ANNUAL REPORT 2006

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ANNUAL REPORT 2006

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SAME CORPORATE

BRAND ON ALL MARKETS

BE Group will change the names of all subsidiaries in the fi rst half of 2007 and launch a corporate brand for the entire Group. Bröderna Edstrand in Sweden and Starckjohann Steel in Finland as well as eight subsidiaries in Eastern and Central Europe and Denmark will be doing business under the BE Group name.

As part of the Group’s orientation

towards Excellent Service and higher

service content, the BE logo has also been

developed into a softer, more modern

design idiom.

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This report contains forward-looking information. While BE Group’s management believes this information is reasonable, no warranties are given, whether expressed or implied, that these expectations will prove accurate. Actual future outcomes may vary from the statements in forward-looking information due to factors including changes in economic, market and competitive conditions, changes in legal requirements and other political measures and fl uctuations in exchange rates.

FINANCIAL REPORTS

Interim reports and the annual report are posted on the BE Group website at www.begroup.com. Printed material may also be ordered online. Current information is published on www.begroup.com and is available via Waymaker.

ANNUAL GENERAL MEETING

BE Group’s annual general meeting will be held Tuesday, May 15, 2007 at 4 p.m., Malmö

Börshus, Malmö, Sweden. Notices concer- ning registration for the meeting and the agenda will be provided in press releases and published well in advance of the meeting on the BE Group website (www.begroup.com).

BE Group’s audited annual accounts will be available on the website and at the head offi ce on Spadegatan in Malmö after April 16, 2007.

Shareholders whose holdings are nominee registered must temporarily register their shares under their own names (“direct registration”) by May 9, 2007. Shareholders should request the custodian to temporarily change the registration well in advance of the meeting.

REGISTRATION

The Company must receive notice of intent to attend the general meeting by May 9, 2007 at 4 p.m. Shareholders may register by e-mail to arsstamma@begroup.se or by phone on +46 (0) 40-38 42 00.

The notice must state the shareholder’s name, personal or company registration number, address and telephone number, as well as the details concerning the shareholder’s proxy, if any.

DIVIDEND

Last day for right to dividend is May 21, 2007 and expected distribution is May 24, 2007.

The Board of Directors and Chief Executive Offi cer are proposing a distribution to shareholders of SEK 3.50 per share in cash, corresponding to 44% of profi t after tax.

INVESTOR INFORMATION

REPORTING DATES IN 2007

Interim report January-March: April 26 Interim report April-June: July 18 Interim report July-September: October 26 Year-end report 2007: February 2008

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HIGHLIGHTS 2006

• BE Group is reporting its best financial year ever.

• Net sales increased by 15.4% to SEK 6,681.2M (5,790.2). Underlying sales growth was 8.5%.

• Operating profit increased to SEK 550.2M (265.4). Underlying EBITA

^*

was SEK 473.7M (395.6) and the underlying EBITA margin increased to 7.1% (6.8).

• Underlying return on operating capital

^*

excluding intangible assets increased to

72.5% (54.5) on the strength of an improved capital turnover rate.

• Profit after tax was substantially higher than in the preceding year, totaling SEK 394.7M (170.1).

• Earnings per share increased to SEK 7.90 (3.41).

• Robust volume growth continued in the

New Markets business area and sales

increased by 42.6%.

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• BE Group established operations in St Petersburg, Russia.

• Restructuring of the Swedish business continued during the year to enhance service, streamline operations and reduce capital tied up. The project is slated for completion in the second quarter of 2007.

• Aimed at increasing and developing service sales, BE Group will be investing SEK 17M in production service equipment at the site in Lapua, Finland.

• BE Group was listed on the Stockholm Stock Exchange on November 24, 2006.

• Proposed dividend to shareholders of SEK 3.50 per share.

• BE Group is forecasting sustained healthy demand and relatively high prices in 2007.

* See pages 104-105 for defi nitions.

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MESSAGE FROM THE CEO

Welcome to BE Group, a listed company on the Stockholm Stock Exchange as of late 2006. The market extended an enthusiastic welcome to the Group and the IPO was over-subscribed eleven times.

As I write this, BE Group has more than 11,000 shareholders and I would like to welcome each and every one of our owners to participate in the continued development of the Group.

OUR VALUE DIMENSIONS

As this is BE Group’s first public annual report, I would like to begin by explaining a few of the disciplines upon which BE Group is creating value for its shareholders, customers and employees.

BE Group is a leading trading and service company in steel, stainless steel and aluminium in the Nordic region with expanding opera- tions in Eastern Europe. We have leveraged our capacity to sustain cost-effective and capital-effective operations and strong customer relationships to build market shares over a long period of time.

I would like to particularly emphasize four value dimensions that have been funda- mental to consolidating our strong market position:

LOGISTICS:

BE Group has built an efficient logistics structure with robust distribution and strategically located production and warehouse facilities.

EFFICIENCY:

We have developed a cost- effective organization with high earnings per employee. The Group maintains low working capital and high inventory turnover compared to industry norms.

MESSAGE FROM THE CEO

Håkan Jeppsson,

President and Chief Executive Officer

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CUSTOMER INTIMACY:

We work closely with our customers in long-term relationships.

Keeping our objectives always in mind, we are investing in developing our employees’

skills and understanding of our customers’

businesses and needs.

INDEPENDENCE:

BE Group is independent of steel and metal producers. Our independent status has allowed us to develop a more vital corporate culture and take decisions that are good for us and good for our customers.

This approach was supported by BE Group’s early presence in Eastern European markets, which has fortifi ed our growth and made BE Group one of the few multinational trading and service companies in our industry. We began organically estab- lishing new operations in Eastern Europe only ten years ago and quickly achieved profi tability. Most recently in 2006, we opened a company in Russia. BE Group is now operating in ten countries in the Nordic region, Eastern Europe and Central Europe. The new markets now account for nearly 10% of consolidated sales, up from 3% four years ago.

We have pursued a comprehensive change project over the last three or four years aimed at developing BE Group into an integrated, multinational corporation and reinforcing Group management and the skills of our employees. As of spring 2007, we are performing in all markets under the single BE Group brand to enhance our image and effi ciency.

