2020 Annual Report and Sustainability An international wood Report products Group OPERATIONS GOALS AND THE BERGS PRODUCT SUSTAINABILITY CORPORATE DIRECTOR’S REPORT FINANCIAL STRATEGY GROUP AREAS GOVERNANCE STATEMENTS This is Bergs 3 A Group in change 10 Our operations Wood Protection 19 Strategy & Control 31 Corporate Director’s report 47 Consolidated in summary 17 Governance Report 40 financial statements 51 The year in brief 4 Business concept 11 Joinery 24 The forestry loop 34 Local Board of Directors 44 Parent Company’s Key events during Guiding Sawn Wood 26 Sustainability goals 35 entrepreneurship 18 financial statements 56 the year 5 principles for Bergs 11 Management 45 Energy & Logistics 28 Materiality analysis 36 Marketing and sales 18 Notes on the Covid-19 6 Financial targets 12 Risk 37 consolidated CEO comments 7 Sustainability goals 12 financial statements 60 Investor portrait 13 Signatures 82 Five reasons to Auditor’s Report 83 invest in Bergs 13 Multi-year overview 86 The share 14 Contents 4. 19. 30. ABOUT THE ANNUAL REPORT The Annual Report for the financial year 2020 for the Parent Company and the Group consists of the Director’s Report (pages 47–50) and the financial statements, as well as the notes and comments (pages 51–82). The statutory sustainability report according to the Swedish Annual Accounts Act is included in the Annual Report (pages 30–39). THE YEAR IN BRIEF PRODUCT AREAS SUSTAINABILITY Cover image: Wooden houses presented in Sveriges Televisions programme series Husdrömmar, in which the façades consist of panels made from Linax, which are impregnated with 10. 17. 37. preservatives and treated with linseed oil, from Bergs’s subsidiary Bitus AB. This is a translation of the Photo: Linda Gredåker Swedish original. In case of any inconsistency between Production: Bergs, in the Swedish and English version, partnership with Settcom AB. the Swedish version shall prevail. GOALS AND STRATEGY THE BERGS GROUP RISK FACTORS OPERATIONS GOALS AND THE BERGS PRODUCT SUSTAINABILITY CORPORATE DIRECTOR’S REPORT FINANCIAL STRATEGY GROUP AREAS GOVERNANCE STATEMENTS This is Product areas 44% Bergs Wood Protection Treated wood (impregnated, fire-retardant, etc.) in accordance with international standards and environmental requirements. This also includes a special range of untreated and treated planed products for the DIY sector. Common Bergs owns and develops applications include façade panelling, carcases, wood decks and similar constructions where the requirements for companies that process wood. function, sustainability and aesthetics are stringent. The Bergs Group consists of independent subsidiaries, with clear responsibilities for results, that develop, produce and market processed wood for various 12% applications. Joinery With years of experience in wood and a great deal of competence in processing, Bergs promotes building a High-quality wood products such as houses, sustainable society based on renewable raw materials doors, windows, outdoor furniture and from sustainably cultivated forests in the Baltic Sea garden products. region. Operations are conducted in Sweden, Estonia, Latvia and the UK, and the Group’s products are sold in some 20 countries. The largest markets consist of Scandinavia, the Baltic countries, the UK and France. The head office and Group management are located in Sweden. 36% The company’s share has been listed on Nasdaq Stockholm since 1984. Sawn Wood Sawn products for further processing by another industry. In addition to these three product areas, Bergs conducts operations in pellet production and logistics. These operations represent 8 per cent of the Group’s sales and are described in more detail on page 28. BERGS ANNUAL REPORT AND SUSTAINABILITY REPORT 2020 3 OPERATIONS GOALS AND THE BERGS PRODUCT SUSTAINABILITY CORPORATE DIRECTOR’S REPORT FINANCIAL STRATEGY GROUP AREAS GOVERNANCE STATEMENTS The year in brief Improved earnings, cash flow and financial position. Initial optimism early in the year turned into a great deal of uncertainty owing to the global coronavirus pandemic. Demand for the Group’s products rose gradually during the year, especially through increases 2,149 137 in conversions and renovations, primarily in private households. SEK m, Sales SEK m, Operating profit As a link in the changed focus for the Group, where the ambition is to increase the proportion of processing that creates value, the Swedish sawmill business was sold to Vida AB. Net sales increased by 5% to SEK 2,149 Operating profit amounted to SEK million (2,056), mainly related to higher 137 million (73). Adjusted operating Key performance indicators sales volumes for processed wood profit amounted to SEK 137 million products. (55). Amounts in SEK m 2020 2019 Net sales 2,149 2,056 EBITDA 212 