BE GROUP QUARTER 3 REPORT 2007 Håkan Jeppsson, CEO Torbjörn Clementz, CFO Page 1
Highlights Q3 2007 Net sales increased 8 % Substantial decrease in operational profit - Revaluation stainless steel inventories - Stock losses Underlying profit on same very high level Lower growth rate than beginning of the year Heavy volatility in nickel prices resulted in substantial decrease in base prices for stainless steel Service volumes remains on highest ever, 34 % of total Centralisation Product Supply Page 2
Financial Summary Q3 2007 (MSEK) 2007 2006 Net Sales 1,709 1,581 +8% Operating profit (EBIT) 85 164-48% Profit after tax 55 118-53% Earnings/share 1.10 2.25-51% Page 3
Highlights Q1-Q3 2007 Best first nine months ever Strong growth in all business areas Very high alloy surcharges for stainless Improved underlying margins Stronger competition for acquisitions Page 4
Financial Summary Q1-Q3 2007 (MSEK) 2007 2006 Net Sales 5,848 4,743 +23% Operating profit (EBIT) 428 383 +12% Profit after tax 299 270 +11% Earnings/share 5.98 5.14 +16% Paid dividend 3.50 Page 5
Financial targets September 2007 TARGET ACTUAL 12m Underlying growth >5% 7.2% Underlying EBITA-margin >6% 7.6% Underlying ROOC >40% 70.2% Net debt/equity <150% 108.9% Net DEBT/underlying EBITDA <3 times 1.3 times Page 6
BE Group - quarterly development 165 168 174 171 130 107 125 147 167 122 158 85 1,621 1,581 1,938 2,065 2,073 1,709 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Net Sales (msek) EBITA msek Underlying EBITA msek Page 7
BE Group - quarterly development 8.0% 8.7% 10.4% 8.4% 8.2% 6.6% 7.9% 7.6% 8.1% 7.6% 7.1% 5.0% 1,621 1,581 1,938 2,065 2,073 1,709 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Net Sales (msek) EBITA % Underlying EBITA % Page 8
Underlying ROOC on a high level 72.5% 68.5% 54.5% 48.9% 27.3% 2004 2005 2006 Q3 2007 YTD Sep 2007 Page 9
Working capital affected by stainless turbulence Average Net Working Capital (MSEK) 720 Average Net Working Capital / Sales 13.3% 553 555 575 547 10.4% 9.9% 9.2% 8.2% 2003 2004 2005 2006 R12 Q3/07 2003 2004 2005 2006 R12 Q3/07 Page 10
Page 11 EFFECTS FROM STAINLESS STEEL
Substantial decrease of prices for stainless steel Avg Q1: 88 Avg Q2: 97 Avg Q3: 90 88 87 88 92 98 100 100 92 77 66 Avg Q4: ~66 66 66 54% 54% 57% 61% 65% 70% 73% 73% 69% 65% Estimates 46% 46% 43% 39% 35% 30% 27% 27% 31% 35% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Base price Alloy Surcharge Page 12
Alloy surcharge a substantial part of stainless steel sales Q1 2006 4.8% Q2 2006 Q3 2006 5.2% 6.7% 56 74 64 84 78 106 1,412 1,474 1,397 Q1 2007 9.7% Q2 2007 Q3 2007 12.0% 10.3% 200 249 176 105 118 95 1,760 1,707 1,439 Alloy Surcharge without Contribution Alloy Surcharge with Contribution Net Sales excluding Surcharge Page 13
Page 14 DEVELOPMENT FOR BUSINESS AREAS
Business area Sweden - highlights Strong sales growth in a strong market Lower growth rate than in Q1-Q2 Underlying profits on highest level ever Successful restructuring concluded leading to lower cost Margin pressure due to alloy surcharges Key: Production, sales and warehouse facilities Pure sales facilities Page 15
Business area Sweden quarterly development 8.5% 9.1% 9.1% 8.4% 7.7% 6.7% 7.3% 8.3% 8.2% 8.3% 7.9% 6.1% 888 840 1,075 1,124 1,120 874 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Net Sales (msek) EBITA % Underlying EBITA % Page 16
Business area Finland - highlights Strong growth in a very strong market Strong demand for production services Lower profit margins than in 2006 Improved production efficiency Investment in Lapua service workshop ongoing Key: Production, sales and warehouse facilities Pure sales facilities Page 17