The cornerstone of our strategy in recent years has been to elevate the level of processing and focus on providing expanded

service to our customers. We call this

“Excellent Service” and that is all about creating value for our customers through more comprehensive processing and new services in areas such as logistics, produc- tion, advice, recycling and fi nancing.

Service now accounts for 30% of our sales and service sales have increased by 50% in the last three years.

A BANNER YEAR

Before I discuss BE Group’s ambitions for 2007 and beyond, I would fi rst like to comment on the past fi nancial year.

The global market for steel and metals remained buoyant throughout the year, with high demand from China a key market driver. Trends in BE Group’s Nordic and Eastern European markets shadowed the international economy, with healthy demand from the engineering industry combined with a strengthening in the construction- related sector. The Group also benefi ted from rising global market prices for steel and metals.

The favorable economic trend and higher sales of services helped make 2006 a banner year for BE Group. Consolidated sales rose in volume and the service compo- nent of sales was higher than in any previous year. Sales and profi ts reached their highest levels ever.

All business areas demonstrated favorable growth. BE Group’s performance was remark- able in Eastern Europe, where New Markets leveraged major investments in infrastructure to increase sales volume by 41%.

Carried by strong development, BE Group met all fi ve long-term fi nancial

“We are strengthening

our leading position in

Sweden and Finland,

achieving rapid

growth primarily in

Eastern Europe and

continuing the power-

ful expansion of our

service offer.”

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targets for the individual year of 2006.

Underlying return on operating capital (excluding intangible assets), one of our key management targets, reached 72.5% (54.5) due to higher margins and improved turn- over on operating capital.

The restructuring of operations in Sweden commenced in 2005 continued in 2006 and will be fully implemented in the second quarter of 2007. The objectives are to improve customer service, enhance operational effi ciency and reduce capital tied-up.

BE Group streamlined operations and increased capacity at the site in Finland in order to meet rising demand for processed products. The expansions will continue in 2007 with relatively substantial investments in new equipment at our facility in Lapua.

The expansion into Eastern European markets continued at a brisk pace in 2006 when, as mentioned, BE Group opened its fi rst company in the Russian market in the expansionary St Petersburg region.

BE Group also sold its remaining real estate in Eastern Europe.

The year was otherwise characterized by extensive preparations for the IPO and implementation of the listing process, causing a heavy workload in large parts of the organization.

EXPANSION AND ENHANCED SERVICE

BE Group has been growing rapidly for several years and we intend to sustain our growth and become an even more effi cient, more profi table company. We will accom- plish this by strengthening our leading position in Sweden and Finland, expanding

primarily in Eastern Europe and enhancing the service proposition to our customers in all markets.

Much of our growth is likely to originate with acquisitions in Eastern Europe, where rapid expansion will be a key factor due to the forecasted increase in competition.

We expect to achieve higher volumes and gross margins and bolster our capacity to gain and keep market shares by increasing the service component of sales. By off ering products with higher added value, we are strengthening our position as the link in the value chain between steel and metal produ- cers and our customers, primarily in the engineering and construction sectors.

Two general trends among our suppliers and customers are driving BE Group’s performance. As the major steel and metal producers consolidate, they are investing in more large-scale production and standardi- zed products, resulting in longer lead-times.

This is expanding scope in the market for trading companies like BE Group to step up creation. On the customer side, there is a concurrent trend towards greater specializa- tion and more customer-specifi c solutions.

Companies in the engineering and con- struction sectors are focusing increasingly on their core business and outsourcing simpler production processes, including to trading and service companies. Alongside a growing need for production service, we expect this trend to progressively trigger higher demand for fi nancial, logistics, advisory and recycling services.

BE Group’s critical success factors as we move forward will include successful acquisitions in Eastern Europe. We must

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also continue developing our production expertise so that we can effi ciently handle an increasing share of processing and service in operations. We need to further develop the skills of our workforce and recruit employees with new skills to augment our capacity to help our customers do business and ensure optimum product and service development and pricing.

OUTLOOK 2007

The steel industry is forecasting sustained favorable global demand in 2007. Strong growth in China is expected to persist and total global steel production and consump- tion to increase further, but probably at a somewhat slower rate than in 2006. As be- fore, the uncertainty refers primarily to fore- casts of developments in China and the global economy. The International Iron and Steel Institutes are forecasting an increase of 5-6%

in global steel consumption in 2007.

The increase in demand should cause some upwards pressure on raw materials prices, already evident in the annual contracts made early in the year between leading raw materials producers and steel producers.

Sustained consolidation among steel pro- ducers combined with producer eff orts to maintain equilibrium between supply and demand should keep steel and metal prices high. Additional capacity among new market players in Asia, the Middle East, Africa and elsewhere along with exports from China to Europe and the US may negatively impact prices.

BE Group is forecasting continued robust demand and relatively high prices.

The engineering and construction sectors in

Sweden and Finland are considered strong, while high growth rates and major invest- ments in infrastructure still distinguish countries in the New Markets segment.

Malmö, April 2007

Håkan Jeppsson

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THE BE GROUP SHARE

The Group has been operating for some years under the name BE Group. Formerly Bröderna Edstrand Group AB, the parent company’s name was changed in the third quarter to BE Group AB (publ).

SHARE CAPITAL

BE Group has authorized capital of 50,000,000 shares, each carrying one vote.

Total share capital in BE Group on December 31, 2006 was SEK 102.0M (101.9).

Upon application by BE Group Holding, the 51,788 warrants issued by the company on September 17, 2004 were cancelled by the Swedish Companies Registration Offi ce on October 9, 2006. Accordingly, increases in share capital consequent upon new share subscriptions based on these warrants are no longer possible. The Company currently has no outstanding warrants or convertible loans.

NEW ON THE MARKET

The initial public off ering of BE Group on the Stockholm Stock Exchange took place on November 24, 2006.

The off ering comprised 25,000,000 shares and the price was set in a bid procedure at SEK

62 per share. This corresponds to a value of SEK 1.550 million for the IPO, which was over-subscribed more than eleven times.

SHARE PERFORMANCE

The price quoted for the BE Group share was SEK 70.50 on December 29, 2006, the last trading day of the year, corresponding to growth of 13.7% since the IPO. The highest price paid in 2006 of SEK 71 was noted on December 29.

