. Given the above, the Board of Directors has elected not to maintain a separate internal audit unit. To test the internal control environment, a self-assessment is conducted, among other efforts, based on a Group-wide control framework. The Group's CFO reports the results of the test done of the internal control to the Audit Committee of the Board of Directors. BE Group's internal control of financial reporting covers five main areas: establishment of a control environment, risk assessment, control activities, information and communications and follow-up.

Control environment

BE Group has a simple legal and operational structure and an established governance and internal control system. This allows the organization to react quickly to external changes. Operational decisions are made at the Group or business area level, while decisions on strategy, business direction, acquisitions and general financial issues are made by the Board of Directors and Group Management of BE Group. Internal control of financial reporting at BE Group is designed to work within this organization. Clear regulations on delegation of authority and responsibilities are followed within BE Group, which follow Group structure.

Since 2012, the Board of Directors has applied a so-called "whistle blower" policy, which means that all employees have the possibility to anonymously report if they discover improprieties or illegal actions that affect vital interests for BE Group or the life and health of individual persons. The policy applies to improprieties committed by people in executive positions or other key personnel within the Company.

Risk assessment

The risk assessment is based on a risk review that is updated annually and reported to the Audit Committee. Based on the results of this review, focus is set for the internal control work in the future.

Control activities

The risks identified with regard to financial reporting are managed through the Company's control activities, such as authorization controls in IT systems and signature authentication. Detailed economic analysis of business performance including follow-up against business plans and forecasts supplements operations-specific controls and provides an overall assessment of reporting quality.

Information and communication

The Group maintains channels of information and communication that serve to safeguard completeness and accuracy in financial reporting. Policies, manuals and job descriptions are available on the Company intranet and/or in printed form.

Follow-up

The President is responsible for internal control being organized and followed up in accordance with the guidelines adopted by the Board of Directors. Financial control is exercised by the Corporate Finance Department. Financial reporting is analyzed monthly at a detailed level. The Board of Directors has followed up financial reporting at Board meetings and BE Group's auditor has reported its observations to the Board of Directors. The Board of Directors has received monthly financial reports and the Company's financial situation was discussed at every Board meeting.

AUDITOR'S REPORT ON THE CORPORATE GOVERNANCE STATEMENT

This is a literal translation of the Swedish original report included in RevU 16

To the general meeting of the shareholders in BE Group AB (publ), corporate identity number 556578-4724.

Engagement and responsibility

It is the board of directors who is responsible for the corporate governance statement for the year 2019 on pages 80-83 and that it has been prepared in accordance with the Annual Accounts Act.

The scope of the audit

Our examination has been conducted in accordance with FAR's auditing standard RevU 16 The auditor's examination of the corporate governance statement. This means that our examination of the corporate governance statement is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinions.

Opinions

A corporate governance statement has been prepared. Disclosures in accordance with chapter 6 section 6 the second paragraph points 2-6 the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the annual accounts and the consolidated accounts and are in accordance with the Annual Accounts Act.

Malmö, 19 March 2020

Öhrlings PricewaterhouseCoopers AB

Eva Carlsvi

Authorized Public Accountant

ALTERNATIVE PERFORMANCE MEASURES

The Group uses a number of alternative performance measures in its report.

The alternative performance measures that BE Group considers significant are the following:

Underlying operating result (uEBIT)	2019	2018
Operating result	88	132
Reversal of inventory gains (-)/losses (+)	6	-27
Adjustment for items affecting comparability	–	12
Group	94	117
Net debt excl. IFRS 16	2019	2018
---	---	---
Non-current interest-bearing liabilities and leasing liabilities	985	543
Current interest-bearing liabilities and leasing liabilities	98	5
Deduction leasing liabilities	-541	–
Deduction financial assets	0	0
Deduction cash and equivalents	-168	-108
Rounding	-1	–
Group	373	440

Net debt/equity ratio excl. IFRS 16 is calculated as net debt excl. IFRS 16 divided by equity.

Working capital	2019	2018
Inventories	642	651
Accounts receivables	387	470
Other receivables	57	63
Deduction accounts payables	-398	-468
Deduction other current liabilities	-139	-145
Rounding	–	1
Group	549	572

Average working capital is an average for each period based on quarterly data.

