Bufab AB

Annual Report • Apr 1, 2019

BUFAB

ANNUAL REPORT 2018

WORKING TOWARD LEADERSHIP

CONTENTS

The Year in Brief	1
This is Bufab	2
Message from the CEO	4
Board of Directors' Report	6
Consolidated Financial Statements	10
Notes to Consolidated Financial Statements	15
Parent Company Financial Statements	39
Notes to Parent Company Financial Statements 42
Auditor's report	46

Corporate Governance Report	50
Board of Directors	56
Group Management	57
Five-Year Summary	58
Bufab on the Stock Exchange	59
Definitions of Key Figures	60

" Far-reaching growth reflects the value in our offering.

YEAR IN BRIEF

• Net sales rose by 18 percent to SEK 3,786 million (3,201), of which 8 percent was organic.
• Bufab gained market share in several markets.
• Operating profit (EBITA) rose to SEK 367 million (311) corresponding to an operating margin of 9.7 percent (9.7).
• Earnings per share increased to SEK 6.79 (5.61).
• The Board of Directors proposes raising the dividend to SEK 2.50 (2.25) per share.
• Rudhäll Industri was acquired during the year, with sales of about SEK 210 million and operations in Sweden and China.
• During the year, Bufab continued its work to become the leading player in its industry by 2020.

NET SALES

OPERATING PROFIT (EBITA)

DIVIDEND

KEY FIGURES

SEK million	2018	2017	Change
Order intake	3,798	3,256	17%
Net sales	3,786	3,201	18%
Gross profit %	1,088 28.7%	917 28.6%	19%
Operating profit (EBITA) %	367 9.7%	311 9.7%	18%
Profit after tax	255	213	20%
Earnings per share, SEK	6.79	5.61	21%
Dividend, SEK	2.50*	2.25	11%

*Proposed by the Board of Directors.

See page 60 for definitions.

THIS IS BUFAB

Bufab is a trading company that offers its customers a full service solution for sourcing, quality control and logistics for C-Parts.

A global supply chain partner

Bufab has built up a global network of suppliers and sources a total of 140,000 unique parts, mainly from Asia and Europe.

C-Parts equivalent to approximately 45 percent of the purchase value are sourced in Asia, 10 percent in Sweden and the remaining 45 percent from the rest of Europe.

Bufab secures the quality, making sure the customers get the parts on time, in the right quantity and in accordance with the relevant ethical and environmental standards. Alongside its trading activities, Bufab also manufactures particularly technically demanding C-Parts in Sweden and in the UK.

Bufab's customer base is diversified and comprises approximately 13,000 customers in numerous different industries. These customers are also diversified geographically, with locations in the Nordic countries, the rest of Europe, Asia and the US. The customers also vary in size, and consequently their sourcing behaviours and needs vary as well. Bufab therefore offers both flexible solutions at the local level, and global solutions to national and international customers.

Lower total cost Secured quality Reliable delivery Less complexity Saved time Increased sustainability

Customer satisfaction

C-PARTS A MAJOR CHALLENGE FOR CUSTOMERS

The manufacturing industry classifies components as A-Parts, B-Parts and C-Parts. C-Parts are the least strategically important components, and make up a relatively small portion of the customer's direct component costs. However, due to high volumes and the sheer number of suppliers, the indirect costs associated with

C-Parts are often high in relation to direct costs. The costs of potential deficiencies in C-Parts quality and delivery precision can also be significant. Bufab's offer to customers is a full-service integrated solution for sourcing, design, logistics and management, warehousing and quality assurance of C-parts.

BUFAB'S GLOBAL PRESENCE

BUFAB AS AN INVESTMENT

Strong offering creates value for Bufab's customers

C-Parts have low direct costs but high indirect costs, and are demanding to handle professionally. Through Bufab's Global Parts Productivity™ offering, our customers can usually expect total cost savings in the range of 15–20 percent, while achieving higher quality and delivery reliability. Thanks to Bufab's global scale and efficient processes, customers can achieve better results while using less resources.

Global trend drives organic growth

Switching from managing C-Parts on a proprietary basis to a Supply Chain Partner such as Bufab offers many advantages. It also provides the basis for greater sustainability across the supply chain. Globally, an increasing number of industrial companies are seeing the benefits of this. Bufab therefore sees a strong potential for organic growth. Over the past five years, our organic growth was 6 percent and in 2018 it was 8 percent, significantly higher than underlying industry growth.

Robust business model – operating profit every year for 40 years

As a trading company, Bufab has a limited need for capital-intensive equipment and machinery. Low capital expenditure means that our fixed costs, primarily salaries and rent, can be adapted to demand. Our business is spread over thousands of customers and suppliers in many industries and geographic regions, which limits our dependence on individual customers. Bufab has reported an operating profit each year for 40 years, and has financed all growth using its own cash flow.

International leader in fragmented market. Consolidation through value-creating acquisitions

Bufab is one of the few leading players in a highly fragmented market. In each of our 27 countries, we are a strong local partner, while serving international customers on several continents. This is becoming increasingly important for customers. Our position makes it possible to acquire smaller players that have growth synergies with Bufab. In five years, we have completed seven acquisitions with total sales of SEK 900 million. In this way, we have expanded our presence in new industries, product segments and geographic regions and have become even more relevant for our customers.

2018 was another successful year for Bufab. Both sales and profit reached new all-timehigh levels. We achieved strong growth, both organically and through acquisitions. We maintained good profitability despite volatile raw material and currency markets. But most importantly, we strengthened our customer relations and our supplier base, and we invested heavily in our team, processes and tools. In summary, we took a large step toward our strategic goal of Leadership in 2020.

WORKING TOWARD LEADERSHIP

We achieved particularly strong performance in our largest operating segment, International. Increased market share and successful acquisitions drove growth of over 20%. The gross margin improved, due to favorable exchange rates and significant price increases. Despite continued investment, for instance in the sales and sourcing organizations, revenue grew significantly faster than costs. As a result, operating profit grew by more than 40 percent. These successes give us the confidence to continue investing in the segment. Despite strong growth for many years, both our market share and share of wallet with most existing customers are still very low. We see many attractive business opportunities ahead.

On the other hand, Segment Sweden experienced a poorer trend in 2018. Growth was satisfactory, but the gross margin weakened substantially. The segment was under pressure from high purchasing prices and a Swedish krona rate at historically low levels. We countered these challenges with significant price increases, but did not completely offset the adverse factors. We are therefore intensifying our work on purchasing savings aimed at restoring the segment's gross margin over time.

Such variations are part of Bufab's business. However, the overall picture is a positive one. We showed good growth for the sixth year in a row. We kept the gross margin stable despite significant increases in raw material prices in 2017 and 2018. We used the growth to finance continued investment in our Leadership strategy, but kept the operating margin stable. As a result, our net profit grew by 20% to an all-time-high level of 255 MSEK.

Strong growth and closer customer relations

Since 2017, Bufab has worked toward the target "Leadership 2020". This means that within two years, we want to be the preferred partner for demanding customers in our industry. The most important part of this plan is our Growth strategy. The strong organic growth of 8% in 2018 was partly due to good market demand. But the most important reason was increased market share. We see this as proof that our Growth strategy works. This is not a matter of a few random successes, but of many hundreds of new businesses with customers across all markets. Growth on such a broad basis demonstrates the value of our offering – Global Parts Productivity™. It also shows that our consistent investment over the years in our sales team, processes and tools is paying off. The resulting long-term trust-based customer relationships are the keystone of our Growth strategy.

Investment in the "World's Best Supplier Base"

In 2018, we significantly increased our focus on sourcing with the aim to develop the industry's strongest supplier base. To do this, we strengthened the Executive Team with a global Sourcing Director. She has expanded our global sourcing team and sharpened our processes and tools. The objective is to deepen relationships and cooperation with our best suppliers, while at the same time concentrating more of our volume to them. This is a win-win strategy that benefits our suppliers, our customers, and Bufab. With access to the best suppliers worldwide, we can ensure high quality, competitive prices, as well as fast and accurate deliveries. We can also cooperate with our suppliers on the sustainability across the value chain.

Building a Digital Best Practice

During the year, we continued to invest into our "Digital Best Practice". For instance, we implemented new systems for logistics solutions and increased digital integration with both customers and suppliers. We developed a support system for our sales process, scheduled for roll-out in 2019, with integrated decision-making support that takes commercial, technical and sustainability aspects into account when choosing a solution for our customers.

We see many attractive business " opportunities ahead.

We also continued our systematic work on sustainability throughout the company – please read more about this in our Sustainability Report!

When we take over the responsibility for the sourcing, quality assurance and logistics of our customers' C-parts, we also take on a heavy administrative workload with high accuracy requirements. We have over the years built up the skills to handle this professionally. Now we are structuring these skills into digitally supported best practice. The aim is to improve efficiency and accuracy, giving us more time to build customer and supplier relations.

Win-Win Acquisitions

The acquisitions we have completed in recent years continue to develop very well. We believe that this is due to our stringent acquisition criteria, which insist on acquiring only well-run companies with good growth synergies. But we are also helped by our "pull" integration philosophy, which relies on the skill and business acumen of the acquired companies' management teams to drive the best integration into the Bufab Best Practice. In particular, we saw very good results during 2018 in our recent acquisition in South-East Asia, Kian Soon.

We made one additional acquisition in 2018 in the form of Rudhäll Industrier in Sweden. Rudhäll is a well-managed group of companies with a combination of trading and in-house production. It will strengthen our offering with a widened product portfolio, additional production know-how as well as increased sourcing capabilities in China.

Acquisitions have always been part of Bufab's business model and we continue to search for more equally excellent acquisition candidates.

Preparing for Leadership in 2020

The global political and economic uncertainty increased during the end of 2018, and various forward-looking indicators dropped sharply. However, we did not see any significant impact on demand from our customers, which remained robust into the beginning of 2019. Naturally, we continue to carefully monitor the development.

However, fluctuations in demand, currency rates and raw material prices are an integral part of Bufab's business, and we have been managing such challenges for the last 40 years without ever incurring an operating loss. That is why we remain focus on what builds long-term value in our business: strengthening our global customer relations, improving our work with the best suppliers, and making sure that our processes and tools become more competitive every year. And most important of all: building the world's best team of Solutionists.

It is my pleasure and privilege to say "thank you" to this global team for truly excellent work in 2018! I look forward to a successful 2019 together with you, our customers, and our suppliers.

Värnamo, March 2018

Jörgen Rosengren President and CEO

BUFAB ANNUAL REPORT 2018 5

BOARD OF DIRECTORS' REPORT

The Board of Directors and CEO of Bufab AB (publ) (Bufab), Corporate Registration Number 556685-6240, hereby submits its annual report and consolidated accounts for the 2018 financial year.

The business

Bufab is a trading company that offers its customers a full-service solution as a Supply Chain Partner for sourcing, quality control and logistics for C-Parts. Bufab's customers are found in the manufacturing industry, in which components generally are classified as A-Parts, B-Parts and C-Parts. C-Parts are the least strategically important components, and they make up a relatively small portion of the customer's direct component costs. C-Parts have a relatively low value, both per component and in total, in combination with high volumes and a large number of suppliers. This means the indirect costs associated with C-Parts management are often high in relation to the direct costs. The costs of potential deficiencies in C-Part quality and delivery precision can also be significant. Bufab's customer offering, Global Parts Productivity™, is an integrated full-service solution for sourcing, design, logistics and management, warehousing and quality assurance of C-Parts. For the customer, this means more efficient handling, thus reducing the customer's total costs.

Bufab was founded in 1977 in Småland, Sweden and through organic growth and acquisitions, it has grown into a multinational corporation. Today, the Group has a total of 41 operating companies with activities in 27 countries, primarily in Europe but also in the US and Asia, together with exports to additional countries. Alongside its trading activities, the Group also manufactures C-Parts in Sweden and in the UK. Bufab's in-house manufacturing accounts for about 9 percent of total sales and constitutes a strong complement to its trading activities.

Bufab's customer base is diversified and comprises approximately 13,000 customers in numerous different industries. These customers are also diversified geographically, with locations in the Nordic countries, the rest of Europe, Asia and the US. Bufab's customers vary in size, and consequently their sourcing behaviours and needs vary as well. Bufab therefore offers both flexible solutions at the local level, and global solutions to national and international customers.

Bufab has built up a global network of suppliers and sources a total of 140,000 unique parts from mainly Asia and Europe which are stocked in about thirty own warehouses around the world.

Parts equivalent to approximately 45 percent of the total sourcing value are purchased in Asia, 10 percent in Sweden and 45 percent in the rest of Europe. The proportion of specialised fasteners is rising at the expense of standardised fasteners and today accounts for more than half of Bufab's sales.

The head office is located in Värnamo, Sweden, and at year end 2018, Bufab had approximately 1,200 employees around the world. The Bufab share has been listed on Nasdaq Stockholm since 21 February 2014.

Strategy

During 2017, Bufab presented a new long-term target to be the leading player in the industry by 2020. Bufab's way there is based on three focus areas: to develop a world-leading supplier base, become a priority partner for customers and continue with value-adding acquisitions. In addition, the management system "Bufab Best Practice" has been strengthened, which comprises the platform for the control of internal processes. This will help to drive continuously improved precision, efficiency and sustainability in Bufab's operations. During the year, Bufab carried out significant investments in its organisation and in processes and systems within this framework. This was the company's highest priority in 2018, and will continue to be in 2019.

Significant events during the financial year

Bufab recorded strong growth during 2018, primarily through organic growth but also from acquisitions. The growth is a direct result of the focus in previous years on recruitment, personal development, processes and tools in the sales organisation. Bufab also substantially increased the pace of its sourcing efforts by naming a member of Group management as responsible for this work, which in turn has strengthened the global sourcing organisation. The organisation will continue work to consolidate the supplier base and improve collaboration with key suppliers. At the same time, digitalisation initiatives progressed and the digital integration with customers and suppliers increased. The company financed all of these costly initiatives through organic growth, and has therefore retained a stable operating margin.

Segment International presented a strong result for the year. However, segment Sweden reported a weaker earnings trend. Growth was robust, but the gross margin was lower than in 2017. Throughout the year, the segment was under pressure from high sourcing prices and a weak SEK.

In segment Sweden, Bufab carried out a supplementary acquisition in early October 2018 in the form of Rudhäll Industri AB, with operations in Sweden and China. Roughly half of Rudhäll's total sales of about SEK 210 million relate to trading and the other half consists of its own in-house manufacturing operations. The acquisition will further strengthen Bufab's offering to customers through a broader product portfolio, expanded in-house manufacturing and greater sourcing capacity in China.

Order intake and net sales

BOARD OF DIRECTORS' REPORT

Order intake was SEK 3,798 million (3,256), which was slightly higher than net sales. Net sales rose by 18 percent to SEK 3,786 million (3,201). The Group's organic growth was +8 percent, comprising +6 percent for segment Sweden and +9 percent for segment International. Underlying demand is considered higher in both segments compared with 2017 and the market share is assessed to have increased in both segments.

Profit and profitability

The gross margin was in line with 2017. The negative impact of rising sourcing prices during the year due to higher raw material prices was offset by price increases to customers.

Operating profit (EBITA) rose to SEK 367 million (311) equal to a margin of 9.7 percent (9.7). Compared with the preceding year, exchange-rate fluctuations impacted operating profit by SEK +18 million, volume by SEK +66 million, price/cost/mix/other by SEK –60 million and acquisitions by SEK +31 million.

The Group's net financial items amounted to SEK –29 million (–26), of which exchange-rate differences accounted for SEK –2 million (–2). The Group's profit after financial items was SEK 329 million (278).

The tax expense was SEK –74 million (–65), corresponding to a tax rate of 22 percent (23). Profit after tax amounted to SEK 255 million (213).

Financial goals:

GROWTH 10%

Average annual revenue growth of 10 percent, through organic growth as well as acquisitions.

PROFITABILITY 12%

Operating margin (EBITA) of 12 percent over a business cycle.

DIVIDEND POLICY 30–60%

Dividend of 30–60 percent of annual net profit.

Cash flow, working capital and financial position

Operating cash flow amounted to SEK 175 million (183). The lower cash flow for the full year is primarily attributable to a rise in working capital in the form of trade receivables and inventories, driven in turn by growth. Average working capital in relation to net sales deteriorated slightly to 35.7 percent (35.4).

On 31 December 2018, the Group's net debt totalled SEK 1,177 million (1,015) and the debt/equity ratio was 74 percent (72). Despite positive operating cash flow, net debt increased due to acquisitions carried out, dividends paid, share repurchases and payment of additional purchase considerations over the past 12 months.

SEK million	2018	2017	2016	2015	2014
Order intake	3,798	3,256	2,887	2,463	2,195
Net sales	3,786	3,201	2,847	2,458	2,198
Gross profit %	1,088 28.7%	917 28.6%	828 29.1%	677 27.5%	641 29.2%
Operating profit (EBITA) %	367 9.7%	311 9.7%	277 9.7%	198 8.1%	174 7.9%
Adjusted operating profit (EBITA) %	367 9.7%	311 9.7%	277 9.7%	198 8.1%	192 8.7%
Profit after tax	255	213	163	125	112
Adjusted profit after tax	255	213	187	125	126
Earnings per share, SEK	6.79	5.61	4.29	3.27	2.94
Adjusted earnings per share, SEK	6.79	5.61	4.92	3.27	3.41
Dividend, SEK	2.50*	2.25	2.00	1.70	1.50
Debt/equity ratio, %	74%	72%	65%	75%	47%
Average working capital in relation to net sales, %	35.7%	35.4%	36.5%	36.3%	36.6%
Operating cash flow	175	183	267	194	117
Average number of employees	1,177	1,058	973	834	805

*Proposed by the Board of Directors.

See page 60 for definitions.

Segments

Bufab conducts business in three segments of which two are operational segments, segment Sweden and segment International. Consolidated activities that were not assigned to the geographic segments are reported in segment Other.

Segment International

Segment International encompasses activities Bufab engages in outside Sweden and the United States. Businesses within the segment are organised in six regions: North, South, Central, East, Asia & Pacific and UK. The segment comprises in total 31 companies in 24 countries.

Order intake was SEK 2,648 million (2,172), which was higher than net sales.

Net sales rose by 22 percent to SEK 2,615 million (2,144). Organic growth was 9 percent, due to higher market shares in a number of markets and higher underlying demand compared with 2017.

Net sales (SEK million) and adjusted operating margin (%)

The two operational segments manage local customer relationships and offer similar product and service ranges for C-Parts. The two operational segments' subsidiaries are organised into seven geographic regions.

Gross margin was 30.1 percent (29.1). The reasons for this increase are favourable exchange rates and that it has been possible to compensate for rising sourcing prices with price increases for customers.

EBITA amounted to SEK 290 million (203), equal to a margin of 11.1 percent (9.5).

Compared with the preceding year, exchange-rate fluctuations impacted operating profit positively by SEK +27 million, volumes positively by SEK +47 million, the price/cost/mix/other negatively by SEK –19 million and acquisitions positively by SEK +31 million.

Financial position

SEK million	2018	2017	Change in percent
Order intake	2,648	2,172	22%
Net sales	2,615	2,144	22%
Gross profit %	788 30.1%	623 29.1%	26%
Operating profit (EBITA) %	290 11.1%	203 9.5%	43%

Segment Sweden

Segment Sweden comprises region Sweden, which includes 10 companies in Sweden, the USA, Mexico and China. In addition to trading activities, Bufab has its own manufacturing at five facilities in Sweden.

Order intake was SEK 1,149 million (1,089), which was lower than net sales.

Net sales rose by 11 percent to SEK 1,172 million (1,057), of which 6 percent was organic. The high organic growth was a result of increased market shares and improvements in underlying demand during the first three quarters of the year. In the fourth quarter, demand decreased slightly compared with previous quarters and year-on-year.

Gross margin declined to 27.6 percent (29.5). The lower gross margin is due to rising sourcing prices in recent quarters and the weak SEK, which was not sufficiently offset despite significant price increases to customers, and a lower gross margin in Rudhäll Industri, which was acquired in October 2018. While Rudhäll has a lower gross margin, its operating margin is comparable with the segment in general.

EBITA amounted to SEK 126 million (139), equal to a margin of 10.7 percent (13.2). Compared with the preceding year, exchange-rate fluctuations impacted operating profit negatively by SEK -9 million, volumes positively by SEK +19 million, the price/ cost/mix/other negatively by SEK –27 million and acquisitions positively by SEK +3 million.

Financial position

SEK million	2018	2017	Change in percent
Order intake	1,149	1,089	6%
Net sales	1,172	1,057	11%
Gross profit %	323 27.6%	312 29.5%	4%
Operating profit (EBITA) %	126 10.7%	139 13.2%	–10%

Seasonal variation

Bufab's sales fluctuate over the year, primarily on the basis of the number of customer production days in every quarter.