The price quoted on February 28, 2007 was SEK 83,25, corresponding to an increase of 34% since the IPO.

OWNERSHIP STRUCTURE

As of year-end BE Group had 11,042 shareholders.

Nordic Capital through BE Group Holding AB was the largest shareholder.

Other principal shareholders are listed in the table on the following page. Total institutional ownership (legal persons) was 83.7%.

At year-end, 23.1% of BE Group was owned by foreign shareholders. Ownership structure data was obtained from VPC.

DIVIDEND POLICY

According to the Group dividend policy, BE Group will distribute at least 50% of profi t after tax to shareholders if justifi ed by the Group’s fi nancial position and outlook.

For the 2006 fi nancial year, the Board of Directors and CEO are proposing a cash divi- dend to shareholders of SEK 3.50 per share, corresponding to 44% of profi t after tax.

ANALYST COVERAGE

BE Group stock is monitored particularly by analysts at Carnegie, Handelsbanken and

THE BE GROUP SHARE

KEY RATIOS 2006 2005

(SEK unless otherwise stated)

Basic earnings per share 7.90 3.41 Underlying earnings per share 6.72 5.27 Diluted earnings per share 7.60 3.24 Underlying diluted earnings per share 6.46 5.01

Equity per share 13.28 19.45

Diluted equity per share 13.28 18.98 Proposed dividend per share 3.50 –

Direct return, % 5.0 –

Price quoted on Dec. 29,

last price paid 70.50 –

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THE BE GROUP SHARE

SHARE DISTRIBUTION ON DECEMBER 31

SHAREHOLDING SHAREHOLDERS SHARES % ISSUED CAPITAL

1 – 500 7,762 1,970,345 3.94%

501 – 1,000 1,625 1,379,766 2.76%

1,001 – 5,000 1,289 3,042,803 6.09%

5,001 – 10,000 153 1,240,866 2.48%

10,001 – 15,000 47 603,636 1.21%

15,001 – 20,000 31 576,242 1.15%

20,001 – 135 41,186,342 82.37%

TOTAL 11,042 50,000,000 100.00%

06-11-24 06-11-27 06-11-28 06-11-29 06-11-30 06-12-01 06-12-04 06-12-05 06-12-06 06-12-07 06-12-08 06-12-11 06-12-12 06-12-13 06-12-14 06-12-15 06-12-18 06-12-19 06-12-20 06-12-21 06-12-22 06-12-27 06-12-28 06-12-29 07-01-02 07-01-03 07-01-04 07-01-05 07-01-08 07-01-09 07-01-10 07-01-11 07-01-12 07-01-15 07-01-16 07-01-17 07-01-18 07-01-19 07-01-22 07-01-23 07-01-24 07-01-25 07-01-26 07-01-29 07-01-30 07-01-31 07-02-01 07-02-02 07-02-05 07-02-06 07-02-07 07-02-08 07-02-09 07-02-12 07-02-13 07-02-14 07-02-15 07-02-16 07-02-19 07-02-20 07-02-21 07-02-22 07-02-23 07-02-26 07-02-27 2007

2006 SHARE PERFORMANCE

95

90

85

80

75

70

65

60 SEK

PRINCIPAL SHAREHOLDERS ON DECEMBER 31

NAME SHARES %

BE Group Holding AB 18,159,546 36.32 BNP Paribas Securities Services 1,375,000 2.75

Swedbank Robur 1,132,000 2.26

Goldman Sachs International LTD 1,126,000 2.25

Caceis Bank 927,800 1.86

Nordea Bank Finland ABP 906,160 1.81

IF Skadeförsäkrings AB 904,800 1.81

Bank Of New York 788,415 1.58

Carnegie Funds 659,000 1.32

SEB Funds 582,500 1.16

Länsförsäkringar Funds 577,400 1.15

Jeppsson, Håkan 567,450 1.13

AMF Pensionsförsäkrings AB 510,000 1.02 Odin Sverige 1, Nordea Bank Norge ASA 506,000 1.01

Nordea Funds 490,438 0.98

Handelsbanken Funds 484,520 0.97

Investors Trading Aktiebolag 440,800 0.88

Okobank Oy 430,000 0.86

Société Générale 429,375 0.86

Dresdner bank Luxembourgs S.A. 400,000 0.80 Nordea Bank Norge Odin Sverige II 389,000 0.78

Ridderstråle, Carl-Erik 377,603 0.76

Aktie-Ansvar Funds 375,000 0.75

General Account 350,000 0.70

JP Morgan Chase Bank 311,233 0.62

TOTAL, 25 principal shareholders 33,200,040 66.39

TOTAL, others 16,799,960 33.61

TOTAL SHARES OUTSTANDING 50,000,000 100,00

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BECOMING A STRONGER COMPETITOR THROUGH EXCELLENT SERVICE AND INDEPENDENCE

SALES PER BUSINESS AREA

Finland: SEK 2,550.6M / 38.2%

Sweden: SEK 3,515.8M / 52.6%

New Markets: SEK 614.8M / 9.2%

EBITA (BEFORE EXCEPTIONAL ITEMS) PER BUSINESS AREA*

PRESENTING BE GROUP

New Markets: SEK 41.2M / 44.4%

Sweden: SEK 287.9M / 48.6%

Finland: SEK 263.1M / 7.0%

BE Group is a leading trading and service company in steel and other metals in the Nordic region with expanding operations in Eastern Europe.

Sales in 2006 amounted to SEK 6,681.2M (5,790.2) and EBITA before exceptional items to SEK 551.9M (267.0). The Group has a workforce of 935 (898) employees on December 31, 2006. The head offi ce is in Malmö, Sweden.

BE Group was forged in 1999 through the merger of a Swedish company founded in 1885, Bröderna Edstrand, and a Finnish company founded in 1868, Starckjohann Steel. BE Group was listed on the Stockholm Stock Exchange in November 2006.

MISSION STATEMENT

BE Group’s mission is to create value and increase competitiveness for its customers by saving them time, costs and capital. This will be accomplished by streamlining goods fl ows, reducing the number of business con- tacts and supplying a customer-oriented range of products and Excellent Service in the form of superior delivery capacity, integrated cust- omer solutions and extraordinary availability.