Capital employed excl. IFRS 16	2018	2018
Equity excl. IFRS 16	927	892
Non-current interest bearing liabilities and leasing liabilities	985	543
Current interest bearing liabilities and leasing liabilities	98	5
Deduction leasing liabilities	-541	–
Rounding	-1	–
Group	1,468	1,440

Average capital employed excl. IFRS 16 is an average for each period based on quarterly data.

MULTI-YEAR SUMMARY

(SEK M unless otherwise stated)	2014	2015	2016	2017	2018	2019
Sales	4,202	4,155	3,870	4,348	4,803	4,359
Earnings measurements
Gross profit/loss	527	524	561	619	669	605
Underlying gross profit/loss	533	536	536	596	643	609
Operating result (EBIT)	-17	-114	16	57	132	88
Underlying operating result (uEBIT)	18	22	33	82	117	94
Margin measurements
Gross margin (%)	12.5	12.6	14.5	14.2	13.9	13.9
Underlying gross margin (%)	12.7	12.9	13.9	13.7	13.4	14.0
Operating margin (%)	-0.4	-2.8	0.4	1.3	2.8	2.0
Underlying operating margin (%)	0.4	0.5	0.9	1.9	2.4	2.1
Cash flow
Cash flow from operating activities	-25	-93	78	95	86	200
Capital structure
Net debt excl. IFRS 16 1)	754	609	562	478	440	373
Net debt/equity ratio (%) excl. IFRS 16 1)	105	78	73	60	49	40
Working capital at end of period	426	525	506	492	572	549
Working capital (average)	439	505	488	514	562	570
Capital employed at end of period excl. IFRS 16 1)	1,542	1,427	1,361	1,341	1,440	1,468
Capital employed (average) excl. IFRS 16 1)	1,581	1,523	1,383	1,373	1,408	1,466
Working capital tied-up (%)	10.4	12.2	12.6	11.8	11.7	13.1
Return
Return on capital employed (%) excl. IFRS 16 1)	-1.1	-7.5	1.2	4.2	9.4	5.6
Per share data 2)
Earnings per share (SEK)	-21.49	-19.47	-1.56	1.87	6.13	3.87
Earnings per share after dilution (SEK)	-21.49	-19.47	-1.56	1.87	6.13	3.87
Proposed dividend per share (SEK)	-	-	-	-	1.75	-
Equity per share (SEK)	192.78	60.44	59.41	61.77	68.67	71.05
Cash flow from operating activities per share (SEK)	-7.46	-7.14	5.99	7.35	6.60	15.37
Average number of shares outstanding (thousands)	3,400	8,681	12,983	12,983	12,983	12,983
Average number of shares outstanding after dilution (thousands)	3,401	8,681	12,983	12,983	12,983	12,983
Growth
Sales growth (%)	-4	-1	-7	12	10	-9
of which, organic tonnage growth (%)	-10	-1	-8	-3	4	-10
of which, price and mix changes (%)	4	-2	0	14	3	-1
of which, currency effects (%)	2	2	1	1	3	2
Other
Average number of employees	782	768	739	700	668	652
Inventory gains and losses	-6	-12	28	27	27	-6
Shipped tonnage (thousands of tonnes)	411	406	374	363	377	340

1) To visualize the development of BE Group's financial position, some information is in the key figure overview that is not defined in IFRS. A reconciliation/bridge between alternative performance measures used in this report and the closest IFRS measure is presented under Alternative performance measures.
2) A reverse share split 1:20 was carried out in 2016. Comparable figures has therefore been restated.

The comparative figures for 2014 - 2018 are prepared according to previous accounting principles regarding leasing (IAS 17).