Risks and uncertainties

Exposure to risk, both operational and financial, is a natural part of business activity, as reflected in Bufab's approach to risk management. The aim is to identify and prevent risks and to limit any loss or damage from these risks. The most significant risks to which the Group is exposed are related to the economy's bearing on customer demand. See Note 3 for further information.

Employees

The number of full-time employees in the Group as of 31 December 2018 was 1,253 (1,119), of whom 76 stem from the acquisition of Rudhäll Industri AB. The average number of full-time employees in 2018 was 1,177 (1,058). For further information about employees, see Note 6.

Environment

The Group works proactively with environmental issues to reduce its environmental impact.

Bufab conducts operations through 41 companies, six of which operate in-house manufacturing. At year-end 2018, four of the six manufacturing companies were subject to environmental licensing requirements under the Swedish Environmental Code. Environmentally licensed operations account for about 9 percent (8) of the Group's overall net sales. Environmental licences are required due to the nature of the operations. These companies have been granted licences to conduct environmentally hazardous activities. The Group's other companies conduct trading activities only, which have limited environmental impact. See also Note 32.

Sustainability Report

In accordance with the Swedish Annual Accounts Act, Chapter 6, Section 11, Bufab has issued a Sustainability Report separate from this Annual Report. The Sustainability Report is available on Bufab's website, www.bufab.com.

Guidelines for remuneration of senior executives

The guidelines apply for remuneration of the CEO and other senior executives. Bufab strives to offer total remuneration that will attract and retain qualified employees. The total remuneration may include the components described below.

Fixed salary is to be market-based and must reflect the responsibility that the work involves. The fixed salary is to be revised annually. Cash-based variable salary is not to exceed 50 percent of the fixed salary. Variable remuneration is to be based on established and measurable criteria, designed to promote the company's long-term value creation, and is to be revised annually.

The Board is to annually evaluate whether or not a long-term share-based incentive programme for senior executives and any other employees is to be proposed to the AGM.

Senior executives may be offered individual pension solutions. The pensions are, as far as possible, to be defined contribution.

Other benefits may be provided but are not to constitute a significant portion of the total remuneration.

The notice of termination between the company and the CEO is a maximum of 18 months. Other senior executives are to have a shorter notice of termination period.

The Board is entitled, in individual cases and if there are specific reasons, to deviate from the above guidelines for remuneration. Should such deviation occur, information about this and the reason must be reported at the next AGM.

Long-term share-based incentive programme

The 2018 Annual General Meeting resolved to adopt a long-term share-based incentive programme based on call options, comprising the CEO, senior executives and other key employees within the Group. The programme comprises a maximum of 350,000 call options, corresponding to approximately 0.9 percent of the total number of shares in the company. The purchase price for the call

options has been set, using a Black & Scholes valuation, at SEK 13.34, corresponding to the market value of the options at the date of transfer.

The purchase price for the call options is to correspond to the market value of the options at the date of transfer. Each call option entitles the holder to acquire one share in Bufab during the period 17 May 2021–15 November 2021. The purchase price per share is to correspond to 115 percent of the volume-weighted average price paid for the company's share on Nasdaq Stockholm during the period 27 April 2018–4 May 2018.

A detailed description of the share-based incentive programme can be found in Note 35 on page 36 of the Annual Report.

Related-party transactions

During the period, the CEO and senior executives subscribed for call options within the framework of the long-term share-based incentive programme adopted at the Annual General Meeting under the terms outlined in more detail above. In addition, fees to the Board and remuneration to senior executives have been paid out, which are described in more detail in Note 6 in the consolidated financial statements.

Parent Company

The operations of the Parent Company, Bufab AB (publ), cover the CEO, the consolidated financial reports and the financial management of the Group. Most Group-wide operations pertaining to the remaining members of Group management and administration are managed by the subsidiary Bult Finnveden AB. Accordingly, the Parent Company does not report any sales. The Parent Company reported a loss after financial items of SEK –7 million (–8).

Share capital and ownership structure

On 31 December 2018, the Parent Company's share capital amounted to SEK 547,189.10 divided between 38,110,533 ordinary shares. There was no change in share capital during 2018. The largest shareholder on 31 December 2018 was Liljedahl Group AB with 26.8 percent of shares and votes. On 31 December 2018, Bufab had 642,800 repurchased shares held in treasury.

2019 Annual General Meeting

The AGM for Bufab AB (publ) will be held on 25 April 2019 in Värnamo, Sweden.

Notice of the 2019 AGM and other documentation will be available on Bufab's website, www.bufab.com, from 25 March 2019.

Dividend

The Board of Directors proposes a dividend of SEK 2.50 (2.25) per share for 2018, corresponding to en total dividend of SEK 94 million (85). The proposed record date is 29 April 2019 and the expected payment date for dividends is 3 May 2019. It is proposed that the share be traded without dividend entitlement as of 26 April 2019.

Proposed appropriation of profits

The following earnings are at the disposal of the AGM:

	(SEK)
Retained earnings	312,737,604
The Board of Directors proposes that the earnings be appropriated as follows:
A dividend of SEK 2.50 per share to be paid to shareholders	93,669,333
To be carried forward	219,068,271
Total	312,737,604

CONSOLIDATED INCOME STATEMENT

SEK million		2018	2017
	Note
Net sales	2, 5	3,786	3,201
Cost of goods sold	7	–2,698	–2,284
Gross profit		1,088	917
Distribution costs	7, 23	–512	–446
Administrative expenses	7	–220	–166
Other operating income	8	50	32
Other operating expenses	9	–48	–33
Operating profit	2, 3, 4, 5, 7, 8, 10, 11, 14	358	304
Profit from financial items
Interest and similar income	12	3	1
Interest and similar expenses	13	–32	–27
Profit after financial items	14	329	278
Tax on profit for the year	15	–74	–65
PROFIT FOR THE YEAR		255	213

STATEMENT OF COMPREHENSIVE INCOME

SEK million	2018	2017
Profit after tax	255	213
Other comprehensive income
Items that will not be reclassified in profit or loss
Actuarial gains and losses, net after tax	—	–1
Items that may be reclassified in profit or loss
Translation difference, net assets in foreign currency	49	13
Gain from hedging of net assets in foreign currency	–2	–2
Deferred tax on gain from hedging	—	—
Other comprehensive income after tax	47	10
Total comprehensive income	302	223
Total comprehensive income attributable to:
Parent Company shareholders	302	223
EARNINGS PER SHARE
SEK
Earnings per share 16	6.79	5.61
Weighted number of shares outstanding before dilution, thousands	37,554	37,979
Diluted earnings per share, SEK 16	6.79	5.61
Weighted number of shares outstanding after dilution, thousands	37,554	37,979

CONSOLIDATED BALANCE SHEET

SEK million		31 Dec 2018	31 Dec 2017
	Note
ASSETS
Non-current assets
Intangible assets
Goodwill	17	1,096	1,054
Other intangible assets	17	83	80
Total intangible assets		1,179	1,134
Property, plant and equipment
Land and buildings	18	21	16
Plant and machinery	18	127	59
Equipment, tools and fixtures & fittings	18	59	62
Work in progress and advances for property, plant and equipment	19	14	27
Total property, plant and equipment	18, 19, 20	221	164
Financial assets
Other non-current receivables	21	5	5
Total financial assets		5	5
Non-financial assets
Deferred tax assets	26	16	18
Total non-financial assets		16	18
Total non-current assets		1,421	1,321
Current assets
Inventories	2
Raw materials and consumables		37	27
Products in progress		47	48
Finished goods and merchandise		1,231	1,018
Total inventories		1,315	1,093
Current receivables
Trade receivables	22	727	671
Current tax assets		16	10
Other receivables		35	27
Prepaid expenses and accrued income	23	36	32
Total current receivables		814	740
Cash and bank balances		144	120
Total current assets		2,273	1,953
TOTAL ASSETS		3,694	3,274

CONSOLIDATED BALANCE SHEET

SEK million	31 Dec 2018	31 Dec 2017
Note
EQUITY AND LIABILITIES
Equity 24
Share capital	1	1
Other paid-in capital	488	488
Other reserves	66	19
Retained earnings	1,045	908
Total equity	1,600	1,416
Non-current liabilities
Pension obligations, interest-bearing 25	35	33
Deferred tax, non-interest-bearing 26	62	56
Other interest-bearing liabilities 27, 29	1,212	1,047
Other non-interest-bearing liabilities 28	27	46
Total non-current liabilities	1,336	1,182
Current interest-bearing liabilities
Liabilities to credit institutions	18	23
Overdraft facilities 29, 30	56	32
Total current interest-bearing liabilities	74	55
Current non-interest-bearing liabilities
Trade payables	435	395
Current tax liabilities	22	27
Other liabilities 28	86	85
Accrued expenses and deferred income 31	141	114
Total current non-interest-bearing liabilities	684	621
TOTAL EQUITY AND LIABILITIES	3,694	3,274

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

SEK million	Share capital	Other paid-in capital	Other reserves	Retained earnings	Total equity
Equity on 1 January 2017	1	488	8	800	1,297
Comprehensive income
Profit after tax	—	—	—	213	213
Other comprehensive income
Items that will not be reclassified in profit or loss
Actuarial loss on pension obligations, net after tax	—	—	—	–1	–1
Items that may be reclassified in profit or loss
Translation difference, net assets in foreign currency	—	—	13	—	13
Gain from hedging of net assets in foreign currency	—	—	–2	—	–2
Deferred tax on gain from hedging	—	—	—	—	—
Total comprehensive income	0	0	11	212	223
Transactions with shareholders
Issued call options	—	—	—	3	3
Repurchase of own shares	—	—	—	–31	–31
Dividend to Parent Company shareholders	—	—	—	–76	–76
Total shareholder transactions	0	0	0	–104	–104
Equity on 31 December 2017	1	488	19	908	1,416
Comprehensive income
Profit after tax	—	—	—	255	255
Other comprehensive income
Items that will not be reclassified in profit or loss
Actuarial loss on pension obligations, net after tax	—	—	—	—	—
Items that may be reclassified in profit or loss
Translation difference, net assets in foreign currency	—	—	49	—	49
Gain/loss from hedging of net assets in foreign currency	—	—	–2	—	–2
Deferred tax on gain/loss from hedging	—	—	—	—	—
Total comprehensive income	0	0	47	255	302
Transactions with shareholders
Issued call options	—	—	—	4	4
Repurchase of own shares	—	—	—	–37	–37
Dividend to Parent Company shareholders	—	—	—	–85	–85
Total shareholder transactions	0	0	0	–118	–118
Equity on 31 December 2018	1	488	66	1,045	1,600

The Group's restricted equity comprises share capital and SEK 32 million in other paid-in capital.

CONSOLIDATED CASH FLOW STATEMENT

SEK million	31 Dec 2018	31 Dec 2017
Note
Operating activities
Profit before financial items	358	304
Depreciation/amortisation and impairment	51	43
Interest and other finance income	2	—
Interest and other finance expenses	–31	–25
Other non-cash items	13	2
Income tax paid	–93	–68
Cash flow from operating activities before changes in working capital	300	256
Cash flow from changes in working capital
Increase (-)/decrease (+) in inventories	–170	–142
Increase (-) / decrease (+) in operating receivables	–20	–79
Increase (+) / decrease (-) in operating liabilities	21	116
Cash flow from operating activities	131	151
Investing activities
Acquisition of intangible assets	–4	—
Acquisition of property, plant and equipment	–74	–61
Company acquisition including payment of additional purchase considerations 34	–98	–132
Cash flow from investing activities	–176	–193
Financing activities
Dividend paid	–85	–76
Call options 35	4	3
Repurchase of own shares 35	–37	–31
Increase (+)/decrease (-) in borrowings 38	182	142
Cash flow from financing activities	64	38
Cash flow for the year	19	–4
Cash and cash equivalents at beginning of year	120	122
Translation differences	5	2
Cash and cash equivalents at year-end	144	120

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

All amounts are in SEK million unless otherwise specified. The figures in brackets indicate the preceding year's values.

NOTE 1 GENERAL INFORMATION

The company, Bufab AB (publ), Corporate Registration Number 556685-6240, operates as a limited liability company, with its registered office in Stockholm, Sweden.

The address of the head office is Box 2266, SE-331 02, Värnamo, Sweden.

NOTE 2

SUMMARY OF KEY ACCOUNTING POLICIES

This Annual Report has been prepared in accordance with IFRS as adopted by the EU, as well as the Swedish Financial Reporting Board's recommendation RFR 1 Supplementary Accounting Rules for Groups and the Swedish Annual Accounts Act. The consolidated annual financial statements have been prepared in accordance with the cost method. The Parent Company's accounting policies are consistent with those applied for the Group, unless otherwise specified.

In addition to these standards, both the Swedish Companies Act and the Swedish Annual Accounts Act contain regulations requiring the disclosure of certain additional information. Preparing financial statements in accordance with IFRS requires the use of a number of important accounting estimates. Management is also required to make certain judgements when applying its accounting policies. Information about areas that are complex or involve a high proportion of assumptions and estimates, or about areas where accounting estimates are of key significance to the consolidated financial statements, can be found in Note 4. The estimates and assumptions are reviewed regularly and the effect on the reported amounts is recognised in profit or loss.

New and amended standards that came into effect in 2018

The following new standards came into effect during the financial year.

IFRS 9 Financial Instruments

This standard addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the parts of IAS 39 that pertain to classification and measurement of financial instruments. The standard is to be applied to financial years beginning on or after 1 January 2018.

The Group's work has shown that IFRS 9 does not have any material impact on the Group's financial statements and current accounting policies.

However, IFRS 9 will introduce a new model for calculating provisions for credit losses based on expected credit losses. The new model for impairment contains a three-step approach based on changes in credit quality for the financial assets. The different steps govern how a company measures and recognises impairment and how it must apply the effective interest rate method. For financial assets without a significant financing component, for example, normal trade receivables and lease receivables,

there are simplification rules that entail the company can immediately recognise a provision for the receivable's entire maturity period and thus does not need to register when a material deterioration in creditworthiness occurs.

Bufab applies the simplified approach to credit provision, meaning the provision will match the expected loss over the entire life expectancy of the account receivable. No material effect of this has been identified as bad debt losses are historically very low and the forward-looking assessment is that credit risk will remain low.

IFRS 15 Revenue from Contracts with Customers

This standard regulates how revenue is to be recognised. IFRS 15 will replace IAS 18 Revenue and IAS 11 Construction Contracts and associated SICs and IFRICs. IFRS 15 came into effect on 1 January 2018.

Revenue is recognised when a customer obtains control over the product or service sold, a principle that replaces the previous principle that revenue is recognised when risks and benefits have been transferred to the purchaser. The basic principle in IFRS 15 is that the company recognises revenue in the manner that best reflects the transfer of the goods or service promised to the customer. This method of recognition is conducted using a five-step model:

• Step 1: identify the contract with a customer.
• Step 2: identify the performance obligations in the contract.
• Step 3: determine the transaction price.
• Step 4: allocate the transaction price to the performance obligations in the contract.
• Step 5: recognise revenue when the entity satisfies a performance obligation.

The main changes compared with previous rules are:

• Distinct products or services in integrated contracts must be recognised as separate obligations and any discounts must, as a general rule, be allocated to the separate obligations.
• If the transaction price contains variable remuneration (such as performance bonuses, discounts, royalties, etc.) then revenue can be recognised earlier than under current rules. This is to be estimated and included in the transaction price to the extent it is highly probable that its inclusion will not result in a reversal.
• The date when the revenue is to be recognised may change: certain revenue that is currently recognised when a contract is finalised may need to be recognised allocated across the contract period or the opposite may be the case.
• There are new specific rules for licenses, guarantees, payments on account that are not refunded and consignment contracts.
• The standard also involves enhanced disclosure requirements.

The Group is engaged in trading fastener products. Revenue from product sales is recognised at the time when control of the product is transferred to the customer. This is usually when delivery takes place to the customer and ownership rights are transferred.

The Group's work has shown that IFRS 15 does not have any material impact on the Group's financial statements nor have any transitional effects arisen.

New and amended standards that come into effect in 2019

The following new standard comes into effect during or after 2019.

IFRS 16 Leases

In January 2016, the IASB published a new leasing standard that will replace IAS 17 Leases and the associated interpretations IFRIC 4, SIC-15 and SIC-27. The standard requires that assets and liabilities attributable to all leases, with some exceptions, are recognised in the balance sheet. This method of recognition is based on the approach that the lessee has the right to control the use of the asset for a period of time in exchange for consideration. Lessor accounting is substantially unchanged. The standard is to be applied to financial years beginning on or after 1 January 2019. Early application is permitted. IFRS 16 addresses the recognition of rental contracts and leases for both lessors and lessees. The implementation of this standard entails that nearly all leases will be recognised in the lessee's balance sheet, since no difference is made any longer between operational and financial leases. According to the new standard, an asset (the right to use a leased asset) and a financial liability covering the obligation to pay lease fees are to be recognised. Exceptions are made for short-term leases and leases for which the underlying assets have a low value. Bufab will apply the new standard prospectively, but will restate the right-of-use assets retrospectively with the total effect of an initial application as an adjustment of the opening amount of retained earnings on 1 January 2019. Accordingly, comparative information will not be restated.

The new standard will have a material impact on Bufab's total assets, partly in relation to the right-of-use assets, which will increase Bufab's property, plant and equipment, and regarding the lease liabilities that are now recognised in the balance sheet and will increase Bufab's interest-bearing liabilities.

The impact on the balance sheet at the beginning of 2019 is expected to be as set out in Note 36. Most of the increase in rightof-use assets pertains to buildings and land. The effect on the consolidated income statement will not be material and the effects on net income in the near future are expected to be marginal.

Consolidated financial statements

Subsidiaries

Subsidiaries are all the entities in which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than 50 percent of the voting rights.

The existence and effect of potential voting rights which may be used or converted is taken into account when assessing whether control exists. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are excluded from the consolidated financial statements as of the date on which control ceases.

The Group's acquisition of subsidiaries is accounted for in accordance with the acquisition method. The cost of an acquisition comprises the fair value of assets transferred including any additional purchase considerations, equity instruments issued and liabilities incurred or assumed at the transfer date. Conditional purchase consideration is classified either as shareholders' equity or a financial liability. Amounts classified as financial liabilities are remeasured each period at fair value. Any remeasurement gains or losses are recognised in operating profit/loss. Transaction expenses attributable to the acquisition are recognised as incurred. Identifiable acquired assets and assumed liabilities and contingent liabilities in a business combination are measured initially at their acquisition-date fair value, irrespective of any minority interest. If the cost of acquisition exceeds the fair value of the Group's share of the acquired net identifiable assets, the difference is

recognised as goodwill. If the cost of acquisition is less than the fair value of the acquired subsidiary's net assets, the difference is recognised directly in profit or loss.

Elimination of intra-group transactions

Intra-group transactions and balances and unrealised gains on intra-group transactions are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred.

The accounting policies for subsidiaries have been amended, where necessary, in order to ensure consistent application of the Group's policies.

Foreign currency translation

Items in the individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated financial statements are presented in Swedish kronor (SEK), which is the Parent Company's functional and presentation currency.

Foreign currency transactions are translated into the functional currency according to the exchange rates prevailing at the date of the transaction. Exchange gains and losses arising from the settlement of such transactions and during translation of foreign currency monetary assets and liabilities at the closing rate are recognised in profit or loss.

The results and financial position of all Group entities are translated into the Group's presentation currency. Assets and liabilities are translated at the closing rate, while income and expenses are translated at the average rate, with all resulting exchange-rate differences recognised as a separate component of equity. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are reported as assets and liabilities in the Group's balance sheet and are translated at the closing rate. The following exchange rates were used for the translation of foreign operations:

	Average rate		Closing rate
Currency	2018	2017	2018	2017
DKK	1.38	1.29	1.38	1.32
EUR	10.26	9.63	10.28	9.85
GBP	11.59	10.99	11.35	11.10
CZK	0.40	0.37	0.40	0.38
HUF	0.03	0.03	0.03	0.03
NOK	1.07	1.03	1.02	1.00
PLN	2.41	2.26	2.39	2.36
RMB	1.31	1.26	1.31	1.26
INR	0.13	0.13	0.13	0.13
NTD	0.29	0.28	0.30	0.28
RUB	0.14	0.15	0.13	0.14
USD	8.69	8.54	8.97	8.23
RON	2.23	2.14	2.25	2.11
TRY	1.84	2.34	1.70	2.18

Classification

Non-current assets, liabilities and provisions are amounts expected to be recovered or settled more than 12 months after the balance-sheet date. Current assets and liabilities are amounts expected to be recovered or settled no more than 12 months after the balance-sheet date.

Items affecting comparability

Items affecting comparability are recognised separately in the financial statements when it is necessary to explain the Group's earnings. Items affecting comparability relate to material income or cost items recognised separately due to the significance of their nature or amount.