OBJECTIVES AND STRATEGIES

BE Group’s main objective is to create value for its customers to strengthen their market position and competitiveness. This objec- tive imbues every aspect of the Group’s operations. BE Group’s fi nancial targets and dividend policy are described on page 30.

The four main pillars of the strategy are to:

Ensure strong growth through

- organic and acquisition-driven growth in Eastern Europe,

- sustained leading position in Sweden and Finland,

- higher service component in sales;

Offer the best service in the market through

- growth and increased profi tability in production service,

- introduction of new value-adding services;

Coordinate operations for higher profitability and stronger cash flow through

- steady focus on costs and operating capital, especially in Sweden and Finland,

- acting as an integrated multinational corporation;

Develop strong, results-oriented managers through

- training and recruiting managers to ensure broader competence.

PRODUCTS, SERVICE AND LOGISTICS

BE Group’s independent status enables the Company to off er a broad and competitive range of steel, stainless steel and aluminium products.

Sales are through three main channels:

inventory sales at 48%, direct sales at 22%

and the growing category of service sales (including component materials) at 30%.

Value is added to the product in service sales primarily in the form of processing, which distinguishes BE Group from conventional wholesalers.

Logistics are expansive and effi cient at BE Group, contributing to the high turnover rate for company-owned inventory, compa- red to the industry norm.

BUSINESS AREAS

Operations are divided into three business areas: Sweden, Finland and New Markets.

* Excluding parent company and Group items

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PRESENTING BE GROUP

Head offi ce, sales offi ces, warehouses and production centres Sales offi ces and production centres SWEDEN

Malmö Gothenburg Jönköping Norrköping Karlstad Stockholm Borlänge Sundsvall FINLAND

Lahti Helsinki Turku Lapua Pori Oulu Tampere Jyväskylä Lappeenranta Joensuu ESTONIA

Tallinn LATVIA

Riga LITHUANIA

Kaunas POLAND

Gdynia Warsaw Poznan Wroclaw Sosnowiec CZECH REPUBLIC

Prerov SLOVAKIA

Michalovce DENMARK

Copenhagen RUSSIA

St Petersburg 29

30

29

16

28 27

26 25

24 23

22

20 19

18

17 15

14

13 12

11 10

9 8

7

5 6 4 2 3

1

26 24 23

30 28 27 25 22 21 20 19 9 10 11 12 13 14 15 16 17 18 1 2 3 4 5 6 7 8

21

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PRESENTING BE GROUP

Sweden is the largest business area, accoun- ting for 53% of sales in 2006. Finland generated 38% and New Markets 9%. New Markets is made up of expanding operations in eight countries: Denmark, Estonia, Latvia, Lithuania, Poland, Russia, Slovakia and the Czech Republic.

CUSTOMERS

BE Group has maintained stable market shares in its two main markets over the years.

In 2006, the Company had approximate market shares of 20% in Sweden and 25% in Finland. BE Group’s market shares vary in New Markets, where the markets are relatively fragmented among a great many small companies.

BE Group’s customers are primarily industrial companies in a wide variety of sectors. The largest are equipment and machinery (27%) and construction (20%).

Other signifi cant industries include auto- motive, process, other transport, energy and power, heating and ventilation, mining and telecommunications.

BE Group had a large customer base of about 10,000 active customers in 2006. A few of the Company’s largest customers are Peab, Volvo, Skanska, Starkki, Pintos and Metso Paper.

SUPPLIERS

BE Group is an independent market player.

As one of the largest buyers of steel, stainless steel and aluminium in the Nordic region, the Company has the muscle to negotiate competitive prices and favorable purchase terms and conditions.

A large portion of BE Group’s purchases

are made from steel producers in Western Europe, but the Group also buys from other regions including Asia. BE Group works with some 500 suppliers, including several world- leading steel producers like Beltrame, Corus, Arcelor Mittal, Outokumpu and SSAB.

PREPARED FOR THE FUTURE

BE Group expects to continue its growth

trajectory and become an even leaner, more

profi table company. The Group’s leading

position in Sweden and Finland will be

strengthened through organic growth and

business acquisitions in Eastern Europe and

by providing Excellent Service to customers

in all markets.

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TRENDS IN THE MARKET

LEADING TO NEW BUSINESS OPPORTUNITIES

Strong focus on volume has traditionally characterized the steel market, but customer needs for services are increasing. Trading and service companies are responding with service development initiatives that are generating additional growth and profi tability.

MARKET WORTH

Volumes in the trading and service market for steel, stainless steel and aluminium are dependent on two factors: total sales tonnage and the share of tonnage distributed via trading and service operations.

Total steel tonnage in BE Group’s geo- graphical markets was approximately 25 million tonnes in 2005 excluding Russia, which alone accounted for some 33 million tonnes. A signifi cant share is distributed via trading and service operations.

MARKET GROWTH

Average volume growth in BE Group’s markets was 5% per year for 2000-2005.

Steel prices rose considerably during the period and growth was substantially higher in terms of market worth.

Shipped volume is aff ected by prices, but primarily in other respects by developments in the sectors where BE Group’s customers operate. Growth in these industries, such as engineering and construction, often co-varies with growth rates for GDP and industrial production.

Growth rates diff er signifi cantly among BE Group’s geographical markets. Demand is accelerating in the expansionary Eastern European economy, while countries in a more mature phase of development are de- monstrating more stable demand oriented

towards more services and more sophisticated products such as aluminium and stainless steel.

COMPETITION

Trading and service in the steel industry are characterized by signifi cant economies of scale, primarily in purchasing but also in logistics and the increasingly important production processes. The Nordic market features a number of players. BE Group is one of a few large leading companies with a broad product range and stable and substantial market shares.

BE Group is an exception in a market where many of the largest trading and service operations are integrated with producers. The Eastern European markets are still relatively fragmented among many small competitors of varying size.

TRENDS

A distinct trend in the steel and metals market is that the various players in the value chain are increasingly structuring and focusing their operations aimed at achieving higher cost-eff ectiveness and profi tability.