FINANCIAL DEFINITIONS

Earnings measurements

Gross profit/loss	Profit after deduction for cost of goods sold.
Underlying gross profit/loss	Underlying gross profit/loss is the reported gross profit/loss adjusted for inventory gains and losses (deductions for gains and additions for losses).
Operating result (EBIT)	Operating result before financial items.
Underlying operating result (uEBIT)	Operating result (EBIT) before items affecting comparability and adjusted for inventory gains and losses (deductions for gains and additions for losses).
Items affecting comparability	Items that do not have any link to the normal operations of the Group or that are of a non-recurring nature, where a reporting together with other items in the consolidated comprehensive income statement would have given a comparison distortion effect that would have made it difficult to judge the development of the ordinary operations for an outside viewer. Replaces previous concept “non-recurring items”.
Margin measurements
Gross margin	Gross profit/loss as a percentage of net sales.
Underlying gross margin	Underlying gross profit/loss as a percentage of net sales.
Operating margin	Operating result as a percentage of net sales
Underlying operating margin	Underlying operating result (uEBIT) as a percentage of net sales.
Capital structure
Net debt excl. IFRS 16	Interest-bearing liabilities excluding leasing liabilities acc. to IFRS 16 less cash and equivalents and financial assets.
Net debt/equity ratio excl. IFRS 16	Net debt excl. IFRS 16 divided by equity excl. IFRS 16.
Working capital	Inventories and current receivables less current liabilities, excluding provisions and interest-bearing liabilities.
Working capital (average)	Inventories and current receivables less current liabilities, excluding provisions and interest-bearing liabilities. This measure represents an average for each period based on quarterly data.
Capital employed excl. IFRS 16	Equity excl. IFRS 16 plus interest-bearing liabilities excl. leasing liabilities acc. to IFRS 16.
Capital employed (average) excl. IFRS 16	Equity excl. IFRS 16 plus interest-bearing liabilities excl. leasing liabilities acc. to IFRS 16. This measure represents an average for each period based on quarterly data.
Working capital tied-up	Average working capital, as a percentage of annual net sales.
Return
Return on capital employed excl. IFRS 16	Annually adjusted operating result excl. IFRS 16, as a percentage of average capital employed excl. IFRS 16.
Per share data
Earnings per share	Profit/loss for the period divided by the average number of shares outstanding during the period.
Earnings per share after dilution	Profit/loss for the period divided by the average number of shares outstanding during the period after dilution.
Equity per share	Equity divided by the number of shares outstanding at the end of the period.
Cash flow per share from operating activities	Cash flow from operating activities divided by the average number of shares for the period.
Shares outstanding at the end of the period	Shares outstanding at the end of the period adjusted for rights issues and share splits.
Shares outstanding at the end of the period after dilution	Number of shares at the end of the period adjusted for rights issues and share splits. Any dilution has been taken into account.
Average number of shares	Weighted average number of shares outstanding during the period, adjusted for rights issues and share splits.
Average number of shares after dilution	Weighted average number of shares outstanding during the period, adjusted for rights issues and share splits. Any dilution has been taken into account.
Growth
Sales growth	Change in the net sales of the business compared with the previous period, in percent.
Other
Average number of employees	The number of employees recalculated as full-time positions and as an average for reporting period.
Shipped volumes	BE Group products sold during the period in thousands of tonnes.
Inventory gains and losses	The difference between the cost of goods sold at acquisition value and the cost of goods sold at replacement price.

ANNUAL GENERAL MEETING

The Annual General Meeting will be held at 4.00 p.m. on Wednesday 29 April 2020, at Malmö Börshus, Skeppsbron 2 in Malmö.

Notice of attendance

Shareholders who wish to attend the Annual General Meeting must:

be recorded in the share register kept by Euroclear Sweden AB on Thursday 23 April 2020 and
notify the company of their intention to attend the meeting no later than on Thursday 23 April 2019, preferably before 12.00 noon.

Notice of attendance shall be made by telephone +46 40 38 42 00 or on the company website, www.begroup.com. The notice of attendance shall state name, personal identity number/corporate identity number, address, telephone number, shareholding and number of advisors. Shareholders represented by proxy must issue a power of attorney for the proxy. A proxy form is available at the company and on the company website. Representative of a legal entity shall submit a copy of the certificate of registration or similar papers of authorization indicating persons authorized to sign on behalf of the legal entity. In order to facilitate the entrance to the meeting, the original power of attorney and documents of authorization should be provided to the company at the address BE Group AB, Box 225, SE 201 22 Malmö, Sweden, on Thursday 23 April 2020 at the latest.