Intangible assets

Goodwill

The amount by which the cost exceeds the acquisition-date fair value of the Group's share of the acquired subsidiary's net identifiable assets is recognised as goodwill. Goodwill on acquisitions of subsidiaries is reported under intangible assets.

Goodwill is not amortised but is tested for impairment annually and is carried at cost less accumulated impairment.

Goodwill is allocated to cash-generating units for impairment testing.

Other intangible assets

The Group's other intangible assets comprise acquired customer and supplier relationships and capitalised expenditure for IT and business systems. The Group's basis for acquisitions is that customer relationships and supplier relationships have a limited useful life and are recognised at cost less any accumulated depreciation. Amortisation is applied on a straight-line basis to distribute the costs of their estimated useful lives.

Property, plant and equipment

Property, plant and equipment is recognised as an asset in the balance sheet when, based on available information, it is probable that future economic benefits associated with the ownership will flow to the Group/company and the cost of the asset can be measured reliably.

Items of property, plant and equipment are recognised at cost less accumulated depreciation and impairment losses.

Cost comprises the purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended.

The carrying amount of an item of property, plant and equipment is derecognised from the balance sheet on disposal or divestment, or when no future economic benefits are expected from its use. The gain or loss arising from the disposal of an item of property, plant and equipment is the difference between the selling price and the asset's carrying amount less direct distribution costs. The gain or loss is reported under other operating income/expenses.

Leases – Group as lessee

The Group applies IAS 17 Leases. Leases are classified in the consolidated financial statements as financial leases or operating leases. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. Otherwise, it is classified as an operating lease. Assets held under financial leases are recognised as assets in the consolidated balance sheet. Future lease payment obligations are reported as current and non-current liabilities. An asset leased under a finance lease is subject to depreciation, while the lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each accounting period during the lease term so as to produce a constant periodic rate of interest on the balance of the liability reported during the period. Contingent rents are recognised as an expense in the period in which they are incurred.

Operating lease payments are recognised as an expense over the lease term, based on the use of the asset, which may differ from actual lease payments during the year. If significant changes are made to the provisions of the lease during the term of the lease, an assessment is made as to whether these new provisions would have resulted in a different lease classification had they been in effect at the inception of the lease. If this is the case, the lease is treated as a new lease, to be assessed using the updated parameters at its inception.

Depreciation policies for property, plant and equipment

Depreciation according to plan is based on original cost less estimated residual value. Depreciation is applied on a straight-line basis over the useful life of the asset.

The following depreciation periods are applied:

Customer and supplier relationships	10 years
Other intangible assets	3–5 years
Buildings*	12–15 years
Plant and machinery	5–10 years
Equipment, tools and fixtures & fittings	3–10 years

* In addition to capitalised improvement expenses on others' property, Buildings also includes financial leases of buildings, and for these the period of depreciation corresponds to the length of the lease. Refer also to Note 20.

Borrowing costs

Borrowing costs are recognised in profit or loss in the period in which they are incurred.

Impairment

Assets with an indefinite useful life are not subject to depreciation or amortisation; instead, these assets are tested annually for impairment. Assets that are subject to depreciation or amortisation are also tested for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss is the amount by which an asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the asset's fair value less distribution costs and its value in use. For impairment testing, assets are grouped at the lowest levels at which there are separate identifiable cash flows (cash-generating units).

Receivables

Receivables are recognised at cost less any impairment.

Inventories

Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. An obsolescence risk is also taken into account. At the end of the financial year, the obsolescence reserve totalled SEK 84 million (76), of which SEK 2 million pertains to obsolescence reserves assumed from acquired companies during the year. The cost of the Group's merchandise is calculated as a weighted average purchase price and includes expenses arising from the acquisition of inventories and bringing them to their existing location and condition. The cost of finished goods and work in progress includes a reasonable proportion of indirect manufacturing costs. Measurement takes into account normal capacity utilisation.

Business combination

The purchase method is used to recognise the Group's business combinations, regardless of whether the acquisition consists of equity interests or other assets. The purchase consideration for the acquisition of a subsidiary comprises the fair value of:

• transferred assets,
• liabilities the Group assumes from previous owners,
• shares issued by the Group,
• assets or liabilities that result from an agreement
• covering a contingent purchase consideration,
• earlier equity interests in the acquired company.

Identifiable acquired assets, assumed liabilities and assumed contingent liabilities in a business combination are initially measured, with a few exceptions, at fair value on the date of acquisition. For each acquisition, that is, on an acquisition-by-acquisition basis, the Group determines whether non-controlling interest in the acquired company is to be recognised at fair value or at the shareholding's proportional share in the carrying amount of the acquired company's identifiable net assets.

Acquisition-related costs are expensed as they arise.

• Goodwill pertains to the amount with which
• transferred consideration,
• any holding of non-controlling interests in the acquired company, and
• fair value at the date of acquisition of earlier equity interests in the acquired company, (if the business combination was conducted in stages) exceeds the fair value of acquired net identifiable assets.

If the amount is less than the fair value of the acquired net assets, in the event of an acquisition at low price, the difference is recognised directly in profit or loss. If all or part of the purchase consideration is deferred, future payments are to be discounting to the present value at the date of acquisition. The discount rate is the company's incremental borrowing rate of interest, which is the interest rate the company would have paid for financing through loans during a corresponding period and at similar terms. Conditional purchase consideration is classified either as shareholders' equity or a financial liability. Amounts classified as financial liabilities are remeasured each period at fair value. Any remeasurement gains or losses are recognised in profit or loss.

Employee benefits

Group companies have various pension schemes in accordance with local conditions and practices in the countries in which they operate. The most common pension arrangements are definedcontribution pension plans. Under these plans, the company settles its obligations on an ongoing basis through payments to insurance companies or pension funds.

However, the company has a more extensive responsibility in the case of defined-benefit pension plans, which are based on an agreed future pension entitlement. With these plans, the company's recognised cost is affected by factors such as assumptions about the future. The Group's net obligation is calculated separately for each plan by estimating the future benefit that employees have earned through their service in the current and prior periods. The present value of this benefit is determined by discounting the estimated future cash flows. The Group has safeguarded a portion of its obligations through transfers to pension funds, and the fair value of plan assets is offset against the provision in the balance sheet. The discount rate is obtained by reference on the balance-sheet date to market yields on high-quality corporate bonds of a term consistent with the term of the Group's pension obligation. The calculation is performed by a qualified actuary using the projected unit credit method. Actuarial gains and losses are presented in other comprehensive income when they arise.

For salaried professionals in Sweden, the ITP 2 plan's defined-benefit pension obligations for retirement and survivors' pensions are backed by an Alecta insurance policy. According to a statement from the Swedish Financial Reporting Board (UFR10 Recognition of ITP 2 pension plan financed by an Alecta insurance policy), this is a defined-benefit plan that encompasses several employers. For the 2018 financial year, the company has not had access to enough information to report its proportional share of the plan's obligations, plan assets and costs, and the company was therefore unable to recognise it as a defined-benefit plan.

Accordingly, the ITP 2 pension plan, which is backed by an Alecta insurance policy, was recognised as a defined-contribution plan. The premium for the defined-benefit retirement and survivors' pension is calculated on a case-by-case basis and is determined by such factors as salary, previously vested pension benefits and the expected remaining professional life of the beneficiary.

The collective consolidation level comprises the market value of Alecta's assets as a percentage of the insurance obligations calculated using Alecta's actuarial methods and assumptions, which do not correspond with IAS 19. The collective consolidation level is generally permitted to range from 125 to 155 percent. If Alecta's collective consolidation level falls below 125 percent or exceeds 155 percent, actions must be taken to enable the consolidation level to return to the standard interval. In the event of a low consolidation level, the company may raise the contractual cost of signing up for a policy and expanding the current benefits. In the event of a high consolidation level, the company may introduce premium deduction. At the end of the financial year, Alecta's surplus in the form of the collective consolidation level was 142 percent (154).

Revenues

Net sales comprise, in all material respects, revenues from the sale of goods and services. The Group is engaged in trading fastener products and C-parts. Revenue recognition occurs in profit or loss when the products have been delivered to the customer and control and the right of ownership have been transferred. Revenue includes only the gross inflow of economic benefits received and receivable for the company's own account. Revenue from the sale of goods is recognised when the company has transferred control of ownership of the goods and the company does not exercise any effective control over the goods sold. Revenue is recognised at the fair value of the consideration received or receivable, net of discounts. Settlement is made in cash, with revenue comprising the amount of cash received or receivable. Amounts collected on behalf of third parties are not included in the company's revenue. Revenue from the rendering of services is recognised over time as the services are performed. No financing component is considered to exist on the date of sale since the customer's credit period is shorter than one year and generally complies with market practice. A receivable is recognised when the products are delivered, as this is the date when remuneration becomes unconditional (in other words, only the passage of time is needed before payment will take place). The distribution of revenue by segment is presented in Note 5.

The item "other operating income" includes other revenues in the operation that do not stem from the day-to-day business operations, such as capital gains from the sale of non-current assets and exchange-rate gains from operating receivables/liabilities.

Dividends are recognised when the right to receive payment is established.

Intra-group sales are eliminated in the consolidated financial statements.

Costs

The income statement is classified using the function of expense method. The functions are as follows:

Cost of goods sold comprises the cost of the good, the cost for material handling and manufacturing costs, including payroll and material costs, purchased services, costs of premises, and depreciation/amortisation and impairment of property, plant and equipment.

Administrative expenses comprise costs of the companies' own administrative functions and costs relating to boards, management and staff functions.

Distribution costs comprise costs associated with the sales organisation and inventory obsolescence.

Other operating income/expenses relates to secondary activities, exchange-rate differences on operating items, the remeasurement of additional purchase considerations for acquired companies and capital gains/losses on the sale of property, plant and equipment.

Financial income and expenses

Financial income and expenses comprise interest income on bank deposits and receivables, interest expense on borrowings, dividend income, exchange-rate differences and other financial income and expenses.

The interest component of finance lease payments is recognised in profit or loss using the effective interest method, which means that the interest is allocated to each accounting period during the lease term so as to produce a constant periodic rate of interest on the balance of the liability reported during the period.

Tax

Income tax consists of current tax and deferred tax. Taxes are recognised in profit or loss except when the underlying transaction is recognised directly in equity, in which case the related tax effect is also recognised in equity.

Current tax is the amount of income taxes payable or recoverable in respect of the current year. This includes adjustments of current tax attributable to prior periods. Deferred tax is accounted for using the balance-sheet method. A deferred tax liability is recognised for temporary differences between the carrying amounts of assets and liabilities and their corresponding tax bases. Amounts are calculated based on how the temporary differences are expected to be settled and by applying the tax rates enacted or substantively enacted by the balance-sheet date. Deferred tax is not recognised on temporary differences arising from goodwill on consolidation, and is not normally recognised on temporary differences arising from participations in subsidiaries that are not expected to be taxed in the foreseeable future. Untaxed reserves are recognised including deferred tax liabilities in the legal entity. However, in the consolidated financial statements, untaxed reserves are divided into deferred tax liability and equity. Deferred tax assets related to deductible temporary differences and loss carry-forwards are only recognised insofar as it is probable that they will result in lower tax payments in the future.

Cash-flow statement

The cash-flow statement is prepared using the indirect method. Recognised cash flows only concern transactions that involve cash inflows and outflows. Cash and bank balances are classified as cash and cash equivalents.

Related-party transactions

None of the Parent Company's total purchases charged to operating profit relate to transactions with other companies within the corporate group to which the company belongs. Within the

Group, there are some internal sales between its different markets. Related-party transactions are also reported in Note 6 (Employees, personnel expenses and fees paid to directors and auditors) and Note 33 (Related-party transactions). Related-party transactions are made on terms equivalent to commercial transactions.

Financial instruments

The Group recognises all financial instruments at amortised cost. The Group classifies its financial assets and liabilities depending on the purpose for which the financial asset or liability was acquired. The classification of investments in debt instruments is dependent on the Group's business model for managing financial assets and the contractual rights for an asset's cash flow.

Financial assets at amortised cost

Assets held for the purpose of collecting contractual cash flow and where this cash flow is made up solely of the principal amount and interest are measured at amortised cost. Assets in this category are recognised initially at fair value including transaction costs. After the date of acquisition, these are recognised at cost by applying the effective interest method. The carrying amount of these assets are adjusted by any recognised expected credit losses (see impairment below). Interest income from these financial assets is recognised using the effective interest method and entered in financial income. Assets in this category comprise long-term financial receivables, trade receivables and other current receivables. They are included in current assets unless the settlement date is more than 12 months after the end of the reporting period, in which case they are classified as non-current assets.

Financial liabilities at amortised cost

The Group's financial liabilities are recognised initially at fair value, net after transaction costs. Financial liabilities are then recognised at amortised cost by applying the effective interest method. Non-current liabilities have an expected maturity beyond 1 year while current liabilities have a maturity shorter than 1 year. This category includes liabilities to credit institutions, trade payables and other current liabilities.

Hedge accounting

The effective portion of change in value for derivative instruments or other financial instruments that fulfil the requirements of hedge accounting according to the method for cash flow hedging or hedging of net investments in foreign operations is recognised in other comprehensive income. Accumulated change in value from hedging of net investments in foreign operations is reversed from equity to profit or loss when foreign operations are divested in full or in part.

Cash and cash equivalents

Cash and cash equivalents include cash and bank balances and other current investments with an original maturity of three months or less, and overdraft facilities. Utilised overdraft facilities are reported as borrowings under current liabilities in the balance sheet.

Borrowings

Borrowings are recognised initially at fair value and are subsequently measured at amortised cost. Any difference between the amount received and the repayment amount is recognised in profit or loss over the borrowing period using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance-sheet date.

RISKS AND RISK MANAGEMENT

Operational risks

Market and business risks

Customer demand for products and services from Bufab depends on general economic conditions and the level of activity in the manufacturing industry in the countries in which Bufab and its customers operate.

Bufab operates in Sweden, Denmark, Finland, Norway, Germany, France, the Netherlands, Austria, the Czech Republic, Poland, the UK, Estonia, Hungary, Spain, Slovakia, India, the United States, Taiwan, China, Russia, Turkey, Romania, Italy, Singapore, Malaysia, Indonesia and Mexico.

Bufab's customers are found in a wide spectrum of manufacturing industries, including the technology sector, electronics/ telecommunications, consumer goods, the offshore and refining industry, the transportation and construction sectors, furniture and the automotive sector. Geographical diversification combined with a vast number of customers spread across many sectors reduces the effects of isolated changes in customer demand.

However, despite this breadth, it can be stated that the company is clearly impacted by customers' underlying demand, which is considered to comprise the company's most tangible operational risk. The company was substantially impacted by reduced customer demand during the sharp global economic downturn in 2009.

There is a risk that major customers will choose to bypass the wholesale stage and deal directly with manufacturers. However, Bufab adds value to its customers by providing efficient logistics and a broad base of suppliers, as well as a reliable level of quality. The company believes that this broad range as a logistics partner remains competitive.

Bufab can be negatively impacted when its suppliers experience economic, legal or operational problems, raise prices or when they are unable to deliver on time or at the agreed level of quality. Bufab sources most of its goods from suppliers that are mainly located in Asia, but also from some European suppliers. Bufab works with a large number of suppliers from different countries. The company aims to avoid making itself dependent on specific suppliers.

Inventories constitute a significant share of Bufab's assets and are costly to relocate, store and manage. Accordingly, efficient inventory management is a key element in Bufab's operation. Inefficient inventory management can lead to inventory surpluses or deficits. Inventory surpluses expose Bufab to the risk of having to incur impairment losses on or to dispose of the inventory. Conversely, inventory deficits expose Bufab to the risk of having to source products at higher prices in order to deliver on time, or to incur expensive express delivery costs or penalties.

With its large and complex flow of items combined with a broad base of customers and suppliers, there is a risk that Bufab's customers will not receive their products at the specified time or with the right quality. Bufab may become subject to significant product liability and other claims if the products it sources and produces are defective, cause production stops or personal or property damage, or otherwise do not fulfil the requirements agreed with the customer. Such defects may be caused by mistakes made by Bufab's own personnel or the company's suppliers. If a product is defective, Bufab may also have to recall the product. Furthermore, Bufab may not be able to file or collect a corresponding claim against, for example, its own suppliers in order to receive compensation for damages and related costs. To address this risk, internal and external processes are in place that must be adhered to by employees and external parties. Bufab works continuously

to develop these processes and to train employees and external parties.

Bufab could lose business or growth opportunities from existing customers as a result of many factors, including, but not limited to, relocations of the customers' manufacturing operations or customer dissatisfaction, particularly with product quality or service, as well as customers underperforming in, or shutting down, their businesses. In connection with a customer relocating manufacturing operations, for example, to a low-cost country, Bufab may not be requested, or be able, to make deliveries to the new location to the same extent as prior to the relocation, or may not be able to efficiently source all, or any, of its products to the new location. Moreover, should customers relocate outside of Bufab's operating jurisdictions, and particularly outside the European Union, it may be difficult or burdensome for Bufab to establish new operations and comply with local regulations in such locations. As a consequence, Bufab may lose all, or part of, its business from that manufacturing operation.

Bufab's supply chain (including manufacturing units and some warehouses) and business processes are, to a large extent, automated via hardware and software for robotics and via the Group's IT systems. Bufab is particularly dependent on these systems to purchase, sell and deliver products, to invoice its customers and to manage its production units and certain automated warehouses. It is also an important tool for accounting and financial reporting as well as inventory and net working capital management. Disruptions, as a consequence of, for example, upgrades of existing IT systems, or deficiencies that materialise in the function of its IT systems or hardware could, even in the short term, adversely affect Bufab's business, results of operations and financial condition.

Bufab's strategy covers both organic growth and growth through acquisitions. Acquisitions may expose Bufab to risks, primarily related to integration, such as impairment of relationships with key customers, inability to retain key employees and difficulties and higher costs than anticipated for combining operations. Following some of its past acquisitions, Bufab has experienced such integration difficulties. Moreover, acquisitions may expose Bufab to unknown liabilities.

Bufab manages its operations through operating subsidiaries in a number of countries. The business, including transactions between Group companies, is run according to Bufab's understanding or interpretation of current tax laws, tax treaties, other tax law stipulations and the requirements of the tax authorities concerned. Furthermore, the tax authorities of the countries concerned could make assessments and take decisions which deviate from Bufab's understanding or interpretation of the abovementioned laws, treaties and other regulations. Bufab's tax position, both for previous years and the current year, may change as a result of the decisions of the tax authorities concerned or as a result of changed laws, treaties and other regulations. Such decisions or changes, possibly retroactive, could adversely affect Bufab's business, results of operations and financial condition.

Bufab holds environmental permits for manufacturing at its production facilities. Bufab previously conducted manufacturing at other facilities in Sweden. Bufab has completed environmental inventories and, where required, environmental technical investigations, at all properties where Bufab has historically conducted manufacturing in Sweden. These investigations detected traces of contamination at or in proximity to some of these properties. For more information regarding environmental risks, refer to Note 32.

Bufab has a substantial goodwill item in its consolidated balance sheet, which is regularly tested for impairment requirements; see also Note 17.

Sourcing prices

Bufab is exposed to fluctuations in the market price of certain commodities, particularly steel, stainless steel (which fluctuates with the price of alloy metals) and other metals. Any increase in such prices may impact the price for which Bufab purchases its products, and thereby the cost of goods sold. Energy prices and the price of oil impact manufacturing and freight costs, which significantly affect cost of goods sold. In addition, labour shortages and labour costs in the countries from which Bufab sources its products may increase Bufab's cost of goods sold through its sourcing prices. Moreover, Bufab may not be able to compensate for increased sourcing prices by raising prices for its own customers.

Competition

Bufab acts as a subcontractor to the engineering industry and faces competition in all types of customer segments. Customer requirements concerning price, quality, delivery reliability, etc. are constantly increasing. Since the entry barriers for smaller companies and the investments required to start a competing business are low, Bufab can also lose sales to new companies. The company's continued success is dependent on its ability to respond to these increasing requirements and be more competitive than its competitors in the areas of attractive pricing, delivery reliability, quality, high internal efficiency and broad, secure logistics solutions from all of the countries in which Bufab operates.

Legal risks

Legal risks primarily include legislation and regulation, government decisions, disputes, etc. The fastener industry within Europe and North America has periodically been subject to heavy duties on imports of standard parts from certain geographies, mainly China. Bufab has been forced to find alternative purchasing channels, primarily in Asia, which has worked well considering the volume size. It cannot be ruled out that, for example, the EU or USA may introduce increased duties in the future, and there is considerable uncertainty about the extent of such duties.

Furthermore, there is considerable uncertainty about a possible Brexit and the impact this may have. Bufab has, however, taken several operative steps to reduce the adverse impact of a possible Brexit on the Group.

Bufab's operations face risks related to taxes and the environment. See also Note 32.