Consolidation and cost-eff ectiveness among steel producers

The steel production sector is undergoing global consolidation towards fewer and larger companies, longer lead-times, higher volumes and standardized production. Higher effi ciency and more stable price formation are the objectives. One result of this develop- ment is that only major users can effi ciently order directly from producers. BE Group has the capacity to help small and medium- size customers attain more cost-eff ective production and fl exible purchasing.

MARKET AND BUSINESS ENVIRONMENT

NEW MARKETS SWEDEN

FINLAND

GDP (SEK bn) 1.461

Growth 2005 3.0%

Industrial production

growth rate 2005 -2.0%

Investment growth rate 2005 3.5%

Capital expenditures (machinery and equipment)

growth rate 2005 1.3%

Steel consumption 2005 2.1 m tonnes Annual volume

growth 2000–2005 2%

GDP (SEK bn) 5.900

Growth 2005 3.7%

Steel consumption 2004* 19.1 m tonnes Annual volume

growth 2000–2004 6%

GDP (SEK bn) 2.673

Growth 2005 2.7%

Capital expenditures (machinery and equipment)

Steel consumption 2005 4.0 m tonnes Annual volume

growth 2000–2005 2%

BE GROUP’S GEOGRAPHICAL MARKETS (Figures refer to 2005 unless otherwise stated. Statistics for 2006 are not yet available.)

* Excluding Russia

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PRICE TREND FOR BE GROUP

140

Flat 130

120 110 100 90 80 70

Long 150

Index

2005 2006

2 4 6 8 10 2 4 6 8 10 Aluminium Stainless steel PRICE TRENDS IN THE

NORTHERN EUROPEAN STEEL MARKET

1000 USD/ton

1500 2000 2500 3000 3500 4000 4500

2005 2006

2 4 6 8 10 2 4 6 8 10 PRICE TRENDS IN THE

NORTHERN EUROPEAN STEEL MARKET

900

Long

Flat 800

700 600 500 400 300 200 USD/ton

2005 2006

2 4 6 8 10 2 4 6 8 10

160 150 140 130 120 110 100 90 80

Aluminium

PRICE TREND FOR BE GROUP Index

2005

2 4 6 8 10 2 4 6 8 10 Stainless steel

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MARKET AND BUSINESS ENVIRONMENT

As an independent, BE Group also enjoys greater fl exibility in the choice of suppliers and products.

Specialization and greater need for service among users of steel and other metals

More stringent demands for effi ciency are creating a need for greater specialization and focus on the industrial core business among users, including subcontractors, which are operating under strong price pressure.

Outsourcing of certain production processes is increasing as a result. Users are looking for more specialized components, customer- specifi c solutions, shorter lead-times and just-in-time deliveries. This is strengthening BE Group’s position and forging interesting opportunities for new services and value creation.

Growth opportunities in Eastern Europe The attractive emerging markets of Eastern Europe are providing very interesting business opportunities for trading and

service companies. Domestic customers are demanding increasingly high quality as new production standards are implemented. Mean- while, labor-intensive production is re- locating out of the Nordic countries and into countries where production costs are lower.

THE PRICE OF STEEL

The steel price trend has moved steeply upwards in recent years. Strong global demand is a key driver, especially in China, but recently in European countries like Germany, Finland and Sweden as well.

Another price accelerator is the shortage of raw materials such as iron ore, coal/coke and iron scrap caused by a production lag behind the demand for steel. Shortages of transport capacity and rising energy costs have also contributed to high steel prices.

Steel purchases represent a major portion of the costs of trading and service companies and the price of steel has considerable impact on margins and earnings.

What?

Who?

Raw materials Production End users

Shipments to trading and service companies

Trading and service companies

Inventory sales Direct sales

Service sales

Direct sales from steel mills

• Iron ore

• Scrap

• Coal/coke products

• Alloys

• BHP Billiton

• CVRD

• LKAB

• Rio Tinto

• Stena Metall

• Semi-finished

• Hot/cold-rolled products

• Aluminium

• Beltrame

• Ruukki

• Thyssen Krupp

• SSAB

• Direct sales

• Inventory sales

• Service sales

• Construction sector

• Electronics sector

• Automotive sector

• Engineering sector

• Skanska

• Ericsson

• Volvo

• ABB Independent

• BE Group

• Klöckner

Integrated

• Tibnor (SSAB)

• Ruukki

THE VALUE CHAIN

FOR STEEL AND OTHER METALS

Trading and service companies are a vital link in the value chain between major producers and small and medium-size users.

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HIGHER EFFICIENCY MEANS

BETTER BUSINESS FOR OUR CUSTOMERS

As an independent trading and service company in steel, stainless steel and alumi- nium, BE Group is creating value by struc- turing and streamlining the value chain and saving time, costs and capital for customers and producers alike.

The objective is to give added value to customers by supplying intelligently developed products and services. Customer demand is also growing for the package solutions available from BE Group.

NEW NEEDS ARISING FROM CON- SOLIDATION AND SPECIALISATION

Steel producers are consolidating to attain greater economies of scale, while many customers are focusing on core business to improve effi ciency and profi tability. These concurrent trends are giving trading and service operations new opportunities to re- spond to customer needs for Excellent Service.

BE Group continually develops new services, enabling the Company to take advantage of business opportunities that would otherwise have gone to others.

Service sales accounted for slightly less than 30% of consolidated sales in 2006, including the service element and component materials.

Other sales consisted of non-processed products.

WIDE PRODUCT RANGE AND INNOVATIVE SERVICE

BE Group has a wide range of steel and metal products as well as a large and innova- tive selection of production services and other services. BE Group processes materials in various production processes to off er more specialized components and simplify the fl ow of goods for customers.

Reliable delivery and superb product avai- lability are standard procedure at BE Group, aimed at ensuring shorter lead-times, on- time delivery and just-in-time deliveries.

A large percentage of orders currently ship within 24 hours. Overall, the BE Group approach cuts the cost of capital for our customers.