133 Adjusted EBITDA (adjusted for items affecting comparability) 212 115 Adjusted EBITDA margin, % 9.9 5.6 355 SEK Operating profit 137 73 SEK m, Cash flow Operating margin, % 6.4 3.6 Adjusted operating profit 137 55 Adjusted operating margin, % 6.4 2.7 0.20 Earnings per share, before and after dilution, SEK 0.30 0.13 Proposed dividend per share Earnings per share, including discontinued operations, SEK 0.49 0.13 Equity per share, SEK 3.61 3.18 Cash flow from operating activities, including discontinued operations, amounted to SEK 355 million (147). The Swedish sawmill business was sold on 1 September 2020 and is recognised as discontinued operations. Comparative periods in the consolidated income statement have been restated. BERGS ANNUAL REPORT AND SUSTAINABILITY REPORT 2020 4 OPERATIONS GOALS AND THE BERGS PRODUCT SUSTAINABILITY CORPORATE DIRECTOR’S REPORT FINANCIAL STRATEGY GROUP AREAS GOVERNANCE STATEMENTS As of the beginning of the year, Åre-based Radical Wood is part of Woodworks by Bergs, a subsidiary of Key events Bergs. Closing of sawmill Investment in increased production capacity Following a strategic overview of the Swedish sawmill A new production facility has been completed at Bitus in business, the decision was taken to close the Gransjö Nybro, Sweden, which will facilitate an expansion of the sawmill permanently. The closure, which affects approxi- partnership with Organowood, in which Bitus produces mately 45 employees, was announced in March. environmentally classified wood modified with silicon. Temporary adjustment of production Development with design and digital Demand fell sharply in markets including the UK in early services. spring; this was linked to the Covid-19 pandemic, which is Bergs subsidiary Woodworks by Bergs sells many of the why production was temporarily adjusted with some per- Group’s products, both to companies and directly to sonnel being put on furlough. consumers. The company has excellent market know- how and is working on developing future services which Postponed dividend will make it easier for customers to compare various The Board of Directors decided to withdraw the previ- alternatives and even to make purchases online. This is ously proposed dividend of SEK 0.04 per share, a total of an attractive alternate sales channel that is now being SEK 14 million. This was in light of the prevailing business prioritised in Berg’s internal efforts. climate, with uncertainty around the economic effects Another initiative during the year was the acquisition of that the spread of the coronavirus brought in its wake. the Radical Wood brand. Based in Åre, Jämtland County, The Group’s financial position and capacity for manoeuvre Radical Wood produces and sells wood furniture for out- were given priority. door use. The acquisition fits in well with Bergs’s existing product range of garden products. Divestment of the Swedish sawmills A structural transaction was conducted in June encom- Development of English logistics hub. passing the four sawmills in Vimmerby, Orrefors, During the year, investments were made in the Group’s Mörlunda and the previously discontinued Gransjö, all of port and logistics facility at Creeksea in southeast England. which were sold to Vida AB. The purchase price was Warehouse buildings were improved, as was the capacity approximately SEK 390 million, and its purpose was to for providing loading and unloading services to incoming more clearly focus on the previously adopted orientation vessels. The proximity to the M25 motorway makes the on an increase in processing. facility valuable for onward distribution in the UK. Strategic overview Comprehensive strategy work was initiated during the autumn to clarify the future orientation of the Group. The priority has been a business plan that promotes stable growth as well as a high and predictable degree of profit- ability, and thereby increased shareholder value. BERGS ANNUAL REPORT AND SUSTAINABILITY REPORT 2020 5 OPERATIONS GOALS AND THE BERGS PRODUCT SUSTAINABILITY CORPORATE DIRECTOR’S REPORT FINANCIAL STRATEGY GROUP AREAS GOVERNANCE STATEMENTS Production could function normally and demand from the DIY segment Covid-19 was strong. and Bergs In a business environment where encouragement to work from home where practically and technologically possible. The directors of sub- limitations to meetings and mobility are sidiaries were instructed to prioritise health and rapidly changing the conditions for safety ahead of optimising daily operations. doing business, partnerships between Impact on staff and facilities suppliers and customers have become A few individual cases of Covid-19 were confirmed more important than ever. among the Group’s employees in 2020. Production has functioned normally and deliveries could