Insurance

Bufab insures its assets against property damage and business interruption losses. In addition, there are insurance policies for product liability, product recall, transportation, legal protection, crime against property and business travel. There have been no claims for damages with regard to product liability or product recall that had any material impact on earnings during the last decade.

Risks related to employees

Bufab must have access to competent and motivated employees and ensure access to good leaders as a means of achieving its established strategic and operational targets. Bufab is working in a structured manner to ensure the health and well-being of its employees and that they can find positive challenges in their daily work.

Bufab also has a strong focus on safety efforts in all units. Through strategic manpower planning, Bufab can ensure access to persons with the right qualifications at the right time. Recruitment may take place both externally and internally, where internal recruitment is facilitated as vacant positions are advertised both internally and externally. Salaries and other terms and conditions are in line with market conditions and are connected to each subsidiary's priorities. Bufab is also striving to maintain good relationships with trade union organisations. However, securing a skills supply to each subsidiary is always a challenge, given that the labour market is mobile.

Risks in IT systems

Bufab is dependent on IT systems for its ongoing operations. Disruption or faults in critical systems have a direct impact on deliveries of products and services to customers and other important business processes. Incorrect management of financial systems may affect the company's reporting of results. These risks are increasing in an ever-more technically complex and interconnected world. In recent years, Bufab has therefore worked towards more standardised IT processes and an organisation for information security. IT security includes a continuous risk assessment, the implementation of preventive measures and the use of security technologies. Standardised processes exist to implement new systems, to change current systems as well as for daily operations. A large share of Bufab's system landscape is based on thoroughly tested products, such as Jeeves.

Financial risks

Bufab is exposed to various types of financial risk in the course of its operations. Examples of these are currency, financing, interest rate and counterparty risks. The Board is responsible for adopting risk-management policies. Financial activities such as risk management, liquidity management and borrowing are managed at the Group level by the subsidiary Bult Finnveden AB.

Currency risks

Changes in exchange rates affect the Group's earnings and equity in different ways. Currency risk arises from:

• flow exposures in the form of receipts and payments in different currencies
• recognised assets and liabilities of subsidiaries
• translation of the earnings of foreign subsidiaries to SEK
• translation of net assets of foreign subsidiaries to SEK

Exchange-rate fluctuations may also affect the Group's competitiveness or that of its customers, thereby indirectly affecting the Group's sales and earnings. The Group's overall currency exposure has increased over time as operations have become more global, with increased trade from Asia as well as a higher proportion of sales outside Sweden – from Swedish subsidiaries but mainly from foreign subsidiaries. The Group's currency risk management policy primarily focuses on transaction-related currency risks. Currency risks are mainly managed by price adjustments to customers and suppliers, and by working to change the business's operating terms by aligning revenues and costs in currencies other than SEK with each other.

Some 74 percent (74) of the Group's total invoicing and 75 percent (76) of its costs are in foreign currencies. Flow exposure in 2018 was marginally hedged at fixed exchange rates.

During the financial year, the Group's currency flows (excluding the reporting currency, SEK) were distributed as follows (amounts in SEK million):

Currency	Costs*	Sales*
EUR	1,508	1,870
USD	777	296
GBP	279	446
NOK	75	91
PLN	101	83
RMB	80	112
SGD	61	71
NTD	28	2
HUF	21	98
DKK	19	35
TRY	10	32
RON	10	24
INR	10	0
CZK	8	47
JPY	8	0
RUB	3	3
CHF	2	1

* Expressed in SEK million at the average rate for 2018. Currency flows represent gross flows, including intra-group transactions

The company's largest exposure is to the USD, as trade from Asia is largely conducted in this currency, and to the EUR, as a large proportion of its European sales are in this currency.

Net assets in foreign subsidiaries correspond to investments in foreign currencies that give rise to translation differences when they are translated to SEK. Loans were raised in GBP and EUR to reduce the effect of translation differences on the Group's comprehensive income and capital structure. Exchange-rate gains and exchange-rate losses on these loans are considered to be effective hedges, as defined by IFRS, of translation differences and are recognised in other comprehensive income and the accumulated amount in equity. During 2018, the Group increased its lending in foreign currencies with the aim of reducing the impact of currency exposure on Group's equity that originates from companies with net assets in the currency in question. The effectiveness of the hedge is assessed when entering into a hedging relationship. The hedged item and hedge instrument is then assessed regularly to ensure the conditions satisfy requirements. Total borrowing in foreign currencies defined as hedging instruments amounted to EUR 35 million and GBP 26 million, respectively, at 31 December 2018. For a specification refer to Note 39. Refer also to the consolidated statement of comprehensive income and the consolidated statement of changes in equity.

Credit risk

Credit risk related to cash and cash equivalents, balances and credit exposures are managed at the Group level. Credit risk related to receivables outstanding are managed by the company in which the receivable was created. The company conducts individual assessments of its customers' credit ratings and credit risks, including customers' financial position, as well as previous experiences and other factors. The management does not anticipate any losses due to missing payments from counterparties other than the amount reserved as "doubtful debts." Provisions are made for trade receivables and contract assets in accordance with the Group's loss risk provision model. The Group therefore makes

provisions for trade receivables based on the Group's expected losses based on a historic model of expected losses in each age category. Indications that specific impairment is required include the Group's assessment that there is no reasonable expectation of repayment since the debtor is failing to comply with the repayment plan. When a debtor's payments have fallen due by more than 180 days, half of the value of the receivable is written off in line with the Group's loss risk provision model. When a debtor's payments have fallen due by more than 360 days, or when there is no reasonable expectation of repayment (for example, bankruptcy) the full value of the receivable is written off. For more information about past-due receivables and multi-year history, see Note 22.

Financing, liquidity and capital

Financing risk is defined as the risk of being unable to meet payment obligations as a result of insufficient liquidity or difficulties in obtaining financing. Liquidity risk is managed by ensuring that the Group holds sufficient levels of cash and cash equivalents and access to financing under credit facility agreements. Executive management regularly monitors the need to refinance external loans with the aim of renegotiating the Group's credit facilities at least 12 months before the maturity date.

The Group receives its primary financing from a bank under an SEK 1,800 million credit facility with a maturity in February 2021. The credit facility was signed in February 2018. This credit is linked to certain borrowing terms (known as covenants), which are detailed in Note 27.

At year-end 2018, the Group had a liquidity reserve in the amount of SEK 655 million (357). The Group's finance policy stipulates that the available funds, meaning cash and cash equivalents and available but unutilised credits, must be greater than the Group's standard expenses for 0.7 of a month. On 31 December 2018, the liquidity reserve totalled 2.3 months' standard expenses for the Group.

The Group's target for total capital structure is to secure the Group's ability to continue its operations, in order to generate returns for shareholders and benefits for other stakeholders and to retain a solid capital structure to keep capital costs low. Executive management regularly monitors the need to refinance external loans with the aim of renegotiating the Group's credit facilities at least 12 months before the maturity date.

The Group has an equity/assets ratio of 43 percent (43), whereby the equity/assets ratio is defined as recognised equity divided by total assets.

Equity/assets ratio	2018	2017
Group
Equity	1,600	1,416
Total assets	3,694	3,274
Equity/assets ratio	43%	43%

The net debt/equity ratio as at 31 December 2018 and 2017 was as follows:

Debt/equity ratio	2018	2017
Group
Interest-bearing liabilities	1,321	1,135
Cash	–144	–120
Net debt	1,177	1,015
Total equity	1,600	1,416
Debt/equity ratio, %	74%	72%

Classification of financial instruments

The following table shows the classification of financial instruments in the balance sheet for 2018 and 2017 (for definitions, see Note 2).

Assets, 2018	Financial assets at amortised cost	Total
Financial assets	5	5
Current assets
– Trade receivables	727	727
– Other receivables	35	35
– Cash and cash equivalents	144	144
Total current assets	906	906
Total assets	911	911
Liabilities, 2018	Financial liabilities at amortised cost	Total
Non-current liabilities and provisions	1,247	1,247
Current liabilities and provisions
– Interest-bearing liabilities	74	74
Liabilities for additional purchase considerations	28	28
Total current liabilities	102	102
Total liabilities	1,349	1,349
Assets, 2017	Financial assets at amortised cost	Total
Financial assets	5	5
Current assets
– Trade receivables	671	671
– Other receivables	32	32
– Cash and cash equivalents	120	120
Total current assets	823	823
Total assets	828	828
Liabilities, 2017	Financial liabilities at amortised cost	Total
Non-current liabilities and provisions	1,080	1,080
Current liabilities and provisions
– Interest-bearing liabilities	56	56
Liabilities for additional purchase considerations	34	34
Total current liabilities	90	90
Total liabilities	1,170	1,170

The maturity structure for existing borrowings is shown in Note 27. The amounts do not include the current portion, which will mature within one year. The overdraft facility normally matures within one year, but is usually extended on the due date.

The table below illustrates the Group's financial liabilities categorised by time left to maturity as per balance-sheet date. The amounts shown in the table are the contractual undiscounted cash flows, including estimated future interest payments.

On 31 December 2018	Less than 1 year	1–5 years	More than 5 years
Bank loans and overdrafts	74	1,247	—
Interest	23	44	—
Liabilities for additional purchase considerations	28	19	—
Trade payables	435	—	—
Total	560	1,310	0
On 31 December 2017	Less than 1 year	1–5 years	More than 5 years
Bank loans and overdrafts	56	1,105	—
Interest	21	57	—

Liabilities for additional purchase considerations 34 43 — Trade payables 395 — — Total 506 1,205 0

Financial instruments

IFRS 13 Fair Value Measurement is applied. The Group's borrowings mainly take the form of credit facilities with long-term credit but short fixed-rate periods. Consequently, it is the assessment that the fair value is essentially consistent with the carrying amount.

Interest-rate risk

Changes in interest rates have a direct impact on the Group's earnings, while their impact on the overall economy also produces an indirect effect. The Group's bank loans at the end of the year had an average remaining fixed-rate period of three months.

Sensitivity analysis

Significant factors affecting the Group's earnings are described below. The assessment is based on year-end values, assuming all other factors remain constant.

Fluctuations in sales prices are the variable that has the greatest impact on earnings, with a change of +/–1 percent on resale prices affecting operating profit by about SEK 38 million (32).

Volume changes and sourcing prices affect Bufab's earnings. A 1-percentage point change in volume has an effect on earnings of about SEK 11 million (10), while a 5-percentage point change has an effect of about SEK 55 million (50) on operating profit. A 1-percentage point change in merchandise sourcing prices has an effect on earnings of about SEK 23 million (20), while a 5-percentage point change has an effect of about SEK 115 million (100) on operating profit.

Payroll costs represent a large proportion of the Group's cost base. A 1-percentage point increase affects operating profit by about SEK 6 million (6).

The Group's net debt was SEK 1,177 million on the balancesheet date. A one percentage point change in the market rate for the closing net debt has an effect on profit after financial items of SEK 13 million (10).

The Group has considerable currency exposure in terms of transaction effects to the USD. which is related to the company's trade with Asia, particularly China and Taiwan. Local prices in Asia are largely set on the basis of the USD level. A one percentage point strengthening of the USD against the SEK, with all other variables held constant, has a negative impact of SEK 5 million (neg: 4) on operating profit. In a similar way, a five percentage point strengthening of the USD, with all other variables held constant, has a negative impact of SEK 25 million (neg: 20) on operating profit.

The Group currency exposure to EUR in terms of transaction and translation effects is also substantial. Exposure to the EUR is primarily due to the fact that the Group's invoicing in Europe is largely in this currency. A one percentage point change in the EUR, with all other variables held constant, has a positive impact of SEK 4 million (3) on operating profit. In a similar way, a five percentage point strengthening of the EUR, with all other variables held constant, has a positive impact of SEK 20 million (15) on operating profit.

The Group currency exposure to GBP in terms of transaction and translation effects is also substantial. Exposure to the GBP is primarily due to the fact that the Group's invoicing in the UK is largely in this currency. A one percentage point change in the GBP, with all other variables held constant, has a positive impact of SEK 2 million (2) on operating profit. In a similar way, a five percentage point strengthening of the GBP, with all other variables held constant, has a positive impact of SEK 10 million (10) on operating profit.

The Group's currency effects with regard to translation effects in foreign net assets is significant, primarily in GBP and EUR. A one percentage point change in the EUR and GBP, respectively, would, notwithstanding any hedges and all other variables held constant, yield a positive impact on the Group's equity of SEK 7 million and SEK 5 million, respectively. A five percentage point change in the EUR and GBP, respectively, would, notwithstanding any hedges and all other variables held constant, yield a positive impact on the Group's equity of SEK 35 million and SEK 25 million, respectively. For information on the Group's hedging for translation effects in foreign net assets, see Note 39.

NOTE 4

SIGNIFICANT ESTIMATES AND ASSESSMENTS

Accounting estimates and assessments are evaluated regularly. They are largely based on historical experience and other factors, including expectations about future events that are considered reasonable in the present circumstances. The Group makes judgements and assumptions concerning the future. These result in accounting estimates, which, by definition, rarely correspond with the actual outcome. Estimates and assumptions which involve considerable risk of material adjustments to the carrying amounts of assets and liabilities during the next financial year are described below.

The assumptions made in connection with goodwill impairment testing can be found in Note 17.

In 2006, the Group sold four properties located in Värnamo, Svartå and Åshammar. The properties were built and equipped for industrial use. In connection with the sale, leases were signed for a term of 15 years. In the management's overall assessment pursuant to IAS 17, since the future economic benefits and risks after the sale largely flow to the buyer of three of the properties (located in Värnamo and Svartå), the leases for these properties are recognised as operational leases. The leases were subject to minor changes without impacting their classification as operational leases under IAS 17. For the fourth property, located in Åshammar, a new lease was signed in 2013, entailing its classification as a financial lease. See Note 11 and 20 for further information.

Inventories represents a significant item in the Group's balance sheet.

At 31 December 2018, inventories amounted to SEK 1,315 million (1,093), net, after deductions for obsolescence of SEK 84 million (76).

The policies for recognising inventories are presented in Note 2.

The risk of obsolescence is taken into consideration in conjunction with establishing the value of inventories. Bufab applies a Group-wide policy for determining obsolescence, which considers to turnover rate of the individual items and forecast sales volumes. Accordingly, the size of the obsolescence reserve is thus sensitive to changes in forecast sales volumes.

Bufab has been ordered to carry out surveys of environmental pollutants at an industrial property. See also Note 32.

NOTE 5

INFORMATION ON OPERATING SEGMENTS

Segment reporting is prepared in accordance with IFRS 8. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker is the function that makes decisions about resources to be allocated to the operating segments and assesses their performance. For the Group, this function has

been identified as Group management. Three segments have been identified in the Group, two operational, named segment Sweden and segment International, as well as segment Other. This segment structure is consistent with the internal reporting.

Segment Sweden comprises Bufab's nine subsidiaries in Sweden and Bufab's subsidiary in China attributable to the acquisition of Rudhäll Industri AB as well as subsidiaries in the USA and Mexico, which work closely with other subsidiaries in the segment. Segment International encompasses all other activities Bufab engages in, which includes operations in 26 countries allocated across six regions. Governance of the operations occurs on a segment basis in respect of objectives, resource allocation and earnings follow-ups. Net sales in the segments relate to net sales to external customers. No individual customer accounts for more than 10 percent of net sales in any of the segments.

Common overhead costs are distributed between the segments and are allocated on an arm's length basis. Segment Other consists of other unallocated costs for the Parent Company and Group eliminations.

		Sweden		International		Other		Group
Group	2018	2017	2018	2017	2018	2017	2018	2017
Income items
Total revenue	1,172	1,057	2,615	2,144	0	0	3,786	3,201
Operating profit/loss (EBITA)	126	139	290	203	–49	–31	367	311
Amortisation of acquisition-related intangible assets	–1	–1	–8	–6			–9	–7
Financial items	—	—	—	—	—	—	–29	–26
Profit after financial items	—	—	—	—	—	—	329	278
Taxes	—	—	—	—	—	—	–74	–65
Profit for the year	—	—	—	—	—	—	255	213
Assets	1,493	1,271	2,155	1,968	46	35	3,694	3,274
Liabilities	386	343	462	432	1,246	1,082	2,094	1,857
Other disclosures
Investments in non-current assets	69	29	7	10	4	0	80	39

EMPLOYEES, PERSONNEL EXPENSES AND FEES PAID TO DIRECTORS AND AUDITORS

Average number of employees	2018	% Male	2017	% Male
Parent Company
Sweden	1	100%	1	100%
Total	1	100%	1	100%
Subsidiaries
Sweden	318	77%	306	75%
Norway	17	82%	21	90%
Finland	58	81%	53	83%
Germany	26	69%	23	74%
Poland	55	69%	48	81%
Austria	29	79%	28	79%
Czech Republic	25	56%	22	59%
Spain	11	55%	9	56%
France	93	66%	90	66%
Netherlands	85	82%	78	79%
UK	210	77%	196	88%
Slovakia	14	64%	12	67%
Estonia	12	50%	12	75%
China	56	50%	55	51%
India	23	74%	21	71%
Taiwan	20	55%	17	47%
Romania	19	58%	20	60%
Russia	15	53%	11	64%
Hungary	10	50%	11	73%
Singapore	62	42%	7	43%
Other	18	89%	17	100%
Total, subsidiaries	1,176	71%	1,057	75%
GROUP TOTAL	1,177	71%	1,058	76%

Board and senior executives	2018	% Female	2017	% Female
Board	7	29%	7	29%
CEO and other senior executives	7	29%	6	17%

		2018	2017
Salaries, employee benefits and social security fees	Salaries and benefits	Social security fees	Salaries and benefits	Social security fees
Parent Company	7.6	3.8	5.9	3.1
(of which bonuses, etc.)	1.8		0.7
(of which pension cost, defined-contribution plans)		1.1		0.9
Subsidiaries	483.1	155.6	401.0	135.1
(of which bonuses, etc.)	8.3		4.9
(of which pension cost)		39.2		36.5
GROUP TOTAL	490.7	159.4	406.9	138.2
(of which pension cost)		40.3		37.4

	2018		2017
Salaries and other remuneration categorised by country and among Board members, CEO and other employees	Management*	Other employees	Management*	Other employees
Parent Company	7.6	—	5.9	—
(of which bonuses, etc.)	1.8	—	0.7	—
Total, Parent Company	7.6	—	5.9	—
(of which bonuses, etc.)	1.8	—	0.7	—
Subsidiaries
Subsidiaries, Sweden	12.9	151.8	11.7	134.9
(of which bonuses, etc.)	3.8		2.2
Foreign subsidiaries	36.6	281.8	26.5	227.9
(of which bonuses, etc.)	4.5		2.7
Total, subsidiaries	49.5	433.6	38.2	362.8
(of which bonuses, etc.)	8.3		4.9
GROUP TOTAL	57.1	433.6	44.1	362.8
(of which bonuses, etc.)	10.1		5.6

* Includes current and former Board members, the CEO of the Parent Company and subsidiaries, as well as other senior executives in Group management.

2018				2017
Group	Fee/ Basic salary	Variable remunera tion	Other benefits	Pension	Fee/ Basic salary	Variable remunera tion	Other benefits	Pension
Board of Directors
Sven-Olof Kulldorff	0.4	—	—	—	0.4	—	—	—
Hans Björstrand	0.2	—	—	—	0.2	—	—	—
Johanna Hagelberg	0.2	—	—	—	0.2	—	—	—
Bengt Liljedahl	0.2	—	—	—	0.2	—	—	—
Eva Nilsagård	0.2	—	—	—	0.2	—	—	—
Adam Samuelsson	0.2	—	—	—	0.2	—	—	—
Gunnar Tindberg	0.2	—	—	—	0.2	—	—	—
CEO
Jörgen Rosengren	4.0	1.8	0.1	1.1	3.5	0.7	0.1	0.9
Other senior executives	7.2	3.3	0.6	2.9	6.0	1.2	0.6	2.0

The Chairman is paid fees as resolved by the Annual General Meeting (AGM). The AGM set the Chairman's fees at SEK 0.4 million (0.4). Other Board members receive a total of SEK 1.3 million (1.2). Remuneration for the CEO and other senior executives comprises basic salary, variable remuneration, other benefits and a pension. The term "senior executives" refers to the members of Group management.

The variable remuneration received by the CEO and other senior executives is based on the achievement of financial targets. The CEO received a basic salary of SEK 4.0 million (3.5), variable remuneration of SEK 1.8 million (0.7) and pension benefits of SEK 1.1 million (0.9) during the year. The variable remuneration received by other senior executives is based on operating profit for each area of responsibility and at Group level. Other senior executives received a basic salary of SEK 7.2 million (6.0) and variable remuneration of SEK 3.3 million (1.2). There were six (five) other senior executives in 2018.