BE Group deploys its own warehouse and distribution system to off er customers

CREATING VALUE AT BE GROUP

TRENDS IN THE VALUE CHAIN

Global consolidation

• Fewer steel mills

• Standardized production

• Long series

• Long lead-times

Service providers

• Production

• Logistics

• Financial services

• Advisory services

• Recycling

Specialisation

• Specialized production

• Customer-specific solutions

• Just-in-time

• Short lead-times

Steel producers Trading and service operations Users

The gap between user demands and producer capabilities has the potential to strengthen the position of trading and service operations in the value chain.

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BE GROUP’S PRODUCT RANGE AND SERVICE OFFER

complete logistics solutions. There is tremen- dous potential for customers to enhance effi ciency by outsourcing aspects of their logistics to BE Group.

BE Group off ers advisory services related to the use of steel, stainless steel and alumi- nium throughout the customer’s entire production process. Services off ered include technical support related to materials, stream- lining fl ows, support to the sales organization and training the customer’s personnel.

BE Group Recycling assists customers with collecting and recycling surplus and used material.

The gap between user demands and producer capabilities has the potential to strengthen the position of trading and service operations in the value chain.

BE GROUP IS A VITAL LINK IN THE VALUE CHAIN

The gap between user demands and produ- cer capabilities has the potential to strengthen the position of trading and service operations in the value chain. As a partner to both customers and producers, BE Group is building good relationships for long-term mutual value creation. The objective is to develop a value proposition that saves custo-mers time, costs and capital.

ADDING VALUE FOR CUSTOMERS

More specifi cally, BE Group is creating value for customers through:

- Reducing the number of supplier contacts by means of a uniform interface towards producers,

- economies of scale in purchasing, enabling cost reductions,

- greater fl exibility throughout the produc tion process by means of shorter, more fl exible delivery times,

- considerably more reliable deliveries than most steel producers can manage,

- complete materials handling to save time, costs and capital for customers,

- professional advice concerning product choice and other technical advice.

ADDING VALUE FOR PRODUCERS

More specifi cally, BE Group is creating value for steel producers through:

- Providing opportunities for more cost- eff ective production with long series and less downtime without losing customers who require fast delivery and customized products,

- effi cient sales with large volumes to a single customer, knowledgeable contact persons, a carefully designed and reliable order process, consistent fl ows and secure payment,

- access to an expansive distribution system and a sales organization with established customer relationships and local market expertise. This increases access to customers, especially low-volume users, sthat would otherwise have been unprofi table.

OTHER SERVICES - Logistics - Advisory service - Recycling

- Complete materials handling Planned services

- Financing of operating capital PRODUCT GROUPS AND SHARE OF EXTERNAL SALES 2006

- Hot-rolled plate 23%

- Stainless steel 23%

- Long products 16%

- Hot and cold-rolled thin sheet 11%

- Steel tubes 10%

- Aluminium 7%

- Reinforcement steel 6%

- Engineering steel 4%

- Shot blasting and painting - Drilling, threading and deburring - Prefabricated reinforcing - Cutting of long products - Cutting to length and slitting - Cutting

- Sawing of aluminium and other service

PRODUCTION SERVICE

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WORKING CLOSELY WITH CUSTOMERS

BE Group is strengthening its position as the link in the value chain between steel and metals producers and customers in the engineering and construction sectors by off ering products with high added value.

Increasing the service component in sales is raising volumes, improving gross margins and strengthening BE Group’s capacity to retain market shares and gain new ones.

Per Horstmann and Ylva Berg are in charge of market and business development.

Per Horstmann is Vice President, Purchasing and Production at BE Group.

Ylva Berg is Vice President, Market and Business Development. Both are working intensively to develop BE Group’s service proposition to customers.

BE Group’s mission is to make its custo- mers more profi table and competitive by saving them time, costs and capital. How is that done in practice?

Per: Our business is based on delivering the right products to our customers at competi- tive prices and at the right time. That includes giving them the best possible service in the form of product processing and off ering new services as required.

In purely practical terms, our sales representatives have close relationships with our customers and learn as much as possible about their operations so we can craft good solutions for them. Meeting with customers in the offi ce is not enough. We have to get into their production and see what they do and how they work. Let’s say they are cutting material on a machine they hardly ever use, while we have much higher capacity utilization in our production. In that

situation, we can off er favorable terms to perform that step for them. In other words, to provide Excellent Service, we have to talk, ask questions, learn and get out on the factory fl oor.

Ylva: Exactly. We achieve economies of scale by serving many customers at the same time, compared to the low resource utilization many have for their production equipment.

And when customers outsource parts of their production, they can free up capital formerly tied up in production equipment to streamline their capital use. Capital tied- up in production is expensive!

Many of our customers are also struggling to cut the time their material is in work. The less time in work, the higher their profi t generally is. So even from that perspective, many appreciate the opportunity to buy preprocessed materials from us. In practice:

the less time that elapses between paying their suppliers and getting paid by their customers, the better.

Larger customers are already thinking along these lines, but many small and medium-size outfi ts haven’t come to that point yet. Here we must not only understand where our customers will reap the greatest benefi t in each specifi c case, but also communicate that eff ectively.

What will it take to persuade more customers to use BE Group for production service?

Ylva: Our focus in 2007 will be on selling

more preprocessed products by expanding

our production service. We will select the

segments we believe will benefi t the most

from these services and then approach

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the customers that are the most mature.

Demand for this service is very high right now in Finland. Even though the Swedish market is somewhat diff erent, the trend here is also moving towards more outsourcing and the growing needs of our customers for production services.

Per: It’s up to us to take the initiative and dive into the customer’s processes and make them more effi cient. Our sales force will be given advanced training in this area in 2007. We will also be increasing our investments in production equipment.

How can we increase the share of produc- tion service in New Markets as well?

Ylva: My feeling is that we will be increa- sing the service component faster in New Markets than in Sweden and Finland over the next few years. Industry in many of these countries is in an intensive phase of powerful growth and change and they may be more inclined to look for new solutions.

As well, many of our large customers in Sweden and Finland are relocating produc- tion to these countries and they see our subsidiaries as their logical partners.

How do logistics work at BE Group today and what is the impact on customers?

Per: We have one of our industry’s most fully developed logistics systems in Europe and a very high inventory turnover rate.