Business area Finland quarterly development 11.3% 8.7% 8.2% 12.4% 10.4% 9.9% 9.4% 9.1% 8.8% 8.4% 8.3% 5.8% 635 633 754 812 820 686 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Net Sales (msek) EBITA % Underlying EBITA % Page 18
Business area New Markets - highlights Market demand and growth still strong Contribution margins not satisfying Critical mass needed for improved profitability Czech Republic and Russia need to reach stable profits Increase in service sales from low level Denmark Czech Rep. Poland Slovakia Estonia Latvia Lithuania Russia Consolidation expected to speed up Key: Production services, sales and warehouse facilities Pure sales facilities Page 19
Business area New Markets quarterly development 8.3% 14.3% 148 167 172 189 188 193 2.2% 1.7% 1.0% 1.2% -1.0% 2.2% -1.3% 1.3% 1.1% -0.2% Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Net Sales (msek) EBITA % Underlying EBITA % Page 20
Market outlook Continued strong global steel markets with high production costs Healthy general demand in Sweden and Finland Strong markets in Eastern and Central Europe Lower overall growth rate to be expected for BE Group compared to latest 12 months More or less stable high carbon steel prices in Q4 Lower stainless prices and alloy surcharges Page 21
BE Group average sales prices 13.0 12.5 12.0 11.5 11.0 10.5 10.0 9.5 (SEK/kg) 13.0 12.5 12.0 11.5 11.0 10.5 10.0 9.5 Quarter 9.0 3 4 1 2 3 4 1 2 3 2005 2006 2007 R12 9.0 Page 22
Going forward in 2007 Looking for growth - Acquisitions -Organic Service development highly focused Coordinating BE Group further into ONE Group Continued focus on underlying performance Page 23
Page 24 APPENDIX FINANCIAL INFORMATION
EBITA-development Q3 compared to last year OPERATING PROFIT Q3 2006 Reversal of amortization of intangible assets EBITA Q3 2006 Exceptional items Adjustment for stock profits Q3 2006 Underlying EBITA Q3 2006 Changes in volume, price, mix and gross margin Changes in overhead cost etc Underlying EBITA Q3 2007 Exceptional items stainless stock revaluation Adjustment for other stock losses Q3 2007 EBITA Q3 2007 Less amortization of intangible assets OPERATING PROFIT Q3 2007 (MSEK) 164 1 165-12 -28 125 0-3 122-27 -10 85 0 85 Page 25
Sensitivity analysis Change in underlying EBITA YTD Sep 2007 (m SEK) +/- 5% in Volume +/- 5% in Average steel price +/- 5% in Selling and Administration Cost +/- 5% in SEK/EUR exchange rate +/- 10% in Alloy surcharge +/-54 +/-45 -/+13 -/+26 +/-4 Page 26
Financial summary 2006 2007 2006 2007 Amounts in MSEK Q1 Q2 Q3 Q4 Q1 Q2 Q3 YTD YTD Volume (kton) 149.3 155.4 141.4 164.0 169.5 162.3 134.9 446.2 466.7 Net Sales 1,542 1,621 1,581 1,938 2,065 2,073 1,709 4,743 5,848 EBITA 89 130 165 168 174 171 85 384 429 % of Sales 5.8% 8.0% 10.4% 8.7% 8.4% 8.2% 5.0% 8.1% 7.3% Underlying EBITA 95 107 125 147 167 158 122 327 446 % of Sales 6.2% 6.6% 7.9% 7.6% 8.1% 7.6% 7.1% 6.9% 7.6% Profit 63 88 118 125 126 118 55 270 299 Earnings/share 1 1.20 1.69 2.25 2.50 2.52 2.36 1.10 5.14 5.98 Cash flow -50 52-66 156 2-152 -117-64 -267 Operating Capital 585 663 711 713 743 856 995 648 869 Underlying ROOC 65.1% 64.2% 70.3% 82.5% 89.9% 73.6% 48.9% 67.2% 68.5% 1 Earnings per share after dilution Page 27
Sales per product area Q3 06/07 YTD Sep 06/07 7.1% 3.2% 6.7% 3.4% 3.8% 27.3% 7.0% 25.7% 3.8% 25.7% 7.0% 25.7% 24.2% 23.4% 26.0% 23.4% 6.5% 6.5% 33.5% 31.8% 6.2% 6.5% 33.5% 32.0% Long Steel Flat Steel Reinforcement steel Stainless steel Aluminium Other Page 28
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