The CEO's retirement age is 65. Pension costs are premium based and correspond to 25 percent of basic salary paid. The company and the CEO have a mutual period of notice of six months. The CEO is also entitled to severance pay of 12 months' basic salary if notice is initiated by the company. The retirement age for other senior executives is 65, and their pension costs are also premium based. The company and other senior executives have a maximum period of notice of 12 months when notice is initiated by the company and six months when initiated by the employee.

Auditors' fees and remuneration	2018	2017
PricewaterhouseCoopers
Audit assignment	4	3
– of which to PricewaterhouseCoopers AB	1	1
Audit activities in addition to audit assignment	0	0
– of which to PricewaterhouseCoopers AB	0	0
Tax advice	0	0
– of which to PricewaterhouseCoopers AB	0	0
Other services	6	2
– of which to PricewaterhouseCoopers AB	1	1
Total	10	5
Other auditors
Auditing fees to others	0	0

Audit assignment refers to fees for the statutory audit, meaning the work that was necessary in order to submit the audit report, as well as audit advisory services provided in connection with the audit assignment.

NOTE 7

TYPES OF COSTS

	2018	2017
Materials purchased, including costs of delivery	2,334	1,987
Salaries, including social security fees	675	570
Depreciation	51	43
Other	368	297
Total operating expenses	3,428	2,897

NOTE 8

OTHER OPERATING INCOME

	2018	2017
Capital gain on sale of property, plant and equipment	2	1
Exchange-rate gains on operating receivables/liabilities	41	26
Rental income	—	1
Other	7	4
Total other operating income	50	32

NOTE 9 OTHER OPERATING EXPENSES

Total other operating expenses	–48	–33
Other	–5	–2
Remeasurement of additional purchase considerations	–4	–3
Exchange-rate losses on operating receivables/liabilities	–39	–28
	2018	2017

NOTE 10

DEPRECIATION/AMORTISATION OF NON-CURRENT ASSETS

	2018	2017
Depreciation/amortisation according to plan, by class of asset
Other intangible assets	–13	–11
Buildings	–1	–1
Plant and machinery	–17	–12
Equipment, tools and fixtures & fittings	–20	–19
Total depreciation/amortisation	–51	–43
Depreciation/amortisation according to plan, by function
Cost of goods sold	–25	–20
Distribution costs	–19	–18
Administrative expenses	–7	–5
Total depreciation/amortisation	–51	–43

OPERATIONAL LEASING PAYMENTS

	2018	2017
Assets held under operational leases
Minimum lease payments	74	63
Total lease payments for the year	74	63
Agreed future minimum lease payments on non-cancellable leases are due as follows:
Within one year	81	65
Between one and five years	165	167
After five years	33	17
Total payments	279	249

The Group's operational leases primarily comprise business premises. These leases are principally indexed against the Consumer Price Index and include extension options. For more information, refer to Note 4.

NOTE 12

INTEREST AND SIMILAR INCOME

	2018	2017
Exchange-rate differences	—	—
Interest income, other	3	1
Total	3	1

NOTE 13

INTEREST AND SIMILAR EXPENSES

	2018	2017
Interest expenses, other	–26	–21
Exchange-rate differences	–2	–2
Other	–4	–4
Total	–32	–27

NOTE 14

EXCHANGE-RATE DIFFERENCES AFFECTING PROFIT/LOSS ITEMS

Total	0	–3
Exchange-rate differences on financial items	–2	–2
Exchange-rate differences affecting operating profit	2	–1
	2018	2017

NOTE 15

TAX ON PROFIT FOR THE YEAR

	2018	2017
Current tax
Current tax for the year	–71	–62
Total	–71	–62
Deferred tax expense (–) / income (+)
Deferred tax income on temporary differences	–3	–3
Total	–3	–3
Recognised tax expense	–74	–65
Reconciliation of effective tax	2018	2017
Profit before tax	329	278
Tax according to Parent Company's applicable rate	–72	–61
Effect of foreign subsidiaries' tax rates	5	–1
Effect of non-deductible expenses	–2	–1
Revaluation of tax losses/temp. differences	–5	–2
Recognised tax expense	–74	–65
Effective tax rate	22%	23%

NOTE 16

EARNINGS PER SHARE

	2018	2017
Profit for the year attributable to shareholders	255	213
Estimated average number of ordinary shares outstanding before dilution	37,544,413	37,978,683
Earnings per share before dilution, SEK	6.79	5.61
Estimated average number of ordinary shares outstanding after dilution	37,544,413	37,978,683
Earnings per share
after dilution, SEK	6.79	5.61

INTANGIBLE ASSETS

		Goodwill		Other intangible assets
	31 Dec 2018	31 Dec 2017	31 Dec 2018	31 Dec 2017
Accumulated cost
At beginning of year	1,098	1,019	110	89
New purchases for the year	22	74	5	25
New purchases through acquisitions	—	—	9	—
Exchange-rate differences for the year	19	5	3	–4
At year-end	1,139	1,098	127	110
Accumulated amortisation according to plan and impairments
At beginning of year	–45	–44	–30	–20
Amortisation according to plan for the year	—	—	–13	–10
Amortisation in acquired companies	—	—	—	—
Exchange-rate differences for the year	2	–1	—	0
At year-end	–43	–44	–44	–30
Carrying amount at beginning of period	1,054	975	54	54
Carrying amount at end of period	1,096	1,054	83	80

Bufab tests goodwill for impairment requirements on an annual basis.

The Group's goodwill has been allocated to its lowest cash-generating units. Accordingly, SEK 550 million (526) was attributable to segment Sweden and SEK 548 million (528) to segment International. In segment Sweden, goodwill is divided among 2 (1) cash-generating units and in segment International goodwill is divided among 6 (17) cash-generating units. In 2018, a review was conducted of the number of cash-generating units to reflect the Group's regionalisation of operations and the degree to which goodwill is monitored. Since all new cash-generating units are a combination of previously individual cash-generating units, the reallocation of goodwill values has been achieved through a similar combination of the recognised goodwill values.

Since acquired units are integrated into Bufab's business model and exposed to similar risks, the same assumptions apply to all cash-generating units.

The recoverable amount for the cash-generating units was determined by calculating the value in use by way of discounting future cash flows.

The calculations were based on the company's budget and financial plans for 2019–2021, as approved by executive management and the Board. The plans for these years are detailed. The growth presented in the budget and financial plans during the forecast period is based on the Group's past organic growth and performance in the market segments in which Bufab is active. For the periods beyond those forecast, a 2 percent (2) rate of growth and inflation was assumed.

Expected future cash flows according to these assessments form the basis for the estimates. Changes in working capital and investment needs were also taken into account. The present value of the forecast cash flow was calculated using a discount rate of 7.5 percent (7.5) after tax, corresponding to 8.0 percent (8.0) before tax.

Impairment testing was conducted in conjunction with the annual accounts on 31 December 2018 and was addressed by the company's Board. No impairment requirement was indicated.

Executive management conducted a number of calculations based on reasonable potential changes in significant assumptions concerning the discount rate, growth and gross margins.

A change in the discount rate to 8.5 percent after tax would not result in any impairment requirement of the Group's recognised goodwill. The Group's budget and business plans during the forecast period include increases in sales, gross margin, earnings and cash flow. Nor would an assumption of a halved rate of growth or an assumption of a halved increase in the gross margin result in any need for impairment of goodwill. Segment International includes a cash-generating unit that is particularly sensitive to changed assumptions of future cash flows. Assuming a sustainable cash-flow level on a par with the outcome for 2018, an impairment requirement of SEK 38 million arises in this separate unit.

PROPERTY, PLANT AND EQUIPMENT

	Land and buildings		Plant and machinery			Equipment, tools and fixtures & fittings
	31 Dec 2018	31 Dec 2017	31 Dec 2018	31 Dec 2017	31 Dec 2018	31 Dec 2017
Accumulated cost
At beginning of year	22	17	177	153	196	176
New purchases for the year	7	5	55	27	14	6
New purchases through acquisitions	—	—	64	—	17	7
Divestments and disposals	—	—	–18	–5	–9	–3
Reclassifications	—	—	13	2	0	8
Exchange-rate differences for the year	—	—	—	—	5	2
At year-end	29	22	291	177	223	196
Accumulated depreciation according to plan
At beginning of year	–5	–4	–118	–109	–134	–111
Divestments and disposals	—	—	18	3	9	2
Depreciation according to plan for the year	–3	–1	–16	–12	–20	–20
Depreciation in acquired companies	—	—	–48	—	–15	–4
Exchange-rate differences for the year	—	—	—	—	–4	–1
At year-end	–7	–5	–164	–118	–164	–134
Carrying amount at beginning of period	16	13	59	44	62	73
Carrying amount at end of period	21	16	127	59	59	62

NOTE 19

WORK IN PROGRESS AND ADVANCES FOR PROPERTY, PLANT AND EQUIPMENT

	Intangible assets		Property, plant and equipment
	31 Dec 2018	31 Dec 2017	31 Dec 2018	31 Dec 2017
At beginning of year	—	—	27	10
Reclassifications	—	—	–13	–10
Investments	—	—	—	27
Carrying amount at end of period	0	0	14	27

NOTE 20

FINANCIAL LEASES

	Cost		Accumulated depreciation
	31 Dec 2018	31 Dec 2017	31 Dec 2018	31 Dec 2017
Buildings	14	14	–6	–4
Total financial leases	14	14	–6	–4

Future minimum lease payments fall due as follows:		Nominal value	Present value
	2018	2017	2018	2017
Within one year	2	2	2	2
Between one and five years	6	6	6	6
After five years	2	4	2	4
Total future lease payments	10	12	10	12

The present value of future minimum lease payments is recognised as an interest-bearing liability. The consolidated earnings do not include any variable fees concerning financial leases.

OTHER NON-CURRENT RECEIVABLES

	31 Dec 2018	31 Dec 2017
Accumulated cost
At beginning of year	5	4
Investments for the year	—	1
Carrying amount at year-end	5	5

NOTE 22

PAST-DUE RECEIVABLES

	31 Dec 2018	31 Dec 2017
Number of days past due
30–90 days	36	37
91–180 days	4	3
181–360 days	1	1
More than 360 days	6	7
Carrying amount at year-end	47	48
Provision in balance sheet for doubtful debts	8	10

Bad debt losses	2018	2017
Costs of bad debt losses affecting profit for the year	2	2
Total	2	2

Over the past five years, average bad debt losses amount to approximately 0.1 percent of each year's net sales.

NOTE 23

PREPAID EXPENSES AND ACCRUED INCOME

	31 Dec 2018	31 Dec 2017
Rent	10	7
Insurance	2	2
Licences	9	6
Other prepaid expenses	15	17
Carrying amount at year-end	36	32

NOTE 24

EQUITY

For a specification of the number of shares outstanding, refer to Note 7 for the Parent Company

NOTE 25

PENSION OBLIGATIONS, INTEREST-BEARING

	31 Dec 2018	31 Dec 2017
FPG/PRI	25	24
Retirement pension, foreign companies	10	9
Total	35	33

The assumptions in the table below are used to measure the pension obligation under defined-benefit pension plans.

		Sweden
	31 Dec 2018	31 Dec 2017
Discount rate	2.3%	2.5%
Rate of salary increase	—*	—*
Inflation	2.0%	1.9%

	Other countries
	31 Dec 2018	31 Dec 2017
Discount rate	2.2%	2.3%
Rate of salary increase	2.1%	2.0%
Inflation	1.6%	1.2%

* In the Swedish companies, the FPG/PRI pension plans are closed. The benefits are instead financed through insurance with Alecta. This assumption is not used for this reason.

Specification of total costs for post-

retirement benefits recognised in profit or loss(SEK million)	2018	2017
Costs relating to defined-benefit plans
Service costs for current year	0	0
Interest on obligations	1	1
Costs relating to defined-benefit plans	1	1
Costs relating to defined contribution plans	39	35
Total costs recognised

in profit or loss 40 36

Post-employment benefits are settled mainly by payments to insurance companies or agencies which then assume the obligations to the employees (defined-contribution pensions). The remainder are settled under defined-benefit plans, meaning that the obligations remain in the Bufab Group. The largest defined-benefit plan is in Sweden (FPG/PRI). The company's costs and the value of the outstanding obligations under defined-benefit plans are measured using actuarial calculations designed to determine the present value of the obligations. Interest and the expected return are classified as finance costs.

Other expense items are recognised in operating profit under cost of goods sold, distribution costs or administrative expenses, depending on the employee's function.

DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES

	31 Dec 2018		31 Dec 2017
	Deferred tax assets	Deferred tax liabilities	Deferred tax assets	Deferred tax liabilities
Machinery and equipment	—	16	—	12
Tax allocation reserve	—	31	—	28
Intangible assets	—	13	—	12
Other	5	2	5	4
Loss carry-forwards	11	—	13	—
Total	16	62	18	56

Tax-loss carry-forwards are recognised as deferred tax assets insofar as it is probable that they can be credited against future taxable profits. According to current plans, all companies' earnings in the coming years will enable the Group to utilise the recognised tax asset that exists. The Group has no significant

loss carry-forwards that were not taken into account in its financial statements. The provision for deferred tax for intangible assets is attributable to the tax effect of consolidated remeasurement of assets to fair value.

NOTE 27

NON-CURRENT INTEREST-BEARING LIABILITIES

	31 Dec 2018	31 Dec 2017
Amount of liability items expected to be settled one–five years after balance-sheet date	1,212	1,047
Amount of liability items expected to be settled more than five years after balance-sheet date	0	0
Total	1,212	1,047

Of the Group's non-current interest-bearing liabilities, SEK 1,208 million (1,040) stem from credit from Svenska Handelsbanken. The remainder of the non-current interest-bearing liability derives primarily from financial leases. The Group must fulfil specific borrowing terms (covenants) required by external creditors, including equity/assets ratios and the ratio between operating profit before depreciation/amortisation and impairment, and net debt. These covenants were fulfilled throughout the financial year. On the balance-sheet date, the average interest rate on the Group's non-current liabilities was 1.8 percent (1.8).

NOTE 28

LIABILITIES RELATING TO ADDITIONAL PURCHASE CONSIDERATIONS

	2018	2017
Carrying amount at beginning of year	77	67
Additional purchase considerations for acquired companies	1	53
Paid additional purchase consider ations for acquired companies	–34	–46
Remeasurement of liability for additional purchase considerations	3	3
Carrying amount at year-end	47	77
– of which recognised as "Other current liability"	28	34
– of which recognised as "Other non-interest-bearing liabilities"	19	43

Additional purchase considerations are related to acquisitions carried out in 2017 and 2018. For more information, see Note 34. In all material respects, additional purchase considerations are conditional and dependent on the future earnings trend of the acquired companies and the effect of this on the companies' valuation. Liabilities relating to additional purchase considerations are remeasured on an ongoing basis by management at an estimated fair value based on the acquired companies' earnings performance, established budget and business plans and forecasts. This means that the measurement of fair value is essentially based on unobservable input data (Level 3 according to the definition in IFRS 13).

Total contingent considerations outstanding amounted to SEK 47 million on 31 December 2018. Liabilities for contingent considerations are, in all material respects, in foreign currency, but based on the closing rate on 31 December 2018 contingent considerations are measured at what may be the maximum outcome. The contingent considerations recognised as a liability fall due for payment in 2019 and 2020.

NOTE 29

PLEDGED ASSETS

	31 Dec 2018	31 Dec 2017
Floating charges	246	246
Shares in subsidiaries	1,652	1,452
Total	1,898	1,698

NOTE 30

OVERDRAFT FACILITIES

Credit amount utilised	56	32
Unutilised portion	–99	–119
Credit limit granted	155	151
	31 Dec 2018	31 Dec 2017

ACCRUED EXPENSES AND DEFERRED INCOME

	31 Dec 2018	31 Dec 2017
Accrued salaries incl. holiday pay	71	54
Accrued social security fees	22	20
Other items	48	40
Total	141	114

NOTE 32

CONTINGENT LIABILITIES

	31 Dec 2018	31 Dec 2017
Environment	30	30
Other contingent liabilities	5	5
Total	35	35

Environment

In accordance with an injunctive order, the company conducted environmental investigations at a property where a subsidiary had been engaged in manufacturing until 1989, which was prior to the subsidiary being acquired by Bufab. The investigations revealed traces of environmental pollution. In light of the investigations performed, it is probable that the subsidiary's operations caused the pollution at this property. The legal and technical experts engaged in this case believe that it is probable that the municipality will order the subsidiary to carry out remediation measures, although the extent of these measures is not known.

On the termination of a lease agreement in 2013, Bufab also conducted an environmental investigation at another property. In order to obtain an overview of environmental issues relevant to the Group, Bufab also conducted an environmental audit in 2013, and where necessary an environmental engineering survey, of all properties where Bufab has previously engaged in manufacturing. The investigations have shown traces of pollution in two additional cases. If any link were established between this pollution and Bufab's operations, it would be the result of working and production methods that ceased to be used in the 1980s or earlier. Based on the investigations, it is Bufab's assessment that the identified pollution may have been caused by activities conducted by parties other than Bufab. However, the legal liability issue is difficult to assess and it is not inconceivable that Bufab could be required to implement remediation measures. During the year, meetings were held with relevant authorities and the assessment is that further investigations may need to be conducted in the next few years at the initiative of Bufab or other parties. Having consulted technical and legal experts based on the information available when the financial report was issued, it is Bufab's assessment that the total cost of potential remediation measures arising from the identified environmental pollution will not exceed a total of SEK 30 million during the next decade.

NOTE 33 RELATED-PARTY TRANSACTIONS

Related parties to the Bufab Group are primarily the senior executives. Remuneration of senior executives is presented in Note 6.

NOTE 34 ACQUISITIONS 2018

One acquisition was completed in the 2018 financial year. In October, Rudhäll Industri AB was acquired, with operations in Sweden and China. The company is recognised in segment Sweden. Transaction costs for the acquisition amounted to SEK 3 million and are recognised in the item administrative expenses in segment Other.

The amounts of the assets and liabilities included in the acquisition were as follows:

Preliminary acquisition analysis

of Rudhäll Industri AB	Fair value
Intangible assets	9
Other non-current assets	18
Inventories	39
Other current assets	36
Cash and cash equivalents	12
Deferred tax liabilities	–10
Other liabilities	–40
Acquired net assets	63
Goodwill	23
Purchase consideration*	86
Less: cash and cash equivalents in acquired operations	–12
Less: conditional purchase consideration yet to be paid	–1
Effect on the Group's cash and cash equivalents	73

* The consideration is stated excluding acquisition expenses.

The purchase consideration in the preliminary acquisition analysis for Rudhäll Industri AB amounted to SEK 86 million, of which SEK 31 million was allocated to goodwill and other intangible assets according to the acquisition analysis. The unconditional additional purchase consideration of SEK 1 million will be settled in 2019.

In 2018, the acquisition has positively impacted the Bufab Group's net sales by SEK 53 million since transfer. The net impact, after acquisition costs, on accumulated operating profit was SEK 0 million and the effect on profit after tax was SEK 0 million. The acquisition would have positively impacted the Group's net sales for the 2018 financial year by an estimated SEK 210 million, operating profit after transaction costs by about SEK 23 million and profit after tax for the period by about SEK 16 million if it had been implemented on 1 January 2018.

The amounts allocated to intangible assets refer to customer relationships. They were valued at the discounted amount of future cash flows and are amortised on a straight-line basis over a period of ten years. Amortisation for the year regarding intangible assets for acquisitions during the year amounted to SEK 0.3 million and annual future estimated amortisation amounts to SEK 2 million.

The acquisition analysis for Rudhäll Industri AB is preliminary.

Goodwill arising in connection with the acquisition is attributable to the knowledge accrued in the acquired company and the established and consolidated market positions and the anticipated profitability related to it.

2017

Two acquisitions were carried out during the 2017 financial year: Thunderbolts Group Ltd. in the UK in May, and Kian Soon Mechanical Components Pte. Ltd. in Singapore in December. Both of these companies are recognised in segment International.

Transaction costs for these acquisitions amounted to SEK 3 million in 2017 and are recognised in the item administrative expenses in segment Other.

The amounts of the assets and liabilities included in the acquisitions were as follows:

Acquisition analysis Thunderbolts Group Ltd.	Fair value
Intangible assets	6
Other non-current assets	0
Inventories	3
Other current assets	7
Cash and cash equivalents	7
Deferred tax liabilities	–1
Other liabilities	–5
Acquired net assets	17
Goodwill	8
Purchase consideration*	25
Less: cash and cash equivalents in acquired operations	–7
Less: conditional purchase consideration yet to be paid	–10
Added: paid out conditional consideration	10
Effect on the Group's cash and cash equivalents	18

* The consideration is stated excluding acquisition expenses.

The purchase consideration for Thunderbolts Group Ltd. amounted to SEK 25 million, of which SEK 14 million was allocated to goodwill and other intangible assets according to the acquisition analysis. The additional purchase consideration was adjusted in 2018. The conditional purchase consideration was dependent on the future earnings trend and its effect on the company's valuation.