Fast deliveries are not the only factor, you also have to have precisely the right inven- tory so that products are not lying around costing money. BE Group is leveraging effi cient inventory and capital management

to generate a high return on operating capital.

Our effi cient distribution with extremely fast deliveries is one of our most valuable assets. These days, a large percentage of our customers order today what they want tomorrow. That is, customers are demanding delivery within 24 hours. We off er extremely reliable delivery in a market where the producers have doubled their lead-times in a single year, in part due to the high demand.

That can cause major losses, for instance when a late delivery brings a building project to a screeching halt. Our focus on Excellent Service is helping our customers run their production smoothly, which is critically important to them.

LEADING THE WAY IN LOGISTICS – About 500 suppliers in Europe, Asia and South America

– About 10,000 customers in ten Nordic and Eastern European countries – 140-year history as a steel and metals wholesaler in Sweden and Finland – Wide product and service range – 32 sites for sales, production and warehousing

– Shipments within 24 hours

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BE GROUP OVERVIEW

Demand strengthened in all markets during the year and 2006 was BE Group’s best fi nancial year ever. Demand in Sweden and Finland was stronger than in the preceding year and particularly strong growth was noted in the Baltic and Eastern European markets.

FINANCIAL TARGETS

BE Group has set fi ve fi nancial targets for operations. The outcomes for growth, profi tability and return will be measured over an economic cycle. The other two targets refer to the capital structure and temporary deviations may occur, for instance in conjunction with acquisitions. All fi ve targets were met for the individual year of 2006, as shown on the following table.

BE GROUP OVERVIEW

Underlying earnings and returns are measured to provide a clear view of business develop- ment. These measurements are recognized earnings and returns, adjusted for exceptional items and inventory gains/losses.

NET SALES

Stronger demand and higher prices in all markets increased consolidated net sales by 15.4% to SEK 6,681.2M (5,790.2).

FINANCIAL TARGETS

Target Outcome last

12 months

Underlying sales growth >5% 8.5%

Underlying EBITA margin >6% 7.1%

Underlying return on

operating capital >40% 72.5%

Net debt as a percentage

of total equity >150% 83.8%

Net debt/underlying EBITDA <multiple 3 multiple 1.1

The rise in net sales is mainly distributed between organic volume growth of 8.5% and price and mix changes of 7.0%.

The average selling price per kg was SEK 10.95 (10.29), an increase of 6.4%.

Total shipped volume increased to 610,200 tonnes (562,500), up by 8.5%.

BUSINESS PERFORMANCE

Consolidated gross profi t rose to SEK 1,172.8M (926.1). Reported gross profi t in- cludes inventory gains of SEK 56.8M (-27.8).

The gross margin was 17.6% (16.0). The underlying gross margin increased slightly to 16.7% (16.5).

EBITA rose steeply to SEK 551.9M (267.0) and benefi ted from inventory gains of SEK 56.8M (-27.8) and exceptional items of SEK 21.4M (-100.8). The exceptional items comprised capital gains on the sale of real estate in Estonia, Lithuania and Poland of SEK 29.6M and preparatory costs for the initial public off ering of SEK 8.2M.

The underlying EBITA was SEK

473.7M (395.6). The strengthening of

underlying EBITA was due mainly to

volume, price and mix changes, which had

a positive impact of SEK 176.8M. This was

off set by higher production and transport

costs of SEK 38.0M and an increase of SEK

55.7M in other overheads, primarily

resulting from a negative cost trend in

Sweden early in the year, organizational

build-up, costs for potential acquisitions in

New Markets that were not completed and

expansion of corporate functions required

to meet the stricter standards applied to

listed companies.

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VDs KOMMENTAR

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KONCERNÖVERSIKT

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The EBITA margin was 8.3% (4.6). The underlying EBITA margin, adjusted for inventory gains and exceptional items, increased to 7.1% (6.8).

Performance per business area is discussed on pages 34-35.

CAPITAL, INVESTMENTS AND RETURN

On December 31, BE Group had working capital of SEK 549.6M (409.2), an increase of 34.3%.

The inventory turnover rate improved steadily over the year. Despite the increase, average working capital declined by 5% to SEK 546.9M (575.5), resulting in a decline in average working capital to 8.2% (9.9) of sales.

Return on operating capital (excluding intangible assets) increased sharply to 84.4%

(36.8), as a result of a higher margin and improved turnover rate for operating capital. For the same reasons, underlying return on operating capital (excluding intangible assets) increased to 72.5% (54.5)

CASH FLOW

BE Group’s cash fl ow for the full year was SEK 92.4M (-107.1). Cash fl ow from operating activities was SEK 235.6M (354.5).

Profi t before tax was substantially higher at SEK 539.0M than in the preceding year (235.2), but tax paid was lower. In addition, exceptional costs that did not aff ect liquidity were charged to income in 2006.

Working capital increased and impaired cash fl ow from operating activities by SEK -231.9M (153.4).

Negative cash fl ow from investing activities was SEK 16.3M (-40.5). The net

fi gure includes sales of real estate in the amount of SEK 53.0M. Capital expenditures amoun- ted to SEK 68.1M (40.5). Investments in intangible assets amounted to SEK 5,1M.

Cash fl ow from fi nancing activities was a negative SEK 126.9M (-421.1). The change in cash fl ow from fi nancing activities is primarily attributable to the previously mentioned dividend distribution of SEK 680M and new loans of SEK 553.0M net.

BE GROUP OVERVIEW

AVERAGE SALES PRICES (SEK/KG) QUARTERLY AND ROLLING 12 MONTHS NET SALES, SEKM

QUARTERLY AND ROLLING 12 MONTHS

EBITA, SEKM

QUARTERLY AND ROLLING 12 MONTHS

12,00

11,00

10,00

9,00

8,00 Q1

12,00

11,00

10,00

9,00

8,00

2005 2006

Q2 Q3 Q4 Q1 Q2 Q3 Q4

Quarter Rolling 12 200

150

100

50

-50 Q1

800

600

400

200

-200

2005 2006

Q2 Q3 Q4 Q1 Q2 Q3 Q4

0 0

Quarter Rolling 12 2 ,0

1,5

1,0

0,5

Q1

8,0

7,0

6,0

5,0

2005 2006

Q2 Q3 Q4 Q1 Q2 Q3 Q4

0,0 4,0

Quarter Rolling 12

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SWEDEN

Sweden is BE Group’s largest business area and generated more than half of consolidated net sales and EBITA (before exceptional items).