Nominee-registered shares

In order to participate in the meeting, shareholders with nominee-registered shares should request their bank or broker to have the shares temporarily owner-registered with Euroclear Sweden AB. Such registration must be effected by Thursday 23 April 2020. Shareholders must, well in advance of this date, instruct their nominees to carry out such registration.

Notice

The notice has been published in Post och Inrikes Tidningar (The Official Swedish Gazette) and is available at the Company website, www.begroup.com. An announcement of notice publication was also published in Svenska Dagbladet and Sydsvenskan.

Information about actions taken due to the coronavirus

Due to the uncertainties surrounding the coronavirus, BE Group will take the necessary measures to reduce the risk of spreading the virus in connection with the Annual General Meeting. For example, food will not be served and customary speeches will be minimized. Updated information on any further measures taken will be published on the company's website www.begroup.com.

ADDRESSES

BE Group AB (publ)

Krangatan 4B
Box 225
201 22 Malmö
Sweden
Tel: +46 40 38 42 00

Subsidiaries

BE Group Sverige AB

Krangatan 4B
Box 225
201 22 Malmö
Sweden
Tel: +46 40 38 40 00

BE Group Oy Ab

Laiturikatu 2
P O Box 54
15101 Lahti
Finland
Tel: +358 3 825 200

BE Group AS

Vana-Narva mnt. 5
74114 Maardu
Estonia
Tel: +372 605 1300

BE Group SIA

Piedrujas iela 7
1073 Riga
Latvia
Tel: +371 67 147 374

BE Group UAB

T Masiulio 18 B
52459 Kaunas
Lithuania
Tel: +370 37 370 669

BE Group Sp. z o.o.

ul. Przemysłowa 22
98-355 Trębaczew
Poland
Tel: +48 43 33 30 004

Lecor Stålteknik AB

Växelgatan 1
442 40 Kungälv
Sweden
Tel: +46 303 24 66 70

ArcelorMittal BE Group SSC AB

Blekegatan 7
652 21 Karlstad
Sweden
Tel: +46 54 85 13 20

AI assistant

BE Group AB — Annual Report 2019

3140_10-k_2020-04-02_5ba4976e-638a-44df-a2b5-4c677f51b2e7.pdf

CONTENTS

OUR IMPROVEMENT WORK CONTINUES

Strong cash flow and continued focus on efficiency improvements and investments

Challenging year for both business area Sweden & Poland and Finland & Baltics

Organization

Focus going forward

ORGANIZATION

Business area Sweden & Poland

Business area Finland & Baltics

CUSTOMERS

Construction industry

Manufacturing industry

BUSINESS SOLUTIONS

Production service sales

Inventory sales

Direct sales

PRODUCTS AND SERVICE

Products

Production service

Advice and services

VISION

BUSINESS IDEA

CORE VALUES

Dynamic

Transparent

Sustainable

FINANCIAL TARGETS AND OUTCOME

Sales growth that exceeds the market growth

Outcome

A profit margin of at least 5 percent

Outcome

At least 15 percent return on capital employed

Outcome

19th century

20th century

21st century

Sales and business performance

Continued development

Sales and business performance

Continued development

MARKET FOR STEEL SERVICE COMPANIES

STEEL MARKET OUTLOOK

COMPETITORS

Share capital and voting rights

Ownership structure

Dividend and dividend policy

Shareholder contacts

Per share data

Development over the year

Operations

Alternative performance measures

Market and business environment

Group structure and organization

Net sales and business performance

Business area Sweden & Poland

Business area Finland & Baltics

Parent Company & consolidated items

Parent Company

Net financial items and tax

Cash flow

Capital, investments and return

Financial position and liquidity

Employees

Environmental policy and environmental work

Overarching environmental policy

Risks and risk management in BE Group

Market risks

Economic trend

Steel price trend

Operational risks

Suppliers

Customers

Increased direct deliveries from steel producers

Contractual relations

Human Resources

Product liability

Legal

BE Group AB Annual Report 2019