In 2017, the acquisition has positively impacted the Bufab Group's net sales by SEK 20 million since transfer. The net impact, after acquisition costs, on accumulated operating profit was a positive SEK 2 million and the effect on profit after tax was a positive SEK 1 million. The acquisition would have positively impacted the Group's net sales for the 2017 financial year by an estimated SEK 32 million, operating profit after transaction costs by about SEK 4 million and profit after tax for the period by about SEK 3 million if it had been implemented on 1 January 2017.

The amounts allocated to intangible assets refer to customer relationships. They were valued at the discounted amount of future cash flows and are amortised on a straight-line basis over a period of ten years. Amortisation for the year regarding intangible assets for acquisitions during the year amounted to SEK 0.3 million and annual future estimated amortisation amounts to SEK 0.6 million.

Goodwill arising in connection with the acquisition is attributable to the knowledge accrued in the acquired company and the established and consolidated market positions and the anticipated profitability related to it.

Acquisition analysis

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

* The consideration is stated excluding acquisition expenses.

The purchase consideration for Kian Soon Mechanical Components Pte. Ltd. amounted to SEK 136 million, of which SEK 85 million was allocated to goodwill and other intangible assets according to the acquisition analysis. Of the not yet paid purchase consideration, the estimated fair value of the conditional purchase consideration amounted to SEK 46 million. The conditional purchase consideration is dependent on the future earnings trend during the three years from the acquisition date and its effect on the company's valuation and are recognised at a value that may be the maximum outcome.

In 2017, the acquisition has positively impacted the Bufab Group's net sales by SEK 10 million since transfer. The net impact, after acquisition costs, on accumulated operating profit was a positive SEK 1 million and the effect on profit after tax was a positive SEK 1 million. The acquisition would have positively impacted the Group's net sales for the 2017 financial year by an estimated SEK 105 million, operating profit after transaction costs by about SEK 11 million and profit after tax for the period by about SEK 9 million if it had been implemented on 1 January 2017.

The amounts allocated to intangible assets refer to customer relationships. They were valued at the discounted amount of future cash flows and are amortised on a straight-line basis over a period of ten years. Amortisation for the year regarding intangible assets for acquisitions during the year amounted to SEK 0.2 million and annual future estimated amortisation amounts to SEK 2 million.

Goodwill arising in connection with the acquisition is attributable to the knowledge accrued in the acquired company and the established and consolidated market positions and the anticipated profitability related to it. In light of the company's independent role, the goodwill item totalling SEK 66 million that arose was recognised in a separate cash-generating unit in the segment International.

NOT 35

INCENTIVE PROGRAMME

Incentive programme 2018–2021

The Annual General Meeting on 26 April 2018 resolved to adopt a long-term share-based incentive programme based on call options, comprising the CEO, senior executives and other key employees within the Group. The programme comprises a maximum of 350,000 call options, corresponding to approximately 0.9 percent of the total number of shares in the company. The purchase price for the call options has been set, using a Black & Scholes valuation, at SEK 13.34, corresponding to the market value of the options at the date of transfer. Each call option entitles the holder to acquire one share in Bufab during the period 17 May 2021–15 November 2021. The purchase price per share is SEK 133.90, corresponding to 115 percent of the volume-weighted average price paid for the company's share on Nasdaq Stockholm during the period 27 April 2018 and 4 May 2018. During the period, a total of 308,950 call options were subscribed for.

To encourage participation in the programme, the Board of Directors has resolved on a subsidy in the form of gross salary additions to participants who remain as employees of the company in 2021 and still hold the acquired call options, which may correspond to not more than the price paid for the call options.

To hedge Bufab's delivery of shares, the Annual General Meeting also resolved to authorise the Board of Directors to repurchase a maximum of 350,000 shares in the company, and approved the transfer of a maximum of 350,000 of the company's shares to the participants of the programme. During the year, 308,850 shares were repurchased for the equivalent of SEK 37 million.

Incentive programme 2017–2020

The Annual General Meeting on 4 May 2017 resolved to adopt a long-term share-based incentive programme based on call options, comprising the CEO, senior executives and other key employees within the Group. The programme comprises a maximum of 350,000 call options, corresponding to approximately 0.9 percent of the total number of shares in the company. The purchase price for the call options has been set, using a Black & Scholes valuation, at SEK 10.01, corresponding to the market value of the options at the date of transfer. Each call option entitles the holder to acquire one share in Bufab during the period 15 May 2020–15 November 2020. The purchase price per share is SEK 120.40, corresponding to 115 percent of the volume-weighted average price paid for the company's share on Nasdaq Stockholm during the period 8 May 2017–12 May 2017. During the period, a total of 333,950 call options were subscribed for.

To encourage participation in the programme, the Board of Directors has resolved on a subsidy in the form of gross salary additions to participants who remain as employees of the company in 2020 and still hold the acquired call options, which may correspond to not more than the price paid for the call options.

To hedge Bufab's delivery of shares, the Annual General Meeting also resolved to authorise the Board of Directors to repurchase a maximum of 350,000 shares in the company, and approved the transfer of a maximum of 350,000 of the company's shares to the participants of the programme. During the year, 333,950 shares were repurchased for the equivalent of SEK 31 million.

	2018		2017
	Average exercise price per call option	No. of options	Average exercise price per call option	No. of options
On 1 January	10.01	333,950	—	—
Allocated during the year	13.34	308,850	10.01	333,950
Redeemed during the year	—	—	—	—
Forfeited during the year	—	—	—	—
On 31 December	11.61	642,800	10.01	333,950

Incentive programme	Date of allotment	Maturity date	Exercise price	Stock options on 31 December 2018	Stock options on 31 December 2017
Incentive programme 2018–2021	17 May 2018	15 November 2021	13.34	308,850	—
Incentive programme 2017–2020	15 May 2017	15 November 2020	10.01	333,950	333,950
Total				642,800	333,950
Participant subsidy

(gross salary bonus)	2018	2017
Cost of participant subsidy	2	1
Total	2	1

EXPECTED IMPACT OF IMPLEMENTATION OF IFRS 16 LEASES

The new standard, IFRS 16 Leases, will have a material impact on Bufab's total assets, partly in relation to the right-of-use assets, which will increase Bufab's property, plant and equipment, and regarding the lease liabilities that are now recognised in the balance sheet and will increase Bufab's interest-bearing liabilities.

The impact on the balance sheet, such as the adjustment in the opening balance as of 1 January 2019, is expected to be as follows.

IFRS 16

Balance sheet items	SEK million
Right-of-use assets*	283
Deferred tax	5
Prepaid expenses	–6
Retained earnings	–18
Lease liabilities, interest-bearing	300

*Most of the increase in right-of-use assets pertains to buildings and land.

NOTE 37

EVENTS AFTER THE END OF THE FINANCIAL YEAR

No significant events for the period have been noted since the balance-sheet date up to and including the presentation of the annual report.

NOTE 38

CHANGES TO BORROWINGS

Net debt

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

SEK million	31 Dec 2018	31 Dec 2017
Non-current interest-bearing liabilities	1,247	1,080
Current interest-bearing liabilities	74	55
Less: Cash and cash equivalents	–144	–120
Less: other interest-bearing receivables	0	0
Net debt on balance-sheet date	1,177	1,015

SEK million	Non-current interest-bearing liabilities	Current interest-bearing liabilities including overdraft facilities	Cash and cash equivalents	Other interest-bearing receivables	Total
Net debt on 1 January 2018	–1,080	–55	120	0	–1,015
Cash flow	–167	–17	19	—	–165
Exchange-rate fluctuations	–1	–2	5	—	2
Net debt on 31 December 2018	-1,247	-74	144	0	–1,177

HEDGE OF NET ASSETS IN FOREIGN CURRENCY

The Group hedges portions of its net assets in foreign operations by borrowing in foreign currency with the aim of reducing the impact of currency exposure on the Group's equity. During the year, no ineffectiveness was noted in hedging net investments in foreign operations.

Hedged net investments in foreign operations in EUR

Reported amount bank loans	SEK million	360
Reported amount in hedged currency	EUR million	35
The hedged amount is substantially lower than the maximum hedgeable amount
Changes to the loan's carrying amount due to fluctuations in currency during the year		–1
Changes to the hedged item's carrying amount due to fluctuations in currency during the year		1
Hedged net investments in foreign operations in GBP
Reported amount bank loans	SEK million	299

The hedged amount is substantially lower than the maximum hedgeable amount
Changes to the loan's carrying amount due to fluctuations in currency during the year	–1
Changes to the hedged item's carrying amount due to fluctuations in currency during the year	1

Reported amount in hedged currency GBP million 26

PARENT COMPANY INCOME STATEMENT

SEK million	2018	2017
Note
Administrative expenses	2 –14	–14
Other operating income	7	6
Operating profit/loss	2 –7	–8
Profit from financial items
Interest and similar expenses	3 —	—
Profit after financial items	–7	–8
Appropriations	4 68	89
Tax on profit for the year	5 –14	–18
PROFIT FOR THE YEAR	47	63

STATEMENT OF COMPREHENSIVE INCOME

SEK million	2018	2017
Profit after tax	47	63
Other comprehensive income	—	—
Total comprehensive income	47	63

PARENT COMPANY BALANCE SHEET

SEK million	31 Dec 2018	31 Dec 2017
Note
ASSETS
Non-current assets
Financial assets
Participations in Group companies 6	845	845
Total financial assets	845	845
Total non-current assets	845	845
Current assets
Current receivables
Receivables from Group companies	77	166
Other receivables	8	0
Total current receivables	85	166
Cash and bank balances	0	1
Total current assets	85	167
TOTAL ASSETS	930	1,012
EQUITY AND LIABILITIES
Equity 7
Share capital	1	1
Other paid-in capital	488	488
Retained earnings	313	384
Total equity	801	872
Untaxed reserves 8	122	128
Current non-interest-bearing liabilities
Trade payables	1	1
Liabilities to Group companies	—	—
Current tax liabilities	—	6
Accrued expenses and deferred income 9	6	5
Total current non-interest-bearing liabilities	7	12
TOTAL EQUITY AND LIABILITIES	930	1,012

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

SEK million	Share capital	Other paid-in capital *	Retained earnings	Total equity
Equity on 1 January 2017	1	488	424	913
Other comprehensive income	—	—	63	63
Transactions with shareholders
Issued call options	—	—	3	3
Repurchase of own shares	—	—	–31	–31
Dividend to Parent Company shareholders	—	—	–76	–76
Total shareholder transactions	0	0	–104	–104
Equity on 31 December 2017	1	488	384	872
Other comprehensive income	—	—	47	47
Transactions with shareholders
Issued call options	—	—	4	4
Repurchase of own shares	—	—	–37	–37
Dividend to Parent Company shareholders	—	—	–85	–85
Total shareholder transactions	0	0	–118	–118
Equity on 31 December 2018	1	488	313	801

* The Parent Company's restricted equity comprises share capital and SEK 32 million in other paid-in capital.

PARENT COMPANY CASH-FLOW STATEMENT

SEK million	2018	2017
Note
Operating activities 2
Loss before financial items	–7	–8
Income tax paid	–14	–17
Cash flow from operating activities before changes in working capital	–21	–25
Cash flow from changes in working capital
Increase (–) / decrease (+) in operating receivables	82	20
Increase (+) / decrease (–) in operating liabilities	–5	0
Cash flow from operating activities	56	–5
Financing activities
Dividend to shareholders	–85	–76
Issued call options	4	3
Repurchase of own shares	–37	–31
Group contributions received	61	109
Cash flow from financing activities	–57	5
Cash flow for the year	–1	0
Cash and cash equivalents at beginning of year	1	1
Cash and cash equivalents at year-end	0	1

NOTES TO PARENT COMPANY FINANCIAL STATEMENTS

All amounts are in SEK million unless otherwise specified. The figures in brackets indicate the preceding year's values.

NOTE 1

SUMMARY OF KEY ACCOUNTING POLICIES

The Parent Company applies the Swedish Financial Reporting Board's recommendation RFR 2 Accounting for Legal Entities. Under the recommendation, the parent of a group which has voluntarily elected to apply IFRS/IAS in its consolidated financial statements is, as a general rule, to apply the IFRS/IAS that are applied in the Group.

The Parent Company's participations in Group companies are recognised using the cost method. Distributions received are only recognised as revenue if they are derived from post-acquisition earnings. Distributions received in excess of such earnings are regarded as a recovery of investment and are recognised as a reduction of the carrying amount of the investment.

Shareholders' contributions are recognised directly in the recipient's equity and are capitalised in the issuer's shares and participating interests, to the extent that impairment is not required. Group contributions are recognised as appropriations in profit or loss.

NOTE 2

EMPLOYEES, PERSONNEL EXPENSES AND FEES PAID TO DIRECTORS AND AUDITORS

The company has 1 (1) employee.

Average number of employees	2018	2017
Female	—	—
Male	1	1
Total	1	1

	2018			2017
Salaries, employee benefits and social security fees	Salaries and benefits	Social security fees	Salaries and benefits	Social security fees
Salaries and remuneration to Board and CEO	7.6	3.9	5.9	3.1
(of which bonuses, etc.)	1.8		0.7
(of which pension cost, defined-contribution plans)		1.1		0.9
Total	7.6	3.9	5.9	3.1

Sickness absence

Sickness absence information is not disclosed since the Parent Company has fewer than ten employees.

Auditors' fees and remuneration

	2018	2017
Öhrlings PricewaterhouseCoopers AB
Audit assignment	1	1
Other services	0	0

Audit assignment refers to fees for the statutory audit, meaning the work that was necessary in order to submit the audit report, as well as audit advisory services provided in connection with the audit assignment.

NOTE 3

INTEREST AND SIMILAR EXPENSES

	2018	2017
Interest expenses, other	—	—
Total	0	0

NOTE 4

APPROPRIATIONS

	2018	2017
Transfers to tax allocation reserve, 2019 tax year	–21	—
Transfers to tax allocation reserve, 2018 tax year	—	–28
Reversal of tax allocation reserve, 2014 tax year	27	—
Reversal of tax allocation reserve, 2013 tax year	—	8
Group contributions received	61	109
Total	68	89

NOTE 5

TAX ON PROFIT FOR THE YEAR

	2018	2017
Current tax
Current tax for the year	–14	–18
Total	–14	–18
Reconciliation of effective tax	2018	2017
Profit before tax	66	83
Tax according to Parent Company's
applicable rate	–14	–18

PARTICIPATIONS IN GROUP COMPANIES

Carrying amount at end of period	845	845
Total cost	845	845
At beginning of year	845	845
Accumulated cost
	31 Dec 2018	31 Dec 2017

Specification of Parent Company's and Group's holdings of shares in Group companies		31 Dec 2018	31 Dec 2017
Subsidiary/Corp. Reg. No./registered office
Bult Finnveden AB, 556194-4884, Värnamo, SE	100%	845	845
Bufab Sweden AB, 556082-7973, Värnamo, SE	100%
Bufab Kit AB, 556250-8506, Värnamo, SE	100%
Bufab Lann AB, 556180-8675, Värnamo, SE	100%
Magnetfabriken AB, 559010-5614, Västerås, SE	100%
Swedfast Trading AB, 556914-0733, Värnamo, SE	100%
Rudhäll Industri AB, 556265-0993, Gnosjö, SE	100%
Ejvo Mekaniska Verkstad AB, 556148-7793, Värnamo, SE	100%
Hallborn Metall AB, 556096-5112, Gnosjö, SE	100%
Ningbo Rudhall QLC Co., Ltd., Ningbo, CN	100%
Bufab Benelux BV, 3117232260, Eindhoven, NL	100%
Bufab Danmark A/S, 157848, Albertslund, DK	100%
Bufab Norge AS, 876612062, Oslo, NO	100%
Bufab (UK) Limited, 02611234, Reading, UK	100%
Bufab France SAS, B 112 721, Gennevilliers, FR	100%
Bufab Hungary Kft, 13-09-143460, HU	100%
Bufab Germany GmbH, 07229 / 21283, Mörfelden-Walldorf, DE	100%
Bumax AB, 556176-1957, Degerfors, SE	100%
Bufab Poland Sp.z.o.o., KRS 0000036164, Gdansk, PL	100%
Bufab Austria GmbH, FN 266844 v, Vienna, AT	100%
Bufab CZ s.r.o., (IC) 25561260, Brno, CZ	100%
Bufab Baltic OÜ, EE101042585, Keila, EST	100%
Bufab Spain SLU, ESB08464430, Terrassa Barcelona, ES	100%
Bufab Industries SAS, FR12353237431, Corbas Lyon, FR	100%
Bufab Fasteners Trading (Shanghai) Co Ltd, 310000400448552, Shanghai, CH	100%
Bufab Finland Oy, Vantaa, 2042801-2, FI	100%
Bufab India, U29299PN2008PTC131481, Pune, IN	100%
Bufab USA Inc, 26-2606492, New York, US	100%
Bufab Taiwan Co Ltd, 29002549, Kaohsiung City, TW	100%
Bufab Slovakia s.r.o., Banska Bystrica, 31 639 291, SK	100%
Bufab Russia, INN7840408623, St. Petersburg, RU	100%
Bufab Turkey, 1890607929, Istanbul, TR	100%
Bufab Romania SRL, RO25446590, Apahida Cluj, RO	100%
Bufab Ireland LTD, NI061428, Dundalk, IE	100%
Bufab Italy S.r.l., 97605340153, Corsico (Milan), IT	100%
Bufab Singapore PTE. Ltd, 201614160Z, Singapore, SG	100%
Flos B.V., 17062762, Eindhoven, NL	100%
Apex Stainless Holdings Limited, 08403936, Rugby, UK	100%
Apex Stainless Fasteners Limited, 02631068, Rugby, UK	100%
Montrose Holdings Limited, 09731597, High Wycombe, UK	100%
Montrose Fasteners Limited, 02646431, High Wycombe, UK	100%
Thunderbolts Group Limited, 02841225, Southampton, UK	100%
Thunderbolts Fasteners Limited, 02841171, Southampton, UK	100%
Kian Soon Mechanical Components Pte. Ltd, 198703945H, Singapore, SG	100%
Puresys Pte. Ltd, 201210504E, Singapore, SG	100%
PT Kian Soon Hardware, 03-184-577-9-215-000, Batam, ID	100%
Kian Soon Mechanical Components Sdn. Bhd., 1081316P, Penang, MY	100%
Industrias Bufab de Mexico, S.a. de C.v., IBM170911RV6, Mexico, MX	100%
		845	845

1 Ownership of capital, which also corresponds to the percentage of votes for the total number of shares.

NOTE 7 EQUITY

A total of 38,110,533 ordinary shares were issued on the balancesheet date. The shares had a quotient value of SEK 0.01436 on the balance-sheet date. All issued shares have been paid for in full. On 31 December 2018, Bufab had 642,800 repurchased shares held in treasury.

In accordance with the Group's financial targets, as adopted by Bufab's Board of Directors, the regular dividend to shareholders is to correspond to about 30–60 percent of the Group's profit after tax during the year. Exemptions are permissible in exceptional circumstances, such as acquisitions. The Bufab Group's capital requirements, its profit, financial position, capital requirement, covenants and the prevailing cyclical conditions must also be taken into account. For the 2018 financial year, the Board of Directors proposed a regular dividend of SEK 2.50 per share, totalling SEK 94 million (85). No change has taken place in the Parent Company's capital management during the year.

NOTE 8

UNTAXED RESERVES

	31 Dec 2018	31 Dec 2017
Tax allocation reserve, 2014 tax year	—	27
Tax allocation reserve, 2015 tax year	22	22
Tax allocation reserve, 2016 tax year	20	20
Tax allocation reserve, 2017 tax year	32	32
Tax allocation reserve, 2018 tax year	28	28
Tax allocation reserve, 2019 tax year	21	—
Total	122	128

NOTE 9

ACCRUED EXPENSES AND DEFERRED INCOME

	31 Dec 2018	31 Dec 2017
Accrued salaries incl. holiday pay	3	3
Accrued social security fees	1	1
Other	2	1
Total	6	5

NOTE 10

PLEDGED ASSETS

	31 Dec 2018	31 Dec 2017
Shares in subsidiaries	845	845
Total	845	845

NOTE 11 CONTINGENT LIABILITIES

	31 Dec 2018	31 Dec 2017
Guarantees to subsidiaries	1,303	1,303
Total	1,303	1,303

Guarantees to subsidiaries relates to subsidiaries' liability in Svenska

Handelsbanken.

NOTE 12 APPROPRIATION OF PROFITS

Proposed appropriation of profits	SEK
The following earnings are at the disposal of the AGM:
Retained earnings	312,737,604
The Board of Directors proposes that the earnings

Total	312,737,604
To be carried forward	219,068,271
A dividend of SEK 2.50 per share to be paid to shareholders	93,669,333
be appropriated as follows:

The income statements and balance sheets will be presented for adoption by the Annual General Meeting on 25 April 2019.