BE Group supplies most of the Group’s products to the Swedish market, along with production service and other services in- cluding sophisticated logistics solutions and advice. The service component of sales is 22%.

After the restructuring is finalized, BE Group will have three facilities in Sweden with warehousing and production in Malmö and Norrköping and production in Borlänge.

The sales organization covers three areas, North, South and Service, and has a staff of about 115 representatives. Sales offices are located in Alvesta, Borlänge, Gislaved, Göteborg, Jönköping, Karlstad, Malmö, Norrköping, Stockholm and Sundsvall. The sales offices are backed up by a nationwide dealer network.

MARKET

The Swedish economy has displayed superior growth and a positive trend for industrial production in recent years. The steel consumption in 2006 was 4,445,000 tonnes, while the average volume growth rate in the market between 2000 and 2006 was approx- imately 3.5%.

BUSINESS AREAS

Bo Söderqvist, Business Area Manager

KEY FIGURES 2006 2005

Net sales, SEKM* 3,516 3,114

Growth, % 12.9 7.1

EBITA, SEKM 288 167

EBITA margin, % 8.2 5.4

Underlying EBITA, SEKM 264 226

Underlying EBITA margin, % 7.5 7.3

Investments, SEKM 42 26

Average number of employees 445 439

* External sales

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While the market as a whole is mature, BE Group believes there is scope for future structural growth in the market for trading and service as a larger share of steel, stainless steel and aluminium is routed via service and trading companies.

Shipments of steel and stainless steel from trading and service companies in 2006 totaled 1,340,000 tonnes. The average volume growth rate for the trading and service market was 3.1% between 2000 and 2006, with wide variations between the years.

It is important to note that volume fi gures do not fully refl ect growth in market worth, as trading and service companies’ sales may increase faster than steel consumption as a result of a higher share of service sales.

CUSTOMERS

BE Group’s customer base is a good refl ection of the Swedish industrial structure, with a high proportion of companies of varying size and operational category in the engine- ering sector. Construction and civil works companies are another large customer group, as are dealers.

COMPETITION

There is a relatively high number of compe- ting trading and service companies in the steel, stainless steel and aluminium sector in Sweden. Market shares have remained stable in recent years, but a few new companies have entered the stainless steel and alumi- nium market. BE Group is among the largest suppliers in the market with an estimated market share of 20% in terms of volume.

The Group’s competitors include Tibnor, which is part of the SSAB Group.

Other signifi cant competitors include Ruukki Sweden, part of the Ruukki Group and active in production and distribution, Heléns Rör, a member of the German trading group Benteler Handel, and Stena Steel, part of the Göteborg-based Stena industrial and fi nance empire. Heléns Rör specializes in various types of industrial tubing, while other signifi cant competitors have a wider product range. Tibnor and Ruukki Sweden are integrated with steel producers.

SALES AND BUSINESS PERFORMANCE

The Swedish economy performed very well during the year. The engineering sector developed well and the construction-related segment of the market rallied, driven by strong demand, not least for housing.

The favorable economy bumped up demand for BE Group’s products and services in 2006 and external sales totaled SEK 3,515.8M (3,113.7), an increase of 12.9%.

EBITA rose to SEK 287.9M (167.0), primarily as a result of higher volumes and prices, but the full eff ect was constrained by higher costs. Underlying EBITA rose to SEK 264.4M (226.2).

Margins improved, with the EBITA margin increasing to 8.2% (5.4) and under- lying EBITA margin to 7.5% (7.3).

SIGNIFICANT EVENTS

An agreement was reached early in the year with Inox, a supplier of stainless steel in the Italy-based Valbruna Group, whereby the company has discontinued operations in Sweden and referred all Swedish customers to BE Group.

BUSINESS AREAS

UNDERLYING EBITA, SWEDEN*

SALES, SWEDEN

Other business areas 2006: SEK 3,165M, 47.4%

Sales 2006, SEK 3,516.8M (2005: 3,114)

% of consolidated sales 2006: 52.6%

Other business areas 2006: SEK 242M, 47.8%

Underlying EBITA 2006, SEK 264 (2005: 226)

% of consolidated underlying EBITA 2006: 52.2%

*Excluding parent company and Group items

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A new version of BE Group’s electronic order system, BE Online, went operational in April 2006. BE Online gives customers in Sweden the option to place orders, track order status, check invoices, etc., around the clock, over the Internet. The entire product range is available, but so far only certain components of the service proposition.

BE Group intends to make the same kind of solution available in all other Group markets.

The restructuring of operations in Sweden commenced in 2005 continued in 2006 and is expected to be fully implemented in the second quarter of 2007. The objectives are to improve customer service, enhance operational effi ciency and reduce capital tied up by concentrating operations to three sites.

All production and warehousing opera- tions are being relocated from Göteborg, Jönköping and Sundsvall to Malmö and Norrköping, where sites have been expan- ded and the workforce reinforced. The sales offi ces remain in Göteborg, Jönköping and Sundsvall and a reduction in force of about 75 employees was implemented in those towns in 2005-2006.

About ten new jobs were created during the same period and the Company has invested about SEK 55M in Malmö.

BE Group has also invested approximately SEK 60M and created about twenty new jobs in Norrköping. Operations in Borlänge were not aff ected by the changes.

FUTURE DEVELOPMENT

In line with BE Group’s corporate strategy, future focus in Sweden will be on consoli-

dating the strong market position by further improving inventory availability and the on-time delivery rate to strengthen customer relationships.

BE Group in Sweden will also prioritize the service component in sales, which is expected to enhance growth and profi tability, especially considering the strong demand.

BE Group has focused on successively cutting costs over the years and is sustaining eff orts to continue progress in this area.

“Future focus in Sweden will be con-

solidating the strong market position by further improving inventory avail- ability and the on- time delivery rate to strengthen customer relationships.”

BUSINESS AREAS

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ANNUAL REPORT 2006