The undersigned certify that the annual report for the Group and the Parent Company has been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and generally accepted accounting policies, and gives a

true and fair view of the financial positions and results of the Group and the Parent Company, and that the directors' report gives a fair overview of the performance of the operations, financial positions and results of the Group and the Parent Company, and describes substantial risks and uncertainties faced by the Group's companies.

Värnamo, 20 March 2019

Sven-Olof Kulldorff Hans Björstrand Johanna Hagelberg Chairman of the Board Board member Board member

Bengt Liljedahl Eva Nilsagård Adam Samuelsson Board member Board member Board member

Gunnar Tindberg Jörgen Rosengren

Board member President and CEO

Our audit report was submitted on 20 March 2019 Öhrlings PricewaterhouseCoopers AB

Fredrik Göransson Frida Wengbrand Authorised Public Accountant Authorised Public Accountant Auditor in Charge

AUDITOR'S REPORT

To the general meeting of the shareholders of Bufab AB (publ), corporate identity number 556685-6240

Report on the annual accounts and consolidated accounts Opinions

We have audited the annual accounts and consolidated accounts for Bufab AB (publ), for the year 2018. The annual accounts and consolidated accounts of the company are included on pages 6-45 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 the parent company as of 31 December 2018 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 2018 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. 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 supplementary report that has been submitted to the Parent Company's Audit Committee in accordance with Article 11 of the Auditors Ordinance (537/2014).

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 means that, based on our best knowledge and belief, no prohibited services referred to in Article 5.1 of the Auditors Ordinance (537/2014) have been provided to the audited company or, as the case may be, its parent company or its controlled company 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 focus and 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.

When we designed our group audit strategy and group audit plan, we determined the degree of audit activities required by the group audit team, respective component auditors within the PwC network As a result of the group's decentralised finance organisation, a significant portion of the group's financial reporting is prepared in components outside Sweden. This implies that a significant portion of the group audit is required to be executed by component auditors working within the PwC network in other countries.

When we assessed the degree of audit activities required to be implemented in the respective units, we considered the group's geographical spread, the size of the respective units, and the specific risk profile represented by the respective components. Against this background, we determined that a full audit was to be executed on, in addition to the parent company in Sweden, financial information prepared by twelve significant subsidiaries (with registered offices in a total of six different countries).

For the components (20 units in 17 countries) where we have deemed that it is not motivated to execute a complete audit, we have instructed the component auditors to undertake specifically defined audit measures. For the other ten units deemed to be of no significance to the group audit, the group team undertook analytical procedures at group level.

In the case the unit auditors execute work which is significant to our audit of the group, we evaluate, in our role as group auditors, the need and degree of involvement required in the work of the component auditors with the aim of determining whether significant audit evidence has been obtained to provide the basis for our opinion in the group's Auditor's Report. For this purpose, the group audit team regularly visits the component auditors and significant subsidiaries.

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 financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the 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.

Valuation of goodwill

As at 31 December 2018, the group reports goodwill of 1,096 MSEK which is divided between a total of 8 cash-generating units, of which two cash-generating units are attributable to Segment Sweden and six cash-generating units are attributable to Segment International.

In accordance with IAS 36, the group tests, on an annual basis, the existence of an impairment requirement as regards reported goodwill. This testing is undertaken per cash-generating unit and through the recoverable value being calculated and compared with the carrying value of the operations.

The recoverable value is determined by company management on the basis of a calculation of the cash-generating units' capacity to generate cash flow in the future.

The impairment tests are significant to our audit as goodwill represents a major item in the balance sheet and, in addition, the impairment testing implies that company management are required to undertake significant estimations and judgements on the future.

Based on the group's prepared impairment tests, no write-down requirement for goodwill was identified as at 31 December 2018. The most significant assumptions applied in the impairment testing are described in Note 17.

Key audit matter How our audit addressed the Key audit matter

Our audit measures included an assessment of the cash flow calculations' mathematical correctness and a reconciliation of the cash flow forecasts against the 2019 budget adopted by the Board of the Directors and against the business plan for 2020-2021.

We have evaluated and assessed the company's valuation model to determine if it is in accordance with generally accepted valuation techniques.

We have challenged the company management regarding the reasonableness of the assumptions having the greatest effect on the impairment testing, which includes the sustainable growth rate, sustainable gross margin and the discount rate

On the basis of our own implemented sensitivity analyses, we have challenged company management's assumptions and tested the margin of safety and assessed the risk of a write-down requirement.

We have also assessed whether the company has provided sufficient disclosures in the annual report regarding the assumptions which in the case of a change could lead to a write-down of goodwill in the future.

Valuation of inventories

As at 31 December 2018, the group reports inventories of 1,315 MSEK.

The valuation of inventories is significant to our audit as this valuation includes a number of estimations and judgements and, in addition, the value of the inventory is equivalent to a major portion (approximately 36%) of the group's total assets.

An important assessment which company management is required to undertake in making a valuation of the inventory comprises of the group's capacity to sell its products in the inventory at a price in excess of acquisition cost and, in this context, consider the risk of obsolescence.

The risk of obsolescence is impacted by Bufab's business model as an important portion of the group's client offering is comprised of fulfilling the clients' needs regarding fasteners quickly and cost effectively. Consequently, and with the aim of meeting the clients' requirements, Bufab can, in cases, find it necessary to keep in stock significant quantities of articles which reduces the turnover rate and increases the risk of obsolescence.

With the aim of identifying and calculating the consistency in the risk of obsolescence, company management has adopted a groupwide obsolescence policy. The obsolescence policy considers the individual articles' turn- over rate which, together with assessed future sales volumes, comprises the basis on which company management can determine a reasonable obsolescence provision.

The group's principles for the valuation of inventory and reporting of obsolescence are described in Note 2 on page 17 in the annual report. Important estimations and judgements required to be undertaken by the group in conjunction with the accounting of the inventory are found in Note 4 in the annual report.

Our audit measures included an evaluation of the group's principles for calculating obsolescence in the inventory.

With the aim of assessing the reasonability of the company's obsolescence provisions, we have instructed our component auditors to examine and report back to the group team any possible deviations from the group-wide obsolescence policy.

We have tested the reasonableness of the assumptions and judgements made by company management regarding the saleability of articles with a low turnover rate.

We have, on a sample basis, tested the mathematical correctness of the company's reports concerning obsolescence calculations.

We have also discussed with management and examined minutes from Board meetings and other management meeting with the aim of identifying forecasted changes in the company's sales which could result in inventory items being obsolete.

Finally, we have evaluated to determine if the group has described, in an appropriate manner, its principles for inventory valuation in the annual report, including the estimations and judgements made to value the inventory as at 31 December 2018.

Other Information than the annual accounts and consolidated accounts

This document also contains other Information than the annual accounts and consolidated accounts which can be found on pages 1-5 and pages 50-61. The Board of Directors and CEO 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 Directors 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 and the Annual Accounts Act. 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 intends to liquidate the company, to cease operations, or has no realistic alternative but to do so.

The Board's Audit Committee shall, without affecting the other tasks and responsibilities of the Board, monitor the company's financial reporting, among other things.

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 the Swedish Inspectorate of Auditors' 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 Directors and the Managing Director of Bufab AB (publ) for the year 2018 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 Directors 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 Directors 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 fulfil 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 and consolidated accounts is available on the Swedish Inspectorate of Auditors' website: www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor´s report.

Öhrlings PricewaterhouseCoopers AB, 113 21 Stockholm, Sweden was appointed Bufab AB (publ)'s auditor at the Annual General Meeting on 26 April 2018, and has been the company's auditor since 12 September 2005. Bufab AB (publ) has been a public interest company since 21 February 2014.

Värnamo, 20 March 2019 Öhrlings PricewaterhouseCoopers AB

Fredrik Göransson Frida Wengbrand Authorised Public Accountant Authorised Public Accountant Auditor-in-charge

CORPORATE GOVERNANCE REPORT

Bufab Holding AB (publ) is a Swedish public limited liability company. Bufab has been listed on Nasdaq Stockholm since 21 February 2014. Bufab applies the Swedish Corporate Governance Code (the "Code") and hereby submits its Corporate Governance Report for the 2018 financial year in accordance with the provisions of the Swedish Annual Accounts Act and the Code. The Corporate Governance Report was reviewed by the company's auditors.

The Code guidelines are available on the website of the Swedish Corporate Governance Board (www.corporategovernanceboard.se). The Code is based on the principle of "comply or explain," which means that companies applying the Code do not always have to comply with every rule on condition that an explanation is provided. Bufab did not make any such deviations in 2018, with the exception of the fact that the Group has not set up a separate internal audit function.

Delegation of responsibility

The purpose of Bufab's corporate governance is to create a clear delegation of roles and responsibilities between owners, the Board, the Board's Committees and senior management. Corporate governance at Bufab is based on applicable legislation, primarily the Swedish Companies Act, Nasdaq Stockholm's rules and regulations, the Code and internal guidelines and rules.

Share capital and shareholders

At year-end 2018, the company's share capital totalled SEK 547,189, represented by a total of 38,110,533 shares. All shares carry equal voting rights and there are no limitations governing how many votes each shareholder may cast at a general meeting. At year-end 2018, Bufab had 5,856 shareholders (6,946). Of the total number of shares, 19 percent were held by foreign shareholders. The ten largest shareholders owned a combined total of 60 percent of the shares.

For more information about the share and shareholders, see page 59.

Nomination Committee

Bufab is to have a Nomination Committee comprising one representative for each of the four largest shareholders in terms of number of votes in the shareholders' register maintained by Euroclear

Sweden AB as of 31 August in the year prior to the AGM, who on being asked expressed a wish to participate in the nomination work, as well as the Chairman of the company. The names of the four owner representatives and the shareholders they represent must be announced not later than six months prior to the AGM. The Nomination Committee's mandate is valid until a new Nomination Committee is appointed. If the group of the largest shareholders changes during the nomination process, the composition of the Nomination Committee may change. The Nomination Committee's task is to prepare proposals on the following issues:

• Chairman of the Meeting
• Board members
• Chairman of the Board
• remuneration of the Board
• auditor
• auditor's fees, and
• any changes to the Nomination Committee's instructions.

The Nomination Committee for the 2018 AGM consisted of Adam Gerge (Didner & Gerge fonder), Bengt Liljedahl (Liljedahl Group), Viktor Henriksson (Carnegie fonder), Johan Ståhl (Lannebo fonder) and the Chairman of the Board Sven-Olof Kulldorff.

The reasoned statement to the 2018 AGM shows that the Nomination Committee has applied Section 4.1 of the Swedish Corporate Governance Code as diversity policy when making its proposal. With regards to the company's operations, development stages and conditions in general, the goal of the policy is that the Board should have an appropriate composition characterised by versatility and width of expertise, experience and background as well an even gender distribution. The 2018 AGM decided to appoint members of the Board in accordance with the Nomination Committee proposal, resulting in the current Board of Directors with seven members, of whom two women and five men (corresponding to approximately 29 and 71 percent, respectively). The Nomination Committee notes that female representation is in line with the level of ambition pronounced by the Swedish Corporate Governance Board, but falls below the Nomination Committee's long-term goal concerning gender balance.

Governance structure

Important external rules and regulations

• Swedish Companies Act
• Stock market's rule book for issuers
• Swedish Corporate Governance Code
• Swedish Annual Accounts Act
• Book-keeping Act

Important internal rules and regulations

• Articles of Association
• Board's rules of procedure
• Audit Committee's rules of procedure
• Distribution of work Board of Directors/CEO
• The Group's and business areas'
• resolutions procedure
• Bufab's Code of Conduct
• Control documents in the form of policies, regulations, guidelines and instructions

The names of the Nomination Committee's representatives and the shareholders that they represent ahead of the 2019 AGM were published on 16 October 2018:

• Adam Gerge (Chairman), Didner & Gerge fonder,
• Fredrik Liljedahl, Liljedahl Group,
• Johan Ståhl, Lannebo fonder,
• Niklas Johansson, Handelsbanken Fonder, and
• Sven-Olof Kulldorff, Chairman of the Board.

General Shareholders' Meeting

The general shareholders' meeting is the company's highest decision-making body. At the general shareholders' meeting, the shareholders exercise their voting rights on key issues, such as the adoption of income statements and balance sheets, appropriation of the company's results, discharge from liability of Board members and the CEO, election of the Chairman, Board members and auditors and remuneration of the Board of Directors and the auditors. There are no provisions contained in the Articles of Association concerning the appointment or dismissal of Board members, or regarding changes to the Articles of Association. Further information about the AGMs, the minutes of the Meetings, and Bufab's Articles of Association are available on www.bufab.com.

2018 AGM

The AGM was held in Värnamo on 26 April 2018. Some 101 shareholders attended the Meeting, in person or by proxy, representing 64 percent of the company's voting rights. The Meeting was also attended by the Board of Directors, Group management and the auditor. The following key resolutions were made:

• Adoption of the income statement and balance sheets for 2017, appropriation of the company's results, and discharge from liability of Board members and the CEO.
• The re-election of Sven-Olof Kulldorff, Hans Björstrand, Johanna Hagelberg, Bengt Liljedahl, Eva Nilsagård, Adam Samuelsson and Gunnar Tindberg.
• Sven-Olof Kulldorff was elected Chairman of the Board.
• Guidelines for remuneration of senior executives
• A long-term share-based incentive programme for 2018 was approved.

The 2019 AGM will be held on 25 April 2019 in Värnamo, Sweden. Notice of the AGM is available at www.bufab.com.

Board of Directors

Composition

According to Bufab's Articles of Association, the Board of Directors is to be comprised of not less than three and not more than ten AGM-elected members, with not more than three deputy members.

Bufab applies section 4.1. in the Code relating to the composition of the Board. The Board should therefore be characterised by diversity and breadth of expertise, experience and background of the members elected by the AGM. An even gender distribution should be pursued.

Since the 2018 AGM, the Board has comprised seven AGM-elected members; Sven-Olof Kulldorff (Chairman), Hans Björstrand, Johanna Hagelberg, Bengt Liljedahl, Eva Nilsagård, Adam Samuelsson and Gunnar Tindberg. All Board members are independent in relation to the company and company management. All Board members, except for Bengt Liljedahl, are independent in relation to the company's largest shareholders. Accordingly, the Board meets the requirement that at least two Board members who are independent in relation to the company and company management are also independent in relation to the largest shareholders.

Further information regarding the Board members is presented on page 56 of the Annual Report and on www.bufab.com.

Work of the Board

The Board is responsible for the organisation of the company and for managing the company's operations. The Board is also to issue guidelines and instructions to the CEO. Furthermore, the Board is to ensure that the organisation of the company regarding accounting, management of funds and financial position are controlled in a satisfactory manner. The Board of Directors applies written rules of procedure, which are revised annually and adopted by the statutory Board meeting every year. Among other aspects, the rules of procedure govern the practice of the Board of Directors, functions and the division of work between the Board of Directors and the CEO. At the statutory Board meeting, the Board of Directors also adopts instructions for the CEO, including instructions for financial reporting. The Board of Directors meets according to an annual predetermined schedule. In addition to these meetings, additional Board meetings can be convened to address issues which cannot be postponed until the next ordinary Board meeting. The Chairman of the Board and the CEO also engage in an ongoing dialogue concerning the management of the company.

The Board's obligations are partly performed by the Audit Committee and Remuneration Committee and the Board has also adopted rules of procedure for these Committees.

Evaluation of Board work

The Chairman of the Board is responsible for evaluating the Board's work, including assessing the performance of each Board member. This is performed on an annual basis according to an established process. The assessment focuses on such factors as availability of and requirement for specific expertise in the Board, commitment, the quality of the Board material and the time required for reading such material. The evaluation is reported to the Nomination Committee and comprises the basis of the Nomination Committee's proposal for Board members and fees to be paid to the Board.

Work of the Board in 2018

The Board regularly addresses strategic matters that affect Bufab's operations and orientation, potential divestments and acquisitions, as well as major investments. The company's financial statements and Annual Report are addressed at the beginning of the year, as are matters to be presented at the AGM. At the end of the year, the Board deals with the budget for the forthcoming year as well as the Group's long-term strategic plan, in addition to which it also reviews the quarterly results after each quarter. The work of the Board's two Committees is also presented at each scheduled Board meeting.

The agenda is approved by the Chairman and sent to each Board member, along with the relevant material, approximately one week before each meeting. At each meeting, the CEO presents the Group's sales and earnings, the current business situation and important external factors that may have bearing on the Group's earnings. Each Board meeting includes a discussion that is not attended by the CEO. When appropriate, other senior executives may attend and present plans and proposals. The company's auditor participates in meetings when necessary, and participates once a year without the presence of management.

In addition to the information presented in connection with Board meetings, management issues a monthly report to Board members and maintains regular contact with the Chairman of the Board.

Attendance and remuneration of the Board 2018

	Attendance			Remuneration
Group	Board meetings	Audit Committee	Remuneration Committee	Board fee/ Basic salary, SEK million	Variable remuneration	Other benefits	Pension
Board of Directors
Sven-Olof Kulldorff	10/10	6/6	3/3	0.4
Hans Björstrand	10/10			0.2
Eva Nilsagård	10/10	6/6		0.2
Bengt Liljedahl	10/10		3/3	0.2
Johanna Hagelberg	9/10			0.2
Adam Samuelsson	10/10	6/6		0.2
Gunnar Tindberg	10/10			0.2
CEO
Jörgen Rosengren				4.0	1.8	0.1	1.1
Other senior executives (six people)				7.2	3.3	0.6	2.9

Audit Committee and Remuneration Committee

The Board has two Committees: an Audit Committee and a Remuneration Committee.

Audit Committee

The Audit Committee is, without it affecting the responsibilities and tasks of the Board of Directors, to monitor the company's financial reporting, monitor the efficiency of the company's internal control, internal auditing and risk management, keep informed of the auditing of the annual report and the consolidated financial statements, review and monitor the impartiality and independence of the auditors and pay close attention to whether the auditors are providing other non-audit services for the company, and assist the Nomination Committee in the preparation of proposals for the general shareholders' meeting's decision on election of auditors.

The Audit Committee is to comprise three members. The Board appoints Committee members every year at the statutory Board meeting or when a Committee member needs to be replaced. The Board also adopts an instruction for the Committee's work at the statutory meeting. The Committee members appointed in April 2018 were Adam Samuelsson (Chairman), Sven-Olof Kulldorff and Eva Nilsagård.

The Audit Committee convened six times in 2018.

Remuneration Committee

The Remuneration Committee is to prepare matters concerning remuneration principles, and remuneration and other employment terms for the CEO and senior executives.

The Remuneration Committee is to comprise two members. The Board appoints Committee members every year at the statutory Board meeting or when a Committee member needs to be replaced. The Board also adopts an instruction for the Committee's work at the statutory meeting. The Committee members appointed in April 2018 were Sven-Olof Kulldorff (Chairman) and Bengt Liljedahl.

The Remuneration Committee convened three times in 2018.

Remuneration of Board members

Fees and other remuneration to Board members, including the Chairman, are resolved on by the AGM. At the AGM held on 26 April 2018, it was resolved that the Chairman be paid SEK 430,000 and that the other non-executive members be paid SEK 215,000. The three members of the Audit Committee were paid a further fee of SEK 35,000 each.

Board members are not entitled to any benefits after leaving their position on the Board.

CEO

The CEO is Jörgen Rosengren, and a presentation can be found on page 57 of the Annual Report and on www.bufab.com.

The CEO is subordinate to the Board of Directors and is responsible for the everyday management and operations of the company. The division of work between the Board of Directors and the CEO is set out in the rules of procedure for the Board of Directors and the CEO's instructions, which are adopted every year at the statutory Board meeting. The CEO is also responsible

for the preparation of reports and compiling information from management prior to the Board meetings and for presenting such material at the Board meetings. According to the instructions for financial reporting, the CEO is responsible for the financial reporting in the company and consequently must ensure that the Board of Directors receives information adequate to enable evaluation of the company's financial position.

Remuneration guidelines for the CEO and other senior executives

The guidelines for the CEO and other senior executives were adopted at the AGM on 26 April 2018.

Bufab strives to offer total remuneration that will attract and retain qualified employees. The total remuneration may include the components described below.

Fixed salary is to be market-based and must reflect the responsibility that the work involves. The fixed salary is to be revised annually. Normally, variable salary is not to exceed 50 percent of the fixed salary. The variable remuneration is to be based on established and measurable criteria, designed to promote the company's long-term value creation, and is to be revised annually. The Board is to annually evaluate whether or not a long-term share-based incentive programme for senior executives and any other employees is to be proposed to the AGM.

Senior executives may be offered individual pension solutions. The pensions are, as far as possible, to be defined contribution.

Other benefits may be provided but are not to constitute a significant portion of the total remuneration.

The notice of termination between the company and the CEO is a maximum of 18 months. Other senior executives are to have a shorter notice of termination period.

The Board is entitled, in individual cases and if there are specific reasons, to deviate from the above guidelines for remuneration. Should such deviation occur, information about this and the reason must be reported at the next AGM.

Share-based incentive programmes

The 2018 Annual General Meeting resolved to adopt a long-term share-based incentive programme based on call options, comprising the CEO, senior executives and other key employees within the Group. The programme comprises a maximum of 350,000 call options, corresponding to approximately 0.9 percent of the total number of shares in the company. The purchase price for the call options has been set, using a Black & Scholes valuation, at SEK 13.34, corresponding to the market value of the options at the date of transfer.

The purchase price for the call options is to correspond to the market value of the options at the date of transfer. Each call option entitles the holder to acquire one share in Bufab during the period 17 May 2021–15 November 2021. The purchase price per share is to correspond to 115 percent of the volume-weighted average price paid for the company's share on Nasdaq Stockholm during the period 27 April 2018–4 May 2018.

A detailed description of the share-based incentive programme can be found in Note 35 on page 36 of the Annual Report.

Current employment agreements for the CEO and other senior executives

Decisions as to the current remuneration levels and other conditions for employment for the CEO and other senior executives have been resolved on in accordance with the existing guidelines for remuneration adopted by the AGM. All decisions on individual remuneration to senior executives have been made within these guidelines. Agreements concerning pensions are, wherever possible, to be based on fixed premiums and must correspond with the levels, practices and collective bargaining agreements applicable in the country where said senior executive is employed.

For senior executives resident in Sweden, six months' notice applies when resigning and a maximum of 12 months' notice when dismissed by the company. The CEO is to receive severance pay of up to 12 months' salary during the notice period, in addition to the salary stated above, when dismissed by the company. Refer also to Note 6 on page 26 of the Annual Report.

Auditing

The auditor is to review the company's annual reports and accounting, as well as the management of the company by the Board of Directors and the CEO. Following each financial year, the auditor is to submit an audit report and a consolidated audit report to the AGM. Pursuant to Bufab's Articles of Association, the company is to have no less than one and no more than two auditors and no more than two deputy auditors. The company's auditor until the conclusion of the 2018 AGM is Öhrlings Pricewaterhouse-Coopers AB, with Fredrik Göransson as Auditor in Charge. The company's auditor is presented in more detail in "Group management and auditors." Fees to auditors are to be paid in accordance with approved invoices. In 2018, the company's auditor was paid a total of SEK 10 million.

Internal control over the financial reporting

The objective of the internal financial control at Bufab is to create an efficient decision process in which requirements, targets and frameworks are clearly defined. The company and management use internal control systems to monitor the operation and the Group's financial position.

Control environment

The basis for the internal control over the financial reporting is the overall control environment. Bufab's control environment consists of sound core values, expertise, management philosophy, organ-

isational structure, responsibility and authority. Bufab's internal instructions, policies, guidelines and manuals serve as guides for employees. The control environment also includes laws and external rules and regulations.

At Bufab, there is a distinct division between role and responsibility to efficiently handle the risks of the operations, including rules of procedure for the Board and Committees, as well as instructions for the CEO. In the operating activities, the CEO is also responsible for the system of internal controls required to generate a control environment for significant risks.

Bufab also has guidelines and policies for financial control and monitoring, communication issues and business ethics. Most of the companies in the Group have the same financial system with the same accounting systems.

The Board has appointed an Audit Committee tasked to ensure compliance with established policies for financial reporting and for maintaining the internal control.

Internal audit

The company's size combined with the work of the Audit Committee and established and implemented solid control procedures mean that the Board does not believe that it need establish a separate internal audit function. However, the matter of a separate internal audit function is addressed annually.

Risk assessment and control activities

Risks of material misstatement in the annual accounts may occur in connection with accounting and the evaluation of assets, liabilities, income and expenses or deviation from disclosure requirements. Bufab's accounting function performs a risk analysis every year regarding items in the consolidated balance sheets and income statements based on qualitative and quantitative risks.

Normal control activities include reconciliation of accounts and support controls. The purpose of all control activities is to prevent, detect and correct any errors or deviations in the financial reporting. In the Group's work with internal control, the material risks identified in the financial reporting are handled through control structures, which, in all material respects, are based on deviation reporting from established goals or norms.

Information

Accurate internal and external information entails that all sections of the operations will be able to efficiently exchange and report relevant material information. In addition to managers' information responsibility, Bufab has a well-functioning intranet for exchanging information. Bufab has established a policy document to inform employees and other relevant personnel at Bufab about the applicable regulations and instructions for disclosing company information and the special requirements that apply for inside information.

For communication with external parties, there is a policy that states the guidelines for how such communication is to take place. The aim of this is to ensure compliance with information obligations and to ensure that investors receive the right information in time.

The Group has a whistleblower function. Employees can anonymously contact a third party to report behaviour or actions that constitute breaches or suspected breaches of laws and guidelines, etc. All contact is logged and a summary about the calls and measures taken is regularly is reported to the Board.

Monitoring

The Group applied IFRS as defined in Bufab's accounting manual. This manual includes accounting and valuation rules that must be adhered to by all companies within the Group, and reporting instructions. Financial data is reported from all legal entities every month.

Reporting takes place in accordance with standardised reporting procedures documented in the Group's accounting manual. This reporting comprises the basis of the Group's consolidated financial reporting. Consolidation takes place based on a legal and operating perspective, which results in quarterly statutory reports containing complete income statements and balance sheets for every company and consolidated for the Group, and monthly operating reports.

Every Board member receives a monthly report containing consolidated income statements and balance sheets for the Group and income statements and balance sheets for the subsidiaries with comments. In addition to this monthly information, similar information is received in connection with Board meetings and a report that includes monitoring of tax obligations, disputes, compliance with policies, whistleblower summaries, environment and internal audit.

Värnamo, 20 March 2019

Sven-Olof Kulldorff

Chairman of the Board

Hans Björstrand Johanna Hagelberg

Bengt Liljedahl Eva Nilsagård

Adam Samuelsson Gunnar Tindberg

AUDITOR'S STATEMENT ON THE CORPORATE GOVERNANCE REPORT

To the Annual General Meeting of Bufab AB (publ), Corporate Registration Number 556685-6240

Engagement and responsibility

The Board of Directors is responsible for the Corporate Governance Report for 2018 on pages 50–54 and that it has been prepared inaccordance with the Swedish Annual Accounts Act.

Focus and scope of the audit

The audit was conducted in accordance with FAR's auditing standard RevU16, "The auditor's examination of the Corporate Governance Statement". This means that our examination of the Corporate Governance 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 our audit provides a reasonable basis for our opinion as given below.

Opinion

A Corporate Governance Report has been prepared. Information in accordance with Chapter 6, Section 6, second paragraph, items 2–6 of the Annual Accounts Act and Chapter 7, Section 31, second paragraph of the same Act are consistent with the annual report and the consolidated statements and comply with the Annual Accounts Act.

Värnamo, 20 March 2019 Öhrlings PricewaterhouseCoopers AB

Fredrik Göransson

Authorised Public Accountant

BOARD OF DIRECTORS

Sven-Olof Kulldorff Chairman of the Board since 2006.

Born: 1954.

Education: MSc in Mechanical Engineering from the Institute of Technology at Linköping University.

Previous assignments: Executive positions at IKEA (1978–2004, during which he served as purchasing manager of the IKEA Group in 1995–2004), and Executive Vice President of ICA.

Other Board assignments: Chairman of Pierce AB and Board member of K Hautwall OY.

Shareholding: Total of 336,676 shares, of which 281,238 shares through an endowment policy and 54,138 shares through company.

Hans Björstrand Board member since 2006.

Born: 1950.

Education: Upper secondary school economics programme. Education: MSc in Industrial Engineering and Management from Institute of Technology

Previous assignments: President and CEO of Bufab. at Linköping University and Cranfield University.

Other Board assignments: Board member of Värnamo Energi AB, Stacke Hydraulik AB, Värnamo Elnät AB, Entreprenörinvest Sverige AB, LMT Group AB, Värnamo Näringsliv AB, Ekeborg Kapital AB and Axelent AB.

Shareholding: 5,000 shares.

Shareholding: 1,500 shares.

in the automotive industry.

ment Officer at

and Logistics Stora Enso Oyj.

Born: 1972.

Johanna Hagelberg Board member since 2015.

Education: MSc in Economics and Business Administration from School of Business Economics and Law,

Present assignments: President, CEO and founder of Liljedahl Group. Previously CEO Skånebil, Regional

Other Board assignments: Chairman of the Board of Liljedahl Group AB, Elcowire Group AB, LWW Group AB, Hörle Wire Group AB and Finnvedens Lastvagnar AB. Board member of LMT Group AB, Finnvedens Bil AB and Liljedahl Group Fastighets AB.

Shareholding: 10,232,500 shares through company.

Eva Nilsagård Board member since 2015.

Born: 1964.

Education: MSc in accounting and financial management and Executive

MBA from School of Business, Economics and Law at the University of Gothenburg.

Present assignments: Founder and CEO Nilsagård consulting.

Previous assignments: CFO Plastal Group, SVP Strategy & Business development within sales and marketing, EMEA at Volvo Trucks, CFO Vitrolife (publ). Various senior positions in finance and business development within Volvo, AstraZeneca Group and SKF.

Other Board assignments: Board member of AddLife AB, Svensk

Exportkredit and Irras AB.

Shareholding: 0 shares.

Adam Samuelsson Board member since 2006.

Born: 1972.

Education: MSc in accounting and financial management from Stockholm School of Economics and an MBA from Harvard Business School.

Present assignments: President, CEO and founder of Idun Industrier AB.

Other Board assignments: Chairman of the Board of Ekab Elkraftservice AB, Intermercato AB, Pamaco Total service AB and PreCont AB.

Shareholding: 250,000 shares through company.

Gunnar Tindberg Board member since 2007.

Born: 1938. Education: Qualified engineer.

Previous assignments: President and CEO (1978–2004) and Board member (1980–2007) of Indutrade AB.

Other Board assignments: Chairman of Idun Industrier AB.

Shareholding: 100,000 shares.

Manager AB Volvo Sweden. Previous assignments: Chief Procure-Vattenfall, RSA Scandinavia and NCC AB and senior positions in procurement

GROUP MANAGEMENT

Jörgen Rosengren President and CEO since 2012

Born: 1967.

Education: MSc in Electrical Engineering from Lund University, Faculty of Engineering, LTH.

Previous assignments: Husqvarna, Electrolux, McKinsey and Philips.

Shareholding: 330,000 shares.

Stock options: 69,000 call options.

Marcus Andersson CFO since 2017 (employed 2014).

Born: 1983.

Education: MSc in Business Administration from Växjö University.

Previous assignments: Ernst & Young.

Shareholding: 4,000 shares, of which 450 shares through company.

Stock options: 29,250 call options.

Jesper Blomquist COO since 2013.

Born: 1968.

Education: Master of Mechanical Engineering at the Institute of Technology at Linköping University.

Previous assignments: Swisslog, VSM Group AB and Sanmina SCI Enclosure Systems AB.

Shareholding: 53,200 shares.

Stock options: 25,500 call options.

Urban Bülow Group Director North America since 2018 (employed 2014).

Born: 1965.

Education: MSc in Electrical Engineering from Chalmers University of Technology.

Previous assignments: Latour Group, Kapsch TrafficCom, SAAB and Electrolux.

Shareholding: 0 shares.

Stock options: 22,500 call options.

Mona Jeppsson Director Human Resources since 2013 (employed 2012).

Born: 1961.

Education: MSc in Social Studies from Lund University.

Previous assignments: Proton Group, FöreningsSparbanken and Alfa Laval.

Shareholding: 200 shares. Stock options: 0 call options.

Other At the end of 2018. Mona Jeppsson chose to seek new challenges outside the Group. Mona's employment ended on 30 November 2018. Work has begun to recruit a replacement.

Johan Lindqvist Regional Director, Region Nordic since 2015 (employed 1998).

Born: 1969.

Education: Qualified Engineer Previous assignments: Skanska and Primo AB. Shareholding: 117,000 shares.

Stock options: 30,000 call options.

Carina Lööf Global Sourcing Director since 2018.

Born: 1969. Education: Degree in chemical engineering, Växjö University. Previous assignments: Trioplast, Cargotec Corporation Shareholding: 0 shares.

Stock options: 18,000 call options.

The information regarding Board members' and Group Management's holding of shares and other financial instruments in Bufab refers to the conditions as per 31 December 2018 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. The information for the CEO also includes any significant shareholdings and partnership in companies which Bufab has

significant business relations with.

Auditors

Öhrlings PricewaterhouseCoopers AB has been the company's auditor since 2005 and was re-elected at the 2018 AGM until the end of the 2019 AGM. Fredrik Göransson (born 1973) is the Auditor in Charge. Fredrik Göransson is an Authorised Public Accountant and a member of FAR (professional institute for authorised public accountants). Öhrlings PricewaterhouseCoopers AB's office address is Skånegatan 1, SE-405 32 Gothenburg, Sweden. Öhrlings PricewaterhouseCoopers AB was the company's auditor throughout period covered by the historic financial information in this Annual Report.

FIVE-YEAR SUMMARY

SEK million	2018	2017	2016	2015	2014
EARNINGS
Order intake	3,798	3,256	2,887	2,463	2,195
Net sales	3,786	3,201	2,847	2,458	2,198
Sweden	1,172	1,057	968	937	982
International	2,615	2,144	1,880	1,521	1,217
Gross profit	1,088	917	828	677	641
Operating profit (EBITA)	367	311	277	198	174
Sweden	126	139	131	108	144
International	290	203	179	120	75
Adjusted operating profit (EBITA)	367	311	277	198	192
Sweden	126	139	131	108	144
International	290	203	179	120	75
Depreciation and amortisation of acquired intangible assets	–9	–7	–5	–1	—
Net financial items	–29	–26	–21	–26	–23
Profit after financial items	329	278	251	171	151
Tax on profit for the year	–74	–65	–88	–46	–39
Profit for the year	255	213	163	125	112
MARGINS
Gross margin, %	28.7	28.6	29.1	27.5	29.2
Operating margin, %	9.7	9.7	9.7	8.0	7.9
Sweden	10.7	13.2	13.5	11.5	14.7
International	11.1	9.5	9.5	7.9	6.2
Adjusted operating margin, %	9.7	9.7	9.7	8.1	8.7
Sweden	10.7	13.2	13.5	11.5	14.7
International	11.1	9.5	9.5	7.9	6.2
CAPITAL STRUCTURE
Net debt	1,177	1,015	839	884	543
Equity	1,600	1,416	1,297	1,183	1,147
Debt/equity ratio, %	74	72	65	75	47
Equity/assets ratio, %	43	43	45	45	52
Average working capital in relation to net sales, %	35.7	35.4	36.5	36.3	36.6
CASH FLOW
Operating cash flow	175	183	267	194	117
KEY FIGURES PER SHARE
Earnings per share	6.79	5.61	4.29	3.27	2.94
Dividend per share	2.50*	2.25	2.00	1.70	1.50
EMPLOYEES
Average number of employees	1,177	1,058	973	834	805

* Proposed by Board of Directors.

BUFAB ON THE STOCK EXCHANGE

Listing and turnover

The Bufab share has been listed on Nasdaq Stockholm since 21 February 2014. The total turnover of Bufab shares in 2018 was 15.9 million shares for a total amount of SEK 1.7 billion and the average daily turnover was 63,693 shares.

Dividend and dividend policy

The Board's proposal is a dividend of SEK 2.50 per share (2.25) for 2018, which corresponds to 37 percent of net profit. The objective is to pay 30–60 percent of annual net profit, taking into account the company's financial position, cash flow, acquisition opportunities and future outlook.

Brief facts

Listing: Nasdaq Stockholm Number of shares: 38,110,533 Ticker: BUFAB ISIN code: SE 0005677135

More information

For share-price and up-to-date information, visit www.bufab.com/investors

Share data	2018	2017
Earnings per share, SEK	6.79	5.61
Earnings per share after dilution, SEK	6.79	5.61
Dividend per share, SEK1	2.501	2.25
Yield2 , %	2.9%	2.1%
Share of dividend3, %	37%	40%
Share price at year-end, SEK	85.7	106.25
Highest share price, SEK	127.40	115.25
Lowest share price, SEK	81.40	73.50
Number of shareholders at year-end	5,856	6,946
Market capitalisation at year-end, SEK million	3,266	4,014

The dividend pertains to the Board's proposal.

1

2 The dividend in relation to the share price at year-end.

3 The dividend for the financial year in relation to profit for the year per share.

Largest shareholders on 31 December 2018	Share of capital and votes, %
Liljedahl Group	26.8%
Lannebo fonder	8.8%
Didner & Gerge fonder	7.9%
Carnegie Fonder	3.9%
Nordea Investment Funds	3.8%
Livförsäkringsbolaget Skandia	2.8%
Handelsbanken fonder	2.7%
Spiltan fonder AB	2.7%
State Street Bank	1.7%
Other shareholders	38.9%
Total	100%

Ownership distribution by country, 31 December 2018

Bufab's total return since IPO

DEFINITIONS OF KEY FIGURES

Gross margin, %

Gross profit as a percentage of net sales for the period.

Adjusted gross profit Gross profit adjusted for items affecting comparability.

Adjusted gross margin, % Adjusted gross profit as a percentage of net sales for the period.

EBITDA Operating profit before depreciation, amortisation and impairment.

Adjusted EBITDA

Adjusted operating profit before depreciation, amortisation and impairment.

Operating profit (EBITA) Gross profit less operating expenses.

Adjusted operating profit (EBITA) Adjusted gross profit less operating expenses.

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

Adjusted operating profit Operating profit (EBITA) adjusted for items affecting comparability.

Adjusted operating margin, %

Adjusted operating profit (EBITA) as a percentage of net sales for the period.

Adjusted profit after tax

Profit after tax adjusted for items affecting comparability.

Adjusted net margin, %

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

Net debt

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

Operating expenses

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

Debt/equity ratio, %

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

Net indebtedness/adjusted EBITDA, multiple

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

Working capital

Total current assets less cash and cash equivalents less current non-interest-bearing liabilities, excluding liabilities for additional purchase prices, calculated at the end of the period.

Average working capital

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

Working capital/net sales, %

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

Equity/assets ratio, %

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

Operating cash flow

Operating profit adjusted for depreciation, impairment and other non-cash items minus changes in working capital and investments.

Earnings per share

Profit for the period divided by the average number of ordinary shares adjusted for the set-off issue and 80:1 split conducted in the first quarter of 2014.

Adjusted earnings per share

Adjusted profit for the period after tax divided by the average number of ordinary shares adjusted for the set-off issue and 80:1 split conducted in the first quarter of 2014.

Items affecting comparability

Non-recurring items with a significant impact on the results which are important for understanding the underlying development of the business.

KEY FIGURES NOT DEFINED IN ACCORDANCE WITH IFRS

Operating cash flow

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

SEK million	2018	2017
EBITDA	408	347
Other non-cash items	13	2
Changes in inventory	–174	–142
Changes in operating receivables	–28	-79
Changes in operating liabilities	27	116
Cash flow from operations	247	244
Investments excluding acquisitions	–72	–61
Operating cash flow	175	183

EBITDA

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

SEK million	2018	2017
Operating profit	358	304
Depreciation/amortisation and impairment	51	43
EBITDA	408	347

EBITA

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

SEK million	2018	2017
Operating profit	358	304
Depreciation/amortisation and impairment	9	7
EBITA	366	311

Operating expenses

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

SEK million	2018	2017
Distribution costs	–512	–446
Administrative expenses	–220	–166
Other operating income	50	32
Other operating expenses	–48	–33
Depreciation, amortisation and impair ment from acquired intangible assets.	9	7
Operating expenses	–721	–606

Working capital

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

SEK million	2018	2017
Current assets	2,273	1,953
Less: cash and cash equivalents	–144	–120
Less: current non-interest-bearing liabilities excluding liabilities for additional purchase prices	–656	–621
Working capital on the balance-sheet date	1,473	1,212

Net debt

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

SEK million	2018	2017
Non-current interest-bearing liabilities	1,247	1,080
Current interest-bearing liabilities	74	55
Less: cash and cash equivalents	–144	–120
Less: other interest-bearing receivables	0	0
Net debt on balance-sheet date	1,177	1,015

Organic growth

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

	2018
	Group	Sweden	International
Organic growth	8	6	9
Currency translation effects	3	0	5
Acquisitions	7	5	8
Recognised growth	18	11	22

	2017
	Group	Sweden	International
Organic growth	8	9	7
Currency translation effects	0	0	1
Acquisitions	4	0	6
Recognised growth	12	9	14

Box 2266 SE-331 02, Värnamo, Sweden. Visiting address: Stenfalksvägen 1, Värnamo, Sweden. Phone: +46 370 69 69 00 www.bufab.com